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UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.20549

FORM 10-QSB

(MarkOne)

|           |                                                                                  |
|-----------|----------------------------------------------------------------------------------|
| [X]  | QUARTERLY REPORTUNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the quarterly period ended March  31,2006

|                            |                                                                          |
|----------------------------|--------------------------------------------------------------------------|
| [   ]  | TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT |

For the transition period from                     to                    

Commission File Number:     000-51702

RELATIONSERVE MEDIA,INC.(Exact Name Of Small Business Issuer As SpecifiedIn ItsCharter)

|                                                              |  |                                     |  |  |  |  |
|--------------------------------------------------------------|--|-------------------------------------|--|--|--|--|
| Delaware                                                     |  | 43-2053462                          |
| (Stateor Other Jurisdiction of Incorporation orOrganization) |  | (I.R.S. Employer IdentificationNo.) |
|                                                              |

6700 North Andrews Avenue,2nd FloorFort Lauderdale, Florida33309(Address of Principal ExecutiveOffices)

(954)202-6000(Issuer's Telephone Number, IncludingArea Code)

N/A(Former Name, FormerAddress and Former Fiscal Year, If Changed Since LastReport)

Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months or for such shorter period that theregistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes[x] No [   ]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes [   ] No [x]

State the number of shares outstanding of each of theissuer’s classes of common equity, as of the latest practicabledate: 42,755,082 shares at May  16,2006

Transitional Small Business Disclosure Format (Checkone): Yes [   ] No[x]

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESFORM 10-QSBQUARTERLY PERIOD ENDEDMARCH 31,2006

INDEX

|                                                                                                                  |  |        |  |  |  |  |
|------------------------------------------------------------------------------------------------------------------|--|--------|--|--|--|--|
|                                                                                                             |  | Page   |
| PARTI – FINANCIALINFORMATION                                                                               |  |   |
| Item 1 –Consolidated Financial Statements(Unaudited)                                                       |  |   |
| Condensed ConsolidatedBalance Sheet (Unaudited)As of March 31,2006                                               |  | 3      |
| CondensedConsolidated Statements of Operations (Unaudited)For the ThreeMonths Ended March 31, 2006 and2005       |  | 4      |
| Condensed ConsolidatedStatement of Stockholders’ Equity (Unaudited)For the ThreeMonths Ended March 31,2006 |  | 5      |
| Condensed ConsolidatedStatements of Cash Flows (Unaudited)For the Three Months EndedMarch 31, 2006 and2005       |  | 6      |
| Notes to Unaudited CondensedConsolidated FinancialStatements                                                     |  | 7      |
| Item 2 –Management's Discussion and Analysis or Plan ofOperation                                           |  | 31     |
| Item 3 – Controlsand Procedures                                                                            |  | 37     |
| PART II –OTHER INFORMATION                                                                                 |  |   |
| Item 1 –Legal Proceedings                                                                                  |  | 37     |
| Item 2 –Unregistered Sales of Equity Securities and Use ofProceeds                                         |  | 38     |
| Item 3 – DefaultsUpon Senior Securities                                                                    |  | 39     |
| Item 6–Exhibits                                                                                            |  | 39     |
|                                                                                                                  |

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCESHEETMARCH 31,2006(Unaudited)

|                                                                                                                    |  |        |             |         |  |  |
|--------------------------------------------------------------------------------------------------------------------|--|--------|-------------|---------|--|--|
| ASSETS                                                                                                             |  |   |        |    |
| Currentassets                                                                                                      |  |   |        |    |
| Cash                                                                                                               |  | $      | 5,270,406   |    |
| Accountsreceivable, less allowance for doubtful accounts of$841,000                                                |  |   | 11,283,994  |    |
| Prepaid expensesand other currentassets                                                                            |  |   | 370,466     |    |
| Totalcurrentassets                                                                                                 |  |   | 16,924,866  |    |
|                                                                                                               |  |   |        |    |
| Propertyand equipment, net                                                                                         |  |   | 1,728,554   |    |
| Intangibleassets,net                                                                                               |  |   | 5,816,502   |    |
| Goodwill                                                                                                           |  |   | 40,489,056  |    |
| Otherassets                                                                                                        |  |   | 49,196      |    |
| Totalassets                                                                                                        |  | $      | 65,008,174  |    |
|                                                                                                               |  |   |        |    |
| LIABILITIESAND STOCKHOLDERS’ EQUITY                                                                          |  |   |        |    |
| Currentliabilities                                                                                                 |  |   |        |    |
| Accountspayable                                                                                                    |  | $      | 9,470,868   |    |
| Accruedexpenses                                                                                                    |  |   | 614,551     |    |
| Accruedcompensation                                                                                                |  |   | 135,055     |    |
| Accruedcommissions                                                                                                 |  |   | 310,102     |    |
| Accrued penalty– registrationrights                                                                          |  |   | 265,000     |    |
| Deferredrevenue                                                                                                    |  |   | 1,387,794   |    |
| Customerdeposits                                                                                                   |  |   | 486,204     |    |
| Totalcurrentliabilities                                                                                            |  |   | 12,669,574  |    |
|                                                                                                               |  |   |        |    |
| Debenturespayable, net of debt discount of$33,396,667                                                              |  |   | 1,553,333   |    |
| Deferredrent                                                                                                       |  |   | 306,549     |    |
|                                                                                                               |  |   |        |    |
| Totalliabilities                                                                                                   |  |   | 14,529,456  |    |
|                                                                                                               |  |   |        |    |
| Commitmentsandcontingencies                                                                                        |  |   |        |    |
|                                                                                                               |  |   |        |    |
| Stockholders’equity                                                                                          |  |   |        |    |
| Series A Convertible Preferred stock– $.001 par value; 1,500,000 authorized; no shares issued andoutstanding |  |   | —     |    |
| Common stock –$.001 par value; 90,000,000 shares authorized; 40,741,920 shares issuedand outstanding         |  |   | 40,742      |    |
| Deferredcompensation                                                                                               |  |   | (3,906,357  | )  |
| Additional paid incapital                                                                                          |  |   | 72,556,841  |    |
| Accumulateddeficit                                                                                                 |  |   | (18,212,508 | )  |
|                                                                                                               |  |   |        |    |
| Totalstockholders’equity                                                                                     |  |   | 50,478,718  |    |
|                                                                                                               |  |   |        |    |
| Totalliabilities and stockholders’equity                                                                     |  | $      | 65,008,174  |    |
|                                                                                                                    |

