<PAGE>

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

                       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 MARCH 31, 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)

<Table>
<S>                                            <C>
                   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)
</Table>

       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 of May 15, 2002, there were 14,563,158 shares of the registrant's Common
Stock, par value $.001, outstanding.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                       CROSS MEDIA MARKETING CORPORATION

                                   FORM 10-Q
                                 MARCH 31, 2002

                                C O N T E N T S

PART I.  FINANCIAL INFORMATION

<Table>
<Caption>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
Item 1.   Financial Statements
  Condensed Consolidated Balance Sheets as of March 31, 2002
     (unaudited) and December 31, 2001................................  F-1
  Condensed Consolidated Statements of Operations for the three months
     ended March 31, 2002 and March 31, 2001 (unaudited)..............  F-2
  Condensed Consolidated Statements of Cash Flows for the three months
     ended March 31, 2002 and March 31, 2001 (unaudited)..............  F-3
  Notes to Condensed Consolidated Financial Statements (unaudited)....  F-4
          Management's Discussion and Analysis of Financial Condition
Item 2.   and Results of Operations...................................    1

PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings...........................................   14
Item 2.   Change in Securities........................................   14
Item 3.   Defaults Upon Securities....................................   15
Item 4.   Submission of Matters to Vote of Stockholders...............   15
Item 5.   Other Information...........................................   15
Item 6.   Reports on Form 8-K.........................................   15

SIGNATURE
</Table>

                                        i
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                               MARCH 31,    DECEMBER 31,
                                                                 2002           2001
                                                              -----------   ------------
                                                              (UNAUDITED)
                                                                    (IN THOUSANDS)
<S>                                                           <C>           <C>
ASSETS:
Current assets
  Cash and cash equivalents.................................   $  9,288       $ 12,490
  Accounts receivable, net of reserves......................     62,144         46,058
  Other receivables.........................................      5,425          6,664
  Inventory.................................................      3,841             --
  Prepaid expenses and other................................      3,442          1,829
  Deferred expenses.........................................      4,472          2,239
                                                               --------       --------
          Total current assets..............................     88,612         69,280
  Property and equipment, net...............................      6,460          4,425
  Deferred taxes............................................      1,546          2,800
  Goodwill..................................................     31,352         12,137
  Intangibles, net..........................................      2,945          5,733
  Other assets..............................................      1,893            856
                                                               --------       --------
                                                               $132,808       $ 95,231
                                                               ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
  Revolving credit facility.................................   $ 26,036       $ 17,329
  Accounts payable and accrued expenses.....................     15,802          6,916
  Amounts due to publishers.................................      3,925          3,768
  Deferred revenue..........................................        534          3,191
  Notes payable.............................................      1,869             --
                                                               --------       --------
          Total current liabilities.........................     48,166         31,204
Long term liabilities
  Amounts due to publishers.................................      4,753          4,984
  Capital lease obligations.................................        767            869
  Notes payable.............................................      3,444             --
Minority interest...........................................        354             --

STOCKHOLDERS' EQUITY:
  Common stock, par value $.001 per share; authorized 40,000
     shares; 14,490 issued and 14,392 outstanding at March
     31, 2002 and 12,712 issued and 12,614 outstanding at
     December 31, 2001......................................         14             13
  Additional paid in capital................................    122,237        106,183
  Note receivable -- common stock...........................       (698)          (698)
  Treasury stock, 98 shares.................................       (857)          (857)
  Deferred compensation.....................................        (53)           (53)
  Accumulated deficit.......................................    (45,319)       (46,414)
                                                               --------       --------
          Total stockholders' equity........................     75,324         58,174
                                                               --------       --------
                                                               $132,808       $ 95,231
                                                               ========       ========
</Table>

        The accompanying notes are an integral part of these statements.
                                       F-1
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                  FOR THE THREE
                                                                  MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                                2002        2001
                                                              ---------   ---------
                                                                   (UNAUDITED)
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>         <C>
Revenues, net...............................................   $44,001     $19,678
Direct costs and expenses
  Commission expense........................................    11,541       9,581
  Other direct costs........................................    21,835       5,204
                                                               -------     -------
                                                                33,376      14,785
     Gross profit...........................................    10,625       4,893
General and administrative expenses.........................     7,819       3,282
                                                               -------     -------
Income from operations......................................     2,806       1,611
Other income(expense)
  Interest expense..........................................      (516)       (458)
  Minority interest.........................................      (332)         --
  Equity in income of affiliates............................       140          --
                                                               -------     -------
Income before income taxes..................................     2,098       1,153
Provision for income taxes..................................       525         232
                                                               -------     -------
Net income before extraordinary item........................     1,573         921
Extraordinary loss..........................................       478          --
                                                               -------     -------
Net income..................................................     1,095         921
Preferred dividends.........................................        --       1,131
                                                               -------     -------
Net income (loss) applicable to common stockholders.........   $ 1,095     $  (210)
                                                               =======     =======
Income (loss) per share applicable to common stockholders:
  Income (loss) per share before extraordinary item:
  Basic.....................................................   $  0.12     $ (0.03)
                                                               =======     =======
  Diluted...................................................   $  0.11     $ (0.03)
                                                               =======     =======
Extraordinary loss per share:
  Basic.....................................................   $ (0.04)    $    --
                                                               =======     =======
  Diluted...................................................   $ (0.03)    $    --
                                                               =======     =======
Income (loss) per share applicable to common stockholders:
  Basic.....................................................   $  0.08     $ (0.03)
                                                               =======     =======
  Diluted...................................................   $  0.08     $ (0.03)
                                                               =======     =======
Weighted -- average shares of common stock:
  Basic.....................................................    13,258       6,558
                                                               =======     =======
  Diluted...................................................    14,575       6,558
                                                               =======     =======
</Table>

