SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                   For the Fiscal Year Ended January 31, 2000

                                       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 33-12755

                            SHARPER IMAGE CORPORATION
             (Exact name of registrant as specified in its charter)

          Delaware                                               94-2493558
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                650 Davis Street, San Francisco, California 94111
               (Address of principal executive offices) (Zip Code)


               Registrant's telephone number including area code:
                                 (415) 445-6000

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, par value $.01
                                (Title of Class)

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 is not contained  herein,  and will not be contained,  to the
best  of  the  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

  The aggregate market value of the voting stock held by non-affiliates of the
                 Registrant as of April 17, 2000 was $80,438,900

           The number of shares of Common Stock, with $.01 par value,
              outstanding on April 17, 2000 was 12,026,259 shares.

Documents incorporated by reference:

Portions of Registrant's Annual Report to Stockholders for the fiscal year ended
January  31, 2000 are  incorporated  by  reference  into Parts II and IV of this
Report.  Portions of  Registrant's  Proxy  Statement  for the Annual  Meeting of
Stockholders  to be held June 12, 2000 are  incorporated  by reference into Part
III of this report.

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                                     PART 1

         This Annual Report on Form 10-K and the documents  incorporated  herein
by reference of Sharper Image  Corporation  (referred to as the "Company,"  "The
Sharper Image," "it," "we," "ours," and "us") contain forward-looking statements
that  have  been made  pursuant  to the  provisions  of the  Private  Securities
Litigation  Reform Act of 1995.  Such  forward-looking  statements  are based on
current  expectations,  estimates and projections about the Company's  industry,
management's  beliefs and certain assumptions made by the Company's  management.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," or variations of such words and similar  expressions,  are intended
to identify such forward-looking statements. These statements are not guarantees
of future  performance  and are  subject to  certain  risks,  uncertainties  and
assumptions that are difficult to predict.  Therefore, actual results may differ
materially  from  those  expressed  or  forecasted  in any such  forward-looking
statements.  Such risks and  uncertainties  include those set forth herein under
"Factors  Affecting Future Operating Results" on pages 15 through 23, as well as
those noted in the documents  incorporated herein by reference.  Unless required
by  law,  the  Company   undertakes  no   obligation  to  update   publicly  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise. However, readers should carefully review the statements set
forth in other reports or documents the Company files from time to time with the
Securities and Exchange  Commission,  particularly the Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K.


Item 1. Business

Overview

         The Sharper Image is a leading specialty  retailer of innovative,  high
quality  products that are useful and entertaining and are designed to make life
easier and more enjoyable.  The Company offers a unique  assortment of products,
in the electronics,  recreation and fitness,  personal care, houseware,  travel,
toy, gift and other categories.  The Company's merchandising  philosophy focuses
on new and creative  proprietary  Sharper Image Design  products,  Sharper Image
private  label  products  and branded  products,  a portion of which the Company
offers on a exclusive  basis.  The  Company's  products  are  marketed  and sold
through  three  primary sales  channels:  The Sharper Image stores,  The Sharper
Image catalog,  and the Internet,  primarily  through its  sharperimage.com  Web
site. The Company also has business-to-business operations consisting of Sharper
Image  Corporate  Rewards & Incentives  and  wholesale  operations.  The Company
believes that its unique  merchandising and creative  marketing  strategies have
made The Sharper Image one of the most widely  recognized  retail brand names in
the United States.

         The  Company's  merchandising  strategy  emphasizes  products  that are
innovative  and  new-to-market.   In  recent  years,  the  Company  has  focused
significant  resources on the  development  and  marketing of its Sharper  Image
Design  products  and its  Sharper  Image  private  label  products,  which  are
exclusive to The Sharper Image. Sharper Image Design products typically generate
higher gross margins than its other products and, the Company believes,  broaden
its  customer  reach.  The Company has  increased  the  percentage  of its sales
attributable to Sharper Image Design products to 29% for the year ending January
31, 2000

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(fiscal  1999) from 18% for the year ended January 31, 1999 (fiscal 1998) and 8%
for the year ended  January 31, 1998 (fiscal  1997).

         The  Company  markets  and sells its  merchandise  through a variety of
sales  channels,  including The Sharper Image stores,  The Sharper Image catalog
and the Internet,  primarily through its  sharperimage.com Web site. The Company
believes  that  this   multi-channel   approach  provides  it  with  significant
marketing,  sales and  operational  synergies,  and provides its customers  with
enhanced shopping flexibility and superior customer service. The Company's store
operations   generate  the  highest   proportion  of  its  sales,   representing
approximately 64% of total revenues in fiscal 1999 and 67% in fiscal 1998. As of
January 31, 2000, the Company  operated 89 The Sharper Image stores in 28 states
and the District of Columbia.  The Sharper Image stores  present an  interactive
and   entertaining   selling   environment  that  emphasizes  the  features  and
functionality  of its products and allows the customer to truly  experience  the
product while  shopping.  The Company's  average store sales per square foot are
consistently  above  industry  averages,  and during 1999 the Company  generated
average  sales of $546 per square foot, an increase of 13% as compared with $484
per square foot for fiscal 1998.

         The Company  also offers its  products  through its  award-winning  The
Sharper Image catalog,  a full-color  monthly catalog that uses dramatic visuals
and creative product descriptions designed and produced by its in-house staff of
writers and  production  artists.  The Sharper Image  catalog,  which  generally
features  between 180 and 250 products in each monthly  catalog,  increasing  to
over 340 products during the Holiday shopping  season,  also currently serves as
the primary advertising vehicle for its stores.  During fiscal 1999, the Company
mailed  approximately  47.6  million The  Sharper  Image  catalogs,  to over 7.9
million  individuals.  Approximately  22% of the Company's  total  revenues were
generated  by catalog  operations  in fiscal 1999 and 25%,  excluding  specialty
catalogs,  in fiscal 1998. Catalog operations also include revenues generated by
single   product   mailings,   print  media   (newspapers   and  magazines)  and
infomercials.

         Sharper Image products are also marketed through the Company's Internet
retail operations,  including its own Web site, which the Company has maintained
at sharperimage.com  since 1995. The Sharper Image was one of the early entrants
into Internet retailing, and has participated in online shopping since 1994. The
Company's  Internet  operations  grew  significantly  in  fiscal  1999 to  $28.5
million, or approximately 10% of its total revenues,  from $4.9 million or 2% of
total  revenues  for fiscal 1998.  In addition to its Web site,  the Company has
offered its  products  through  Internet  marketing  partnerships  with  America
Online,  Catalog  City,  Linkshare,  Yahoo!  Shopping,  and others.  The Company
believes that online retailing over the Internet presents The Sharper Image with
a  significant  opportunity  for the marketing and sale of its products and will
enable it to significantly  expand and diversify its existing customer base. The
Company  believes  that its  Sharper  Image  Design  products  are  particularly
well-positioned to be marketed and sold over the Internet.  The Company plans to
significantly  expand the  resources  dedicated  to its Internet  operations  by
establishing   additional  strategic  relationships  with  other  online  retail
partners and continuing to enhance the technical  capabilities  and presentation
of products on its Web site.  The Company  also  operates an auction  site where
consumers can bid to win products at less than retail prices, while allowing the
Company the opportunity to effectively manage its closeout products.

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<PAGE>


         The Company was founded in 1977 by Richard Thalheimer, who continues as
Chairman and Chief Executive Officer. The Sharper Image mailed its first catalog
in 1981,  began the  expansion  into store  operations  in 1984,  and  commenced
Internet  online retail  operations  in 1994.  The  Company's  store  operations
generate the highest proportion of its sales, representing  approximately 64% of
total  revenues for fiscal 1999 and 67% for fiscal 1998. As of January 31, 2000,
the  Company  operated  89 The  Sharper  Image  stores in the United  States and
licensees  operated three stores  internationally  and two airport stores in the
United States. The typical Sharper Image store ranges from  approximately  2,200
to 2,500  selling  square feet in size,  with several  larger size stores having
3,000 to 5,000  selling  square  feet.  The  Sharper  Image  stores  present  an
interactive and  entertaining  selling  environment that emphasizes the features
and  functionality  of its products and allows the customer to truly  experience
the  product  while  shopping.  The  Company  also has three  additional  retail
formats,  Sharper Image Design stores,  Outlet stores and airport  shops.  These
formats are discussed under "Store Operations" and "Licensed Operations."

         During fiscal 1999,  the Company  opened five new stores of The Sharper
Image  format and closed  three  Sharper  Image  stores at the maturity of their
leases.  The Company plans to open four to six new stores during the fiscal year
ending January 31, 2001 (fiscal  2000).  Lease terms for several of the existing
The Sharper Image store  locations will be maturing during fiscal 2000 and these
locations may be relocated, closed, or leases renegotiated.  The Company employs
approximately  1,400  employees  in  twenty-eight  states  and the  District  of
Columbia.

         The  Company is known for its varied  product  mix and a  merchandising
philosophy focusing on innovative, well-designed, high-quality products that are
developed by The Sharper Image,  exclusive to The Sharper  Image,  or in limited
distribution.  In product lines where the Company  competes  directly with other
retailers,  it chooses to sell the best  version  of the  product  with the most
advanced  features.  The Company is frequently sought after by manufacturers and
inventors to launch  technologically  advanced  products  with features that are
unique and surprising.

         During fiscal 1999, the Company continued the expansion of its in-house
Sharper Image Design product development  function. As a result of the increased
resources  devoted to proprietary  Sharper Image Design  products,  creating the
highest  number  of new  Sharper  Image  Design  products,  and  the  continuing
cumulative  sales from Sharper Image Design products  introduced in prior years,
the percentage of sales  attributable to Sharper Image Design products increased
to 29 percent in fiscal 1999 from 18 percent in fiscal 1998. Since Sharper Image
Design  products  generally  carry higher  margins than branded  products,  this
increase was the primary reason that the gross margin  percentage  rate improved
by two percentage points in fiscal 1999.

