##### 



U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB

(Mark One)



| |  |  | Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
| |  |  | ---------------------------------------------------------------------------------
|
| |  |  | For the quarterly period ended March 31, 2002                                    



| |  |  | Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act
| |  |  | ---------------------------------------------------------------------

For the transition period from to

Commission File Number 0-32497

UDATE.COM, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 330835561                           
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

New Enterprise House, St Helens Street,
Derby, England DE1 3GY
(Address of Principal Executive Offices)

+44 (0) 1332 268700
(Issuers Telephone Number, Including Area Code)

Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]

As of April 16,
2002, there were 25,156,663 shares of registrants Common
Stock, $0.001 par value, outstanding.

Transitional Small Business Disclosure Format: Yes [] No [X]





---



##### 



UDATE.COM, INC. AND SUBSIDIARIES
INDEX

|                              |                                                            |         |  |    |  |  | 
|----------------------------- | ---------------------------------------------------------- | ------- |  | -- |  |  | 
|PART I. FINANCIAL INFORMATION |                                                            | PageNo.
|                              |                                                            |         |  |    |  |  | 
|Item 1                        | Financial Statements                                       |         |  |    | 
|                              |                                                            |         |  |    |  |  | 
|                              | Condensed Consolidated Balance Sheets                      |         |  |    | 
|                              | March 31, 2002 and December 31, 2001                       |         |  | 3  | 
|                              |                                                            |         |  |    |  |  | 
|                              | Condensed Consolidated Statements of Operations -          |         |  |    | 
|                              | Three Months ended March 31, 2002 and 2001                 |         |  | 5  | 
|                              |                                                            |         |  |    |  |  | 
|                              | Condensed Consolidated Statements of Cash Flows -          |         |  |    | 
|                              | Three Months ended March 31, 2002 and 2001                 |         |  | 6  | 
|                              |                                                            |         |  |    |  |  | 
|                              | Notes to Condensed Consolidated Financial Statements       |         |  | 7  | 
|                              |                                                            |         |  |    |  |  | 
|Item 2                        | Management's Discussion and Analysis or Plan of Operations |         |  | 14 | 
|                             
|PART II. OTHER INFORMATION   
|                              |                                                            |         |  |    |  |  | 
|Item 1                        | Legal Proceedings                                          |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|Item 2                        | Changes in Securities and Use of Proceeds                  |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|Item 3                        | Defaults upon Senior Securities                            |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|Item 4                        | Submission of Matters to a Vote of Security Holders        |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|Item 5                        | Other Information                                          |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|Item 6                        | Exhibits and Reports on Form 8-K                           |         |  | 33 | 
|                              |                                                            |         |  |    |  |  | 
|                              | Signatures                                                 |         |  | 34 | 
|                              |                                                            |         |  |    |  |  | 
|                              | Exhibit Index                                              |         |  | 35 | 

2



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##### 



PART IFinancial Information

|                                                                       |                                                     |             |                      |                           |  |           |            |            |  |           |            | 
|---------------------------------------------------------------------- | --------------------------------------------------- | ----------- | -------------------- | ------------------------- |  | --------- | ---------- | ---------- |  | --------- | ---------- | 
|UDATE.COM, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets |                                                     | (unaudited) |                      |                           |  |          
|                                                                       |                                                     | March 31,   |                      | December 31,             
|                                                                       |                                                     |             |                      |                           |  | 2002      |            | 2001      
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|ASSETS                                                                 |                                                     |             |                      |                           |  |           |            |           
|Current assets:                                                        |                                                     |             |                      |                           |  |           |            |           
|                                                                       | Cash                                                |             | $                    | 3,542,709                 |  |           | $          | 4,325,580  | 
|                                                                       | Trade accounts receivable                           |             |                      | 362,880                   |  |           |            | 492,303    | 
|                                                                       | Due from officers and employees                     |             |                      | 84,467                    |  |           |            | 79,170     | 
|                                                                       | Prepaid expenses                                    |             |                      | 103,030                   |  |           |            | 229,247    | 
|                                                                       | Deferred tax asset                                  |             |                      | 482,134                   |  |           |            | 1,309,168  | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|                                                                       |                                                     |             | Total current assets |                           |  | 4,575,220 |            |            |  | 6,435,468 |           
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|Intangible assets:                                                     |                                                     |             |                      |                           |  |           |            |           
|                                                                       | Goodwill                                            |             |                      | 10,995,499                |  |           |            | 10,995,499 | 
|                                                                       | Kiss.com trade name                                 |             |                      | 11,143,000                |  |           |            | 11,143,000 | 
|                                                                       | Less: Accumulated amortization                      |             |                      |                           |  |           |            |            | 
|                                                                       | Goodwill                                            |             |                      | 824,662                   |  |           |            | 824,662    | 
|                                                                       | Kiss.com trade name                                 |             |                      | 1,114,300                 |  |           |            | 835,725    | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|                                                                       |                                                     |             |                      | Total intangible assets   |  |           | 20,199,537 |            |  |           | 20,478,112 | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|Restricted cash                                                        |                                                     |             | 2,120,000            |                           |  |           |           |           
|Tangible fixed assets:                                                 |                                                     |             |                      |                           |  |           |            |           
|                                                                       | Computer and office equipment                       |             |                      | 2,845,443                 |  |           |            | 2,665,177  | 
|                                                                       | Less: Accumulated depreciation                      |             |                      | 1,668,477                 |  |           |            | 1,457,172  | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|                                                                       | Net computer and office equipment                   |             |                      | 1,176,966                 |  |           |            | 1,208,005  | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|                                                                       |                                                     |             |                      | Total assets              |  |           | 28,071,723 |            |  |           | 28,121,585 | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                    |                                                     |             |                      |                           |  |           |            |           
|Current liabilities:                                                   |                                                     |             |                      |                           |  |           |            |           
|                                                                       | Current portion of obligations under capital leases |             | $                    | 67,100                    |  |           | $          | 72,002     | 
|                                                                       | Accounts payable and accrued liabilities            |             |                      | 4,099,003                 |  |           |            | 2,013,209  | 
|                                                                       | Provision for restructuring costs                   |             |                      | 248,049                   |  |           |            | 929,614    | 
|                                                                       | Deferred revenue                                    |             |                      | 3,109,486                 |  |           |            | 2,942,462  | 
|                                                                       | Note payable                                        |             |                      |                          |  |           |            | 2,606,326  | 
|                                                                       | Other current liabilities                           |             |                      | 563,774                   |  |           |            | 805,346    | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           
|                                                                       |                                                     |             |                      | Total current liabilities |  |           | 8,087,412  |            |  |           | 9,368,959  | 
|                                                                       |                                                     |             |                      |                           |  |           |            |           

3



---



##### 



|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |            |   |   |            | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | ------------------------------------------ | - | ---- | ---------- | ---------- | - | - | ---------- | 
|Condensed Consolidated Balance Sheets                       |                                                                                                                                                                                                                                    | (unaudited) |           |                                            |   |     
|                                                            |                                                                                                                                                                                                                                    | March 31,   |           | December 31,                              
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   | 2002 |            | 2001      
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|Long term liabilities:                                      |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|Obligations under capital leases, excluding current portion |                                                                                                                                                                                                                                    |             | 9,563     |                                            |   |      | 27,246     |           
|                                                            | Deferred revenue                                                                                                                                                                                                                   |             |           | 30,806                                     |   |      |            | 54,340     |  
|                                                            | Deferred tax liability                                                                                                                                                                                                             |             |           | 2,871,208                                  |   |      |            | 2,954,781  |  
|                                                            | Provision for restructuring costs                                                                                                                                                                                                  |             |           | 124,025                                    |   |      |            | 186,037    |  
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|                                                            |                                                                                                                                                                                                                                    |             | 3,035,602 |                                            |   |      | 3,222,404  |           
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|                                                            |                                                                                                                                                                                                                                    |             |           | Total liabilities                          |   | $    | 11,123,014 |            |   | $ | 12,591,363 | 
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|Stockholders equity (deficit):                             |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|                                                            | Common stock $0.001 par value;
Authorised 150,000,000 and 50,000,000 at March 31,
2002 and December 31, 2001, respectively;
Issued and outstanding 25,106,663 and 24,771,202 at
March 31, 2002 and December 31, 2001, respectively |             | $         | 25,107                                     |   |      | $          | 24,771     |  
|                                                            | Additional paid-in capital                                                                                                                                                                                                         |             |           | 23,217,564                                 |   |      |            | 22,533,534 |  
|                                                            | Retained deficit                                                                                                                                                                                                                   |             |           | (6,335,555                                 | ) |      |            | (7,069,676 | )
|                                                            | Accumulated other comprehensive income  cumulative
translation adjustment                                                                                                                                                         |             |           | 41,593                                     |   |      |            | 41,593     |  
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|                                                            |                                                                                                                                                                                                                                    |             |           | Total stockholders equity                 |   |      | 16,948,709 |            |   |   | 15,530,222 | 
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           
|                                                            |                                                                                                                                                                                                                                    |             |           | Total liabilities and stockholders equity |   | $    | 28,071,723 |            |   | $ | 28,121,585 | 
|                                                            |                                                                                                                                                                                                                                    |             |           |                                            |   |      |            |           

The accompanying notes are an integral part of these condensed consolidated financial statements.