        The accompanying notes are an integral part of these statements.
                                       F-2
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                    FOR THE
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2002       2001
                                                              --------   --------
                                                                  (UNAUDITED)
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Cash flows from operating activities:
  Net Income................................................  $  1,095   $    921
  Adjustments to reconcile results of operations to net cash
     effect of operating activities:
     Depreciation and amortization..........................       457        317
     Extraordinary Item -- non cash.........................       278         --
  Net change in asset and liability accounts, net of
     businesses acquired
     Accounts receivable....................................   (11,753)    (1,794)
     Inventories and other current assets...................        16        165
     Other assets...........................................     1,114        215
     Accounts payable and other current liabilities.........    (3,232)       259
                                                              --------   --------
          Net cash (used in) provided by operating
           activities.......................................   (12,025)        83
Cash flows from investing activities:
     Net cash paid for NSI acquisition......................    (9,512)        --
     Additional cash paid for prior acquisitions............      (161)        --
     Purchase of equipment..................................    (1,962)      (285)
     Investment in joint venture............................        90         --
                                                              --------   --------
          Net cash used in investing activities.............   (11,545)      (285)
Cash flows from financing activities:
     Net proceeds from common stock offering................    10,957      1,423
     Net proceeds from exercise of options/warrants.........     1,496         --
     Redemption of preferred stock..........................        --     (2,100)
     Net funds drawn on revolver for DSI acquisition........        --     20,800
     Net repayments of Coast credit agreement...............   (17,952)   (20,255)
     Preferred dividends paid...............................        --       (168)
     Payment of NSI notes...................................      (296)        --
     Net proceeds from revolving credit facility............    28,158         --
     Payment of bridge loan.................................    (2,000)        --
     Proceeds from bridge loan..............................     2,000         --
     Payment of NSI notes...................................    (1,500)        --
     Termination fee in connection with retirement of Coast
      credit facility.......................................      (200)        --
     Deferred financing fees................................      (295)        --
                                                              --------   --------
          Net cash provided by (used in) financing
           activities.......................................    20,368       (300)
                                                              --------   --------
Net decrease in cash and cash equivalents...................    (3,202)      (502)
  Cash and cash equivalents at beginning of period..........    12,490      2,327
                                                              --------   --------
  Cash and cash equivalents at end of period................  $  9,288   $  1,825
                                                              ========   ========
Supplemental disclosure of cash flow information:
  Interest paid during the period...........................  $    516   $    458
                                                              ========   ========
  Income taxes paid during the period.......................  $    470   $     --
                                                              ========   ========
</Table>

         The accompanying notes are an integral part of this statement.
                                       F-3
<PAGE>

               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 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 direct mail, inbound and outbound
telesales, print ads, web marketing and e-mail. The Company 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 utilizes its proprietary database management and
profiling technology to augment and perpetually update its permission-based
database of over 30 million consumers.

     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. For example, e-mails or direct mail often
attract the interest of a consumer, who then responds by calling an 800 number.

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 only of normal recurring adjustments) necessary to
present fairly the financial position of Cross Media as of March 31, 2002 and
December 31, 2001, the results of operations for the three months ended March
31, 2002 and 2001, and cash flows for the three months ended March 31, 2002 and
2001. The condensed consolidated financial statements include the accounts of
Cross Media and its wholly-owned and majority-owned subsidiaries. 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 the Company's
Annual Report on Form 10-KSB. The accompanying condensed consolidated financial
statements and related notes should be read in conjunction with the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001.

     Principles of Consolidation:  The 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 by Cross Media when Cross Media receives the first installment
payment for subscriptions purchased. Revenues also include commissions earned
from publishers in connection with originating paid subscriptions for certain
publications. Commissions are also earned from outside parties for securing
memberships in a discount-buying club and sales of long-distance telephone
services. Commissions are recognized when the related subscriptions or
memberships are obtained. Magazine revenues are reflected net of cancellation
and collection reserves as well amounts due to publishers. Such cancellation and
collection reserves are based upon Cross Media's historical cancellation and
collection experience. In the first quarter ended March 31, 2002, two
independent call centers accounted for approximately 32% 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. Cross Media continually evaluates
actual collection and cancellation experience as it

                                       F-4
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

relates to magazines sales and adjusts collection and cancellation reserves
based on actual experience. Based upon this evaluation, for the three months
ended March 31, 2002, Cross Media adjusted net revenues by approximately $0.9
million.

     Upfront Revenue:  Upfront sales relating to National Syndications Inc. and
Preferred Consumer Marketing (collectively referred to as "NSI") operations are
one time purchases made by customers. Upfront sales are usually generated by
inbound calling in response to advertising space in Parade Magazine and USA
Weekly and involve the one time sale of products such as coins, collectibles and
other products. Sales are recognized when the product is shipped. If cash is
received before the product is shipped, the sale is deferred until inventory has
been released.

     Continuity Revenue:  Continuity sales are recognized when the product is
shipped.

     Cash and Cash Equivalents:  Cross Media considers all highly liquid
investments with maturities of three months or less to be cash equivalents. As
of March 31, 2002, Cross Media had approximately $9.3 million in cash on hand to
be used to in its operations.

     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.

     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 writes down the value of the goodwill to the
revised fair value. In June 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 F for more information). At each balance sheet date, Cross
Media evaluates the realizability of goodwill based on expectations of
discounted cash flows. If the sum of the discounted cash flows is less than the
carrying amount of all assets, including intangible assets, Cross Media
recognizes an impairment loss. Cross Media believes no material impairment to
goodwill exists at March 31, 2002.

     Joint Ventures:  Joint ventures are accounted under the equity method of
accounting and relate to joint ventures entered into by NSI with third parties
prior to the closing of the acquisition.

     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 over the term of the related credit facility, which is two years.

     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.

                                       F-5
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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
                                                                  MONTHS ENDED
                                                              ---------------------
                                                              MARCH 31,   MARCH 31,
                                                                2002        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>         <C>
Numerator:
  Net income before extraordinary item and preferred
     dividends..............................................   $1,573      $  921
  Extraordinary loss........................................      478          --
                                                               ------      ------
  Net income................................................    1,095         921
  Preferred stock dividends.................................       --       1,131
                                                               ------      ------
  Net income (loss) applicable to common stockholders.......   $1,095      $ (210)
                                                               ======      ======
Denominator:
  Basic -- weighted average shares..........................   13,258       6,558
     Stock options..........................................      627          --
     Warrants...............................................      690          --
                                                               ------      ------
  Diluted weighted average shares...........................   14,575       6,558
                                                               ======      ======
Income (loss) per share before extraordinary item:
  -- basic..................................................   $ 0.12      $(0.03)
                                                               ======      ======
  -- diluted................................................   $ 0.11      $(0.03)
                                                               ======      ======
Extraordinary loss per share:
  -- basic..................................................   $(0.04)         --
                                                               ======      ======
  -- diluted................................................   $(0.03)         --
                                                               ======      ======
Income (loss) per share applicable to common stockholders:
  -- basic..................................................   $ 0.08      $(0.03)
                                                               ======      ======
  -- diluted................................................   $ 0.08      $(0.03)
                                                               ======      ======
</Table>

     Stock options which were not included in the calculation, were the
equivalent of 3.5 million shares as of March 31, 2002 and 3.4 million shares as
of March 31, 2001 because they were antidilutive. In addition, the effect of the
convertible preferred stock was also antidilutive in 2001.