         The  Company's  business  is  seasonal,  with  sales  peaks in June for
Father's Day and graduation gift giving,  and the Holiday shopping  season.  See
"Seasonality".

         In addition to its primary businesses,  The Sharper Image leverages its
name and  reputation  through its  Corporate  Incentives  and  Rewards  program,
wholesale  sales of Sharper Image brand  products,  which include  Sharper Image
Design  proprietary  products  and  private-labeled   products,  and  a  product
licensing program with selected  businesses.  Wholesale sales are made primarily
to fine department stores and to international retailers.

                                                                               4

<PAGE>


Store Operations

         The   Sharper   Image   stores  are  located   throughout   the  United
States-typically  in densely populated downtown financial districts and business
centers, upscale shopping malls and drive-up suburban locations.

         Each  store  is  generally  staffed  with  approximately  six to  eight
employees,  including a manager, an assistant manager, a senior sales associate,
sales  associates,  and other support  staff. A few of the Company's high volume
stores are staffed with 11 to 15 associates.  The Company's  store managers have
an  average  tenure  of over  six  years.  The  Company's  store  personnel  are
compensated primarily through commissions.  In order to maintain a high customer
service level, the Company's sales associates undergo  considerable  training on
its many new and often technically oriented products.

         The Sharper  Image stores are designed by the  Company's  visual design
staff at the  Company's  headquarters  in San  Francisco to  standardize,  where
possible,  layout so as to simplify  their  operations.  The stores are operated
according to standardized  procedures for customer service,  merchandise display
and pricing, product demonstration,  inventory maintenance,  personnel training,
administration  and  security.  The  Company's  original  Sharper  Image  stores
typically  have 2,200 to 2,500  square feet of selling  space and  approximately
1,300 to 2,200  square feet of storage  and  administrative  space.  The cost of
leasehold improvements,  before landlord  contributions,  but including fixtures
and  pre-opening  expenses,  averages  $300,000 to $500,000  per store.  Initial
inventory  for a new  Sharper  Image  store  has  generally  cost  approximately
$100,000  to  $200,000.  Outlet  stores are  approximately  half the cost of the
original Sharper Image stores.  The Company also operates a second retail format
of Sharper  Image  Design  stores which are  approximately  half the size of the
original  store with between 1,000 to 1,200 of selling  square feet, and feature
higher margin proprietary products in addition to other top selling merchandise.
At the end of fiscal 1999,  the Company had 79 The Sharper Image  stores,  eight
Sharper Image Design stores, and two outlet locations.

         In 1997 the  Company  decided  to update the look and appeal of its new
retail stores and select existing stores. The new format presents an open, fresh
and inviting  environment  that appeals to both men and women and highlights the
Company's  proprietary  products.  The  average  cost of  remodeling  a store is
$300,000 to $500,000 subject to leasehold allowances.  Utilizing the new format,
the Company opened four new stores and remodeled four stores during fiscal 1998,
and opened five new stores and remodeled two stores in fiscal 1999.  The Company
intends to continue to selectively remodel stores utilizing the new store format
at the time of lease renewals.

The Sharper Image Catalog

         The Sharper Image catalog is a full-color  catalog that is mailed to an
average of approximately  3.2 million  individuals each month. The Sharper Image
Catalog operations  generated  approximately 22% of its total revenues in fiscal
1999 and 25%, excluding specialty catalogs in fiscal 1998. The Company's catalog
is recognized for creative  excellence by the Direct  Marketing  Association,  a
leading  catalog  industry  trade group.  The catalog is  currently  the primary
advertising  vehicle for its retail stores and its online  store.  During fiscal
1999,  the  Company  mailed  approximately  47.6  million of The  Sharper  Image
catalogs

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to over 7.9 million individuals.  Circulation and number of pages of The Sharper
Image  catalog is under  continual  review to balance  the costs of mailing  the
catalogs with the revenues  generated.  The mailings increase  significantly for
Father's Day and the Holiday  shopping season  reflecting the seasonal nature of
the business.

         The  Sharper   Image   catalog   design  uses   dramatic   visuals  and
benefit-oriented  product  descriptions.  The catalog  design  features the most
important products  prominently.  The number of items featured each month ranges
between  180 and 250  products  during  the first  three  quarters  of the year,
increasing  to more than 340  products  during the fourth  quarter.  The Sharper
Image  catalog is designed  and  produced  by the  Company's  in-house  staff of
writers and  production  artists.  This enables the Company to maintain  quality
control and shorten the  lead-time  needed to produce the  catalog.  The monthly
production and  distribution  schedule  permits  frequent changes in the product
selection. During fiscal 1999, The Sharper Image catalog contained from 52 to 76
pages for  non-peak  months and between 76 and 124 pages for the peak seasons of
Father's Day and the Holiday shopping season.

         The Company has  developed a proprietary  customer  database of over 11
million  names which the Company  uses  regularly  and rents  periodically  to a
highly selected group of companies.  The Company collects customer names through
its  catalog  and  online  Web  site  order  processing  as well  as  electronic
point-of-sale  registers in its retail stores.  The names and  associated  sales
information  are merged  daily into its customer  master file.  This daily merge
process  provides a constant  source of current  information  to help assess the
effectiveness  of the  catalog  as a form of retail  advertising,  identify  new
customers that can be added to its in-house  mailing list without using customer
lists  obtained  from other  catalogers,  and  identify its top  purchasers.  To
further enhance the  effectiveness of its catalog mailings to individuals in the
Company's customer database,  its in-house staff utilizes statistical evaluation
and selection  techniques  to determine  which  customer  segments are likely to
contribute the greatest revenue per mailing.  The Company has established a data
bank of top purchasers who receive preferred services, including invitations for
special sales events and enhanced customer service. To enhance the effectiveness
of the catalog, the Company's in-house staff utilizes statistical evaluation and
selection  techniques to determine  which segments of the in-house  mailing list
are likely to contribute the greatest revenue per mailing.

         In addition,  from time to time, the Company has also produced  certain
specialty catalogs to test new catalog concepts. During fiscal 1998, the Company
discontinued  its mail test  catalogs  for The  Sharper  Image  Home  Collection
concept.  The  Company  mailed  over 3 million  Sharper  Image  Home  Collection
catalogs during fiscal 1998.

Internet Operations

         The Sharper  Image was an early entrant into  Internet  retailing.  The
Company has  participated  in online shopping since 1994, and has maintained its
own Web site since 1995.  Revenues from the Company's  Internet  operations have
increased to $28.5 million in fiscal 1999 from $4.9 million in fiscal 1998.  The
Company  achieved these results without  significant  incremental  investment in
online advertising.  The Company's online retailing  operations benefit from its
brand  name,  customer  base  and  unique  product  offerings,  as  well  as its
multimedia approach to advertising. In addition, the Company is able to leverage
its catalog  operational  infrastructure  for fulfillment  and customer  service
experience,  providing it with a significant  advantage over Internet  retailers
who have not  developed  such  capabilities.  Shoppers  on our Web site have the
convenience of exchanging or returning  products  purchased through the Internet
at our stores.

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         The Company's goal is to make sharperimage.com a Web site that provides
its online customers with an interactive experience similar to its Sharper Image
stores. The Company is aggressively updating its site by incorporating  advanced
technologies  to  improve  its  product   presentations   and  making  its  site
increasingly  customer  friendly,  while retaining its  entertainment  value. In
fiscal 1999, the Company  implemented  technology which allows it to display its
products  using  interactive  3D  enriched  presentations  and  sound;  one-time
registration  in a secure  environment;  express  shopping  enhancements to free
customers of redundant keying of information;  multiple ship-to  addresses;  and
virtual   electronic  gift   certificates.   The  Company  believes  that  these
presentation  features  are a valuable  tool for  further  increasing  its brand
recognition and advertising its products,  and will prove particularly useful in
reaching its goal of attracting a broader consumer base to its Web site.

         In February 1999, the Company also established its online auction site.
The Company's  auction site allows customers to bid on and acquire a broad range
of new,  returned,  repackaged and  refurbished  Sharper Image products for less
than list  price. Most  products  purchased  on the  auction  site have the same
warranty and return  benefits that  accompany full price  products.  The Company
believes that bidders have an enhanced  level of  confidence  in its  operations
since,  unlike certain other  retailers  with auction  sites,  the Company is an
established retailer with an inventory of well-known products under warranty and
an established return policy. The auction site not only offers consumers the fun
of bidding and winning  products at less than retail  prices,  it also allow the
Company the opportunity to effectively manage its closeout products.

         The Company is pursuing additional steps to achieve continued growth of
its   Internet   operations.   These  steps   include   improvements   that  are
technological, ddramatic visual presentations, and for ease of use for consumers
of sharperimage.com with significant enhancements during fiscal 2000 and seeking
to  establish  strategic  Internet  marketing  partnerships.   The  Company  has
established  relationships with America Online, Catalog City, Linkshare,  Yahoo!
Shopping, and others.

Other Operations

         In addition to its store, catalog and Internet operations,  the Company
also has a  business-to-business  operation which includes Corporate  Incentives
and Rewards program, wholesale, and licensing. The Company also derives revenues
from its list rental program.