4



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##### 



|                                                                                    |                                                |                              |            |           |           |      |            |         |           | 
|----------------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------- | ---------- | --------- | --------- | ---- | ---------- | ------- | --------- | 
|UDATE.COM, INC. AND SUBSIDIARIES                                                    |                                                | (unaudited)                 
|Condensed Consolidated Statements of Operations                                     |                                                | Three months ended March 31,
|                                                                                    |                                                |                             
|                                                                                    |                                                |                              |            | 2002      |           | 2001
|                                                                                    |                                                |                              |            |           |           |     
|Revenues                                                                            |                                                | $                            | 9,136,984  |           |           | $    | 1,538,431  |        
|Operating expenses:                                                                 |                                                |                              |            |           |           |      |            |        
|                                                                                    | Selling, general and administrative expenses   |                              |            | 3,161,956 |           |      |            | 911,474 |          
|                                                                                    | Advertising expense                            |                              |            | 3,905,433 |           |      |            | 878,577 |          
|                                                                                    | Depreciation                                   |                              |            | 211,305   |           |      |            | 146,152 |          
|                                                                                    | Amortization of goodwill and intangible assets |                              |            | 278,575   |           |      |            |        |          
|                                                                                    |                                                |                              |            |           |           |      |            |        
|                                                                                    |                                                | Total operating expenses     |            |           | 7,557,269 |      |            |         | 1,936,203 | 
|                                                                                    |                                                |                              |            |           |           |      |            |        
|Net income (loss) before interest and income taxes                                  |                                                |                              | 1,579,715  |           |           |      | (397,772   | )      
|Interest income                                                                     |                                                |                              | 10,482     |           |           |      | 3,506      |        
|Interest expense                                                                    |                                                |                              | 112,615    |           |           |      | 2,079      |        
|                                                                                    |                                                |                              |            |           |           |      |            |        
|Net income (loss) before income taxes                                               |                                                |                              | 1,477,582  |           |           |      | (396,345   | )      
|Income taxes                                                                        |                                                |                              | 743,461    |           |           |      |           |        
|                                                                                    |                                                |                              |            |           |           |      |            |        
|Net income (loss)                                                                   |                                                | $                            | 734,121    |           |           | $    | (396,345   | )      
|                                                                                    |                                                |                              |            |           |           |      |            |        
|Basic earnings per share                                                            |                                                |                              | 0.03       |           |           |      | (0.02      | )      
|Diluted earnings per share                                                          |                                                |                              | 0.02       |           |           |      | (0.02      | )      
|Weighted average number of shares used in
calculation of basic earnings per share   |                                                |                              | 25,045,325 |           |           |      | 18,393,889 |        
|Weighted average number of shares used in
calculation of diluted earnings per share |                                                |                              | 32,210,897 |           |           |      | 18,393,889 |        

The accompanying notes are an integral part of these condensed consolidated financial statements.

5



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##### 



|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |          |  
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------------- | ---------- | ---- | - | --------- | -------- | -
|UDATE.COM, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows | (unaudited)                                                                                                                                             
|                                                                                 |                                                                                                                                                          |   | Three months ended March 31,
|                                                                                 |                                                                                                                                                          |   |                             
|                                                                                 |                                                                                                                                                          |   | 2002                         |            | 2001
|                                                                                 |                                                                                                                                                          |   |                              |            |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            |                                                                                                                                                          |   |                              |            |      |   |           |         
|                                                                                 | Net income (loss)                                                                                                                                        |   | $                            | 734,121    |      |   | $         | (396,345 | )
|                                                                                 | Restricted cash                                                                                                                                          |   |                              | (2,120,000 | )    |   |           |         |  
|                                                                                 | Depreciation of plant and equipment                                                                                                                      |   |                              | 211,305    |      |   |           | 146,152  |  
|                                                                                 | Amortization of goodwill and intangible assets                                                                                                           |   |                              | 278,575    |      |   |           |         |  
|                                                                                 | Stock compensation expense                                                                                                                               |   |                              |           |      |   |           | 3,547    |  
|                                                                                 | Interest paid via issuance of stock                                                                                                                      |   |                              | 82,966     |      |   |           |         |  
|                                                                                 | Decrease in trade accounts receivable, amounts
due from officers and employees and prepaid
expenses and deferred tax                                     |   |                              | 250,343    |      |   |           | 7,138    |  
|                                                                                 | Increase in amounts payable and accrued
liabilities, deferred revenue, amounts due to
officers and directors, other current
liabilities and deferred tax |   |                              | 1,862,965  |      |   |           | 159,908  |  
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|Net cash provided by (used in) operating activities                              |                                                                                                                                                          |   | 1,300,275                    |            |      |   | (79,600   | )       
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|CASH FLOWS USED IN INVESTING ACTIVITIES:                                         |                                                                                                                                                          |   |                              |            |      |   |           |         
|                                                                                 | Cash acquired with Kiss.com, Inc                                                                                                                         |   |                              |           |      |   |           | 49,483   |  
|                                                                                 | Costs associated with the acquisition of Kiss.com                                                                                                        |   |                              |           |      |   |           | (363,178 | )
|                                                                                 | Website development                                                                                                                                      |   |                              |           |      |   |           | (105,098 | )
|                                                                                 | Capital expenditure                                                                                                                                      |   |                              | (55,635    | )    |   |           | (7,094   | )
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|Net cash used in investing activities                                            |                                                                                                                                                          |   | (55,635                      | )          |      |   | (425,887  | )       
|                                                                                
|CASH FLOWS USED IN FINANCING ACTIVITIES:                                         |                                                                                                                                                          |   |                              |            |      |   |           |         
|                                                                                 | Repayment of capital lease obligations                                                                                                                   |   |                              | (22,585    | )    |   |           | (19,483  | )
|                                                                                 | Loan note repayment                                                                                                                                      |   |                              | (2,606,326 | )    |   |           | (100,000 | )
|                                                                                 | Proceeds from issuance of common stock                                                                                                                   |   |                              | 601,400    |      |   |           |         |  
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|Net cash used in financing activities                                            |                                                                                                                                                          |   | (2,027,511                   | )          |      |   | (119,483  | )       
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|Net decrease in cash and cash equivalents                                        |                                                                                                                                                          |   | (782,871                     | )          |      |   | (624,970  | )       
|Cash and cash equivalents at beginning of period                                 |                                                                                                                                                          |   | 4,325,580                    |            |      |   | 1,450,366 |         
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         
|Cash and cash equivalents at end of period                                       |                                                                                                                                                          | $ | 3,542,709                    |            |      | $ | 825,396   |         
|                                                                                 |                                                                                                                                                          |   |                              |            |      |   |           |         

Cash paid for interest during the period was $24,096 (2001: $nil) and cash paid for income taxes
during the period was $nil (2001: $nil).

The accompanying notes are an integral part of these condensed consolidated financial statements.

6



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##### 



uDate.com, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, March 31, 2002
(unaudited)

Note 1. Basis of
Presentation

The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.

In the opinion of management, the accompanying interim unaudited condensed
consolidated financial statements contain all material adjustments consisting
only of normal recurring adjustments necessary to present fairly the
consolidated financial position, the consolidated results of operations, the
changes in stockholders equity and cash flows of uDate.com, Inc., a Delaware
corporation (the Company), and subsidiaries for the interim periods
presented.

The results of the three months ended March 31, 2002 are not necessarily
indicative of the results of operations for the full year. These interim
unaudited condensed consolidated financial statements and related footnotes
should be read in conjunction with the financial statements and footnotes
thereto included in the Companys Form 10-KSB filed with the Securities and
Exchange Commission (the Commission) on March 28, 2002.

Note 2. Nature of
Business

The Companys operations, which are all within the Internet dating
segment, are split across two Web properties:



| |  | uDate.com Limited (uDate-UK), a United Kingdom (UK)
based company providing Internet dating services on a global basis.
| | - | ---------------------------------------------------------------------------------------------------------------------------
|
| |  | Kiss.com, Inc. (Kiss.com), a Delaware corporation, also
providing Internet dating services on a global basis.            

Revenues are derived principally from the sale of membership subscriptions
that allow a paying member to contact and communicate with other members using
the Web sites private e-mail and messaging services.

7



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##### 



For the three months
ended March 31, 2002, revenue and net income before income
taxes are derived as follows:

|                                                                                             |  |                                           |           |                |  |       |           |  |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------- | --------- | -------------- |  | ----- | --------- |  |  | - | ---------- | -
|                                                                                             |  | (unaudited)                              
|                                                                                             |  | For the three months ended March 31, 2002
|                                                                                             |  |                                          
|                                                                                             |  | uDate.Com
Limited                         |           | Kiss.com, Inc. |  | Total
|                                                                                             |  |                                           |           |                |  |      
|Revenues                                                                                     |  | $                                         | 4,124,116 |                |  | $     | 5,012,868 |  |  | $ | 9,136,984  |  
|Net income before interest,
amortization, depreciation,
non-allocated costs
and income taxes |  | $                                         | 2,704,980 |                |  | $     | 1,198,879 |  |  | $ | 3,903,859  |  
|Amortization and depreciation                                                                |  |                                           |           |                |  |       |           |  |  | $ | (489,880   | )
|Non-allocated costs and interest                                                             |  |                                           |           |                |  |       |           |  |  | $ | (1,936,397 | )
|                                                                                             |  |                                           |           |                |  |       |           |  |  |   |            |  
|Net income before income taxes                                                               |  |                                           |           |                |  |       |           |  |  | $ | 1,477,582  |  

For the three months ended March 31, 2001 all operating activities related
solely to uDate.com.

Note 3. Acquisitions

On March 29, 2001, the Company completed the acquisition of Kiss.com, a
privately held Washington corporation. Kiss.com operated a picture personals
service. As a result of the acquisition, Kiss.com became a wholly-owned
subsidiary of uDate.com, Inc. and uDate.com, Inc. issued 6,249,998 shares of
its common stock, along with notes payable for an aggregate principal amount of
$5,000,000, in exchange for all of the outstanding shares of Kiss.com. The
acquisition was accounted for under the purchase method of accounting, and was
valued at approximately $19.6 million, including transaction costs.

In respect of the $5,000,000 notes payable, the balance of the notes
outstanding as of March 31, 2002 is $nil.

A summary of the purchase price for the acquisition is as follows:

|                                  |  |   |            | 
|--------------------------------- |  | - | ---------- | 
|Fair value of common stock issued |  | $ | 14,107,138 | 
|Notes payable                     |  | $ | 5,000,000  | 
|                                  |  |   |            | 
|                                  |  | $ | 19,107,138 | 
|Direct acquisition costs          |  | $ | 528,384    | 
|                                  |  |   |            | 
|Total purchase price              |  | $ | 19,635,522 | 
|                                  |  |   |            | 

The purchase price has been allocated as follows:

|                            |  |   |            |  
|--------------------------- |  | - | ---------- | -
|Current assets acquired     |  | $ | 29,095     |  
|Cash                        |  | $ | 49,483     |  
|Equipment                   |  | $ | 206,492    |  
|Non-current assets acquired |  | $ | 41,342     |  
|Liabilities                 |  | $ | (1,456,289 | )
|Deferred tax liability      |  | $ | (4,187,100 | )
|Goodwill                    |  | $ | 10,995,499 |  
|Customer base               |  | $ | 2,814,000  |  
|Kiss.com trade name         |  | $ | 11,143,000 |  
|                            |  |   |            |  
|Total                       |  | $ | 19,635,522 |  
|                            |  |   |            |  

8



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##### 



The amount shown above as goodwill represents the excess of purchase price
over the value of the identifiable net assets acquired, including identified
intangible assets.