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

     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.

                                       F-6
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Advertising and promotion costs: Costs related to advertising and promotion
are amortized ratably over the estimated lifetime revenue stream generating from
the advertising effort.

     Reclassification:  Certain amounts in the March 31, 2001 financial
statements have been reclassified to conform to the March 31, 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 consist 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.

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 estimate 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 ACQUISITION

     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

                                       F-7
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $5.0 million as a result of total consideration over the net assets
acquired on the date of the merger. During the first quarter 2002, Cross Media
finalized its valuation of intangibles acquired from the acquisition of LFMN and
subsequently reduced the value recorded at December 31, 2001 from $6.0 million
to $3.3 million based on an outside third party evaluation. This resulted in a
decrease in intangibles and net deferred tax assets and an increase in goodwill.

     In connection with the merger, Cross Media assumed options to purchase
2,687,667 shares of LifeMinders common stock. The number of shares issuable on
exercise of these options was adjusted by the per share exchange ratio of .2596
and the exercise price of these options was divided by the per share exchange
ratio of .2596. As a result, these options are exercisable to purchase an
aggregate of 697,825 shares of Cross Media common stock. This resulted in a $1.9
million increase to the total purchase of the acquisition of LifeMinders.

     Simultaneously with the closing of the merger with LifeMinders, Cross Media
redeemed 25,312.5 Series A Shares for cash payment of $2,531,250 or ($100 per
share) and converted the remaining 25,312.5 Series A Shares into 342,060 shares
of Cross Media common stock at a conversion price of $7.40 per share. In
addition, Cross Media made cash payment of $968,750 to the holders of Series A
Shares and issued warrants to purchase 50,000 shares of common stock at an
exercise price of $9.9225 per share.

  NSI

     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 $19.8
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
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 and the
aggregate Joint Ventures' income from January 1, 2001 through December 31, 2004.
The contingent consideration 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 March 31, 2002, as the outcome of the
contingency is not determinable beyond a reasonable doubt. Goodwill recorded as
a result of the transaction was $14.9 million as of March 31, 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 are secured by the assets of NSI.
Upon the closing, 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). As of March 31, 2002, $5.3 million was outstanding as a result of
monthly payments made under the note agreement.

                                       F-8
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<Table>
<Caption>
                                                               (IN THOUSANDS)
                                                               --------------
<S>                                                            <C>
Accounts receivable.........................................      $ 4,332
Inventory...................................................        3,701
Other current assets........................................        1,928
Deferred costs..............................................        3,372
Fixed assets................................................        1,102
Other assets................................................        1,551
                                                                  -------
          Total assets acquired.............................      $15,986
Current liabilities.........................................       11,130
                                                                  -------
          Net assets acquired...............................      $ 4,856
                                                                  =======
</Table>

                                       F-9
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<Table>
<Caption>
                                                                              FOR THE THREE
                                                                              MONTHS ENDED
                                                                          ---------------------
                                                                          MARCH 31,   MARCH 31,
                                                                            2002        2001
                                                                          ---------   ---------
                                                                          (IN THOUSANDS EXCEPT
                                                                           PER SHARE AMOUNTS)
<S>                                                         <C>           <C>         <C>
Revenues, net.............................................  As Reported    $44,001    $ 19,678
                                                            Pro forma       44,001      30,698

Net income (loss) before extraordinary item...............  As Reported    $ 1,573    $    921
                                                            Pro forma        1,373     (16,650)

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

Income (loss) applicable to common stockholders...........  As Reported    $ 1,095    $   (210)
                                                            Pro forma          895     (17,781)
Income (loss) per share
  before extraordinary item:
     -- basic.............................................  As Reported    $  0.12    $  (0.03)
                                                            Pro forma         0.11       (1.51)

     -- diluted...........................................  As Reported    $  0.11    $  (0.03)
                                                            Pro forma         0.09       (1.51)
Extraordinary loss:
     -- basic.............................................  As Reported    $ (0.04)   $     --
                                                            Pro forma        (0.04)         --
     -- diluted...........................................  As Reported    $ (0.03)   $     --
                                                            Pro forma        (0.03)         --
Income (loss) per share applicable to common stockholders:
     -- basic.............................................  As Reported    $  0.08    $  (0.03)
                                                            Pro forma         0.07       (1.51)
     -- diluted...........................................  As Reported    $  0.08    $  (0.03)
                                                            Pro forma         0.06       (1.51)
</Table>

NOTE D -- REVOLVING CREDIT FACILITIES

  LANCER CREDIT FACILITY

     On March 1, 2002, Cross Media obtained a $2 million revolving credit
facility from Lancer Offshore, Inc., 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, 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, and the Lancer revolving credit
facility was terminated.
                                       F-10
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  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, 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 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. As of March 31, 2002, Cross
Media had $26 million outstanding under the Fleet credit facility.

NOTE E -- INCOME TAXES

     As of March 31, 2002, Cross Media has federal and state net operating loss
carryforwards of approximately $95 million that will be available to offset
future taxable income, if any, through December 2021. This consists primarily of
net operating losses acquired in connection with the acquisition of LifeMinders,
Inc. The utilization of net operating losses is subject to a substantial
limitation due to the change of ownership provisions under Section 382 of the
Internal Revenue Code and similar state provisions. Such limitation may result
in the expiration of the net operating losses before their utilization. A
valuation allowance has been established to reserve for the remaining deferred
tax assets arising from substantially all of the net operating losses and other
temporary differences due to the uncertainty that their benefit will be realized
in the future.