SeeNotes to Unaudited Condensed Consolidated FinancialStatements

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RELATIONSERVE MEDIA, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS(Unaudited)

|                                                                       |  |                                    |            |         |  |        |            |        |  |  |
|-----------------------------------------------------------------------|--|------------------------------------|------------|---------|--|--------|------------|--------|--|--|
|                                                                  |  | Forthe Three Months Ended March31, |
|                                                                  |  | 2006                               |            | 2005    |
| Revenues,net                                                          |  | $                                  | 8,513,022  |    |  | $      | 2,691,670  |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Costofrevenues                                                        |  |                               | 5,782,180  |    |  |   | 470,437    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Grossprofit                                                           |  |                               | 2,730,842  |    |  |   | 2,221,233  |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Operatingexpenses                                                     |  |                               |       |    |  |   |       |   |
| Salaries                                                              |  |                               | 1,678,413  |    |  |   | 325,202    |   |
| Baddebt                                                               |  |                               | 256,054    |    |  |   | 300,401    |   |
| Commissions                                                           |  |                               | 163,329    |    |  |   | 514,333    |   |
| Professionalfees                                                      |  |                               | 539,854    |    |  |   | 22,443     |   |
| Advertising andtradeshows                                             |  |                               | 42,406     |    |  |   | 135,853    |   |
| Depreciationandamortization                                           |  |                               | 277,362    |    |  |   | 45,405     |   |
| Othergeneral andadministrative                                        |  |                               | 1,492,225  |    |  |   | 317,870    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Totaloperatingexpenses                                                |  |                               | 4,449,643  |    |  |   | 1,661,507  |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| (Loss)Income fromoperations                                           |  |                               | (1,718,801 | )  |  |   | 559,726    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Otherincome (expense)                                                 |  |                               |       |    |  |   |       |   |
| Registrationrightspenalty                                             |  |                               | 60,000     |    |  |   | —    |   |
| Covenantpenalty                                                       |  |                               | (1,443,750 | )  |  |   | —    |   |
| Loss onequity-methodinvestment                                        |  |                               | (153,389   | )  |  |   | —    |   |
| Interestincome                                                        |  |                               | 18,419     |    |  |   | —    |   |
| Interestexpense                                                       |  |                               | (1,897,008 | )  |  |   | —    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Totalotherexpense                                                     |  |                               | (3,415,728 | )  |  |   | —    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| (Loss)Income before provision for incometaxes                         |  |                               | (5,134,529 | )  |  |   | 559,726    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Provisionfor incometaxes                                              |  |                               | —    |    |  |   | —    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Net(loss) income attributable to commonstockholders                   |  | $                                  | (5,134,529 | )  |  | $      | 559,726    |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Net(loss) income per common share: basic anddiluted                   |  | $                                  | (0.14      | )  |  | $      | 0.05       |   |
|                                                                  |  |                               |       |    |  |   |       |   |
| Weightedaverage number of common shares outstanding: basic anddiluted |  |                               | 37,261,031 |    |  |   | 12,001,000 |   |
|                                                                       |

SeeNotes to Unaudited Condensed Consolidated FinancialStatements

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RELATIONSERVE MEDIA, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OFSTOCKHOLDERS’ EQUITYFOR THE THREE MONTHS ENDED MARCH 31,2006(Unaudited)

|                                                                     |  |                                |          |                             |  |                 |             |         |  |                      |            |                          |  |                    |         |                           |  |        |            |         |  |        |            |         |  |        |             |         |  |        |            |         |  |  |
|---------------------------------------------------------------------|--|--------------------------------|----------|-----------------------------|--|-----------------|-------------|---------|--|----------------------|------------|--------------------------|--|--------------------|---------|---------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--------|-------------|---------|--|--------|------------|---------|--|--|
|                                                                |  | PreferredStock $.001 Par Value |          | Common Stock $.001 ParValue |  |            |             |    |  |                 |            |                     |
|                                                                |  | Numberof Shares                |          | Amount                      |  | Number ofShares |             | Amount  |  | DeferredCompensation |            | AdditionalPaid-InCapital |  | AccumulatedDeficit |         | Stockholders’Equity |
| Balance – January  1,2006                                     |  |                           | 762,199  |                        |  | $               | 10,289,690  |    |  |                 | 19,671,015 |                     |  | $                  | 19,671  |                      |  | $      | (1,851,973 | )  |  | $      | 16,651,325 |    |  | $      | (13,077,979 | )  |  | $      | 12,030,734 |    |
| Conversionof preferred stock into commonstock                       |  |                           | (762,199 | )                      |  |            | (10,289,690 | )  |  |                 | 7,621,990  |                     |  |               | 7,622   |                      |  |   | —    |    |  |   | 10,282,068 |    |  |   | —     |    |  |   | —    |    |
| Commonstock issued in privateplacement                              |  |                           | —  |                        |  |            | —     |    |  |                 | 500,000    |                     |  |               | 500     |                      |  |   | —    |    |  |   | 674,500    |    |  |   | —     |    |  |   | 675,000    |    |
| Commonstock issued in STACacquisition                               |  |                           | —  |                        |  |            | —     |    |  |                 | 9,506,380  |                     |  |               | 9,506   |                      |  |   | —    |    |  |   | 5,296,517  |    |  |   | —     |    |  |   | 5,306,023  |    |
| Commonstock issued upon exercise ofwarrants                         |  |                           | —  |                        |  |            | —     |    |  |                 | 2,914,399  |                     |  |               | 2,915   |                      |  |   | —    |    |  |   | 59,585     |    |  |   | —     |    |  |   | 62,500     |    |
| Beneficialconversion feature of warrants issued to debentureholders |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | —    |    |  |   | 34,950,000 |    |  |   | —     |    |  |   | 34,950,000 |    |
| Commonstock issued to debenture holders pursuant to letteragreement |  |                           | —  |                        |  |            | —     |    |  |                 | 525,000    |                     |  |               | 525     |                      |  |   | —    |    |  |   | 1,443,225  |    |  |   | —     |    |  |   | 1,443,750  |    |
| Commonstock issued as employeecompensation                          |  |                           | —  |                        |  |            | —     |    |  |                 | 3,136      |                     |  |               | 3       |                      |  |   | —    |    |  |   | 8,934      |    |  |   | —     |    |  |   | 8,937      |    |
| Adjustmentof previous financingcosts                                |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | —    |    |  |   | (1,442     | )  |  |   | —     |    |  |   | (1,442     | )  |
| Allocationof consulting agreement to acquisitioncosts               |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | 750,000    |    |  |   | —    |    |  |   | —     |    |  |   | 750,000    |    |
| Grantof common stockoptions                                         |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | (3,192,129 | )  |  |   | 3,192,129  |    |  |   | —     |    |  |   | —    |    |
| Amortizationof deferredcompensation                                 |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | 387,745    |    |  |   | —    |    |  |   | —     |    |  |   | 387,745    |    |
| Netloss                                                             |  |                           | —  |                        |  |            | —     |    |  |                 | —    |                     |  |               | — |                      |  |   | —    |    |  |   | —    |    |  |   | (5,134,529  | )  |  |   | (5,134,529 | )  |
| Balance– March  31,2006                                       |  |                           | —  |                        |  | $               | —     |    |  |                 | 40,741,920 |                     |  | $                  | 40,742  |                      |  | $      | (3,906,357 | )  |  | $      | 72,556,841 |    |  | $      | (18,212,508 | )  |  | $      | 50,478,718 |    |
|                                                                     |

