<PAGE>


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

                                   (MARK ONE)
              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       OR

              | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.

                        FOR THE TRANSITION PERIOD FROM TO
                           COMMISSION FILE NO. 0-25435

                        CROSS MEDIA MARKETING CORPORATION

             (Exact Name of Registrant as Specified in Its Charter)



                 DELAWARE                                13-4042921
       (State or Other Jurisdiction         (I.R.S. Employer Identification No.)
    of Incorporation or Organization)

461 FIFTH AVENUE, 19TH FLOOR, NEW YORK, NY                 10017
 (Address of Principal Executive Office)                 (Zip Code)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 457-1200

Indicate by check |X| whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No

As November 14, 2002, there were 15,048,671 shares of the registrant's Common
Stock, par value $.001, outstanding.


<PAGE>

                        CROSS MEDIA MARKETING CORPORATION

                                    FORM 10-Q
                               SEPTEMBER 30, 2002

                                 C O N T E N T S


                                                                        PAGE
PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements
  Condensed Consolidated Balance Sheets as of September 30, 2002
     (unaudited) and December 31, 2001................................   2
  Condensed Consolidated Statements of Operations for the three months
     ended September 30, 2002 and September 30, 2001(unaudited).......   3
  Condensed Consolidated Statements of Operations for the nine months
     ended September 30, 2002 and September 30, 2001 (unaudited)......   4
  Condensed Consolidated Statements of Cash Flows for the nine months
     ended September 30, 2002 and September 30, 2001(unaudited).......   5
  Notes to Condensed Consolidated Financial Statements (unaudited)....   6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   14

Item 3.   Quantitative and Qualitative Disclosures About Market Risk..   26

Item 4.   Controls and Procedures.....................................   26

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...........................................   26
Item 2.   Change in Securities and Use of Proceeds ...................   27
Item 3.   Defaults Upon Senior Securities.............................   27
Item 4.   Submission of Matters to Vote of Security Holders...........   27
Item 5.   Other Information...........................................   28
Item 6.   Exhibits and Reports on Form 8-K............................   28

Signature.............................................................   28


                                       1

<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,   December 31,
                                                                 2002           2001
                                                              -----------   ------------
                                                                     (UNAUDITED)
                                                                    (IN THOUSANDS)
<S>                                                           <C>             <C>
ASSETS:
Current assets
  Cash and cash equivalents.................................   $    706       $ 12,490
  Accounts receivable, net of reserves......................     66,028         46,058
  Other receivables.........................................      5,402          6,664
  Inventory.................................................      3,654             --
  Prepaid expenses and other current assets.................      2,487          1,829
  Deferred expenses.........................................      2,844          2,239
                                                               --------       --------
          Total current assets..............................     81,121         69,280
  Property and equipment, net...............................      9,944          4,425
  Deferred taxes............................................      1,034          2,800
  Goodwill..................................................     49,815         12,190
  Intangibles, net..........................................        201          5,733
  Other assets..............................................        993            856
                                                               ---------      ---------
                                                               $143,108       $ 95,284
                                                               =========      =========


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
  Revolving credit facility.................................   $ 25,036       $ 17,329
  Accounts payable and accrued expenses.....................     25,191          6,916
  Amounts due to publishers.................................      4,476          3,768
  Deferred revenue..........................................      2,137          3,191
  Notes and other acquisition related payables..............      4,966             --
  Restructuring liability...................................      3,610
                                                               --------       --------
          Total current liabilities.........................     65,416         31,204
Long term liabilities
  Amounts due to publishers.................................      4,259          4,984
  Capital lease obligations.................................        800            869
  Notes and other acquisition related payables..............      3,858             --

Series B Convertible Preferred Stock........................      1,900             --


STOCKHOLDERS' EQUITY:
  Common stock, par value $.001 per share; authorized
     40,000 shares; 15,049 issued and 15,018
     outstanding at September 30, 2002 and 12,712 issued and
     12,614 outstanding at December 31, 2001................         15             13
  Additional paid in capital................................    128,796        106,183
  Note receivable -- common stock...........................       (698)          (698)
  Treasury stock, 31 shares at September 30, 2002 and 98
     shares at December 31, 2001............................       (424)          (857)
  Accumulated deficit.......................................    (60,814)       (46,414)
                                                               --------       --------
          Total stockholders' equity........................     66,875         58,227
                                                               --------       --------
                                                               $143,108       $ 95,284
                                                               ========       ========

</TABLE>

The accompanying notes are an integral part of these statements.

                                       2
<PAGE>


               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                  FOR THE THREE
                                                                  MONTHS ENDED
                                                                    SEPTEMBER  30,
                                                              ---------------------
                                                                2002        2001
                                                              ---------   ---------
                                                                   (UNAUDITED)
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>          <C>
Revenues, net...............................................  $ 36,403     $25,910
Direct costs and expenses
  Commission expense........................................    10,094      10,590
  Other direct costs........................................    24,034       7,202
                                                              --------     -------
                                                                34,128      17,792

Gross profit................................................     2,275       8,118

General and administrative expenses.........................     9,537       4,559
Restructuring charge........................................     4,196          --
                                                              --------     -------
Income (loss) from operations...............................   (11,458)      3,559

Other income(expense)
  Interest expense..........................................    (1,268)       (514)
  Equity in income of affiliates............................       194          --
                                                              --------     -------
Income (loss) before income taxes...........................   (12,532)      3,045
Provision for income taxes........................                  --         607
                                                              --------     -------
Net income (loss)...........................................   (12,532)      2,438
Preferred dividends.........................................        39         129
                                                              --------     -------
Net income (loss) applicable to common stockholders.........  $(12,571)    $ 2,309
                                                              ========     =======
Income (loss) per share applicable to common stockholders:
  Basic.....................................................   $(0.84)     $  0.32
                                                               =======     =======
  Diluted....................................................  $(0.84)     $  0.26
                                                               =======     =======

Weighted -- average shares of common stock:
  Basic.....................................................    15,049       7,225
                                                               =======     =======
  Diluted...................................................    15,049       9,005
                                                               =======     =======

</TABLE>


The accompanying notes are an integral part of these statements.


                                       3
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                  FOR THE NINE
                                                                  MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              ---------------------
                                                                2002        2001
                                                              ---------   ---------
                                                                   (UNAUDITED)
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>          <C>
Revenues, net...............................................  $117,496     $69,189
Direct costs and expenses
  Commission expense........................................    31,716      31,543
  Other direct costs........................................    67,621      18,545
                                                              --------     -------
                                                                99,337      50,088
     Gross profit...........................................    18,159      19,101

General and administrative expenses.........................    26,429      11,055
Restructuring charge........................................     4,196
                                                              --------     -------
Income (loss) from operations...............................   (12,466)      8,046
Other income(expense)
  Interest expense..........................................    (2,224)     (1,465)
  Minority interest.........................................       (74)         --
  Equity in income of affiliates............................       381          --
                                                              --------     -------
Income (loss) before income taxes...........................   (14,383)      6,581
Provision (benefit) for income taxes........................      (463)      1,316
                                                              --------     -------
Net income (loss) before extraordinary item.................   (13,920)      5,265
Extraordinary loss..........................................      (478)         --
                                                              --------     -------
Net income (loss)...........................................   (14,398)      5,265
Preferred dividends.........................................        51       1,387
                                                              --------     -------
Net income (loss) applicable to common stockholders.........  $(14,449)    $ 3,878
                                                              ========     =======
Income (loss) per share applicable to common stockholders:
  Income (loss) per share before extraordinary item:
  Basic.....................................................  $  (0.97)    $  0.56
                                                              ========     =======
  Diluted...................................................  $  (0.97)    $  0.46
                                                              ========     =======
Extraordinary loss per share:
  Basic.....................................................  $  (0.04)    $    --
                                                              ========     =======
  Diluted...................................................  $  (0.04)    $    --
                                                              ========     =======
Income (loss) per share applicable to common stockholders:
  Basic.....................................................  $  (1.01)    $  0.56
                                                              ========     =======
  Diluted...................................................  $  (1.01)    $  0.46
                                                              ========     =======
Weighted -- average shares of common stock:
  Basic.....................................................    14,346      6,969
                                                              ========     =======
  Diluted...................................................    14,346      8,444
                                                              ========     =======

</TABLE>


The accompanying notes are an integral part of these statements.


                                       4
<PAGE>


               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                           FOR THE
                                                                       NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                     -------------------
                                                                       2002       2001
                                                                     --------   --------
                                                                         (UNAUDITED)
                                                                       (IN THOUSANDS)
<S>                                                                 <C>         <C>
Cash flows from operating activities:
  Net Income (Loss).........................................        $ (14,398)  $  5,265
  Adjustments to reconcile results of operations to net cash
  effect of operating activities:
     Value of common stock and common stock purchase
     warrants issued for services ..........................              523        205
     Depreciation and amortization..........................            1,975      1,413
     Extraordinary Item -- non cash.........................              278         --
     Minority Interest - non cash...........................             (263)        --
  Net change in asset and liability accounts, net of
     businesses acquired
     Accounts receivable and other receivables..............          (13,983)   (11,987)
     Inventories and other current assets...................             (375)    (1,126)
     Accounts payable and other current liabilities.........           11,481      3,216
                                                                    ---------   --------
          Net cash used in operating activities...........            (14,762)    (3,014)
Cash flows from investing activities:
     Net cash paid for NSI acquisition......................           (9,927)        --
     Additional cash paid for prior acquisitions............             (321)        --
     Purchase of equipment..................................           (6,354)    (2,980)
     Investment in joint venture............................               17         --
     Net cash paid for JWE acquisition......................           (1,820)        --
     Deferred acquisition costs.............................               --     (1,172)
                                                                    ----------   --------
          Net cash used in investing activities.............          (18,405)    (4,152)
Cash flows from financing activities:
     Net proceeds from common stock offering................           10,967      2,438
     Net proceeds from exercise of options/warrants.........            2,484        --
     Redemption of preferred stock..........................               --     (2,100)
     Net funds drawn on Revolving Credit Agreement..........               --      6,422
     Net repayments of Coast credit agreement...............          (17,952)        --
     Preferred dividends paid...............................               --        251
     Net proceeds from revolving credit facility............           27,158         --
     Payment of bridge loan.................................             (500)      (199)
     Proceeds from bridge loan..............................            2,000         --
     Payment of NSI notes and other acquisition related
      payables..............................................           (3,067)        --
     Termination fee in connection with retirement of Coast
      credit facility.......................................             (200)        --
     Accrued closing costs..................................               --       (250)
     Deferred financing fees................................             (499)      (123)
     Purchase of treasury shares............................             (658)        --
     Proceeds from Lancer Notes.............................            1,650         --
                                                                    ---------   --------
          Net cash provided by financing
           activities.......................................           21,383      6,439
                                                                    ---------   --------
Net decrease in cash and cash equivalents...................          (11,784)      (727)
  Cash and cash equivalents at beginning of period..........           12,490      2,327
                                                                    ---------   --------
  Cash and cash equivalents at end of period................        $     706   $  1,600
                                                                    =========   ========
Supplemental disclosure of cash flow information:
  Interest paid during the period...........................        $   1,393    $ 1,316
                                                                    =========   ========
  Income taxes paid during the period.......................        $      --   $     --
                                                                    =========   ========
Supplemental disclosure of non-cash financing activities
  Non-cash proceeds from reduction of notes receivable......        $      --   $  1,800
                                                                    =========   ========
Acquisition of NSI:

Cash paid to former NSI owner ..............................        $   9,000
Total transaction costs paid ...............................              928
                                                                    ---------
Total cash paid ............................................            9,928

Non cash consideration:
Promissory notes issued ....................................            5,600
Value of common stock issued ...............................            3,200
Contingent consideration ..................................             1,000
Value of warrants issued ...................................              372
                                                                    ---------

Total non cash consideration ...............................           10,172

Total consideration for NSI ................................        $  20,100
                                                                    =========

Acquisition of JWE:

Cash paid to JWE owner .....................................        $   1,500
Total transaction costs paid ...............................              355
                                                                    ---------
Total cash paid ............................................            1,855

Non Cash Consideration:
Preferred stock issued .....................................            1,900
Value of common stock issued ...............................            5,000
Contingent consideration ...................................              550
Value of warrants issued ...................................            1,145
                                                                    ---------

Total non cash consideration ...............................            8,595

Total consideration for JWE ................................        $  10,450
                                                                    =========

</TABLE>


The accompanying notes are an integral part of these statements.


                                       5
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002
                                   (UNAUDITED)

NOTE A -- NATURE OF BUSINESS

Cross Media is a technology-driven direct marketing company that specializes in
executing targeted, interactive sales campaigns utilizing multiple direct
marketing channels, including, inbound and outbound telesales, print ads, web
marketing and e-mail. Cross Media sells a variety of products through these
multiple channels, including multi-magazine subscription packages, discount
buying club memberships, collectibles, lifestyle products and telecom services.

Cross Media emphasizes its cross-channel marketing strategy, which is an
effective integration of online and offline marketing techniques. By utilizing
all available channels to make contact with the consumer, Cross Media seeks to
maximize the synergies of cross-channel marketing. Cross Media frequently
initiates contact with a consumer through one channel and consummates a
transaction through another channel.

See Note D and J for a current discussion of the status of Cross Media's
financing.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Consolidated Financial Statements: In the opinion of Cross Media, the
accompanying unaudited condensed consolidated financial statements reflect all
adjustments (consisting of normal and recurring adjustments) necessary to
present fairly the financial position of Cross Media as of September 30, 2002
and December 31, 2001, the results of operations for the three and nine months
ended September 30, 2002 and 2001, and cash flows for the nine months ended
September 30, 2002 and 2001. All material intercompany profits, transactions and
balances have been eliminated. These financial statements are presented in
accordance with the requirements of Form 10-Q and consequently may not include
all disclosures normally required by generally accepted accounting principles or
those normally made in Cross Media's Annual Report on Form 10-KSB. The
accompanying condensed consolidated financial statements and related notes
should be read in conjunction with Cross Media's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2001. The consolidated statements of
income for the three and nine months ended September 30, 2002 and 2001 are not
necessarily indicative of the results expected for the full year.