Goodwill was amortized on a straight line basis over its estimated useful
life of ten years until December 31, 2001. From January 1, 2002, goodwill is
not being amortized, but instead is reviewed annually for impairment in
accordance with Statement of Financial Accounting Standards No. 142.

The customer base was amortized over its estimated useful life of nine
months.

The Kiss.com trade name is being amortized on a straight line basis over
its estimated useful life of ten years.

The following table presents the actual results of operations for the
three months ended March 31, 2002 and the pro forma results of operations for
the three months ended March 31, 2001 as if the acquisition had occurred at the
beginning of each of the periods presented. The pro forma information is not
necessarily indicative of the combined results that would have occurred had the
acquisition taken place at the beginning of the periods presented, nor is it
necessarily indicative of results that may occur in the future:

|                            |           |   |                              |      |                 |   |           |       |  
|--------------------------- | --------- | - | ---------------------------- | ---- | --------------- | - | --------- | ----- | -
|                            |           |   | (unaudited)                 
|                            |           |   | Three months ended March 31,
|                            |           |   |                             
|                            |           |   | 2002 (actual)                |      | 2001 (proforma)
|                            |           |   |                              |      |                
|Total net revenue           |           | $ | 9,136,984                    |      |                 | $ | 3,032,997 |      
|Net income (loss)           |           | $ | 734,121                      |      |                 | $ | (929,408  | )    
|Net income (loss) per share |           |   |                              |      |                 |   |           |      
|                            | - Basic   |   | $                            | 0.03 |                 |   | $         | (0.04 | )
|                            | - Diluted |   | $                            | 0.02 |                 |   | $         | (0.04 | )

Note 4. Liquidity

As of March 31, 2002, the Company had unrestricted cash and cash
equivalents of $3,542,709 and restricted cash of $2,120,000. The Company
believes that its current unrestricted cash balance, together with its
projected operating results and cash flows, will be sufficient to meet its
liquidity needs for the next 12 months and, accordingly, has prepared its
financial statements assuming that the Company will continue as a going
concern.

Notwithstanding this, however, the Company does not currently have an
established line of credit with a commercial bank. Such a credit facility may
be difficult to obtain in the short-term with the Companys historical
operating results.

In order to obtain additional funds in the future, the Company may need to
seek additional equity capital, which would be dilutive to current
stockholders.

On the basis of its actual position as at March 31, 2002 and forecasts
through 2002, the Company anticipates that it will be able to fund its
operating expenses in 2002 with the cash flow from its operations.

9



---



##### 



Restricted cash of $2,120,000 on the accompanying balance sheet consists
of funds held on deposit with financial institutions in connection with credit
card merchant services agreements. Restricted cash is presented separately
from cash and cash equivalents in the consolidated statements of cash flows.

Note 5. Earnings Per
Share

Basic earnings (loss) per share (EPS) is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding for the period, excluding the effect of any dilutive
potential common stock. Diluted EPS reflects the potential dilution in the
earnings of an entity that could occur as a result of any potential common
stock outstanding during the period.

For the periods presented herein, basic EPS differs from diluted EPS due
to the inclusion in diluted EPS of 6,730,000 potential common shares related to
employee stock options and 787,550 potential common shares related to other
options and warrants.

For the three months
ended March 31, 2001 basic EPS is the same as diluted EPS as the
effect of the potential common shares was anti-dilutive.

Note 6. Share Option Agreements

The Company has granted stock options to certain officers and employees of
the Company to purchase 100,000 shares of common stock at an exercise price of
$3.25 per share; 25,000 of the options vested on January 27, 2002 and the
remainder vest at the rate of 18,750 shares on each of the six month
anniversaries of January 27, 2002 until fully vested. These options expire on
January 27, 2012 if not exercised.

Stock option activity during the periods indicated is as follows:

|                                           |  |           |           |                  |  |   |      | 
|------------------------------------------ |  | --------- | --------- | ---------------- |  | - | ---- | 
|                                           |  | Number of |           | Weighted average
|                                           |  | Shares    |           | exercise price  
|                                           |  |           |           |                 
|Balance at March 1, 1999 and March 1, 2000 |  |           |          |                  |  |   |     | 
|Granted                                    |  |           | 1,200,000 |                  |  | $ | 7.50 | 
|                                           |  |           |           |                  |  |   |      | 
|Balance at December 31, 2000               |  |           | 1,200,000 |                  |  | $ | 7.50 | 
|Granted                                    |  |           | 5,470,000 |                  |  | $ | 1.70 | 
|Exercised                                  |  |           | (40,000   | )                |  | $ | 1.94 | 
|                                           |  |           |           |                  |  |   |      | 
|Balance at December 31, 2001               |  |           | 6,630,000 |                  |  | $ | 2.74 | 
|Granted                                    |  |           | 100,000   |                  |  | $ | 3.25 | 
|Exercised                                  |  |           | (310,000  | )                |  | $ | 1.94 | 
|Expired                                    |  |           | (70,000   | )                |  | $ | 1.94 | 
|                                           |  |           |           |                  |  |   |      | 
|Balance at March 31, 2002                  |  |           | 6,350,000 |                  |  | $ | 2.80 | 

Note 7. Income Taxes

Income tax for the periods ended March 31, 2002 and March 31, 2001
differed from amounts computed by applying the UK income tax rate of 30% to
pretax income from continuing operations as a result of the following:

10



---



##### 



|                                                     |                                                                                           |   |                              |         |      |   |          |         | 
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | - | ---------------------------- | ------- | ---- | - | -------- | ------- | 
|                                                     |                                                                                           |   | Three months ended March 31,
|                                                     |                                                                                           |   |                             
|                                                     |                                                                                           |   | 2002                         |         | 2001
|                                                     |                                                                                           |   |                              |         |     
|Expected tax expense (credit)                        |                                                                                           | $ | 443,275                      |         |      | $ | (118,904 | )      
|Increase (reduction) in income taxes
resulting from: |                                                                                           |   |                              |         |      |   |          |        
|                                                     | Change in the valuation allowance                                                         |   |                              |        |      |   |          | 118,904 | 
|                                                     | Non-deductible legal expenses
relating to a transaction the
Company elected not to pursue |   |                              | 249,796 |      |   |          |        | 
|Other                                                |                                                                                           |   | 50,390                       |         |      |   |         |        
|                                                     |                                                                                           |   |                              |         |      |   |          |        
|Total                                                |                                                                                           | $ | 743,461                      |         |      | $ |         |        
|                                                     |                                                                                           |   |                              |         |      |   |          |        

The significant components of deferred tax assets and deferred tax
liabilities at March 31, 2002 and December 31, 2001 are as follows:

|                                     |                                  |  |            |            |              |  |            |            |  
|------------------------------------ | -------------------------------- |  | ---------- | ---------- | ------------ |  | ---------- | ---------- | -
|                                     |                                  |  | March 31,  |            | December 31,
|                                     |                                  |  |            |            |             
|                                     |                                  |  | 2002       |            | 2001        
|                                     |                                  |  |            |            |             
|Deferred tax assets                  |                                  |  |            |            |              |  |            |           
|                                     | Net operating loss carryforwards |  | $          | 482,134    |              |  | $          | 1,309,168  |  
|                                     | Non-compete payment              |  |            | 112,500    |              |  |            | 112,500    |  
|                                     | Other                            |  |            | 6,000      |              |  |            | 6,000      |  
|                                     | Plant and equipment              |  |            | 18,902     |              |  |            | 18,902     |  
|                                     |                                  |  |            |            |              |  |            |           
|                                     | Net deferred tax assets          |  |            | 619,536    |              |  |            | 1,446,570  |  
|                                     |                                  |  |            |            |              |  |            |           
|Deferred tax liabilities             |                                  |  |            |            |              |  |            |           
|                                     | Trade names                      |  |            | (3,008,610 | )            |  |            | (3,092,183 | )
|                                     |                                  |  |            |            |              |  |            |           
|Total gross deferred tax liabilities |                                  |  | (3,008,610 | )          |              |  | (3,092,183 | )         
|                                     |                                  |  |            |            |              |  |            |           
|Net deferred tax liabilities         |                                  |  | (2,389,074 | )          |              |  | (1,645,613 | )         
|                                     |                                  |  |            |            |              |  |            |           

The deferred tax assets and liabilities are considered to be
current unless otherwise stated.

As of March 31, 2002, tax losses in the amount of $1,607,113 are carried
forward. There is no expiration date for the utilization of these losses.

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.

Note 8. Recent Accounting Pronouncements

The Company has adopted the provisions of Statement of Financial
Accounting Standards No.141, Business Combinations. Statement 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies criteria
which intangible assets acquired in a

11



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##### 



purchase method business combination must meet in order to be recognized and reported apart from goodwill, noting that
any purchase price allocable to an assembled workforce may not be accounted for
separately.

Effective January 1, 2002, the Company also adopted the provisions of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets. Statement 142 requires that any goodwill and any intangible
asset determined to have an indefinite life should not be amortized, but should
be evaluated for impairment on at least an annual basis in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible
assets with definite useful lives be amortized over their estimated useful
lives to their estimated residual values and be reviewed for impairment in
accordance with Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets.

Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs, will be effective for the Company for
the year commencing January 1, 2003. The Company does not expect the standard
to have a material effect on its financial statements.

Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets,
is effective for the Company for the year commencing January 1,
2002. The standard did not have a material effect on the Company's financial
statements.