         In the Corporate  Incentives  and Rewards  programs,  the Company sells
incentive  and  merchandise   certificates  to  client  companies  who  in  turn
distribute them under their programs to increase their sales, or to motivate and
reward their high  achievers  and best  customers.  The Sharper Image stores and
catalog  are the primary  means of  offering  and  conveniently  delivering  the
incentives  and gifts.  The Company's  certificates  are  redeemable for Sharper
Image  merchandise  through its retail  stores,  by mail,  or over the telephone
through the catalog  telemarketing  group.  The Company is also  developing  the
Internet  channel  for this area of its  business.  Recently,  the  editors  and
readers of Incentive magazine honored  sharperimage.com  as one of the incentive
industry's  best Web sites.  The Company  records  revenues and expenses for its
Corporate  Incentives  and  Rewards  program  through  its  stores,  catalog and
Internet operations.

         The  Company's  Business  Development  department  is the primary group
responsible for marketing to other retailers,  including fine department  stores
in the U.S. as well as

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retailers  in other  countries.  Wholesale  sales to these  retailers  increased
during fiscal 1999  primarily as result of new customers  acquired  prior to the
1999 Holiday  season.  This group's  sales  increased to $10.5 million in fiscal
1999 from $3.5 million in fiscal 1998. Certain of these customers were part of a
concept test program and may not generate repeat sales in fiscal 2000. Plans for
this  group  are to  selectively  increase  its  presence  in the  international
marketplace  in 2000,  and increase the number of Sharper  Image brand  products
offered to these customers.  In addition, the Company rents its customer list to
a highly selected group of companies for a fee or in exchange for their customer
lists. List exchanges are not included in the Company's revenues.

         The  Company  has   exclusive   licensing   agreements   in  Japan  and
Switzerland,  as well as  airport  locations  in the  United  States.  Under the
international  license agreements,  the licensee is granted the right to use the
trademarked  name,  "The Sharper Image," in their country in connection with The
Sharper Image retail store and catalog  operations.  The Company will assist the
licensee by producing a foreign  language  edition of The Sharper Image catalog,
with  economies of scale but at the expense of the  licensees who then print and
distribute  locally.  There are  currently  three  Sharper  Image retail  stores
operated by the foreign licensees in Switzerland. The Company receives royalties
on sales by the  licensees.  Licensees  purchase  products  from the  Company or
directly  from  manufacturers,  maintain  their  own  supply of  inventory,  and
establish their own product prices.  The airport licensee is entitled to utilize
The Sharper Image trademark and trade dress in designated airport locations, the
design  of which is  subject  to the  approval  of the  Company.  There  are two
locations  --  one  at  Dallas-Fort  Worth  and a  second  location  at  Detroit
Metropolitan. The Company continues to pursue additional licensing and wholesale
opportunities in foreign countries.

Merchandising, Product Selection and Development

Merchandising

         The Company's  merchandise mix emphasizes  innovative products that are
new to market,  and unique  products  which are  proprietary,  private  label or
available  exclusively  through  The  Sharper  Image,  or branded  products  not
available in broad  distribution.  The Company  chooses each product  separately
because its sales are driven by individual  products,  and its marketing efforts
focus on each item's unique  attributes,  features and  benefits.  This approach
distinguishes  the Company from other retailers who are more category or product
classification  oriented.  The Company  adjusts its  merchandise  mix to reflect
market trends and customer buying habits. New products are selected or developed
and  brought  into the  Company's  merchandise  mix  based on  criteria  such as
anticipated   popularity,   gross   margin,   uniqueness,   value,   competitive
alternatives,  exclusivity,  quality and vendor performance. As a result of such
shifting  emphasis among individual  items, the mix of sales by category changes
from time to time. The effect, from year to year, can be to increase or decrease
the merchandise gross margin rates since some categories of merchandise  sustain
traditionally higher margins and some traditionally  sustain lower margin rates.
The  Company's  goal is to increase  sales of Sharper  Image Design  proprietary
products and other exclusive private label products, as these products generally
carry higher margins than branded products.  The popularity of these proprietary
products  contributed to the two  percentage  point increase in the gross margin
rate for fiscal  1999,  and  should  continue  to have a positive  impact on the
Company's gross margin rate.

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         The Company's current merchandise strategy is to offer an assortment of
products with  emphasis on Sharper  Image Design and private  label  proprietary
products.  The Company intends to focus on offering  products in the $40 to $350
price  range to appeal to a wide  customer  base.  The Company  also  intends to
increase  its  proprietary  product  offerings.   While  these  proprietary  and
private-labeled   products  offer   important  sales  and  gross  margin  growth
opportunities  for all the revenue  generating  areas of the Company,  there are
certain risks  associated  with these  internally  developed  products,  such as
possible manufacturing constraints,  delays in bringing these products to market
and  cost  increases.  Products  may also be  subject  to  other  regulation  or
limitations. See "Factors Affecting Future Operating Results."

         Sharper Image Design proprietary  products are produced for the Company
on a contract basis primarily by manufacturers in Asia. The Company provides all
product specifications to the contract  manufacturers.  Development lead-time is
generally  in  the  range  of  12  to  18  months.   However,   certain  product
introductions may require longer lead time.

         The  Company  generates  information  daily on  merchandise  orders and
inventory,  which is reviewed by the Company's buyers, its senior  merchandising
staff and top management. The Company averages new offerings of approximately 50
to 100  products  during the two peak  selling  seasons.  The Company  carefully
considers  which  products  will not be  offered  in future  months  based  upon
numerous  factors,  including  revenues  generated,  gross margins,  the cost of
catalog  and store  space  devoted to each  product,  product  availability  and
quality.

Sourcing

         The process of finding  new  products  involves  the  Company's  buyers
reviewing voluminous product literature,  traveling extensively throughout North
America  and Asia to  attend  trade  shows and  exhibitions,  and  meeting  with
manufacturers.  The Company enjoys  relationships with many major  manufacturers
who use The Sharper Image  regularly to introduce  their newest  products in the
United States. See "Factors Affecting Future Operating Results".

         The Company  purchases  merchandise  from numerous foreign and domestic
manufacturers and importers. The Company had a single supplier that provided 14%
of the net merchandise  purchases in fiscal 1999. Of the products offered by the
Company  in  recent  catalogs,  approximately  82%  were  manufactured  in Asia,
approximately 12% were manufactured  within the United States,  approximately 3%
were  manufactured in Europe,  and  approximately 2% were manufactured in Mexico
and Canada.  The Company  expects these  percentages to vary as new products are
introduced. See "Factors Affecting Future Operating Results."

Product Development

         In  addition to finding new product  ideas from  outside  sources,  the
Company's  product  development  group  conceives,  designs and produces Sharper
Image Design products.  The product  development  group meets regularly with the
merchandising  and sales  staff to review  new  product  opportunities,  product
quality,  and customer feedback.  From these creative sessions product ideas are
put into design,  development and production.  Successful product  introductions
during the past two years  include,  among  others,  the Ionic Breeze Silent Air
Purifier; Power

                                                                               9

<PAGE>


Tower 100  Motorized CD Rack;  Ionic Breeze  Personal Air  Purifier;  Lightscape
Relaxation  System; CD Radio/Alarm  Clock with Sound Soother;  Weebot Electronic
Pet;  Personal  Cooling  System;  Ionic  Breeze  Car  Air  Purifier;  CD  Shower
Companion;  Turbo Groomer 2.0;  Ionic Hair Wand II; Q Ball;  Personal  Warm-Cool
System;  BioTouch Interactive Mood Light; Ionic Bath Pet Brush; Shower Companion
Plus; and the Ionic Breeze Quadra Silent Air Purifier.

         The Company  believes that the Sharper Image Design group will continue
to design  and  develop a variety  of unique  products  that  enhance  sales and
maintain or increase  margins.  The  Company  believes  that the appeal of these
proprietary products also serves as a key driver in broadening its customer base
and enhancing its brand appeal. The Company's goal is to increase sales of these
proprietary  products.  However,  there is no assurance that the Company will be
able to  continue  the  growth  of  gross  margin  and  sales  related  to these
proprietary products. See "Factors Affecting Future Operating Results".

Customer Service

         The Company is committed to providing  its  customers  with  courteous,
knowledgeable,  and prompt service.  The Company's  customer service and catalog
sales groups at the corporate  headquarters and at the Little Rock  distribution
center provide personal  attention to customers who call toll free or via e-mail
(servicing  Internet  customers)  to  request a catalog  subscription,  place an
order, or inquire about a product.  The Company's customer service group is also
responsible  for  resolving  customer  problems  promptly and to the  customer's
complete satisfaction.  The Company also contracts with third party call centers
for heavy volume periods and twenty-four hour coverage.

         The  Company  seeks to hire and  retain  qualified  sales and  customer
service  representatives in both its mail-order  (including  Internet) and store
operations  and to train them  thoroughly.  Each new store manager  undergoes an
intensive  program  during  which the  manager is trained in all  aspects of the
Company's  business.  Sales  personnel are trained during the first two weeks of
employment,   or  during  the  weeks  before  a  new  store  opens  and  updated
periodically with on-going sales training  sessions.  Training focuses primarily
on acquiring a working  knowledge of the  Company's  products and on  developing
selling  skills and an  understanding  of the Company's  high  customer  service
standards. Each sales associate is trained to adhere to the Company's philosophy
of "taking  ownership"  of every  customer  service  issue  that may arise.  The
Company  has also  developed  ongoing  programs  conducted  at each store and by
district  that are  designed  to keep  each  salesperson  up to date on each new
product offered.