Principles of Consolidation: The condensed consolidated financial statements
include the accounts of Cross Media and its wholly-owned subsidiaries and
majority owned joint ventures.

Segment Reporting: Cross Media is in the direct marketing business, which it
considers its sole business segment.

Magazine Revenue: Revenues derived from originating magazine subscriptions are
recognized when Cross Media receives the first installment payment for
subscriptions purchased. Magazine revenues are reflected net of cancellation and
collection reserves as well as amounts due to publishers. Such cancellation and
collection reserves are based upon Cross Media's historical cancellation and
collection experience, as well as the sale of these receivables to outside third
parties and third party collection agencies. Cross Media continually evaluates
actual collection and cancellation experience as it relates to magazines sales
and adjusts collection and cancellation reserves based on actual experience.
Based upon this evaluation, for the three and nine months ended September 30,
2002, Cross Media decreased net revenues by $1.5 million and $0.6 million,
respectively. For the three months ended September 30, 2002, one independent
call center accounted for approximately 31% of Cross Media's magazine
subscription revenues. This call center does not have any commitment to generate
sales for Cross Media and could therefore, at any time, terminate its
relationships with Cross Media without notice, which could have a material
adverse effect on Cross Media's business.

Other Magazine Revenues: Cross Media receives fees from outside third parties
for securing memberships in a discount-buying club. These fees are recognized
when the related subscriptions or memberships are obtained. Revenues also
include commissions earned from publishers in connection with originating paid
subscriptions for certain publications

Revenue from Print Advertising: Revenue from print advertising relating to
National Syndications Inc. ("NSI") operations are one time purchases made by
customers. Revenue from print advertising is usually generated by inbound
calling in response to advertising space in Sunday magazines and involves the
one time sale of products such as coins and collectibles.

Continuity Revenue: Continuity revenue is generated from the sale of products to
a customer over multiple months, generally involving the sale of videos or
coins. Revenue is recognized upon each shipment of product, net of reserves.

Commission Expense: Commission expense is recognized when Cross Media receives
the first installment payment for subscriptions purchased.

Advertising and promotion costs: Costs related to direct response, advertising
and promotion is amortized over the three month period.

Cash and Cash Equivalents: Cross Media considers all highly liquid investments
with maturities of three months or less to be cash equivalents. As of September
30, 2002, Cross Media had approximately $0.7 million in cash on hand to be used
in its operations.


                                       6
<PAGE>



Property and Equipment: Property and equipment are recorded at cost, less
accumulated depreciation. Depreciation expense is computed using the
straight-line method over the estimated useful lives of the assets, which range
from three to seven years.

Derivatives: Cross Media enters into swap and cap agreements to minimize
interest rate risk. The fair value of the contracts was not material at
September 30, 2002.

Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories consist of
purchased items ready for resale.

Goodwill Amortization: Goodwill represents the excess of the purchase price over
the fair market value of net assets acquired in business combinations. The
carrying value of goodwill is analyzed by Cross Media, based upon the expected
revenue and profitability levels of the acquired enterprise, to determine
whether the value and future benefit may indicate a decline in value. If Cross
Media determines that there has been a decline in value of the acquired
enterprise, Cross Media will write down the value of the goodwill to the revised
fair value. In September 2001, Cross Media adopted Statements of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations" and beginning
January 1, 2002 Cross Media adopted SFAS No. 142, "Goodwill and Other Intangible
Assets." (See Note E for more information)

Joint Ventures: Joint ventures are accounted under the equity method of
accounting and relate to joint ventures entered into by NSI.

Income Taxes: As part of the process of preparing Cross Media's consolidated
financial statements, Cross Media is required to estimate its income taxes in
each of the jurisdictions in which Cross Media operates. This process involves
Cross Media estimating its actual current tax exposure together with assessing
temporary differences resulting from different treatment of items. These
differences result in deferred tax assets and liabilities, which are included
within Cross Media's consolidated balance sheet. Cross Media must then look at
the likelihood that its deferred tax assets will be recovered from future
taxable income and to the extent Cross Media believes that recovery is not
likely, Cross Media must establish a valuation allowance.

Deferred Financing Costs: Deferred financing costs are costs incurred in
connection with obtaining outside financing and are amortized on a straight-line
basis which approximates the interest basis over the expected term of the
related credit facility.

Accounting for Stock-Based Compensation: Cross Media has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," (APB No. 25). Under APB No. 25, when the exercise price of an
employee stock option granted by Cross Media is equal to or greater than the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Net Income (Loss) Per Share Applicable to Common Stockholders: Net income (loss)
per share applicable to common stockholders is presented under Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). In
accordance with SFAS No. 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period plus potentially dilutive securities.

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>

                                                                                FOR THE THREE                FOR THE NINE
                                                                                 MONTHS ENDED                MONTHS ENDED
                                                                          ---------------------------  ----------------------------
                                                                          SEPTEMBER 30, SEPTEMBER 30,  SEPTEMBER 30, SEPTEMBER  30,
                                                                              2002           2001         2002            2001
                                                                          ------------- -------------  ------------- --------------
                                                                                           (IN THOUSANDS, EXCEPT
                                                                                               PER SHARE DATA)
<S>                                                                       <C>           <C>            <C>           <C>
Numerator:
  Net income (loss) before extraordinary item and preferred
     dividends ........................................................     $(12,532)       $2,438       $ (13,920)       $5,265
  Extraordinary loss ..................................................           --            --             478            --
                                                                            --------        ------       ---------        ------
  Net income ..........................................................      (12,532)        2,438         (14,398)        5,265
  Preferred stock dividends ...........................................           39           129              51         1,387
                                                                            --------        ------       ---------        ------
  Net income (loss) applicable to common stockholders .................     $(12,571)       $2,309       $ (14,449)       $3,878
                                                                            ========        ======       =========        ======
Denominator:
  Basic -- weighted average shares ....................................       15,049         7,225          14,346         6,969
     Preferred stock ..................................................           --           734              --           956
     Stock options ....................................................           --           229              --           175
     Warrants .........................................................           --           817              --           344
                                                                            --------        ------       ---------        ------
  Diluted weighted average shares .....................................       15,049         9,005          14,346         8,444
                                                                            ========        ======       =========        ======
Income (loss) per share before extraordinary item:
  -- basic ............................................................     $  (0.84)       $ 0.32       $   (0.97)       $ 0.56
                                                                            ========        ======       =========        ======
  -- diluted ..........................................................     $  (0.84)       $ 0.26       $   (0.97)       $ 0.46
                                                                            ========        ======       =========        ======
Extraordinary loss per share:
  -- basic ............................................................      $    --            --       $   (0.04)           --
                                                                            ========        ======       =========        ======
  -- diluted ..........................................................      $    --            --       $   (0.04)           --
                                                                            ========        ======       =========        ======
Income (loss) per share applicable to common stockholders:
  -- basic ............................................................     $  (0.84)       $ 0.32       $   (1.01)       $ 0.56
                                                                            ========        ======       =========        ======
  -- diluted ..........................................................     $  (0.84)       $ 0.26       $   (1.01)       $ 0.46
                                                                            ========        ======       =========        ======
</TABLE>



                                       7
<PAGE>

Stock options and warrants which were not included in the calculation, were the
equivalent of 4.7 and 4.3 million shares for the three and nine months ended
September 30, 2002 and 3.4 million shares for the three and nine months ended
September 30, 2001 because they were antidilutive. In addition, the effect of
the convertible preferred stock was also antidilutive in 2001.


Reclassification: Certain amounts in the September 30, 2001 financial statements
have been reclassified to conform to the September 30, 2002 classifications.

Use of Estimates in the Preparation of Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. These estimates and assumptions relate to
estimates of pay to maturity of accounts receivable used in recording net
revenue, collectibility of accounts receivable, the realizability of goodwill
and other intangible assets, amounts due to publishers and due from partners,
accruals, income taxes and other factors. Management has exercised reasonable
judgment in deriving these estimates; however, actual results could differ from
these estimates. Consequently, change in conditions could affect Cross Media's
estimates.

Fair Value of Financial Instruments: The recorded values of cash, accounts
receivable and accrued liabilities reflected in the financial statements
approximates their fair value due to the short-term nature of the instruments.
Borrowings under the line of credit approximate fair value as such line is
subject to a variable interest rate that reflects adjustments in the market
rates of interest. The recorded value of the stock note receivable approximates
fair value.

Concentration of Credit Risk: Cross Media's financial instruments that are
exposed to concentrations of credit risk consists primarily of cash and cash
equivalents and trade accounts receivable. Cross Media places its cash and cash
equivalents with high quality credit institutions. At times, such investments
may be in excess of the Federal Deposit Insurance Corporation insurance limit.
Cross Media has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risks. Financial instruments which
potentially subject Cross Media to concentrations of credit risk consist
principally of trade accounts receivable as Cross Media does not require
collateral or other securities to support customer receivables. Cross Media
sells primarily to individuals throughout the United States. However, credit
risk concentration is mitigated, due to the significant number of customers with
relatively small balances and the geographical dispersion of Cross Media's
customer base.

Leases: Leases, which meet certain criteria, are capitalized as capital leases.
In such leases, assets and obligations are recorded initially at the fair market
value of the leased assets. The capitalized leases are amortized using the
straight-line method over the assets' estimated economic lives. Interest expense
relating to the liabilities is recorded to effect a constant rate of interest
over the term of the obligations. Leases not meeting capitalization criteria are
classified as operating leases and related rentals are charged to expense as
incurred.



                                       8
<PAGE>

NOTE C -- ACQUISITIONS

Acquisitions are accounted for as a purchase and, accordingly, have been
included in Cross Media's consolidated results of operations since the
acquisition date. The purchase price is allocated based on the estimated fair
value of the assets acquired and the liabilities assumed. Purchase price
allocations are subject to refinement until all pertinent information regarding
the acquisition is obtained.

                                   LIFEMINDERS

On October 24, 2001, Cross Media acquired the stock of LifeMinders, Inc.,
("LFMN") an online direct marketer, through the merger of LifeMinders with and
into Cross Media. The total purchase price of the merger was approximately $62
million. Cross Media received in aggregate approximately $18 million in cash
after payments to existing LifeMinders shareholders of $24 million, $3.5 million
for the redemption and inducement to convert Series A preferred stock and $4
million in transaction costs. In addition, Cross Media issued an aggregate of
approximately 4.54 million shares of common stock to the former LifeMinders
shareholders. Cross Media recorded goodwill of $12.4 million as a result of
total consideration over the net assets acquired on the date of the merger.
During the first quarter of 2002, Cross Media revalued the intangibles acquired
from the acquisition of LFMN and reduced the value recorded at December 31, 2001
from $6.0 million to $3.3 million based on an outside third party evaluation.
During the quarter ended September 30, 2002, Cross Media discovered it had
previously relied on inaccurate information used for the original valuation and
based on this revised information further reduced the value from $3.3 million to
$0 based on a discounted cash flow method. This resulted in a decrease in
amortization of the intangibles previously recorded of approximately $0.6
million during the nine months ended September 30, 2002.

                                       NSI

On January 11, 2002, Cross Media acquired all of the capital stock of NSI. NSI
develops and markets a wide variety of products through direct response
advertising in Sunday publications. Cross Media recorded the cost of the NSI
acquisition of approximately $20.1 million, as follows: (i) $9 million in cash,
(ii) $3.1 million in negotiable promissory notes, (iii) $2.5 million in
non-negotiable promissory notes, (iv) $3.2 million through the issuance of
279,859 shares of common stock, (v) a $1.3 million liability for the estimated
current portion of the contingent consideration (described below) and (vi)
approximately $1 million in transaction costs, including warrants valued at
$372,000. Cross Media may pay up to approximately $3.1 million in contingent
consideration based on three times the Joint Ventures' 2001 EBITDA of certain
joint ventures of which NSI is a party (the "Joint Ventures") and the aggregate
Joint Ventures' income from January 1, 2001 through December 31, 2004. The
contingent consideration, if paid, will be accounted for as additional purchase
price. The remaining balance of the $2.1 million contingent consideration has
not been recorded on the balance sheet as of September 30, 2002, as the outcome
of the contingency is not determinable beyond a reasonable doubt. Goodwill
recorded as a result of the transaction was $19.6 million as of September 30,
2002. The operating results from NSI have been included in the consolidated
results of operations since the date of the acquisition.

The promissory notes bear interest at the rate of 7% per annum, are payable in
36 consecutive monthly installments on the last business day of each month,
payments commenced on January 31, 2002, and were initially secured by the assets
of NSI. Upon the closing of the NSI transaction, Cross Media obtained a letter
of credit in the amount of $1 million from Fleet National Bank under the NSI
existing credit agreement. On March 19, 2002, Cross Media obtained a letter of
credit in the amount of $5.6 million, representing the full amount of the notes,
under its credit facility (See Note D) and the lien on the NSI assets was
released. As of September 30, 2002, $4.3 million was outstanding as a result of
payments made under the note agreement.

The following table summarizes the fair values of the assets acquired and
liabilities assumed at the date of acquisition.

                                 (IN THOUSANDS)


                                                                --------------
 Accounts receivable.........................................      $ 3,395
 Inventory...................................................        3,701
 Other current assets........................................        1,928
 Deferred costs..............................................           --
 Fixed assets................................................        1,102
 Other assets................................................        1,551
                                                                   -------
           Total assets acquired.............................      $11,677
 Current liabilities.........................................       11,130
                                                                   -------
           Net assets acquired...............................      $   547
                                                                   =======


                                       9
<PAGE>


                                 JWE Acquisition

On May 27, 2002, Cross Media completed the acquisition of substantially all of
the assets of JWE Enterprises, Inc., a magazine subscription business, and the
other 50% interest a joint venture from JWE Holdings, Inc. (collectively JWE).
The non-contingent purchase price for the acquisition was approximately $9.1
million, consisting of (i) approximately $1.7 million in cash, of which $1.5
million was borrowed from, and is evidenced by a note payable to, Lancer
Offshore Inc. (See Note D) (ii) 416,980 shares of common stock, with a fair
value of $5.0 million, (iii) 2,000 shares of Series B convertible redeemable
preferred stock (the "Preferred Stock") having a redemption value and fair value
on the date of issuance on the date of issuance of $1.9 million and (iv) $0.6
million of additional consideration, payable in cash in the fourth quarter. As
additional consideration Cross Media issued warrants valued at approximately
$1.1 million. In addition, Cross Media may be required to make additional cash
payments of up to $8.9 million during the period of January 1, 2003 through June
30, 2005 if certain performance criteria for the acquired businesses are met.