NOTE F -- 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.

     As a result of the adoption of SFAS 142, Cross Media did not recognize
goodwill amortization for the three months ended March 31, 2002. If SFAS No. 142
was in effect during the first quarter of 2001, Cross Media would not have
recognized $0.2 million in goodwill amortization, therefore net income
applicable to common stockholders would have increased to approximately $17,000
and earnings per share applicable to common stockholder would have increased by
$0.03.

     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

                                       F-11
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long Lived Assets." This statement is effective for
fiscal years beginning after December 15, 2001. This supercedes SFAS 121, while
retaining many of the requirements of such statement. Cross Media has determined
that the impact of this statement is not material as of March 31, 2002.

     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 reclassify the extraordinary loss of $0.5 million
recorded as of March 31, 2002 into income from operations in the first quarter
of 2003.

NOTE G -- COMMITMENTS AND CONTINGENCIES

     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 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 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 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 and believes that it has adequate insurance to cover any
award of monetary damages in the lawsuit. Cross Media is vigorously defending
these claims.

     In April 2002, the United States Justice Department, on behalf of the
Federal Trade Commission ("FTC"), filed a complaint in the United States
District Court for the Northern District of Georgia against Cross Media, Media
Outsourcing, Inc. ("MOS"), Ronald Altbach, Dennis Gougion, an officer of Media
Outsourcing, 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
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. At the hearing for the temporary restraining motion, the
parties agreed to

                                       F-12
<PAGE>
               CROSS MEDIA MARKETING CORPORATION AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

postpone the hearing for a later date. Upon mutual agreement of the parties, the
rescheduled hearing was postponed for an undetermined date to facilitate
settlement discussions. Because this matter is in its early stages, Cross Media
is unable to predict the outcome and the potential effect, if any, on its
financial statements.

NOTE H -- STOCKHOLDERS' EQUITY

     At March 31, 2002, Cross Media was authorized to issue 40,000,000 shares of
common stock, $.001 par value. As of March 31, 2002 there were approximately
14,392,000 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.

     If the holders of all outstanding options and common stock purchase
warrants converted them into common stock as of March 31, 2002, Cross Media
would have been required to issue approximately 4.8 million additional shares of
common stock.

     During the quarter ended March 31, 2002, Cross Media received proceeds of
$1.5 million from the exercise of approximately 393,000 warrants and stock
options.

     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.

                                       F-13
<PAGE>

                           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, certain statements contained herein and in the information posted
on the website of Cross Media 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: Cross Media's ability to integrate the recently
acquired National Syndications operations and to make additional strategically
appropriate acquisitions; the adequacy of accounts receivable reserves, changes
in economic conditions or a material decline in the availability of consumer
credit, interest rate fluctuations, Cross Media's limited operating history,
competitive factors, the need to manage growth, volatility in the market price
of the common stock and the securities markets generally, risks relating to
government regulation of telemarketing and Internet marketing activities, Cross
Media's ability to exploit its database and technological innovations and
potential dilution. These factors are described in detail in this Form 10-Q.

                        PART I -- FINANCIAL INFORMATION

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

     The following discussion and analysis should be read together with the
Condensed Consolidated Financial Statements of Cross Media Marketing Corporation
and the notes to the Condensed Consolidated Financial Statements 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-month periods ended March 31, 2002
and 2001.

CRITICAL ACCOUNTING POLICIES

     The Securities and Exchange Commission ("SEC") recently issued disclosure
guidance for "critical accounting policies". The 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

     During the quarter ended March 31, 2002, Cross Media derived revenues from
the sale of magazine subscription contracts. As described below, significant
management judgments and estimates must be made and used in connection with the
revenue recognized in any accounting period. 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.

     Revenues derived from originating magazine subscriptions for others are
recognized by Cross Media when Cross Media receives the first installment 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 pay to maturity of Cross
Media's portfolio of consumer receivables. This evaluation is inherently
judgmental

                                        1
<PAGE>

and requires material estimates based on historical experience of collectibility
and economic trends. A one percent change in the estimated cancellation and
collection rate at March 31, 2002 could have resulted in a change in the
cancellation and collection reserve, and a change in net revenue of $0.2
million.

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.

RESULTS OF OPERATIONS

  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND MARCH 31,
2001

     Revenues, net:  During the three months ended March 31, 2002, net revenues
were $44 million, a 124% increase from net revenues of $19.7 million for the
three months ended March 31, 2001. Net revenues increased as a result of higher
sales of magazine contracts, increased revenue from sales of memberships, as
well as revenues from the sale of coins, collectibles and other products. For
the quarter ended March 31, 2002, net revenues consisted of (1) $27.8 million in
sales of magazine contracts, (2) $3.5 million in other revenues consisting of
commission revenues from sales of memberships to discount third party buying
clubs, publisher fees and other revenues relating to Cross Media's magazine
business and (3) $12.7 million in revenues from the sale of coins, collectibles
and other products sold through our print and outbound telesales channels. Sales
of magazine contracts increased 77% while other revenues relating to the
magazine business decreased 12% over the same period in prior year. Cross Media
continually evaluates actual collection and cancellations experience activity
and adjusts collection and cancellation reserves based on actual experience.
Based upon this evaluation, for the three months ended March 31, 2002, Cross
Media adjusted net revenues by approximately $0.9 million.

     Commission Expense:  Commission expense increased 20.5% to $11.5 million in
the three months ended March 31, 2002 from $9.6 million in the same period of
2001 as a result of higher sales of magazine contracts. Commission expense
decreased as a percentage of net magazine revenues from 61% for the three months
ended March 31, 2001 compared to 42% for the three months ended March 31, 2002
as a result of the use of Cross Media's company owned and operated call centers
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 $16.6 million from $5.2
million for the three months ended March 31, 2001 to $21.8 million for the three
months ended March 31, 2002. This is a result of a $3.5 million increase
relating to the expansion of Cross Media's company owned and operated call
centers, a $2.7 million increase in direct recurring payroll, rent and other
costs relating to the expansion of Cross Media's operations and a $10.4 million
increase relating to cost of sales and promotional advertising costs incurred in
connection with the sale of coins, collectibles and other products relating to
our print and outbound telesales channels. For the three months ended March 31,
2002 and 2001, other direct costs as a percentage of net revenues associated
with Cross Media's magazine business were 36% and 26%, respectively. The
increase is related to a greater portion of Cross Media's magazine contracts
generated from company owned operations and call centers.