Order Fulfillment and Distribution

         The Company  owns a single  fulfillment  and  distribution  facility in
Little  Rock,  Arkansas  of  approximately  110,000  square  feet,  and  uses an
additional  leased facility in Little Rock of  approximately  32,000 square feet
and contract warehouse facilities for additional requirements.  The Company also
contracts  for mail order  fulfillment  overflow  needs from a third party.  The
Company's  merchandise  generally  is  delivered  to the  catalog  and  Internet
customers  and  to  The  Sharper  Image  stores   directly  from  the  Company's
distribution  facilities.  Certain products are shipped directly from the vendor
to the customer or to the stores. The shipment of products directly from vendors
to the  stores and  customers  reduces  the level of  inventory  required  to be
carried at the distribution center, freight costs, and the lead-time required to
receive the products.

                                                                              10

<PAGE>


Each catalog order is received via remote terminal at the distribution  facility
after the order has been  approved for shipment.  The Company's  goal is to ship
catalog and  Internet  orders  within  24-48 hours after the order is  received.
Store  customers  generally  take  their  purchases  with them.  The  Company is
currently  evaluating  various  alternatives  to  expand  the  capacity  of  its
distribution facilities to provide for planned business growth.

         Sales and  inventory  information  about  store,  catalog and  Internet
operations is provided on an ongoing basis to the Company's  merchandising staff
and to top  management  for  review.  The  Company's  stores are  equipped  with
electronic point-of-sale registers that communicate daily with the main computer
system at corporate  headquarters,  transmitting  sales,  inventory and customer
data as well as  receiving  data from the  Company's  headquarters.  The  sales,
inventory,  and customer data enables  sales and corporate  personnel to monitor
sales  by  item on a daily  basis,  provides  the  information  utilized  by the
automatic  replenishment system (ARS) and merchandising  personnel for inventory
allocations,   provides   management  with  current  inventory  and  merchandise
information,  and  enables the  Company's  in-house  mailing  list to be updated
regularly with customer names and activity.

         The Company has developed a  proprietary  ARS which is used to maximize
sales  with  minimal  inventory  investment.  Under  this  ARS,  information  on
merchandise inventory and sales by each store location is generated and reviewed
daily.  Sales  information  by product and location is  systematically  compared
daily to each product's "model stock" to determine store shipment quantities and
frequency.  The ARS computes any  adjustments  to the model stock level based on
factors  such as sales  history by location  in relation to total the  Company's
sales of each product. Under this system, the model stock is continually revised
based on this  analysis.  Recommended  adjustments  to model  stock  levels  and
recommended  shipment  amounts are  reviewed  daily by a group of Company  store
distributors  and  merchandising  managers who are  responsible  for  allocating
inventory to stores.

Advertising

         While the catalog remained the Company's  primary  advertising  vehicle
during  fiscal  1999,  the Company  also  broadened  its  customer  base through
increased multimedia advertising, including: single product mailers; newspapers;
magazines;  television;  radio;  infomercials;  email marketing programs; online
advertising and marketing programs; and business-to-business trade publications.
These increased  advertising  initiatives were launched to realize the Company's
goal of  acquiring  new  customers,  which the  Company  believes  will  produce
additional  sales  in  the  stores,   catalog,   and  Internet   channels,   and
business-to-business  sales in the  current  and  future  periods.  The  Company
intends to continue the strategy of growing its customer base through aggressive
multimedia   programs  in  fiscal  2000  with  the  objective  of  achieving  an
appropriate  return on  investment.  The  Company  continually  reevaluates  its
advertising   strategies  to  maximize  the  effectiveness  of  its  advertising
programs.

Information Systems

         The Company maintains an integrated  management  information system for
order fulfillment,  distribution and financial  reporting.  The Company believes
its  system  increases  its  productivity  by  providing  extensive  merchandise
information  and  inventory  control.  The  Company  continually  evaluates  and
enhances its computer  systems and  information  technology in  connection  with
providing  additional  and improved  management  and financial

                                                                              11

<PAGE>


information.  In fiscal 1999 and 2000,  technology  development  and enhancement
initiative  for the Company's  Internet Web site was and will be part of the key
objectives of its Information Systems Team.

         The Company continually  evaluates its computer systems and information
technology in connection with providing  additional and improved  management and
financial  information.  The Company is  currently in the process of designing a
new POS system to be  installed  in its stores to expand  its  customer  service
capabilities.  The Company is currently  developing  improvements and intends to
introduce in fiscal 2000 significant enhancement to content, functionality,  and
processing capabilities to its sharperimage.com Web site.

Competition

         The Company operates in a highly competitive  environment.  The Company
principally  competes with a diverse mix of department  stores,  sporting  goods
stores,  discount  stores,  specialty  retailers  and other catalog and Internet
retailers that offer products similar to or the same as some of those offered by
the Company. Many of the Company's competitors are larger companies with greater
financial  resources,  a wider selection of merchandise and a greater  inventory
availability.  Although the Company  attempt to market  products  not  generally
available elsewhere and have emphasized  exclusive products in its merchandising
strategy,  many of the Company's  products or similar products can also be found
in other retail stores or through other catalogs or on-line.  The Company offers
competitive  pricing where other retailers market certain products  identical to
the Company's at lower prices.  In addition,  a number of other  companies  have
attempted to imitate the  presentation  and method of operation of the Company's
catalog and stores, and the Company's proprietary designed products. The Company
competes  principally  on the basis of  product  exclusivity,  selection,  brand
recognition, quality and price of its products, merchandise  presentation in the
catalog,  stores, and on the Internet, its customer list, and the quality of its
customer service. The Company is committing additional resources to its internal
product development group to create and produce proprietary products exclusively
available from the Company. The Company believes that these proprietary products
provide a competitive advantage for it in its merchandising offering.

Trademark Licenses

         The Company  believes its registered  service mark and trademark,  "The
Sharper  Image," and the brand name  recognition  that it has developed,  are of
significant  value.  The  Company  actively  protects  its brand  name and other
intellectual  property  rights to ensure  that the  quality of its brand and the
value of its proprietary  rights are maintained.  The Company currently licenses
the  use  of  its  trademarked  name  in  connection  with  the  production  and
circulation of foreign  language  editions of The Sharper Image catalog in Japan
and  Switzerland  and in connection with The Sharper Image stores in Switzerland
in   consideration   for   royalties  and  other  fees.  In  addition  to  these
international  licensees,  the Company has also  entered  into a license for the
right to  operate  Sharper  Image  stores  in  domestic  non-duty  free  airport
locations as well as various product license agreements which

                                                                              12

<PAGE>


grant the right to  licensees  to  manufacture  and sell  products  bearing  the
Company's trademark.

Seasonality

         The  Company's  business  is highly  seasonal,  reflecting  the general
pattern  associated  with the retail  industry of peak sales and earnings during
the  Holiday  season.  The  secondary  peak  period  for the  Company  is  June,
reflecting  gift  buying  for  Father's  Day  and  graduations.   A  substantial
percentage of the Company's  total revenues and all or most of the Company's net
earnings  occur in its fourth  fiscal  quarter  ending  January  31. The Company
generally  experiences  lower  revenues  during the other  quarters  and,  as is
typical in the retail industry, has incurred and may continue to incur losses in
these quarters.  The results of these interim quarters may not be representative
of the results for the full fiscal year. In addition,  like many retailers,  the
Company makes  merchandising and inventory decisions for the Holiday season well
in advance of the Holiday  selling  season.  Accordingly,  unfavorable  economic
conditions  and/or  deviations  from  projected  demand for products  during the
fourth quarter could have a material adverse effect on the Company's  results of
operations  for the entire fiscal year.  During fiscal years 1999 and 1998,  the
Company's  total revenues for the fourth quarter  accounted for more than 45% of
total  revenues.  During  fiscal  1999,  the Company  generated a profit for its
fiscal third quarter of $148,000, or $0.01 per share, as compared with a loss of
$1,460,000, or $0.17 per share for the same quarter of fiscal 1998.

Legal Proceedings

         The Company is party to various legal  proceedings  arising from normal
business  activities.  Management  believes that the resolution of these matters
will not have an adverse material effect on the Company's financial condition.

Employees

         As of January  31,  2000,  the  Company  employed  approximately  1,400
associates,  approximately 60% of whom were full-time. The Company considers its
employee relations to be good.

                                                                              13

<PAGE>


Executive Officers of the Registrant

         Set forth below is a list of the  executive  officers  of the  Company,
together with brief biographical descriptions.

Name                                Position                              Age
----                                --------                              ---
Richard Thalheimer          Founder,                                       52
                              Chairman of the Board, and
                              Chief Executive Officer

Tracy Wan                   President and Chief Operating                  40
                              Officer

Greg Alexander              Senior Vice President, Management              38
                              Information Systems

Anthony Farrell             Senior Vice President, Creative Services       50

Jeffrey Forgan              Senior Vice President, Chief                   42
                              Financial Officer, and Corporate Secretary

Robert Thompson             Senior Vice President, Merchandising           55

Joe Williams                Senior Vice President, Loss Prevention         50


         Richard  Thalheimer is the founder of the Company and has served as the
Chief  Executive  Officer  and as a Director  of the  Company  since 1978 and as
Chairman of the Board of Directors since 1985. Mr. Thalheimer also served as the
Company's President from 1977 through July 1993.

         Tracy Wan has been the Company's  President and Chief Operating Officer
since April 1999. Ms. Wan served as Executive Vice  President,  Chief  Financial
Officer  from  August 1998  through  April 1999;  Senior Vice  President,  Chief
Financial  Officer from  February 1995 through  August 1998; as Vice  President,
Chief  Financial  Officer from  September  1994 through  February  1995; as Vice
President,  Controller  from  November  1991  through  September  1994;  and  as
Controller from July 1989 through  November 1991. Ms. Wan is a certified  public
accountant.