SeeNotes to Unaudited Condensed Consolidated FinancialStatements

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RELATIONSERVE MEDIA, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS(Unaudited)

|                                                                                    |  |                                    |            |         |  |        |          |         |  |  |
|------------------------------------------------------------------------------------|--|------------------------------------|------------|---------|--|--------|----------|---------|--|--|
|                                                                               |  | Forthe Three Months Ended March31, |
|                                                                               |  | 2006                               |            | 2005    |
| CASHFLOWS FROM OPERATINGACTIVITIES                                                 |  |                               |       |    |  |   |     |    |
| Net (loss)income                                                                   |  | $                                  | (5,134,529 | )  |  | $      | 559,726  |    |
| Adjustmentsto reconcile net (loss) income to net cash used in operatingactivities: |  |                               |       |    |  |   |     |    |
| Depreciationandamortization                                                        |  |                               | 564,591    |    |  |   | 160,291  |    |
| Stock-basedcompensation                                                            |  |                               | 396,684    |    |  |   | —  |    |
| Non-cashinterest                                                                   |  |                               | 1,553,333  |    |  |   | —  |    |
| Covenantpenalty                                                                    |  |                               | 1,443,750  |    |  |   | —  |    |
| Provisionfor baddebt                                                               |  |                               | 256,054    |    |  |   | —  |    |
| Loss onequity-methodinvestment                                                     |  |                               | 153,389    |    |  |   | —  |    |
| Changesin assets andliabilities:                                                   |  |                               |       |    |  |   |     |    |
| Accountsreceivable                                                                 |  |                               | (2,408,189 | )  |  |   | (801,036 | )  |
| Duefrom former members ofLLC                                                       |  |                               | —    |    |  |   | 140,312  |    |
| Prepaidexpenses and other currentassets                                            |  |                               | (47,914    | )  |  |   | (15,455  | )  |
| Otherassets                                                                        |  |                               | (1,177     | )  |  |   | —  |    |
| Accountspayable                                                                    |  |                               | (1,514,461 | )  |  |   | 187,508  |    |
| Accruedexpenses                                                                    |  |                               | (786,862   | )  |  |   | 114,647  |    |
| Accruedcompensation                                                                |  |                               | (147,418   | )  |  |   | —  |    |
| Accruedcommissions                                                                 |  |                               | (133,467   | )  |  |   | 140,264  |    |
| Deferredrent                                                                       |  |                               | (11,191    | )  |  |   | (6,117   | )  |
| Deferredrevenue                                                                    |  |                               | 867,281    |    |  |   | —  |    |
| Customerdeposits                                                                   |  |                               | 94,314     |    |  |   | (40,000  | )  |
| Totaladjustments                                                                   |  |                               | 278,717    |    |  |   | (119,586 | )  |
| Netcash (used by) provided by operatingactivities                                  |  |                               | (4,855,812 | )  |  |   | 440,140  |    |
| CASHFLOWS FROM INVESTINGACTIVITIES                                                 |  |                               |       |    |  |   |     |    |
| Cash acquired inpurchaseaccounting                                                 |  |                               | 9,347,155  |    |  |   | —  |    |
| Cashreceived in reconciliation of assetpurchase                                    |  |                               | 318,670    |    |  |   | —  |    |
| Purchaseof property andequipment                                                   |  |                               | (209,040   | )  |  |   | (26,098  | )  |
| Investmentin prospectiveacquiree                                                   |  |                               | (193,385   | )  |  |   | —  |    |
| Purchaseof intangibleassets                                                        |  |                               | (31,154    | )  |  |   | (408,227 | )  |
| Netcash provided by (used by) investingactivities                                  |  |                               | 9,232,246  |    |  |   | (434,325 | )  |
| CASHFLOWS FROM FINANCINGACTIVITIES                                                 |  |                               |       |    |  |   |     |    |
| Net proceeds from salesof commonstock                                              |  |                               | 675,000    |    |  |   | —  |    |
| Proceedsreceived upon exercise ofwarrants                                          |  |                               | 62,500     |    |  |   | —  |    |
| Payments onnotespayable                                                            |  |                               | —    |    |  |   | (60,000  | )  |
| Netcash provided (used) by financingactivities                                     |  |                               | 737,500    |    |  |   | (60,000  | )  |
| Netincrease (decrease) incash                                                      |  |                               | 5,113,934  |    |  |   | (54,185  | )  |
| Cash –beginning ofperiod                                                     |  |                               | 156,472    |    |  |   | 154,379  |    |
| Cash– end ofperiod                                                           |  | $                                  | 5,270,406  |    |  | $      | 100,194  |    |
| SUPPLEMENTALDISCLOSURE OF CASH FLOWINFORMATION                                     |  |                               |       |    |  |   |     |    |
| Cash paidduring the periodsfor:                                                    |  |                               |       |    |  |   |     |    |
| Interest                                                                           |  | $                                  | 535,901    |    |  | $      | —  |    |
| Incometaxes                                                                        |  | $                                  | —    |    |  | $      | —  |    |
| Non-cashinvestingactivities                                                        |  |                               |       |    |  |   |     |    |
| Issuance ofcommon stock in connection withconsolidation                            |  | $                                  | 5,306,022  |    |  | $      | —  |    |
|                                                                                    |