     General and Administrative Expenses:  General and administrative expenses
increased $4.5 million to $7.8 million for the quarter ended March 31, 2002 from
$3.3 million in the quarter ended March 31, 2001. The increase is attributable
to $1.7 million of general and administrative costs relating to acquired
operations and an additional $2.8 million relating to the expansion of Cross
Media's operations.

                                        2
<PAGE>

     Other Income (Expense):  For the three months ended March 31, 2002, other
expense increased approximately $251,000 compared to the same period in the
prior year relating to higher interest expense due to a higher average
outstanding balance during the current quarter, a reduction for minority
interest relating to Cross Media's 50% ownership in J Cross Marketing LLC of
approximately $332,000, offset by $140,000 in income from NSI's 49% ownership of
several joint ventures.

     Provision for Income Taxes:  Cross Media recorded a provision of $.5
million for income taxes for the three months ended March 31, 2002 reflecting
estimated taxes due based on a 25% effective tax rate estimated for fiscal 2002.

     Extraordinary Loss:  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 million as well as an early termination fee of $0.2
million. As a result of the early termination of the Coast facility, in the
quarter ended March 31, 2002 Cross Media recorded an extraordinary charge of
approximately $0.5 million relating to the early termination fee and the write
off of the unamortized balance of deferred financing costs relating to the Coast
facility.

     Preferred Dividends:  For the three months ended March 31, 2002, Cross
Media did not record preferred dividends as a result of the redemption and
conversion of all preferred stock in 2001, compared to $1.1 million of preferred
dividends recorded in the first quarter of 2001. The $1.1 million of dividends
recorded in 2001 included $0.9 million of non-cash deemed dividends and
approximately $0.2 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 three months
ended March 31, 2002, Cross Media had net income applicable to common
stockholders of approximately $1.1 million, which resulted in diluted earnings
per share applicable to common stockholders of $0.08. Net loss applicable to
common stockholders for the quarter ended March 31, 2001 was $0.2 million, or
$(0.03) per share. The increase is primarily the result of the impact of $1.1
million of preferred dividends recorded for the quarter ended March 31, 2001 and
earnings of NSI.

                       LIQUIDITY AND FINANCIAL CONDITION

     At March 31, 2002, Cross Media had cash on hand of $9.3 million. During the
quarter ended March 31, 2002 Cross Media used $12 million in operating
activities, used $11.5 million in investing activities, relating to the net cash
paid in connection with the NSI acquisition plus purchases of equipment, and
generated $20.4 million from financing activities in connection with the private
placement of Cross Media common stock and new Fleet credit facility. 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 the
print and outbound sales channels.

     At May 15, 2002, Cross Media had cash on hand of approximately $0.3
million. This reduction in available cash is primarily due to the use of
approximately $10 million of cash proceeds from the March 2002 private placement
described below to reduce outstanding borrowings under the Fleet credit
facility. In the event that cash on hand, together with available borrowings
under the Fleet credit facility ($9.7 million as of May 15, 2002) are not
sufficient to fund operations, Cross Media will need to obtain additional debt
or equity financing.

                                        3
<PAGE>

NSI ACQUISITION

     On January 11, 2002, Cross Media acquired all of the capital stock of
National Syndications, Inc. and all of the capital stock of Preferred Consumer
Marketing, Inc. (which are collectively referred to as "NSI"). Cross Media
recorded the cost of the NSI acquisition of approximately $19.8 million, as
follows: (i) $9.0 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 million
liability for the current portion of the contingent consideration (described
below) and (vi) 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 and the aggregate Joint Ventures' income from
January 1, 2001 through December 31, 2004. The contingent consideration will be
accounted for as additional purchase price. The remaining balance of $2.1
million of the contingent consideration has not been recorded on the balance
sheet as of March 31, 2002, as the outcome of the contingency is not
determinable beyond a reasonable doubt. Goodwill recorded as a result of the
transaction was $14.9 million as of March 31, 2002.

     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 are secured by the assets of NSI.
Upon the closing, 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.
As of March 31, 2002 $5.3 million of the line of credit was outstanding due to
repayments made in the first quarter.

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.

     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, 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.

     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.

     As of the execution of the agreement, the interest rate on the outstanding
loans was 4.75%, the commitment fee was .375% and the letter of credit fee was
2.5%.

     As of March 31, 2002, Cross Media had outstanding debt of $26 million under
the Fleet credit facility and $5.6 million in letters of credit.

                                        4
<PAGE>

     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 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.

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 subsequent to March 31, 2002.

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.

     As a result of the adoption of SFAS 142, Cross Media did not recognize
goodwill amortization for the three months ended March 31, 2002. If SFAS No. 142
was in effect during the first quarter of 2001, Cross Media would not have
recognized $0.2 million in goodwill amortization, therefore net income
applicable to common stockholders would increase to approximately $16,000 and
earnings per share applicable to common stockholder would have increased by
$0.03.

     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 of SFAS No. 143 will
have on its consolidated financial position, results of operations or cash
flows.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long Lived Assets." This statement is effective for
fiscal years beginning after December 15, 2001. This supercedes SFAS 121, while
retaining many of the requirements of such statement. Cross Media has determined
that this impact of this statement is not material as of March 31, 2002.

     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 No. 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 reclassify the extraordinary loss of $0.5 million
recorded as of March 31, 2002 into income from operations in the first quarter
of 2003.
                                        5
<PAGE>

                                  RISK FACTORS

CROSS MEDIA HAS A LIMITED 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.
Therefore, Cross Media has a limited history of operations under its current
business strategy upon which the likelihood of its success can be evaluated.
Moreover, prior to the merger, LifeMinders had only a limited operating history.

     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 retain and motivate qualified personnel;

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

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

     - the need to attract and retain a large number of customers from a variety
       of industries.

THE ANTICIPATED BENEFITS OF THE ACQUISITIONS OF NSI 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 NSI'S BUSINESS DIVERTS TOO MUCH ATTENTION
AWAY FROM CROSS MEDIA'S BUSINESS.