         Greg  Alexander  has  been  our  Senior  Vice   President,   Management
Information  Systems since March 1999. Mr.  Alexander  served as Vice President,
Management  Information  Systems from  February  1995 through  March 1999 and as
Director, Management Information Systems from July 1991 through February 1995.

         Anthony Farrell has been our Senior Vice President,  Creative Services,
since July 1998.  Mr.  Farrell was a consultant  to The Sharper Image from April
1998 through July 1998. Mr. Farrell was a senior vice  president,  merchandising
with SelfCare Catalog from March 1991 through December 1997.

                                                                              14

<PAGE>


         Jeffrey Forgan has been our Senior Vice  President and Chief  Financial
Officer since April 1999.  Prior to that,  Mr. Forgan served as Vice  President,
Corporate Finance with Foundation Health Systems from 1995 to 1998, and was with
Deloitte & Touche  LLP from 1980 to 1995,  serving  as an audit  partner  during
1995. Mr. Forgan is a certified public accountant.

         Robert  Thompson has been our Senior Vice  President  of  Merchandising
since August 1999. Mr. Thompson served as Vice President of  Merchandising  from
January 1998 through August 1999. Prior to that. Mr. Thompson served as Director
of Planning and Allocation for Natural Wonders from April 1991 to January 1998.

         Joe Williams has been our Senior Vice President, Loss Prevention, since
March 1999. Mr. Williams served as Vice President,  Loss Prevention,  from March
1993 through March 1999 and served as Director,  Loss Prevention from April 1989
through March 1993.

Factors Affecting Future Operating Results

         The provisions of the Private Securities  Litigation Reform Act of 1995
(the "Act"),  which became law in late December 1995,  provide  companies with a
"safe  harbor"  when  making  forward-looking  statements.  This  "safe  harbor"
encourages  companies to provide  prospective  information about their companies
without fear of  litigation.  The Company  wishes to take advantage of the "safe
harbor" provisions of the Act and is including this section in its Annual Report
on Form  10-K in  order to do so.  Statements  that  are not  historical  facts,
including  statements about  management's  expectations for fiscal year 2000 and
beyond,   are   forward-looking   statements  and  involve   various  risks  and
uncertainties.  Factors that could cause the Company's  actual results to differ
materially from management's projections,  forecasts, estimates and expectations
include, but are not limited to, the following:

If we fail to offer merchandise that our customers find attractive, our business
and operating results will be harmed

         In order to meet our strategic goals, we must successfully offer to our
customers new, innovative and high quality products.  Our product offerings must
be affordable, useful to the customer, well made, distinctive in design, and not
widely available from other retailers.  We cannot predict with certainty that we
will successfully offer products that meet these requirements in the future.

         If other retailers, especially department stores or discount retailers,
offer the same products or products  similar to those we sell or if our products
become less popular with our  customers,  our sales may decline or we may decide
to offer our products at lower prices. If customers buy fewer of our products or
if we have to reduce our prices, our revenues and earnings will decline.

         In addition,  we must be able to deliver our  merchandise in sufficient
quantities to meet the demands of our customers and deliver this  merchandise to
customers in a timely manner. We must be able to maintain  sufficient  inventory
levels,  particularly  during peak selling seasons.  Our future results would be
adversely affected if we are not successful in achieving these goals.

         Our  success  depends  on our  ability  to  anticipate  and  respond to
changing  product trends and consumer  demands in a timely manner.  Our products
must appeal to a broad

                                                                              15

<PAGE>


range of consumers  whose  preferences  we cannot predict with certainty and may
change between sales seasons.  If we misjudge either the market for our products
or our customers'  purchasing habits, our sales may decline, our inventories may
increase or we may be required to sell our products at lower prices.  This would
result in a negative effect on our business.

Our quarterly  operating  results are subject to  significant  fluctuations  and
seasonality

         Our business is highly seasonal, reflecting the general pattern of peak
sales and earnings for the retail industry during the Holiday shopping season. A
substantial  portion of our total  revenues  and all or most of our net earnings
occur  during our fourth  quarter  ending  January 31.  During our 1999 and 1998
fiscal  years,  our total  revenues  for the fourth  quarter  ending  January 31
accounted  for more than 45% of total  revenues  for the full  fiscal  year.  In
anticipation of increased  sales activity  during the fourth  quarter,  we incur
significant additional expenses,  including significantly higher inventory costs
and the  costs  of  hiring  a  substantial  number  of  temporary  employees  to
supplement  our  regular  store  staff.  If for any  reason our sales were to be
substantially  below those  normally  expected  during the fourth  quarter,  our
annual  results  would  be  adversely  affected.  Due to this  seasonality,  our
operating  results  for any one period may not be  indicative  of our  operating
results for the full fiscal year.

         Our  operating  results  during  the  other  quarters  of the  year are
generally lower and we have historically experienced losses in these periods. It
is  possible  that we will  experience  similar  losses  in the  future in these
periods.  Our quarterly  results of operations may fluctuate  significantly as a
result of a variety of factors,  including among other things, the timing of new
store openings,  net sales contributed by new stores,  increases or decreases in
comparable store sales, changes in our merchandise mix and net catalog sales.

         In addition,  like other retailers we typically make  merchandising and
purchasing  decisions  well in  advance of the  Holiday  shopping  season.  As a
result,  poor economic  conditions or differences from projected customer demand
for our products  during the fourth  quarter could result in lower  revenues and
earnings.

Our success depends in part on our ability to design, develop, obtain and timely
deliver our proprietary products

         We are  increasingly  dependent  on  the  success  of  the  proprietary
products  that we design  and  develop  for our  customers.  We must  design and
develop  products that meet the demands of our customers and  manufacture  these
products cost-effectively. We rely solely on our contract manufacturers, most of
whom are located in Asia, to produce these products in sufficient  quantities to
meet customer  demand and to obtain and deliver these  products to our customers
in a timely manner.  These  arrangements  are subject to the risks of relying on
products manufactured outside the United States,  including political unrest and
trade  restrictions,   currency  fluctuations,   work  stoppages,  and  economic
uncertainties including inflation and foreign government regulations.  If we are
unable to  successfully  design and  develop  or to obtain  and  timely  deliver
sufficient quantities of these products,  our operating results may be adversely
affected.

                                                                              16

<PAGE>


Our Internet strategy may not succeed

         Our growth  strategy  depends  in  substantial  part on our  ability to
significantly increase sales of our products over the Internet. We believe that,
in order to continue to grow our business  and to achieve our goals,  we need to
market and sell our products to our current  customers and new customers through
channels other than store and catalog operations.  We are pursuing opportunities
to sell our products over the Internet through our Web site  sharperimage.com as
well as through Internet  marketing  partnerships  with America Online,  Catalog
City,  LinkShare,  Yahoo! Shopping and others. This is a relatively new business
and marketing strategy for us and involves risks and  uncertainties.  We may not
succeed in increasing the sales of our products over the Internet.  In addition,
our  Internet   strategy   will  require  us  to   significantly   increase  our
technological development online marketing and human resources expenditures.  If
these  expenditures  do  not  result  in  commensurate  sales,  our  results  of
operations will be adversely affected.

We face risks associated with expansion of our store operations

         We plan to continue to increase the number of The Sharper  Image stores
in the future in order to grow our  revenues.  Our ability to expand will depend
in part on the following factors:

     o   the availability of attractive store locations;
     o   our ability to negotiate favorable lease terms;
     o   our ability to identify customer demand in different geographic areas;
     o   general economic conditions; and
     o   the availability of sufficient funds for expansion.

         As we continue to expand, we have started to and may continue to become
concentrated in limited  geographic  areas.  This could increase our exposure to
customer demand, weather, competition,  distribution problems, and poor economic
conditions in these regions. In addition,  our catalog sales, including Internet
sales,  or existing store sales in a specific region may decrease as a result of
new store openings.

         In order to continue  our  expansion,  we will need to hire  additional
management and staff for our corporate offices and employees for each new store.
We must also expand our management  information systems and distribution systems
to serve these new stores. If we are unable to hire necessary  personnel or grow
our existing  systems,  our expansion efforts may not succeed and our operations
may suffer.

         Some of our expenses will  increase with the opening of new stores.  If
store sales are inadequate to support these new costs,  our  profitability  will
decrease.  For example,  inventory costs will increase as we increase  inventory
levels to supply additional  stores. We may not be able to manage this increased
inventory without decreasing our profitability. We may need additional financing
in excess of our  current  credit  facility  to be used for new store  openings.
Furthermore,  our current  credit  facility has various  loan  covenants we must
comply with in order to maintain  the credit  facility.  We cannot  predict with
certainty that we will be successful in obtaining additional funds or new credit
facilities on favorable terms or at all.

                                                                              17

<PAGE>


We are dependent on the success of our advertising and marketing efforts

         Our revenues  depend in part on our ability to  effectively  market and
advertise our products  through The Sharper Image catalog and other  advertising
vehicles. Increases in advertising, paper costs or postage may limit our ability
to advertise without reducing our profitability.  If we decrease our advertising
efforts due to increased  advertising costs,  restrictions  placed by regulatory
agencies,  or  for  any  other  reason,  our  future  operating  results  may be
materially adversely affected. We are also testing other advertising media, such
as  television,  infomercials,  radio,  and  single  product  mailings,  and are
planning to significantly  increase advertising in fiscal 2000.  Expenditures on
these and other media are expected to increase, but may not produce a sufficient
level of sales to cover such expenditures, which would reduce our profitability.

We rely on our catalog operations

         Our success  depends in part on the success of our catalog  operations.
We believe that the success of our catalog  operations  depends on the following
factors:

     o   our ability to achieve adequate response rates to our mailings;
     o   our ability to continue to offer a  merchandise  mix that is attractive
         to our mail order customers;
     o   our ability to cost-effectively add new customers; and
     o   our ability to cost-effectively design and produce appealing catalogs.

