**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-K**

| **(Mark                  One)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                            |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| **x**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **ANNUAL                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934**     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **For                  the fiscal year ended January 30, 2005**                                                                                 |
| **or**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **¨**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **TRANSITION                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **For                  the transition period from ____________ to                  ____________**                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                            |
| **Commission                  file number 0-8550**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **PORTRAIT                  CORPORATION OF AMERICA, INC.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **(Exact                  name of registrant as specified in its                  charter)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Delaware**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **57-1208051**                                                                                                                                  |
| **(State                  or other jurisdiction of****incorporation                  or organization)**                                                                                                                                                                                                                                                                                                                                                                                                                                                             | **(I.R.S.                  Employer****Identification                  No.)**                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **815                  Matthews-Mint Hill Road, Matthews, NC**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | **28105**                                                                                                                                       |
| **(Address                  of principal executive offices)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | **(Zip                  Code)**                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                            |
| **Registrant’s                  telephone number, including area code: (704)                  847-8011**                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Securities                  registered pursuant to Section 12(b) of the Act:                  None**                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Securities                  registered pursuant to Section 12(g) of the Act:                  None**                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 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. ¨                  Yes x                  No |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Indicate                  by check mark if disclosure of delinquent filers pursuant to Item                  405 of                  Regulation S-K (§ 229.405 of this chapter) is not contained herein, and                  will not be contained, to the best of registrant’s knowledge, in                  definitive proxy or information statements incorporated by reference                  in                  Part III of this Form 10-K or any amendment to this Form 10-K.                  x                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Indicate                  by check mark whether the registrant is an accelerated filer (as                  defined                  in Rule 12b-2 of the Act). ¨                  Yes x                  No                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| The                  Company is privately held. There is no trading in the common equity                  and                  therefore an aggregate market value based on sales or bid and asked                  prices                  is not determinable.                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| The                  number of shares of $0.01 par value Common Stock outstanding as                  of July                  28, 2005 was 2,294,352                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Documents                  Incorporated by Reference:                  None**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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**PORTRAIT        CORPORATION OF AMERICA, INC.**

**FORM        10-K**

**FISCAL        YEAR ENDED JANUARY 30, 2005**

**TABLE        OF CONTENTS**

| **Item                  Number****in                  Form 10-K** |                                                                                                                          | **Page** |
|-------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                              | **PART                  I**                                                                                                   |     |
| 1.                                                                | Business                                                                                                                      | 1        |
| 2.                                                                | Properties                                                                                                                    | 24       |
| 3.                                                                | Legal                  Proceedings                                                                                            | 25       |
| 4.                                                                | Submission                  of Matters to a Vote of                  Security Holders                                         | 25       |
|                                                              | **PART                  II**                                                                                                  |     |
| 5.                                                                | Market                  for Registrant’s Common Equity                  and Related Stockholder Matters                 | 26       |
| 6.                                                                | Selected                  Financial                  Data                                                                     | 26       |
| 7.                                                                | Management’s                  Discussion and Analysis of Financial                  Condition and Results of Operations | 30       |
| 7A.                                                               | Quantitative                  and Qualitative Disclosures About                  Market Risk                                  | 51       |
| 8.                                                                | Financial                  Statements and Supplementary                  Data                                                 | 53       |
| 9.                                                                | Changes                  in and Disagreements with Accountants                  on Accounting and Financial Disclosures       | 94       |
| 9A.                                                               | Controls                  and Procedures                                                                                      | 94       |
| 9B.                                                               | Other                  Information                                                                                            | 94       |
|                                                              | **PART                  III**                                                                                                 |     |
| 10.                                                               | Directors                  and Executive Officers of                  the Registrant                                          | 95       |
| 11.                                                               | Executive                  Compensation                                                                                       | 99       |
| 12.                                                               | Security                  Ownership of Certain                  Beneficial Owners and Management                              | 103      |
| 13.                                                               | Certain                  Relationships and Related                  Transactions                                              | 105      |
| 14.                                                               | Principal                  Accounting Fees and                  Services                                                      | 105      |
|                                                              | **PART                  IV**                                                                                                  |     |
| 15.                                                               | Exhibits,                  Financial Statement                  Schedules                                                     | 107      |
| (a)                                                               | 1.                  Financial Statements                                                                                      | 107      |
|                                                              | 2.                  Financial Statement Schedules                                                                             | 107      |
|                                                              | 3.                  Exhibits                                                                                                  | 107      |
| Schedule                  II                                      | Valuation                  and Qualifying                  Accounts                                                           | 108      |
| Signatures                                                        |                                                                                                                          | 109      |

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**PART        I**

**ITEM        1.    ****BUSINESS**

**Company        Overview**

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| -      | we                  are not required to undertake the effort and expense to identify                  and                  obtain real estate locations for our studios, but instead open                  substantially all of our new studios in prime Wal-Mart                  locations;                                                                                                         |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                  |
| -      | we                  provide a customized service to Wal-Mart customers and therefore                  carry                  very few inventory items and use our inventory very quickly, thereby                  mitigating the effect of common inventory problems experienced                  by most                  specialty retailers, such as obsolescence and                  shrinkage; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                  |
| -      | our                  new studios require smaller amounts of working capital and capital                  expenditures; and                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                  |
| -      | our                  new studios generate immediate revenues because of their location                  in                  Wal-Mart stores without the extended new store opening ramp-up                  of a                  typical specialty retailer.                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                  |

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**Industry**

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| **2004                  Domestic Professional Portrait Photography Industry Sales: $8.0                  Billion** |
|--------------------------------------------------------------------------------------------------------------------|
| School                  Age                                                                                        | 32% |
| Pre-School                                                                                                         | 15% |
| Adult                                                                                                              | 10% |
| Weddings                                                                                                           | 10% |
| Family/Group                                                                                                       | 7% |
| Church                                                                                                             | 2% |
| Passport                                                                                                           | 2% |
| Other                                                                                                              | 22% |
|                                                                                                               |   |
| *Source:                  2004 Mass Portrait Review, by PhotoFinishing News,                  Inc.*                |
|                                                                                                               |

**Competitive        Strengths**

| -      | *Leading                    Market Position.*We                    believe we are the leader in the $1.2 billion domestic pre-school                    portrait                    photography market, with over a 20% share of total sales. In                    2004, no                    other professional portrait provider served more customers in                    retail hosts                    or operated more permanent studio locations than our company.                    In fiscal                    2003, we surpassed CPI Corporation as the leader in the professional                    portrait photography market by total sales. We have increased                    the number                    of customers we served domestically over the past three years                    from 5.9                    million to 6.4 million. As of January 30, 2005, we operated 2,061                    permanent portrait studios domestically.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| -      | *Strong,                    Mutually Beneficial Relationship with Wal-Mart.*By                    aligning our strategy with Wal-Mart’s emphasis on providing low-cost, high                    quality products, we have enjoyed a mutually beneficial, longterm                    relationship with Wal-Mart, the world’s largest retailer in terms of                    sales. Since 1998, we have been the sole operator of portrait                    photography                    studios in Wal-Mart stores in North America. The majority of                    our permanent                    Wal-Mart studios are located in prominent locations at the front                    of the                    discount store or supercenter, affording us easy access to Wal-Mart’s                    unrivaled customer foot traffic. In return, we provide Wal-Mart                    with                    strong profit per square foot and provide consumers with high                    quality                    photography at every day low prices.  At                    January 30, 2005, Wal-Mart had 3,066 discount stores and supercenters                    in                    the U.S. as well as 1,587 stores internationally, and we operated                    in 2,061                    Wal-Mart stores in the U.S. and 340 internationally. We have                    been able to                    significantly increase the number of permanent studios in Wal-Mart,                    having                    grown our number of permanent portrait studios in Wal-Mart stores                    in North                    America from 1,112 studios at the beginning of fiscal 1998 to                    2,376                    studios at the end of fiscal 2004, representing a CAGR of 11.5%.                    Sales                    from our Wal-Mart business totaled $310.3 million for the fiscal                    year                    ended January 30, 2005, which, despite the decline in our year                    over year                    sales in fiscal 2004, represents a CAGR of 12.8% from $150.6                    million in                    fiscal 1998. As a result of this growth, we have been able to                    significantly expand brand awareness for Wal-Mart Portrait Studios.                    Wal-Mart has agreed to use commercially reasonable efforts to                    include a                    Wal-Mart Portrait Studio operated by us in the blueprint of each                    new                    supercenter (except for new supercenters of 145,000 square feet)                    and store                    of 100,000 square feet or larger. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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| -      | *Low                    Cost Producer*.                    We offer our portrait packages at prices consistent with Wal-Mart’s every                    day low price strategy. We believe we have one of the lowest-cost                    portrait                    production systems in the industry. We believe that the cost                    advantage we                    enjoy today is due primarily to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | our                    more modest capital expenditure requirements for each new                    studio; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | low                    depreciation and maintenance expenses associated with our proprietary                    integrated imaging and portrait processing system; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | our                    integrated digital imaging system, which allows our customers                    to view a                    digital proof of each pose during the photography session and                    to select                    only the desired images before any printing occurs; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the                    efficiency and flexibility of our integrated portrait photography                    and                    production process system, which streamlines and automates the                    production                    process, resulting in higher volume, faster speeds, lower labor                    costs and                    less waste, and allows us to leverage our existing scalable                    infrastructure, which includes our two processing facilities                    and our                    distribution center in the Charlotte, North Carolina area;                    and |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | a                    marketing focus on selling larger portrait collections based                    on more                    poses, which lowers the average production cost per unit as more                    units are                    produced per customer. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
| -      | *Focus                    on Innovation*.                    We have a history of assessing advancements in technology and                    successfully                    implementing such advancements when we have determined that they                    are cost                    effective on a large-scale basis. We are one of the few companies                    in the                    domestic professional portrait photography industry to have developed                    a                    proprietary integrated system that allows customers to select                    their choice                    of portraits prior to actual production and that automatically                    links the                    image selection process to the sale and production of the portrait                    package. This technology is fully scalable; as we continue our                    rapid                    expansion plans, each new outlet or channel requires minimal                    incremental                    expenditures.  We                    have developed a free-standing specialty retail concept called                    GoPortraits                    that features two all digital portrait photography studios in                    the                    Charlotte, North Carolina metropolitan area. In addition, we                    strive to                    maintain a strong focus on new product development. Recently,                    we expanded                    our portfolio of products to include all occasion greeting cards                    and                    large-format canvas portraits. Leveraging our digital imaging                    system, we                    have augmented our product offerings with digital portraits on                    CD or disk,                    the Portrait GalleryTM, available immediately after the portrait                    session                    with email capability. The Portrait Gallery is sold with PhotoParade,                    a                    companion software on CD that enables customers to create themed                    screensavers and print-at-home projects such as portrait stickers,                    gift                    tags and portrait magnets. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| -      | *Experienced                    and Results-Oriented Management Team*.                    Members of our senior management team have an average of over                    14 years of                    experience in the specialty retail industry. They are invested                    in our                    business, beneficially owning approximately 11.2% of our common                    stock on a                    fully-diluted basis. Since joining PCA in 1999, Barry J. Feld,                    our                    Chairman, President and Chief Executive Officer, has directed                    our                    expansion by further strengthening our relationship with                    Wal-Mart.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

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**Business        Strategy**

| -      | *Increase                  Same Studio Sales.*In                  order to address our recent weak same store sales trends, we have                  implemented a series of highly focused, tactical operating initiatives                  designed to restore our core U.S. Wal-Mart studio business back                  to prior                  positive same studio sales growth. Examples of these recent initiatives                  include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | increased                  external recruiting of field operations management; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | instituting                  a new bonus program for our field associates; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | launching                  new marketing initiatives, including selected coordinated marketing                  efforts with Wal-Mart; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | re-implementing                  our successful “Portrait Smiles” customer continuity program which was                  previously eliminated in fiscal 2003; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | re-introducing                  a mid-tier price point in our package offers in order to promote                  customer                  trade ups; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | increasing                  our opening price point. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | We                  believe these initiatives will result in improvements primarily                  in average                  transaction size per customer, as well as improved customer traffic                  as our                  current fiscal year progresses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| -      | *Continue                  to Participate in Wal-Mart’s Growth*.                  Based upon our relationship with Wal-Mart, we believe that we have                  the                  strongest platform for expansion in the industry as Wal-Mart continues                  its                  rapid growth. We opened 200 permanent Wal-Mart studios in fiscal                  2004 and                  are currently planning to open over 200 permanent Wal-Mart studios                  in                  fiscal 2005. We expect that this new studio growth, combined with                  the                  increasing brand awareness for Wal-Mart Portrait Studios, will                  result in                  increased market share for PCA.                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| -      | *Disciplined                  Extension of Our International Presence*.                  We believe that international markets for professional portrait                  photography services represent an attractive growth opportunity                  for PCA.                  We intend to grow our international market share primarily through                  our                  relationship with Wal-Mart. As of January 30, 2005, we operated                  226                  studios in Wal-Mart Canada and 89 studios in Wal-Mart Mexico, and                  are                  testing 25 Wal-Mart locations in Germany and the U.K. See “Item 1.                  Business—Risk Factors—Risks Related to Our Business—Our international                  expansion may not be successful and may expose us to additional                  risks that                  could adversely affect our business.” |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| -      | *Disciplined                  Extension into Non-Portrait Photography Related Concepts*.                  With our acquisition of certain assets and liabilities of Hometown                  Threads®                  in                  October 2004, we expanded our service offering in Wal-Mart stores                  beyond                  portrait photography to include embroidery services and personalization                  of                  gifts. Additionally, with the opening of our first Fun Factory                  location in                  Wal-Mart, we have the opportunity to expand our presence in Wal-Mart                  stores with this child-centered, value-priced concept.                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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**The        Portrait Photography Experience**

*Permanent        Studios*

*Modular        Traveling Locations*

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**Distribution        Channels**

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | *Wal-Mart                  Portrait Studios*.                  We are currently the sole provider of portrait studios in Wal-Mart                  in all                  50 states as well as Canada, Mexico, Germany and the U.K. As of                  January                  30, 2005, we had 2,401 permanent studios in Wal-Mart stores in                  the U.S.,                  Canada, Mexico, Germany and the U.K. We continue to explore additional                  geographic diversification by monitoring our Wal-Mart Portrait                  Studios in                  Europe. Our U.S. operations in Wal-Mart stores accounted for approximately                  84.8%, 85.8% and 86.2% of consolidated sales in fiscal 2004, 2003                  and                  2002, respectively. Our international operations in Wal-Mart stores                  contributed 11.1%, 9.5% and 8.1% of consolidated sales for fiscal                  2004,                  2003 and 2002, respectively. We operate our studios in Wal-Mart                  stores                  under license and lease agreements. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | *Other                  Retail*.                  In fiscal 2000, we began portrait photography operations on select                  military bases. In fiscal 2004, we began offering embroidery services                  and                  gift personalization in Wal-Mart stores through Hometown                  Threads®                  locations and we opened our first Fun Factory, a stuffed animal,                  child-centered, value-priced concept.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | *GoPortraits*.                  We have developed a free-standing retail concept called GoPortraits                  that                  features two all-digital portrait photography studios. We also                  provide                  services, including digital photographic retouching, and on-site                  production of film and digital images. We currently have two concept                  studios located in the Charlotte, North Carolina metropolitan                  area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|   |                                                                                                                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | *Institutional*.                  Through our institutional channel, we target church accounts. Our                  institutional operations accounted for less than 5% of overall                  sales for                  fiscal 2004, 2003 and 2002. |
|   |                                                                                                                                                                                                                                                        |

**Technology,        Manufacturing and Software Development**

----

**Marketing        and Sales**

----

**Raw        Materials and Suppliers**

----

**Employees**

**Governmental        Regulations**

**Licenses,        Trademarks and Patents**

***Wal-Mart        Licenses***

*United        States*

----

*Canada*

*Mexico*

*Germany*

*United        Kingdom*

----

*Hometown        Threads*
*®*

*.        *

**Other        Licenses and Concessions**

*Meijer*

*Navy/Marines*

*Army/Air        Force*

----

*Callisto        (PhotoParade®)*

*Other*

**RISK        FACTORS**

**Risks        Related to Our Business**

***We        are materially dependent upon Wal-Mart.***

***We        experienced a significant downturn in our results of operations in fiscal        2004        were unable to comply with certain financial covenants in our prior senior        secured credit facility. We had a net loss and a deficiency of earnings to        fixed        charges in fiscal 2004, and we have a negative net        worth.***

----

***Substantial        doubt was raised about PCA LLC’s, our wholly-owned operating subsidiary, ability        to continue as a going concern.***

***We        were unable to timely file our Annual Report on Form 10-K for fiscal 2004        and        our Quarterly Report on Form 10-Q for the thirteen weeks ended May 1, 2005        because of the ineffectiveness of our internal controls over financial reporting        of our Mexican subsidiary. If we fail to improve and maintain the effectiveness        of our internal control over financial reporting of our Mexican subsidiary,        we        may not be able to accurately and timely file our periodic reports and our        financial condition and results of operations may be materially adversely        affected.***

----

***Our        business practices and operations need to be acceptable to        Wal-Mart.***

|   |                                                                                                                                                                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | relocate                  any studio location in a Wal-Mart store at Wal-Mart's                  request,                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                             |
| -      | obtain                  Wal-Mart's prior written approval of all advertising,                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                             |
| -      | maintain                  specified levels of worker's compensation and liability                  insurance,                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                             |
| -      | operate                  the studios every day that the Wal-Mart store is open for specified                  hours,                                                                                                                                             |
|   |                                                                                                                                                                                                                                                             |
| -      | indemnify                  Wal-Mart from any claim by an employee, vendor or portrait studio                  customer                  relating to studio operation or for accident or injury anywhere                  in the                  Wal-Mart store, |
|   |                                                                                                                                                                                                                                                             |
| -      | observe                  all Wal-Mart policies relating to customer service, and                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                             |
| -      | observe                  all Wal-Mart policies relating to the activities of our employees                  in the                  Wal-Mart store,                                                                                                              |
|   |                                                                                                                                                                                                                                                             |

| -      | make                  improvements to our Wal-Mart studios without Wal-Mart's prior written                  consent, |
|--------|-----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                  |
| -      | conduct                  any “fire,”“50% off” or similar sales,                               |
|   |                                                                                                                  |
| -      | issue                  a press release using the Wal-Mart name without Wal-Mart’s consent,                  and |
|   |                                                                                                                  |
| -      | advertise                  on radio or television without Wal-Mart’s consent.                                   |
|   |                                                                                                                  |

----

***Wal-Mart        may terminate, breach, otherwise limit or increase our expenses under our        license or lease agreements.***

***An        economic downturn, a reduction in consumer spending or decreased customer        traffic in our host stores could materially adversely affect our        business.***

----

***We        may not be able to finance the rapid growth we may        experience.***

***During        fiscal 2004, we were unable to meet the payment terms of our key supplier        of        photographic film, paper and processing chemistry. Additionally, the German        parent company of our key supplier recently filed a petition for insolvency.        If        our key supplier becomes unable to continue to provide us supplies under        our        current contract, we will need to obtain an alternative source of supplies.        If        we enter into an agreement to obtain such supplies at less desirable terms,        we        may be required to raise additional equity and/or debt financing and our        financial condition and results of operations could be materially adversely        affected.***

----

***Our        inability to raise prices could limit our growth.***

***If        we lose our key personnel, our business may be adversely        affected.***

***Our        business may be adversely affected if we cannot manage the growth of our        operations or generate sufficient cash flow or obtain sufficient capital        to fund        future growth.***

***Our        expansion into geographic areas we already serve could adversely affect our        business.***

----

***Our        fourth quarter sales and income are disproportionately high and we are        vulnerable to downturns in consumer holiday spending that can adversely affect        our business.***

***If        our competitors initiate price-cutting or changes in package configurations        or        introduce new technology, we may experience lower sales or higher        costs.***

***Our        international expansion may not be successful and may expose us to additional        risks that could adversely affect our business.***

----

***We        may not be able to keep pace with the evolution of technology and develop        and        invest in new technologies as required to compete        effectively.***

***A        significant increase in piracy of our photographs could materially adversely        affect our business, financial condition or results of        operations.***

***Any        disruption in our manufacturing process could have a material adverse impact        on        our business.***

*** ***

**Risks        Related to Our Indebtedness**

***Our        substantial indebtedness could materially adversely affect our business and        prevent us from fulfilling our debt obligations.***

|   |                                                                                                                                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | $50.0                  million of senior secured notes due 2009,                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                             |
| -      | $18.0                  million of letters of credit issued under our new $20.0 million                  letters of                  credit facility,                                                                                             |
|   |                                                                                                                                                                                                                                             |
| -      | $165.0                  million of senior notes,                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                             |
| -      | $10.0                  million of senior subordinated notes,                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                             |
| -      | $30.0                  million of senior subordinated discount notes and $14.6                  million of                  additional principal outstanding from capitalized interest on such                  notes,                  and |
|   |                                                                                                                                                                                                                                             |
| -      | $20.7                  million of interest bearing extended vendor payables due in June                  2006 if                  we are unable torenegotiate                  the supply contract.                                              |
|   |                                                                                                                                                                                                                                             |

----

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | increasing                  our vulnerability to adverse economic and industry                  conditions;                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | limiting                  our ability to obtain additional financing;                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | requiring                  a substantial portion of our cash flow from operations to be used                  for                  interest payments on our debt and annual revolver pay downs required                  by                  our new senior secured revolving credit facility, thereby reducing                  our                  ability to use our cash flow to fund our studio expansion program                  and                  capital expenditures; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | limiting                  our flexibility in planning for, or reacting to, changes in our                  business                  and industry; and                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| -      | placing                  us at a disadvantage compared to competitors with less debt or                  greater                  resources.                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

***The        agreements governing our debt impose restrictions on our        business.***

|   |                                                                                                                                                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | incur                  more debt;                                                                                                                                                            |
|   |                                                                                                                                                                                         |
| -      | pay                  dividends, redeem or repurchase our stock or make other                  distributions;                                                                                 |
|   |                                                                                                                                                                                         |
| -      | make                  acquisitions or investments;                                                                                                                                           |
|   |                                                                                                                                                                                         |
| -      | enter                  into transactions with affiliates;                                                                                                                                    |
|   |                                                                                                                                                                                         |
| -      | merge                  or consolidate with others;                                                                                                                                           |
|   |                                                                                                                                                                                         |
| -      | dispose                  of assets or use asset sale proceeds;                                                                                                                               |
|   |                                                                                                                                                                                         |
| -      | create                  liens on our assets; and                                                                                                                                             |
|   |                                                                                                                                                                                         |
| -      | pledge                  capital stock of any subsidiary that is held by PCA LLC, PCA Finance                  Corp.                  or any of their domestic                  subsidiaries. |