The fair values of the assets acquired and liabilities assumed at the date of
acquisition was approximately $0.2 million, which consisted mainly of fixed
assets. The allocation of the purchase price to acquired assets and liabilities
in accordance with SFAS No. 141, resulted in the allocation of $10.3 million to
goodwill and $0.2 to fixed assets. The acquisition was accounted for as a
purchase in accordance with SFAS No. 141. Any adjustment to the allocation of
the purchase price for these acquisitions upon finalization of the valuation of
assets acquired and liabilities assumed is not expected to have a significant
effect on Cross Media's financial statements.

The following pro forma information illustrates the estimated effects of the
acquisitions of LifeMinders, NSI and JWE as if such transactions were
consummated on January 1, 2001:

<TABLE>
<CAPTION>

                                                                                    FOR THE THREE              FOR THE NINE
                                                                                    MONTHS ENDED               MONTHS ENDED
                                                                              ------------------------    ------------------------
                                                                           September 30,  September 30,  September 30, September 30,
                                                                                 2002          2001          2002          2001
                                                                           -------------  -------------  ------------- -----------
                                                                                              (IN THOUSANDS EXCEPT
                                                                                                PER SHARE AMOUNTS)
<S>                                                            <C>           <C>           <C>           <C>           <C>
Revenues, net ..............................................   As Reported   $   36,403    $   25,910    $    117,496  $   69,189
                                                               Pro forma         36,403        40,397         122,457     125,952

Net income (loss) before extraordinary item ................   As Reported   $  (12,532)   $    2,438    $   (13,920)  $    5,265
                                                               Pro forma        (12,532)          865        (13,051)     (44,228)

Extraordinary loss .........................................   As Reported   $       --    $       --    $      (478)  $      --
                                                               Pro forma             --            --           (478)         --

Income (loss) applicable to common stockholders ............   As Reported   $   (12,571)  $    2,309    $   (14,449)  $    3,878
                                                               Pro forma         (12,571)         736        (13,580)     (45,615)
Income (loss) per share before extraordinary item:
     -- basic ..............................................   As Reported   $     (0.84)  $     0.32    $    (0.97)   $    0.56
                                                               Pro forma           (0.84)        0.06         (0.91)       (3.50)

     -- diluted ............................................   As Reported   $     (0.84)  $     0.26    $    (0.97)   $    0.46
                                                               Pro forma           (0.84)        0.05         (0.91)       (3.14)
Extraordinary loss:
     -- basic ..............................................   As Reported   $       --    $       --    $    (0.04)   $       --
                                                               Pro forma             --            --         (0.04)           --
     -- diluted ............................................   As Reported   $       --    $       --    $    (0.04)   $       --
                                                               Pro forma             --            --         (0.04)           --
Income (loss) per share applicable to common stockholders:
     -- basic ..............................................   As Reported   $    (0.84)   $     0.32    $    (1.01)   $     0.56
                                                               Pro forma          (0.84)         0.06         (0.95)       (3.61)
     -- diluted ............................................   As Reported   $    (0.84)   $     0.26    $    (1.01)   $     0.46
                                                               Pro forma          (0.84)         0.05         (0.95)       (3.23)

</TABLE>


NOTE D -- REVOLVING CREDIT FACILITIES AND NOTES PAYABLE

                             LANCER CREDIT FACILITY

On March 1, 2002, Cross Media obtained a $2 million revolving credit facility
from Lancer, a principal stockholder of Cross Media. The interest rate on
borrowings under the revolving credit facility was 8% per annum and Lancer had
the right to demand repayment of all borrowings at any time after March 31,
2002. Cross Media issued to Lancer two-year warrants to purchase 50,000 shares
of common stock at an exercise price of $10.00 per share as an inducement for
Lancer to provide Cross Media the revolving credit facility.



                                       10
<PAGE>

On March 19, 2002, Cross Media repaid the $2 million of outstanding borrowings
under the Lancer revolving credit facility plus accrued interest from the
proceeds from the Fleet credit facility, described below, and the Lancer
revolving credit facility was terminated.

                              FLEET CREDIT FACILITY

On March 19, 2002, Cross Media entered into a credit agreement with Fleet
National Bank, as agent for the lenders and as issuing lender, and the several
other lenders, to provide Cross Media a $35 million credit facility, subject to
certain availability limitations. Cross Media may borrow funds under the credit
facility as revolving prime rate or LIBOR rate loans and/or obtain letters of
credit. Interest on the credit facility accrues at the prime rate designated
from time to time by the agent, Fleet, plus an applicable margin, for prime rate
loans, or at the LIBOR rate plus an applicable margin for LIBOR loans. The
applicable margin is subject to adjustment based on Cross Media's leverage
ratio. Cross Media also pays a commitment fee during the term of the facility
based on the unused borrowings under the facility, and a letter of credit fee
based on the applicable margin for the LIBOR rate loans during the time that
letters of credit remain outstanding.

All of Cross Media's subsidiaries are joint and several co-borrowers under the
Fleet credit facility. Cross Media has pledged all of its assets and all of the
assets and capital stock of its subsidiaries to secure its obligations under the
facility. The Fleet credit facility imposes certain limitations on Cross Media's
activities, including restrictions on acquisitions, incurring additional
indebtedness, granting liens and declaring and paying dividends. Cross Media is
also required to maintain minimum EBITDA levels and minimum leverage,
consolidated net worth and fixed charge coverage ratios.

Upon entering into the new credit agreement with Fleet, Cross Media terminated
its credit agreement with Coast Business Credit ("Coast"). Cross Media repaid
the remaining borrowings under the Coast Facility of approximately $18.0 million
as well as an early termination fee of $0.2 million. As a result of the early
termination of the Coast facility, Cross Media recorded an extraordinary charge
of approximately $0.5 million.

On August 13, 2002, the Fleet Credit Facility was amended to (i) increase the
interest rate by 0.5%, (ii) adjust certain financial covenants, (iii) require
Cross Media to obtain up to $3.0 million of subordinated debt financing in form
satisfactory to the lenders on or prior to September 2, 2002, the failure of
which shall be a default, (iv) reduce the facility from $35 million to $30.7
million, provided that the remaining approximately $1.5 million of borrowing
availability will only become available if Cross Media obtains the $3.0 million
of subordinated debt financing described above, (v) provide that a default will
occur if the settlement of the FTC complaint (See Note F) is settled on terms
that would require Cross Media to make a payment of damages, penalties, fines or
similar payments in excess of $1 million, (vi) provide that a default will occur
if neither of the following occurs by November 1, 2002: (a) the obligations
under the credit facility are repaid and the lenders obligations to lend to be
terminated or (b) Cross Media enters into a binding commitment with one or more
financial institutions reasonably acceptable to Fleet which enables the credit
facility to be paid in full and the lenders obligations to lend to be terminated
by November 30, 2002; provided, however, that Cross Media may extend these dates
by one month by making a $50,000 cash payment; and (vii) waive certain other
non-financial defaults.

On August 16, 2002, Cross Media's credit facility was amended. The amendment
reduced the amount of subordinated debt financing which Cross Media is required
to receive by September 2, 2002 from $3.0 million to $1.5 million. Cross Media
obtained this financing from Lancer on August 19, 2002, as described below.
Cross Media borrowed $750,000 under the facility without obtaining the lenders
prior consent. There is also another $750,000 of availability under the credit
facility, which Cross Media may borrow only with the lenders consent.

As of September 30, 2002, Cross Media had $25.0 million outstanding under the
Fleet credit facility. Cross Media will not be able to repay the credit facility
from cash from operations and must obtain replacement financing. During the
quarter ended September 30, 2002 Cross Media wrote off all deferred financing
fees related to the credit facility, which amounted to approximately $0.5
million

As of November 14, 2002, Cross Media is not in compliance with certain financial
covenants required by the Fleet Credit Facility, did not make the required
November 1, 2002 cash payment of $50,000 and is in default of its loan. Cross
Media has not obtained a waiver, but is currently in discussion with Fleet to
obtain a waiver. Cross Media has not received a notice of default from Fleet as
of November 14, 2002. There can be no assurance that a waiver will be obtained
or that Fleet will not declare a default and demand payment and foreclose on its
collateral. Cross Media must repay the facility or obtain such a binding
commitment, which will enable payment by December 31, 2002. Cross Media has
received an initial financing proposal from an asset-based lender for a $50
million credit facility. There can be no assurance that Fleet will deem this
proposal to be satisfactory or that the proposed financing will be completed in
the required time frame or at all.


                                       11
<PAGE>

                                  LANCER NOTES

To fund the JWE acquisition in May 2002, Cross Media borrowed $1.5 million from
Lancer Offshore, Inc. ("Lancer"). This note was amended in August 2002 (the "May
Lancer Note"). The amended May Lancer Note is due February 16, 2003, and bears
interest at the rate of 6% per annum until November 27, 2002 and 10% thereafter.
Interest, which accrues from the date of issuance of the original note, is
payable at maturity. If Cross Media does not repay the May Lancer Note at
maturity, Lancer may convert the May Lancer Note into shares of common stock of
Cross Media at the rate of $1.91 of principal of, and/or accrued unpaid interest
on, the note or (ii) receive a warrant to purchase up to a number of shares of
common stock of Cross Media equal to 500,000 multiplied by a fraction, the
numerator of which is the then outstanding principal amount of the May Lancer
Note and the denominator of which is $1.5 million (the "May Lancer Note
Warrants"). The May Lancer Note Warrants will be exercisable for a period of ten
years from the date of issuance at an exercise price of $1.91 per share. In
connection with the amendment of the original note and issuance of the May
Lancer Note, Cross Media issued to Lancer an additional ten-year warrant to
purchase 200,000 shares of its common stock at an exercise price of $1.91 per
share. This resulted in a deferred finance charge of approximately $250,000
using the black-scholes fair market value approach, which resulted in a non-cash
interest charge of approximately $62,000, which Cross Media recorded as interest
expense during the three months ended September 30, 2002.

On August 16, 2002 Cross Media borrowed an additional $1.65 million from Lancer
for operational cash needs. Cross Media must pay the entire unpaid balance and
accrued interest on or after the earlier of (i) August 16, 2003 or (ii) the
receipt by Cross Media of debt and/or equity financing resulting in at least $5
million of gross proceeds to Cross Media. The note bears interest at an annual
rate of 10%, payable quarterly, in arrears. If Cross Media does not repay this
note on the Maturity Date, the lenders may convert the note into shares of
common stock at the ratio of $1.91 of principal and for accrued interest on the
note. In the event that this note is not repaid on or prior to February 16,
2003, Cross Media must issue to Lancer a warrant to purchase a number of shares
of common stock equal to 500,000 multiplied by the a fraction, the numerator
being the then outstanding of the note and the denominator being $1.65 million.
Cross Media issued 200,000 warrants to purchase shares of common stock to Lancer
in conjunction with the note. This resulted in a deferred financing charge of
approximately $250,000 using the black-scholes fair market value approach which
resulted in a non-cash interest charge of approximately $62,000, which Cross
Media recorded as interest expense during the three months ended September 30,
2002. The warrants must be exercised on or prior to August 16, 2012 and are
exercisable at price of $1.91 per share of common stock. Cross Media paid Lancer
a fee of $150,000 for providing this financing which is being amortized as
interest expense over the life of note.


NOTE E -- EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board approved the issuance of
SFAS No. 141 "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". The new standards require that all business combinations
initiated after June 30, 2001 must be accounted for under the purchase method.
In addition, all intangible assets acquired that are obtained through
contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to at least an annual assessment
for impairment by applying a fair value based test. Cross Media anticipates
completing the SFAS No. 142 valuation by the end of fiscal 2002. At this time,
Cross Media is not able to determine if an impairment has incurred.

Cross Media adopted SFAS No. 142 on January 1, 2002. In connection with adopting
this standard, Cross Media considered the measurement of transitional
impairment. Initial adoption had no effect on Cross Media's financial
statements. As a result of the adoption of SFAS No. 142, Cross Media did not
recognize goodwill amortization for the three months and nine months ended
September 30, 2002. If SFAS No. 142 was in effect during the three and nine
months ended 2001, Cross Media would not have recognized $0.2 million and $0.7
million, respectively, in goodwill amortization. Therefore, for the three and
nine months ended September 30, 2001, net income applicable to common
stockholders would have increased to approximately $2.5 million and $4.6
million, respectively, and basic earnings per share applicable to common
stockholder would have increased to $0.35 and $0.66, respectively.

In August 2001, the FASB, issued SFAS, No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." SFAS No. 143 addresses
financial accounting and reporting for the retirement obligation of an asset.
This statement provides that companies should recognize the asset retirement
cost at its fair value as part of the cost of the asset and classify the accrued
amount as a liability. The asset retirement liability is then accreted to the
ultimate payout as interest expense. The initial measurement of the liability
would be subsequently updated for revised estimates of the discounted cash
outflows. The Statement will be effective for fiscal years beginning after June
15, 2002. Cross Media has not yet determined the effect that SFAS No. 143 will
have on its consolidated financial position, results of operations or cash
flows.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
This statement eliminates the requirement under SFAS 4 to aggregate and classify
all gains and losses from extinguishment of debt as an extraordinary item, net
of related income tax effect. This statement also amends SFAS 13 to require that
certain lease modifications with economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
In addition, SFAS No. 145 requires reclassification of gains and losses in all
prior periods presented in comparative financial statements related to debt
extinguishment that do not meet the criteria for extraordinary item in
Accounting Principles Board Opinion ("APB") 30. The statement is effective for
fiscal years beginning after May 15, 2002 with early adoption encouraged. The
Company will adopt SFAS No. 145 effective January 1, 2003. Cross Media will
record the extraordinary loss of $0.5 million recorded as of March 31, 2002 as
income from operations in the first quarter of 2003.

