Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Words such as "may," "could," "anticipate," "potential," "intend," "expect," "believe," "in our view," and variations of such words and similar expressions, are intended to identify such forward-looking statements, which include, but are not limited to, statements regarding our expectations and beliefs regarding future revenue growth; sources of revenue; gross margins; financial performance and results of operations; technological trends in, and demand for online advertising; management's strategy, plans and objectives for future operations; employee relations and our ability to attract and retain highly qualified personnel; our intent to continue to invest in establishing our brand identity and developing of our web properties; competition, competitors and our ability to compete; liquidity and capital resources; changes in foreign currency exchange rates; the outcome of any litigation to which we are a party; our accounting policies; and sufficiency of our cash resources and investments to meet our operating and working capital requirements. Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including those set forth in the Risk Factors contained in our Form 10-K filed with the Securities and Exchange Commission and in Part II., Item 1A Risk Factors, included elsewhere in this Form 10-Q. We undertake no obligation to update the forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Critical Accounting Estimates
There have been no significant changes to our critical accounting estimates during the six months ended June 30, 2012 as compared to what was previously disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2011.

Overview

We are an online network for the global geek community, which is comprised of technology professionals, technology enthusiasts and general consumers of technology-oriented goods, services and media. Our websites include: ThinkGeek, SourceForge, Slashdot, and Freecode. We provide our audiences and customers with content, culture, connections and commerce.

Our business consists of two operating segments: e-Commerce and Media. Our e-Commerce segment sells technology-themed retail products for technology enthusiasts and others through our ThinkGeek website. We offer a broader range of unique products in a single web property than are available in traditional brick-and-mortar stores. We introduce a range of new products to our audience on a regular basis and sell our own innovative products developed in-house ("GeekLabs"). Our Media segment provides web properties that serve as platforms for the creation, review and distribution of online peer produced content. Our audience of technology professionals and enthusiasts relies on our web properties, SourceForge, Slashdot, and Freecode, to create, improve, compare and distribute Open Source software and to research, debate and discuss current issues relating to the technology marketplace. We currently have 59 full-time equivalent employees ("FTE") at e-Commerce and 59 full-time equivalent employees at Media.

ThinkGeek's business strategy is to increase revenue by expanding the range of new and innovative products we sell, including our GeekLabs products, and by increasing traffic to our site and customer conversion. We attract traffic to our sites by using a variety of traditional online and direct retail marketing channels including paid search, and e-mail to our customers and followers. We continue to use the capabilities of the internet, including social networking sites such as Facebook, Twitter and YouTube, to increase brand awareness and to communicate with our customers.

Our ThinkGeek business is highly seasonal, reflecting the general pattern associated with the retail industry of peak sales and earnings during the calendar year-end holiday shopping season. In the past several years, a substantial portion of ThinkGeek revenue has occurred in the fourth quarter ending December 31. As is typical in the retail industry, we generally experience lower monthly revenue during the first nine months of the year.

We currently use the following key metrics to measure our e-Commerce business:

                                       Three Months Ended June 30,               Six Months Ended June 30,
                                       2012                  2011                2012                 2011
Unique visitors (in thousands)
(1)                                     18,590                15,991              37,087                29,605
Number of orders received (in
thousands) (2)                             296                   245                 603                   514
Conversion rate                           1.59 %                1.53 %              1.63 %                1.74 %
Average order value received (3) $          63         $          64       $          60         $          61

Number of orders shipped (in
thousands) (4)                             295                   254                 613                   538
Average order value shipped  (3) $          60         $          57       $          58         $          56

(1) Unique visitors is the total of unique visitors for the e-Commerce site during the periods presented. This data is accumulated daily and can include the same unique visitor on different days. We track unique visitors and the volume of traffic to our website to help us determine the effectiveness of our online marketing efforts.

(2) The number of orders received represents all orders placed on the ThinkGeek website during each period shown and does not necessarily correlate to revenue recognized during the period For example, some orders placed on the ThinkGeek website at the end of a reporting period are recognized as revenue in the subsequent reporting period because delivery had not yet occurred.

(3) Average order value received or shipped is calculated by the total sales for orders received or shipped divided by the number of orders received or shipped. Average order value can vary depending on, but not limited to, seasonality, promotions, the number of volume sales in a given period, the competitive environment and economic conditions.

(4) The number of orders shipped represents all orders associated with the amount of revenue recognized for e-Commerce for the period presented.