----

**Forward        Looking Statements**

|   |                                                                                                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -      | risks                  associated with substantial indebtedness, leverage, debt service                  and                  liquidity;                     |
|   |                                                                                                                                                         |
| -      | risks                  associated with our relationship with Wal-Mart, our principal business                  relationship;                                 |
|   |                                                                                                                                                         |
| -      | performance                  of our new studios and their future operating results;                                                                          |
|   |                                                                                                                                                         |
| -      | risks                  of competition from companies including, but not limited to, those                  currently operating in other photography markets; |
|   |                                                                                                                                                         |
| -      | risks                  associated with the domestic professional portrait photography                  industry;                  and                        |
|   |                                                                                                                                                         |

----

| -      | other                  risks and uncertainties affecting Portrait Corporation of America,                  Inc.                  and its subsidiaries referred to in this Form 10-K (see “Item 1.                  Business—Risk Factors” and “Item 7. Management’s Discussion and Analysis                  of Financial Condition and Results of Operations”) and in our other                  current and periodic filings with the Securities and Exchange Commission,                  all of which are difficult or impossible to predict accurately                  and many of                  which are beyond our control. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

**ITEM        2.    ****PROPERTIES**

----

**ITEM        3.    ****LEGAL        PROCEEDINGS**

**ITEM        4.    ****SUBMISSION        OF MATTERS TO A VOTE OF SECURITY HOLDERS**

----

**PART        II**

**ITEM        5.    ****MARKET        FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER        MATTERS**

**ITEM        6.    ****SELECTED        FINANCIAL DATA**

|                                                                         |   | **For                  the Fiscal Year** |    |
|------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                         |   | **2004**                                 |    | **2003****(13)** |   | **2002****(13)** |   | **2001****(1)                  (13)** |   | **2000****(13)** |   |
|                                                                         |   | **(in                  thousands)**      |    |
| **Statement                  of Operations Data:**                           |   |                                     |    |   |   |   |   |   |   |   |   |
| Sales                  (2)                                                   |   | $                                        | 323,553 |   | $ | 324,814 |   | $ | 296,616 |   | $ | 258,403 |   | $ | 227,470 |   |
| Costs                  of sales                                              |   |                                     | 258,396 |   |   | 245,028 |   |   | 219,551 |   |   | 192,362 |   |   | 171,875 |   |
| Gross                  profit                                                |   |                                     | 65,157  |   |   | 79,786 |   |   | 77,065 |   |   | 66,041 |   |   | 55,595 |   |
| General                  and administrative expenses (3)                     |   |                                     | 47,669  |   |   | 45,610 |   |   | 41,300 |   |   | 37,652 |   |   | 34,546 |   |
| Amortization                  of intangibles                                 |   |                                     | ----    |   |   | ---- |   |   | 192 |   |   | 1,971 |   |   | 1,974 |   |
| Income                  from operations                                      |   |                                     | 17,488  |   |   | 34,176 |   |   | 35,573 |   |   | 26,418 |   |   | 19,075 |   |
| Interest                  expense, net                                       |   |                                     | 32,459  |   |   | 30,706 |   |   | 28,610 |   |   | 29,681 |   |   | 29,107 |   |
| Other                  expense (4)                                           |   |                                     | ----    |   |   | ---- |   |   | 2,776 |   |   | 15,026 |   |   | ---- |   |
| Early                  extinguishment of debt (5)                            |   |                                     | ----    |   |   | ---- |   |   | 4,569 |   |   | ---- |   |   | ---- |   |
| Income                  tax provision (benefit) (6)                          |   |                                     | 14,769  |   |   | 2,148 |   |   | (14,817 | ) |   | 43 |   |   | (448 | ) |
| Income                  (loss) before cumulative effect of accounting change |   |                                     | (29,740 | ) |   | 1,322 |   |   | 14,435 |   |   | (18,332 | ) |   | (9,584 | ) |
| Cumulative                  effect of accounting change (7)                  |   |                                     | ----    |   |   | ---- |   |   | ---- |   |   | (1,728 | ) |   | (5,990 | ) |
| Net                  income (loss)                                           |   | $                                        | (29,740 | ) | $ | 1,322 |   | $ | 14,435 |   | $ | (20,060 | ) | $ | (15,574 | ) |

----

|                                                                  |   | **For                  the Fiscal Year** |    |
|-----------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                  |   | **2004**                                 |    | **2003****(13)** |   | **2002****(13)** |   | **2001****(1)                  (13)** |   | **2000****(13)** |   |
|                                                                  |   | **(in                  thousands)**      |    |
| **Cash                  Flow Data:**                                  |   |                                     |    |   |   |   |   |   |   |   |   |
| Purchases                  of property and equipment                  |   | $                                        | 21,382  |   | $ | 21,080 |   | $ | 17,046 |   | $ | 12,924 |   | $ | 11,316 |   |
| Depreciation                  and amortization                        |   |                                     | 12,818  |   |   | 11,408 |   |   | 10,168 |   |   | 9,114 |   |   | 9,477 |   |
| Net                  cash provided by operating activities            |   |                                     | 24,248  |   |   | 17,994 |   |   | 30,901 |   |   | 12,522 |   |   | 5,702 |   |
| Net                  cash used in investing activities                |   |                                     | (22,522 | ) |   | (21,066 | ) |   | (17,046 | ) |   | (12,924 | ) |   | (9,076 | ) |
| Net                  cash provided by (used in) financing activities  |   |                                     | 8,713   |   |   | 6,031 |   |   | (14,598 | ) |   | (963 | ) |   | (298 | ) |
|                                                                  |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Financial Data:**                            |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                  of earnings to fixed charges (8)               |   |                                     | ---     |   |   | 1.1 |   |   | --- |   |   | --- |   |   | --- |   |
| Same                  studio sales percentage increase (decrease) (9) |   |                                     | (7.0    | )% |   | 1.5 | % |   | 5.2 | % |   | 3.2 | % |   | 6.4 | % |

|                                                         |   | **At                  End of Fiscal Year** |     |
|--------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                         |   | **2004**                                   |     | **2003****(13)** |   | **2002****(13)** |   | **2001****(13)** |   | **2000****(13)** |   |
| **Balance                  Sheet Data: (in thousands)**      |   |                                       |     |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                   |   | $                                          | 15,178   |   | $ | 4,820 |   | $ | 2,515 |   | $ | 2,870 |   | $ | 4,822 |   |
| Working                  capital (deficit) (10)              |   |                                       | (39,393  | ) |   | (39,592 | ) |   | (36,253 | ) |   | (50,322 | ) |   | (37,613 | ) |
| Total                  assets                                |   |                                       | 166,792  |   |   | 163,665 |   |   | 150,981 |   |   | 129,294 |   |   | 125,886 |   |
| Total                  consolidated debt                     |   |                                       | 245,862  |   |   | 229,937 |   |   | 217,247 |   |   | 217,961 |   |   | 214,975 |   |
| Series                  A preferred stock                    |   |                                       | 15,000   |   |   | 15,000 |   |   | 15,000 |   |   | 7,688 |   |   | 14,914 |   |
| Consolidated                  shareholders’ deficiency |   |                                       | (171,041 | ) |   | (141,144 | ) |   | (142,793 | ) |   | (179,177 | ) |   | (160,872 | ) |
|                                                         |   |                                       |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Studio/Store                  Data:**                      |   |                                       |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number                  of permanent studios and stores:     |   |                                       |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Wal-Mart:                                                    |   |                                       |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                  (11)                                   |   |                                       | 2,063    |   |   | 1,900 |   |   | 1,707 |   |   | 1,537 |   |   | 1,381 |   |
| Canada,                  Mexico, Germany and U.K.            |   |                                       | 340      |   |   | 301 |   |   | 256 |   |   | 210 |   |   | 171 |   |
| Other                  (12)                                  |   |                                       | 13       |   |   | 39 |   |   | 38 |   |   | 30 |   |   | 10 |   |
| Total                                                        |   |                                       | 2,416    |   |   | 2,240 |   |   | 2,001 |   |   | 1,777 |   |   | 1,562 |   |
|                                                         |   |                                       |     |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                |   | **For                  the Fiscal Year** |   |
|---------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                |   | **2004**                                 |   | **2003** |   | **2002** |   | **2001** |   | **2000** |   |
| **Studio/Store                  Opening Data:**                     |   |                                     |   |   |   |   |   |   |   |   |   |
| Number                  of new permanent studios and stores opened: |   |                                     |   |   |   |   |   |   |   |   |   |
| Wal-Mart:                                                           |   |                                     |   |   |   |   |   |   |   |   |   |
| U.S.                  (11)                                          |   |                                     | 163    |   |   | 193 |   |   | 170 |   |   | 156 |   |   | 127 |   |
| Canada,                  Mexico, Germany and U.K.                   |   |                                     | 39     |   |   | 45 |   |   | 46 |   |   | 39 |   |   | 14 |   |
| Other                  (12)                                         |   |                                     | (26    | ) |   | 1 |   |   | 8 |   |   | 20 |   |   | 10 |   |
| Total                                                               |   |                                     | 176    |   |   | 239 |   |   | 224 |   |   | 215 |   |   | 151 |   |
|                                                                |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Notes**

|   |                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | fiscal                  year 2001 consisted of 53 weeks. (All other years presented consisted                  of                  52 weeks.) |
|   |                                                                                                                                          |
| (2)    | The                  following table sets forth our sales by                  channel:                                                        |

|                             |   | **For                  the Fiscal Year** |    |
|----------------------------------|--------|------------------------------------------|---------|
|                             |   | **2004**                                 |    | **2003** |   | **2002** |   | **2001** |   | **2000** |   |
|                             |   | **(in                  thousands)**      |    |
|     Wal-Mart |   | $                                        | 310,253 |   | $ | 309,398 |   | $ | 279,692 |   | $ | 247,404 |   | $ | 215,557 |   |
|     Kmart    |   |                                     | ---     |   |   | --- |   |   | --- |   |   | --- |   |   | 4,758 |   |
|     Other    |   |                                     | 13,300  |   |   | 15,416 |   |   | 16,924 |   |   | 10,999 |   |   | 7,155 |   |
| Total                            |   | $                                        | 323,553 |   | $ | 324,814 |   | $ | 296,616 |   | $ | 258,403 |   | $ | 227,470 |   |
|                             |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (3)    | The                  amounts for fiscal 2000 and fiscal 2001 include $3.2 million and                  $0.8                  million, respectively, of expenses incurred to close our studios                  in Kmart                  stores, including severance, net of reimbursements received from                  Kmart for                  unamortized leasehold improvements in our closed                  studios.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (4)    | Other                  expense in fiscal 2001 and 2002 represented the cumulative mark-to-market                  adjustment for the relevant fiscal year for the embedded derivative                  in our                  Series A redeemable convertible preferred stock in accordance with                  Statement of Financial Accounting Standards No. 133 (“SFAS No. 133”),                  “Accounting for Derivative Instruments and Hedging Activities,” as amended                  (see Note (7) below), which we adopted in fiscal 2001. In 1999,                  we issued                  to Jupiter Partners 15,000 shares of our Series A redeemable convertible                  preferred stock for net cash proceeds of $14.9 million. Prior to                  December                  20, 2002, our Series A redeemable convertible preferred stock was                  convertible at any time and redeemable in cash on April 30, 2011                  at the                  greater of (a) $1,000 per share or (b) the fair value of our common                  stock                  into which it is convertible, plus declared and unpaid dividends.                  On                  December 9, 2002, a special meeting of the shareholders of PCA                  was held                  and the shareholders approved modifications to the provisions of                  our                  Series A redeemable convertible preferred stock. Upon the filing                  of                  restated articles of incorporation on December 20, 2002, we modified                  the                  liquidation and redemption provisions of our Series A redeemable                  convertible preferred stock. As a result of these changes, we have                  determined the embedded derivative in our Series A redeemable convertible                  preferred stock no longer meets the requirements of bifurcation                  and                  separate accounting under the provisions of SFAS No. 133. See Notes                  (4)                  and (10) of our consolidated financial statements. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

----

| (5)    | On                  June 27, 2002, PCA LLC and PCA Finance Corp., our wholly-owned                  subsidiaries, issued $165.0 million in senior notes due 2009. Also                  on June                  27, 2002, PCA LLC entered into our prior senior secured credit                  facility,                  PCA LLC issued $10.0 million of senior subordinated notes, and                  we issued                  $30.0 million of senior subordinated discount notes. The net proceeds                  from                  the issuance of the senior notes, together with borrowings under                  our prior                  senior secured credit facility and the proceeds from the sale of                  the                  senior subordinated notes and the senior subordinated discount                  notes, were                  used to repay our other previously outstanding senior secured credit                  facility, our previously outstanding senior subordinated term loans,                  and                  related interest and fees. As a result of these extinguishments,                  we                  realized a loss on the early extinguishment of debt in fiscal 2002                  of $4.6                  million. This loss was comprised of $10.2 million for the write-off                  of                  deferred financing costs less $5.6 million for the write-off of                  accrued                  effective interest on retired increasing rate debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (6)    | For                  fiscal 2004, 2001 and 2000, a valuation allowance was provided                  against                  deferred tax assets since we concluded it was more likely than                  not that                  such deferred tax assets would not ultimately be realized. For                  fiscal                  2002, we concluded it was more likely than not that we would be                  able to                  utilize substantially all of the existing deferred tax assets.                  Therefore,                  substantially all of the valuation allowance in fiscal 2001 was                  reversed                  in fiscal 2002.                  This change in the valuation allowance generated a tax benefit                  and                  additional net income of $18.6 million in fiscal 2002 which was                  subsequently reversed as a charge in fiscal 2004. See Note (7)                  of our                  consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (7)    | Effective                  for fiscal 2001, we adopted SFAS No. 133. Our Series A preferred                  stock                  contained an embedded derivative under SFAS No. 133 which required                  bifurcation and separate accounting. As a result, PCA recorded                  a                  cumulative effect of accounting change under SFAS No. 133 of $(1.7)                  million for fiscal 2001. In addition, we recorded $(15.0) million                  in                  fiscal 2001 of other expense as we marked the embedded derivative                  to                  market in accordance with SFAS No. 133. See Note (4) above. Effective                  for                  fiscal 2000, we changed our policy for recognizing revenues relating                  to                  photographic sales to be consistent with the Securities and Exchange                  Commission’s Staff Accounting Bulletin (“SAB”) No. 101, “Revenue                  Recognition in Financial Statements.” Revenues from photographic sales are                  recognized when the photographs are delivered to customers. Costs                  relating                  to portraits processed, or in process, are deferred when incurred                  and                  expensed when the photographs are delivered and the related photographic                  sales revenue is recognized. As a result of this change in accounting                  policy, we recorded a cumulative effect of accounting change of                  $(6.0)                  million in fiscal 2000. Prior to the change, sales were recognized                  when                  portraits were purchased at the time of photography and all costs                  incurred                  or to be incurred related to portraits processed or to be processed                  but                  not delivered were accrued and expensed. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (8)    | For                  purposes of computing the ratio of earnings to fixed charges, earnings                  consist of income from continuing operations before income taxes                  plus                  fixed charges. Fixed charges consist of net interest expense                  and amortization of deferred financing costs. For fiscal                  2003,                  earnings were sufficient to cover fixed charges by $3.5 million.                  However,                  for fiscal 2004, 2002, 2001, and 2000, earnings were insufficient                  to cover                  fixed charges by $15.0 million, $0.4 million, $18.3 million, and                  $10.0                  million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (9)    | We                  consider a studio to be in our same studio sales calculation once                  it has                  been open for fifty-two weeks (i.e., in its fifty-third week).                  Same studio                  sales represent only Wal-Mart studios, both domestically and                  internationally. As noted in Note (7) above, we adopted SAB No.                  101 in                  fiscal 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (10)   | Current                  assets minus current liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

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| (11)   | Includes                  the acquisition of one Hometown Threads® company-owned store and the                  opening of one Fun Factory store.                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                           |
| (12)   | Includes                  the closings of 24 permanent studios in Meijer locations and 2                  permanent                  studios in military locations.                                            |
|   |                                                                                                                                                                                                           |
| (13)   | The                  selected financial data has been restated to give effect to the                  matters                  discussed in Note 16 to the consolidated financial                  statements. |
|   |                                                                                                                                                                                                           |

**ITEM        7.    ****MANAGEMENT’S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF        OPERATIONS**

**Description        of the Company**

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**Selected        Performance Metrics**

|                                                                  |   | **Fiscal                  Year****(1)**           |     |
|-----------------------------------------------------------------------|--------|---------------------------------------------------|----------|
|                                                                  |   | **2004**                                          |     | **2003** |   | **2002** |   |
|                                                                  |   | **(dollar                  amounts in millions)** |     |
| **Financial                  and Operating Data:**                    |   |                                              |     |   |   |   |   |
| Sales                                                                 |   | $                                                 | 323.6    |   | $ | 324.8 |   | $ | 296.6 |   |
| Gross                  profit                                         |   |                                              | 65.2     |   |   | 79.8 |   |   | 77.1 |   |
| Income                  from operations                               |   |                                              | 17.5     |   |   | 34.2 |   |   | 35.6 |   |
| Income                  (loss) before taxes                           |   |                                              | (15.0    | ) |   | 3.5 |   |   | (0.4 | ) |
| Net                  income (loss) (2)                                |   |                                              | (29.7    | ) |   | 1.3 |   |   | 14.4 |   |
|                                                                  |   |                                              |     |   |   |   |   |   |   |   |
| Permanent                  studios/stores at end of year              |   |                                              | 2,416    |   |   | 2,240 |   |   | 2,001 |   |
| Change                  in permanent studios/stores (3)               |   |                                              | 176      |   |   | 239 |   |   | 224 |   |
| Customers                  served (in millions)                       |   |                                              | 7.3      |   |   | 7.3 |   |   | 6.7 |   |
|                                                                  |   |                                              |     |   |   |   |   |   |   |   |
| **Change                  over Prior Year:**                          |   |                                              |     |   |   |   |   |   |   |   |
| Sales                                                                 |   |                                              | (0.4     | )% |   | 9.5 | % |   | 14.8 | % |
| Gross                  profit                                         |   |                                              | (18.3    | )% |   | 3.5 | % |   | 16.7 | % |
| Income                  from operations                               |   |                                              | (48.8    | )% |   | (3.9 | )% |   | 34.7 | % |
| Income                  (loss) before taxes                           |   |                                              | (531.4   | )% |   | 1,008.4 | % |   | 97.9 | % |
| Net                  income (loss) (2)                                |   |                                              | (2,349.6 | )% |   | (90.8 | )% |   | 172.0 | % |
|                                                                  |   |                                              |     |   |   |   |   |   |   |   |
| Permanent                  studios/stores                             |   |                                              | 7.9      | % |   | 11.9 | % |   | 12.6 | % |
| New                  permanent studios/stores (3)                     |   |                                              | (26.4    | )% |   | 6.7 | % |   | 4.2 | % |
| Customers                  served                                     |   |                                              | 0.4      | % |   | 9.2 | % |   | 12.8 | % |
| Same                  studio sales percentage increase (decrease) (4) |   |                                              | (7.0     | )% |   | 1.5 | % |   | 5.2 | % |

|   |                                                                                                                                                                                                                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Our                  fiscal years 2004, 2003, and 2002 ended on January 30, 2005, February                  1,                  2004 and February 2, 2003, respectively. Each fiscal year presented                  consisted of 52 weeks.                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                        |
| (2)    | For                  fiscal 2004, a valuation allowance was provided against deferred                  tax                  assets since we concluded it was more likely than not that such                  deferred                  tax assets would not ultimately be realized. See Note (7) of our                  consolidated financial statements. |

| (3)    | In                  fiscal 2004, we opened 200 new permanent studios and 1 Fun Factory                  store                  and acquired 1 Hometown Threads® company-owned store in Wal-Mart stores                  worldwide. However, we closed 24 permanent studios in Meijer stores                  and 2                  permanent studios in military locations during fiscal                  2004.              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (4)    | We                  consider a studio to be in our same studio sales calculation once                  it has                  been open for fifty-two weeks (i.e., in its fifty-third week).                  Same studio                  sales represent Wal-Mart studios, both domestically and internationally,                  as such calculation is not significant for our non-Wal-Mart-based                  business. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                               |

----

**Executive        Summary**

*Financial        Results*

*Amendment        to Prior Senior Secured Credit Facility*

*Issues        Regarding Our Key Supplier*

----

*Going        Concern with Respect to Operating Subsidiary*

*Suspected        Fraudulent Activities by Former Employees at Our Mexican        Subsidiary*

----

*Late        Filing of Form 10-K and Form 10-Q*

*Notification        of Late Filing*
*Notification        of Late Filing*

*Classification        of Long Term Indebtedness*

----

*Amendments        to the Senior Subordinated Notes and the Senior Subordinated Discount        Notes*

*pari        passu*

*Recent        Financing Transactions*

----

*Non-Portrait        Photography-Related Specialty Retail Concepts*

**Sales        and Expenses**

----

**Statement        of Operations - By Percentage of Sales**

|                                               |   | **Fiscal                  Year** |   |
|----------------------------------------------------|--------|----------------------------------|--------|
|                                               |   |  **2004**                   |   |  **2003** |   |  **2002** |   |
| Sales                                              |   |                             | 100.0  | % |   | 100.0 | % |   | 100.0 | % |
| Cost                  of sales                     |   |                             | 79.9   |   |   | 75.4 |   |   | 74.0 |   |
| Gross                  profit                      |   |                             | 20.1   |   |   | 24.6 |   |   | 26.0 |   |
| General                  and administrative        |   |                             | 14.7   |   |   | 14.0 |   |   | 13.9 |   |
| Amortization                  of intangibles       |   |                             | ---    |   |   | --- |   |   | 0.1 |   |
| Income                  from operations            |   |                             | 5.4    |   |   | 10.5 |   |   | 12.0 |   |
| Interest                  expense, net             |   |                             | (10.0  | ) |   | (9.5 | ) |   | (9.6 | ) |
| Other                  expense                     |   |                             | ---    |   |   | --- |   |   | (0.9 | ) |
| Early                  extinguishment of debt      |   |                             | ---    |   |   | --- |   |   | (1.5 | ) |
| Income                  (loss) before income taxes |   |                             | (4.6   | ) |   | 1.1 |   |   | (0.1 | ) |
| Income                  tax (provision) benefit    |   |                             | (4.6   | ) |   | (0.7 | ) |   | 5.0 |   |
| Net                  income (loss)                 |   |                             | (9.2)% |  |   | 0.4 | % |   | 4.9 | % |
|                                               |   |                             |   |   |   |   |   |   |   |   |