On July 30, 2002, The FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. Cross Media is currently evaluating the requirements and impact of
this statement on our consolidated results of operations and financial position.



                                       12
<PAGE>

NOTE F -- COMMITMENTS AND CONTINGENCIES

In March 2002, a complaint, J.M. Thies, et al. v. LifeMinders, Inc. et al (No.
02-2119-KHV), was filed in the United States District Court for the District of
Kansas by J.M. Thies, John Minnick and William Sharp against LifeMinders, Inc.
(which Cross Media acquired by merger on October 24, 2001), and several former
officers and directors of LifeMinders, requesting monetary damages in an amount
not less than $4.2 million and punitive damages in an amount not less than $5
million against the defendants. In accordance with the terms of Cross Media's
merger agreement with LifeMinders, Cross Media is obligated to indemnify the
other defendants.

The plaintiffs, former stockholders of eCoupons.com, Inc., a company that merged
with and into LifeMinders in December 2000, allege that the defendants made
misrepresentations to the plaintiffs to induce them to merge eCoupons with and
into LifeMinders. Cross Media was aware of the dispute prior to closing the
Lifeminders acquisition.

On November 6, 2002, the District Court for the District of Kansas (i) dismissed
all of the individual defendants from the action, (ii) ordered that plaintiffs'
claims against LifeMinders (now Cross Media) must proceed in arbitration, and
(iii) stayed all claims against LifeMinders pending the outcome of arbitration.
If the plaintiffs pursue this matter further, Cross Media intends to vigorously
defend these claims.

On April 9, 2002, the United States Justice Department ("DOJ"), on behalf of the
Federal Trade Commission ("FTC"), filed a complaint United States v. Prochnow
et al. No. 1:02-CV-917 (JOF) in the United States District Court for the
Northern District of Georgia against Cross Media, Media Outsourcing, Inc., a
wholly owned subsidiary, ("MOS"), Ronald Altbach, Dennis Gougion, an officer of
MOS, and Richard Prochnow, a consultant to MOS. The complaint alleged violations
of the Federal Telemarketing Sales Rule and the Federal Trade Commission Act and
non-compliance with a previous FTC order entered into by Mr. Prochnow,
individually and doing business as Direct Sales International, Inc., and Mr.
Gougion, individually. MOS acquired certain assets of Direct Sales International
in January 2000. The complaint seeks monetary civil penalties, redress,
injunctive, and other relief against any such future violations.

Simultaneous with the filing of the complaint, plaintiffs filed a motion for a
temporary restraining order against the defendants seeking, among other things,
compliance with the Telemarketing Sale Rule, the FTC Act, and the previous FTC
order. At the April 10 hearing for the temporary restraining motion, the parties
agreed to postpone the hearing for a later date to facilitate settlement
discussions. On October 21, 2002 the court issued an order denying the FTC's
motion for a temporary restraining order, with leave to renew the motion.
Because this matter is in its early stages, Cross Media is unable to predict the
outcome and the potential effect, if any, it may have on Cross Media's operating
results, financial condition or stock price.

Four securities class action complaints seeking monetary damages have been filed
in the United States District Court for the Southern District of New York
against Cross Media and Mr. Altbach, on behalf of a putative class of persons
who purchased shares of Cross Media common stock from November 5, 2001 through
July 11, 2002 (the "Class Period").

The complaints generally allege that Cross Media violated Section 10(b) and Mr.
Altbach violated Sections 10(b) and 20(a) of the Securities and Exchange Act of
1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially
false and misleading statements to the market during the Class Period, including
press releases that allegedly overstated Cross Media's business prospects and
allegedly mischaracterized the status of the FTC proceedings brought against
Cross Media and others. These actions were consolidated under the caption In re
Cross Media Marketing Securities Litigation 02 CV 5462 (RPP), on October 16,
2002 in the District Court for the Southern District of New York, which ordered
the plaintiffs were ordered to serve a consolidated amended class action
complaint within 60 days thereof and providing for a briefing schedule with
respect to any motion to dismiss the consolidated amended complaint. Cross Media
and Mr. Altbach dispute these claims and intend to vigorously defend this
matter. Because this lawsuit is still in the early stages, Cross Media is unable
to predict the outcome or the effect it may have on Cross Media's operating
results, financial condition or stock price.

In September 2002, a shareholder derivative lawsuit, Pardo v. Altbach, et al. 02
CV 6740 (JSM), was filed against Cross Media and certain of its current and
former directors alleging substantially the same claims made in the class action
complaints. The defendants dispute these claims and intend to vigorously defend
this matter. In October, the District Court for the Southern District of New
York entered an order extending the defendants' time to respond to the complaint
to 30 days following final entry of an order on defendants' motion to dismiss
the consolidated class action shareholders suit. Because this lawsuit is in its
early stages, Cross Media is unable to predict the outcome or the effect it may
have on Cross Media's operating results, financial condition or stock price.

NOTE G -- STOCKHOLDERS' EQUITY

At September 30, 2002, Cross Media was authorized to issue 40,000,000 shares of
common stock, $.001 par value. As of September 30, 2002 there were approximately
15,049,000 shares of common stock outstanding. All prior year share amounts have
been properly restated to reflect the 1:5 reverse stock split effected on
October 24, 2001.



                                       13
<PAGE>

If the holders of all outstanding options and common stock purchase warrants
were exercised as of September 30, 2002, Cross Media would have been required to
issue approximately 4.7 million additional shares of common stock.

In March 2002, Cross Media completed a private placement in which it sold
1,105,475 shares of its common stock at a price of $10.50 per share to a limited
number of accredited investors and received gross proceeds of approximately
$11.6 million. Stonegate Securities, Inc. served as placement agent, for which
it received a placement agent fee equal to 6% of the gross proceeds and
five-year warrants to purchase 110,548 shares of Cross Media common stock at an
exercise price of $10.50 per share.

In April, 2002 Cross Media cancelled 117,000 treasury shares which resulted in a
decrease of additional paid in capital of approximately $1 million.

In August 2002, Cross Media issued 400,000 warrants to purchase common stock,
which caused an increase of approximately $0.5 million in additional paid in
capital.

NOTE H--RESTRUCTURING COSTS

During the quarter ended September 30, 2002, Cross Media announced changes to
its business plan and other actions to reduce operating expenses through a
reduction in workforce and non-personnel operating expenses. As a result of this
restructuring, Cross Media recorded $4.2 million in restructuring costs during
the third quarter ended September 30, 2002. The restructuring costs consist of
$2.7 million relating to Cross Media's estimate of employee severance and
related costs for employees terminated and $1.5 million relating to estimates of
office space lease commitments where Cross Media intends to close offices, net
of any sublease rentals, and other exit costs. Restructuring costs were accrued
in accordance with EITF 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity". As of September 30,
2002, the balance sheet reflects a restructuring liability of $3.6 million net
of termination payments made during the three months ended September 30, 2002.
The following table illustrates the components of the restructuring charge:

                                 (in thousands)

         Employee severance and related costs                   $2,700
         Lease cancellation, net of sublease income              1,500
                                                                ------
         Total Restructuring Charge                              4,200

         Less: Paid severance                                     (590)
                                                                ------
         Restructuring liability as of September 30, 2002       $3,610
                                                                ======


NOTE I -RELATED PARTY TRANSACTIONS

During the quarter ended September 30, 2002, Cross Media purchased leads from
Jason Ellsworth, former owner of JWE and current employee of Cross Media, for
approximately $0.6 million.

Cross Media has two notes payable outstanding as of September 30, 2002
aggregating $3.2 million that are payable to Lancer, a principal stockholder of
the Cross Media. (See Note D for more details regarding the terms of the notes)

NOTE J - SUBSEQUENT EVENTS

Cross Media has received an initial financing proposal from an asset-based
lender for a $50 million credit facility. There can be no assurance that Fleet
will deem this proposal to be satisfactory or the proposed financing will be
completed in the required time frame or at all. In the event that Cross Media
does not complete the proposed financing, there could be a material adverse
effect on Cross Media's liquidity.



                                       14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

                           FORWARD-LOOKING STATEMENTS

The statements contained in this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties that could
affect Cross Media's ability to achieve the anticipated financial results.
Additionally, some statements contained herein and in the information posted on
Cross Media's website that are not based on historical fact are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Cross Media intends that forward-looking statements contained herein
and on its website be subject to the safe harbor created thereby. Such
forward-looking statements are based on current expectations of management but
involve certain risks and uncertainties. Cross Media's actual results,
performance or achievements could differ materially from the results,
performance or achievements projected in, or implied by, such forward-looking
statements as a result of risk factors, including, without limitation, the
following: the outcome of the class action stockholder derivative and other
lawsuits and the FTC complaint; Cross Media's ability to replace or extend the
Fleet credit facility, integrate the recently acquired JWE operations, generate
sufficient quality and quantity leads for magazine sales and obtain adequate
magazine advertising space for NSI; the continued engagement of its largest
independent call center; the adequacy of accounts receivable reserves; changes
in economic conditions or a material decline in the availability of consumer
credit; the performance of independent call centers; Cross Media's limited
relevant operating history; competitive factors; volatility in the market price
of Cross Media's common stock and the securities markets generally; risks
relating to government regulation of telemarketing and Internet marketing
activities and potential dilution. These factors are described in detail in
this Form 10-Q.

INTRODUCTION

The following discussion and analysis should be read together with the Condensed
Consolidated Financial Statements of Cross Media Marketing Corporation and the
related notes thereto included elsewhere in this Form 10-Q. This discussion
summarizes the significant factors affecting the consolidated operating results,
financial condition and liquidity and cash flows of Cross Media for the three
months and nine months ended September 30, 2002 and 2001.


CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission ("SEC") defines "critical accounting
policies" as those that require application of 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 and may change in
subsequent periods.

Cross Media's significant accounting policies are described in Note B in the
Notes to the Condensed Consolidated Financial Statements. Not all of these
significant accounting policies require management to make difficult, subjective
or complex judgments or estimates. However, the following policies could be
deemed to be critical within the SEC definition.

REVENUE RECOGNITION

Revenues derived from originating magazine subscriptions for publishers are
recognized by Cross Media when Cross Media receives the first installment
payment for subscriptions purchased. Magazine subscription revenues are recorded
net of cancellations, collection reserves, and payments made to publishers for
fulfillment costs. Cross Media performs an ongoing review of its cancellation
and collection reserve using a static pool analysis of its portfolio of consumer
receivables. This evaluation is inherently judgmental and requires material
estimates based on historical experience of collectibility and economic trends.
Material differences may result in the amount and timing of Cross Media's
revenue for any period if Cross Media's management made different judgments or
utilized different estimates. For example, a one percent change in the estimated
cancellation and collection rate at September 30, 2002 would result in a change
in the cancellation and collection reserve, and a change in net revenue of $0.5
million.

RESTRUCTURING

During the quarter ended September 30, 2002, Cross Media announced changes to
its business plan and other actions to reduce operating expenses through a
reduction in workforce and non-personnel operating expenses. As a result of this
restructuring, Cross Media recorded $4.2 million in restructuring costs during
the third quarter ended September 30, 2002. The restructuring costs consist of
$2.7 million relating to Cross Media's estimate of employee severance and
related costs for employees terminated and $1.5 million relating to estimates of
office space lease commitments where Cross Media intends to close offices, net
of any sublease rentals, and other exit costs. Restructuring costs were accrued
in accordance with EITF 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity".


VALUATION OF INTANGIBLE ASSETS

Cross Media assesses the impairment of goodwill and identifiable intangibles
whenever changes in circumstances, such as recurring losses, indicate that the
fair value is less than the stated value reported on the consolidated financial
statements. Management has utilized an outside valuation specialist to assist in
estimating the value of such intangibles. Cross Media amortizes its finite lived
intangibles over a period of three to five years. The evaluation of the
estimated useful lives of intangible assets requires management to assess the
period over which such intangibles will provide future economic benefit and to
the extent the period decreases, the finite lived intangible assets will be
expensed over the shorter period.



                                       15
<PAGE>


INCOME TAXES

Management must make estimates in recording Cross Media's provision for income
taxes, including determination of deferred tax assets and deferred tax
liabilities and any valuation allowances that might be required against the
deferred tax assets. Cross Media has recorded a valuation allowance against the
deferred tax asset based upon management's assessment of the realizability of
the asset through future taxable income.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND
SEPTEMBER 30, 2001

Revenues, net: During the three months ended September 30, 2002, net revenues
were $36.4 million, a 40% increase from net revenues of $25.9 million for the
three months ended September 30, 2001. The increase in revenues relates to $14
million generated from the sale of coins, collectibles and other products sold
through our print and telesales channels, which we acquired through our
acquisition of NSI during the first quarter of 2002, a decrease in our magazine
revenues and other related revenus of approximately $5.0 million, and an
increase in our online revenues of $1.5 million.

The decrease in magazine revenues is attributable to lower sales of
approximately $1.1 million relating to fewer magazine subscriptions and a change
in Cross Media's cancellation and collection reserve of approximately $1.5
million, which decreased net magazine revenues, as well as a decrease in
revenues associated with the sale of memberships to discount third party buying
clubs, publisher fees and other revenues of $2.4 million. The $1.5 million
increase in online revenues is attributable to online programs implemented in
2002, which were not operational during the three months ended September 30,
2001.

Commission Expense: Commission expense decreased $0.5 million or 5% to $10.1
million in the three months ended September 30, 2002 from $10.6 million in the
same period of 2001 as a result of a decrease in magazine contracts from our
independent call centers. Commission expense increased as a percentage of net
magazine revenues from 50% for the three months ended September 30, 2001
compared to 54% for the three months ended September 30, 2002 as a result of an
adjustment of approximately $1.5 million to Cross Media's cancellation and
collection reserve, which decreased net magazine revenue and a write off of $0.4
million related to commission advances from prior periods. Commission expense as
a percentage of net magazine revenues would have been 50% before the adjustment.