     The success of the acquisition of NSI 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 businesses 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;

     - the inability to utilize the acquired member database and technology
       effectively to grow Cross Media business; and

     - potential conflicts between business cultures.

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

CROSS MEDIA MAY NEED ADDITIONAL FINANCING TO IMPLEMENT ITS STRATEGY AND EXPAND
ITS BUSINESS.

     Cross Media may need additional debt or equity financing to pursue its
strategy of expanding its business through the acquisition of companies whose
businesses are strategically appropriate for it or for its existing operations.
Any financing that Cross Media needs may not be available at all and, if
available, may not be available on terms that are acceptable to Cross Media. The
failure to obtain financing on a timely basis, or on economically favorable
terms, could prevent Cross Media from continuing its strategy or from responding
to changing business or economic conditions, and could cause Cross Media to
experience difficulty in withstanding adverse operating results or competing
effectively.

     If Cross Media raises additional funds by issuing equity securities, Cross
Media stockholders may experience dilution of their ownership interest.
Moreover, Cross Media could issue preferred stock that has rights senior to
those of its common stock. If Cross Media raises funds by issuing debt
securities, these

                                        6
<PAGE>

securities would have rights, preferences and privileges senior to holders of
common stock and lenders may place limitations on Cross Media's operations.

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

     In March 2002, Cross Media entered into a credit agreement with Fleet
National Bank, as issuing lender. 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 the facility.

     Under the agreement with Fleet, Cross Media is required, among other
things, to maintain minimum financial ratios. If Cross Media cannot satisfy
these or other covenants under the facility, Cross Media will be required to
seek a waiver or amendment. If it should require waivers or amendments to the
agreement, there can be no assurance that the lenders will agree. If Cross Media
defaults in performing its obligations to the lenders, the lenders would be
entitled to accelerate the maturity of outstanding indebtedness under the credit
facility, $26 million as of March 31, 2002, and to enforce its security interest
in the pledged assets and stock.

  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.

     Cross Media extends credit to subscribers who purchase multi-magazine
subscription packages. Cross Media has established a reserve to cover
subscription cancellation based upon its past history with magazine subscription
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 effect Cross Media's results of
operations.

  INTERNET ADVERTISING CUSTOMERS AND THE COMPANIES WITH WHICH CROSS MEDIA HAVE
OTHER BUSINESS RELATIONSHIPS MAY EXPERIENCE ADVERSE BUSINESS CONDITIONS THAT
COULD ADVERSELY EFFECT ITS BUSINESS.

     Some of Cross Media's customers may experience difficulty in supporting
their current operations and implementing their business plans. These customers
may reduce their spending on LifeMinders' products and services, or may not be
able to discharge their payment and other obligations. The non-payment or late
payment of amounts due from a significant customer could negatively impact Cross
Media's financial condition. In addition to intense competition, the overall
market for Internet advertising has been characterized in recent quarters by
increasing softness of demand, the reduction or cancellation of advertising
contracts, an increased risk of uncollectible receivables from advertisers, and
the reduction of Internet advertising budgets, especially by Internet-related
companies. Customers may experience difficulty in raising capital, or may be
anticipating such difficulties, and therefore may elect to scale back the
resources they devote to advertising, including on LifeMinders' system. Other
companies in the Internet industry have depleted their available capital, and
could cease operations or file for bankruptcy protection.

     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.

                                        7
<PAGE>

  FUTURE GROWTH COULD PLACE SIGNIFICANT STRAIN ON CROSS MEDIA'S RESOURCES AND
CROSS MEDIA MAY BE UNABLE TO MANAGE FUTURE GROWTH.

     Growth in Cross Media's operations could place a significant strain on
operational systems and employee resources. As a result, Cross Media may have to
implement new operational and financial systems, procedures and controls. In
order to manage and accommodate Cross Media's planned growth, if it occurs,
Cross Media will need to continue to improve and adapt its financial planning,
accounting systems, information systems and management structures. Cross Media
will also need to expand, train, retain and manage its employee base. If Cross
Media is unable to manage growth effectively, financial condition and results of
operations could be materially adversely affected.

  IF CROSS MEDIA ACQUIRES OR MAKES STRATEGIC INVESTMENTS IN OTHER BUSINESSES OR
ACQUIRES OR LICENSES TECHNOLOGY AND OTHER ASSETS, CROSS MEDIA MAY HAVE
DIFFICULTY INTEGRATING THESE BUSINESSES, TECHNOLOGIES AND ASSETS OR GENERATING
AN ACCEPTABLE RETURN ON ITS INVESTMENTS.

     Cross Media may acquire or enter into strategic relationships with other
businesses and acquire or license technology and other assets. Cross Media
cannot assure you that acquisition or licensing opportunities will be available
on terms acceptable to it or at all. Any future acquisitions and strategic
relationships will involve risks, including:

     - inability to raise the required capital;

     - difficulty in assimilating the acquired assets, operations and personnel;

     - disruption of ongoing business;

     - distraction of management from other responsibilities; and

     - lack of the necessary experience to enter new markets.

     Cross Media may not successfully overcome problems encountered in
connection with potential acquisitions or licensing arrangements. In addition,
acquisitions or strategic relationships could materially impair Cross Media's
operating results, causing Cross Media to incur additional debt, or requiring
Cross Media to amortize acquisition expenses and acquired assets.

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

     For the three months ended March 31, 2002 and the year ended December 31,
2001, two independent call centers accounted for approximately 32% and 39%,
respectively 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.

  IF CROSS MEDIA DOES NOT MAINTAIN LIFEMINDERS ENGAGED MEMBER BASE, CROSS MEDIA
MAY NOT BE ABLE TO COMPETE EFFECTIVELY FOR, OR MAINTAIN, ADVERTISERS AND ITS
BUSINESS COULD BE ADVERSELY AFFECTED.

     Although Cross Media intends to continue to produce and distribute emails
to LifeMinders' members, prior to the merger, LifeMinders scaled back its
business operations and reduced the number of emails it sends to members. A
significant portion of LifeMinders' revenue was historically derived from
performance-based and revenue sharing arrangements. Under these arrangements,
advertisers pay LifeMinders in part based on member responses to advertisements
and promotions placed in email newsletters. If LifeMinders' members do not
respond to advertisements and promotions placed in email newsletters, revenues
from these operations could be materially and adversely affected.