Our Media segment is a social media destination for millions of influential technology professionals and enthusiasts. Our strategy targets business to business technology companies and their advertising agencies with the goal of increasing revenue per page. We provide a variety of lead generation programs directly to our customers. We believe that customers value lead generation programs and that these programs will have the potential to constitute a growing source of future revenue. We are focused on increasing international traffic to our Media websites and have developed and implemented strategies to increase international revenue. We have an established sales force based in the United States and Europe. We also have executed agreements with representatives in Australia and Asia to market and sell our Media advertising products.

We currently use the following key metrics which are derived from data provided by Google Analytics to measure our Media business:

                                    Three Months Ended June 30,          Six Months Ended June 30,
                                       2012               2011             2012              2011
Unique visitors per month (in
thousands) (1)                            43,670           47,804            44,650           48,618
Visits per unique visitor per
month                                          1.5            1.6                 1.5            1.6
Visits per month (in thousands)
(2)                                       67,184           76,815            68,877           78,206
Pages per visit                              2.1              2.0               2.1              2.1
Page views per month (in
thousands) (2)                           141,999          155,788           146,633          163,108
Revenue per thousand pages (RPM) $         12.38     $      12.31     $       11.40     $      10.69
Revenue per user (RPU) (3)       $          0.48     $       0.48     $        0.45     $       0.43

(1) Unique visitors is the monthly average of unique visitors for all of our Media websites during the periods presented. This data is accumulated monthly and can include the same unique visitor in different months or can include the same user that may have visited from a different device or platform. In the third quarter of 2011, we made changes to our websites that affect the way we account for some of the metric data shown in the table above, and may result in the number of Unique visitors, Visits per unique visitor and Visits per month to decrease while Pages per visit may increase. This change will not affect Page views per month.

(2) Per month amounts are the average calculated as the total amount for the period divided by the months in the period.

(3) RPU is an annualized amount based on revenue and unique users during the period presented.

We continue to invest and improve our web properties SourceForge, Slashdot, and Freecode. Last year we launched an open source version of our platform for developers of Open Source projects, named Allura. This includes

source code repositories, bug reports, discussions, mailing lists, wiki pages and blogs. It demonstrates our commitment to the Open Source community. Last year we also improved the SourceForge directory and made it easier to find open source software. The redesigned directory includes a new browse experience, better project summary page, reviews and ratings, and improved search results. This year we also launched a new mirror directory, enabling an expanded catalog with projects that may not be developed on SourceForge. This will help users see a greater selection of software to choose from when searching for applications. On our Slashdot website we made several enhancements which improved the user experience, site performance and scalability. We launched SlashTV which offers video content, generated by us, for technology professionals and IT decision makers that frequent the Slashdot website. We also recently launched SlashCloud, SlashBI and Slashdot Data Center. Cloud computing (SlashCloud) and Business Intelligence (SlashBI) are two new business to business editorial destinations designed to give breaking news, insights and analysis to IT professionals. Slashdot Data Center provides content related to data center hardware, technology, and other news. On our Freecode website, formerly named freshmeat, we completed a site re-brand.

On May 11, 2012, we announced that our Board of Directors is exploring strategic alternatives with respect to our Media business, including the SourceForge, Slashdot and Freecode websites. We, along with our advisers, are evaluating a range of options to maximize shareholder value, including, but not limited to, a potential sale of our Media business, investing additional capital to expand the Media business, or other possible transactions involving the Media business. There can be no assurance that the exploration of strategic alternatives will result in any transaction. This process is on-going and our Board of Directors, executive management team and advisers continue to review and analyze opportunities for our Media business.

Critical Accounting Policies

Accounting policies, methods and estimates are an integral part of the condensed consolidated financial statements prepared by management and are based upon management's current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management's current judgments. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include revenue recognition, inventories, the assessment of impairment of goodwill and long-lived assets, stock-based compensation and contingencies and litigation.

Revenue Recognition

The Company recognizes revenue as follows:

e-Commerce Revenue

e-Commerce revenue is derived from the online sale of consumer goods. We recognize e-Commerce revenue from product sales when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable, and collectibility is reasonably assured. Revenue is deferred for orders shipped but not delivered before the end of the period. The amount recorded is estimated because of e-Commerce's high volume of transactions and the use of multiple shipping carriers. These estimates are used to determine what orders, placed at the end of the reporting period, were delivered and should be recognized as revenue. When calculating these estimates, we consider historical experiences of shipping transit times for domestic and international orders using different carriers. On average, shipping transit times are approximately one to six business days. As of June 30, 2012 and December 31, 2011, $0.5 million and $0.9 million, respectively, was recognized as deferred revenue for orders placed at the end of the reporting period, but not yet delivered.