12



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##### 



Note 9. Shareholders Equity

UDATE.COM, INC. AND SUBSIDIARIES
Statement of Shareholders Equity and Other Comprehensive Income
10 month period ended December 31, 2000, year ended December 31, 2001, and the three month period ended March 31, 2002

|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |            |           | 
|---------------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------------------------- | ---------- | --------- | --------- | ------ | ------ | ---------- | ------ | -------- | ---------- | ------------- | --------- | ------------- | ---------- | - | - | - | ------ | ----------- | - | ----- | ---------- | ---------- | --------- | 
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        | Accumulated |   |       |            |           
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        | other       |   | Total
|                                                           |                                                          |                                                            |            | Number    |           | Common |        | Additional |        | Retained |            | comprehensive |           | stockholders'
|                                                           |                                                          |                                                            |            | of shares |           | stock  |        | capital    |        | earnings |            | income        |           | equity       
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |              
|Balances at March 1, 2000                                  |                                                          |                                                            | 10,711,835 |           |           | $      | 167    |            |        | $        |           |               |           | $             | (506,088   | ) |   | $ | 16,680 |             |   | $     | (489,241   | )         
|Net loss for the 10 month period                           |                                                          |                                                            |           |           |           |        |       |            |        |          |           |               |           |               | (6,202,691 | ) |   |   |       |             |   |       | (6,202,691 | )         
|Cumulative translation adjustment                          |                                                          |                                                            |           |           |           |        |       |            |        |          |           |               |           |               |           |   |   |   | 24,913 |             |   |       | 24,913     |           
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|Comprehensive net loss                                     |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       | (6,177,778 | )         
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|Shares issued in connection with:                          |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|                                                           |                                                          | Warrants and options granted
to non-employees for services |            |           |          |        |        |            |       |          |            |               | 451,423   |               |            |   |  |   |        |             |  |       |            |            | 451,423   | 
|                                                           |                                                          | Offer to new investors in
uDate.com Limited                |            |           | 213,165   |        |        |            |       |          |            |               | 223,880   |               |            |   |  |   |        |             |  |       |            |            | 223,880   | 
|                                                           |                                                          | Reverse acquisition and share
reorganization               |            |           | 7,330,000 |        |        |            | 18,088 |          |            |               | 7,287,854 |               |            |   |  |   |        |             |  |       |            |            | 7,305,942 | 
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|Balances at December 31, 2000                              |                                                          |                                                            | 18,255,000 |           |           |        | 18,255 |            |        |          | 7,963,157  |               |           |               | (6,708,779 | ) |   |   | 41,593 |             |   |       | 1,314,226  |           
|Net loss for the year                                      |                                                          |                                                            |           |           |           |        |       |            |        |          |           |               |           |               | (360,897   | ) |   |   |       |             |   |       | (360,897   | )         
|Warrants and options granted to
non-employees for services |                                                          |                                                            |           |           |           |        |       |            |        |          | 42,564     |               |           |               |           |   |   |   |       |             |   |       | 42,564     |           
|Shares issued in connection with:                          |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|                                                           | Acquisition of Kiss.com                                  |                                                            |            | 6,249,998 |           |        |        | 6,250      |        |          |            | 14,100,888    |           |               |            |  |   |   |        |            |   |       |            | 14,107,138 |          
|                                                           | Loan note interest following
the acquisition of Kiss.com |                                                            |            | 226,204   |           |        |        | 226        |        |          |            | 349,365       |           |               |            |  |   |   |        |            |   |       |            | 349,591    |          
|                                                           | Exercise of stock options                                |                                                            |            | 40,000    |           |        |        | 40         |        |          |            | 77,560        |           |               |            |  |   |   |        |            |   |       |            | 77,600     |          
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|Balances at December 31, 2001                              |                                                          |                                                            | 24,771,202 |           |           |        | 24,771 |            |        |          | 22,533,534 |               |           |               | (7,069,676 | ) |   |   | 41,593 |             |   |       | 15,530,222 |           
|Net profit for the 3 month period                          |                                                          |                                                            |           |           |           |        |       |            |        |          |           |               |           |               | 734,121    |   |   |   |       |             |   |       | 734,121    |           
|Shares issued in connection with :                         |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|                                                           | Loan note interest following the
acquisition of Kiss.com |                                                            |            | 25,461    |           |        |        | 26         |        |          |            | 82,940        |           |               |            |  |   |   |        |            |   |       |            | 82,966     |          
|                                                           | Exercise of stock options                                |                                                            |            | 310,000   |           |        |        | 310        |        |          |            | 601,090       |           |               |            |  |   |   |        |            |   |       |            | 601,400    |          
|                                                           |                                                          |                                                            |            |           |           |        |        |            |        |          |            |               |           |               |            |   |   |   |        |             |   |       |            |           
|Balances at March 31, 2002                                 |                                                          |                                                            | 25,106,663 |           |           | $      | 25,107 |            |        | $        | 23,217,564 |               |           | $             | (6,335,555 | ) |   | $ | 41,593 |             |   | $     | 16,948,709 |           

13



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##### 



Special Note Regarding References

References in this Quarterly Report on Form 10-QSB to www.udate.com,
www.kiss.com, any variations of the foregoing, or any other uniform resource
locator, or URL, are inactive textual references only. The information on
uDates Web site, Kiss Web site and any other Web site is not incorporated by
reference into this Quarterly Report on Form 10-QSB and should not be
considered to be a part of this document.

Item 2. Managements Discussion and Analysis or Plan of Operations.

This report includes forward-looking statements. Any statement in this
report that is not a statement of historical fact may be deemed to be a
forward-looking statement. Some of the forward-looking statements can be
identified by the use of forward-looking words such as believes, expects,
may, will, should, seeks, approximately, intends, plans,
estimates or anticipates or the negative of those words or other comparable
terminology. Forward-looking statements in this report include:



| |  | forecasts of the growth of our market, and our ability to
capitalize on such growth;                 
| | - | -----------------------------------------------------------------------------------------------------
|
| |  | statements regarding our profitability and growth strategy;
and                                      
|
| |  | statements regarding our future revenues, our expense levels
and our liquidity and capital resources.

Forward-looking statements involve risks and uncertainties. A number of
important factors could cause actual results to differ materially from those in
the forward-looking statements. For a discussion of factors that could cause
actual results to differ, please see the discussion under Risk Factors
contained in this report. Any forward-looking statements in this report
represent our views as of the date of this report, and we disclaim any duty to
update these statements, even if subsequent events cause our views to change.

Any of such statements and this discussion should be read in conjunction
with the Companys unaudited consolidated financial statements included herein
and the Companys Form 10-KSB filed with the Securities and Exchange Commission
(the Commission) on March 28, 2002.

In this report, the Company, we, us and our refer to uDate.com,
Inc., a Delaware corporation.

Overview

uDate.com, Inc. is an online personals business that provides adults with
a secure, effective environment for meeting other adults. The Company provides
a global service through two leading Web properties: uDate.com (uDate) and
Kiss.com (Kiss). The Company is a pure play Internet business and derives
substantially all of its revenues from the sale of paying memberships.

The Companys main office is located in Derby, England. The Companys Web
infrastructure, including its server hardware and software application, is
housed under a co-location agreement with XO Communications in Secaucus, New
Jersey. The uDate and Kiss Web sites are available globally under the uniform
resource locators (URLs) www.udate.com and www.kiss.com, respectively. As of
March 31, 2002, the Company had approximately 8 million members and 213,000
paying members in more than 50 countries world-wide. The Companys principal
markets are the US, UK and continental Europe.

14



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The US online personals market has evolved over the last 6 years. Until
recently, the market was fragmented but is now consolidating as the main
competitors make acquisitions and tie up the major available routes for online
personals services to reach large numbers of potential customers by
establishing relationships with the major Internet portals, search engines and
Internet service providers (or ISPs). The recognised industry leader is
Match.com, a subsidiary of Ticketmaster. Other companies competing in the
online personals market include Yahoo! Personals, Lavalife.com, Matchmaker.com,
Cupidjunction.com, Datingclub.com, Date.com and Americansingles.com.

The Company attracts customers to its Web sites through its affiliate
program and its integrated content relationships and by purchasing targeted
advertising on select Web sites. Based on an analysis of the sources of traffic
to its Web sites, the Company believes that it is attracting a growing
proportion of its visitors by reference or word-of-mouth.

uDate and Kiss members access the Companys Web sites by Web browsers such
as Microsofts Internet Explorer and Netscape Navigator. Members interface with
the Companys server hardware and software application, including both Web and
database servers, which share information among members and enable
instantaneous interaction between members.

The uDate and Kiss Web sites allow members to register free of charge.
Free membership entitles a member to build a personal profile that is visible
to other members. The personal profile includes detailed demographic data,
photographs and a personal description. Members are able to visit the Web sites
at any time and identify other members whom they might like to meet. The
Company operates a pay to communicate business model. The principal
difference between membership generally and paying membership is that paying
members may contact other paying members through the uDate and Kiss Web sites
and may initiate contact with non-paying members. Non-paying members may not
read messages from other members or reply to messages. This Quarterly Report
uses the term paying member or subscriber to denote a person who has
purchased a subscription from the Company and the term registered member or
non-paying member to denote a person who has not agreed to pay the Company
but who has registered with the Company and created a personal profile.

The Companys operations are supported by 24-hour customer service. The
customer service team receives and responds to members inquiries by e-mail.

Services

The uDate and Kiss Web sites provide a wide range of product features that
enable members to find potential friends. These include:



| |  | Whos On a list of members who are logged on and active on
the Web site at that moment in time;                                                                                                                                                
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Match a user-driven tool that enables members to search
the entire membership database using up to 33 elements of
demographic and psychographic criteria. A range of Matches are
supported, including 1-Way, 2-Way, Online Users and New Users;
|
| |  | Encounters a list of members who have shown an interest in
the users profile, along with the type of interest shown;                                                                                                                          
|
| |  | My uDate / Kiss a summary of the members profile with
useful hints and tips on how to get noticed. This feature also
provides a number of useful lists of other members who may be of
interest to the user;                                   

15



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##### 





| |  | Gallery a summary of members with new or revised
photographs; and                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | E-mail prompts all members are provided with
system-generated e-mail prompts and alerts about new or matching
members who may be of interest.