     If Cross Media is unable to maintain LifeMinders engaged member base by
keeping current members active (i.e., opening email newsletters and responding
to the advertisements contained in those newsletters), advertisers could find
its audience less attractive and effective for promoting their products and its
services.

                                        8
<PAGE>

  CROSS MEDIA RELIES HEAVILY 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 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.

  CROSS MEDIA DEPENDS HEAVILY ON ITS NETWORK INFRASTRUCTURE AND IF THIS FAILS IT
COULD RESULT IN UNANTICIPATED EXPENSES, AS WELL AS PREVENT ITS LIFEMINDERS'
MEMBERS FROM EFFECTIVELY UTILIZING LIFEMINDERS' SERVICES. THIS COULD NEGATIVELY
IMPACT CROSS MEDIA'S ABILITY TO RETAIN LIFEMINDERS' MEMBERS AND ADVERTISERS.

     Cross Media's ability to successfully create and deliver its LifeMinders'
email newsletters depends in large part on the capacity, reliability and
security of its networking hardware, software and telecommunications
infrastructure. Failures of the network infrastructure could result in
unanticipated expenses to address such failures and could prevent LifeMinders'
members from effectively utilizing LifeMinders' services, which could prevent
Cross Media from retaining members and advertisers. Cross Media does not have
fully redundant systems or a formal disaster recovery plan. The system is
susceptible to natural and man-made disasters, including earthquakes, fires,
floods, loss and vandalism. Further, telecommunications failures, computer
viruses, electronic break-ins or other similar disruptive problems could
adversely affect the operation of the systems. Cross Media's insurance policies
may not adequately compensate it for any power losses that may occur due to any
damages or interruptions in the systems. Accordingly, Cross Media could be
required to make capital expenditures in the event of unanticipated damage.

     In addition, LifeMinders' members depend on Internet service providers, or
ISPs, for access to LifeMinders website due to the rapid growth of the Internet,
ISPs and websites have experienced significant system failures and could
experience outages, delays and other difficulties due to system failures
unrelated to Cross Media's systems. These problems could harm LifeMinders'
business by preventing members from effectively utilizing its services.

  THE CONTENT CONTAINED IN LIFEMINDERS' EMAILS 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 LifeMinders'
members or any content that is accessible from LifeMinders' emails through links
to other 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 could include
material that is defamatory, violates the copyright or trademark rights of third
parties, or subjects it to liability for other types of claims. Cross Media
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.

                                        9
<PAGE>

CONCERNS ABOUT, OR BREACHES OF, THE SECURITY OF LIFEMINDERS' MEMBER 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 LifeMinders
members. Unauthorized users accessing LifeMinders' systems remotely may 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 LifeMinders' 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.

PROBLEMS WITH THE PERFORMANCE AND RELIABILITY OF THE INTERNET INFRASTRUCTURE
COULD ADVERSELY AFFECT THE QUALITY AND RELIABILITY OF THE PRODUCTS AND SERVICES
OFFER MEMBERS AND ADVERTISERS.

     Cross Media depends on the Internet infrastructure 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 benefits of LifeMinders' products
and services to LifeMinders' members and undermine advertising partners' and
members' confidence in the Internet as a viable commercial medium. 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.

CROSS MEDIA MAY HAVE TO LITIGATE TO PROTECT ITS INTELLECTUAL PROPERTY AND OTHER
PROPRIETARY RIGHTS OR TO DEFEND CLAIMS OF THIRD PARTIES, AND SUCH LITIGATION MAY
SUBJECT IT TO SIGNIFICANT LIABILITY AND EXPENSE.

     There is a substantial risk of litigation regarding intellectual property
rights in Internet-related businesses. Legal standards relating to the validity,
enforceability and scope of protection of certain proprietary rights in
Internet-related businesses are uncertain and still evolving. Cross Media may
have to litigate in the future to enforce its intellectual property rights,
protect its trade secrets or defend itself against claims of violating the
proprietary rights of third parties. This litigation may subject Cross Media to
significant liability for damages and result in invalidation of proprietary
rights. In addition, such litigation could be time-consuming and expensive to
defend, even if not meritorious, and result in the diversion of management time
and attention. Any of these factors could adversely affect Cross Media's
business operations.

THE UNITED STATES JUSTICE DEPARTMENT HAS FILED A COMPLAINT AGAINST CROSS MEDIA,
MOS 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 in the United States District Court
for the Northern District of Georgia against Cross Media, Media Outsourcing,
Inc., Ronald Altbach, Dennis Gougion, an officer of Media Outsourcing, 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 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

                                        10
<PAGE>

Act, and the previous FTC order. At the hearing for the temporary restraining
motion, the parties agreed to postpone the hearing for a later date. Upon mutual
agreement of the parties, the rescheduled hearing was postponed for an
undetermined date to facilitate settlement discussions.

     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. Even if Cross Media
is able to resolve this matter amicably, it may have to agree to modify MOS'
operating practices which could have a material adverse effect on Cross Media.
Moreover, any adverse developments could effect Cross Media's ability to make
additional borrowings under the Fleet credit facility.

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, consumer protection and membership club services are
becoming more prevalent. Each of the 50 states and the Federal government has
laws regulating telemarketing, sweepstakes promotions, promotional incentives
and advertising to consumers, which vary from state to state. While Cross Media
reviews its telemarketing scripts and advertising copy to ensure that they
comply 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, 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 in the process of reviewing the
provisions of the Telemarketing Sales Rule and Negative Option Rule to determine
if any changes to the rule should be made. The Federal Trade Commission recently
issued a Notice of Proposed Rulemaking in which it proposed substantial changes
in the Telemarketing Sales Rule, which if adopted could have a significant
adverse effect on Cross Media's business.

     In 1999, Congress enacted the Deceptive Mail Prevention and Enforcement
Act, which imposes various restrictions on the offering of sweepstakes through
the mail. Additional sweepstake legislation has been enacted or is pending in
various states. This additional regulation could have an adverse impact on Cross
Media's marketing activities.