e-Commerce also engages in the sale of gift certificates. When a gift certificate is sold, revenue is deferred until the certificate is redeemed and the products are delivered. Deferred revenue at June 30, 2012 and December 31, 2011 relating to gift certificates was $0.6 million and $0.7 million, respectively.

e-Commerce reserves an amount for estimated returns at the end of each reporting period. We generally give customers a 90-day right to return products. These estimates are based on historical trends of amounts returned per revenue for a period. Reserves for returns at June 30, 2012 and December 31, 2011 were $0.1 million and $0.7 million, respectively. This decrease was due to the seasonality effect from holiday sales occurring at year end.

We voluntarily ceased selling a product in July 2012 because of safety concerns. We are offering our customers who have purchased this product, the opportunity to return the product in exchange for a ThinkGeek credit. We believe the reserves for returns at June 30, 2012 to be adequate. We will adjust our reserves for returns as deemed appropriate based on future product returns. Media Revenue

Media revenue is derived primarily from advertising on our various websites or from lead generation information provided to the customer. Advertisements include various forms of rich media and banner advertising, video, text links and sponsorships, while lead generation information utilizes advertising and other methods to deliver leads to a customer. We recognize Media advertising revenue over the contractual campaign period and recognize lead generation revenue as leads are delivered to the customer, provided that persuasive evidence of an arrangement exists, no significant obligations remain, the fee is fixed or determinable, and collection of the receivable is reasonably assured. Revenue recognized is limited to the lesser of actual delivery or on a straight line basis. Our obligations may include guarantees of a minimum number of impressions (the number of times that an advertisement is viewed by visitors to the Company's websites). We defer Media advertising revenue for contracts where we have been compensated on certain performance criteria until we complete the contractually specified performance. Deferred revenue for the Media segment was $2.1 million and $1.8 million as of June 30, 2012 and December 31, 2011, respectively.

Inventories

Inventories related to our e-Commerce segment consist solely of finished goods that are valued at the lower of cost, using the weighted average cost method, or market. We review inventories each quarter and, when required, reduce estimated excess and obsolete inventories to their net realizable values.

Long-Lived Assets

We continually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, we use an estimate of the related undiscounted future cash flows over the remaining life of the long-lived assets in measuring whether they are recoverable. If the carrying value of the asset exceeds the estimated undiscounted future cash flows, a loss is recorded as the excess of the asset's carrying value over fair value. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Goodwill

We evaluate goodwill for impairment annually and when an event occurs or circumstances change that indicates that the carrying value may not be recoverable. Our annual testing date is December 31. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying net assets, including goodwill, to the fair value of the reporting unit. The Company has two reporting units, e-Commerce and Media. All goodwill is related the Media reporting unit. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of the reporting unit exceeds its fair value a second step is performed to measure the amount of the impairment loss, if any. The preparation of the goodwill impairment analysis requires us to make significant estimates and assumptions with respect to the determination of fair values of reporting units and tangible and intangible assets. These estimates and assumptions, which include future values, are often subjective and may differ significantly from period to period based on changes in the overall economic environment, changes in our business and changes in our strategy or our internal forecasts. See the Recent Accounting Pronouncements section elsewhere in this Management's Discussion and Analysis for additional information on a standard update related to goodwill testing that was adopted January 1, 2012.

Stock-Based Compensation

We measure compensation cost for stock awards at grant date fair value and recognize the expense net of estimated forfeitures for shares expected to vest over the service period of the award.

Calculating compensation expense for stock options requires the input of subjective assumptions, including the expected term of the stock option grant, stock price volatility, interest rates and the forfeiture rate. The fair value of the option grants are calculated on the date of grant using the Black-Scholes option pricing model. The expected life is based on historical settlement patterns. Expected volatility is based on the historical implied volatility of our stock. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate the forfeiture rate based on historical trends of our stock-based awards that cancel.

Results of Operations

The following table sets forth our operating results for the periods indicated
as a percentage of net revenue, represented by selected items from the
consolidated statements of operations. This table should be read in conjunction
with the condensed consolidated financial statements and the accompanying notes
included in this Form 10-Q.