Paying members have access to two additional product features that enable
them to communicate with other members:



| |  | Whispers- an integrated instant-messaging product which
enables paying members to hold up to 30 real-time, discreet
one-on-one conversations with other paying members; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Private E-mail- an HTML-based private e-mail system.                                                                                                                       

The Company derives substantially all of its revenues from the sale of
paying memberships. Members may subscribe to enable unlimited communication
with other paying members and to initiate contact with non-paying members.
Subscription plans are available for periods of one month, three months, six
months and 12 months. A one-month subscription currently costs $24.95. Free
memberships do not have a fixed duration or term and may be cancelled by the
member at any time.

Critical Accounting Policies

The Company has identified the following as critical accounting policies
to the Company: revenue recognition, valuation and impairment of acquired
intangible assets and goodwill and realization of deferred tax assets.
Critical accounting policies are those accounting policies that are both most
important to the portrayal of a companys financial condition and results, and
that require managements most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters
that are inherently uncertain. A more full description of each of the Critical
Accounting Policies can be found in the Companys Annual Report filed on Form
10-KSB for the year ended December 31, 2001.

Results of Operations for the Three
Months Ended March 31, 2002 and March 31, 2001

The acquisition of Kiss.com was completed on March 29, 2001. Accordingly,
the results of operations for the three months ended March 31, 2001 do not
include the operating results of Kiss.com; however, pro-forma percentage
comparisons are made where appropriate to aid understanding. In addition,
although not required, the Company provides a basis for comparative evaluation
of performance between the fourth quarter of 2001 and the first quarter of
2002. This information is being provided in this filing in an effort to help
investors follow the Companys progress until comparative information on a
year-to-year basis is more meaningful. Unless specifically discussed below,
there were no material changes from period to period in line items of the
financial statements, other than those changes arising from the inclusion of
the results of operations of Kiss.com for the three months ended March 31,
2002. In addition, unless specifically discussed below, there are no seasonal
aspects that had a material effect on the Companys financial conditions or
results of operations.

Revenues

Total revenues for the three months ended March 31, 2002 were $9,136,984
compared to $1,538,431 for the three months ended March 31, 2001, an increase
of 494%. On a pro-forma basis (as if the Companys acquisition of Kiss.com had
occurred on January 1, 2001), the revenues for the three months ended March 31,
2001 for uDate and Kiss combined were $3,032,997; the Companys
revenues

16



---



##### 



for the first quarter of 2002 increased 201% over its pro forma revenues for
the first quarter of 2001. The growth in membership revenues was primarily due
to the continued greater awareness of the uDate and Kiss Web sites as a
consequence of targeted marketing activities and the impact of automatic
renewal of the members subscriptions upon the expiration of the subscription
period. The automatic renewal process was introduced on the uDate Web site on
May 23, 2001 and was in effect on the Kiss Web site prior to the Companys
March 2001 acquisition of Kiss.com.

Membership revenues for the three months ended March 31, 2002 comprised
99.9% of total revenues returned in the quarter.

No barter advertisements were displayed on either Web site during the
three months ended March 31, 2002.

Total revenues for the three months ended March 31, 2002 were $9,136,984
compared to $7,742,538 for the three months ended December 31, 2001, an
increase of 18.0%.

Selling, General and Administrative Expense

Total selling, general and administrative expenses for the three months
ended March 31, 2002 were $3,161,956 compared to $911,474 for the three months
ended March 31, 2001, an increase of 247%.

Significant components of selling, general and administrative expense in
the three months ended March 31, 2002 include a) wages and salaries of
$962,882, b) legal, professional, accounting and consultancy fees of $372,885,
c) bank and transaction charges of $351,543, d) Internet Service Provider
charges of $272,360, and e) legal, professional, accounting and consultancy
fees associated with a transaction the Company chose not to pursue of $973,452.

Excluding one off costs of $973,452 and $1,994,334 for the for first
quarter of 2002 and fourth quarter of 2001, respectively, selling general and
administration expenses for the first quarter of 2002 were $2,188,504 compared
to $2,440,959 for the last quarter of 2001, a decrease of 10.3%. This decrease
is primarily the result of savings obtained in wages and salaries, ISP and
offices costs in connection with the re-organization of the Kiss.com operations
during the three months ended December 31, 2001.

Advertising Expense

Advertising expense for the three months ended March 31, 2002 was
$3,905,433 compared to $878,577 for the three months ended March 31, 2001, an
increase of 345%. On a pro-forma basis (as if the Companys acquisition of
Kiss.com had occurred on January 1, 2001), advertising expense for the three
months ended March 31, 2001 for uDate and Kiss combined were $1,630,907; the
Companys advertising expense for the first quarter of 2002 increased 139% over
its pro forma advertising expense for the first quarter of 2001. The Company
invested in marketing activities in order to grow its subscription revenues by
attracting more potential paying members to its sites.

Advertising through on-line media contributed to the majority of the
1,958,497 new registered members who joined in the three months ended March 31,
2002.

Advertising expense continues to be predominantly for online media. The
Company has a number of integrated content relationships with portals, ISPs
and online newspapers, and purchases targeted advertising on key Web
properties, including portals, Web sites dedicated to alumni networks, search
engines and ISPs. The Company also has an affiliate program.

17



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Advertising expense for the first quarter of 2002 was $3,905,433 compared
to $2,367,561 for the last quarter of 2001, an increase of 65%. This increase
was primarily due to a 24% increase in the number of new registered members
joining the Companys sites, combined with a 32% increase in the cost of
acquiring new registered members.

Depreciation

Depreciation during the three months ended March 31, 2002 totaled
$211,305, compared to $146,152 for the three months ended March 31, 2001, an
increase of 45%. This increase was due to the significant capital expenditure
undertaken by the Company to continue to expand its server hardware, housed in
Secaucus, New Jersey.

Amortization of Goodwill and Intangible Assets

Amortization of intangible assets relating to the acquisition of Kiss.com
amounts to $278,575 for the three months ended March 31, 2002 compared to $nil
for the three months ended March 31, 2001.

The purchase price for the Kiss.com acquisition, including transaction
costs, was approximately $19.6 million along with the assumption of liabilities
of $5.3 million. Of this, approximately $11.0 million was allocated to
goodwill, $2.8 million was allocated to Kiss.coms customer base and $11.1
million was allocated to the Kiss.com trade name. Goodwill has been amortized
in the results for 2001 on a straight-line basis over its estimated useful life
of ten years. The Company has adopted Statement of Financial Accounting
Standards No. 142, effective January 1, 2002, which requires that, beginning
January 1, 2002, goodwill will no longer be amortized but will be reviewed for
impairment on an annual basis. The customer base was fully amortized in 2001
over its estimated useful life of nine months. The Kiss.com trade name will be
amortized on a straight-line basis over its estimated useful life of ten years.

The Company has adopted the provisions of Statement of Financial
Accounting Standards No.141, Business Combinations. Statement 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria which intangible assets acquired in a purchase method business
combination must meet in order to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled workforce
may not be accounted for separately.

Effective January 1, 2002, the Company also adopted the provisions of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets. Statement 142 requires that any goodwill and any intangible
asset determined to have an indefinite life should not be amortized, but should
be evaluated for impairment on at least an annual basis in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible
assets with definite useful lives be amortized over their estimated useful
lives to their estimated residual values and be reviewed for impairment in
accordance with Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets.

18



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##### 



The Company has completed the purchase accounting analysis to allocate
acquisition costs to the acquired net assets. Unamortized goodwill in the
amount of $10,170,837 is subject to the transition provisions of Statements 141
and 142.

Interest

The principal component of the interest expense during the quarter ended
March 31, 2002 is interest due on the promissory notes issued in connection
with the acquisition of Kiss.com, Inc. (the Kiss.com Notes), which amounted
to $107,061.

The remaining balance outstanding under the Kiss.com Notes was fully
repaid during the three months ended March 31, 2002.

Income Taxes

The income tax charge for the three months ended March 31, 2002 is
$743,461. The high effective rate is a result of non-deductible expenses in
respect of a transaction the Company elected not to pursue.

Net Income (Loss)

The overall net income for the three months ended March 31, 2002 is
$734,121 compared to ($396,345) for the three months ended March 31, 2001.

The net income for the three months ended March 31, 2002 is stated after
having taken account of amortization of intangibles of $278,575 arising from
the acquisition of Kiss.com and legal, professional, accounting and consultancy
fees associated with a transaction the Company chose not to pursue of $973,452.

Liquidity and Capital Resources

At March 31, 2002, the Companys principal sources of liquidity consisted
of cash of $5,662,709, compared to $4,325,580 as at December 31, 2001. This
increase in cash is primarily the result of cash generated from operations and
proceeds from the issuance of common stock, mitigated by repayments in respect
of the Kiss.com Notes.

Cash as at March 31, 2002 includes restricted cash of $2,120,000 held on
deposit with financial institutions in connection with credit card merchant
services agreements.

The Companys net working capital deficit increased to ($3,374,790) at
March 31, 2002 from ($2,933,491) at December 31, 2001, primarily
as a result of the recognition of restricted cash as described above and the
repayment of the Kiss.com Notes, which has eroded the effect of cash generated
from operations and proceeds from the issuance of common stock.

During the three months ended March 31, 2002, the remaining balance
outstanding on the Kiss.com Notes was repaid in full. This represents a
repayment during the quarter ended March 31, 2002 in excess

19



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##### 



of $2.6 million, and an overall repayment, including interest, during the last
12 months in excess of $5 million, all of which was made from funds generated
through cash flow from operations.

On the basis of the actual position as at March 31, 2002 and forecasts
through 2002, the Company anticipates that it will be able to fund its
operating expenses and capital expenditures in 2002 with existing cash and the
cash flow from its operations. The Companys actual future cash requirements,
however, will depend on many factors, including changes in its advertising and
technology expenses, costs associated with the development and introduction of
new services, and competitive pressures. The Company does not currently have an
established line of credit with a commercial bank. Such a credit facility may
be difficult to obtain in the short-term with the Companys historical
operating results, or may not be obtainable on terms acceptable to the Company.

Accordingly, in order to obtain additional funds in the future, the
Company may need to seek additional equity capital, which would be dilutive to
current stockholders.

Recent Accounting Pronouncements

Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs, will be effective for the Company for
the year commencing January 1, 2003. The Company does not expect the standard
to have a material effect on its financial statements.

Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets,
is effective for the Company for the year commencing January 1, 2002. The standard did not have a material effect on the Companys financial statements.