EXTENSIVE GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATED TO DOING
BUSINESS ON THE INTERNET COULD LIMIT SALES OR ADD SIGNIFICANT ADDITIONAL COSTS
TO CROSS MEDIA'S BUSINESS.

     Laws and regulations directly applicable to Internet communications,
commerce, marketing and data protection are becoming more prevalent. If any of
these laws hinder the growth of Internet use generally or decreases the
acceptance of the Internet as a medium of communications, commerce and marketing
Cross Media's business and prospects may suffer materially. The United States
Congress has enacted Internet laws regarding children's privacy, copyrights and
taxation. Other laws and regulations may be adopted covering issues such as user
privacy, marketing activities, pricing, content, taxation and quality of
products and services. The governments of some states and foreign countries have
begun to regulate Cross Media's transactions and levy sales or other taxes
relating to its activities and will likely continue to do so. The laws governing
the Internet remain largely unsettled, even in areas where legislation has been
enacted. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation apply to the
Internet and Internet advertising and marketing services. In addition, the
growth and development of the market for Internet commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business over the
Internet.

                                        11
<PAGE>

     Laws and regulations governing the transmission of unsolicited email
marketing messages are being considered in many jurisdictions. Legislation of
that type has recently been adopted by numerous states, and similar legislation
is pending in several states and in Congress. These laws could have an adverse
impact on Cross Media Internet marketing activities. The Telecommunications Act
of 1996 prohibits some types of information and content from being transmitted
over the Internet. The prohibition's scope and the liability associated with a
Telecommunications Act violation are currently unsettled. In addition, although
substantial portions of the Communications Decency Act were held to be
unconstitutional, Cross Media cannot be certain that similar legislation will
not be enacted and upheld in the future.

CHANGES IN LAWS RELATING TO DATA COLLECTION AND USE PRACTICES AND THE PRIVACY OF
INTERNET USERS AND CONSUMERS COULD HARM CROSS MEDIA'S BUSINESS.

     There have been increasing public debate about the collection, distribution
and use of information about consumers. New limitations on the collection and
use of information relating to Internet users are currently being considered by
legislatures and regulatory agencies in the United States and internationally.
Cross Media is unable to predict whether any particular proposal will pass, or
the nature of the limitations in those proposals that do pass. Since many of the
proposals are in their developmental stages, Cross Media is unable to determine
the impact these may have on Cross Media's business. In addition, it is possible
that changes to existing law, including new interpretations of existing law,
could have a material and adverse impact on Cross Media's business, financial
condition and results of operations.

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 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 and believes that it has adequate
insurance to cover any award of monetary damages in the lawsuit.

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 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 4.8 million additional shares of common
stock, based on current exercise and conversion prices. The exercise of options
and warrants and convertible rights, most of which have exercise prices or
conversion rates below the current market price of Cross Media common stock,
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 Cross 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,

                                        12
<PAGE>

including the election of directors and the approval of any other action
requiring the approval of stockholders. This concentration of share ownership
may:

     - 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.

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                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     No significant changes have occurred with respect to legal proceedings as
disclosed in Part I, Item 3, of the Company's 2001 Annual Report on Form 10-KSB,
except as follows:

     In April 2002, the United States Justice Department, on behalf of the
Federal Trade Commission, filed a complaint in the United States District Court
for the Northern District of Georgia against Cross Media, Media Outsourcing,
Inc., Ronald Altbach, Dennis Gougion, an officer of Media Outsourcing, 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 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. At the hearing for the temporary restraining motion, the
parties agreed to postpone the hearing for a later date. Upon mutual agreement
of the parties, the rescheduled hearing was postponed for an undetermined date
to facilitate settlement discussions.

ITEM 2.  CHANGES IN SECURITIES

RECENT ISSUANCES OF UNREGISTERED SECURITIES

     On January 11, 2002, Cross Media issued an aggregate of 279,859 shares of
common stock to Bud Pironti and the two other stockholders at NSI in connection
with Cross Media's acquisition of NSI. The issuance of these securities was made
in reliance on Section 4 (2) of the Securities Act as a transaction not
involving any public offering, because: (1) Bud Pironti and the two other
stockholders of NSI represented that each were 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.

     On January 11, 2002, Cross Media issued five-year warrants to purchase
20,000 shares of common stock to Transaction Marketing Partners for consulting
services rendered to Cross Media in connection with the acquisition of NSI. The
issuance of these securities was made in reliance on Section 4 (2) of the
Securities Act as a transaction not involving any public offering, because: (1)
Transactional Marketing Partners 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.

     On February 8, 2002, Cross Media issued five-year warrants to purchase
10,000 shares of common stock to Capital Research for consulting services
rendered to Cross Media in connection with the acquisition of NSI. The issuance
of these securities was made in reliance on Section 4 (2) of the Securities Act
as a transaction not involving any public offering, because: (1) Capital
Research represented that it was an accredited investor and 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.

     On March 1, 2002, Cross Media issued two-year warrants to purchase 50,000
shares of common stock to Lancer Offshore, Inc. in connection with the $2
million revolving credit facility. The issuance of these securities was made in
reliance on Section 4 (2) of the Securities Act as a transaction not involving
any public offering, because: (1) Lancer Offshore, Inc. represented that it was
an accredited investor and 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.

     On March 27, 2002, Cross Media issued five-year warrants to purchase in
aggregate 110,540 shares of common stock to Scott Griffith and Jesse Shelmire,
as designees of Stonegate Securities, Inc., as placement agent compensation in
connection with the private placement with Stonegate Securities Inc. The
issuance of

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these securities was made in reliance on Section 4 (2) of the Securities Act as
a transaction not involving any public offering, because: (1) Each represented
that he was an accredited investor and 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 SECURITIES

     None

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF STOCKHOLDERS

     None

ITEM 5.  OTHER INFORMATION

     None

ITEM 6.  REPORTS ON FORM 8-K

     We filed the following Current Report on Form 8-K during the fiscal quarter
ended March 31, 2002:

     (i) On January 11, 2002, we filed a Current Report on Form 8-K regarding
the acquisition of NSI.

     (ii) On January 11, 2002, we filed a Current Report on Form 8-K regarding
the unaudited pro forma combined condensed statement of operations relating to
the acquisition of NSI.

                                          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)

Dated: May 15, 2002

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