                                 Three Months Ended June 30,            Six Months Ended June 30,
                                   2012                2011               2012               2011
Consolidated Statements of
Operations Data:
Net revenue:
e-Commerce revenue                  77.1  %             71.3  %            77.9  %             73.8  %
Media revenue                       22.9                28.7               22.1                26.2
Total net revenue                  100.0  %            100.0  %           100.0  %            100.0  %
Cost of revenue:
e-Commerce cost of revenue          68.1  %             65.8               67.6  %             67.1  %
Media cost of revenue                5.1                 7.3                4.8                 7.0
Total cost of revenue               73.2  %             73.1  %            72.4  %             74.1  %
Gross margin                        26.8  %             26.9  %            27.6  %             25.9  %
Operating expenses:
Sales and marketing                 15.6                16.5               15.0                16.7
Research and development             8.1                 6.5                8.3                 5.7
General and administrative          13.4                14.6               14.1                14.8
Amortization of intangible
assets                               0.1                 0.1                0.1                 0.1
Total operating expenses            37.2  %             37.7  %            37.5  %             37.3  %
Loss from operations               (10.4 )             (10.8 )             (9.9 )             (11.4 )
Gain on Sale of
non-marketable securities           17.4                   -                8.9                   -
Interest and other income
(expense), net                      (0.1 )               0.1               (0.1 )                 -
Income (loss) before income
taxes                                6.9               (10.7 )             (1.1 )             (11.4 )
Provision (benefit) for
income taxes                           -                   -                  -                (0.1 )

Net Revenue

                      Three Months Ended                     Six Months Ended
                           June 30,                              June 30,
                       2012         2011      % Change       2012        2011      % Change
($ in thousands)

e-Commerce revenue increased $3.5 million and $5.8 million during the three and six months ended June 30, 2012 as compared to the same prior year periods. This is primarily due an increase in the number unique visitors from the prior year period which led to an increase in the number of orders placed through our ThinkGeek website as well

as an increase in business to business volume sales.
The number of unique visitors increased 16% and 25% during the three and six month periods ended June 30, 2012, respectively, as compared to the same prior year periods. The higher volume of visitors is primarily due to our efforts to increase consumer awareness of our ThinkGeek website through advertising and media coverage. Business to business volume sales increased $0.6 million and $0.9 million during the three and six month periods ended June 30, 2012, respectively, as compared to the same prior year periods. We continue to diversify our product offerings by introducing new products, including our innovative GeekLabs products and expanding licensing partnerships.
Media revenue decreased $0.5 million during the three months ended June 30, 2012 as compared to the same period ended June 30, 2011 and decreased $0.4 million during the six months ended June 30, 2012 as compared to the same period ended June 30, 2011. This is primarily due to declines in display advertising, as market rates become increasingly competitive, and due to decreases in unique visitors per month, visits per month and page views per month.

Cost of Revenue / Gross Margin

                               Three Months Ended                           Six Months Ended
                                    June 30,                                    June 30,
                               2012          2011         % Change         2012          2011         % Change
($ in thousands)
e-Commerce cost of revenue $   15,708     $  13,209           19  %     $  30,651     $  26,843           14  %
Media cost of revenue           1,186         1,459          (19 )%         2,186         2,805          (22 )%
Total cost of revenue      $   16,894     $  14,668           15  %     $  32,837     $  29,648           11  %
Gross margin               $    6,185     $   5,402           14  %     $  12,505     $  10,338           21  %
Gross margin %                     27 %          27 %                          28 %          26 %

e-Commerce cost of revenues increased $2.5 million during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 primarily due to higher sales. Also, contributing to the increase is a $0.2 million reserve to inventory for a product that we sell on our ThinkGeek website. The Consumer Product Safety Commission filed an administrative complaint against the maker of this product because of safety concerns, particularly to children. As other retailers have done, we voluntarily suspended the sales of this product in late July 2012. The Company does not anticipate this to have a material impact on e-Commerce revenues. Media cost of revenues decreased $0.3 million during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 primarily due to a decrease in personnel and related overhead expenses, depreciation expenses and facility expenses of $0.1 million each, respectively. Depreciation was lower due to certain assets that became fully depreciated during the first half of 2012. Facility expenses that are related to data storage, rent and maintenance costs for our Media website infrastructure and hardware decreased due to renegotiating contracts with certain facilities.

e-Commerce cost of revenues increased $3.8 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 primarily due to higher sales and the $0.2 million reserve to inventory for a certain product as described above. Media cost of revenues decreased $0.6 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 primarily due to a decrease in depreciation and facilities expenses of $0.3 million, each respectively for the reasons discussed above.

Gross margin as a percentage of revenues for the six months ended June 30, 2012 increased by two percentage points due to our efforts in reducing fulfillment . . .