20



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Risk Factors

Risks Related to the
Companys Financial Condition and Business Model

The Company has a limited operating history

The Company was formed in January 1999 in order to provide representation
and other services to musical artists such as songwriters and performers. The
Company had very limited operations and revenues, and limited business
prospects, until May 23, 2000, the date of the acquisition of uDate.com Limited
(uDate-UK).

uDate-UK was established in February 1998 to provide high quality
introduction, matchmaking, relationship and dating services to Internet users.
uDate-UK began commercial operation of its Internet dating service in February
1999. The Company has changed its business strategy to that of its subsidiary,
uDate-UK.

On March 29, 2001, the Company acquired Kiss.com, Inc.  a picture
personals Web site.

Due to the limited operating histories of each of the Company and its
subsidiaries, it will be difficult for owners of the Companys securities and
persons considering an investment in the Company (collectively, Investors) to
evaluate the business and prospects of the Company and an investment in the
Company. As a new company, the Company faces risks and uncertainties relating
to its ability to successfully implement its strategy. Investors must consider
the risks, expenses and uncertainties that an early stage company in a new and
rapidly evolving market faces. Some of these risks include:



| |  | ability to sustain historical revenue growth rates;                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | ability to increase brand awareness;                                                                                                              
|
| |  | managing expanding operations;                                                                                                                    
|
| |  | competition;                                                                                                                                      
|
| |  | attracting, retaining and motivating qualified personnel;                                                                                         
|
| |  | maintaining current, and developing new, relationships with
portals, search engines, ISPs and other Web properties;                               
|
| |  | ability to anticipate and adapt to the changing Internet
market and any changes in government regulation;                                         
|
| |  | the level of usage of the Internet and traffic to the
Companys Web sites;                                                                        
|
| |  | continued acceptance of the Companys products and services,
including the social acceptance of Internet-based matchmaking and
personals services;
|
| |  | capital expenditure and other costs relating to the
expansion of operations;                                                                      
|
| |  | the introduction of new products or services by the Company
or its competitors;                                                                   
|
| |  | the mix of the services sold and the channels through which
those services are sold;                                                              

21



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| |  | pricing changes; and                                                                  
| | - | --------------------------------------------------------------------------------------
|
| |  | general economic conditions and specific economic conditions
in the Internet industry.

The Company may not be able to sustain profitability

For the three months ended March 31, 2002 the Company returned a net
income of $734,121. At March 31, 2002, the Company had an accumulated deficit
of approximately $6.3 million.

The Company cannot assure investors that it can sustain profitability in
the future. If revenues grow at a slower rate than anticipated or decrease, or
if advertising costs or other spending levels exceed expectations or cannot be
adjusted to reflect slower or negative revenue growth, the Company may not be
able to sustain profitability.

Quarterly results may fluctuate

Investors should not rely on quarterly operating results as an indication
of future results because they are subject to significant fluctuations.

Fluctuations in operating results or the failure of operating results to
meet the expectations of public market analysts and investors may negatively
impact the Companys stock price. Quarterly operating results may fluctuate
significantly in the future due to a variety of factors that could affect
revenues or expenses in any particular quarter. Fluctuations in quarterly
operating results could cause the Companys stock price to decline. Investors
should not rely on quarter-to-quarter comparisons of results of operations as
an indication of future performance. Factors that may affect the Companys
quarterly results include:



| |  | mismatches between resource allocation and consumer demand
due to difficulties in predicting consumer demand in a new market;                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the demand for, and acceptance of, the Companys Web sites,
products, product enhancements and services;                                                       
|
| |  | the timing and amount of the Companys subscription
revenues;                                                                                                  
|
| |  | changes in general economic conditions;                                                                                                                        
|
| |  | the magnitude and timing of marketing initiatives;                                                                                                             
|
| |  | the maintenance and development of relationships with
portals, search engines, ISPs and other Web properties;                                                  
|
| |  | the introduction, development, timing, competitive pricing
and market acceptance of the Companys products and services and
those of the Companys competitors;
|
| |  | the Companys ability to manage anticipated growth and
expansion;                                                                                              
|
| |  | the Companys ability to successfully integrate acquired
operations; and                                                                                       
|
| |  | technical difficulties or system downtime affecting the
Internet generally or the operation of the Companys products and
services specifically.               

22



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##### 



As a result of the factors listed above and because the on-line dating and
matchmaking market is still immature, making it difficult to predict consumer
demand, it is possible that in future periods results of operations may be
below the expectations of public market analysts and investors. This could
cause the Companys stock price to decline.

Expense levels and changes in pricing

The Companys expense levels are based, in significant part, on its
expectations as to future revenues and are therefore relatively fixed in the
short term.

The Companys major expenses continue to be selling and marketing costs,
labor costs and technology costs. The Company anticipates that its expenses
will increase as its business expands and if it makes further acquisitions. In
addition, these costs may still be subject to dynamic and, from time to time,
significant variation. If revenues fall below expectations in any quarter and
the Company is unable to quickly reduce spending in response, its operating
results would be lower than expected and the stock price may fall.

The Companys business model is unproven and may not be adaptable to a
changing market

If the Company is not able to anticipate changes in the on-line dating and
matchmaking market or if the business model is not successful, the Company may
not be able to expand the business or to successfully compete with other
companies, which could have a material adverse effect on the Companys
business, results of operations and financial condition. The Companys current
business model depends on recurring revenues from members who subscribe for the
Companys fee-generating services (Subscribers).

Membership revenues depend upon (i) the conversion of new non-paying
members to Subscribers; and (ii) existing Subscribers renewing their
membership for further periods. The Company may have to change its business
model if current Subscribers decide to discontinue the Companys service and
the Company is unable to replace them with new Subscribers. It is possible
that the Company will be required to further adapt its business model in
response to additional changes in the on-line dating and matchmaking market.

Additionally, the Company operates on a global basis with members and
Subscribers in Europe and Asia, as well as North America. Changes in the
economies, trade policies, and fluctuations in interest or exchange rates may
have an impact on its future financial results. As the Company continues to
operate more globally, seasonality may become an increasing factor in its
financial performance.

The Company may not be able to obtain sufficient funds to grow its business
and any additional financing may be on terms adverse to 
     the interests of its
stockholders

The timing, amount, terms and conditions of any additional financing
required by the Company may be unattractive to the Company, and such financing
may be unavailable. If the Company is able to raise additional funds and does
so by issuing equity securities, holders of its common stock may experience
significant dilution of their ownership interest and holders of these
securities may have rights senior to those of the holders of the Companys
common stock.

If the Company obtains additional financing by issuing debt securities,
the terms of these securities could limit its flexibility in making business
decisions. If additional financing is not available when required or is not
available on acceptable terms, the Company may be unable to fund its expansion,
successfully promote its brand names, develop or enhance its products and
services, take advantage of

23



---



##### 



business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on its business.



|                                                                                                                                                | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | 
|The Company will only be able to execute its business model if use of the
Internet grows and its infrastructure is adapted to 
     that growth

If Internet usage does not continue to grow, the Company may not be able
to meet its business objectives. Increased Internet usage will depend, in
large part, upon the maintenance of the Web infrastructure, such as a reliable
network backbone with the necessary speed, data capacity and security, and
timely development of enabling products, such as high speed modems, for
providing reliable Web access and services and improved content. Internet
usage may be inhibited by any of the following factors:



| |  | the Internet infrastructure may not be able to support the
demands placed on it, or its performance and reliability may decline
as usage grows;    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Web sites may not be able to provide adequate security and
authentication of confidential information contained in
transmissions over the Internet;
|
| |  | the Internet industry may not be able to adequately respond
to privacy concerns of potential users; and                                            
|
| |  | Government regulation may decrease the utility of the
Internet for some purposes.                                                                  

The Company cannot assure investors that the Web infrastructure or
Internet industry will be able to effectively respond to the demands placed on
the Web by increased numbers of users, frequency of use or increased bandwidth
requirements of users.

The Company may not be able to develop awareness of its brand names

The Company believes that continuing to build and maintain awareness of
its brand names is critical to achieving widespread acceptance of its business
and to sustain or increase the number of people who use its Web sites. Brand
recognition is a key differentiating factor among providers of on-line dating
and matchmaking services, and the Company believes it could become more
important as competition in its industry increases. In order to maintain and
build brand awareness, the Company must succeed in its marketing efforts,
provide high quality services and increase the number of members using its Web
sites. If it fails to successfully protect, promote, position and maintain its
brand names, incurs significant expenses in promoting its brands and fails to
generate a corresponding increase in revenue as a result of its branding
efforts, or encounters legal obstacles which prevent the continued use of any
of its brand names, the Companys business, results of operations and financial
condition could be materially adversely affected.



|                                                                                           | 
|------------------------------------------------------------------------------------------ | 
|The Company may not be able to successfully introduce new or enhanced
products or services

The failure of any new or enhanced products and services to achieve market
acceptance and generate revenue could result in a material adverse effect on
the Companys revenues. The Company expects to introduce enhanced products and
services in order to generate additional revenues, attract and retain more
members to its Web sites and respond to competition. Any new or enhanced
product or service introduced that is not favorably received could damage the
Companys reputation and the perception of its brand names.

24



---



##### 





|                                                                                                                                                     | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Competition could cause the Company difficulty in attracting and retaining
registered members and converting registered members to 
     subscribers

The Company expects competition to continue to increase because the market
poses no substantial barriers to entry for simple Web-based applications. The
Company believes that its ability to compete depends upon many factors both
within and beyond its control, including the following:



| |  | the timing and market acceptance of new solutions and
enhancements to existing solutions developed either by the Company
or its competitors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | customer service and support efforts;                                                                                                       
|
| |  | selling and marketing efforts; and                                                                                                          
|
| |  | ease of use, performance, price and reliability of solutions
developed either by the Company or its competitors.                            

The Company competes with traditional dating and matchmaking services, as
well as newspapers, magazines and other traditional media companies that
provide dating and matchmaking services. It also competes with large Internet
information hubs, or portals, such as Yahoo.com. Many of its current and
potential competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources and larger customer bases
than it does. These factors may allow them to respond more quickly than the
Company can to new or emerging technologies and changes in customer
requirements. It may also allow them to devote greater resources than the
Company can to the development, promotion and sale of their products and
services.