Other Direct Costs: Other direct costs increased $16.8 million from $7.2 million
for the three months ended September 30, 2001 to $24.0 million for the three
months ended September 30, 2002. This increase is a result of $12.2 million in
direct costs relating to sale and promotional advertising costs incurred in
connection with the sale of coins, collectibles and other products relating to
our print and outbound telesales channels, which were acquired through our
acquisition of NSI during the first quarter of 2002, as well as a $4.6 million
or 66% increase in other direct costs relating to the magazine business and
online business. Direct costs associated with the magazine business increased
$2.6 million as a result of increased employee compensation and benefits and
other direct costs in Cross Media's magazine operations, primarily as a result
of the JWE acquisition, and approximately $2.0 million relating to costs
incurred in the online business, which was not operational during the three
months ended September 30, 2001.

General and Administrative Expenses: General and administrative expenses
increased $4.9 million to $9.5 million for the three months ended September 30,
2002 from $4.6 million in the three months ended September 30, 2001. The
increase is attributable to a $2.0 million increase of general and
administrative costs relating to operations acquired during 2002, $1.8 million
in additional professional fees and an additional $1.1 million relating to the
increased corporate overhead and expansion of MOS' operations in anticipation of
increased revenue from growth of operations.

Restructuring Charge: During the three months ended September 30, 2002, Cross
Media implemented a restructuring plan to better align its operating costs with
its anticipated future revenue stream. The total restructuring charge of $4.2
million related to the elimination of approximately 30 employee positions across
multiple business units and the cancellation of future lease obligations, net of
sublease income for the closing of three offices.

Other Income (Expense), net: For the three months ended September 30, 2002
interest expense relating to the outstanding credit facilities increased $0.7
million to $1.2 million from $0.5 million for the three months ended September
30, 2001 as a result of higher debt outstanding from the previous year. Equity
in income from affiliates increased by approximately $0.2 million as a result of
NSI's 49% ownership of several joint ventures.

Provision for Income Taxes: During the three months ended September 30, 2002,
Cross Media did not record a provision for income tax due to the net loss for
the quarter, compared to a $0.6 million provision for the three months ended
September 30, 2001.

Preferred Dividends: For the three months ended September 30, 2002, Cross Media
recorded $39,000 in preferred dividends as a result of the issuance of the
Series B preferred stock in conjunction with the acquisition of JWE, compared to
$0.1 million of preferred dividends recorded in the third quarter of 2001 in
connection with the Series A Preferred Stock, which is no longer outstanding.

Net Income (Loss) Applicable to Common Stockholders: For the three months ended
September 30, 2002, Cross Media had a net loss applicable to common stockholders
of approximately $12.6 million, which resulted in diluted loss per share
applicable to common stockholders of $0.84 compared to a diluted net income
applicable to common stockholders of $0.26 per share for the three months ended
September 30, 2001.



                                       16
<PAGE>


RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER
30, 2001

Revenues, net: During the nine months ended September 30, 2002, net revenues
were $117.5 million, a $48.3 million or 70% increase from net revenues of $69.2
million for the nine months ended September 30, 2001. The increase in revenues
relates to $37.9 million in revenues from the sale of coins, collectibles and
other products sold through our print and telesales channels, which we acquired
through our acquisition of NSI during the first quarter of 2002, as well as an
increase of $10.4 million relating to Cross Media's magazine business and online
business.

For the nine months ended September 30, 2002, Cross Media's magazine business
increased $7.9 million relating to a $12.2 million increase in the sale of
magazine subscriptions, offset by a decrease of $4.3 million relating to the
sale of memberships to discount third party buying clubs, publisher fees and
other revenues relating to Cross Media's magazine business. Revenues also
increased $2.7 million for the nine months ended September 30, 2002 as a result
of new online programs implemented in 2002, which were not operational during
the nine months ended September 30, 2001.

Commission Expense: Commission expense increased 1% to $31.7 million in the nine
months ended September 30, 2002 from $31.5 million in the same period of 2001 as
a result of an increase in magazine contracts from our independent call centers.
Commission expense decreased as a percentage of net magazine revenues from 57%
for the nine months ended September 30, 2001 to 47% for the nine months ended
September 30, 2002 as a result of the use of Cross Media's owned and operated
call centers which includes the acquisition of JWE during 2002, which are
generating a greater portion of the sale of magazine contracts compared to the
same period in the prior year.

Other Direct Costs: Other direct costs increased $49.1 million from $18.5
million for the nine months ended September 30, 2001 to $67.6 million for the
nine months ended September 30, 2002. This is a result of $32.3 million in
direct costs relating to sale and promotional advertising costs incurred in
connection with the sale of coins, collectibles and other products relating to
our print and outbound telesales channels, which were acquired through our
acquisition of NSI during the first quarter of 2002 as well as a $16.8 million
or 91% increase in other direct costs relating to the magazine and online
business. The increase in other direct costs relating to the magazine business
was due to an increase of $3.8 million in employee compensation and benefits due
to an increase in operational personnel, an $8 million increase in direct costs
relating to our owned operations, primarily related to the JWE acquisition, of
approximately $4.5 million of costs to operate our online business which was not
operational during the third quarter 2001 and $0.5 million of additional
costs incurred in our data sales and other magazine businesses.

General and Administrative Expenses: General and administrative expenses
increased $15.3 million to $26.4 million for the nine months ended September 30,
2002 compared to $11.1 million for the nine months ended September 30, 2001. The
increase is attributable to an additional $5.9 million in general and
administrative costs relating to operations acquired during 2002, $2.5 million
of additional professional fees, a $2.7 million increase in employee
compensation and benefits, $4.2 million increase in other general and
administrative costs consisting of additional general liability insurance of
$0.5 million, an increase in rent and other facility related costs of $1.3
million due to expansion of offices, and a $2.4 million increase in additional
depreciation and amortization, training and development, recruiting and travel
and entertainment.

Restructuring Charge: During the nine months ended September 30, 2002, Cross
Media implemented a restructuring plan to better align its operating costs with
its anticipated future revenue stream. The total restructuring charge of $4.2
million related to the elimination of approximately 30 employee positions across
multiple business units and the cancellation of future lease obligations, net of
sublease income for the closing of three offices.

Other Income (Expense): For the nine months ended September 30, 2002, other
income (expense) which consists of interest expense, minority interest and
income from affiliates increased $0.5 million during the nine months ended
September 30, 2002. Interest expense for the nine months ended September 30,
2002 increased $0.8 million to $2.2 million from $1.5 million for the nine
months ended September 30, 2001 due to an increase in debt outstanding for the
credit facilities and other notes. In addition, Income from affiliates and
minority interest, net increased by approximately $0.3 million as a result of
NSI's 49% ownership of several joint ventures and minority interest recorded on
Cross Media's 50% joint ownership in another venture, which Cross Media
subsequently purchased the remaining minority interest in May 2002.

Provision for Income Taxes: Cross Media recorded a tax benefit of $0.5 million
relating to operating losses for the nine months ended September 30, 2002,
compared to a tax provision of $1.3 million for income taxes for the nine months
ended September 30, 2001.

Preferred Dividends: For the nine months ended September 30, 2002, Cross Media
recorded preferred dividends of $50,666 as a result of the issuance of Series B
Preferred Stock in conjunction with the acquisition of JWE, compared to $1.4
million of preferred dividends recorded in the same period of 2001. The $1.4
million of dividends recorded in the same period of 2001 included $0.9 million
of non-cash deemed dividends and approximately $0.5 million of contractual
dividends. On February 15, 2001, Cross Media redeemed 22,992 shares of preferred
stock. An additional 39,463 shares of preferred stock were converted into
789,250 shares of common stock. In consideration of the agreement of the holders
to convert the preferred stock, Cross Media issued to the holders a total of
133,280 additional shares of common stock, pro rata in accordance with the
number of shares each holder converted. The non-cash deemed dividend of $0.9
million represents the fair value of the additional shares issued.

Net Income (Loss) Applicable to Common Stockholders: For the nine months ended
September 30, 2002, Cross Media had net loss applicable to common stockholders
of approximately $14.5 million, which resulted in a diluted loss per share
applicable to common stockholders of $1.01 compared to a net income applicable
to common stockholders of $0.46 per share for the nine months ended September
30, 2001.


                                       17
<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2002 and November 14, 2002 Cross Media had cash on hand of
$0.7 million and $0.5 million, respectively. Cross Media generates cash flow
from the sale of magazines and collection of consumer receivables, commissions
earned from publishers in connection with originating paid subscriptions for
certain publications, and commissions earned on the sale of third-party discount
buying club memberships. Cross Media also generates cash flow through the sale
of coins, collectibles and other products relating to the print and outbound
sales channels.

During the nine months ended September 30, 2002 Cross Media used $14.7 million
in operating activities, used $18.4 million in investing activities, relating to
the net cash paid in connection with the NSI and JWE acquisitions plus purchases
of equipment, and generated $21.4 million from financing activities from the
private placement of Cross Media common stock and a new Fleet credit facility,
described below. The $14.7 million used in operating activities is principally
comprised of $14.4 million net loss from operations and an increase in our
magazine and other receivables of $13.9 million relating to an increase in
revenues, partially offset by an increase in our payables of $11.5 million and
non-cash charges of approximately $2.5 million. The $18.4 million used in
investing activities is principally comprised of $9.9 million and $1.8 million
in cash paid to acquire both NSI and JWE during 2002 and approximately $6.4
million in cash used to purchase equipment. The $21.4 million generated through
financing activities is principally comprised of $27.2 million of net proceeds
relating to the Fleet Credit Facility, $11.0 million in net proceeds from a
common stock offering, $2.5 million of net proceeds from the exercise of stock
options and warrants, $3.7 million relating to bridge loan and notes received
during 2002, offset by $17.9 million repayment of the Coast Facility and $4.9
million of payments of notes and other acquisition related payables, financing
costs relating to the NSI and JWE acquisitions and other financing related
activities.

We are required to repay all outstanding borrowings under the Fleet credit
facility before the end of 2002. We will not be able to repay this amount from
cash from operations and must obtain replacement financing. Failure to
replacement financing will result in a default under the credit facility.

In November 2002, Cross Media received an initial financing proposal from an
asset-based lender which would, if consummated, would provide a $50 million
credit facility to replace Cross Media's Fleet Credit Facility. The proposal is
contingent upon the lender's due diligence, other conditions and final
documentation. We may not be able to complete this proposed financing or any
other replacement financing.

In addition to requiring cash to repay the Fleet Credit Facility, Cross Media
anticipates that it will require additional funds to finance its capital
requirements over the short-term. There can be no assurance that Cross Media's
borrowing availability under the proposed financing, if obtained, will be
sufficient to fund Cross Media's working capital requirements, or that other
necessary financing will be obtained.



                                       18
<PAGE>

                                 NSI ACQUISITION

On January 11, 2002, Cross Media acquired all of the capital stock of NSI. Cross
Media recorded the cost of the NSI acquisition of approximately $20.1 million,
as follows: (i) $9 million in cash, (ii) $3.1 million in negotiable promissory
notes, (iii) $2.5 million in non-negotiable promissory notes, (iv) $1.3 million
through the issuance of 279,859 shares of common stock, (v) a $1 million
liability for the estimated current portion of the contingent consideration
(described below) and (vi) approximately $1 million in transaction costs. Cross
Media may pay up to approximately $3.1 million in contingent consideration based
on three times the Joint Ventures' 2001 EBITDA of certain joint ventures
operated by NSI (the "Joint Ventures") and the aggregate Joint Ventures' income
from January 1, 2001 through December 31, 2004. The contingent consideration if
paid, will be accounted for as additional purchase price. The remaining balance
of the $2.1 million contingent consideration has not been recorded on the
balance sheet as of September 30, 2002, as the outcome of the contingency is not
determinable beyond a reasonable doubt. Goodwill recorded as a result of the
transaction was $19.6 million as of September 30, 2002. The operating results
from NSI have been included in the consolidated results of operations since the
date of the acquisition.

The promissory notes bear interest at the rate of 7% per annum, are payable in
36 consecutive monthly installments on the last business day of each month,
payments commenced on January 31, 2002, and were originally secured by the
assets of NSI. Upon the closing of the NSI transaction, Cross Media obtained a
letter of credit in the amount of $1 million from Fleet National Bank under the
NSI existing credit agreement. On March 19, 2002, Cross Media obtained a letter
of credit in the amount of $5.6 million, representing the full amount of the
notes, under its credit facility and the lien on the NSI assets was released. As
of September 30, 2002, $4.3 million was outstanding as a result of payments made
under the note agreement.


                                 JWE ACQUISITION

On May 27, 2002, Cross Media completed the acquisition of substantially all of
the assets of JWE Enterprises, Inc., a magazine subscription business, and the
other 50% interest a joint venture from JWE Holdings, Inc. (collectively JWE).
The non-contingent purchase price for the acquisition was approximately $9.1
million, consisting of (i) approximately $1.7 million in cash, of which $1.5
million was borrowed from, and is evidenced by a note payable to, Lancer (the
"Lancer Note," See Note D for details) (ii) 416,980 shares of common stock, with
a fair value of $5.0 million, (iii) 2,000 shares of Series B convertible
redeemable preferred stock (the "Preferred Stock") having a redemption value and
fair value on the date of issuance on the date of issuance of $1.9 million and
(iv) $0.6 million of additional consideration, payable in cash in the fourth
quarter. As additional consideration Cross Media issued warrants valued at
approximately $1.1 million. In addition, Cross Media may be required to make
additional cash payments of up to $8.9 million from January 1, 2003 through June
30, 2005 if certain performance criteria for the acquired businesses are met.