----

**Results        of Operations**

*2004        Fiscal Year Compared With 2003 Fiscal Year.*

| **Attributable                  to**                                                                                                                        |   | **Amount****(in                  millions)** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
| 7.0%                  decrease in same studio sales in Wal-Mart permanent portrait                  studios                                                 |   | $                                            | (20.2  | ) |
| Wal-Mart                  permanent portrait studios not yet included in the same studio                  sales                  base                       |   |                                         | 24.9   |   |
| Decrease                  in sales in our Wal-Mart traveling locations due to fewer locations                  visited                                      |   |                                         | (4.3   | ) |
| Total                  increase attributable to our Wal-Mart portrait photography                  business                                                 |   |                                         | 0.4    |   |
| Increase                  in other retail businesses                                                                                                        |   |                                         | 0.3    |   |
| Decrease                  in sales in institutional segment as a result of a decrease in                  photography                  sessions in churches |   |                                         | (2.0   | ) |
| **Total                  decrease in sales**                                                                                                                |   | $                                            | (1.3   | ) |
|                                                                                                                                                        |   |                                         |   |   |

| **Attributable                  to**                                                                                                                                                                                                                                              |   |  % |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|
| Increase                  in retail photography labor, general studio supplies, freight costs                  for                  portraits and supplies and distribution costs as a percentage of                  sales due                  to decrease in same studio sales |   |    | (3.2   | )% |
| Increase                  in life and health insurance costs for retail employees                                                                                                                                                                                                 |   |    | (0.3   | ) |
| Change                  in our product mix                                                                                                                                                                                                                                        |   |    | (0.7   | ) |
| Increase                  in depreciation expense due to studio expansion                                                                                                                                                                                                         |   |    | (0.4   | ) |
| Other                                                                                                                                                                                                                                                                             |   |    | 0.1    |   |
| **Total                  decrease in gross profit percentage**                                                                                                                                                                                                                    |   |    | (4.5   | )% |
|                                                                                                                                                                                                                                                                              |   |    |   |   |

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| **Attributable                  to**                                                                                                                                                                                                                                                              |   | **Amount****(in                  millions)** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
| Increase                  in professional services primarily related to our Sarbanes-Oxley                  effort,                  legal services and audit fees                                                                                                                                |   | $                                            | 2.3     |   |
| Decrease                  in workers’ compensation expense and general casualty insurance expense                  primarily due to elevated charges experienced in fiscal                  2003                                                                                            |   |                                         | (1.8    | ) |
| Reduction                  in expense related to termination of benefit plan for certain retired                  employees                                                                                                                                                                       |   |                                         | (1.1    | ) |
| Increase                  in foreign currency transaction gain                                                                                                                                                                                                                                    |   |                                         | (0.3    | ) |
| Management’s                  estimate of settlement of outstanding tax claims due to Mexican                  tax                  authority from our Mexican subsidiary                  as the result of suspected fraudulent activities conducted by Mexican                  employees |   |                                         | 1.5     |  |
| Other                    increases related to Mexican subsidiary                                                                                                                                                                                                                                  |   |                                         | 0.7     |   |
| Loss                  on disposal of property, plant and equipment                                                                                                                                                                                                                                |   |                                         | 0.6     |   |
| Other                                                                                                                                                                                                                                                                                             |   |                                         | 0.2     |   |
| **Total                  increase in general and administrative expenses**                                                                                                                                                                                                                        |   | **$**                                        | **2.1** |   |
|                                                                                                                                                                                                                                                                                              |   |                                         |    |   |

| **Attributable                  to**                                                                        |   | **Amount****(in                  millions)** |    |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
| Increase                  from senior subordinated discount notes issued in June                  2002      |   | $                                            | 1.0     |   |
| Increase                  from supplier provided financing                                                  |   |                                         | 0.3     |   |
| Increase                  from prior senior secured credit facility entered into June                  2002 |   |                                         | 0.5     |   |
| **Total                  increase in interest expense**                                                     |   | **$**                                        | **1.8** |   |
|                                                                                                        |   |                                         |    |   |

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*2003        Fiscal Year Compared With 2002 Fiscal Year.*

| **Attributable                  to**                                                                                                                                        |   | **Amount****(in                  millions)** |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|----------|
| 1.5%                  increase in same studio sales in Wal-Mart permanent portrait                  studios                                                                 |   | $                                            | 3.8      |   |
| Wal-Mart                  permanent portrait studios not yet included in the same studio                  sales                  base                                       |   |                                         | 28.2     |   |
| Decrease                  in sales in our Wal-Mart traveling locations due to fewer locations                  visited                                                      |   |                                         | (2.3     | ) |
| Total                  increase attributable to our Wal-Mart business                                                                                                       |   |                                         | 29.7     |   |
| Increase                  in other retail businesses                                                                                                                        |   |                                         | 0.3      |   |
| Decrease                  in sales in institutional portraiture as a result of a decrease                  in                  photography sessions in churches and schools |   |                                         | (1.8     | ) |
| **Total                  increase in sales**                                                                                                                                |   | **$**                                        | **28.2** |   |
|                                                                                                                                                                        |   |                                         |     |   |

| **Attributable                  to**                                                                                         |   |  **%** |     |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------|----------|
| Increase                  in workers’ compensation expense pertaining to retail                  employees             |   |        | (0.1     | )% |
| Increase                  in life and health insurance costs for retail employees                                            |   |        | (0.4     | ) |
| Change                  in our product mix                                                                                   |   |        | (0.3     | ) |
| Increase                  in depreciation expense due to studio expansion                                                    |   |        | (0.2     | ) |
| Lower                  of cost or market write-down of inventory pertaining to low-priced                  portrait packages |   |        | (0.1     | ) |
| Other                                                                                                                        |   |        | (0.3     | ) |
| **Total                  decrease in gross profit percentage**                                                               |   |        | **(1.4** | **)%** |
|                                                                                                                         |   |        |     |   |

----

| **Attributable                  to**                                                                                                                                                                                                                                                                                 |   | **Amount****(in                  millions)** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
| Increase                  in expenses related to 1995 to 2000 plan years administered by                  insolvent                  workers’ compensation/general casualty carrier                                                                                                                            |   | $                                            | 1.7     |   |
| Increase                  in expenses related to 2000 to 2003 plan years administered by                  second                  insolvent workers’ compensation/general casualty carrier                                                                                                                     |   |                                         | 0.8     |   |
| Increase                  in expenses related 2003 plan year administered by workers’                  compensation/general casualty carrier who discontinued operations                  in North                  America                                                                                    |   |                                         | 0.3     |   |
| Total                  expenses related to insolvent and discontinued workers’                  compensation/general casualty carriers                                                                                                                                                                         |   |                                         | 2.8     |   |
| Increase                  in other general liability insurance expense                                                                                                                                                                                                                                               |   |                                         | 0.4     |   |
| Loss                  on disposals of property and equipment                                                                                                                                                                                                                                                         |   |                                         | 0.5     |   |
| Increase                  in payroll cost                                                                                                                                                                                                                                                                            |   |                                         | 1.6     |   |
| Stock                  option compensation expense as a result of adopting SFAS No. 123,                  “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148,                  “Accounting for Stock-Based Compensation—Transition and                  Disclosure” |   |                                         | 0.1     |   |
| Other                  decreases related to Mexico subsidiary                                                                                                                                                                                                                                                        |   |                                         | (0.7    | ) |
| Other                  decreases in general and administrative expenses                                                                                                                                                                                                                                              |   |                                         | (0.4    | ) |
| **Total                  increase in general and administrative expenses**                                                                                                                                                                                                                                           |   | **$**                                        | **4.3** |   |
|                                                                                                                                                                                                                                                                                                                 |   |                                         |    |   |

----

| **Attributable                  to**                                                                        |   | **Amount****(in                  millions)** |    |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
| Increase                  from senior notes issued in June 2002                                             |   | $                                            | 8.0     |   |
| Increase                  from senior subordinated discount notes issued in June                  2002      |   |                                         | 2.8     |   |
| Increase                  from prior senior secured credit facility entered into June                  2002 |   |                                         | 0.3     |   |
| Decrease                  from senior term loans retired in June 2002                                       |   |                                         | (2.5    | ) |
| Decrease                  from senior subordinated debt retired in June 2002                                |   |                                         | (6.5    | ) |
| **Total                  increase in interest expense**                                                     |   | **$**                                        | **2.1** |   |
|                                                                                                        |   |                                         |    |   |

**Liquidity        and Capital Resources**

*Liquidity*

----

----

----

----

*Seasonality.        *

*Purchases        of Property and Equipment*

----

*Net        Cash Provided by/Used in Operating Activities*

| **Changes                  Attributable to**                                 |   | **Amount****(in                  millions)** |    |
|------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
| Net                  loss                                                    |   | $                                            | (31.1   | ) |
| Trade                  accounts payable                                      |   |                                         | 15.4    |   |
| Deferred                  income taxes                                       |   |                                         | 11.6    |   |
| Other                  current accrued liabilities                           |   |                                         | 3.6     |   |
| Other                  noncurrent accrued liabilities                        |   |                                         | (2.7    | ) |
| Inventories                                                                  |   |                                         | 2.5     |   |
| Accrued                  interest                                            |   |                                         | 2.1     |   |
| Prepaid                  expenses and other assets                           |   |                                         | 1.5     |   |
| Depreciation                  and amortization                               |   |                                         | 1.4     |   |
| Loss                  on disposal                                            |   |                                         | 0.6     |   |
| Paid-in-kind                  interest                                       |   |                                         | 1.0     |   |
| Accounts                  receivable                                         |   |                                         | 0.6     |   |
| Other                                                                        |   |                                         | (0.2    | ) |
| **Total                  increase in cash provided by operating activities** |   | **$**                                        | **6.3** |   |
|                                                                         |   |                                         |    |   |

| **Changes                  Attributable to**                                 |   | **Amount****(in                  millions)** |     |
|------------------------------------------------------------------------------|--------|----------------------------------------------|----------|
| Net                  income                                                  |   | $                                            | (13.1    | ) |
| Trade                  accounts payable                                      |   |                                         | (5.3     | ) |
| Accrued                  interest                                            |   |                                         | (9.7     | ) |
| Other                  current accrued liabilities                           |   |                                         | 0.2      |   |
| Other                  noncurrent accrued liabilities                        |   |                                         | 2.6      |   |
| Inventories                                                                  |   |                                         | 0.5      |   |
| Prepaid                  expenses and other assets                           |   |                                         | (1.5     | ) |
| Depreciation                  and amortization                               |   |                                         | 1.2      |   |
| Paid-in-kind                  interest                                       |   |                                         | 1.4      |   |
| Change                  in fair value of derivative instruments              |   |                                         | (2.8     | ) |
| Early                  extinguishment of debt                                |   |                                         | (4.6     | ) |
| Provision                  for deferred income taxes                         |   |                                         | 17.2     |   |
| Loss                  on disposal of property and equipment                  |   |                                         | 0.7      |   |
| Amortization                  of deferred financing costs                    |   |                                         | (0.5     | ) |
| Interest                  expense—effective interest method            |   |                                         | 0.5      |   |
| Amortization                  of debt discounts                              |   |                                         | 0.2      |   |
| Other                                                                        |   |                                         | 0.1      |   |
| **Total                  decrease in cash provided by operating activities** |   | **$**                                        | **12.9** |   |
|                                                                         |   |                                         |     |   |

*Net        Cash Used in Investing Activities*

----

*Net        Cash Provided by/Used in Financing Activities*

*Interest        Rate Exposure. *

**Contractual        Obligations and Commercial Commitments**

----

|                                                                                                           |   | **Repayment                  by Period** |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                           |   | **Total**                                |   | **Less                  than****1                  year (fiscal****2005)** |   | **2-3                  years (fiscal****2006                  &****2007)** |   | **4-5                  years (fiscal 2008 &****2009** |   | **More                  than 5 years (beyond****fiscal                  2009)** |   |
|                                                                                                           |   | **(in                  millions)**       |   |
| Long-term                  debt obligations:                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |
| Lines                  of credit (prior senior secured credit facility)                                        |   | $                                        | 29.0   |   | $ | 14.0 |   | $ | 15.0 |   | $ | --- |   | $ | --- |   |
| Commitment                  and letters of credit fees (prior senior secured credit                  facility) |   |                                     | 1.8    |   |   | 0.8 |   |   | 1.0 |   |   | --- |   |   | --- |   |
| Senior                  notes due 2009                                                                         |   |                                     | 165.0  |   |   | --- |   |   | --- |   |   | 165.0 |   |   | --- |   |
| Interest                  payments on senior notes due 2009                                                    |   |                                     | 98.0   |   |   | 19.6 |   |   | 49.0 |   |   | 29.4 |   |   | --- |   |
| Senior                  subordinated notes                                                                     |   |                                     | 10.0   |   |   | --- |   |   | --- |   |   | --- |   |   | 10.0 |   |
| Interest                  payments on senior subordinated notes                                           |   |                                     | 7.6    |   |   | 1.4 |   |   | 2.8 |   |   | 2.8 |   |   | 0.6 |   |
| Senior                  subordinated discount notes (original principal amount)                                |   |                                     | 30.0   |   |   | --- |   |   | --- |   |   | --- |   |   | 30.0 |   |
| Paid-in-kind                  interest capitalized on senior subordinated discount                  notes |   |                                     | 36.3   |   |   | --- |   |   | --- |   |   | --- |   |   | 36.3 |   |
| Interest                  payments on senior subordinated discount notes                                  |   |                                     | 32.8   |   |   | --- |   |   | 5.5 |   |   | 21.8 |   |   | 5.5 |   |
| Total                  long-term debt obligations                                                              |   |                                     | 410.5  |   |   | 35.8 |   |   | 73.3 |   |   | 219.0 |   |   | 82.4 |   |
| Purchase                  obligations:                                                                         |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Installment                  purchase agreement                                                                |   |                                     | 0.2    |   |   | 0.2 |   |   | --- |   |   | --- |   |   | --- |   |
| Other                  obligations:                                                                            |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  lease obligations                                                                   |   |                                     | 3.2    |   |   | 1.4 |   |   | 1.3 |   |   | 0.4 |   |   | 0.1 |   |
| Sub-lease                  guarantee obligations                                                               |   |                                     | 2.0    |   |   | 0.6 |   |   | 1.0 |   |   | 0.4 |   |   | --- |   |
| Severance                  agreements with former employees                                                    |   |                                     | 0.1    |   |   | 0.1 |   |   | --- |   |   | --- |   |   | --- |   |
| Series                  A preferred stock                                                                      |   |                                     | 15.0   |   |   | --- |   |   | --- |   |   | --- |   |   | 15.0 |   |
| Total                  other obligations                                                                       |   |                                     | 20.3   |   |   | 2.1 |   |   | 2.3 |   |   | 0.8 |   |   | 15.1 |   |
| Total                  contractual cash obligations                                                            |   | $                                        | 431.0  |   | $ | 38.1 |   | $ | 75.6 |   | $ | 219.8 |   | $ | 97.5 |   |
|                                                                                                           |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Off        Balance Sheet Arrangements**

----

**Critical        Accounting Policies**

*Revenue        Recognition and Deferred Costs*

*Workers’        Compensation and General Insurance*

*Income        Tax*

----

*Goodwill*

*Depreciation        of Property and Equipment*

| Land                  improvements                           | 10                  to 30 years |
|--------------------------------------------------------------|---------------------------------|
| Buildings                  and improvements                  | 10                  to 55 years |
| Photographic,                  sales and finishing equipment | 3                  to 13 years  |
| Studio                  improvements                         | 3                  to 10 years  |

*Long-Lived        Asset Impairments*

**Inflation        **

**ITEM        7A.    ****QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

----

|    |   | **Fiscal                  2004**    |   | **Fiscal                  2003** |   | **Fiscal                  2002** |   |
|---------|--------|-------------------------------------|--------|----------------------------------|--------|----------------------------------|--------|
|    |   | **(in                  thousands)** |   |
|    |   | +10%                                |   | -10%                             |   | +10%                             |   | -10% |   | +10% |   | -10% |   |
| Canada  |   | $                                   | (287   | )                                | $      | 372                              |   | $ | (492 | ) | $ | 617 |   | $ | (385 | ) | $ | 471 |   |
| Mexico  |   | $                                   | (177   | )                                | $      | 212                              |   | $ | (291 | ) | $ | 363 |   | $ | (166 | ) | $ | 212 |   |
| Germany |   | $                                   | (275   | )                                | $      | 329                              |   | $ | (178 | ) | $ | 209 |   | $ | (64 | ) | $ | 78 |   |
| U.K.    |   | $                                   | (32    | )                                | $      | 39                               |   | $ | (25 | ) | $ | 26 |   | $ | (13 | ) | $ | 16 |   |
|    |   |                                |   |                             |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**ITEM        8.    **
**FINANCIAL        STATEMENTS AND SUPPLEMENTARY        DATA**

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**INDEX        TO CONSOLIDATED FINANCIAL STATEMENTS**

| Report                  of Independent Registered Public Accounting                  Firm                                                                                                                                                                                                                | 54     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                     |   |
| Consolidated                  Balance Sheets as of January 30, 2005                  and February 1, 2004 (Restated)                                                                                                                                                                                     | 55     |
|                                                                                                                                                                                                                                                                                                     |   |
| Consolidated                  Statements of Operations for                  the fiscal year ended January 30, 2005, February 1, 2004 (Restated),                  and                  February 2, 2003 (Restated)                                                                                       | 57     |
|                                                                                                                                                                                                                                                                                                     |   |
| Consolidated                  Statements of Shareholders’                  Deficiency and Comprehensive Income (Loss) for the fiscal year                  ended                  January 30, 2005, February 1, 2004 (Restated), and February 2,                  2003                  (Restated) | 58     |
|                                                                                                                                                                                                                                                                                                     |   |
| Consolidated                  Statements of Cash Flows for the fiscal                  year ended January 30, 2005, February 1, 2004 (Restated), and February                  2,                  2003 (Restated)                                                                                       | 59     |
|                                                                                                                                                                                                                                                                                                     |   |
| Notes                  to Consolidated Financial                  Statements                                                                                                                                                                                                                             | 61     |

----

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING        FIRM**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEETS**

**(dollar        amounts in thousands)**

|                                                         |   |  **January                  30,****2005** |     | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   |
|--------------------------------------------------------------|--------|------------------------------------------------|----------|-------------------------------------------------------------------------------------------------------------|--------|
| **ASSETS**                                                   |   |                                           |     |                                                                                                        |   |
| CURRENT                  ASSETS:                             |   |                                           |     |                                                                                                        |   |
| Cash                  and cash equivalents                   |   | $                                              | 15,178   |                                                                                                        | $      | 4,820 |   |
| Accounts                  receivable                         |   |                                           | 2,781    |                                                                                                        |   | 2,593 |   |
| Inventories                                                  |   |                                           | 11,439   |                                                                                                        |   | 12,236 |   |
| Deferred                  income taxes                       |   |                                           | 108      |                                                                                                        |   | 1,605 |   |
| Prepaid                  expenses and other assets           |   |                                           | 3,303    |                                                                                                        |   | 3,626 |   |
| Total                  current assets                        |   |                                           | 32,809   |                                                                                                        |   | 24,880 |   |
| PROPERTY                  AND EQUIPMENT:                     |   |                                           |     |                                                                                                        |   |   |   |
| Land                  and improvements                       |   |                                           | 2,306    |                                                                                                        |   | 2,306 |   |
| Buildings                  and improvements                  |   |                                           | 13,684   |                                                                                                        |   | 13,117 |   |
| Photographic,                  sales and finishing equipment |   |                                           | 152,315  |                                                                                                        |   | 138,679 |   |
| Studio                  improvements                         |   |                                           | 26,530   |                                                                                                        |   | 23,566 |   |
| Construction                  in progress                    |   |                                           | 3,048    |                                                                                                        |   | 1,085 |   |
| Total                                                        |   |                                           | 197,883  |                                                                                                        |   | 178,753 |   |
| Accumulated                  depreciation and amortization   |   |                                           | (123,974 | )                                                                                                      |   | (111,931 | )  |
| Property                  and equipment, net                 |   |                                           | 73,909   |                                                                                                        |   | 66,822 |   |
| GOODWILL                                                     |   |                                           | 52,989   |                                                                                                        |   | 51,643 |   |
| OTHER                  INTANGIBLE ASSETS                     |   |                                           | 135      |                                                                                                        |   | --- |   |
| DEFERRED                  FINANCING COSTS, NET               |   |                                           | 6,823    |                                                                                                        |   | 8,466 |   |
| DEFERRED                  INCOME TAXES, NONCURRENT           |   |                                           | ---      |                                                                                                        |   | 11,835 |   |
| OTHER                  ASSETS                                |   |                                           | 127      |                                                                                                        |   | 19 |   |
| TOTAL                  ASSETS                                |   | $                                              | 166,792  |                                                                                                        | $      | 163,665 |   |
|                                                         |   |                                           |     |                                                                                                        |   |   |   |

**See        notes to consolidated financial statements.**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEETS (continued)**

**(dollar        amounts in thousands)**

|                                                                                                                                                                                                                                                                                       |   | **January                  30,****2005** |     | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|-------------------------------------------------------------------------------------------------------------|--------|
| **LIABILITIES                  AND SHAREHOLDERS’ DEFICIENCY**                                                                                                                                                                                                                        |   |                                     |     |                                                                                                        |   |
| CURRENT                  LIABILITIES:                                                                                                                                                                                                                                                      |   |                                     |     |                                                                                                        |   |
| Short-term                  borrowings                                                                                                                                                                                                                                                     |   | $                                        | ---      |                                                                                                        | $      | 10,000 |   |
| Current                  portion of long-term debt                                                                                                                                                                                                                                         |   |                                     | 182      |                                                                                                        |   | 279 |   |
| Accounts                  payable—trade                                                                                                                                                                                                                                              |   |                                     | 36,179   |                                                                                                        |   | 23,667 |   |
| Accrued                  insurance                                                                                                                                                                                                                                                         |   |                                     | 4,141    |                                                                                                        |   | 4,043 |   |
| Accrued                  income taxes                                                                                                                                                                                                                                                      |   |                                     | 2,022    |                                                                                                        |   | 858 |   |
| Accrued                  compensation                                                                                                                                                                                                                                                      |   |                                     | 4,834    |                                                                                                        |   | 5,309 |   |
| Accrued                  interest                                                                                                                                                                                                                                                          |   |                                     | 10,377   |                                                                                                        |   | 10,197 |   |
| Other                  accrued liabilities                                                                                                                                                                                                                                                 |   |                                     | 14,467   |                                                                                                        |   | 10,119 |   |
| Total                  current liabilities                                                                                                                                                                                                                                                 |   |                                     | 72,202   |                                                                                                        |   | 64,472 |   |
| LONG-TERM                  DEBT                                                                                                                                                                                                                                                            |   |                                     | 245,680  |                                                                                                        |   | 219,658 |   |
| DEFERRED                  INCOME TAXES                                                                                                                                                                                                                                                     |   |                                     | 108      |                                                                                                        |   | --- |   |
| OTHER                  LIABILITIES                                                                                                                                                                                                                                                         |   |                                     | 4,843    |                                                                                                        |   | 5,679 |   |
| TOTAL                  LIABILITIES                                                                                                                                                                                                                                                         |   |                                     | 322,833  |                                                                                                        |   | 289,809 |   |
| COMMITMENTS                  AND CONTINGENCIES                                                                                                                                                                                                                                             |   |                                     |     |                                                                                                        |   |   |   |
| SERIES                  A REDEEMABLE CONVERTIBLE PREFERRED STOCK, $0.01 par value at January                  30,                  2005 and $10.00 par value at February 1, 2004 (authorized—200,000 shares;                  outstanding—15,000 shares)                       |   |                                     | 15,000   |                                                                                                        |   | 15,000 |   |
| SHAREHOLDERS’                  DEFICIENCY:                                                                                                                                                                                                                                           |   |                                     |     |                                                                                                        |   |   |   |
| Common                  stock, $0.01 par value at January 30, 2005 and $0.20 par value                  at February                  1, 2004 (authorized—20,000,000 shares; issued and outstanding at January                  31, 2005 and February 1, 2004—2,294,352 shares) |   |                                     | 23       |                                                                                                        |   | 459 |   |
| Warrants                  to purchase Series A redeemable convertible preferred stock (issued                  and                  outstanding—287)                                                                                                                                 |   |                                     | 642      |                                                                                                        |   | 642 |   |
| Warrants                  to purchase common stock (issued and outstanding—306,610)                                                                                                                                                                                                  |   |                                     | 2,947    |                                                                                                        |   | 2,947 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                |   |                                     | 24,104   |                                                                                                        |   | 23,668 |   |
| Deferred                  compensation                                                                                                                                                                                                                                                     |   |                                     | (256     | )                                                                                                           |   | (333 | ) |
| Accumulated                  deficit                                                                                                                                                                                                                                                       |   |                                     | (198,233 | )                                                                                                           |   | (168,493 | ) |
| Accumulated                  other comprehensive loss                                                                                                                                                                                                                                      |   |                                     | (268     | )                                                                                                           |   | (34 | ) |
| Total                  shareholders’ deficiency                                                                                                                                                                                                                                      |   |                                     | (171,041 | )                                                                                                           |   | (141,144 | ) |
| TOTAL                  LIABILITIES AND SHAREHOLDERS’ DEFICIENCY                                                                                                                                                                                                                      |   | $                                        | 166,792  |                                                                                                        | $      | 163,665 |   |
|                                                                                                                                                                                                                                                                                       |   |                                     |     |                                                                                                        |   |   |   |