         Catalog  production and mailings  entail  substantial  paper,  postage,
merchandise  acquisition  and human resource costs,  including costs  associated
with catalog development and increased inventories. We incur nearly all of these
costs  prior to the  mailing of each  catalog.  As a result,  we are not able to
adjust the costs  being  incurred in  connection  with a  particular  mailing to
reflect  the actual  performance  of the  catalog.  If we were to  experience  a
significant  shortfall in  anticipated  revenue from a particular  mailing,  and
thereby not recover the costs  associated with that mailing,  our future results
would be adversely affected. In addition, response rates to our mailings and, as
a result,  revenues  generated  by each  mailing are affected by factors such as
consumer  preferences,  economic  conditions,  the  timing  and  mix of  catalog
mailings and changes in our merchandise mix, several of which may be outside our
control.  Further, we have historically experienced fluctuations in the response
rates to our  catalog  mailings.  If we are  unable  to  accurately  target  the
appropriate  segment  of the  consumer  catalog  market or to  achieve  adequate
response  rates,  we could  experience  lower  sales,  significant  markdowns or
write-offs  of inventory and lower  margins,  which would  adversely  affect our
future results.

Our new business lines may not succeed

         In the past we have tested new lines of  business  that have not always
proven  profitable.  We continually  examine and evaluate all sales channels for
profitability.  We may  decide  to  develop  new  business  lines or to  acquire
additional  businesses in the future, and we cannot predict whether such efforts
will be  successful.  During  fiscal 1998, we  discontinued  our test mailing of
catalogs for The Sharper  Image Home  Collection  concept  which we initiated in
January 1996.  Additionally,  during 1997 we closed our SPA Collection  division
and  eliminated  our SPA  Collection  catalog after  critical  evaluation of its
operating  results  and  prospects.   The  failure  of  new  business  lines  or
acquisitions could adversely affect our future results.

                                                                              18

<PAGE>


Our catalog costs are unpredictable

         Historically,  a  significant  portion of our  revenues  have been from
purchases  made by customers  from The Sharper Image  catalog.  Increases in the
costs of producing and distributing the catalog may reduce the  profitability of
our catalog sales.  Specifically,  we may experience increases in postage, paper
or shipping  costs due to factors  beyond our control.  As a result,  our future
results may be adversely affected.

We depend on our vendors'  ability to timely  deliver  sufficient  quantities of
products

         Our  performance  depends on our  ability to purchase  our  products in
sufficient  quantities at competitive prices and on our vendors' ability to make
and deliver high quality  products in a cost effective,  timely manner.  Some of
our smaller vendors have limited  resources,  production  capacities and limited
operating histories.  We have no long-term purchase contracts or other contracts
that provide continued supply,  pricing or access to new products and any vendor
or distributor could discontinue selling to us at any time. We cannot assure you
that we will be able to acquire the products we desire in sufficient  quantities
or on terms that are  acceptable  to us in the future.  In  addition,  we cannot
assure you that our vendors  will make and deliver  high  quality  products in a
cost-effective,  timely manner.  We may also be unable to develop  relationships
with new vendors.  All products we purchase from vendors in Asia must be shipped
to our distribution centers by freight carriers and we cannot assure you that we
will be able to obtain  sufficient  freight  capacity at  favorable  rates.  Our
inability to acquire suitable products in a cost-effective, timely manner or the
loss of one or more key vendors or freight carriers could have a negative effect
on our business.

         Additionally,  our  relationships  with our vendors are also subject to
the risks of  relying  on  products  manufactured  outside  the  United  States,
including  political  unrest and trade  restrictions,  work stoppages,  economic
uncertainties  including inflation,  foreign government  regulation and currency
fluctuations. Because 82% of our products were manufactured in various countries
in Asia, primarily China, during fiscal 1999, any significant  disruption in any
of these  countries  may impair our ability to obtain  sufficient  quantities of
products in a timely manner.

We face certain risks relating to customer service

         Our ability to provide customer service depends,  to a large degree, on
the efficient and uninterrupted  operation of our call centers,  our contracting
services with third party call centers and our  sharperimage.com  Web site.  Any
material  disruption or slowdown in our order processing  systems resulting from
labor disputes, telephone or Internet down times, electrical outages, mechanical
problems,  human error or accidents,  fire,  earthquakes,  natural disasters, or
comparable  events  could  cause  delays in our  ability  to  receive  orders by
telephone or over the Internet and distribute orders, and may cause orders to be
lost or to be shipped or delivered late. As a result, customers may be unable to
place  orders,  cancel  orders or refuse to  receive  goods on  account  of late
shipments,  which  would  result in a  reduction  of net  sales  and could  mean
increased administrative and shipping costs. We cannot assure you that telephone
call  volumes will not exceed our present  telephone  system  capacity.  If this
occurs,  we could  experience  telephone  answer  delays  and  delays in placing
orders.  Because our strategies depend in part on maintaining our reputation for
superior levels of customer

                                                                              19

<PAGE>


service, any impairment of our customer service reputation could have an adverse
effect on our business.

We face risks associated with our distribution and fulfillment operations

         We conduct the majority of our  distribution  operations and all of our
catalog and  Internet  order  processing  fulfillment  functions  from the owned
facility in Little Rock,  Arkansas,  and uses an additional  leased  facility in
Little Rock.  We also use contract  fulfillment  and  warehouse  facilities  for
additional volume and seasonal requirements. Any disruption in the operations at
the distribution center,  particularly during the Holiday shopping season, could
have a negative  effect on our business.  In addition,  we rely upon third party
carriers for our product shipments,  including  shipments to and from all of our
stores. As a result, we are subject to certain risks, including employee strikes
and  inclement  weather,  associated  with such  carriers'  ability  to  provide
delivery services to meet our shipping needs. We are also dependent on temporary
employees to adequately staff our  distribution  facility,  particularly  during
busy periods such as the Holiday shopping  season.  We cannot assure you that we
will continue to receive adequate  assistance from our temporary  employees,  or
that  we will  continue  to have  access  to  sufficient  sources  of  temporary
employees.

Results for our comparable store sales may fluctuate

         Our  comparable  store  sales are  affected  by a variety  of  factors,
including, among others:

     o   customer demand in different geographic regions;
     o   our ability to efficiently source and distribute products;
     o   changes in our product mix;
     o   effects of competition; and
     o   general economic conditions.

        Our comparable store sales have fluctuated significantly in the past and
we believe that such  fluctuations may continue.  Our historic  comparable store
net sales changes were as follows:

                                                        Percentage
             Fiscal Year                            Increase (Decrease)
             -----------                            -------------------
               1997                                         1.1
               1998                                         5.3
               1999                                        12.3


         These  historic  results  are  not  necessarily  indicative  of  future
results,  and we cannot assure you that our comparable  store sales results will
not decrease in the future.  Any changes in our  comparable  store sales results
could impact our future operating  performance and cause the price of the common
stock to fluctuate.

We experience intense competition in the rapidly changing retail markets

         We operate in a highly competitive environment.  We principally compete
with a variety of department  stores,  sporting goods stores,  discount  stores,
specialty  retailers and other  catalogs that offer  products  similar to or the
same as our products. We may increasingly

                                                                              20

<PAGE>


compete  with  major  Internet  retailers.  Many of our  competitors  are larger
companies with greater financial resources, a wider selection of merchandise and
a greater inventory  availability.  If we experience increased competition,  our
business and operating results could be adversely affected.

         The United States retail  industry (the  specialty  retail  industry in
particular)  and  e-commerce  sector are  dynamic  in nature and have  undergone
significant  changes over the past several years.  Our ability to anticipate and
successfully  respond to  continuing  challenges  is  critical  to our long term
growth.

We may be subject to  regulations  regarding  state sales and use tax on catalog
and Internet sales and other Internet regulation

         Our business may be affected by the  adoption of  regulations  or rules
governing the sale of our products, with regard to state sales and use taxes and
the  regulation of the Internet.  Because we have broad store  presence,  we are
currently required to collect taxes for the majority of our catalog and Internet
transactions.  However,  any unfavorable change in the state sales and use taxes
which affects our catalog and Internet sales could adversely affect our business
and  results of  operations.  In  addition,  the  Internet at present is largely
unregulated  and we are unable to predict  whether  significant  regulations  or
taxes will be imposed on Internet  commerce in the near future. We are unable to
predict  how such  regulations  could  affect  the  further  development  of our
Internet business.

Poor economic conditions may hurt our business

         Certain economic  conditions that affect the level of consumer spending
on our products include the following:

     o   general business conditions;
     o   interest rates;
     o   taxation; and
     o   consumer confidence in future economic conditions.

         Our  business  could be  negatively  affected  by a  recession  or poor
economic conditions and any related decline in consumer demand for discretionary
items  such as our  products.  Because  we  purchase  merchandise  from  foreign
entities and use foreign  manufacturers  on a contract  basis for Sharper  Image
Design  products  and other  private  label  products,  we are  subject to risks
resulting from fluctuations in the economic conditions in foreign countries. The
majority of our vendors and  manufacturers  are located in various  countries in
Asia, and as a result,  our business may be particularly  impacted by changes in
the  political,  social,  legal,  and economic  conditions  in these  countries.
Additionally,  weather  and product  transportation  problems  could  affect our
ability to maintain  adequate  inventory  levels and adversely affect our future
results.