In connection with the acquisition described above, Cross Media issued 2,000
shares of Preferred Stock. The Preferred Stock has a liquidation value of $950
per share, a dividend rate of 8% per annum (payable at the Cross Media's option
in cash or shares of Cross Media's common stock) and is convertible at any time
after November 27, 2002 into a number of shares of common stock equal to $950.00
divided by the lesser of (i) $11.991 per share and (ii) the greater of (a) the
fair market value of Cross Media's common stock at the time of conversion or (b)
$10.1924 per share. Cross Media has the right to redeem the Preferred Stock at
any time at the liquidation value plus accrued and unpaid dividends (the
"Redemption Price"). JWE has the right, exercisable on one occasion after
November 27, 2002, to put the Preferred Stock, in whole or in part (provided the
remaining shares are converted), to Cross Media at the Redemption Price. Cross
Media is currently negotiating with JWE to amend the redemption provisions of
the Preferred Stock.

To fund the JWE acquisition in May 2002, Cross Media borrowed $1.7 million from
Lancer and issued the May Lancer Note. The May Lancer Note was amended in August
2002. The amended May Lancer Note is due February 16, 2003, and bears interest
at the rate of 6% per annum until November 27, 2002 and 10% thereafter.
Interest, which accrues from the date of issuance of the original note, is
payable at maturity. If Cross Media does not repay the May Lancer Note at
maturity, the Lancer may convert the May Lancer Note into shares of common stock
of Cross Media at the rate of $1.91 of principal of, and/or accrued unpaid
interest on, the note or (ii) receive a warrant to purchase up to a number of
shares of common stock of Cross Media equal to 500,000 multiplied by a fraction,
the numerator of which is the then outstanding principal amount of the May
Lancer Note and the denominator of which is $1.5 million (the "May Lancer Note
Warrants"). The May Lancer Note Warrants will be exercisable for a period of ten
years from the date of issuance at an exercise price of $1.91 per share. In
connection with the amendment of the original note and issuance of the May
Lancer Note, Cross Media issued to Lancer an additional ten-year warrant to
purchase 200,000 shares of its common stock at an exercise price of $1.91 per
share. This resulted in a deferred finance charge of approximately $250,000
using the black-scholes fair market value approach, which resulted in a a
non-cash interest charge of approximately $62,000, which Cross Media recorded as
interest expense during the three months ended September 30, 2002.


CREDIT FACILITIES

On March 1, 2002, Cross Media obtained a $2 million revolving credit facility
from Lancer, a principal stockholder of Cross Media. The interest rate on
borrowings under the revolving credit facility was 8% per annum and Lancer had
the right to demand repayment of all borrowings at any time after March 31,
2002. Cross Media issued to Lancer two-year warrants to purchase 50,000 shares
of common stock at an exercise price of $10.00 per share as an inducement for
Lancer to provide Cross Media the revolving credit facility. On March 19, 2002,
all outstanding amounts owed under the Lancer facility were paid off upon
entering into the Fleet credit facility, and subsequently the Lancer facility
was terminated.



                                       19
<PAGE>


On March 19, 2002, Cross Media entered into a credit agreement with Fleet
National Bank, as agent for the lender banks and as issuing lender and the
several other lenders, to provide Cross Media a $35 million credit facility,
subject to certain availability limitations. Cross Media may borrow funds under
the credit facility as revolving prime rate or LIBOR plus rate loans and/or
obtain letters of credit. Interest on the credit facility accrues at the prime
rate designated from time to time by the agent, Fleet, plus an applicable
margin, for prime rate loans, or at the LIBOR rate plus an applicable margin for
LIBOR loans. The applicable margin is subject to adjustment based on Cross
Media's leverage ratio. Cross Media also pays a commitment fee during the term
of the facility based on the unused borrowings under the facility, and a letter
of credit fee based on the applicable margin for the LIBOR rate loans during the
time that letters of credit remain outstanding.

Cross Media's active subsidiaries are joint and several co-borrowers under the
Fleet credit facility. Cross Media has pledged all of its assets and all of the
assets and capital stock of its subsidiaries to secure its obligations under the
facility. The Fleet credit facility imposes certain limitations on Cross Media's
activities, including restrictions on acquisitions, incurring additional
indebtedness, granting liens and declaring and paying dividends. Cross Media is
also required to maintain minimum EBITDA levels and minimum leverage,
consolidated net worth and fixed charge coverage ratios.

Upon entering into the new credit agreement with Fleet, Cross Media terminated
its credit agreement with Coast. Cross Media repaid the remaining borrowings
under the Coast Facility of approximately $18.0 million as well as an early
termination fee of $0.2 million. As a result of the early termination of the
Coast facility, Cross Media recorded an extraordinary charge of approximately
$0.5 million.

On August 13, 2002, the Fleet Credit Facility was amended to (i) increase the
interest rate by 0.5%, (ii) adjust certain financial covenants, (iii) require
Cross Media to obtain up to $3.0 million of subordinated debt financing in form
satisfactory to the lenders on or prior to September 2, 2002, the failure of
which shall be a default, (iv) reduce the facility from $35 million to $30.7
million, provided that the remaining approximately $1.5 million of borrowing
availability will only become available if Cross Media obtains the $3.0 million
of subordinated debt financing described above, (v) provide that a default will
occur if the settlement of the FTC complaint (See Note F) is settled on terms
that would require Cross Media to make a payment of damages, penalties, fines or
similar payments in excess of $1 million, (vi) provide that a default will occur
if neither of the following occurs by November 1, 2002: (a) the obligations
under the credit facility are repaid and the lenders obligations to lend to be
terminated or (b) Cross Media enters into a binding commitment with one or more
financial institutions reasonably acceptable to Fleet which enables the credit
facility to be paid in full and the lenders obligations to lend to be terminated
by November 30, 2002; provided, however, that Cross Media may extend these dates
by one month by making a $50,000 cash payment; and (vii) waive certain other
non-financial defaults.

On August 16, 2002, Cross Media's credit facility was amended. The amendment
reduced the amount of subordinated debt financing which Cross Media is required
to receive by September 2, 2002 from $3.0 million to $1.5 million. Cross Media
obtained this financing from Lancer on August 19, 2002, as described below.
Cross Media borrowed $750,000 under the facility without obtaining the lenders
prior consent. There is also another $750,000 of availability under the credit
facility, which Cross Media may borrow only with the lenders consent.

As of September 30, 2002, Cross Media had $25.0 million outstanding under the
Fleet credit facility. Cross Media will not be able to repay the credit facility
from cash from operations and must obtain replacement financing. During the
quarter ended September 30, 2002 Cross Media wrote off all deferred financing
fees related to the credit facility, which amounted to approximately $0.5
million

As of November 14, 2002, Cross Media is not in compliance with certain financial
covenants required by the Fleet Credit Facility, did not make the required
November 1, 2002 cash payment of $50,000 and is in default of its loan. Cross
Media has not obtained a waiver, but is currently in discussion with Fleet to
obtain a waiver. Cross Media has not received a notice of default from Fleet as
of November 14, 2002. There can be no assurance that a waiver will be obtained
or that Fleet will not declare a default and demand payment and foreclose on its
collateral. Cross Media must repay the facility or obtain such a binding
commitment, which will enable payment by December 31, 2002. Cross Media has
received an initial financing proposal from an asset-based lender for a $50
million credit facility. There can be no assurance that Fleet will deem this
proposal to be satisfactory or that the proposed financing will be completed in
the required time frame or at all. See Note J for more information.

As of November 13, 2002, the interest rate on the outstanding loans under the
Fleet credit facility is currently 5.25%, the commitment fee was .375% and the
letter of credit fee was 2.5%.

PRIVATE PLACEMENT

In March 2002, Cross Media completed a private placement in which it sold
1,105,475 shares of its common stock at a price of $10.50 per share to a limited
number of accredited investors and received gross proceeds of approximately
$11.6 million. Stonegate Securities, Inc. served as placement agent, for which
it received a placement agent fee equal to 6% of the gross proceeds and
five-year warrants to purchase 110,548 shares of Cross Media common stock at an
exercise price of $10.50 per share. The proceeds were used to reduce borrowings
under the Fleet credit facility.


                                       20
<PAGE>


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board approved the issuance of
SFAS No. 141 "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". The new standards require that all business combinations
initiated after June 30, 2001 must be accounted for under the purchase method.
In addition, all intangible assets acquired that are obtained through
contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to at least an annual assessment
for impairment by applying a fair value based test.

The Company adopted SFAS No. 142 on January 1, 2002. In connection with adopting
this standard, Cross Media considered the measurement of transitional
impairment. Initial adoption had no effect on Cross Media's financial
statements. As a result of the adoption of SFAS No. 142, Cross Media did not
recognize goodwill amortization for the three months and nine months ended
September 30, 2002. If SFAS No. 142 was in effect during the three and nine
months ended 2001, Cross Media would not have recognized $0.2 million and $0.7
million, respectively, in goodwill amortization. Therefore, for the three and
nine months ended September 30, 2001, net income applicable to common
stockholders would have increased to approximately $2.5 million and $4.6
million, respectively, and basic earnings per share applicable to common
stockholder would have increased to $0.35 and $0.66, respectively.

In August 2001, the FASB, issued SFAS, No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." SFAS No. 143 addresses
financial accounting and reporting for the retirement obligation of an asset.
This statement provides that companies should recognize the asset retirement
cost at its fair value as part of the cost of the asset and classify the accrued
amount as a liability. The asset retirement liability is then accreted to the
ultimate payout as interest expense. The initial measurement of the liability
would be subsequently updated for revised estimates of the discounted cash
outflows. The Statement will be effective for fiscal years beginning after June
15, 2002. Cross Media has not yet determined the effect that SFAS No. 143 will
have on its consolidated financial position, results of operations or cash
flows.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
This statement eliminates the requirement under SFAS 4 to aggregate and classify
all gains and losses from extinguishment of debt as an extraordinary item, net
of related income tax effect. This statement also amends SFAS 13 to require that
certain lease modifications with economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
In addition, SFAS No. 145 requires reclassification of gains and losses in all
prior periods presented in comparative financial statements related to debt
extinguishment that do not meet the criteria for extraordinary item in
Accounting Principles Board Opinion ("APB") 30. The statement is effective for
fiscal years beginning after May 15, 2002 with early adoption encouraged. The
Company will adopt SFAS No. 145 effective January 1, 2003. Cross Media will
record the extraordinary loss of $0.5 million recorded as of March 31, 2002 as
income from operations in the first quarter of 2003.

On July 30, 2002, The FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The Company is currently evaluation the requirements and impact of
this statement on our consolidated results of operations and financial position.

                                  RISK FACTORS


CROSS MEDIA HAS A LIMITED RELEVANT OPERATING HISTORY WHICH MAKES IT DIFFICULT TO
EVALUATE ITS PROSPECTS.

Cross Media developed its business strategy in 1999, completed its first
acquisition in January 2000, and opened its first company-owned and operated
call center and undertook its first email campaign in the last quarter of 2000.
Moreover, Cross Media has acquired three businesses during the previous twelve
months. Therefore, Cross Media has a limited history of operations under its
current business strategy upon which the likelihood of its success can be
evaluated.

The implementation of a new business strategy frequently involves risks,
expenses and uncertainties that may adversely affect Cross Media's business,
results of operations, financial condition and prospects, including:

- the ability to compete effectively against other companies;

- the need to hire, retain and motivate qualified personnel;

- the ability to anticipate and adapt to the changing market; and

- the ability to develop and introduce new products and services and continue
  to develop and upgrade technology.




                                       21
<PAGE>




CLASS ACTION AND SHAREHOLDER DERIVATIVE LAWSUITS HAVE BEEN FILED AGAINST CROSS
MEDIA AND CERTAIN OF ITS OFFICERS AND DIRECTORS ALLEGING SECURITIES LAW
VIOLATIONS, THE EFFECT OF WHICH CANNOT CURRENTLY BE DETERMINED.

Four securities class action complaints seeking monetary damages have been filed
in the United States District Court for the Southern District of New York
against Cross Media and Mr. Altbach on behalf of a putative classes of persons
who purchased shares of Cross Media common stock from November 5, 2001 through
July 11, 2002 (the "Class Period"). These complaints generally allege that Cross
Media violated Section 10(b) and Mr. Altbach violated Sections 10(b) and 20(a)
of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of materially false and misleading statements to
the market during the Class Period, including press releases that allegedly
overstated Cross Media's business prospects and allegedly mischaracterized the
status of the Federal Trade Commission proceedings brought against Cross Media
and others. These actions were consolidated on October 16, 2002 in the District
Court for the Southern District of New York under the caption In re Cross Media
Marketing Corporation Securities Litigation 02 CV 5462 (RPP), which ordered the
plaintiffs were ordered to serve a consolidated amended class action complaint
within 60 days thereof and providing for a briefing schedule with respect to any
motion to dismiss the consolidated amendment complaint. Cross Media and Mr.
Altbach dispute these claims and intend to vigorously defend this matter.
Because these lawsuits are in the early stages, Cross Media is unable to predict
the outcome or the effect it may have on Cross Media's operating results,
financial condition or stock price.

In September 2002, a shareholder derivative lawsuit Pardo v. Altbach, et al.
02 CV 6740 (JSM) was filed against Cross Media and certain of its current and
former directors alleging substantially the same claims made in the class action
complaints. In October, the District Court for the Southern District of New York
entered an order extending the defendants' time to respond to the complaint to
30 days following final entry of an order on defendants' motion to dismiss the
consolidated class action shareholder suit. The defendants dispute these claims
and intend to vigorously defend this matter. Because this lawsuit is in its
early stages, Cross Media is unable to predict the outcome on the effect it may
have on Cross Media's operating results, financial condition or stock price.


THE UNITED STATES JUSTICE DEPARTMENT HAS FILED A COMPLAINT AGAINST CROSS MEDIA,
MEDIA OUTSOURCING, INC. AND TWO OF THEIR OFFICERS, ALLEGING VIOLATIONS OF THE
TELEMARKING SALES RULE AND THE FEDERAL TRADE COMMISSION ACT.