These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns and adopt more
aggressive pricing policies. The Company cannot assure Investors that its
competitors will not develop products or services that are equal or superior to
its solutions or that achieve greater market acceptance than its solutions. In
addition, current and potential competitors are making and are expected to
continue to make strategic acquisitions or establish cooperative, and, in some
cases, exclusive relationships with significant companies or competitors to
expand their businesses or to offer more comprehensive solutions. Any of these
competitors could cause the Company difficulty in attracting and retaining
members and converting members to Subscribers and could jeopardize the
Companys existing affiliate program and relationships with portals, search
engines, ISPs and other Web properties.



|                                                                                                                                                            | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|The short length of the average subscription requires that the Company must
continually seek new subscribers to maintain its current 
     level of revenue

The Company believes that the average length of a subscription for any
on-line dating service, including those offered by uDate and Kiss, is
approximately four months. The Company also believes that users of on-line
dating services will often re-register on a new site following the expiration
of their initial subscription on their original site, to increase their chances
of a fresh start. This makes it difficult for the Company to have a stable
customer base and requires that the Company must constantly seek new
subscribers to maintain its current level of revenue.



|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|The Company may lose business if it fails to keep pace with rapidly changing
technologies and customer needs

25



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##### 



To remain competitive, the Company must continually improve the
responsiveness, functionality and features of its products and services and
develop other products and services that are attractive to members. If it is
unable to timely and successfully develop and introduce new services, products
and enhancements to existing products in response to industrys changing
technological requirements, revenues could be materially adversely affected.
New Internet-based services, products or enhancements that have been offered or
may be offered in the future by the Company may contain design flaws or other
defects that could require extensive modifications or result in a loss of
client confidence.

The Company may lose members if the content of its Web sites is not
attractive to them

The Companys future growth depends on its ability to attract and retain
members. This in turn depends in part on its ability to deliver original and
compelling content to these members. The Company cannot assure Investors that
its content will be attractive to Internet users. It also cannot assure
Investors that it will be able to anticipate, monitor and successfully respond
to rapidly changing consumer tastes and preferences to continue to attract a
sufficient number of Internet users to its Web sites. Internet users can
freely navigate and instantly switch among a large number of Web sites. In
addition, many other Web sites offer very specific, highly-targeted content.
These sites could have greater appeal than the Companys Web sites to
particular groups within its target audience.



|                                                                                                          | 
|--------------------------------------------------------------------------------------------------------- | 
|The Companys business and growth will suffer if it is unable to hire and
retain highly skilled personnel

The Companys success depends to a significant extent upon a number of key
management and technical personnel, the loss of one or more of whom could
adversely affect the business. In addition, the Company believes that its
future success will depend to a significant extent on its ability to recruit,
hire and retain highly skilled employees for product development, selling,
marketing, and customer service. Competition for such personnel in the
Internet industry is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. Management of
the Company will also be required to manage growth of the Company in a manner
that requires a significant amount of management time and skill. There can be
no assurance that the Company will be successful in managing any future growth
or that any failure to manage such growth will not have a material adverse
effect on the Companys business, operating results or financial condition.

The Companys future success depends to a significant degree on the
skills, experience and efforts of Melvyn Morris, the Companys Chief Executive
Officer. The loss of the services of Mr. Morris could have a material adverse
effect on the Companys business, operating results and financial condition.

The Company does not currently maintain key person insurance for Mr.
Morris or any other member of its management team.

In addition, though the Company has confidentiality agreements with each
of its employees, if it were to lose a key employee, it cannot assure Investors
that it would be able to prevent the unauthorized disclosure or use of its
procedures, practices, new product development or client lists.

The Company may not be able to effectively manage its expanding operations

In order to execute its business plan, the Company must continue to grow
significantly. If it is not able to expand its operations in an efficient
manner, its expenses could grow disproportionately to revenues or its revenues
could decline or grow at a slower rate than expected, either of which could
have a material adverse effect on its business, results of operations and
financial condition. The Company has recently experienced a period of rapid
growth that has placed considerable demands on its managerial,

26



---



##### 



operational, financial and information systems resources. The Company expects
to continue to increase the scope of its operations.

The Companys growth has placed, and its anticipated future growth,
combined with the requirements the Company faces as a public company, will
continue to place, a significant strain on its management, operations, systems
and resources. The Company expects that it will need to continue to improve
its financial and managerial controls and reporting systems and procedures, and
will need to continue to expand, train and manage its workforce. The Companys
success depends to a significant extent on the ability of its executive
officers and other members of senior management to operate effectively  both
independently and as a group. It will also need to continue to expand and
maintain close coordination among its products and technology, finance and
administration and selling and marketing organizations. The Company cannot
assure Investors that if it continues to grow, management will be effective in
attracting and retaining additional qualified personnel, expanding its physical
facilities, integrating acquired businesses or otherwise managing growth. It
cannot assure Investors that its information systems, procedures or controls
will be adequate to support its operations or that its management will be able
to successfully offer its products and services and implement its business
plan.



|                                                                                                                                                    | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | 
|The failure to establish and maintain agreements and relationships with
other Web properties could limit the growth of the 
     Companys business

The Company has entered into, and expects to continue to enter into,
arrangements with third parties to increase its member base, bring traffic to
its Web sites and enhance its brands. If any of the current agreements are
terminated, it cannot assure Investors that it will be able to replace the
terminated agreement with an equally beneficial arrangement. It also cannot
assure Investors that it will be able to renew any of its current agreements
when they expire or, if it is able to do so, that such renewals will be
available on acceptable terms. It also does not know whether it will be
successful in entering into additional agreements or that any relationships, if
entered into, will be on terms favorable to the Company.

The Company may not be successful in its plan for international expansion

The Company may not be able to successfully execute its business plan in
foreign markets. If revenue from international ventures is not adequate to
cover its investment in those ventures, total revenues could be materially
adversely affected. The Company believes that expansion into international
markets through a combination of internal business expansion, strategic
alliances, joint ventures and potential acquisitions will be important to
continue the growth of the business. Future international operations might not
succeed for a number of reasons including:



| |  | difficulties in staffing and managing foreign operations;                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------
|
| |  | competition from local dating services and cultural and
sociological attitudes toward dating services;                           
|
| |  | operational issues such as longer customer payment cycles
and greater difficulties in collecting accounts receivable;            
|
| |  | language and cultural differences;                                                                                               
|
| |  | legal uncertainties inherent in transnational operations
such as export and import regulations, tariffs and other trade
barriers;

27



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##### 





| |  | taxation issues;                                                                                                               
| | - | -------------------------------------------------------------------------------------------------------------------------------
|
| |  | unexpected changes in trading policies, regulatory
requirements and exchange rates;                                            
|
| |  | issues relating to uncertainties of law and enforcement
relating to the regulation and protection of intellectual property;
and
|
| |  | general political and economic trends.                                                                                         



|                                                                                                     | 
|---------------------------------------------------------------------------------------------------- | 
|The Company may not be able to successfully make acquisitions of, or
investments in, other companies

The Company expects its growth to continue, in part, by acquiring further
complementary businesses, products, services or technologies. It expects to
have discussions with companies regarding acquiring, or investing in, their
businesses, products, services or technologies. The Company cannot assure
Investors that it will be able to identify suitable acquisition or investment
candidates. Even if it does identify suitable candidates, it cannot assure
Investors that it will be able to make acquisitions or investments on
commercially acceptable terms. Acquiring other businesses and technologies
involves numerous risks, including:



| |  | availability of financing on terms acceptable to the
Company;                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | diversion of managements attention from other business
concerns;                                                                           
|
| |  | retention of key personnel of the acquired company;                                                                                         
|
| |  | entry into markets in which the Company has little or no
direct prior experience;                                                           
|
| |  | inability to identify and acquire businesses on a
cost-effective basis;                                                                     
|
| |  | inability to manage and integrate acquired personnel,
operations, services, products and technologies into its
organization effectively; and
|
| |  | inability to retain and motivate key personnel and to retain
the clients or goodwill of acquired entities.                                  

In pursuing acquisitions, the Company may compete with competitors that
may be larger and have greater financial and other resources than it has.
Competition for these acquisition targets could result in increased prices. In
addition, in executing the Companys acquisition strategy, it may incur
expenses without being able to identify suitable acquisition candidates. This
could reduce its profitability.

The Company is dependent on third parties to process its credit card
receipts

Substantially all of the Companys paying members purchase subscriptions
online using credit cards. The Company uses a third party to process credit
card receipts in the US and another third party to process credit card receipts
in the UK. Any failure on the part of either third party to process these
receipts, whether due to system failure or breach of contractual obligation,
could deprive the Company for an indefinite period of time of the funds it
requires to operate its business on a daily basis.

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Risks related to the Internet and the Companys Technology Infrastructure

The Companys technology may not be able to accommodate increased Web site
traffic

To support its high level of growth it is critical that the Company scales
its Web site operations to support growth and maintain acceptable levels of
performance. The Company believes that the process of converting members to
paying members is highly sensitive to Web site availability, performance, speed
of page delivery and database operations. Any catastrophic failure at its
facility could prevent it from serving its Web traffic for up to several days,
and any failure of one or more of its Internet service providers may adversely
affect the networks performance.

The Company believes that its sites are among the busiest of sites on the
Web. As the performance of the Companys services are enhanced following
upgrades, users typically stay on-line longer. This can make capacity planning
extremely difficult, giving rise to spikes in demand for services. The
long-term scalability of its current technology will be a critical factor as
the Company grows.

The Company may experience reduced visitor traffic, reduced revenue and
harm to its reputation in the event of unexpected network interruptions caused
by system failures. Any system failure, including network, software or
hardware failure, that causes an interruption in the delivery of the Companys
products and services or a decrease in responsiveness of its services could
result in reduced visitor traffic, reduced revenue and could materially
adversely affect its reputation and brand. The Companys servers and software
must be able to accommodate a high volume of traffic. The Company has
experienced system interruptions in the past, and it believes that these
interruptions will continue to occur from time to time in the future.

Any increase in demands on its servers beyond their current capacity will
require it to expand and adapt its network infrastructure. If it is unable to
add additional software and hardware to accommodate increased demand, it could
experience unanticipated system disruptions and slower response times.