Excessive merchandise returns could harm our business

         As part of our  customer  service  commitment,  we  maintain  a liberal
merchandise return policy which allows customers to return most merchandise.  We
make  allowances  for returns of catalog  and  Internet  sales in our  financial
statements  based on historical  return rates.  We cannot assure you that actual
merchandise  returns will not exceed our  allowances.

                                                                              21

<PAGE>


In addition,  because our  allowances are based on historical  return rates,  we
cannot  assure you that the  introduction  of new  merchandise  in our stores or
catalogs, the opening of new stores, the introduction of new catalogs, increased
sales over the Internet,  changes in the  merchandise  mix or other factors will
not cause actual returns to exceed return allowances.  Any significant  increase
in merchandise  returns that exceed our allowances  could  adversely  affect our
future results.

We may be subject  to risks  associated  with our  products,  including  product
liability or patent and trademark infringement claims

         Our current and future products may contain defects which could subject
us to product liability claims.  Although we maintain limited products liability
insurance,  if any  successful  products  liability  claim is not  covered by or
exceeds  our  insurance,  our  business,  results  of  operation  and  financial
condition would be harmed. Additionally, third parties may assert claims against
us  alleging  infringement,  misappropriation  or other  violations  of  patent,
trademark or other  proprietary  rights,  whether or not such claims have merit.
Such claims can be time  consuming  and expensive to defend and could require us
to cease  using and  selling  the  allegedly  infringing  products  and to incur
significant litigation costs and expenses.

We depend on our key personnel

         Our success  depends to a significant  extent upon the abilities of our
senior management,  particularly Richard Thalheimer,  our founder,  Chairman and
Chief Executive  Officer.  The loss of the services of any of the members of our
senior  management or of certain  other key  employees  could have a significant
adverse  effect on our  business.  We  maintain  key man life  insurance  on Mr.
Thalheimer  in the amount of $30 million.  In  addition,  our  performance  will
depend   upon  our  ability  to  attract   and  retain   qualified   management,
merchandising and sales personnel. There can be no assurance that Mr. Thalheimer
and the other members of our existing management team will be able to manage our
company  or our growth or that we will be able to  attract  and hire  additional
qualified personnel as needed in the future.

We are controlled by a single stockholder

         As  of  April  17,  2000,   Richard   Thalheimer   beneficially   owned
approximately  41% of all of the  outstanding  shares of the common stock of our
company.  As a  result,  Mr.  Thalheimer  will  continue  to  exert  substantial
influence over the election of directors and over our corporate actions.

Our common stock price is volatile

         Our common  stock is quoted on the Nasdaq  National  Market,  which has
experienced  and is likely to  experience  in the future  significant  price and
volume  fluctuations  which could  reduce the market  price of our common  stock
without  regard to our  operating  performance.  Additionally,  as our  Internet
business grows, we may become  increasingly  subject to stock price fluctuations
associated  with  companies  operating in the Internet  sector.  We believe that
among other factors,  any of the following  factors could cause the price of the
common stock to fluctuate substantially:

                                                                              22

<PAGE>


     o   quarterly fluctuations in our comparable store sales;
     o   announcements by other accessory and gift item retailers;
     o   the trading volume of our common stock in the public market;
     o   general economic conditions; and
     o   financial market conditions.

Our charter  documents,  our stockholders  rights agreement and Delaware law may
make a takeover more difficult

         We are a Delaware  corporation.  The Delaware  General  Corporation Law
contains  certain  provisions  that may make a change in control of our  company
more difficult or prevent the removal of incumbent directors.  In addition,  our
Certificate of Incorporation  and Bylaws and our recently  adopted  stockholders
rights agreement contain provisions that have the same effect.  These provisions
may have a negative  impact on the price of our  common  stock,  may  discourage
third-party bidders from making a bid for our company or may reduce any premiums
paid to stockholders for their common stock.


Item 2.  Properties

         The Company occupies  approximately  58,000 square feet of office space
for its corporate headquarters in San Francisco,  CA. The Company signed a lease
extension in February 2000, extending the expiration date to January 2006.

         As of January 31, 2000 the Company operates 89 The Sharper Image stores
under  leases  covering  a total of  approximately  206,000  square  feet of net
selling space.

         The  Company  owns and  operates  a 110,000  square  foot  distribution
facility located in Little Rock, Arkansas.  Distribution functions are conducted
through  this  facility,  a 32,000  square foot leased  facility in Little Rock,
Arkansas  and other  seasonally  occupied  space  rented by the Company in close
proximity  thereto.  Additional  mail order  fulfillment is conducted by a third
party.


Item 3.  Legal Proceedings

         The Company is party to various legal  proceedings  arising from normal
business activities.  In the opinion of management,  resolution of these matters
will not have a material adverse effect on the Company's financial condition.


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

          None.


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

          The  information  set forth under "Note D -- Revolving  Loan and Notes
Payable" in the Notes to Financial Statements on page 25 and the information set
forth under the caption "Common Stock Market Prices and Dividend Policy" on page
31 of the Sharper  Image

                                                                              23

<PAGE>


Corporation  1999  Annual  Report  to  Stockholders  is  incorporated  herein by
reference.  As of April  17,  2000  there  were 412  holders  of  record  of the
Registrant's Common Stock.


Item 6.  Selected Financial Data

          The information set forth under the caption "Financial  Highlights" on
page 3 of the Sharper Image  Corporation  1999 Annual Report to  Stockholders is
incorporated herein by reference.


Item 7.  Management's  Discussion  and  Analysis  of Results of  Operations  and
Financial Condition

          The information set forth under the caption  "Management's  Discussion
and Analysis of Results of Operations and Financial Condition" on pages 14 to 19
of  the  Sharper  Image  Corporation  1999  Annual  Report  to  Stockholders  is
incorporated herein by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

           The  information  set  forth  under  the  caption  "Quantitative  and
Qualitative  Disclosure  About  Market  Risk"  on page 19 of the  Sharper  Image
Corporation  1999  Annual  Report  to  Stockholders  is  incorporated  herein by
reference.


Item 8.  Financial Statements and Supplementary Data

          The financial statements and independent auditors' report set forth on
pages 20 through 31 of the  Sharper  Image  Corporation  1999  Annual  Report to
Stockholders are incorporated herein by reference.


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

          None.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

          Information  with  respect  to  the  directors  of the  Registrant  is
incorporated  herein by reference to the  Registrant's  2000 Proxy  Statement to
Stockholders,  pages 2 through 3.  Information  with  respect  to the  executive
officers of the  Registrant is contained in Part I of this Annual Report on Form
10-K.


Item 11.  Executive Compensation

          Information  with respect to executive  compensation  is  incorporated
herein by reference to the Registrant's 2000 Proxy Statement, pages 14 to 15.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

          Information  with respect to security  ownership of beneficial  owners
and  management is  incorporated  herein by reference to the  Registrant's  2000
Proxy Statement, pages 13 to 14.

                                                                              24

<PAGE>


Item 13.  Certain Relationships and Related Transactions

          None.

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)1.     List of Financial Statements.

The  following  Financial  Statements  and Notes  thereto  set forth on pages 20
through 31 of the Sharper Image  Corporation  1999 Annual Report to Stockholders
are incorporated by reference as Exhibit 13.1 to this Report on Form 10-K:

Independent Auditor's Report

Statements of Operations  for the years ended January 31, 2000,  1999, and 1998,
Balance sheets at January 31, 2000 and 1999,

Statements of  Stockholders'  Equity for the years ended January 31, 2000, 1999,
and 1998  Statements of Cash Flows for the years ended  January 31, 2000,  1999,
and 1998.


Notes to Financial Statements.

(a)2. List of Financial Statement Schedule.

The following are filed as part of this Report:

Independent Auditors' Report on Schedule.

Schedule II - Valuation and Qualifying Accounts

Financial Data Schedule

     Schedules  other than those listed are omitted for the reason that they are
     not required or are not applicable, or the required information is shown in
     the financial statements or notes thereto, contained in, or incorporated by
     reference into, this Report.

(a)3. List of Exhibits.

         Incorporated herein by reference is a list of the Exhibits contained in
the Exhibit Index which begins on page 30 of this report.

(b) Reports on Form 8-K.

         No  reports on Form 8-K were filed  with the  Securities  and  Exchange
Commission during the last quarter of the period covered by this Report.

                                                                              25

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SHARPER IMAGE CORPORATION                    SHARPER IMAGE CORPORATION

By: /s/ Richard J. Thalheimer                By: /s/ Jeffrey P. Forgan
    ----------------------------                 ----------------------------
Richard J. Thalheimer                        Jeffrey P. Forgan
Chief Executive                              Senior Vice President, Chief
Officer, Chairman                            Financial Officer, Corporate
(Principal Executive Officer)                Secretary (Principal Financial &
                                             Accounting Officer)


                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below  constitutes and appoints  Richard  Thalheimer and Jeffrey P. Forgan,  and
each of them,  as such person's  true and lawful  attorneys-in-fact  and agents,
with full power of substitution and resubstitution,  for such person and in such
person's name, place, and stead, in any and all capacities,  to sign any and all
amendments to this report, and to file the same, with all exhibits thereto,  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission,  granting unto said  attorneys-in-fact and agents, and each of them,
full  power  and  authority  to do and  perform  each and  every  act and  thing
requisite  and  necessary to be done in  connection  therewith,  as fully to all
intents and  purposes as he might or could do in person,  hereby  ratifying  and
confirming all that said  attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes,  may lawfully do or cause to be done by virtue
hereof.

<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the dates indicated.