In April 2002, the United States Justice Department, on behalf of the Federal
Trade Commission, filed a complaint United States v. Prochnow, et al. No.
1:02-CV-917 (JOF) in the United States District Court for the Northern District
of Georgia against Cross Media, MOS "Media Outsourcing Inc.", Ronald Altbach,
Dennis Gougion, an officer of MOS, and Richard Prochnow, a consultant to MOS.
The complaint alleged violations of the Federal Telemarketing Sales Rule and the
Federal Trade Commission Act ("FTC Act") and non-compliance with a previous FTC
order ("FTC Order") entered into by Prochnow, individually and doing business as
Direct Sales International, Inc., and Gougion, individually. MOS acquired
certain assets of Direct Sales International in January 2000. The complaint
seeks monetary civil penalties, redress, injunctive, and other relief against
any such future violations.

Simultaneous with the filing of the complaint, plaintiffs filed a motion for a
temporary restraining order against the defendants seeking, among other things,
compliance with the Telemarketing Sale Rule, the FTC Act, and the previous FTC
Order. The parties agreed to postpone the hearing for a later date to facilitate
settlement discussions. On October 21, 2002, the court issued an order denying
the FTC's motion for a temporary restraining order with leave to renew the
motion. The FTC and Cross Media continue to negotiate to settle the matter.

Cross Media believes that the filing of this complaint may have adversely
affected magazine subscription sales during the second and third quarters of
2002. Although Cross Media believes that it has taken steps to prevent any
further adverse effect on magazine subscription sales, there can be no assurance
that the FTC complaint will not adversely affect Cross Media's magazine
subscription business.

However, because this matter is in the early stages, Cross Media is unable to
predict the outcome. In the event that Cross Media is unable to resolve this
matter amicably, it could be subject to monetary damages and injunctive relief,
which could have a material adverse effect on Cross Media's operating results,
financial condition and stock price. Even if Cross Media is able to resolve this
matter amicably, it may have to agree to pay the government a civil penalty,
fund a consumer redress account, and/or modify MOS' operating practices, which
could have similarly adverse effects on Cross Media. Moreover, a settlement of
this matter by Cross Media, which requires it to pay more than $1.0 million of
damages, penalties, fines or similar payments in connection with this matter,
will result in a default under the Fleet credit facility.

THE ANTICIPATED BENEFITS OF THE JWE ENTERPRISES ACQUISITION MAY NOT BE REALIZED
IN A TIMELY FASHION, OR AT ALL. IN ADDITION, CROSS MEDIA'S OPERATIONS MAY BE
ADVERSELY AFFECTED IF THE OPERATION OF JWE's BUSINESSES DIVERTS TOO MUCH
ATTENTION AWAY FROM CROSS MEDIA'S BUSINESS.

The success of the JWE acquisition will depend, in part, on Cross Media's
ability to realize the anticipated revenue enhancements, growth opportunities
and synergies of the combined company and effectively utilize resources Cross
Media now has after the acquisition. There are risks related to the integration
and management of the acquired technology and operations and personnel. The
integration of the business will be a complex, time-consuming and potentially
expensive process and may disrupt Cross Media's business if not completed in a
timely and efficient manner. Some of the difficulties that may be encountered
include:

- the diversion of management's attention from other ongoing business concerns;
  and

- potential conflicts between business cultures.



                                       22
<PAGE>


If management focuses too much time, money and effort to integrate JWE's
operations and assets, they may not be able to execute its overall business
strategy.

OUTSTANDING BORROWINGS UNDER CROSS MEDIA'S EXISTING CREDIT FACILITY MUST BE
REPAID BEFORE THE END OF 2002 AND CROSS MEDIA MUST OBTAIN A BINDING COMMITMENT
BY NOVEMBER 30, 2002 FOR SUCH FINANCING.

Cross Media is required to obtain a binding commitment by November 30, 2002 to
replace its existing credit facility and to repay the existing credit facility
by December 31, 2002. This financing may not be available to Cross Media on
favorable terms or at all. Failure to obtain either financing could result in
Cross Media's lenders declaring a default under the facility. Moreover, even if
Cross Media obtains this financing, the interest rate and financing costs are
likely to be greater than the interest rate under the existing credit facility,
which will reduce profit in future periods.

CROSS MEDIA IS IN DEFAULT OF ITS CREDIT FACILITY AND SUBJECT TO RESTRICTIVE
CREDIT FACILITY COVENANTS WHICH COULD HARM ITS FINANCIAL STATUS AND HAVE A
NEGATIVE IMPACT ON ITS STOCK PRICE.

Cross Media has pledged all of its assets and the assets and stock of its
subsidiaries to Fleet and all assets to secure its obligations under its
facility.

Under the agreement with Fleet, Cross Media is also required, among other
things, to maintain minimum financial ratios and remain current on certain other
debt and trade payables. As of November 14, 2002, Cross Media is not in
compliance with certain financial covenants required by the Fleet Credit
Facility, did not make the required November 2002 cash payment of $50,000 and is
in default of its loan. Cross Media has not received a notice of default from
Fleet as of November 14, 2002. If Cross Media defaults in performing its
obligations to the lenders, the lenders are entitled to accelerate the maturity
of outstanding indebtedness under the credit facility, $29.3 million as of
November 14, 2002 and to enforce its security interest in the pledged assets and
stock, which would materially interrupt Cross Media's operations and possibly
require Cross Media to curtail or cease operations. There can be no assurance
that a waiver will be obtained or that Fleet will not declare a default and
demand payment and foreclose on its collateral.

IF CROSS MEDIA IS UNABLE TO COLLECT ITS RECEIVABLES IN A TIMELY MANNER ITS CASH
FLOW FROM OPERATIONS WILL BE NEGATIVELY IMPACTED.

Cross Media is subject to the risks associated with selling products on credit,
including delays in collection or uncollectibility of accounts receivable. If
Cross Media experiences significant delays in collection or uncollectibility of
accounts receivable, its liquidity and working capital position could suffer.

IF SUBSCRIPTION CANCELLATION RESERVES ARE NOT ADEQUATE, CROSS MEDIA COULD BE
REQUIRED TO INCREASE ITS RESERVES, WHICH WILL RESULT IN A REDUCTION OF REVENUES
AND INCOME.

Cross Media extends credit to subscribers who purchase multi-magazine
subscription packages. Cross Media has established a reserve to cover
subscription cancellations based upon its past history with such orders. If
Cross Media's accounts subscription cancellation reserves are inadequate, it
will be required to increase reserves, which will reduce revenues and could
otherwise materially adversely affect Cross Media's results of operations.

THE NATURE OF CROSS MEDIA'S BUSINESS SUBJECTS IT TO THE EFFECTS OF ECONOMIC
SLOWDOWNS.

In addition, Cross Media's business may be adversely affected by periods of
economic slowdown, inflation or recession, which may be accompanied by a
decrease in the availability of consumer credit. Any material decline in the
availability of consumer credit may result in a decrease in consumer demand to
make credit card purchases, which could adversely affect the demand for Cross
Media's products and services.



THE LOSS OF CROSS MEDIA'S LARGEST INDEPENDENT CALL CENTERS WOULD LIKELY RESULT
IN A REDUCTION OF REVENUES AND OTHERWISE ADVERSELY AFFECT OPERATING RESULTS.

For the nine months ended September 30, 2002, one independent call center
accounted for approximately 42% of MOS's magazine subscription revenues and for
the year ended December 31, 2001, two independent call centers accounted for
approximately 39% of Cross Media's magazine subscription revenues. These call
centers do not have any commitment to generate sales for Cross Media and could
therefore, at any time, terminate their relationships with Cross Media without
notice, which could have a material adverse effect on Cross Media's business.
Moreover, over the past few months, Cross Media has become increasingly
dependent on its largest call center and expects the trend to continue for the
foreseeable future.

IF CROSS MEDIA'S LEAD GENERATION FOR MAGAZINE SALES DECLINES, ITS OPERATING
RESULTS WILL BE ADVERSELY AFFECTED.



                                       23
<PAGE>



Cross Media is substantially dependent upon the quality and quantity of leads
for magazine sales. Cross Media obtains leads from many sources. To the extent
that Cross Media is unable to generate sufficient leads and/or the percentage of
sales generated by its leads decreases, Cross Media's magazine sales will
decline.

NSI'S SUCCESS IS HEAVILY DEPENDENT UPON ITS ABILITY TO OBTAIN ADEQUATE MAGAZINE
ADVERTISING SPACE.

NSI's lifestyles and continuity product sales are heavily dependent upon NSI
obtaining sufficient magazine advertising space. NSI historically acquires
magazine advertising space at favorable rates through agreements to purchase
unsold advertising space from selected magazines. While Cross Media believes
that NSI will be able to purchase sufficient advertising space in the future,
the advertising rates are expected to be higher, which will adversely effect
NSI's gross margins. Moreover, NSI may not accurately estimate the amount of
unsold advertising space available to it in time to buy sufficient additional
advertising space. Additionally, because NSI must purchase advertising space
before it will know how much unsold advertising space it will receive, NSI may
have more advertising space available than it needs, which could adversely
effect NSI's operating results.

CROSS MEDIA RELIES ON ITS INTELLECTUAL PROPERTY RIGHTS AND OTHER PROPRIETARY
INFORMATION, AND ANY FAILURE TO PROTECT AND MAINTAIN THESE RIGHTS AND
INFORMATION COULD PREVENT CROSS MEDIA FROM COMPETING EFFECTIVELY.

Cross Media seeks to protect its technologies, intellectual property rights and
proprietary information through a combination of patent, copyright, trade secret
and trademark law, as well as confidentiality or license agreements with
employees, consultants, and corporate and strategic partners. If Cross Media is
unable to prevent the unauthorized use of its proprietary information or if its
competitors are able to develop similar technologies independently, the
competitive benefits of Cross Media's technologies, intellectual property rights
and proprietary information will be diminished.

THE CONTENT CONTAINED IN CROSS MEDIA'S ELECTONIC MAIL MESSAGES AND DISPLAYED ON
ITS WEB SITES MAY SUBJECT IT TO SIGNIFICANT LIABILITY FOR NEGLIGENCE, COPYRIGHT
OR TRADEMARK INFRINGEMENT OR OTHER MATTERS.

If any of the content that Cross Media creates and delivers to consumers by
electronic mail or any content that is accessible from the LifeMinders' or NSI
websites contains errors, third parties could make claims against Cross Media
for losses incurred in reliance on such information. In addition, the content
contained in or accessible from LifeMinders' emails and from the LifeMinders'
and NSI websites could include material that is defamatory, violates the
copyright or trademark rights of third parties, violates consumer protection
laws or regulations, or subjects it to liability for other types of claims.
Cross Media's general liability insurance may not cover claims of these types or
may not be adequate to indemnify it for all liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by insurance
or is in excess of insurance coverage, could result in significant costs and
expenses and damage Cross Media's reputation. Cross Media has also entered into
agreements with certain e-commerce partners under which Cross Media may be
entitled to receive a share of certain revenue generated from the purchase of
goods and services through direct links to LifeMinders' e-commerce partners from
the emails sent by Cross Media. These agreements may expose Cross Media to
additional legal risks and uncertainties, including potential liabilities to
consumers of those products and services by virtue of Cross Media's involvement
in providing access to those products or services, even if Cross Media does not
provide those products or services. Any indemnification provided to Cross Media
in its agreements with these parties, if available, may not adequately protect
Cross Media.

CONCERNS ABOUT, OR BREACHES OF, THE SECURITY OF CROSS MEDIA'S CUSTOMER DATABASE
COULD RESULT IN SIGNIFICANT EXPENSES TO PREVENT BREACHES, AND SUBJECT CROSS
MEDIA TO LIABILITY FOR FAILING TO PROTECT THE MEMBERS' INFORMATION.

Cross Media maintains a database containing information about Cross Media's
customers. Unauthorized users accessing Cross Media's systems remotely may,
among other ways, access its database or authorized users may make unauthorized
copies of all or part of the database for their own use in violation of specific
agreements to the contrary. As a result of these security and privacy concerns,
Cross Media may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by security breaches, and may
be unable to effectively target direct marketing offers to members or may be
subject to legal claims of members if unauthorized third parties gain access to
Cross Media's system and alter or destroy information in its database. Also, any
public perception that Cross Media engaged in the unauthorized release of member
information, whether or not correct, would adversely affect Cross Media's
ability to retain members.


                                       24
<PAGE>



PROBLEMS WITH THE PERFORMANCE AND RELIABILITY OF THE INTERNET INFRASTRUCTURE
COULD ADVERSELY AFFECT SALES AND THE QUALITY AND RELIABILITY OF THE PRODUCTS AND
SERVICES OFFERED TO MEMBERS.

Cross Media depends on the Internet infrastructure to market to potential
customers, gather data about prospects and customers and to deliver attractive,
reliable and timely email newsletters to LifeMinders members. If Internet usage
grows, the Internet infrastructure may not be able to support the demands placed
on it by this growth, and its performance and reliability may decline. Among
other things, continued development of the Internet infrastructure will require
a reliable network backbone with necessary speed, data capacity and security.
Currently, there are regular failures of the Internet network infrastructure,
including outages and delays, and the frequency of these failures may increase
in the future. These failures may reduce the number of potential customers who
respond to marketing campaigns and the benefits of LifeMinders' products and
services to LifeMinders' members. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new technology required to accommodate increased levels of Internet activity or
due to government regulation.

GOVERNMENT REGULATION COULD ADD SIGNIFICANT ADDITIONAL COSTS TO CROSS MEDIA'S
BUSINESS AND IMPOSE RESTRICTIONS ON CROSS MEDIA'S MARKETING PRACTICES WHICH
COULD INTERFERE WITH CROSS MEDIA'S OPERATIONS AND HAVE A SIGNIFICANT ADVERSE
EFFECT ON REVENUES.

Laws and regulations applicable to direct marketing, telemarketing, Internet
marketing, privacy, list development and use, and consumer protection and
membership club services are becoming more prevalent. Each of the 50 states and
the Federal government enforce various laws and regulations regulating
telemarketing, sweepstakes promotions, promotional incentives and advertising to
consumers. While Cross Media reviews its telemarketing scripts and advertising
copy and general marketing practices for compliance with applicable laws, there
is no guarantee that Federal or state authorities will not find that Cross
Media's marketing efforts do not comply with these laws. In addition, it is
likely that additional Federal and/or state regulations regarding telemarketing,
sweepstakes, privacy, list development and use, email marketing and other
marketing practices engaged in by Cross Media will be enacted. If enacted, these
regulations could have an adverse effect on revenues and result in additional
expenses to Cross Media and could require Cross Media to refrain from engaging
in specific activities or modify its business practices.