**See        notes to consolidated financial statements.**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF        OPERATIONS**

**(dollar        amounts in thousands)**

|                                               |   | **For                  the Fiscal Year Ended** |    |
|----------------------------------------------------|--------|------------------------------------------------|---------|
|                                               |   |  **January                  30,****2005** |    | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   | **February                  2,****2003****(as                  restated;****see                  Note 16)** |   |
| SALES                                              |   | $                                              | 323,553 |   | $ | 324,814 |   | $ | 296,616 |   |
| COST                  OF SALES                     |   |                                           | 258,396 |   |   | 245,028 |   |   | 219,551 |   |
| GROSS                  PROFIT                      |   |                                           | 65,157  |   |   | 79,786 |   |   | 77,065 |   |
| GENERAL                  AND ADMINISTRATIVE        |   |                                           | 47,669  |   |   | 45,610 |   |   | 41,300 |   |
| AMORTIZATION                  OF INTANGIBLES       |   |                                           | ---     |   |   | --- |   |   | 192 |   |
| INCOME                  FROM OPERATIONS            |   |                                           | 17,488  |   |   | 34,176 |   |   | 35,573 |   |
| INTEREST                  INCOME                   |   |                                           | 8       |   |   | 10 |   |   | 14 |   |
| INTEREST                  EXPENSE                  |   |                                           | (32,467 | ) |   | (30,716 | ) |   | (28,624 | ) |
| OTHER                  EXPENSE                     |   |                                           | ---     |   |   | --- |   |   | (2,776 | ) |
| EARLY                  EXTINGUISHMENT OF DEBT      |   |                                           | ---     |   |   | --- |   |   | (4,569 | ) |
| INCOME                  (LOSS) BEFORE INCOME TAXES |   |                                           | (14,971 | ) |   | 3,470 |   |   | (382 | ) |
| INCOME                  TAX BENEFIT (PROVISION)    |   |                                           | (14,769 | ) |   | (2,148 | ) |   | 14,817 |   |
| NET                  INCOME (LOSS)                 |   | $                                              | (29,740 | ) | $ | 1,322 |   | $ | 14,435 |   |
|                                               |   |                                           |    |   |   |   |   |   |   |   |

**See        notes to consolidated financial statements.**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF SHAREHOLDERS’ DEFICIENCY        AND COMPREHENSIVE INCOME (LOSS)**

**(dollar        amounts in thousands)**

|                                                                                                             |   | **Common                  Stock** |      | **Warrants                  to Purchase Series A Redeemable Convertible Preferred****Stock** |   | **Warrants                  to Purchase****Common                  Stock** |   | **Additional                  Paid-In****Capital** |   | **Deferred****Comp-****ensation** |   | **Accumul-ated****Deficit** |   | **Compre-****hensive****Income****(Loss)** |     | **Accumul-****ated****Other****Compre-****hensive****Income****(Loss)** |   | **Total****Share-****holders’****Deficiency** |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|----------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|----------------------------------------------------|--------|-----------------------------------|--------|-----------------------------|--------|--------------------------------------------|----------|-------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                                                             |   | **Shares**                        |      | **Amount**                                                                                   |   | **Shares**                                                                 |   | **Amount**                                         |   | **Shares**                        |   | **Amount**                  |   |
| **BALANCE,                  FEBRUARY 3, 2002 (as previously reported)**                                          |   |                              | 2,293,152 |                                                                                         | $      | 458                                                                        |   |                                               | ---    |                              | $      | ---                         |   |                                       | 508,300  |                                                                    | $      | 4,843                                               |   | $ | --- |   | $ | --- |   | $ | (182,173 | ) |   |   |   | $ | (518 | ) | $ | (177,390 | ) |
| Restatement                  adjustment (see Note 16)                                                            |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   | (1,645 | ) |   |   |   |   | (142 | ) |   | (1,787 | ) |
| **BALANCE,                FEBRUARY 3, 2002 (as restated; see Note 16)**                                          |   |                              | 2,293,152 |                                                                                         |   | 458                                                                        |   |                                               | ---    |                              |   | ---                         |   |                                       | 508,300  |                                                                    |   | 4,843                                               |   |   | --- |   |   | --- |   |   | (183,818 | ) |   |   |   |   | (660 | ) |   | (179,177 | ) |
| Comprehensive                  income:                                                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income (as restated; see Note 16)                                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   | 14,435 |   | $ | 14,435 |   |   |   |   |   | 14,435 |   |
| Foreign                  currency translation adjustment, net of tax (as restated; see Note                  16) |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   | 362 |   |   | 362 |   |   | 362 |   |
| Total                  comprehensive income (as restated; see Note 16)                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   | $ | 14,797 |   |   |   |   |   |   |   |
| Accretion                  of Series A redeemable convertible preferred stock                                    |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   | (432 | ) |   |   |   |   |   |   |   | (432 | ) |
| Reclassification                  of embedded derivative                                                         |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   | 20,412 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,412 |   |
| Issuance                  of warrants                                                                            |   |                              |      |                                                                                         |   |                                                                       |   |                                               | 287    |                              |   | 642                         |   |                                       | 52,460   |                                                                    |   | 965                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,607 |   |
| Cancellation                  of warrants                                                                        |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       | (254,150 | )                                                                       |   | (2,861                                              | )      |   | 2,861 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | --- |   |
| **BALANCE,                  FEBRUARY 2, 2003 (as restated; see Note 16)**                                        |   |                              | 2,293,152 |                                                                                         |   | 458                                                                        |   |                                               | 287    |                              |   | 642                         |   |                                       | 306,610  |                                                                    |   | 2,947                                               |   |   | 23,273 |   |   | --- |   |   | (169,815 | ) |   |   |   |   | (298 | ) |   | (142,793 | ) |
| Comprehensive                  income:                                                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income (as restated; see Note 16)                                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   | 1,322 |   | $ | 1,322 |   |   |   |   |   | 1,322 |   |
| Foreign                  currency translation adjustment, net of tax (as restated; see Note                  16) |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   | 264 |   |   | 264 |   |   | 264 |   |
| Total                  comprehensive income (as restated; see Note 16)                                           |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   | $ | 1,586 |   |   |   |   |   |   |   |
| Stock                  option compensation                                                                       |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   | 386 |   |   | (333 | ) |   |   |   |   |   |   |   |   |   |   | 53 |   |
| Issuance                  of common stock                                                                        |   |                              | 1,200     |                                                                                         |   | 1                                                                          |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   | 9 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10 |   |
| **BALANCE,                  FEBRUARY 1, 2004 (as restated; see Note 16)**                                        |   |                              | 2,294,352 |                                                                                         |   | 459                                                                        |   |                                               | 287    |                              |   | 642                         |   |                                       | 306,610  |                                                                    |   | 2,947                                               |   |   | 23,668 |   |   | (333 | ) |   | (168,493 | ) |   |   |   |   | (34 | ) |   | (141,144 | ) |
| Comprehensive                  loss:                                                                             |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                        |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   | (29,740 | ) | $ | (29,740 | ) |   |   |   |   | (29,740 | ) |
| Foreign                  currency translation adjustment, net of tax                                             |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   |   | (234 | ) |   | (234 | ) |   | (234 | ) |
| Total                  comprehensive loss                                                                        |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   |   |   |   |   |   | $ | (29,974 | ) |   |   |   |   |   |   |
| Stock                  option compensation                                                                       |   |                              |      |                                                                                         |   |                                                                       |   |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   |   |   |   | 77 |   |   |   |   |   |   |   |   |   |   |   | 77 |   |
| Effect                  of merger and reincorporation                                                            |   |                              |      |                                                                                         |   | (436                                                                       | )      |                                               |   |                              |   |                        |   |                                       |     |                                                                    |   |                                                |   |   | 436 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **BALANCE,                  JANUARY 30, 2005**                                                                   |   |                              | 2,294,352 |                                                                                         | $      | 23                                                                         |   |                                               | 287    |                              | $      | 642                         |   |                                       | 306,610  |                                                                    | $      | 2,947                                               |   | $ | 24,104 |   | $ | (256 | ) | $ | (198,233 | ) |   |   |   | $ | (268 | ) | $ | (171,041 | ) |

**See        notes to consolidated financial statements.**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

**(dollar        amounts in thousands)**

|                                                                                                                       |   | **For                  the Fiscal Year Ended** |    |
|----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                                                                       |   |  **January                  30,****2005** |    | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   | **February                  2,****2003****(as                  restated;****see                  Note 16)** |   |
| **OPERATING                  ACTIVITIES:**                                                                                 |   |                                           |    |   |   |   |   |
| Net                  income (loss)                                                                                         |   | $                                              | (29,740 | ) | $ | 1,322 |   | $ | 14,435 |   |
| Adjustments                  to reconcile net income (loss) to net cash provided by operating                  activities: |   |                                           |    |   |   |   |   |   |   |   |
| Depreciation                  and amortization                                                                             |   |                                           | 12,818  |   |   | 11,408 |   |   | 10,168 |   |
| Amortization                  of deferred financing costs                                                                  |   |                                           | 1,643   |   |   | 1,642 |   |   | 2,114 |   |
| Interest                  expense—effective interest method                                                          |   |                                           | ---     |   |   | --- |   |   | (509 | ) |
| Paid-in-kind                  interest                                                                                     |   |                                           | 6,538   |   |   | 5,579 |   |   | 4,135 |   |
| Change                  in fair value of derivative instruments                                                            |   |                                           | ---     |   |   | --- |   |   | 2,776 |   |
| Early                  extinguishment of debt                                                                              |   |                                           | ---     |   |   | --- |   |   | 4,569 |   |
| Amortization                  of debt discounts                                                                            |   |                                           | 614     |   |   | 614 |   |   | 374 |   |
| Stock                  compensation expense                                                                                |   |                                           | 77      |   |   | 53 |   |   | --- |   |
| Provision                  for deferred income taxes                                                                       |   |                                           | 13,440  |   |   | 1,890 |   |   | (15,330 | ) |
| Loss                  on disposal of property and equipment                                                                |   |                                           | 1,356   |   |   | 781 |   |   | 46 |   |
| Changes                  in assets and liabilities which provided (used) cash:                                             |   |                                           |    |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                       |   |                                           | (163    | ) |   | (733 | ) |   | (560 | ) |
| Inventories                                                                                                                |   |                                           | 797     |   |   | (1,694 | ) |   | (2,225 | ) |
| Prepaid                  expenses and other assets                                                                         |   |                                           | 324     |   |   | (1,210 | ) |   | 296 |   |
| Other                  noncurrent assets                                                                                   |   |                                           | 7       |   |   | (3 | ) |   | (6 | ) |
| Accounts                  payable—trade                                                                              |   |                                           | 12,512  |   |   | (2,901 | ) |   | 2,416 |   |
| Accrued                  expenses                                                                                          |   |                                           | 787     |   |   | 959 |   |   | 956 |   |
| Accrued                  interest                                                                                          |   |                                           | 180     |   |   | (1,887 | ) |   | 7,848 |   |
| Other                  current accrued liabilities                                                                         |   |                                           | 3,894   |   |   | 286 |   |   | 92 |   |
| Other                  noncurrent accrued liabilities                                                                      |   |                                           | (836    | ) |   | 1,888 |   |   | (694 | ) |
| **NET                  CASH PROVIDED BY OPERATING ACTIVITIES**                                                             |   |                                           | 24,248  |   |   | 17,994 |   |   | 30,901 |   |
| **INVESTING                  ACTIVITIES:**                                                                                 |   |                                           |    |   |   |   |   |   |   |   |
| Purchases                  of property and equipment                                                                       |   |                                           | (21,382 | ) |   | (21,080 | ) |   | (17,046 | ) |
| Purchase                  of Hometown Threads®                                                                        |   |                                           | (1,140  | ) |   | --- |   |   | --- |   |
| Proceeds                  from sales of property and equipment                                                             |   |                                           | ---     |   |   | 14 |   |   | --- |   |
| **NET                  CASH USED IN INVESTING ACTIVITIES**                                                                 |   |                                           | (22,522 | ) |   | (21,066 | ) |   | (17,046 | ) |

**See        notes to consolidated financial statements.**

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**                                 |   |
|-------------------------------------------------------------------------------------------------------------|--------|
| **CONSOLIDATED                  STATEMENTS OF CASH FLOWS (continued)**                                      |   |
| **(dollar                  amounts in thousands)**                                                          |   |
|                                                                                                        |   |
|                                                                                                        |   | **For                  the Fiscal Year Ended** |   |
|                                                                                                        |   | **January                  30,****2005** |   | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   | **February                  2,****2003****(as                  restated;****see                  Note 16)** |   |
| **FINANCING                  ACTIVITIES:**                                                                  |   |   |   |   |   |   |   |
| Proceeds                  from issuance of senior notes                                                     |   |   | --- |   |   | --- |   |   | 162,060 |   |
| Proceeds                  from issuance of senior subordinated discount notes                               |   |   | --- |   |   | --- |   |   | 30,000 |   |
| Proceeds                  from issuance of senior subordinated notes                                        |   |   | --- |   |   | --- |   |   | 10,000 |   |
| Increase                  in borrowings under senior secured credit facility                                |   |   | 78,800 |   |   | 93,000 |   |   | 79,700 |   |
| Repayment                  of senior secured credit facility and capital lease                  obligations |   |   | (69,859 | ) |   | (86,894 | ) |   | (74,983 | ) |
| Repayment                  of senior subordinated term loans                                                |   |   | --- |   |   | --- |   |   | (210,393 | ) |
| Repayment                  of installment purchase agreement                                                |   |   | (228 | ) |   | --- |   |   | --- |   |
| Deferred                  financing cost                                                                    |   |   | --- |   |   | (85 | ) |   | (10,982 | ) |
| Issuance                  of common stock                                                                   |   |   | --- |   |   | 10 |   |   | --- |   |
| **NET                  CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES**                                    |   |   | 8,713 |   |   | 6,031 |   |   | (14,598 | ) |

| **EFFECT                  OF EXCHANGE RATE CHANGES ON CASH**                                           |   |   | (81    | )      |   | (654   | )      |   | 388    |   |
|--------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **INCREASE                  (DECREASE) IN CASH AND CASH EQUIVALENTS**                                  |   |   | 10,358 |   |   | 2,305  |   |   | (355   | )      |
| **CASH                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD**                                  |   |   | 4,820  |   |   | 2,515  |   |   | 2,870  |   |
| **CASH                  AND CASH EQUIVALENTS AT END OF PERIOD**                                        |   | $      | 15,178 |   | $      | 4,820  |   | $      | 2,515  |   |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  CASH FLOW INFORMATION:**                                               |   |   |   |   |   |   |   |   |   |   |
| Interest                  paid                                                                         |   | $      | 23,435 |   | $      | 24,658 |   | $      | 14,106 |   |
| Income                  taxes paid                                                                     |   | $      | 293    |   | $      | 116    |   | $      | 23     |   |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |
| **NONCASH                  OPERATING, INVESTING AND FINANCING ACTIVITIES:**                            |   |   |   |   |   |   |   |   |   |   |
| Service                  contract acquired under installment purchase agreement                        |   | $      | ---    |   | $      | 60     |   | $      | ---    |   |
| Property                  and equipment acquired under installment purchase                  agreement |   | $      | ---    |   | $      | 331    |   | $      | ---    |   |
| Property                  and equipment acquired under capital lease                                   |   | $      | 60     |   | $      | ---    |   | $      | ---    |   |
| Issuance                  of warrants                                                                  |   | $      | ---    |   | $      | ---    |   | $      | 1,607  |   |
| Cancellation                  of warrants                                                              |   | $      | ---    |   | $      | ---    |   | $      | (2,861 | )      |
| Paid-in-kind                  interest capitalized                                                     |   | $      | 6,538  |   | $      | 5,579  |   | $      | 4,135  |   |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |

**See        notes to consolidated financial statements.**

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL        STATEMENTS**

**(dollar        amounts in thousands, except share data, per share data and where        noted)**

| **1.** | **Description                  of Business and Summary of Significant Accounting                  Policies** |
|--------|--------------------------------------------------------------------------------------------------------------|

***Description        of Business***

***Principles        of Consolidation***

***Fiscal        Year***

***Concentrations***

*Source        of Revenue*

*Source        of Supply*

----

***Use        of Estimates***

***Foreign        Currency Transactions***

***Cash        and Cash Equivalents***

***Accounts        Receivable***

***Inventories***

***Property        and Equipment***

| Land                  improvements                           | 10                  to 30 years |
|--------------------------------------------------------------|---------------------------------|
| Buildings                  and improvements                  | 10                  to 55 years |
| Photographic,                  sales and finishing equipment | 3                  to 15 years  |
| Studio                  improvements                         | 3                  to 10 years  |

----

***Impairment        of Long-Lived Assets***

***Goodwill***

***Deferred        Financing Costs***

***Insurance***

***Postretirement        Benefits***

***Revenue        Recognition and Deferred Costs***

***Cost        of Sales***

----

***Advertising***

***Studio        Pre-opening Costs***

***Income        Taxes***

***Stock-Based        Compensation***

----

|                                                  |   | **For                  the Fiscal Year Ended** |    |
|-------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                  |   | **January                  30,****2005**       |    | **February                  1,****2004****(as                  restated;****see                  Note 16)** |   | **February                  2,****2003****(as                  restated;****see                  Note 16)** |   |
| Net                  income (loss):                   |   |                                           |    |   |   |   |   |
| As                  reported                          |   | $                                              | (29,740 | ) | $ | 1,322 |   | $ | 14,435 |   |
| Recorded                  stock compensation expense  |   |                                           | 77      |   |   | 53 |   |   | --- |   |
| Pro                  forma stock compensation expense |   |                                           | (108    | ) |   | (84 | ) |   | (31 | ) |
| Pro                  forma net income (loss)          |   | $                                              | (29,771 | ) | $ | 1,291 |   | $ | 14,404 |   |
|                                                  |   |                                           |    |   |   |   |   |   |   |   |

***Fair        Value of Financial Instruments***

***Related        Party***

***Impact        of Newly Issued Accounting Standards***

----

**2.    **
**Operations,        Liquidity and Other Matters**

*Operations        and Liquidity*

*Foreign        Tax Claim and Forensic Investigation*

*Defaults        under Debt and Supplier Agreements*

----

----

*Management’s        Plan*

**3.    **
**Debt**

----

----

|                                                                                                 |   | **January                  30, 2005** |    | **February                  1, 2004** |   |
|------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|---------------------------------------|--------|
| Senior                  Notes, net of discount                                                       |   | $                                     | 163,142 |                                  | $      | 162,729 |   |
| Senior                  Secured Credit Facility                                                      |   |                                  | 29,000  |                                  |   | 20,000 |   |
| Senior                  Subordinated Notes (Opco Notes), net of discount                             |   |                                  | 9,728   |                                  |   | 9,678 |   |
| Senior                  Subordinated Discount Notes (Parent Notes), net of                  discount |   |                                  | 43,776  |                                  |   | 37,088 |   |
| Other                                                                                                |   |                                  | 216     |                                  |   | 442 |   |
| Total                  debt                                                                          |   |                                  | 245,862 |                                  |   | 229,937 |   |
| Less—current                  portion of long-term debt                                        |   |                                  | 182     |                                  |   | 10,279 |   |
| Long-term                  debt                                                                      |   | $                                     | 245,680 |                                  | $      | 219,658 |   |
|                                                                                                 |   |                                  |    |                                  |   |   |   |

| 2005                                   |   | $      | 14,182  |   |
|----------------------------------------|--------|--------|---------|--------|
| 2006                                   |   |   | 21      |   |
| 2007                                   |   |   | 15,013  |   |
| 2008                                   |   |   | ---     |   |
| 2009                                   |   |   | 165,000 |   |
| 2010                  and thereafter   |   |   | 54,592  |   |
| Total                  debt maturities |   |   | 248,808 |   |
| Debt                  discounts        |   |   | (2,946  | )      |
| Total                  debt            |   | $      | 245,862 |   |
|                                   |   |   |    |   |

**4.    **
**Derivative        Instruments **

***Series        A Redeemable Convertible Preferred Stock***

----

**5.    **
**Other        Accrued Liabilities **

|                                             |   | **January                  30,****2005** |   | **February                  1,****2004** |   |
|--------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
| Accrued                  taxes other than income |   | $                                        | 2,655  |                                     | $      | 2,587 |   |
| Other                  accrued expenses          |   |                                     | 6,398  |                                     |   | 3,260 |   |
| Customer                  deposits               |   |                                     | 5,414  |                                     |   | 4,272 |   |
| Total                  other accrued liabilities |   | $                                        | 14,467 |                                     | $      | 10,119 |   |
|                                             |   |                                     |   |                                     |   |   |   |