<CAPTION>
Signature                                Title                               Date
---------                                -----                               ----
<S>                                 <C>                                 <C>
/s/ Richard J. Thalheimer           Chief Executive                     April  28, 2000
----------------------------          Officer, Chairman
Richard J. Thalheimer                 (Principal Executive Officer)


/s/ Jeffrey P. Forgan               Senior Vice President,              April  28, 2000
----------------------------          Chief Financial Officer,
Jeffrey P. Forgan                     Corporate Secretary
                                      (Principal Financial and
                                      Accounting Officer)


/s/ Alan Thalheimer                 Director                            April  28, 2000
----------------------------
Alan Thalheimer

                                                                                     26

<PAGE>


/s/ Gerald Napier                   Director                            April  28, 2000
----------------------------
Gerald Napier


/s/ Morton David                    Director                            April  28, 2000
----------------------------
Morton David


/s/ George James                    Director                            April  28, 2000
----------------------------
George James

                                                                                     27
</TABLE>


<PAGE>


<TABLE>
                                              SHARPER IMAGE CORPORATION

                                   SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                       --------------------------------------

                                                       ($000)

<CAPTION>
            COLUMN                                            COLUMN          COLUMN          COLUMN          COLUMN
              A                                                 B               C               D               E

--------------------------------------------------------------------------------------------------------------------
                                                            Balance at      Additions                        Balance
                                                            Beginning       Charged to                      at End of
DESCRIPTION                                                 of Period      Costs & Exp.     Deductions        Period
--------------------------------------------------------------------------------------------------------------------

<S>                                                           <C>             <C>             <C>             <C>
INVENTORY

YEAR ENDED JANUARY 31, 2000:
Inventory Obsolescence                                        $1,938          $2,079          $  863          $3,154

YEAR ENDED JANUARY 31, 1999:
Inventory Obsolescence                                        $1,486          $1,298          $  846          $1,938

YEAR ENDED JANUARY 31, 1998:
Inventory Obsolescence                                        $1,509          $  678          $  701          $1,486

OTHER

YEAR ENDED JANUARY 31, 2000:
Other                                                         $  804          $  265          $  235          $  834

YEAR ENDED JANUARY 31, 1999:
Other                                                         $  508          $  830          $  534          $  804

YEAR ENDED JANUARY 31, 1998:
Other                                                         $  505          $  321          $  318          $  508

                                                                                                                  28
</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT ON SCHEDULE


Board of Directors and Stockholders of
  Sharper Image Corporation


We have audited the  financial  statements of Sharper  Image  Corporation  as of
January 31,  2000 and 1999 and for each of the three  years in the period  ended
January 31, 2000, and have issued our report thereon dated March 24, 2000;  such
financial  statements  and report are  included  in your 1999  Annual  Report to
Stockholders and are incorporated herein by reference.  Our audits also included
the financial  statement schedule of Sharper Image  Corporation,  listed in Item
14. This financial  statement  schedule is the  responsibility  of the Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion,  such financial statement schedule,  when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.


/s/ Deloitte & Touche LLP


San Francisco, California
March 24, 2000

                                                                              29

<PAGE>


                                  EXHIBIT INDEX

    3.1      Certificate of Incorporation. (Incorporated by reference to Exhibit
             3.1  to  Registration  Statement  on  Form  S-1  (Registration  No.
             33-12755).)

    3.2      Bylaws.  (Incorporated  by reference to Exhibit 3.2 to Registration
             Statement on Form S-1 (Registration No. 33-12755).)

    3.3      Form of Certificate of Designation of Series A Junior participating
             Preferred  Stock.  (Incorporated  by  reference  to Exhibit 3.01 to
             Amendment No. 2 to the Registration Statement on Form S-2.)

    4.1      Form of Rights  Certificate.  (Incorporated by reference to Exhibit
             4.01 to Amendment No. 2 to the Registration Statement on Form S-2.)

    4.2      Form of Rights  Agreement  dated  June 7,  1999.  (Incorporated  by
             reference to Exhibit 4.02 to  Amendment  No. 2 to the  Registration
             Statement on Form S-2.)

   10.1      Amended and Restated Stock Option Plan.  (Incorporated by reference
             to Appendix to Form 14A for fiscal year ended January 31, 1999).

   10.2      1994  Non-Employee  Director  Stock Option Plan, as amended,  dated
             October 7, 1994, as amended. (Incorporated by reference to Appendix
             to Form 14A for fiscal year ended January 31, 1999).

   10.3      Cash or Deferred Profit Sharing Plan, as amended.  (Incorporated by
             reference  to Exhibit  10.2 to  Registration  Statement on Form S-1
             (Registration No. 33-12755).)

   10.4      Cash or Deferred Profit Sharing Plan Amendment No. 3. (Incorporated
             by  reference  to Exhibit  10.15 to Form 10-K for fiscal year ended
             January 31, 1988.)

   10.5      Cash or Deferred Profit Sharing Plan Amendment No. 4. (Incorporated
             by  reference  to Exhibit  10.16 to Form 10-K for fiscal year ended
             January 31, 1988.)

   10.6      Form of Stock  Purchase  Agreement  dated July 26, 1985 relating to
             shares of Common Stock  purchased  pursuant to exercise of employee
             stock  options.  (Incorporated  by  reference  to  Exhibit  10.3 to
             Registration Statement on Form S-1 (Registration No. 33-12755).)

   10.7      Form of Stock Purchase  Agreement  dated December 13, 1985 relating
             to shares of Common Stock purchase pursuant to exercise of employee
             stock  options.  (Incorporated  by  reference  to  Exhibit  10.4 to
             Registration Statement on Form S-1 (Registration No. 33-12755).)

   10.8      Form of Stock Purchase  Agreement  dated November 10, 1986 relating
             to  shares  of Common  Stock  purchased  pursuant  to  exercise  of
             employee stock options.  (Incorporated by reference to Exhibit 10.5
             to Registration Statement on Form S-1 (Registration No. 33-12755).)

                                                                              30

<PAGE>


   10.9      Form  of  Director  Indemnification  Agreement.   (Incorporated  by
             reference to Exhibit  10.42 to  Registration  Statement on Form S-1
             (Registration No. 33-12755).)

   10.10     Financing  Agreement  dated  September 21, 1994 between the Company
             and CIT  Group/Business  Credit Inc.  (Incorporated by reference to
             Exhibit 10.12 to Form 10-Q for the quarter ended October 31, 1994)

   10.11     The Sharper Image  401(K)Savings Plan (Incorporated by reference to
             Exhibit 10.21 to Registration  Statement of Form S-8  (Registration
             No. 33-80504) dated June 21, 1994))

   10.12     Chief Executive  Officer  Compensation Plan dated February 3, 1995.
             (Incorporated  by reference  to Exhibit  10.24 to the Form 10-K for
             the fiscal year ended January 31, 1995.)

   10.13     Split-Dollar  Agreement  between the Company and Mr. R. Thalheimer,
             its Chief Executive Officer dated October 13, 1995, effective as of
             May 17, 1995  (Incorporated  by reference to Exhibit  10.17 to Form
             10-K for the fiscal year ended January 31, 1996).

   10.14     Assignments  of Life  Insurance  Policy as  Collateral,  both dated
             October 13, 1995, effective May 17, 1995 (Incorporated by reference
             to Exhibit 10.18 to Form 10-K for the fiscal year ended January 31,
             1996).

   10.15     Amendment to the Financing Agreement dated May 15, 1996 between the
             Company and The CIT  Group/Business  Credit Inc.  (Incorporated  by
             reference to Exhibit  10.19 to the Form 10-Q for the quarter  ended
             April 30, 1996).

   10.16     CAPEX Term Loan  Promissory note dated October 15, 1996 between the
             Company and The CIT  Group/Business  Credit Inc.  (Incorporated  by
             reference to Exhibit  10.21 to the Form 10-Q for the quarter  ended
             October 31, 1996).

   10.17     Employment Agreement between the Company and Mr. Barry Gilbert, its
             Vice  Chairman  and Chief  Operating  Officer  dated and  effective
             December 2, 1996.  (Incorporated  by reference to Exhibit  10.20 to
             Form 10-K for the fiscal year ended January 31, 1997).

   10.18     Amendment  to the  Financing  Agreement  dated  February  13,  1997
             between  the  Company  and  The  CIT  Group/Business   Credit  Inc.
             (Incorporated  by reference  to Exhibit  10.21 to Form 10-K for the
             fiscal year ended January 31, 1997).

   10.19     Amendment to the Financing  Agreement  dated March 24, 1997 between
             the Company and The CIT Group/Business Credit Inc. (Incorporated by
             reference  to Exhibit  10.23 to Form 10-K for the fiscal year ended
             January 31, 1997).

   10.20     Amendment to the  Financing  Agreement  dated April 6, 1998 between
             the Company and The CIT Group/Business Credit Inc. (Incorporated by
             reference  to Exhibit  10.25 to Form 10-K for the fiscal year ended
             January 31, 1998).

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   10.21     Amendment to Employment Agreement between the Company and Mr. Barry
             Gilbert,  its Vice Chairman and Chief  Operating  Officer dated and
             effective  November 30, 1998  (Incorporated by reference to Exhibit
             10.26 to Form 10-K for the fiscal year ended January 31, 1998)

   10.22     Amendment to the Financing  Agreement  dated March 23, 2000 between
             the  Company  and  The Cit  Group/Business  Credit  Inc.  (Attached
             herewith).

   10.23     Amendment to the  Corporate  Headquarters  Office  Lease  Agreement
             dated  February  9, 2000  between  the  Company  and its  landlord,
             CarrAmerica Realty Corporation. (Attached herewith).

   11.1      Statement Re: Computation of Earnings per Share.

   13.1      1999 Annual Report to Stockholders.

   23.1      Independent Auditor's Consent.

   27.0      Financial Data Schedule.

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