SeeNotes to Unaudited Condensed Consolidated FinancialStatements

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE1 – BASIS OF PRESENTATION AND BUSINESSORGANIZATION

Basis ofpresentation

The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance withGenerally Accepted Accounting Principles(‘‘GAAP’’) for interim financialinformation and with the instructions to Form 10-QSB and Item 310(b) ofRegulation S-B. Accordingly, the financial statements do not includeall of the information and footnotes required by GAAP for completefinancial statements. In the opinion of management, all adjustmentsconsidered necessary for a fair presentation have been included andsuch adjustments are of a normal recurring nature. These consolidatedfinancial statements should be read in conjunction with the financialstatements for the year ended December  31,  2005 and notesthereto of RelationServe Media Inc. (the‘‘Company’’ or‘‘RelationServe’’) included in the AnnualReport on Form 10-KSB for the fiscal year ended December31,  2005. The results of operations for the three months endedMarch  31,  2006 are not necessarily indicative of theresults for the full fiscal year ending December  31,2006.

The unaudited condensed consolidated financialstatements are prepared in accordance with GAAP. The consolidatedfinancial statements of the Company include the Company and itssubsidiaries. All material intercompany balances and transactions havebeen eliminated.

The unaudited condensed consolidatedfinancial statements contained herein include commencingFebruary  1,  2006 the results of SendTec Acquisition Corp.(‘‘STAC’’) which became a wholly-ownedsubsidiary of the Company on February  3,  2006. OnOctober  31,  2005, STAC acquired the assets of SendTec. Asof October  31,  2005 and through February  1,2006, the Company retained approximately 23% of the total votinginterests in STAC. Accordingly, from October  31,  2005through February  1,  2006, the Company accounted for itsinvestment in STAC in accordance with the provision of APB 18,‘‘The Equity Method of Accounting for Investments inCommon Stock,’’ which provides that companies mustrecord, in results of operations, their proportionate share of earningsor losses of investees when they are deemed to influence but notcontrol the affairs of the investee enterprise. The Company recorded a$1,034,102 charge for its proportionate share of STAC’s lossesfor the period from October  31,  2005 throughDecember  31,  2005 and a $153,389 charge for itsproportionate share of STAC’s losses for the month endedJanuary  31,  2006.

Organization

RelationServeMedia, Inc. (the ‘‘Company’’) is a holdingcompany organized for the purpose of acquiring, owning, and managingvarious marketing and advertising businesses, primarily involving theInternet. The Company operates two primary businesses and sinceFebruary  2006 the Company's SendTec marketing servicesbusiness has become its dominant operation. On March  17,2006, our board of directors authorized that our name be changed toSendTec, Inc., subject to stockholder approval. SendTec is a marketingcompany, primarily involved in direct response marketing. In additionto SendTec, the Company also owns and operates two smaller businesses,RelationServe Access (‘‘Access’’), andFriendsand.com(‘‘Friendsand’’).

The Companywas originally formed as Chubasco Resources Corp.(‘‘Chubasco’’) in the State of Nevada as anexploration stage company engaged in the business of mineralexploration.

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE1 – BASIS OF PRESENTATION AND BUSINESSORGANIZATION (continued)

RelationServe, Inc., wasincorporated in Delaware in March  2005. RelationServe, throughits wholly-owned subsidiary, Access, purchased certain assets andassumed certain liabilities of Omni Point Marketing LLC(‘‘Omni Point’’), and through itswholly-owned subsidiary, Friendsand, acquired all of the outstandingmembership interests of Friendsand, LLC, a Delaware limited liabilitycompany related to Omni Point by common ownership (the‘‘Affiliated Company’’ or‘‘Friends LLC’’). RelationServe completedthese transactions simultaneously on May  16,  2005. Priorto such acquisitions, RelationServe, Inc. had no operating business orassets. RelationServe acquired the net assets and business of OmniPoint and membership interests of Affiliated Company for a combinationof cash in the amount of $150,000, a two-year promissory note in theprincipal amount of $700,000, and 8,000,000 shares of its Common Stock.RelationServe, which had no business operations prior to thesetransactions, accounted for its acquisition of Omni Point’s netassets and merger with Affiliated Company as a recapitalization becauseOmni Point and the former member of Affiliated Company gained controlof a majority of RelationServe’s Common Stock upon completingthese transactions. Accordingly, Omni Point and Affiliated Company aredeemed to be the acquirer for accounting purposes.

OnJune  13,  2005, RelationServe and Chubasco completed areverse merger (the ‘‘Merger’’). Pursuantto the terms of the merger agreement, the Company acquired all of theissued and outstanding capital stock of RelationServe on a one-for-onebasis in exchange for 13,326,000 shares of its $0.001 par value CommonStock. In addition, certain of Chubasco’s stockholderssimultaneously cancelled an aggregate of 6,800,000 shares of theirCommon Stock upon completing the Merger. Each share of RelationsServeCommon Stock (13,326,000) and each RelationsServe warrant (6,562,500)outstanding prior to the Merger was automatically converted into anequivalent number of shares of the Company’s Common Stock and anequivalent number of warrants to purchase shares of theCompany’s Common Stock, upon completion of the Merger. As aresult, RelationsServe’s former stockholders became theCompany’s majority stockholders and RelationsServe became theCompany’s wholly-owned subsidiary. Chubasco’sstockholders retained 3,216,500 shares of the Company’s CommonStock. In addition, the Company assumed a $700,000 promissory note duein May  2007 that RelationServe issued, which was prepaid during2005, as partial consideration in a previous purchase of net assetsdescribed above, all prior business operations of Chubasco ceased andthe Company’s principal executive offices were relocated to FortLauderdale, Florida.

In addition, the acquisition ofRelationServe by the Company was accounted for as a reverse mergerbecause on a post-merger basis, the former RelationServe stockholdershold a majority of the outstanding Common Stock of the Company on avoting and fully diluted basis. As a result, RelationServe was deemedto be the acquirer for accounting purposes. Accordingly, theconsolidated financial statements presented for the period endingMarch  31,  2005, are those of RelationServe and Omni Pointand Affiliated Company for all periods prior to the acquisition, andthe financial statements of the consolidated companies from theacquisition date forward. The historical stockholders' deficit ofRelationServe prior to the acquisition has been retroactively restated(a recapitalization) for the equivalent number of shares received inthe acquisition after giving effect to any differences in the par valueof the Company and RelationServe's Common Stock, with an offsetto additional paid-in capital. The restated consolidated retainedearnings of the accounting acquirer (RelationServe and Omni Point andAffiliated Company) are carried forward after theacquisition.