----

**6.     **
**Other        Liabilities**

|                                                                          |   | **January                  30,****2005** |   | **February                  1,****2004** |   |
|-------------------------------------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
| Accrued                  interest                                             |   | $                                        | 695    |                                     | $      | 628 |   |
| Long-term                  portion of retiree benefit obligation              |   |                                     | ---    |                                     |   | 1,061 |   |
| Long-term                  portion of workers’ compensation obligations |   |                                     | 4,053  |                                     |   | 3,916 |   |
| Long-term                  occupancy obligations                              |   |                                     | 95     |                                     |   | 74 |   |
| Total                  other liabilities                                      |   | $                                        | 4,843  |                                     | $      | 5,679 |   |
|                                                                          |   |                                     |   |                                     |   |   |   |

**7.    **
**Income        Taxes**

|                                        |   | **For                  the Fiscal Year Ended** |    |
|---------------------------------------------|--------|------------------------------------------------|---------|
|                                        |   | **January                  30,****2005**       |    | **February                  1,****2004** |   | **February                  2,****2003** |   |
| Current:                                    |   |                                           |    |   |   |   |   |
| Federal                                     |   | $                                              | ---     |   | $ | 77 |   | $ | (200 | ) |
| State                                       |   |                                           | ---     |   |   | (476 | ) |   | (26 | ) |
| Foreign                                     |   |                                           | (1,329  | ) |   | (95 | ) |   | (52 | ) |
| Total                  current              |   |                                           | (1,329  | ) |   | (494 | ) |   | (278 | ) |
| Deferred:                                   |   |                                           |    |   |   |   |   |   |   |   |
| Federal                                     |   |                                           | 2,229   |   |   | (2,581 | ) |   | (2,386 | ) |
| State                                       |   |                                           | 678     |   |   | (158 | ) |   | 377 |   |
| Foreign                                     |   |                                           | 1,001   |   |   | 1,085 |   |   | (1,488 | ) |
| Valuation                  allowance change |   |                                           | (17,348 | ) |   | --- |   |   | 18,592 |   |
| Total                  deferred             |   |                                           | (13,440 | ) |   | (1,654 | ) |   | 15,095 |   |
| Total                  (provision) benefit  |   | $                                              | (14,769 | ) | $ | (2,148 | ) | $ | 14,817 |   |
|                                        |   |                                           |    |   |   |   |   |   |   |   |

----

|                                                                                                                  |   | **For                  the Fiscal Year Ended** |    |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                                                                  |   | **January                  30,****2005**       |    | **February                  1,****2004** |   | **February                  2,****2003** |   |
|                                                                                                                  |   | **Amount**                                     |    | **Percent** |   | **Amount** |   | **Percent** |   | **Amount** |   | **Percent** |   |
| Tax                  (provision) benefit at U.S. statutory federal rates                                              |   | $                                              | 5,090   |   |   | 34 | % | $ | (1,180 | ) |   | (34 | )% | $ | 130 |   |   | 34 | % |
| Expenses                  not deductible                                                                              |   |                                           | (197    | ) |   | (1 | ) |   | (210 | ) |   | (6 | ) |   | (228 | ) |   | (60 | ) |
| State                  income tax (provision) benefit, net of federal income tax (provision)                  benefit |   |                                           | 447     |   |   | 3 |   |   | (416 | ) |   | (13 | ) |   | (475 | ) |   | (124 | ) |
| Additional                  foreign subsidiary taxes                                                                  |   |                                           | (1,941  | ) |   | (13 | ) |   | 334 |   |   | 10 |   |   | (1,868 | ) |   | (488 | ) |
| Mark-to-market                  derivative expense                                                                    |   |                                           | ---     |   |   | --- |   |   | --- |   |   | --- |   |   | (944 | ) |   | (247 | ) |
| Non-deductible                  interest                                                                              |   |                                           | (820    | ) |   | (5 | ) |   | (676 | ) |   | (19 | ) |   | (1 | ) |   | --- |   |
| Valuation                  allowance                                                                                  |   |                                           | (17,348 | ) |   | (117 | ) |   | --- |   |   | --- |   |   | 18,592 |   |   | 4,866 |   |
| Other                                                                                                                 |   |                                           | ---     |   |   | --- |   |   | --- |   |   | --- |   |   | (389 | ) |   | (102 | ) |
| Total                  (provision) benefit                                                                            |   | $                                              | (14,769 | ) |   | (99 | )% | $ | (2,148 | ) |   | (62 | )% | $ | 14,817 |   |   | 3,879 | % |
|                                                                                                                  |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                  |   | **January                  30,****2005** |    | **February                  1,****2004** |   |
|-------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|------------------------------------------|--------|
| Deferred                  tax assets:                                                                 |   |                                     |    |                                     |   |
| Current:                                                                                              |   |                                     |    |                                     |   |
| Inventory,                  principally due to obsolescence reserve                                   |   | $                                        | 237     |                                     | $      | 207 |   |
| Workers’                  compensation accrual                                                  |   |                                     | 1,271   |                                     |   | 1,055 |   |
| Deferred                  revenue                                                                     |   |                                     | 1,612   |                                     |   | --- |   |
| Other                                                                                                 |   |                                     | 254     |                                     |   | 343 |   |
| Valuation                  allowance                                                                  |   |                                     | (2,086  | )                                        |   | --- |   |
| Net                  current deferred tax assets                                                      |   |                                     | 1,288   |                                     |   | 1,605 |   |
| Noncurrent:                                                                                           |   |                                     |    |                                     |   |   |   |
| Alternative                  minimum tax and other tax credits                                        |   |                                     | 1,333   |                                     |   | 1,365 |   |
| Net                  operating loss carryforward (federal, state, foreign)                            |   |                                     | 16,944  |                                     |   | 14,494 |   |
| Postretirement                  benefits                                                              |   |                                     | ---     |                                     |   | 460 |   |
| Intangibles                                                                                           |   |                                     | 29      |                                     |   | 89 |   |
| Stock                  option, principally due to compensation element                                |   |                                     | 803     |                                     |   | 778 |   |
| Interest                  expense deferred for tax                                                    |   |                                     | 3,933   |                                     |   | 2,008 |   |
| Workers’                  compensation accrual                                                  |   |                                     | 1,662   |                                     |   | 1,519 |   |
| Other                                                                                                 |   |                                     | ---     |                                     |   | 17 |   |
| Valuation                  allowance                                                                  |   |                                     | (15,339 | )                                        |   | (77 | ) |
| Net                  noncurrent deferred tax assets                                                   |   |                                     | 9,365   |                                     |   | 20,653 |   |
| Total                  deferred tax assets                                                            |   |                                     | 10,653  |                                     |   | 22,258 |   |
| Deferred                  tax liabilities:                                                            |   |                                     |    |                                     |   |   |   |
| Current:                                                                                              |   |                                     |    |                                     |   |   |   |
| Prepaid                  expenses                                                                     |   |                                     | (1,179  | )                                        |   | --- |   |
| Noncurrent:                                                                                           |   |                                     |    |                                     |   |   |   |
| Plant                  and equipment, principally due to differences in                  depreciation |   |                                     | (9,474  | )                                        |   | (8,818 | ) |
| Total                  deferred tax liabilities                                                       |   |                                     | (10,653 | )                                        |   | (8,818 | ) |
| Net                  deferred tax assets                                                              |   | $                                        | ---     |                                     | $      | 13,440 |   |
|                                                                                                  |   |                                     |    |                                     |   |   |   |

**8.    **
**Employee        Benefits**

----

|                                                     |   | **January                  30,****2005** |   | **February                  1,****2004** |   |
|----------------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
| Change                  in benefit obligation:           |   |                                     |   |                                     |   |
| Benefit                  obligation at beginning of year |   | $                                        | 1,191  |                                     | $      | 1,220 |   |
| Benefits                  paid                           |   |                                     | (80    | )                                        |   | (134 | ) |
| Net                  periodic benefit cost               |   |                                     | ---    |                                     |   | 68 |   |
| Actuarial                  (gain) loss                   |   |                                     | (1,111 | )                                        |   | 37 |   |
| Benefit                  obligation at end of year       |   | $                                        | ---    |                                     | $      | 1,191 |   |
| Plan                  assets                             |   | $                                        | ---    |                                     | $      | --- |   |
| Funded                  status                           |   | $                                        | ---    |                                     | $      | (1,191 | ) |
| Accrued                  benefit cost                    |   | $                                        | ---    |                                     | $      | (1,191 | ) |
|                                                     |   |                                     |   |                                     |   |   |   |

|                                        |   | **For                  the Fiscal Year Ended** |   |
|---------------------------------------------|--------|------------------------------------------------|--------|
|                                        |   | **January                  30,****2005**       |   | **February                  1,****2004** |   | **February                  2,****2003** |   |
| Interest                  cost              |   | $                                              | ---    |   | $ | 68 |   | $ | 67 |   |
| Amortization                                |   |                                           | ---    |   |   | --- |   |   | (11 | ) |
| Net                  periodic benefit costs |   | $                                              | ---    |   | $ | 68 |   | $ | 56 |   |
|                                        |   |                                           |   |   |   |   |   |   |   |   |

----

**9.    **
**Commitments        and Contingencies**

|  **Fiscal                  Year**              |   | **Operating****Leases** |   | **Capital****Leases** |   |
|-----------------------------------------------------|--------|-------------------------|--------|-----------------------|--------|
| 2005                                                |   | $                       | 1,363  |                  | $      | 24 |   |
| 2006                                                |   |                    | 823    |                  |   | 24 |   |
| 2007                                                |   |                    | 492    |                  |   | 13 |   |
| 2008                                                |   |                    | 270    |                  |   | --- |   |
| 2009                                                |   |                    | 125    |                  |   | --- |   |
| 2010                  and thereafter                |   |                    | 88     |                  |   | --- |   |
| Total                                               |   | $                       | 3,161  |                  | $      | 61 |   |
| Less                  amounts representing interest |   |                    |   |                  |   | 8 |   |
| Total                  principal on capital leases  |   |                    |   |                  | $      | 53 |   |
|                                                |   |                    |   |                  |   |   |   |

----

| **Fiscal                  Year** |   | **Amount** |   |
|----------------------------------|--------|------------|--------|
| 2005                             |   | $          | 559    |   |
| 2006                             |   |       | 520    |   |
| 2007                             |   |       | 448    |   |
| 2008                             |   |       | 319    |   |
| 2009                             |   |       | 112    |   |
|                             |   |       |   |   |
| Total                            |   | $          | 1,958  |   |
|                             |   |       |   |   |

**10.   **
**Redeemable        Convertible Preferred Stock—Series A**

----

**11.   **
**Stock        Options and Warrants**

***Stock        Options***

***Warrants***

----

|                                 |   | **Common                  Stock Options****and                  Warrants Outstanding** |      |                                                                                    |   |
|--------------------------------------|--------|----------------------------------------------------------------------------------------|-----------|-----------------------------------------------------------------------------------------|--------|
| **Exercise                  Prices** |   | **Number****Outstanding**                                                              |      | **Weighted                  Average****Remaining****Contractual                  Life** |   | **Number                  of****Common                  Stock Options****and                  Warrants Exercisable** |   |
| $0.01                                |   |                                                                                   | 52,460    |                                                                                    |   | 5.4 |   |   | 52,460 |   |
| $0.20                                |   |                                                                                   | 254,150   |                                                                                    |   | 1.6 |   |   | 254,150 |   |
| $8.00                                |   |                                                                                   | 294,300   |                                                                                    |   | 1.7 |   |   | 294,300 |   |
| $18.50                               |   |                                                                                   | 5,000     |                                                                                    |   | 3.1 |   |   | 5,000 |   |
| $26.50                               |   |                                                                                   | 303,450   |                                                                                    |   | 1.9 |   |   | 300,950 |   |
| $30.00                               |   |                                                                                   | 147,000   |                                                                                    |   | 4.3 |   |   | 99,050 |   |
| Total                                |   |                                                                                   | 1,056,360 |                                                                                    |   |   |   |   | 1,005,910 |   |
|                                 |   |                                                                                   |      |                                                                                    |   |   |   |   |   |   |

| **Weighted                  average fair value per option** |   | **January                  30,****2005****(1)** |   | **February                  1,****2004** |   | **February                  2,****2003** |   |
|-------------------------------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
| Assumption                  used:                           |   |                                            |   |                                     |   |                                     |   |
| Weighted                  average expected volatility       |   |                                            | N/A    |                                     |   | 40                                       | %      |   | 40 | % |
| Weighted                  average expected dividend yield   |   |                                            | N/A    |                                     |   | 0                                        | %      |   | 0 | % |
| Weighted                  average risk-free interest rate   |   |                                            | N/A    |                                     |   | 3.85                                     | %      |   | 4.80 | % |
| Weighted                  average expected life, in years   |   |                                            | N/A    |                                     |   | 8.00                                     |   |   | 8.00 |   |

----

|                                                               |   | **Number                  of****Common****Shares** |      | **Weighted****Average****Price** |   |
|--------------------------------------------------------------------|--------|----------------------------------------------------|-----------|----------------------------------|--------|
| Options                  and warrants outstanding February 3, 2002 |   |                                               | 1,313,897 |                             | $      | 11.68 |   |
| Options                  cancelled                                 |   |                                               | (57,597   | )                                |   | (10.75 | ) |
| Warrants                  cancelled                                |   |                                               | (254,150  | )                                |   | (0.20 | ) |
| Options                  granted                                   |   |                                               | 5,000     |                             |   | 30.00 |   |
| Warrants                  granted                                  |   |                                               | 52,460    |                             |   | 0.01 |   |
| Options                  and warrants outstanding February 2, 2003 |   |                                               | 1,059,610 |                             |   | 13.99 |   |
| Options                  cancelled                                 |   |                                               | (41,800   | )                                |   | (28.04 | ) |
| Options                  granted                                   |   |                                               | 49,500    |                             |   | 30.00 |   |
| Options                  exercised                                 |   |                                               | (1,200    | )                                |   | (8.00 | ) |
| Options                  and warrants outstanding February 1, 2004 |   |                                               | 1,066,110 |                             |   | 14.19 |   |
| Options                  cancelled                                 |   |                                               | (9,750    | )                                |   | (18.44 | ) |
| Options                  and warrants outstanding January 30, 2005 |   |                                               | 1,056,360 |                             | $      | 14.15 |   |
|                                                               |   |                                               |      |                             |   |   |   |

**12.**
**Business        Segments**

----

| **Business                  Segment Data**               |   |       |    |              |   |             |   |
|----------------------------------------------------------|--------|------------|---------|-------------------|--------|------------------|--------|
|                                                     |   | **Retail** |    | **Institutional** |   | **Consolidated** |   |
| **For                  the year ended January 30, 2005** |   |       |    |              |   |             |   |
| Net                  loss                                |   | $          | (27,441 | )                 | $      | (2,299           | )      | $ | (29,740 | ) |
| Reconciling                  items:                      |   |       |    |              |   |             |   |   |   |   |
| Depreciation                  and amortization           |   |       | 12,642  |              |   | 176              |   |   | 12,818 |   |
| Income                  tax provision                    |   |       | 14,029  |              |   | 740              |   |   | 14,769 |   |
| Interest                  income                         |   |       | (8      | )                 |   | ---              |   |   | (8 | ) |
| Interest                  expense                        |   |       | 31,368  |              |   | 1,099            |   |   | 32,467 |   |
| Adjusted                  EBITDA                         |   | $          | 30,590  |              | $      | (284             | )      | $ | 30,306 |   |
|                                                     |   |       |    |              |   |             |   |   |   |   |
| **For                  the year ended February 1, 2004** |   |       |    |              |   |             |   |   |   |   |
| Net                  income (loss)                       |   | $          | 2,490   |              | $      | (1,168           | )      | $ | 1,322 |   |
| Reconciling                  items:                      |   |       |    |              |   |             |   |   |   |   |
| Depreciation                  and amortization           |   |       | 11,225  |              |   | 183              |   |   | 11,408 |   |
| Income                  tax provision                    |   |       | 2,132   |              |   | 16               |   |   | 2,148 |   |
| Interest                  income                         |   |       | (10     | )                 |   | ---              |   |   | (10 | ) |
| Interest                  expense                        |   |       | 29,532  |              |   | 1,184            |   |   | 30,716 |   |
| Adjusted                  EBITDA                         |   | $          | 45,369  |              | $      | 215              |   | $ | 45,584 |   |
|                                                     |   |       |    |              |   |             |   |   |   |   |
| **For                  the year ended February 2, 2003** |   |       |    |              |   |             |   |   |   |   |
| Net                  income (loss)                       |   | $          | 16,940  |              | $      | (2,505           | )      | $ | 14,435 |   |
| Reconciling                  items:                      |   |       |    |              |   |             |   |   |   |   |
| Depreciation                  and amortization           |   |       | 9,962   |              |   | 206              |   |   | 10,168 |   |
| Income                  tax benefit                      |   |       | (14,143 | )                 |   | (674             | )      |   | (14,817 | ) |
| Interest                  income                         |   |       | (14     | )                 |   | ---              |   |   | (14 | ) |
| Interest                  expense                        |   |       | 27,247  |              |   | 1,377            |   |   | 28,624 |   |
| Other                  expense                           |   |       | 2,652   |              |   | 124              |   |   | 2,776 |   |
| Early                  extinguishment of debt            |   |       | 4,424   |              |   | 145              |   |   | 4,569 |   |
| Adjusted                  EBITDA                         |   | $          | 47,068  |              | $      | (1,327           | )      | $ | 45,741 |   |
|                                                     |   |       |    |              |   |             |   |   |   |   |

| **For                  the year ended January 30, 2005** |   |   |    |   |   |   |   |
|----------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
| Sales                                                    |   | $      | 313,126 |   | $      | 10,427 |   | $ | 323,553 |   |
| Adjusted                  EBITDA                         |   | $      | 30,590  |   | $      | (284   | )      | $ | 30,306 |   |
| Total                  assets                            |   | $      | 165,786 |   | $      | 1,006  |   | $ | 166,792 |   |
|                                                     |   |   |    |   |   |   |   |   |   |   |
| **For                  the year ended February 1, 2004** |   |   |    |   |   |   |   |   |   |   |
| Sales                                                    |   | $      | 312,357 |   | $      | 12,457 |   | $ | 324,814 |   |
| Adjusted                  EBITDA                         |   | $      | 45,369  |   | $      | 215    |   | $ | 45,584 |   |
| Total                  assets                            |   | $      | 162,435 |   | $      | 1,230  |   | $ | 163,665 |   |
|                                                     |   |   |    |   |   |   |   |   |   |   |
| **For                  the year ended February 2, 2003** |   |   |    |   |   |   |   |   |   |   |
| Sales                                                    |   | $      | 282,309 |   | $      | 14,307 |   | $ | 296,616 |   |
| Adjusted                  EBITDA                         |   | $      | 47,068  |   | $      | (1,327 | )      | $ | 45,741 |   |
|                                                     |   |   |    |   |   |   |   |   |   |   |

----

| **Geographic                  Data**  |   |                 |    |       |   |       |   |
|---------------------------------------|--------|----------------------|---------|------------|--------|------------|--------|
|                                  |   | **United****States** |    | **Canada** |   | **Mexico** |   | **Other****Foreign** |   | **Consolidated** |   |
| **January                  30, 2005** |   |                 |    |       |   |       |   |   |   |   |   |
| Sales                                 |   | $                    | 287,548 |       | $      | 25,179     |   | $ | 9,359 |   | $ | 1,467 |   | $ | 323,553 |   |
| Long-term                  assets     |   | $                    | 114,654 |       | $      | 7,848      |   | $ | 2,310 |   | $ | 2,348 |   | $ | 127,160 |   |
| Deferred                  tax assets  |   | $                    | ---     |       | $      | ---        |   | $ | --- |   | $ | --- |   | $ | --- |   |
|                                  |   |                 |    |       |   |       |   |   |   |   |   |   |   |   |   |   |
| **February                  1, 2004** |   |                 |    |       |   |       |   |   |   |   |   |   |   |   |   |   |
| Sales                                 |   | $                    | 294,067 |       | $      | 21,466     |   | $ | 8,446 |   | $ | 835 |   | $ | 324,814 |   |
| Long-term                  assets     |   | $                    | 108,051 |       | $      | 6,449      |   | $ | 2,092 |   | $ | 1,892 |   | $ | 118,484 |   |
| Deferred                  tax assets  |   | $                    | 13,440  |       | $      | ---        |   | $ | --- |   | $ | --- |   | $ | 13,440 |   |
|                                  |   |                 |    |       |   |       |   |   |   |   |   |   |   |   |   |   |
| **February                  2, 2003** |   |                 |    |       |   |       |   |   |   |   |   |   |   |   |   |   |
| Sales                                 |   | $                    | 272,628 |       | $      | 17,018     |   | $ | 6,876 |   | $ | 94 |   | $ | 296,616 |   |
|                                  |   |                 |    |       |   |       |   |   |   |   |   |   |   |   |   |   |

**13.**
**Acquisitions,        Goodwill and Intangible Assets**

|                                                  |   | **January                  30,****2005** |   | **February                  1,****2004** |   |
|-------------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
| Unamortized                  intangible assets:       |   |                                     |   |                                     |   |
| Goodwill                                              |   | $                                        | 52,989 |                                     | $      | 51,643 |   |
| Trademark                                             |   |                                     | 135    |                                     |   | --- |   |
| Total                  goodwill and intangible assets |   | $                                        | 53,124 |                                     | $      | 51,643 |   |
|                                                  |   |                                     |   |                                     |   |   |   |

----

|                                            |   | **For                  the Fiscal Years Ended** |   |
|-------------------------------------------------|--------|-------------------------------------------------|--------|
|                                            |   | **January                  30,****2005**        |   | **February                  1,****2004** |   | **February                  2,****2003** |   |
| Aggregate                  amortization expense |   | $                                               | ---    |   | $ | --- |   | $ | 192 |   |
|                                            |   |                                            |   |   |   |   |   |   |   |   |