The Federal Trade Commission is currently reviewing certain of its rules to
determine if any changes are warranted. In January 2002, the Federal Trade
Commission issued a Notice of Proposed Rulemaking in which it proposed
substantial changes to the Telemarketing Sales Rule. In June 2002, the Federal
Trade Commission conducted a workshop to address written comments submitted in
response to the January Notice of Proposed Rulemaking. Until the Federal Trade
Commission concludes this review, Cross Media does not which proposals will be
adopted. Certain of the proposed revisions, if adopted, could have an adverse
effect on Cross Media's business, particularly its telemarketing and data
collection, use and sharing practices.

CROSS MEDIA IS DEFENDING A LAWSUIT WHICH, IF DETERMINED ADVERSELY AGAINST IT AND
IF ITS INSURANCE DOES NOT ADEQUATELY COVER THE DAMAGES, COULD HAVE A MATERIAL
ADVERSE EFFECT ON ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In March 2002, a complaint J.M. Thies, et al. v. LifeMinders, Inc. et al. (No.
02-2119-KHV) was filed in the United States District Court for the District of
Kansas by J.M. Thies, John Minnick and William Sharp, on their behalf and on
behalf of other former stockholders of eCoupons.com, Inc., against LifeMinders,
Inc. (which Cross Media acquired on October 24, 2001), Douglas Lindgren and
Jonathan Bulkeley, directors of Cross Media, and former officers and directors
of LifeMinders, requesting monetary damages in an amount not less than $4.2
million and punitive damages in an amount not less than $5 million against the
defendants. In accordance with the terms of the merger agreement with
LifeMinders, Cross Media is obligated to indemnify the other defendants. The
plaintiffs, former stockholders of eCoupons.com, Inc., a company that merged
with and into LifeMinders in December 2000, allege that the defendants made
misrepresentations to the plaintiffs to induce them to merge eCoupons with and
into LifeMinders. Cross Media was aware of the dispute prior to closing the
LifeMinders acquisition.

On November 6, 2002, the District Court for the District of Kansas (i) dismissed
all of the individual defendants from the action, (ii) ordered that plaintiffs'
claims against LifeMinders (now Cross Media) must proceed in arbitration, and
(iii) stayed all claims against LifeMinders pending the outcome of arbitration.
If the plaintiffs pursue this matter further, Cross Media intends to vigorously
defend these claims. However, if an adverse final judgment is issued against
Cross Media in arbitration or in court and if its insurance does not adequately
cover the damages, such an event could have a material adverse effect on its
financial condition and results of operations.

THE SUBSTANTIAL NUMBER OF OPTIONS AND WARRANTS TO PURCHASE CROSS MEDIA COMMON
STOCK COULD RESULT IN DILUTION TO CROSS MEDIA STOCKHOLDERS.

If the holders of the outstanding Cross Media preferred stock, options and
common stock purchase warrants exercise those options and warrants, including
those issued in connection with the merger and warrants being issued as partial
consideration for conversion of outstanding preferred stock, and the holders of
all outstanding convertible securities converted them into common stock, Cross
Media would be required to issue approximately 4.9 million additional shares of
common stock, based on current exercise and conversion prices, which will result
in dilution to Cross Media stockholders.

BECAUSE OWNERSHIP OF CROSS MEDIA IS CONCENTRATED, A SMALL NUMBER OF STOCKHOLDERS
EXERT SIGNIFICANT INFLUENCE OVER CROSS MEDIA.

If a few of the largest stockholders of Cross Media were to act together, as a
result of their aggregate ownership, they would have the ability to exert
significant influence over Cross Media's business, including the election of
directors and the approval of any other action requiring the approval of
stockholders. This concentration of share ownership may:


                                       25

<PAGE>

- delay or prevent a change of control of Cross Media;

- impede a merger, consolidation, takeover or other business combination
  involving Cross Media; and/or

- discourage a potential acquirer from making a tender offer or otherwise
  attempting to obtain control of Cross Media.

PROVISIONS OF CROSS MEDIA'S CORPORATE CHARTER DOCUMENTS AND DELAWARE LAW COULD
DELAY OR PREVENT A CHANGE OF CONTROL.

Cross Media's certificate of incorporation authorizes the board of directors to
issue up to 10,000,000 shares of preferred stock. The preferred stock may be
issued in one or more series, the terms of which may be determined at the time
of issuance by Cross Media's board of directors, without further action by
stockholders, and may include, among other things, voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and liquidation, conversion and redemption rights, and sinking fund provisions.
Specific rights granted to future holders of preferred stock could be used to
restrict Cross Media's ability to merge with, or sell its assets to, a third
party. The ability of Cross Media's board of directors to issue preferred stock
could discourage, delay, or prevent a takeover of Cross Media, thereby
preserving control by the current stockholders.

As a Delaware corporation, Cross Media is subject to the General Corporation Law
of the State of Delaware, including Section 203, an anti-takeover law enacted in
1988. In general, Section 203 restricts the ability of a public Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person became an interested stockholder. Subject to exceptions, an
interested stockholder is a person who, together with affiliates and associates,
owns, or within three years did own, 15% or more of a corporation's voting
stock. As a result of the application of Section 203, potential acquirers may be
discouraged from attempting to acquire Cross Media, thereby possibly depriving
its stockholders of acquisition opportunities to sell or otherwise dispose of
its stock at above-market prices typical of acquisitions.


ITEM 3. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable


ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of Cross Media's
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that Cross Media's disclosure controls and procedures are effective to
ensure that information required to be disclosed by Cross Media in reports that
it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Subsequent to the date of
their evaluation, there were no significant changes in Cross Media's internal
controls or in other factors that could significantly affect the internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


                           Part II. Other Information

ITEM 1. LEGAL PROCEEDINGS

Cross Media provides accruals for all direct costs associated with the estimated
resolution of contingencies at the earliest date at which it is deemed probable
that a liability has incurred and the amount of such liability can be reasonably
estimated.

In March 2002, a complaint J.M. Thies, et al v. LifeMinders, Inc. et al. (No.
02-2119-KHV) was filed in the United States District Court for the District of
Kansas by J.M. Thies, John Minnick and William Sharp, on their behalf and on
behalf of other former stockholders of eCoupons.com, Inc., against LifeMinders,
Inc. (which Cross Media acquired on October 24, 2001), Douglas Lindgren and
Jonathan Bulkeley, directors of Cross Media, and former officers and directors
of LifeMinders, requesting monetary damages in an amount not less than $4.2
million and punitive damages in an amount not less than $5 million against the
defendants. In accordance with the terms of the merger agreement with
LifeMinders, Cross Media is obligated to indemnify the other defendants. The
plaintiffs, former stockholders of eCoupons.com, Inc., a company that merged
with and into LifeMinders in December 2000, allege that the defendants made
misrepresentations to the plaintiffs to induce them to merge eCoupons with and
into LifeMinders. Cross Media was aware of the dispute prior to closing the
LifeMinders acquisition.

On November 6, 2002, the District Court for the District of Kansas (i) dismissed
all of the individual defendants from the action, (ii) ordered that plaintiffs'
claims against LifeMinders (now Cross Media) must proceed in arbitration, and
(iii) stayed all claims against LifeMinders pending the outcome of arbitration.
If the plaintiffs pursue this matter further, Cross Media intends to vigorously
defend these claims. However, if an adverse final judgment is issued against
Cross Media in arbitration or in court and if its insurance does not adequately
cover the damages, such an event could have a material adverse effect on its
financial condition and results of operations.


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<PAGE>



On April 9, 2002, the United States Justice Department ("DOJ"), on behalf of the
Federal Trade Commission ("FTC"), filed a complaint United States v. Prochnow,
et al. No. 1:02-CV-917 (JOF) in the United States District Court for the
Northern District of Georgia against Cross Media, Media Outsourcing, Inc., a
wholly owned subsidiary, ("MOS"), Ronald Altbach, Dennis Gougion, an officer of
MOS, and Richard Prochnow, a consultant to MOS. The complaint alleged violations
of the Federal Telemarketing Sales Rule and the Federal Trade Commission Act and
non-compliance with a previous FTC order entered into by Mr. Prochnow,
individually and doing business as Direct Sales International, Inc., and Mr.
Gougion, individually. MOS acquired certain assets of Direct Sales International
in January 2000. The complaint seeks monetary civil penalties, redress,
injunctive, and other relief against any such future violations.

Simultaneous with the filing of the complaint, plaintiffs filed a motion for a
temporary restraining order against the defendants seeking, among other things,
compliance with the Telemarketing Sale Rule, the FTC Act, and the previous FTC
order. At the April 10 hearing for the temporary restraining motion, the parties
agreed to postpone the hearing for a later date to facilitate settlement
discussions. On October 21, 2002 the court issued an order denying the FTC's
motion for a temporary restraining order, with leave to renew the motion.
Because this matter is in its early stages, Cross Media is unable to predict the
outcome and the potential effect, if any, it may have on Cross Media's operating
results, financial condition or stock price.

Four securities class action complaints seeking monetary damages have been filed
in the United States District Court for the Southern District of New York
against Cross Media and Mr. Altbach, on behalf of a putative class of persons
who purchased shares of Cross Media common stock from November 5, 2001 through
July 11, 2002 (the "Class Period").

The complaints generally allege that Cross Media violated Section 10(b) and Mr.
Altbach violated Sections 10(b) and 20(a) of the Securities and Exchange Act of
1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially
false and misleading statements to the market during the Class Period, including
press releases that allegedly overstated Cross Media's business prospects and
allegedly mischaracterized the status of the FTC proceedings brought against
Cross Media and others. These actions were consolidated on October 16, 2002 in
the District Court for the Southern District of New York under the caption In re
Cross Media Marketing Corporation Securities Litigation, 02 CV 5462 (RPP), which
required the plaintiffs thereof to serve a consolidated amended class action
complaint within 60 days and providing for a briefing schedule with respect to
any motion to dismiss the consolidated amended complaint. Cross Media and Mr.
Altbach dispute these claims and intend to vigorously defend this matter.
Because this lawsuit is still in the early stages, Cross Media is unable to
predict the outcome or the effect it may have on Cross Media's operating
results, financial condition or stock price.

In September 2002, a shareholder derivative lawsuit Pardo v Altbach et al. 02 CV
6740 (JSM) was filed against Cross Media and certain of its current and former
directors alleging substantially the same claims made in the class action
complaints. The defendants dispute these claims and intend to vigorously defend
this matter. In October, the District Court for the Southern District of New
York entered an order extending the defendants' time to respond to the complaint
to 30 days following final entry of an order on defendants' motion dismiss the
consolidated amended shareholder suit. Because this lawsuit is in its early
stages, Cross Media is unable to predict the outcome or the effect it may have
on Cross Media's operating results, financial condition or stock price.

From time to time Cross Media receives complaints and inquiries in the course of
conducting its regular business. It is Cross Media's policy to respond to these
matters as soon as they are received and resolve them as expeditiously as
possible. Cross Media does not believe that the outcome of any of these matters
will likely have a material impact on the company's business operations.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT ISSUANCES OF UNREGISTERED SECURITIES

On August 16, 2002, Cross Media issued ten-year warrants to purchase an
aggregate of 400,000 shares of common stock with an exercise price of $1.91 to
Lancer Offshore, Inc. in connection with the note issued on August 16, 2002 and
the amended note issued in conjunction with the purchase of JWE. The warrants
must be exercised on or prior to August 16, 2012. (1) Lancer Offshore, Inc.
represented that it was acquiring the securities for investment purposes; and
(2) Cross Media did not engage in any general advertisement or general
solicitation in connection with the issuance of the securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None



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<PAGE>


ITEM 5. OTHER INFORMATION

In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as
added by Section 202 of the Sarbanes-Oxley Act of 2002, the Company is
responsible for disclosing any non-audit services approved by the Company's
Audit and Affiliated Transactions Committee (the "Committee") to be performed by
Grant Thornton ("GT"), the Company's external auditor. Non-audit services are
defined in the Act as services other than those provided in connection with an
audit or a review of the financial statements of the Company. During quarter
ending September 30, 2002, the Committee approved the engagement of GT for tax
planning services.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

99.1     Certification of Cross Media Marketing Corporation's Principal
         Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2     Certification of Cross Media Marketing Corporation's Principal
         Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


         (b) We filed the following Current Report on Form 8-K during the fiscal
quarter ended September 30, 2002:

On August 29, 2002, we filed a Current Report on Form 8-K regarding the
amendment to the credit facility.


                                   Signatures

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

                                  CROSS MEDIA MARKETING CORPORATION
                                            (Registrant)





                           By: /s/ CHET BORGIDA
                               ------------------------------------
                               Name:  Chet Borgida
                               Title: Senior Vice President
                                      and Chief Financial Officer
                                      (principal financial and
                                      accounting officer)



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<PAGE>



                  Certification of Principal Executive Officer

I, Ronald Altbach, Chief Executive Officer of Cross Media Marketing Corporation,
certify that:

I have reviewed this quarterly report on Form 10-Q of Cross Media Marketing
Corporation;

1. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

2. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

(b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

(c)  presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

(a)  all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 14, 2002


                                              /s/ Ronald Altbach
                                              ---------------------------------
                                              Ronald Altbach
                                              Chief Executive Officer



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<PAGE>



                  Certification of Principal Financial Officer

I, Chet Borgida, Chief Financial Officer of Cross Media Marketing Corporation,
certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cross Media Marketing
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

(b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

(c)  presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

(a)  all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant internal controls;
     and


6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 14, 2002


                                                     /s/ Chet Borgida
                                                     --------------------------
                                                     Chet Borgida
                                                     Chief Financial Officer




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