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NOTE1 – BASIS OF PRESENTATION AND BUSINESSORGANIZATION (continued)

On August  29,  2005,RelationServe Media, Inc., a Nevada corporation(‘‘RelationServe (Nevada)’’), andRelationServe (Delaware) entered into an Agreement and Plan of Merger.On August  29,  2005, RelationServe (Nevada) merged withand into RelationServe (Delaware) in a reincorporation merger, so thatRelationServe (Nevada) and RelationServe (Delaware) became a singlecorporation named RelationServe Media, Inc. (the‘‘Surviving Corporation’’), which existsunder, and is governed by, the laws of the State of Delaware (the‘‘ReincorporationMerger’’).

The Company completed anacquisition of the net assets and business of SendTec as described inNote4.

NOTE2 – LIQUIDITY AND FINANCIAL CONDITION

The Companyincurred a $5,134,529 loss for the three months ended March31,  2006, which includes an aggregate of approximately$3,662,000 in non-cash charges relating to stock issued to satisfy acovenant breach of $1,444,000, non-cash interest of $1,553,000, stockbased consulting fees of $297,000, depreciation and amortization of$277,000, and stock based compensation of $91,000.

TheCompany is in the process of integrating its newly acquired business(SendTec) into its existing operations and believes that its currentcapital resources and resources available from SendTec will enable itto sustain operations through March 31, 2007. The Company intends toraise additional capital to fund the expansion of its business andbelieves it has access to capital resources; however, the Company hasnot secured any commitments for new financing at this time nor can theCompany provide any assurance that it will be successful in its effortsto raise additional capital if considered necessary, in thefuture.

In addition, due to the requirement in itsagreements with the Debenture holders that the Company must register130% of the shares of Common Stock that the Debenture holderscurrently hold or are entitled to receive under the Debentures or thewarrants they hold, the Company currently does not have sufficientauthorized Common Stock to issue, or reserve for issuance, Common Stockin connection with any proposed equity transaction involving its CommonStock. Moreover, so long as the Debentures remain outstanding, we arerestricted from incurring additional indebtedness other than certainpermitted indebtedness.

The Company is in the process ofevaluating several strategic alternatives regarding the Access andFriendsand operations, including implementing significant cost cuttingmeasures. To date, the Company has not committed to any specific planof action. If no action is taken with respect to the Access andFreindsand operations, the Company estimates that it will requireapproximately $8.9  million to operate the business through March31, 2007, including $330,000 for investments in data, software andcomputer equipment. The Company estimates that funds it currently hasavailable plus operating cash flow it expects to generate during thenext twelve months will amount to approximately $6  million. TheCompany expects that a significant portion of its liquidity needs willbe funded through the operations of STAC.

If theCompany’s implementation of cost cutting measures isinsufficient to reduce or eliminate operating losses, the Companyestimates that it will have to raise additional funds to meet itsliquidity needs through the end of March 2007.

Asdescribed in Note 7, the Company was not in compliance with certainfinancial covenants it is required to maintain under the terms of itsSecurities Purchase Agreement with the Debenture holders. As ofMay  19, 2006, at least 75% of the debenture investorswaived the Company’s breach of these covenants pursuant to aletter agreement dated May  19, 2006 and accordingly under theterms of the Securities Purchase Agreement the waiver becomeseffective. Under the terms of this waiver, the debenture investors haveagreed to permanently forbear their right to (a) declare the Company in

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NOTE2 – LIQUIDITY AND FINANCIAL CONDITION (continued)

default of the debentures and (b) demandacceleration of the loan; however, such waiver relates solely to theCompany’s noncompliance with the covenants as of March31,  2006. The waiver does not amend any other terms of thedebenture agreement nor does it waive the requirement for the Companyto maintain compliance with any covenants contained in the securitiesat any other times subsequent to March  31,2006.

The Company is taking certain measures to avoidfuture instances of non-compliance of the financial covenants in theSecurities Purchase Agreement, which include engaging in discussionwith the debenture investors to amend such covenants to amounts thatwould better enable the Company to comply in future periods and/ormaking changes in the cost structure of business to reduce operatingexpenses and cash outlays that affect its results of operations.However, the Company cannot provide any assurance that in the event itis unable to maintain compliance with such covenants, the debentureinvestors will issue waiver to the Company in the future.

The Company anticipates that it will seek to raise additionalcapital during 2006 and 2007 to fund additional growth of the businessand provide cash for operations if necessary; however, there are nospecific financing transactions planned at this time. The Company alsocan not provide any assurance that in the event it seeks to raiseadditional capital that such capital will be available on acceptableterms, if atall.

NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation offinancial statements in conformity with GAAP requires management tomake estimates and assumptions that affect certain reported amounts anddisclosures. Accordingly, actual results could differ from thoseestimates. Significant estimates in 2006 and 2005 include the allowancefor doubtful accounts, stock-based compensation, the useful life ofproperty and equipment and intangible assets, and impairment ofintangible assets and goodwill.

AccountsReceivable

The Company has a policy of reserving foruncollectible accounts based on its best estimate of the amount ofprobable credit losses in its existing accounts receivable. The Companyperiodically reviews its accounts receivable to determine whether anallowance is necessary based on an analysis of past due accounts andother factors that may indicate that the realization of an account maybe in doubt. Account balances deemed to be uncollectible are charged tothe allowance after all means of collection have been exhausted and thepotential for recovery is considered remote. At March  31, 2006,the Company has established, based on a review of its outstandingbalances, an allowance for doubtful accounts in the amount of$841,000.

Property andEquipment

Property and equipment are carried at cost.The cost of repairs and maintenance is expensed as incurred; majorreplacements and improvements are capitalized. When assets are retiredor disposed of, the cost and accumulated depreciation are removed fromthe accounts, and any resulting gains or losses are included in incomein the year of disposition. Depreciation is computed by thestraight-line method over the following estimated usefullives:

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

|                                          |  |            |  |  |  |  |
|------------------------------------------|--|------------|--|--|--|--|
|                                     |  | Years      |
| Leaseholdimprovements                    |  | 4– 6 |
| Computer equipment                       |  | 3 –5 |
| Furniture, fixtures and office equipment |  | 5–7  |
| Software                                 |  | 3          |
|                                          |

Goodwilland Intangible Assets

The Company accounts forgoodwill and intangible assets in accordance with Statement ofFinancial Accounting Standards (SFAS) No. 142, Goodwill and OtherIntangible Assets. SFAS No. 142 requires that goodwill and otherintangibles with indefinite lives should no longer be amortized, butrather be tested for impairment annually or on an interim basis ifevents or circumstances indicate that the fair value of an asset hasdecreased below its carrying value.