**14.**
**Guarantor        and Non-Guarantor Financial Statements**

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING BALANCE SHEET****January                  30, 2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                      |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Assets:                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                |   | $ | --- |   | $ | --- |   | $ | 14,341 |   | $ | 837 |   | $ | --- |   | $ | 15,178 |   |
| Accounts                  receivable                                                                                                                      |   |   | --- |   |   | --- |   |   | 2,145 |   |   | 636 |   |   | --- |   |   | 2,781 |   |
| Inventories                                                                                                                                               |   |   | --- |   |   | --- |   |   | 11,391 |   |   | 48 |   |   | --- |   |   | 11,439 |   |
| Deferred                  income taxes                                                                                                                    |   |   | (1,090 | ) |   | 1,090 |   |   | 108 |   |   | --- |   |   | --- |   |   | 108 |   |
| Prepaid                  expenses and other assets                                                                                                        |   |   | --- |   |   | --- |   |   | 3,300 |   |   | 3 |   |   | --- |   |   | 3,303 |   |
| Total                  current assets                                                                                                                     |   |   | (1,090 | ) |   | 1,090 |   |   | 31,285 |   |   | 1,524 |   |   | --- |   |   | 32,809 |   |
| Investments                  and intercompany accounts                                                                                                    |   |   | (113,404 | ) |   | 93,885 |   |   | (54,830 | ) |   | (11,531 | ) |   | 85,880 |   |   | --- |   |
| Property                  and equipment, net                                                                                                              |   |   | --- |   |   | --- |   |   | 69,258 |   |   | 4,651 |   |   | --- |   |   | 73,909 |   |
| Goodwill,                  intangible and other assets, net                                                                                               |   |   | ------ |   |   | --- |   |   | 53,244 |   |   | 7 |   |   | --- |   |   | 53,251 |   |
| Deferred                  financing costs, net                                                                                                            |   |   | 1,404 |   |   | 5,419 |   |   | --- |   |   | --- |   |   | --- |   |   | 6,823 |   |
| Total                  assets                                                                                                                             |   | $ | (113,090 | ) | $ | 100,394 |   | $ | 98,957 |   | $ | (5,349 | ) | $ | 85,880 |   | $ | 166,792 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                  and shareholders’ equity (deficiency):                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                  borrowings                                                                                                                    |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | --- |   |
| Current                  portion of long-term debt                                                                                                        |   |   | --- |   |   | --- |   |   | 182 |   |   | --- |   |   | --- |   |   | 182 |   |
| Accounts                  payable—trade                                                                                                             |   |   | --- |   |   | --- |   |   | 35,743 |   |   | 436 |   |   | --- |   |   | 36,179 |   |
| Accrued                  insurance                                                                                                                        |   |   | --- |   |   | --- |   |   | 4,141 |   |   | --- |   |   | --- |   |   | 4,141 |   |
| Accrued                  income taxes                                                                                                                     |   |   | 66 |   |   | 1,883 |   |   | --- |   |   | 73 |   |   | --- |   |   | 2,022 |   |
| Accrued                  compensation                                                                                                                     |   |   | --- |   |   | --- |   |   | 4,771 |   |   | 63 |   |   | --- |   |   | 4,834 |   |
| Accrued                  interest                                                                                                                         |   |   | --- |   |   | 10,377 |   |   | --- |   |   | --- |   |   | --- |   |   | 10,377 |   |
| Other                  accrued liabilities                                                                                                                |   |   | --- |   |   | --- |   |   | 12,698 |   |   | 1,769 |   |   | --- |   |   | 14,467 |   |
| Total                  current liabilities                                                                                                                |   |   | 66 |   |   | 12,260 |   |   | 57,535 |   |   | 2,341 |   |   | --- |   |   | 72,202 |   |
| Long-term                  debt, less current portion                                                                                                     |   |   | 43,776 |   |   | 201,870 |   |   | 34 |   |   | --- |   |   | --- |   |   | 245,680 |   |
| Deferred                  income taxes                                                                                                                    |   |   | (1,724 | ) |   | 1,724 |   |   | 108 |   |   | --- |   |   | --- |   |   | 108 |   |
| Other                  liabilities                                                                                                                        |   |   | 695 |   |   | --- |   |   | 4,148 |   |   | --- |   |   | --- |   |   | 4,843 |   |
| Series                  A redeemable convertible preferred stock                                                                                          |   |   | 15,000 |   |   | --- |   |   | --- |   |   | --- |   |   | --- |   |   | 15,000 |   |
| Total                  shareholders’ equity (deficiency)                                                                                            |   |   | (170,903 | ) |   | (115,460 | ) |   | 37,132 |   |   | (7,690 | ) |   | 85,880 |   |   | (171,041 | ) |
| Total                  liabilities and shareholders’ equity (deficiency)                                                                            |   | $ | (113,090 | ) | $ | 100,394 |   | $ | 98,957 |   | $ | (5,349 | ) | $ | 85,880 |   | $ | 166,792 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING BALANCE SHEET****February                  1, 2004****(as                  restated; see Note 16)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                     |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Assets:                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                               |   | $ | --- |   | $ | --- |   | $ | 4,441 |   | $ | 379 |   | $ | --- |   | $ | 4,820 |   |
| Accounts                  receivable                                                                                                                                                                     |   |   | --- |   |   | --- |   |   | 2,136 |   |   | 457 |   |   | --- |   |   | 2,593 |   |
| Inventories                                                                                                                                                                                              |   |   | --- |   |   | --- |   |   | 12,163 |   |   | 73 |   |   | --- |   |   | 12,236 |   |
| Deferred                  income taxes                                                                                                                                                                   |   |   | (1,783 | ) |   | 3,388 |   |   | --- |   |   | --- |   |   | --- |   |   | 1,605 |   |
| Prepaid                  expenses and other assets                                                                                                                                                       |   |   | --- |   |   | --- |   |   | 3,702 |   |   | (76 | ) |   | --- |   |   | 3,626 |   |
| Total                  current assets                                                                                                                                                                    |   |   | (1,783 | ) |   | 3,388 |   |   | 22,442 |   |   | 833 |   |   | --- |   |   | 24,880 |   |
| Investments                  and intercompany accounts                                                                                                                                                   |   |   | (101,806 | ) |   | 91,444 |   |   | (68,935 | ) |   | (7,724 | ) |   | 87,021 |   |   | --- |   |
| Property                  and equipment, net                                                                                                                                                             |   |   | --- |   |   | --- |   |   | 62,843 |   |   | 3,979 |   |   | --- |   |   | 66,822 |   |
| Goodwill,                  intangible and other assets, net                                                                                                                                              |   |   | --- |   |   | --- |   |   | 51,655 |   |   | 7 |   |   | --- |   |   | 51,662 |   |
| Deferred                  financing costs, net                                                                                                                                                           |   |   | 1,581 |   |   | 6,885 |   |   | --- |   |   | --- |   |   | --- |   |   | 8,466 |   |
| Deferred                  income taxes, noncurrent                                                                                                                                                       |   |   | 11,835 |   |   | --- |   |   | --- |   |   | --- |   |   | --- |   |   | 11,835 |   |
| Total                  assets                                                                                                                                                                            |   | $ | (90,173 | ) | $ | 101,717 |   | $ | 68,005 |   | $ | (2,905 | ) | $ | 87,021 |   | $ | 163,665 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                  and shareholders’ equity (deficiency):                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                  borrowings                                                                                                                                                                   |   | $ | --- |   | $ | 10,000 |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | 10,000 |   |
| Current                  portion of long-term debt                                                                                                                                                       |   |   | --- |   |   | --- |   |   | 279 |   |   | --- |   |   | --- |   |   | 279 |   |
| Accounts                  payable—trade                                                                                                                                                            |   |   | --- |   |   | --- |   |   | 23,425 |   |   | 242 |   |   | --- |   |   | 23,667 |   |
| Accrued                  insurance                                                                                                                                                                       |   |   | --- |   |   | --- |   |   | 4,055 |   |   | (12 | ) |   | --- |   |   | 4,043 |   |
| Accrued                  income taxes                                                                                                                                                                    |   |   | 111 |   |   | 748 |   |   | --- |   |   | (1 | ) |   | --- |   |   | 858 |   |
| Accrued                  compensation                                                                                                                                                                    |   |   | --- |   |   | --- |   |   | 5,195 |   |   | 114 |   |   | --- |   |   | 5,309 |   |
| Accrued                  interest                                                                                                                                                                        |   |   | --- |   |   | 10,129 |   |   | 68 |   |   | --- |   |   | --- |   |   | 10,197 |   |
| Other                  accrued liabilities                                                                                                                                                               |   |   | --- |   |   | --- |   |   | 10,069 |   |   | 50 |   |   | --- |   |   | 10,119 |   |
| Total                  current liabilities                                                                                                                                                               |   |   | 111 |   |   | 20,877 |   |   | 43,091 |   |   | 393 |   |   | --- |   |   | 64,472 |   |
| Long-term                  debt, less current portion                                                                                                                                                    |   |   | 37,088 |   |   | 182,407 |   |   | 163 |   |   | --- |   |   | --- |   |   | 219,658 |   |
| Deferred                  income taxes                                                                                                                                                                   |   |   | (1,837 | ) |   | 1,837 |   |   | --- |   |   | --- |   |   | --- |   |   | --- |   |
| Other                  liabilities                                                                                                                                                                       |   |   | 628 |   |   | --- |   |   | 5,051 |   |   | --- |   |   | --- |   |   | 5,679 |   |
| Series                  A redeemable convertible preferred stock                                                                                                                                         |   |   | 15,000 |   |   | --- |   |   | --- |   |   | --- |   |   | --- |   |   | 15,000 |   |
| Total                  shareholders’ equity (deficiency)                                                                                                                                           |   |   | (141,163 | ) |   | (103,404 | ) |   | 19,700 |   |   | (3,298 | ) |   | 87,021 |   |   | (141,144 | ) |
| Total                  liabilities and shareholders’ equity (deficiency)                                                                                                                           |   | $ | (90,173 | ) | $ | 101,717 |   | $ | 68,005 |   | $ | (2,905 | ) | $ | 87,021 |   | $ | 163,665 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF OPERATIONS****For                  the Fiscal Year Ended January 30, 2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                          |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Sales                                                                                                                                                                                         |   | $ | --- |   | $ | --- |   | $ | 312,726 |   | $ | 10,827 |   | $ | --- |   | $ | 323,553 |   |
| Cost                  of sales                                                                                                                                                                |   |   | --- |   |   | --- |   |   | 246,896 |   |   | 11,500 |   |   | --- |   |   | 258,396 |   |
| Gross                  profit                                                                                                                                                                 |   |   | --- |   |   | --- |   |   | 65,830 |   |   | (673 | ) |   | --- |   |   | 65,157 |   |
| General                  and administrative                                                                                                                                                   |   |   | --- |   |   | --- |   |   | 44,307 |   |   | 3,362 |   |   | --- |   |   | 47,669 |   |
| Income                  (loss) from operations                                                                                                                                                |   |   | --- |   |   | --- |   |   | 21,523 |   |   | (4,035 | ) |   | --- |   |   | 17,488 |   |
| Interest                  income                                                                                                                                                              |   |   | --- |   |   | --- |   |   | 6 |   |   | 2 |   |   | --- |   |   | 8 |   |
| Interest                  expense                                                                                                                                                             |   |   | (6,932 | ) |   | (25,105 | ) |   | (430 | ) |   | --- |   |   | --- |   |   | (32,467 | ) |
| Investment                  income (loss) in equity of wholly-owned subsidiaries                                                                                                              |   |   | (12,056 | ) |   | 17,108 |   |   | (3,991 | ) |   | --- |   |   | (1,061 | ) |   | --- |   |
| Income                  (loss) before income taxes                                                                                                                                            |   |   | (18,988 | ) |   | (7,997 | ) |   | 17,108 |   |   | (4,033 | ) |   | (1,061 | ) |   | (14,971 | ) |
| Income                  tax benefit (provision)                                                                                                                                               |   |   | (10,752 | ) |   | (4,059 | ) |   | --- |   |   | 42 |   |   | --- |   |   | (14,769 | ) |
| Net                  income (loss)                                                                                                                                                            |   | $ | (29,740 | ) | $ | (12,056 | ) | $ | 17,108 |   | $ | (3,991 | ) | $ | (1,061 | ) | $ | (29,740 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF OPERATIONS****For                  the Fiscal Year Ended February 1, 2004****(as                  restated; see Note 16)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                         |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Sales                                                                                                                                                                                                                                        |   | $ | --- |   | $ | --- |   | $ | 315,533 |   | $ | 9,281 |   | $ | --- |   | $ | 324,814 |   |
| Cost                  of sales                                                                                                                                                                                                               |   |   | --- |   |   | --- |   |   | 234,483 |   |   | 10,545 |   |   | --- |   |   | 245,028 |   |
| Gross                  profit                                                                                                                                                                                                                |   |   | --- |   |   | --- |   |   | 81,050 |   |   | (1,264 | ) |   | --- |   |   | 79,786 |   |
| General                  and administrative                                                                                                                                                                                                  |   |   | --- |   |   | --- |   |   | 44,942 |   |   | 668 |   |   | --- |   |   | 45,610 |   |
| Income                  (loss) from operations                                                                                                                                                                                               |   |   | --- |   |   | --- |   |   | 36,108 |   |   | (1,932 | ) |   | --- |   |   | 34,176 |   |
| Interest                  income                                                                                                                                                                                                             |   |   | --- |   |   | --- |   |   | 9 |   |   | 1 |   |   | --- |   |   | 10 |   |
| Interest                  expense                                                                                                                                                                                                            |   |   | (5,948 | ) |   | (24,755 | ) |   | (13 | ) |   | --- |   |   | --- |   |   | (30,716 | ) |
| Investment                  income (loss) in equity of wholly-owned subsidiaries                                                                                                                                                             |   |   | 5,728 |   |   | 34,117 |   |   | (1,987 | ) |   | --- |   |   | (37,858 | ) |   | --- |   |
| Income                  (loss) before income taxes                                                                                                                                                                                           |   |   | (220 | ) |   | 9,362 |   |   | 34,117 |   |   | (1,931 | ) |   | (37,858 | ) |   | 3,470 |   |
| Income                  tax benefit (provision)                                                                                                                                                                                              |   |   | 1,542 |   |   | (3,634 | ) |   | --- |   |   | (56 | ) |   | --- |   |   | (2,148 | ) |
| Net                  income (loss)                                                                                                                                                                                                           |   | $ | 1,322 |   | $ | 5,728 |   | $ | 34,117 |   | $ | (1,987 | ) | $ | (37,858 | ) | $ | 1,322 |   |
|                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF OPERATIONS****For                  the Fiscal Year Ended February 2, 2003****(as                  restated; see Note 16)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                         |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   |  **Total** |   |
| Sales                                                                                                                                                                                                                                        |   | $ | --- |   | $ | --- |   | $ | 289,646 |   | $ | 6,970 |   | $ | --- |   | $ | 296,616 |   |
| Cost                  of sales                                                                                                                                                                                                               |   |   | --- |   |   | --- |   |   | 213,205 |   |   | 6,346 |   |   | --- |   |   | 219,551 |   |
| Gross                  profit                                                                                                                                                                                                                |   |   | --- |   |   | --- |   |   | 76,441 |   |   | 624 |   |   | --- |   |   | 77,065 |   |
| General                  and administrative                                                                                                                                                                                                  |   |   | --- |   |   | --- |   |   | 39,591 |   |   | 1,709 |   |   | --- |   |   | 41,300 |   |
| Amortization                  of intangibles                                                                                                                                                                                                 |   |   | --- |   |   | --- |   |   | 192 |   |   | --- |   |   | --- |   |   | 192 |   |
| Income                  (loss) from operations                                                                                                                                                                                               |   |   | --- |   |   | --- |   |   | 36,658 |   |   | (1,085 | ) |   | --- |   |   | 35,573 |   |
| Interest                  income                                                                                                                                                                                                             |   |   | --- |   |   | --- |   |   | 11 |   |   | 3 |   |   | --- |   |   | 14 |   |
| Interest                  expense                                                                                                                                                                                                            |   |   | (3,200 | ) |   | (25,398 | ) |   | (26 | ) |   | --- |   |   | --- |   |   | (28,624 | ) |
| Other                  expense                                                                                                                                                                                                               |   |   | (715 | ) |   | (2,061 | ) |   | --- |   |   | --- |   |   | --- |   |   | (2,776 | ) |
| Early                  extinguishment of debt                                                                                                                                                                                                |   |   | --- |   |   | (4,569 | ) |   | --- |   |   | --- |   |   | --- |   |   | (4,569 | ) |
| Investment                  income (loss) in equity of wholly-owned subsidiaries                                                                                                                                                             |   |   | 6,664 |   |   | 35,509 |   |   | (1,134 | ) |   | --- |   |   | (41,039 | ) |   | --- |   |
| Income                  (loss) before income taxes                                                                                                                                                                                           |   |   | 2,749 |   |   | 3,481 |   |   | 35,509 |   |   | (1,082 | ) |   | (41,039 | ) |   | (382 | ) |
| Income                  tax benefit (provision)                                                                                                                                                                                              |   |   | 11,686 |   |   | 3,183 |   |   | --- |   |   | (52 | ) |   | --- |   |   | 14,817 |   |
| Net                  income (loss)                                                                                                                                                                                                           |   | $ | 14,435 |   | $ | 6,664 |   | $ | 35,509 |   | $ | (1,134 | ) | $ | (41,039 | ) | $ | 14,435 |   |
|                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF CASH FLOWS****For                  the Fiscal Year Ended January 30, 2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                          |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Net                  cash provided by (used in) operating activities                                                                                                                          |   | $ | --- |   | $ | (9,000 | ) | $ | 31,015 |   | $ | 2,153 |   | $ | 80 |   | $ | 24,248 |   |
| Net                  cash used in investing activities                                                                                                                                        |   |   | --- |   |   | --- |   |   | (20,630 | ) |   | (1,892 | ) |   | --- |   |   | (22,522 | ) |
| Net                  cash provided by (used in) financing activities                                                                                                                          |   |   | --- |   |   | 9,000 |   |   | (287 | ) |   | --- |   |   | --- |   |   | 8,713 |   |
| Effect                  of exchange rate changes on cash                                                                                                                                      |   |   | --- |   |   | --- |   |   | (198 | ) |   | 197 |   |   | (80 | ) |   | (81 | ) |
| Increase                  in cash and cash equivalents                                                                                                                                        |   |   | --- |   |   | --- |   |   | 9,900 |   |   | 458 |   |   | --- |   |   | 10,358 |   |
| Cash                  and cash equivalents at beginning of period                                                                                                                             |   |   | --- |   |   | --- |   |   | 4,441 |   |   | 379 |   |   | --- |   |   | 4,820 |   |
| Cash                  and cash equivalents at end of period                                                                                                                                   |   | $ | --- |   | $ | --- |   | $ | 14,341 |   | $ | 837 |   | $ | --- |   | $ | 15,178 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF CASH FLOWS****For                  the Fiscal Year Ended February 1, 2004****(as                  restated; see Note 16)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                         |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   | **Total** |   |
| Net                  cash provided by (used in) operating activities                                                                                                                                                                         |   | $ | 19 |   | $ | (6,060 | ) | $ | 21,681 |   | $ | 2,344 |   | $ | 10 |   | $ | 17,994 |   |
| Net                  cash used in investing activities                                                                                                                                                                                       |   |   | --- |   |   | --- |   |   | (19,193 | ) |   | (1,873 | ) |   | --- |   |   | (21,066 | ) |
| Net                  cash provided by (used in) financing activities                                                                                                                                                                         |   |   | (19 | ) |   | 6,060 |   |   | --- |   |   | --- |   |   | (10 | ) |   | 6,031 |   |
| Effect                  of exchange rate changes on cash                                                                                                                                                                                     |   |   | --- |   |   | --- |   |   | (359 | ) |   | (295 | ) |   | --- |   |   | (654 | ) |
| Increase                  in cash and cash equivalents                                                                                                                                                                                       |   |   | --- |   |   | --- |   |   | 2,129 |   |   | 176 |   |   | --- |   |   | 2,305 |   |
| Cash                  and cash equivalents at beginning of period                                                                                                                                                                            |   |   | --- |   |   | --- |   |   | 2,312 |   |   | 203 |   |   | --- |   |   | 2,515 |   |
| Cash                  and cash equivalents at end of period                                                                                                                                                                                  |   | $ | --- |   | $ | --- |   | $ | 4,441 |   | $ | 379 |   | $ | --- |   | $ | 4,820 |   |
|                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **PORTRAIT                  CORPORATION OF AMERICA, INC.****CONDENSED                  CONSOLIDATING STATEMENT OF CASH FLOWS****For                  the Fiscal Year Ended February 2, 2003****(as                  restated; see Note 16)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                         |   | **Parent/****Guarantor** |   | **Co-issuers** |   | **Guarantor****Subsidiaries** |   | **Non-guarantor****Subsidiaries** |   | **Eliminations** |   |  **Total** |   |
| Net                  cash provided by operating activities                                                                                                                                                                                   |   | $ | --- |   | $ | 14,598 |   | $ | 14,770 |   | $ | 1,533 |   | $ | --- |   | $ | 30,901 |   |
| Net                  cash used in investing activities                                                                                                                                                                                       |   |   | --- |   |   | --- |   |   | (14,593 | ) |   | (2,453 | ) |   | --- |   |   | (17,046 | ) |
| Net                  cash used in financing activities                                                                                                                                                                                       |   |   | --- |   |   | (14,598 | ) |   | --- |   |   | --- |   |   | --- |   |   | (14,598 | ) |
| Effect                  of exchange rate changes on cash                                                                                                                                                                                     |   |   | --- |   |   | --- |   |   | (543 | ) |   | 931 |   |   | --- |   |   | 388 |   |
| Increase                  (decrease) in cash and cash equivalents                                                                                                                                                                            |   |   | --- |   |   | --- |   |   | (366 | ) |   | 11 |   |   | --- |   |   | (355 | ) |
| Cash                  and cash equivalents at beginning of period                                                                                                                                                                            |   |   | --- |   |   | --- |   |   | 2,678 |   |   | 192 |   |   | --- |   |   | 2,870 |   |
| Cash                  and cash equivalents at end of period                                                                                                                                                                                  |   | $ | --- |   | $ | --- |   | $ | 2,312 |   | $ | 203 |   | $ | --- |   | $ | 2,515 |   |
|                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**15.**
**Selected        Quarterly Financial Data (unaudited)**

|                                    |   | **Fiscal                  Quarters Ended** |   |
|-----------------------------------------|--------|--------------------------------------------|--------|
|                                    |   | **May                  2, 2004**           |   | **August                  1, 2004** |   |
|                                    |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   |
| Sales                                   |   | $                                          | 79,896 |   | $ | 79,896 |   | $ | 68,442 |   | $ | 68,442 |   |
| Gross                  Profit           |   |                                       | 17,190 |   |   | 17,106 |   |   | 11,027 |   |   | 11,264 |   |
| Income                  from operations |   |                                       | 5,470  |   |   | 5,362 |   |   | 878 |   |   | 766 |   |
| Net                  income (loss)      |   |                                       | (1,177 | ) |   | (1,285 | ) |   | (2,015 | ) |   | (2,127 | ) |

|                                           |   | **Fiscal                  Quarters Ended** |    |
|------------------------------------------------|--------|--------------------------------------------|---------|
|                                           |   | **October                  31, 2004**      |    | **January                  30, 2005** |   |
|                                           |   | *As                  Previously**Reported* |    | *As                  Restated;**see                  Note 16* |   |   |   |
| Sales                                          |   | $                                          | 68,829  |   | $ | 68,829 |   | $ | 106,386 |   |
| Gross                  Profit                  |   |                                       | 6,974   |   |   | 7,481 |   |   | 29,306 |   |
| Income                  (loss) from operations |   |                                       | (4,829  | ) |   | (6,305 | ) |   | 17,665 |   |
| Net                  income (loss)             |   |                                       | (34,411 | ) |   | (34,388 | ) |   | 8,060 |   |

|                                    |   | **Fiscal                  Quarters Ended** |   |
|-----------------------------------------|--------|--------------------------------------------|--------|
|                                    |   | **May                  4, 2003**           |   | **August                  3, 2003** |   |
|                                    |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   |
| Sales                                   |   | $                                          | 71,556 |   | $ | 71,556 |   | $ | 71,309 |   | $ | 71,309 |   |
| Gross                  Profit           |   |                                       | 16,194 |   |   | 16,421 |   |   | 16,025 |   |   | 15,681 |   |
| Income                  from operations |   |                                       | 4,681  |   |   | 4,691 |   |   | 5,168 |   |   | 4,971 |   |
| Net                  income (loss)      |   |                                       | (1,686 | ) |   | (1,676 | ) |   | (1,394 | ) |   | (1,591 | ) |

|                                    |   | **Fiscal                  Quarters Ended** |   |
|-----------------------------------------|--------|--------------------------------------------|--------|
|                                    |   | **November                  2, 2003**      |   | **February                  1, 2004** |   |
|                                    |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   | *As                  Previously**Reported* |   | *As                  Restated;**see                  Note 16* |   |
| Sales                                   |   | $                                          | 73,418 |   | $ | 73,417 |   | $ | 108,531 |   | $ | 108,532 |   |
| Gross                  Profit           |   |                                       | 13,380 |   |   | 13,344 |   |   | 34,840 |   |   | 34,340 |   |
| Income                  from operations |   |                                       | 1,644  |   |   | 1,623 |   |   | 22,683 |   |   | 22,891 |   |
| Net                  income (loss)      |   |                                       | (1,497 | ) |   | (1,518 | ) |   | 5,955 |   |   | 6,107 |   |