The computer and communications hardware that are used to maintain the
Companys Web sites are located at the Companys server farm in Secaucus, New
Jersey and in a facility in Seattle, Washington. Fire, floods, earthquakes,
power loss and similar events could damage or cause interruptions in these
systems. The Company does not presently have any secondary off-site systems.

The Companys members may become dissatisfied by any system failure that
interrupts its ability to provide its products and services to them or results
in slower response times. The Company does not maintain business interruption
insurance and its other insurance may not adequately compensate it for any
losses that may occur due to any failures in its system or interruptions in its
service.

Breaches of the Companys network security could be costly

The Company may be required to expend capital and resources to protect
against, or to alleviate, security breaches, which could reduce its
profitability. A significant barrier to confidential communications over the
Internet has been the need for security. If unauthorized persons penetrate its
network security, they could misappropriate proprietary information or cause
interruptions in its services. Misappropriation of the Companys and its
members proprietary information or interruptions of its services could result
in reduced visitor traffic and a loss of members. Computer viruses may cause
the Companys systems to incur delays or other service interruptions and could
damage its reputation and have a material adverse effect on its business,
financial condition and results of operations. The inadvertent transmission of
computer viruses could expose it to a material risk of loss or litigation and
possible liability.

29



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The Companys intellectual property protection may not be adequate

The Company has developed technologies that it uses in its business. It
relies primarily on a combination of common law trade secret, copyright and
trademark protection and contractual provisions to protect its proprietary
rights in such technologies. The Company has not yet obtained federal
registrations covering all of its key marks.

The steps the Company has taken to protect its proprietary rights may not
be adequate to deter misappropriation of proprietary information. The Company
may not be able to detect unauthorized use of its proprietary information or
take appropriate steps to enforce its intellectual property rights. In
addition, the validity, enforceability and scope of protection of intellectual
property in Internet-related industries is uncertain and still evolving. The
laws of other countries in which the Company markets or may market its services
in the future are uncertain and may afford little or no effective protection of
its intellectual property. If the Company resorts to legal proceedings to
enforce its intellectual property rights, the proceedings could be burdensome
and expensive. The proceedings could also involve a high degree of risk.

Defending against intellectual property infringement claims could be time
consuming and expensive, and the Company may be liable for infringing on the
intellectual property rights of others. If the Company is not successful in
defending against these claims, it could be subject to significant damages and
the disruption of its business.

At this time the Company has not filed any applications for patents,
copyrights or trademarks for its technologies. Patents, trademarks and
copyrights may become important in the protection of the commercial viability
of uDates and Kiss products and the failure to obtain such patent protection
could have an adverse effect on the commercial viability of such products. The
Companys success, therefore, may in part depend on its ability to obtain
patents, trademarks and copyrights or licenses to such intellectual property in
the future. It is not possible to anticipate the breadth or degree of
protection that patents, trademarks and copyrights would afford any product or
the underlying technologies. There can be no assurance that any patents,
trademarks or copyrights issued or licensed to the Company will not be
successfully challenged in the future or that any of the Companys products
will not infringe the patents, trademarks or copyrights of third parties.
There can be no assurance that third parties will not assert infringement
claims against the Company in the future with respect to any current or future
product. Any such assertion, whether with or without merit, could require the
Company to enter into costly litigation or royalty arrangements. If required,
such royalty arrangements may not be available on reasonable terms, or at all.



|                                                                                                     | 
|---------------------------------------------------------------------------------------------------- | 
|The Company may be liable as a result of information retrieved from or
transmitted over the Internet

The Company may be sued for defamation, civil rights infringement,
negligence, copyright or trademark infringement, personal injury, product
liability or other legal claims relating to information that is published or
made available on its Web sites and the other sites linked to it. These types
of claims have been brought, sometimes successfully, against on-line services
in the past. The Companys membership database holds confidential information
concerning its members, and the Company could be sued if any of that
information is misappropriated. The Company could also be sued for the content
that is accessible from its Web sites and through links to other Internet sites
or through content and materials that may be posted by members in chat rooms or
on bulletin boards. The Company also offers e-mail services, which may subject
it to potential risks, such as liabilities or claims resulting from unsolicited
e-mail or spamming, lost or misdirected messages, security breaches, illegal or
fraudulent use of e-mail or interruptions or delays in e-mail service. The
Companys insurance does not specifically provide for coverage of these types
of claims and therefore may not adequately protect it against these types of

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claims. In addition, the Company could incur significant costs in
investigating and defending such claims, even if it ultimately is not liable.
If any of these events occur, the Companys revenues could be materially
adversely affected.

Other risks



|                                                                                                                                                             | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|The Company may become subject to burdensome government regulations and
legal uncertainties affecting the Internet which could adversely affect its
business

Legal uncertainties and new regulations could increase the Companys costs
of doing business, require it to revise its products or services, prevent it
from delivering its products and services over the Internet or slow the growth
of the Internet, any of which could increase its expenses, reduce its revenues
or cause its revenues to grow at a slower rate than expected and materially
adversely affect its business, financial condition and results of operations.
Laws and regulations directly applicable to Internet communications, commerce,
recruiting and advertising are becoming more prevalent, and new laws and
regulations are under consideration by the United States Congress, state
legislatures, and foreign governments. Any legislation enacted or restrictions
arising from current or future government investigations or policy could dampen
the growth in use of the Internet generally and decrease the acceptance of the
Internet as a communications, commercial, recruiting and advertising medium.
The laws governing the Internet, however, remain largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing consumer
protection, intellectual property, privacy, libel and taxation apply to the
Internet. In addition to new laws and regulations being adopted, existing laws
may be applied to the Internet.

In addition, any increased taxation of products and services sold over the
Internet may decrease demand for products and services that the Company sells
over the Internet. Current U.S. federal law prohibits states and localities
from imposing any new taxes on Internet access or Internet-based transactions
until November 1, 2003. Failure by Congress to renew this legislation and the
subsequent imposition of new taxes on Internet-based transactions could
adversely affect the Companys future operating results which could result in a
decline in its stock price.

The Companys stock price may experience extreme price and volume
fluctuations

The stock market in general and the market prices of shares in technology
companies, particularly those such as the Company which offer Internet-based
products and services, have been extremely volatile and have experienced
fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. These fluctuations are in response to
many factors, some of which are largely beyond the Companys control. These
factors include:



| |  | quarterly variations in results of operations;                                               
| | - | ---------------------------------------------------------------------------------------------
|
| |  | adverse business developments;                                                               
|
| |  | changes in financial estimates by securities analysts;                                       
|
| |  | investor perception of the Company in particular and on-line
matchmaking services in general;
|
| |  | announcements by competitors of new products and services;
and                               
|
| |  | general economic conditions both in the U.S. and in foreign
countries.                       

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The trading volume of the Companys common stock is very low, which
further increases the volatility of the Companys stock price.

Since the Companys stock price is potentially volatile, it may become
subject to securities litigation, which is expensive and could result in a
diversion of resources. Litigation brought against it could result in
substantial costs to it in defending against the lawsuit and a diversion of
managements attention. Securities class action litigation has often been
brought against companies that experience volatility in the market price of
their securities. Since the Companys stock price is volatile, it could be
subject to securities litigation and incur higher expenses than expected, which
could have a material adverse effect on its business and results of operations.

Future sales of the Companys stock may negatively affect its stock price

The market price of the Companys common stock could decline as a result
of sales of a large number of shares of the common stock in the market or as a
result of sales by its existing stockholders, or the perception that these
sales could occur. The Company has and will continue to have a large number of
shares of common stock outstanding and available for resale. These sales might
make it more difficult for the Company to sell equity securities in the future
at a time and at a price that it deems appropriate. Unregistered shares of its
common stock currently outstanding are or will become eligible for sale without
registration pursuant to Rule 144 under the Securities Act, subject to certain
conditions of Rule 144. Certain holders of the common stock also have certain
demand and piggyback registration rights enabling them to register their shares
under the Securities Act for sale.

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PART II.Other Information

Item 1. Legal Proceedings

The Company has not been a party to, nor has its property been the subject
of any legal proceedings beyond routine litigation incidental to its business.

Item 2. Changes in Securities and Use of Proceeds

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
| | (a)  Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
| | (b)  Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
| | (c)  On January 5, 2002, February 5, 2002 and March 5, 2002, the Company
issued an aggregate of 25,461 shares of common stock to four former
stockholders of Kiss.com, Inc. pursuant to notes issued to such former
stockholders in connection with the Companys acquisition of Kiss.com. The
Company relied on the exemption provided by Section 4(2) of the Securities
Act for this issuance of its common stock. The former stockholders
represented their intention to acquire such securities for investment only
and not with a view to the distribution thereof. Appropriate legends were
affixed to the stock certificates issued in such transactions. All
recipients had access to information about the Company to make an informed
investment decision. No underwriters were involved in these issuances of
securities.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
| | (d)  Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Item 3. Defaults Upon Senior Securities

Not applicable.

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

No matters were submitted to a vote of security holders of the Company
during the quarter ended March 31, 2002.

Item 5. Other Information

Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits. A list of the exhibits to this Form 10-QSB is set forth on
the Exhibit Index immediately preceding such exhibits and is incorporated
herein by reference.

(b)  Reports on Form 8-K.



| |                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On April 1, 2002, the Company filed a Current Report on Form 8-K to
file, under Item 5 (Other Events) and Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits), a press release summarizing the
Companys financial results for the year ended December 31, 2001. No
financial statements were filed with this report.

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##### 



SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|             |  |                 |                                                                                                                                       
|------------ |  | --------------- | --------------------------------------------------------------------------------------------------------------------------------------
|             |  | UDATE.COM, INC.
|            
|May 14, 2002 |  | By:             | /s/ Melvyn Morris
Melvyn MorrisChief Executive Officer                                                                                
|            
|May 14, 2002 |  | By:             | /s/ Michael Brocklesby
Michael BrocklesbyVice President and Chief
Financial Officer (Principal Financial
and Chief Accounting Officer)

34



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##### 



EXHIBIT INDEX



|     |  |                                                                                    
|---- |  | -----------------------------------------------------------------------------------
|10.1 |  | Lease dated April 4, 2002 between Howtin Investments Limited and
uDate.com Limited.

35