Goodwill representsthe excess of the purchase price over the fair value of net assetsacquired in business combinations. SFAS 142, requires that goodwill betested for impairment at the reporting unit level (operating segment orone level below an operating segment) on an annual basis and betweenannual tests when circumstances indicate that the recoverability of thecarrying amount of goodwill may be in doubt. Application of thegoodwill impairment test requires judgment, including theidentification of reporting units, assigning assets and liabilities toreporting units, assigning goodwill to reporting units, and determiningthe fair value. Significant judgments required to estimate the fairvalue of reporting units include estimating future cash flows,determining appropriate discount rates and other assumptions. Changesin these estimates and assumptions could materially affect thedetermination of fair value and/or goodwill impairment for eachreporting unit.

Intangible assets consist of databases ofemail addresses acquired during normal operations, costs associatedwith the development of the Company’s various websites,covenants not to compete, and deferred financing fees. Costs to developnew email databases, which primarily represent direct external costs,are capitalized and are amortized straight-line over the expected livesof the databases. Non-compete agreements are amortized straight-lineover the lives of the underlying employment agreements. Deferredfinancing fees are amortized straight-line over the life of thedebentures. The Company reviews the carrying value of intangibles andother long-lived assets for impairment at least annually or wheneverevents or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable.

Recoverability oflong-lived assets is measured by comparison of its carrying amount tothe undiscounted cash flows that the asset or asset group is expectedto generate. If such assets are considered to be impaired, theimpairment to be recognized is measured by the amount by which thecarrying amount of the property, if any, exceeds its fair marketvalue.

These costs are being amortized using thestraight-line method over the following estimated usefullives:

|                        |  |             |  |  |  |  |
|------------------------|--|-------------|--|--|--|--|
|                   |  | Years       |
| Emaildatabase          |  | 3           |
| Webproperties          |  | 3 – 5 |
| Non-competeagreements  |  | 3 – 5 |
| Deferred financingfees |  | 4           |
|                        |

Fair Value of FinancialInstruments

The carrying amounts reported in thebalance sheet for cash, accounts receivable, accounts payable andaccrued expenses approximate fair value based on the short-termmaturity of these instruments. The carrying amounts of theCompany's convertible debentures approximate fairvalue as such 

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

instruments have effective yields that areconsistent with instruments of similar risk, when taken together withequity instruments issued to theholder.

ConvertibleDebentures

The Company accounts for conversionoptions embedded in convertible notes in accordance with SFAS No. 133‘‘Accounting for Derivative Instruments and HedgingActivities’’ (‘‘SFAS 133’’)and EITF 00-19 ‘‘Accounting for Derivative FinancialInstruments Indexed to, and Potentially Settled in, a Company'sOwn Stock’’ (‘‘EITF 00-19’’).SFAS 133 generally requires companies to bifurcate conversion optionsembedded in convertible notes from their host instruments and toaccount for them as free standing derivative financial instruments inaccordance with EITF 00-19. SFAS 133 provides for an exception to thisrule when convertible notes, as host instruments, are deemed to beconventional as that term is described in the implementation guidanceunder Appendix A to SFAS 133 and further clarified in EITF 05-2‘‘The Meaning of ‘‘Conventional ConvertibleDebt Instrument’’ in Issue No. 00-19.

TheCompany accounts for convertible notes (deemed conventional) inaccordance with the provisions of Emerging Issues Task Force Issue(‘‘EITF’’) 98-5 ‘‘Accountingfor Convertible Securities with Beneficial ConversionFeatures,’’ (‘‘EITF 98-5’’),EITF 00-27 ‘‘Application of EITF 98-5 to CertainConvertible Instruments.’’ Accordingly, the Companyrecords, as a discount to convertible notes, the intrinsic value ofsuch conversion options based upon the differences between the fairvalue of the underlying Common Stock at the commitment date of the notetransaction and the effective conversion price embedded in the note.Debt discounts under these arrangements are amortized over the term ofthe related debt to their earliest date of redemption.

Common Stock Purchase Warrants and Other DerivativeFinancial Instruments

The Company accounts for theissuance of Common Stock purchase warrants and other freestandingderivative financial instruments in accordance with the provisions ofEITF 00-19. Based on the provisions of EITF 00-19, the Companyclassifies as equity any contracts that (i) require physical settlementor net-share settlement or (ii) gives the Company a choice of net-cashsettlement or settlement in its own shares (physical settlement ornet-share settlement). The Company classifies as assets or liabilitiesany contracts that (i) require net-cash settlement (including arequirement to net cash settle the contract if an event occurs and ifthat event is outside the control of the Company) or (ii) give thecounterparty a choice of net-cash settlement or settlement in shares(physical settlement or net-sharesettlement).

Registration RightsAgreements

The Company has adopted View C of EITF05-4 ‘‘Effect of a Liquidated Damages Clause on aFreestanding Financial Instrument Subject to EITF 00-19’’(‘‘EITF 05-4’’). Accordingly, the Companyclassifies as liability instruments, the fair value of registrationrights agreements when such agreements (i) require it to file, andcause to be declared effective under the Securities Act, a registrationstatement with the SEC within contractually fixed time periods, and(ii) provide for the payment of liquidating damages in the event of itsfailure to comply with such agreements. Under View C of EITF 05-4, (i)registration rights with these characteristics are accounted for asderivative financial instruments at fair value and (ii) contracts thatare (a) indexed to and potentially settled in an issuer’s ownstock and (b) permit gross physical or net share settlement with no netcash settlement alternative are classified as equity instruments. AtMarch  31,  2006, the Company recorded a registrationrights penalty liability of $265,000 which has been included on theaccompanying consolidated balance sheet.