----

**16.**
**Restatement**

----

|                                                                  |   | **As                  of and for the****Fiscal                  Year Ended****February                  1, 2004** |     | **As                  of and for the****Fiscal                  Year Ended****February                  2, 2003** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------|----------|-------------------------------------------------------------------------------------------------------------------|--------|
|                                                                  |   | *As                  Previously**Reported*                                                                        |     | *As                  Restated*                                                                                    |   | *As                  Previously**Reported* |   | *As                  Restated* |   |
|                                                                  |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |
| Consolidated                  balance sheets:                         |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |
| Cash                  and cash equivalents                            |   |                                                                                                              |     |                                                                                                              |   |   |   | $ | 2,522 |   | $ | 2,515 |   |
| Accounts                  receivable                                  |   | $                                                                                                                 | 2,349    |                                                                                                              | $      | 2,593 |   |   | 1,723 |   |   | 1,860 |   |
| Deferred                  income taxes                                |   |                                                                                                              | 3,124    |                                                                                                              |   | 1,605 |   |   |   |   |   |   |   |
| Prepaid                  expenses and other assets                    |   |                                                                                                              | 4,018    |                                                                                                              |   | 3,626 |   |   | 2,971 |   |   | 2,357 |   |
| Total                  current assets                                 |   |                                                                                                              | 26,547   |                                                                                                              |   | 24,880 |   |   | 22,061 |   |   | 21,577 |   |
| Photographic,                  sales and finishing equipment          |   |                                                                                                              | 139,742  |                                                                                                              |   | 138,679 |   |   | 123,530 |   |   | 122,682 |   |
| Accumulated                  depreciation and amortization            |   |                                                                                                              | 111,776  |                                                                                                              |   | 111,931 |   |   | 101,371 |   |   | 101,504 |   |
| Property                  and equipment, net                          |   |                                                                                                              | 68,040   |                                                                                                              |   | 66,822 |   |   | 57,762 |   |   | 56,781 |   |
| Deferred                  income taxes, noncurrent                    |   |                                                                                                              | 10,316   |                                                                                                              |   | 11,835 |   |   |   |   |   |   |   |
| Other                  assets                                         |   |                                                                                                              | 34       |                                                                                                              |   | 19 |   |   | 39 |   |   | 16 |   |
| Total                  assets                                         |   |                                                                                                              | 165,046  |                                                                                                              |   | 163,665 |   |   | 152,469 |   |   | 150,981 |   |
|                                                                  |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Accounts                  payable—trade                         |   |                                                                                                              | 23,672   |                                                                                                              |   | 23,667 |   |   | 26,627 |   |   | 26,568 |   |
| Accrued                  insurance                                    |   |                                                                                                              | 4,055    |                                                                                                              |   | 4,043 |   |   | 3,960 |   |   | 3,955 |   |
| Accrued                  income taxes                                 |   |                                                                                                              |     |                                                                                                              |   |   |   |   | 495 |   |   | 542 |   |
| Accrued                  compensation                                 |   |                                                                                                              | 5,270    |                                                                                                              |   | 5,309 |   |   | 4,740 |   |   | 4,754 |   |
| Other                  accrued liabilities                            |   |                                                                                                              | 10,128   |                                                                                                              |   | 10,119 |   |   | 9,853 |   |   | 9,833 |   |
| Total                  current liabilities                            |   |                                                                                                              | 64,459   |                                                                                                              |   | 64,472 |   |   | 57,853 |   |   | 57,830 |   |
| Total                  liabilities                                    |   |                                                                                                              | 289,796  |                                                                                                              |   | 289,809 |   |   | 278,797 |   |   | 278,774 |   |
| Accumulated                  deficit                                  |   |                                                                                                              | (166,851 | )                                                                                                                 |   | (168,493 | ) |   | (168,229 | ) |   | (169,815 | ) |
| Accumulated                  other comprehensive loss                 |   |                                                                                                              | (282     | )                                                                                                                 |   | (34 | ) |   | (419 | ) |   | (298 | ) |
| Total                  shareholders’ deficiency                 |   |                                                                                                              | (139,750 | )                                                                                                                 |   | (141,144 | ) |   | (141,328 | ) |   | (142,793 | ) |
| Total                  liabilities and shareholders’ deficiency |   |                                                                                                              | 165,046  |                                                                                                              |   | 163,665 |   |   | 152,469 |   |   | 150,981 |   |
|                                                                  |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Statements                  of operations:                            |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Costs                  of sales                                       |   |                                                                                                              | 244,375  |                                                                                                              |   | 245,028 |   |   | 219,872 |   |   | 219,551 |   |
| Gross                  profit                                         |   |                                                                                                              | 80,439   |                                                                                                              |   | 79,786 |   |   | 76,744 |   |   | 77,065 |   |
| General                  and administrative                           |   |                                                                                                              | 46,263   |                                                                                                              |   | 45,610 |   |   | 41,090 |   |   | 41,300 |   |
| Income                  from operations                               |   |                                                                                                              | 34,176   |                                                                                                              |   | 34,176 |   |   | 35,462 |   |   | 35,573 |   |
| Income                  (loss) before income taxes                    |   |                                                                                                              | 3,470    |                                                                                                              |   | 3,470 |   |   | (493 | ) |   | (382 | ) |
| Income                  tax benefit (provision)                       |   |                                                                                                              | (2,092   | )                                                                                                                 |   | (2,148 | ) |   | 14,869 |   |   | 14,817 |   |
| Net                  income                                           |   |                                                                                                              | 1,378    |                                                                                                              |   | 1,322 |   |   | 14,376 |   |   | 14,435 |   |
|                                                                  |   |                                                                                                              |     |                                                                                                              |   |   |   |   |   |   |   |   |   |

----

|                                                              |   | **Fiscal                  Year Ended****February                  1, 2004** |    | **Fiscal                  Year Ended****February                  2, 2003** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|-----------------------------------------------------------------------------|--------|
|                                                              |   | *As                  Previously**Reported*                                  |    | *As                  Restated*                                              |   | *As                  Previously**Reported* |   | *As                  Restated* |   |
|                                                              |   |                                                                        |    |                                                                        |   |   |   |   |   |
| Statement                  of cash flows:                         |   |                                                                        |    |                                                                        |   |   |   |   |   |
| Net                  income                                       |   | $                                                                           | 1,378   |                                                                        | $      | 1,322 |   | $ | 14,376 |   | $ | 14,435 |   |
| Depreciation                  and amortization                    |   |                                                                        | 11,386  |                                                                        |   | 11,408 |   |   | 10,090 |   |   | 10,168 |   |
| Accounts                  receivable                              |   |                                                                        | (626    | )                                                                           |   | (733 | ) |   | (230 | ) |   | (560 | ) |
| Prepaid                  expenses and other assets                |   |                                                                        | (987    | )                                                                           |   | (1,210 | ) |   | 51 |   |   | 296 |   |
| Other                  noncurrent assets                          |   |                                                                        | 5       |                                                                        |   | (3 | ) |   | (32 | ) |   | (6 | ) |
| Accounts                  payable—trade                     |   |                                                                        | (2,955  | )                                                                           |   | (2,901 | ) |   | 2,571 |   |   | 2,416 |   |
| Accrued                  expenses                                 |   |                                                                        | 988     |                                                                        |   | 959 |   |   | 931 |   |   | 956 |   |
| Other                  current accrued liabilities                |   |                                                                        | 275     |                                                                        |   | 286 |   |   | 112 |   |   | 92 |   |
| Net                  cash provided by operating activities        |   |                                                                        | 18,330  |                                                                        |   | 17,994 |   |   | 30,972 |   |   | 30,901 |   |
| Purchases                  of property and equipment              |   |                                                                        | (21,314 | )                                                                           |   | (21,080 | ) |   | (17,037 | ) |   | (17,046 | ) |
| Net                  cash used in investing activities            |   |                                                                        | (21,300 | )                                                                           |   | (21,066 | ) |   | (17,037 | ) |   | (17,046 | ) |
| Effect                  of exchange rate changes on cash          |   |                                                                        | (763    | )                                                                           |   | (654 | ) |   | 300 |   |   | 388 |   |
| Increase                  (decrease) in cash and cash equivalents |   |                                                                        | 2,298   |                                                                        |   | 2,305 |   |   | (363 | ) |   | (355 | ) |
| Cash                  and cash equivalents at beginning of period |   |                                                                        | 2,522   |                                                                        |   | 2,515 |   |   | 2,885 |   |   | 2,870 |   |
| Cash                  and cash equivalents at end of period       |   |                                                                        |    |                                                                        |   |   |   |   | 2,522 |   |   | 2,515 |   |

**17.**
**Subsequent        Event**

----

**ITEM        9.    ****CHANGES        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL        DISCLOSURE**

**ITEM        9A.   ****CONTROLS        AND PROCEDURES**

*Disclosure        controls and procedures*

*Internal        control over financial reporting*

*.        *

**.**

** **
** **
** **
** **

**ITEM        9B.   ****OTHER        INFORMATION**

----

**PART        III**

**ITEM        10.    ****DIRECTORS        AND EXECUTIVE OFFICERS OF THE REGISTRANT**

**Board        of Directors**

| **Name**                             | **Age** | **Affiliation**                             |
|--------------------------------------|---------|---------------------------------------------|
| Terry                  J. Blumer     | 46      | Jupiter                  Partners           |
| Barry                  J. Feld       | 48      | PCA                                         |
| Bridgette                  P. Heller | 43      | Johnson                  & Johnson      |
| John                  F. Klein       | 42      | Jupiter                  Partners           |
| Fredric                  M. Roberts  | 63      | F.M.                  Roberts & Company |
| Eric                  A. Scheuermann | 39      | Jupiter                  Partners           |
| John                  A. Sprague     | 52      | Jupiter                  Partners           |

----

**Executive        Officers of Registrant**

|  **Name**                       |  **Age** |  **Positions                  and Offices**                                  |
|--------------------------------------|---------------|-----------------------------------------------------------------------------------|
| Barry                  J. Feld       | 48            | President,                  Chief Executive Officer and Chairman of the Board     |
| James                  O. Mattox     | 52            | Executive                  Vice President, Operations                             |
| Donald                  Norsworthy   | 46            | Executive                  Vice President, Chief Financial Officer and Treasurer  |
| J.                  Robert Wren, Jr. | 58            | Executive                  Vice President, General Counsel and Secretary          |
| Rickey                  Pickett      | 42            | Chief                  Information Officer                                        |
| William                  J. Billiard | 39            | Senior                  Vice President, Corporate Controller                      |
| Todd                  J. Fine        | 36            | Senior                  Vice President, U.S. Wal-Mart                  Operations |

----

**Committees        of Our Board**

***Audit        committee***

----

***Compensation        committee***

|   |                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| -      | reviews                  and approves corporate goals and objectives relevant to the compensation                  of our executive officers; |
|   |                                                                                                                                          |
| -      | evaluates                  the performance of our executive officers; and                                                                     |
|   |                                                                                                                                          |
| -      | sets                  the compensation level of our officers based on its                  evaluation.                                        |
|   |                                                                                                                                          |

**Code        of Ethics**

----

**ITEM        11.    ****EXECUTIVE        COMPENSATION**

**Summary        Compensation Table**

|                                             |               | **Annual                  Compensation** | **Long-Term****Compensation****Awards** |                                                     |
|--------------------------------------------------|--------------------|------------------------------------------|-----------------------------------------|----------------------------------------------------------|
| **Name                  and Principal Position** | **Fiscal****Year** | **Salary****($)**                        | **Bonus****($)**                        | **Other                  Annual****Compensation****($)** | **Securities                  Underlying****Options**** ****(#)** | **All                  Other****Compensation****($)** |
| Barry                  J. Feld                   | 2004               | 400,000                                  | ---                                     | (1)                                                      | --- | 5,090 | (2) |
| President,                  Chief Executive      | 2003               | 400,000                                  | 145,000                                 | (1)                                                      | --- | 1,658 | (2) |
| Officer                  and Chairman            | 2002               | 330,000                                  | 165,000                                 | (1)                                                      | --- | 1,395 | (2) |
|                                             |               |                                     |                                    |                                                     |   |   |
| James                  O. Mattox                 | 2004               | 241,000                                  | ---                                     | (1)                                                      | --- | 1,524 | (2) |
| Executive                  Vice President,       | 2003               | 241,000                                  | 35,000                                  | (1)                                                      | 2,000 | 1,524 | (2) |
| Operations                                       | 2002               | 230,750                                  | 40,000                                  | (1)                                                      | --- | 969 | (2) |
|                                             |               |                                     |                                    |                                                     |   |   |   |
| Donald                  Norsworthy               | 2004               | 235,000                                  | ---                                     | (1)                                                      | --- | 3,245 | (2) |
| Executive                  Vice President,       | 2003               | 204,936                                  | 80,000                                  | (1)                                                      | 10,000 | 549 | (2) |
| Chief                  Financial Officer         | 2002               | 195,000                                  | 92,500                                  | (1)                                                      | --- | 518 | (2) |
| and                  Treasurer                   |               |                                     |                                    |                                                     |   |   |   |
|                                             |               |                                     |                                    |                                                     |   |   |   |
| J.                  Robert Wren, Jr.             | 2004               | 260,000                                  | ---                                     | (1)                                                      | --- | 3,096 | (2) |
| Executive                  Vice President,       | 2003               | 260,000                                  | 7,500                                   | (1)                                                      | --- | 3,096 | (2) |
| General                  Counsel and             | 2002               | 260,000                                  | 10,000                                  | (1)                                                      | --- | 2,616 | (2) |
| Secretary                                        |               |                                     |                                    |                                                     |   |   |   |
|                                             |               |                                     |                                    |                                                     |   |   |   |
| Rick                  Gemereth (3)               | 2004               | 175,000                                  | ---                                     | (1)                                                      | --- | 697 | (2) |
| Senior                  Vice President,          | 2003               | 175,000                                  | 14,500                                  | (1)                                                      | --- | 697 | (2) |
| Chief                  Information Officer       | 2002               | 170,000                                  | 15,000                                  | (1)                                                      | --- | 593 | (2) |

|   |                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Perquisites                  and other personal benefits did not exceed the lesser of either                  $50,000 or                  10% of the total annual salary and bonus reported under the headings                  of                  “Salary” and “Bonus.” |
|   |                                                                                                                                                                                                                                                                                              |
| (2)    | Includes                  amounts received as group term life insurance and key person life                  insurance benefits.                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                              |
| (3)    | Resigned                  from the company April 29, 2005.                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                              |

----

**Option        Grants During 2004**

**Aggregated        Option Exercises in Last Fiscal Year and Fiscal Year-End Option        Values**

|  **Name**                       | **Number                  of Securities Underlying Unexercised Options Held at Fiscal Year                  End                  Exercisable/****Unexercisable****(#)** |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Barry                  J. Feld       | 280,000/0                                                                                                                                                               |
| James                  O. Mattox     | 31,500/3,600                                                                                                                                                            |
| Donald                  Norsworthy   | 27,000/8,000                                                                                                                                                            |
| J.                  Robert Wren, Jr. | 28,400/0                                                                                                                                                                |
| Rick                  Gemereth       | 31,100/0                                                                                                                                                                |

**Employment        and Severance Arrangements**

----

**Management        Stock Option Plan**

----

**Compensation        of Directors**

**Compensation        Committee Interlocks and Insider Participation**

----

**ITEM        12.    ****SECURITY        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER        MATTERS**

| **Name                  and Address of Beneficial Owner(s)**                  |   | **Amount                  and Nature of****Beneficial                  Ownership****(1)** |      | **Percent                  of****Class** |   |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|-----------|------------------------------------------|--------|
| Jupiter                  Partners II L.P. and Ganymede II LLC (2)             |   |                                                                                      | 3,832,812 |                                     |   | (3 | ) |   | 91.9 | % |
| Terry                  J. Blumer                                              |   |                                                                                      | 3,832,812 |                                     |   | (4 | ) |   | 91.9 | % |
| Barry                  J. Feld                                                |   |                                                                                      | 281,334   |                                     |   | (5 | ) |   | 10.9 | % |
| Bridgette                  P. Heller                                          |   |                                                                                      | 10,000    |                                     |   | (5 | ) |   | * |   |
| John                  F. Klein                                                |   |                                                                                      | 3,832,812 |                                     |   | (4 | ) |   | 91.9 | % |
| Fredric                  M. Roberts                                           |   |                                                                                      | 4,000     |                                     |   | (5 | ) |   | * |   |
| Eric                  F. Scheuermann                                          |   |                                                                                      | 3,832,812 |                                     |   | (4 | ) |   | 91.9 | % |
| John                  A. Sprague                                              |   |                                                                                      | 3,832,812 |                                     |   | (4 | ) |   | 91.9 | % |
| Bank                  of America Corporation                                  |   |                                                                                      | 152,490   |                                     |   | (6 | ) |   | 6.2 | % |
| Joseph                  H. Reich                                              |   |                                                                                      | 115,405   |                                     |   |   |   |   | 5.0 | % |
| James                  O. Mattox                                              |   |                                                                                      | 39,940    |                                     |   | (5)                  (7 | ) |   | 1.7 | % |
| Donald                  Norsworthy                                            |   |                                                                                      | 28,000    |                                     |   | (5 | ) |   | 1.2 | % |
| J.                  Robert Wren, Jr.                                          |   |                                                                                      | 46,066    |                                     |   | (5)                  (8 | ) |   | 2.0 | % |
| Rick                  Gemereth                                                |   |                                                                                      | 25,000    |                                     |   | (5 | ) |   | 1.1 | % |
| All                  executive officers and directors as a group (14 persons) |   |                                                                                      | 4,272,152 |                                     |   | (5 | ) |   | 93.2 | % |

| *      | Less                    than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (1)    | Pursuant                    to Rule 13d-3 under the Exchange Act, beneficial ownership of                    a security                    consists of sole or shared voting power, including power to vote                    or direct                    the vote, and/or sole or shared investment power, including the                    power to                    dispose or direct the disposition, with respect to the security                    through                    any contract, arrangement, understanding, relationship or otherwise.                    Except as otherwise set forth below, each beneficial owner exercises                    sole                    voting and sole investment power over the shares indicated. All                    shares of                    common stock issuable upon conversion of currently convertible                    preferred                    stock or preferred stock convertible within 60 days after the                    date set                    forth above or subject to options that are currently exercisable                    or                    exercisable within 60 days after the date set forth above are                    deemed to be                    beneficially owned by the holders of such preferred stock or                    options. For                    the purpose of calculating each holder’s or the executive officers and                    directors as a group percentage of the class, no shares of common                    stock                    issuable upon conversion of such convertible preferred stock                    or subject to                    such options are deemed to be outstanding other than shares of                    common                    stock issuable upon conversion of such convertible preferred                    stock or                    subject to options held by such holder or members of such                    group. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)    | Ganymede                    II LLC is the general partner of Jupiter Partners II L.P. The                    address for                    Jupiter Partners II L.P., Ganymede II LLC and Messrs. Blumer,                    Klein,                    Scheuermann and Sprague is 12 East 49th Street, 36th Floor, New                    York, New                    York 10017.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (3)    | Includes                    1,875,000 shares of common stock that are issuable upon conversion                    of                    shares of Series A preferred stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

----

| (4)    | Represents                    shares of common stock beneficially owned by Jupiter Partners                    II L.P.                    Messrs. Blumer, Scheuermann, Sprague and Klein exercise investment                    and                    voting power over the shares beneficially owned by Jupiter Partners                    II                    L.P. Each of Messrs. Blumer, Sprague, Scheuermann and Klein disclaim                    beneficial ownership of all common stock owned by Jupiter Partners                    II                    L.P., except to the extent of their respective beneficial ownership                    interests in Jupiter Partners II L.P.                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (5)    | The                    numbers and percentages of shares shown in the table above include                    stock                    options covering common stock exercisable and preferred stock                    convertible                    into common stock within 60 days of the date set forth above                    as follows:                    Mr. Blumer—1,875,000; Mr. Feld—280,000; Ms. Heller—10,000; Mr.                    Klein—1,875,000; Mr. Roberts—4,000; Mr. Mattox—32,900; Mr.                    Norsworthy—28,000; Mr. Scheuermann—1,875,000; Mr. Sprague—1,875,000; Mr.                    Wren—28,400; and Mr. Gemereth—25,000; and all executive officers and                    directors as a group (including such individuals)—2,288,300. Such persons                    and members of such group disclaim any beneficial ownership of                    the shares                    subject to such options. Mr. Gemereth resigned effective April                    29,                    2005. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (6)    | Represents                    shares of common stock that are issuable upon the exercise of                    outstanding                    warrants held by a subsidiary of Bank of America Corporation.                    The address                    for Bank of America Corporation is 100 North Tryon Street, Charlotte,                    North Carolina 28255.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (7)    | Includes                    300 shares owned by Mr. Mattox’s children.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (8)    | Includes                    15,000 shares of common stock owned by a partnership of which                    Mr. Wren is                    a general partner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**Equity        Compensation Plan Information**

| **Plan                  Category**                                          |   | **(a)****Number                  of securities to be issued upon exercise of outstanding options,****warrants                  and rights** |      | **(b)****Weighted                  average exercise price of outstanding options,****warrants and rights** |   | **(c)****Number                  of securities available for future issuance under equity compensation                  plans (excluding securities****reflected in column (a))** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                  compensation plans approved by security holders     |   |                                                                                                                                        | 1,090,985 |                                                                                                       | $      | 13.69                                                                                                                                                                             |   |   | 11,150 |   |
| Equity                  compensation plans not approved by security holders |   |                                                                                                                                        | ---       |                                                                                                       |   | ---                                                                                                                                                                               |   |   | --- |   |
| Total                                                                       |   |                                                                                                                                        | 1,090,985 |                                                                                                       | $      | 13.69                                                                                                                                                                             |   |   | 11,150 |   |
|                                                                        |   |                                                                                                                                        |      |                                                                                                       |   |                                                                                                                                                                              |   |   |   |   |