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings PerShare

In accordance with SFAS No. 128‘‘Earnings Per Share,’’ Basic earnings pershare is computed by dividing net income by the weighted average numberof shares of Common Stock outstanding during the period. Dilutedearnings per share is computed by dividing net income by the weightedaverage number of shares of Common Stock, Common Stock equivalents andpotentially dilutive securities outstanding during each period. Dilutedloss per common share is not presented because it is anti-dilutive. TheCompany’s Common Stock equivalents at March  31,2006 include thefollowing:

|                              |  |        |            |        |  |  |
|------------------------------|--|--------|------------|--------|--|--|
| Options                      |  |   | 3,902,500  |   |
| Warrants                     |  |   | 13,944,416 |   |
| ConvertibleDebentures        |  |   | 23,300,000 |   |
| Totalcommon stockequivalents |  |   | 41,146,916 |   |
|                              |

TheCompany included 7,407,660 common stock purchase warrants with anexercise price of $0.01 in its determination of loss per share for thethree months ended March  31,2006.

Income Taxes

The Companyaccounts for income taxes under Statement of Financial AccountingStandards No. 109, ‘‘Accounting for IncomeTaxes’’ (‘‘SFAS No. 109’’).SFAS No. 109 requires the recognition of deferred tax assets andliabilities for both the expected impact of differences between thefinancial statements and tax basis of assets and liabilities and forthe expected future tax benefit to be derived from tax loss and taxcredit carry forwards. SFAS No. 109 additionally requires theestablishment of a valuation allowance to reflect the likelihood ofrealization of deferred tax assets.

Omni Point andFriends, LLC as the predecessors to the Company, were organized aslimited liability companies for federal income tax purposes.Accordingly, any amounts earned during the three months endedMarch  31,  2005 are being reported by the members of theseentities on their individual tax returns. The Company has notrecognized any income tax expense (benefit) in the accompanyingfinancial statements for the three months ended March  31,2006. Deferred tax assets, which principally arise from net operatinglosses, are fully reserved due to management’s assessment thatit is not more likely than not the benefit of these assets will not berealized in future periods.

RevenueRecognition

The Company follows the guidance ofthe Securities and Exchange Commission’s Staff AccountingBulletin 104 for revenue recognition. In general, the Companyrecords revenue when persuasive evidence of an arrangement exists,services have been rendered or product delivery has occurred, the salesprice to the customer is fixed or determinable, and collectibility isreasonably assured. The following policies reflect specificcriteria for the various revenues streams of theCompany:

Internet advertising:    Revenue fromthe distribution of internet advertising is recognized when internetusers visit and complete actions at an advertiser's website.Revenue consists of the gross value of billings to clients, includingthe recovery of costs incurred to acquire online media required toexecute client campaigns. Recorded revenue is based upon reportsgenerated by the Company's trackingsoftware.

Online search:    Revenue derivedfrom search engine marketing services, such as search engine keywordbuying, is recognized on a net basis in the period when the associatedkeyword search media is clicked on by a consumer. SendTec typicallyearns a media commission equal to a percentage of the keyword searchmedia purchased for its clients. In many cases, the amount SendTecbills to clients significantly exceeds the amount of revenue that isearned due to the 

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

existence of various pass-through chargessuch as the cost of the search engine keyword media. Amounts receivedin advance of search engine keyword media purchases are deferred andincluded in deferred revenue in the accompanying balancesheet.

Direct response media:    Revenuederived from the purchase and tracking of direct response media, suchas television and radio commercials, is recognized on a net basis whenthe associated media is aired. In many cases, the amount the Companybills to clients significantly exceeds the amount of revenue that isearned due to the existence of various pass-through charges such as thecost of the television and radio media. Amounts received in advance ofmedia airings are deferred and included in deferred revenue in theaccompanying balance sheet.

Advertisingprograms:    Revenue generated from the production of directresponse advertising programs, such as infomercials, is recognized onthe completed contract method when such programs are complete andavailable for airing. Production activities generally take eight to 12weeks and the Company usually collects amounts in advance and atvarious points throughout the production process. Amounts received fromcustomers prior to completion of commercials are included in deferredrevenue and direct costs associated with the production of commercialsin process are deferred and included within other current assets in theaccompanying balance sheet.

Email appendservices:    The Company’s email append solution allows amarketer to augment their existing customer database with theCompany’s permission-based email data. When a match isconfirmed, the customer’s email address is added to theclient’s file. Revenue is recognized upon completion of theemail append service and the delivery of the updated customer databaseis delivered to the client.

Electronic change ofaddress:    The Company’s electronic change of addressservice enables clients to update their email databases. Revenue isrecognized upon delivery of the updated customer database.

Lead generation:    The Company offers leadgeneration programs to assist a variety of businesses with customeracquisition. The Company pre-screens the leads through its onlinesurveys to meet its clients’ exact criteria. Revenue isrecognized upon delivery of a lead database to the client.

Direct mail and postal list advertisement:    TheCompany compiles an exclusive Internet responders’ postalmailing list. This list is sourced from online registration andindividuals who have responded to the Company’s onlinecampaigns. These consumers are responsive to offers and purchaseproducts and services through online and offline channels. Revenue isrecognized upon delivery of the respective list to the client.

Online market research:    The Company hasdeveloped a consumer survey and offers a variety of targeted leadsgenerated from its ongoing survey responses. The Company also offersmarketers the opportunity to add specific questions to the survey. TheCompany then sells the response information to the marketer on a costper response basis. If a marketer or a market research company needs afull survey completed, the Company will broadcast its client’ssurvey to a designated responder list on a cost per thousand basis.Revenue is recognized upon delivery of the respective survey to thedesignated responder.

Stock-BasedCompensation

Prior to January 1, 2006, theCompany accounted for employee stock transactions in accordance withAccounting Principle Board, APB Opinion No. 25,‘‘Accounting for Stock Issued toEmployees.’’ The Company has adopted the pro formadisclosure requirements of Statement of Financial Accounting StandardsNo. 123, ‘‘Accounting For Stock-BasedCompensation.’’

Effective January1,  2006, the Company adopted FASB Statement of FinancialAccounting Standard (‘‘SFAS’’)No. 123R ‘‘Share BasedPayment’’. This statement is a revision of SFASStatement No. 123, 

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and supersedes APB Opinion No. 25, andits related implementation guidance. SFAS 123R addresses all forms ofshare based payment (‘‘SBP’’) awardsincluding shares issued under employee stock purchase plans, stockoptions, restricted stock and stock appreciation rights. Under SFAS123R, SBP awards result in a cost that will be measured at fair valueon the awards’ grant date, based on the estimated number ofawards that are expected to vest that will result in a charge tooperations. Consequently, during the three months ended March31,  2006 the Company recognized approximately $91,000 inexpense.