**ITEM        13.    ****CERTAIN        RELATIONSHIPS AND RELATED TRANSACTIONS**

**ITEM        14.    ****PRINCIPAL        ACCOUNTING FEES AND SERVICES**

***Audit        Fees***

----

***Audit-Related        Fees***

***Tax        Fees***

***All        Other Fees***

----

**PART        IV**

**ITEM        15.    ****EXHIBITS,        FINANCIAL STATEMENT SCHEDULES**

|   |   |                                                                                                                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    |   |                                                                                                                                                                                                        |
|   | 1.     | Financial                  Statements                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                        |
|   |   | The                  financial statements listed in the                  Index to Consolidated Financial Statements in Part II, Item 8,                  are filed                  as part of this report. |
|   |   |                                                                                                                                                                                                        |
|   | 2.     | Schedule                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                        |
|   |   | The                  Schedule on page 108 is filed as part of                  this report.                                                                                                                 |
|   |   |                                                                                                                                                                                                        |
|   | 3.     | Exhibits                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                        |
|   |   | See                  Index to Exhibits on page 110 of this                  report.                                                                                                                         |
|   |   |                                                                                                                                                                                                        |
|   |   | The                  exhibits are filed with or incorporated by reference in this                  report.                                                                                                  |
|   |   |                                                                                                                                                                                                        |

----

**PORTRAIT        CORPORATION OF AMERICA, INC. AND SUBSIDIARIES**

**SCHEDULE        II - VALUATION AND QUALIFYING        ACCOUNTS**

**(in        thousands)**

|  **Description**                                                       |   | **Balance                  at Beginning****of                  Period** |   | **Tax                  Valuation Allowance Charged to Income Tax****Provision** |   | **Charged                  to Other****Accounts** |   | **Decrease                  in Tax Valuation****Allowance** |   | **Balance                  at End of****Period** |   |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------------------------|--------|--------------------------------------------------|--------|
| Year                  ended January 30, 2005 income tax valuation allowance |   | $                                                                       | 77     |                                                                            | $      | 17,348                                            |   | $                                                           | ---    |                                             | $      | --- |   | $ | 17,425 |   |
| Year                  ended February 1, 2004 income tax valuation allowance |   | $                                                                       | 77     |                                                                            | $      | ---                                               |   | $                                                           | ---    |                                             | $      | --- |   | $ | 77 |   |
| Year                  ended February 2, 2003 income tax valuation allowance |   | $                                                                       | 18,669 |                                                                            | $      | ---                                               |   | $                                                           | ---    |                                             | $      | (18,592 | ) | $ | 77 |   |
|                                                                        |   |                                                                    |   |                                                                            |   |                                              |   |                                                        |   |                                             |   |   |   |   |   |   |

----

**SIGNATURES**

|                                                                           |                                                                                                                                          |                           |
|--------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| /s/                  Barry J. FeldBarry                  J. Feld               | President,                  Chief Executive Officer, Chairman and Director(Principal                  Executive Officer)                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    Donald NorsworthyDonald                  Norsworthy     | Executive                  Vice President, Chief Financial Officer and Treasurer(Principal                  Financial and Accounting Officer) | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    Terry J. BlumerTerry                  J. Blumer         | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    Bridgette P. HellerBridgette                  P. Heller | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    John F. KleinJohn                  F. Klein             | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    Fredric M. RobertsFredric                  M. Roberts   | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    Eric F. ScheuermannEric                  F. Scheuermann | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |
| /s/                    John A. SpragueJohn                  A. Sprague         | Director                                                                                                                                      | July                  28, 2005 |
|                                                                           |                                                                                                                                          |                           |

----

**EXHIBIT        INDEX**

| **Exhibit****Number** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                   | Agreement                    and Plan of Merger, dated August 6, 2004, between                    Portrait Corporation of America, Inc. and                    PCA International, Inc.                    (incorporated by reference to Exhibit 2.1                    to                    the Current                    Report on Form 8-K                    of Portrait                     Corporation                    of America,                    Inc. filed August                    10,                    2004 (file                    No. 000-08550)).                                                   |
| 3.1                   | Certificate                    of Incorporation of Portrait                    Corporation of America, Inc. (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.2                   | By-laws                    of Portrait Corporation of America, Inc. (filed                    herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.3                   | Certificate                    of the Powers, Designations,                    Preferences and Rights of the Series A Redeemable Convertible                    Preferred                    Stock of Portrait Corporation of America, Inc. (filed                    herewith).                                                                                                                                                                                                                                                                                                                                                  |
| 4.1                   | Indenture,                    dated as of June 27, 2002, among PCA LLC, PCA Finance Corp.,                    the                    Guarantors party thereto and The Bank of New York, as trustee                    (incorporated by reference to Exhibit 4.1 to the Registration                    Statement on                    Form S-4 filed by PCA LLC and PCA Finance Corp. on August 23,                    2002 (File                    No. 333-98653; No. 333-98653-01 to 333-98653-07)).                                                                                                                          |
| 4.2                   | Form                    of 11.875% Senior Note due 2009 of PCA LLC and PCA Finance Corp.                    (incorporated by reference to Exhibit A to Exhibit 4.1 to the                    Registration                    Statement on Form S-4 filed by PCA LLC and PCA Finance Corp.                    on August 23,                    2002 (File No. 333-98653; No. 333-98653-01 to                    333-98653-07)).                                                                                                                                                                                                    |
| 4.3                   | Exchange                    and Registration Rights Agreement, dated as of June 20, 2002,                    among PCA                    LLC, PCA Finance Corp., the Guarantors party thereto, and Goldman,                    Sachs                    & Co. and Banc of America Securities LLC as initial purchasers                    (incorporated by reference to Exhibit 4.3 to the Registration                    Statement on                    Form S-4 filed by PCA LLC and PCA Finance Corp. on August 23,                    2002 (File                    No. 333-98653; No. 333-98653-01 to 333-98653-07)). |
| 4.4                   | Purchase                    Agreement, dated as of June 27, 2002, among PCA LLC, the Guarantors                    party                    thereto, and GS Mezzanine Partners II, L.P. and GS Mezzanine                    Partners II                    Offshore, L.P. (incorporated by reference to Exhibit 4.4 to the                    Registration Statement on Form S-4 filed by PCA LLC and PCA Finance                    Corp.                    on August 23, 2002 (File No. 333-98653; No. 333-98653-01 to                    333-98653-07)).                                                                      |
| 4.5                   | Form                    of 13.75% Senior Subordinated Note of PCA LLC (incorporated by                    reference                    to Exhibit 4.5 to the Registration Statement on Form S-4 filed                    by PCA LLC                    and PCA Finance Corp. on August 23, 2002 (File No. 333-98653;                    No.                    333-98653-01 to 333-98653-07)).                                                                                                                                                                                                                                    |
| 4.6                   | Purchase                    Agreement, dated as of June 27, 2002, among PCA International,                    Inc., and                    GS Mezzanine Partners II, L.P. and GS Mezzanine Partners II Offshore,                    L.P.                    (incorporated by reference to Exhibit 4.6 to the Registration                    Statement on                    Form S-4 filed by PCA LLC and PCA Finance Corp. on August 23,                    2002 (File                    No. 333-98653; No. 333-98653-01 to 333-98653-07)).                                                                                    |
| 4.7                   | Form                    of 16.50% Senior Subordinated Note of PCA International, Inc.                    (incorporated by reference to Exhibit 4.7 to the Registration                    Statement on                    Form S-4 filed by PCA LLC and PCA Finance Corp. on August 23,                    2002 (File                    No. 333-98653; No. 333-98653-01 to                    333-98653-07)).                                                                                                                                                                                                                    |

----

| 4.8  | Waiver,                      dated as of July 15, 2005, with respect                      to the Purchase Agreement, among Portrait Corporation of America,                      Inc.                      (formerly PCA International, Inc.), GS Mezzanine Partners II,                      L.P. and GS                      Mezzanine Partners II Offshore, L.P., dated as of June 27,                      2002 (filed                      herewith).                                                                                                                                                                                                                                                 |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.9  | Waiver,                      dated as of July 15, 2005, with respect                      to the Purchase Agreement, among PCA LLC, the guarantors named                      therein, GS                      Mezzanine Partners II, L.P. and GS Mezzanine Partners II Offshore,                      L.P.,                      dated as of June 27, 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                              |
| 4.10 | The                      First Amendment, dated as of July 15, 2005,                      with respect to the Purchase Agreement among Portrait Corporation                      of                      America, Inc. (formerly PCA International, Inc.), GS Mezzanine                      Partners                      II, L.P. and GS Mezzanine Partners II Offshore, L.P., dated                      as of June 27,                      2002 (filed herewith).                                                                                                                                                                                                                                     |
| 4.11 | The                      First Amendment, dated as of July 15, 2005,                      with respect to the Purchase Agreement among PCA LLC, the guarantors                      named                      therein, GS Mezzanine Partners II, L.P. and GS Mezzanine Partners                      II                      Offshore, L.P., dated as of June 27, 2002 (filed                      herewith).                                                                                                                                                                                                                                                                                             |
| 4.12 | Indenture,                      dated as of July 15, 2005, among PCA                      LLC and PCA Finance Corp., the Guarantors party thereto and                      The Bank of                      New York Trust Company, N.A., as trustee (filed                      herewith).                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.13 | Form                      of 14% Senior Secured Note due 2009 of PCA LLC and PCA Finance                      Corp.                      (incorporated by reference to Exhibit A to Exhibit 4.8 of this                      Annual                      Report on Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.14 | Security                      Agreement, dated as of July 15, 2005, among the Grantors listed                      on the                      signature pages thereto and those additional entities that                      thereafter                      become parties thereto and The Bank of New York Trust Company,                      N.A., in                      its capacity as collateral agent for the trustee and the noteholders                      (filed herewith).                                                                                                                                                                                                               |
| 10.1 | The                      Credit Agreement, dated as of July 15, 2005,                      among the lenders identified on the signature pages thereto,                      Wells Fargo                      Foothill, Inc., as the arranger and administrative agent for                      the lenders,                      PCA LLC, each of PCA LLC’s subsidiaries identified on the signature pages                      thereto and Portrait Corporation of America, Inc. (formerly                      PCA                      International, Inc.) (filed herewith).                                                                                                                    |
| 10.2 | The                      General Continuing Guaranty, dated as of                      July 15, 2005, among the persons listed on the signature pages                      thereto                      under the caption “Guarantors” and any additional entities acceding                      thereto, in favor of Wells Fargo Foothill, Inc., as arranger                      and                      administrative agent for the Lenders (filed                      herewith).                                                                                                                                                                                                        |
| 10.3 | The                      Security Agreement, dated as of July 15,                      2005, among the Grantors listed on the signature pages thereto                      and those                      additional entities that thereafter become parties thereto                      and Wells Fargo                      Foothill, Inc., in its capacity as administrative agent for                      the Lender                      Group and the Bank Product Providers (filed                      herewith).                                                                                                                                                                                |
| 10.4 | AGFA/PCA                      2002 Sales Contract, dated as of February 4, 2002, between                      Agfa                      Corporation and PCA International, Inc. (portions of this exhibit                      have                      been omitted and filed separately with the Commission) (incorporated                      by                      reference to Exhibit 10.3 to the Registration Statement on                      Form S-4 filed                      by PCA LLC and PCA Finance Corp. on August 23, 2002 (File No.                      333-98653;                      No. 333-98653-01 to 333-98653-07)).                                                      |
| 10.5 | Amendment                      No. 1, dated as of April 5, 2002, to the AGFA/PCA 2002 Sales                      Contract                      (incorporated by reference to Exhibit 10.4 to the Registration                      Statement                      on Form S-4 filed by PCA LLC and PCA Finance Corp. on August                      23, 2002                      (File No. 333-98653; No. 333-98653-01 to                      333-98653-07)).                                                                                                                                                                                                                                            |
| 10.6 | Letter                      Agreement, dated as of June 15, 2005, between Agfa Photo USA                      Corporation                      and Portrait Corporation of America, Inc., amending                      the AGFA/PCA 2002 Sales Contract (filed                      herewith).                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.7 | Sub-Tenancy                      Contract, dated as of June 1, 2002, between Nueva Wal Mart                      De Mexico, S DE                      R.L. DE C.V. and American Studios De Mexico, S.A. DE C.V. (portions                      of                      this exhibit have been omitted and filed separately with the                      Commission)                      (incorporated by reference to Exhibit 10.5 to the Registration                      Statement                      on Form S-4 filed by PCA LLC and PCA Finance Corp. on August                      23, 2002                      (File No. 333-98653; No. 333-98653-01 to                      333-98653-07)). |

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| 10.8  | License                        Agreement, dated as of April 4, 2002, between Wal-Mart Stores,                        Inc. and                        PCA International, Inc. (portions of this exhibit have been                        omitted and                        filed separately with the Commission) (incorporated by reference                        to                        Exhibit 10.6 to Amendment No. 1 to the Registration Statement                        on Form S-4                        filed by PCA LLC and PCA Finance Corp. on October 22, 2002                        (File No.                        333-98653; No. 333-98653-01 to 333-98653-07)).                                                     |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.9  | Amendment                        No.1 to Wal-Mart Master License Agreement, dated as of June                        17, 2002                        (incorporated by reference to Exhibit 10.7 to the Registration                        Statement                        on Form S-4 filed by PCA LLC and PCA Finance Corp. on August                        23, 2002                        (File No. 333-98653; No. 333-98653-01 to                        333-98653-07)).                                                                                                                                                                                                                                                             |
| 10.10 | Amendment                        Number Two to Wal-Mart Master In-Store license, dated June                        24,                        2004,                        between Wal-Mart Stores,                        Inc. and PCA International, Inc. (portions of this                        exhibit have been omitted and filed separately with the Commission)                        (incorporated by reference to Exhibit 10.3                        to the Quarterly Report on Form 10-Q of Portrait Corporation                        of America,                        Inc. filed September 14, 2004 (file No. 000-08550)).                                                                                              |
| 10.11 | License                        Agreement, dated as of February 9, 1996, between Wal-Mart                        Canada, Inc.                        and                        PCA International, Inc. (portions                        of this exhibit have been omitted and filed separately with                        the                        Commission) (incorporated                        by reference to Exhibit 10.8                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                        to                        333-98653-07)). |
| 10.12 | 1998                        Stock Option Plan                        of                        PCA International, Inc.                        (incorporated by reference to Exhibit 10.9                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                        to                        333-98653-07)).                                                                                                                                                                                                                                            |
| 10.13 | Form                        of Stock Option Agreement relating to the 1998 Stock Option                        Plan                        (incorporated by reference to Exhibit 10.10 to the Registration                        Statement                        on Form S-4 filed by PCA LLC and PCA Finance Corp. on August                        23, 2002                        (File No. 333-98653; No. 333-98653-01 to 333-98653-07)).                                                                                                                                                                                                                                                                                            |
| 10.14 | 1996                        Omnibus Long-Term Compensation Plan of PCA International,                        Inc.                        (incorporated herein by reference to Exhibit 10(j) to the                        Quarterly Report                        on Form 10-Q of PCA International, Inc. for the quarter ended                        April 28,                        1996 (SEC file number 0-8550)).                                                                                                                                                                                                                                                                                                                    |
| 10.15 | Purchase                        Agreement, dated as of June 20, 2002, among PCA LLC, PCA                        Finance Corp.,                        the Guarantors party thereto, and Goldman, Sachs & Co. and Banc of                        America Securities LLC as initial purchasers                        (incorporated by reference to Exhibit 10.12                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                        to                        333-98653-07)).                                                                 |
| 10.16 | Form                        of Agreement relating to the 1996 Omnibus Long-Term Compensation                        Plan                        of                        PCA International, Inc. (incorporated by reference to Exhibit10.13                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                        to                        333-98653-07)).                                                                                                                                                                                        |
| 10.17 | Warrant                        Agreement, dated as of August                        25, 1999, between United States Trust Company of New York                        and                        PCA International, Inc.                        (incorporated by reference to Exhibit 10.14                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                        to                        333-98653-07)).                                                                                                                                          |
| 10.18 | Warrant                        Agreement, dated as of June                        27, 2002,                        among PCA International, Inc., and                        GS Mezzanine                        Partners II,                        L.P. and GS Mezzanine Partners II Offshore, L.P.                        (incorporated by reference to Exhibit 10.15                        to                        the Registration Statement on Form S-4 filed by PCA LLC and                        PCA Finance                        Corp. on August                        23,                        2002 (File No. 333-98653; No. 333-98653-01 to                        333-98653-07)).                                     |

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| 10.19 | Stockholders                          Agreement, dated as of August 25, 1998,                          among PCA                          International, Inc., Jupiter                          Partners II L.P.                          and the other parties thereto                          (incorporated by reference to Exhibit 10.16                          to Amendment No. 1                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on October                          22,                          2002 (File No. 333-98653; No. 333-98653-01 to                          333-98653-07)).                                                         |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.20 | Stockholders’                          Agreement, dated as of August                          25, 1999,                          among Jupiter Partners II L.P., Nationsbridge,                          L.L.C., The Chase Manhattan Bank and PCA                          International, Inc.                          (incorporated by reference to Exhibit 10.17                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                  |
| 10.21 | Stockholders’                          Agreement, dated as of June                          27, 2002,                          among Jupiter                          Partners II L.P., PCA                          International, Inc.,                          GS Mezzanine Partners II, L.P. and GS Mezzanine Partners                          II Offshore,                          L.P.                          (incorporated by reference to Exhibit 10.18                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)). |
| 10.22 | Registration                          Rights Agreement, dated as of August 25, 1999,                          among                          PCA International, Inc.                          and the purchasers party thereto                          (incorporated by reference to Exhibit 10.19                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                                                                                        |
| 10.23 | Registration                          Rights Agreement, dated as of August                          25, 1998, between Jupiter Partners II L.P. and                          PCA International, Inc. (incorporated                          by reference to Exhibit 10.20                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                                                                                                                   |
| 10.24 | Registration                          Rights Agreement,                          dated as of June                          27, 2002, among                          PCA International, Inc.                          and the Purchasers party thereto                          (incorporated by reference to Exhibit 10.21                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                                                                 |
| 10.25 | Offer                          of Employment, dated as of October                          12,                          1999, between Donald                          Norsworthy                          and PCA International, Inc. (incorporated by reference                          to Exhibit                          10.22                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                                                        |
| 10.26 | Offer                          of Employment, dated as of June 15, 1999, between Barry                          J. Feld and PCA                          International, Inc. (incorporated by reference to Exhibit                          10.23 to the                          Registration Statement on Form S-4 filed by PCA LLC and                          PCA Finance Corp.                          on August 23, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).                                                                                                                                                                                                                                                   |
| 10.27 | Employment                          and Non-Compete Agreement, dated as of January 28, 1997,                          between J. Robert                          Wren, Jr. and PCA International, Inc. (incorporated herein                          by reference to                          Exhibit 10(n) to the Annual Report on Form 10-K of PCA                          International, Inc.                          for the year ended February 2, 1997 (SEC file number                          0-8550)).                                                                                                                                                                                                                                                                            |
| 10.28 | Employment                          and Non-Compete Agreement, dated as of January,                          1997, between James                          O. Mattox                          and PCA International, Inc. (incorporated by                          reference to Exhibit 10.25                          to                          the Registration                          Statement on Form S-4 filed by PCA LLC and PCA Finance                          Corp. on August 23,                          2002 (File No. 333-98653; No. 333-98653-01 to 333-98653-07)).                                                                                                                                                                                                       |
| 10.29 | Employment                          and Non-Compete Agreement,                          dated as of June 9, 1997,                          between Eric H. Jeltrup and PCA International, Inc. (incorporated                          herein                          by                          reference to Exhibit 10(p)                          to                          the Quarterly                          Report on Form 10-Q of PCA International, Inc. for the                          quarter ended                          August 3, 1997 (SEC file number 0-8550)).                                                                                                                                                                                                     |
| 10.30 | Amendment                          No. 1, dated as of August 25, 1998, to the Employment and                          Non-Compete                          Agreement between Eric H. Jeltrup                          and PCA International, Inc. (incorporated by reference                          to Exhibit                          10.27                          to                          the Registration Statement on Form S-4 filed by PCA LLC                          and PCA Finance                          Corp. on August                          23,                          2002 (File No. 333-98653; No. 333-98653-01 to                          333-98653-07)).                                                                                                   |

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| 10.31 | PCA                          Employment Agreement, dated March 8, 2004, between                          PCA International, Inc.                          and all of its subsidiaries and Todd J. Fine (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32 | ISDA                          Master                          Agreement, dated as of January                          27, 1997, between National Bank, N.A.                          and PCA International, Inc. (incorporated by reference                          to Exhibit                          10.28                          to                          Amendment No. 1 to the Registration Statement on Form S-4                          filed by PCA LLC                          and PCA Finance Corp. on October 22, 2002 (File No. 333-98653;                          No.                          333-98653-01 to 333-98653-07)).           |
| 10.33 | Extension                          Agreement, dated as of March 31, 2002, among Wal-Mart Canada                          Corp., PCA                          Photo Corporation of Canada, Inc. and PCA International,                          Inc.                          (incorporated by reference to Exhibit 10.29 to Amendment                          No. 1 to the                          Registration Statement on Form S-4 filed by PCA LLC and                          PCA Finance Corp.                          on October 22, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)). |
| 10.34 | Extension                          Agreement, dated as of April 4, 2002, among Wal-Mart Canada                          Corp., PCA                          Photo Corporation of Canada, Inc. and PCA International,                          Inc.                          (incorporated by reference to Exhibit 10.30 to Amendment                          No. 1 to the                          Registration Statement on Form S-4 filed by PCA LLC and                          PCA Finance Corp.                          on October 22, 2002 (File No. 333-98653; No. 333-98653-01                          to                          333-98653-07)).  |
| 10.35 | Licence Amending                          Agreement, dated February                          7, 2003, between Wal-Mart Canada Corp., PCA Photo Corporation                          of Canada,                          Inc. and PCA International, Inc. (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.36 | Letter                          Agreement, dated January 29, 2004, of PCA                          International, Inc. and PCA Photo Corporation of Canada,                          Inc. dated (filed                          herewith).                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 12.1  | Statement                          of Computation of Ratios of Earnings                          to Fixed Charges (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 21.1  | Subsidiaries                          of Portrait Corporation of America,                          Inc. (filed herewith)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.1  | Certification                          of Chief Executive Officer                          pursuant to Section 302 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.2  | Certification                          of Chief Financial Officer                          pursuant to Section 302 (filed                          herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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