The fair value of all options granted wasestimated at the date of grant using the Black-Scholes option valuationmodel. In calculating the fair values of the stock options, thefollowing assumptions wereused:

|                        |  |            |         |             |  |        |         |        |  |  |
|------------------------|--|------------|---------|-------------|--|--------|---------|--------|--|--|
|                   |  | 2006Grants |         | 2005 Grants |
| Dividendyield          |  |       | — |        |  |   | — |   |
| Expectedlife           |  | 10years    |         | 10years     |
| Risk free interestrate |  |       | 4.00    | %      |  | 3.53%  |
| Expectedvolatility     |  |       | 80      | %      |  | 50%    |
|                        |

TheCompany did not issue any stock based compensation awards during thethree months ended March  31,  2005 and therefore is notrequired to present any pro-forma disclosures for such reportingperiod.

Concentration of CreditRisk

The Company maintains its cash in bank depositaccounts, which, at times, exceed federally insured limits.At March 31, 2006, the Company had approximately$5,070,000 in United States bank deposits, which exceedfederally insured limits. The Company had not experienced any losses insuch accounts through March 31, 2006.

RecentAccounting Pronouncements

In May 2005, theFinancial Accounting Standards Board(‘‘FASB’’) issued Statement of FinancialAccounting Standards No. 154, ‘‘AccountingChanges and Error Corrections-a replacement of APB OpinionNo. 20 and FASB Statement No. 3’’(‘‘SFAS 154’’). This Statementreplaces APB Opinion No. 20, Accounting Changes, and FASBStatement No. 3, Reporting Accounting Changes in InterimFinancial Statements, and changes the requirements for the accountingfor and reporting of a change in accounting principle. This Statementapplies to all voluntary changes in accounting principle. It alsoapplies to changes required by an accounting pronouncement in theunusual instance that the pronouncement does not include specifictransition provisions. When a pronouncement includes specifictransition provisions, those provisions should befollowed.

APB Opinion No. 20 previously required that mostvoluntary changes in accounting principle be recognized by including innet income of the period of the change the cumulative effect ofchanging to the new accounting principle. This Statement requiresretrospective application to prior periods’ financial statementsof changes in accounting principle, unless it is impracticable todetermine either the period-specific effects or the cumulative effectof the change. When it is impracticable to determine theperiod-specific effects of an accounting change on one or moreindividual prior periods presented, this Statement requires that thenew accounting principle be applied to the balances of assets andliabilities as of the beginning of the earliest period for whichretrospective application is practicable and that a correspondingadjustment be made to the opening balance of retained earnings (orother appropriate components of equity or net assets in the statementof financial position) for that period rather than being reported in anincome statement. When it is impracticable to determine the cumulativeeffect of applying a change in accounting principle to all priorperiods, this Statement 

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

requires that the new accounting principlebe applied as if it were adopted prospectively from the earliest datepracticable. Effective January  1,  2006, the Companyadopted SFAS 154, which did not have a material impact on theCompany’s financial statements.

On June29,  2005, the EITF ratified Issue No. 05-2, ‘‘TheMeaning of 'Conventional Convertible Debt Instrument' inEITF Issue No. 00-19, 'Accounting for Derivative FinancialInstruments Indexed to, and Potentially Settled in, a Company'sOwn Stock.'‘‘ EITF Issue 05-2 provides guidance ondetermining whether a convertible debt instrument is‘‘conventional’’ for the purpose ofdetermining when an issuer is required to bifurcate a conversion optionthat is embedded in convertible debt in accordance with SFAS 133. IssueNo. 05-2 is effective for new instruments entered into and instrumentsmodified in reporting periods beginning after June  29,2005. The adoption of this pronouncement did not have a material effecton the Company's financial statements.

InSeptember  2005, Issue No. 05-4, ‘‘The Effect of aLiquidated Damages Clause on a Freestanding Financial InstrumentSubject to EITF Issue No. 00-19, 'Accounting for DerivativeFinancial Instruments Indexed to, and Potentially Settled in, aCompany's Own Stock.' " EITF 05-4 providesguidance to issuers as to how to account for registration rightsagreements that require an issuer to use its ‘‘bestefforts’’ to file a registration statement for the resaleof equity instruments and have it declared effective by the end of aspecified grace period and, if applicable, maintain the effectivenessof the registration statement for a period of time or pay a liquidateddamage penalty to the investor. The Company has adopted view C of thispronouncement. Accordingly, the Company has bifurcated registrationrights from their related free standing financial instruments andrecorded them at fair value.

In September  2005,the FASB ratified the Emerging Issues Task Force's(‘‘EITF’’) Issue No. 05-7,‘‘Accounting for Modifications to Conversion OptionsEmbedded in Debt Instruments and Related Issues,’’ whichaddresses whether a modification to a conversion option that changesits fair value affects the recognition of interest expense for theassociated debt instrument after the modification and whether aborrower should recognize a beneficial conversion feature, not a debtextinguishment if a debt modification increases the intrinsic value ofthe debt (for example, the modification reduces the conversion price ofthe debt). The Company adopted EITF Issue No. 05-7 on January1,  2006, and the adoption of this pronouncement did not have amaterial effect on the Company's financialstatements.

In September  2005, the FASB alsoratified the EITF's Issue No. 05-8, ‘‘Income TaxConsequences of Issuing Convertible Debt with a Beneficial ConversionFeature,’’ which discusses whether the issuance ofconvertible debt with a beneficial conversion feature results in abasis difference arising from the intrinsic value of the beneficialconversion feature on the commitment date (which is recorded in thestockholder's equity for book purposes, but as a liability forincome tax purposes), and, if so, whether that basis difference is atemporary difference under FASB Statement No. 109,‘‘Accounting for Income Taxes.’’ This Issueshould be applied by retrospective application pursuant to Statement154 to all instruments with a beneficial conversion feature accountedfor under Issue 00-27 included in financial statements and was adoptedby the Company on January  1,  2006. The adoption of thispronouncement did not have a material effect on the Company’sfinancial statements.

In February  2006, the FASBissued SFAS No. 155 ‘‘Accounting for Certain HybridFinancial Instruments-an amendment of FASB Statements No. 133 and140’’ (‘‘FAS155’’). FAS 155 addresses the following: a)permits fair value re-measurement for any hybrid financial instrumentthat contains an embedded derivative that otherwise would requirebifurcation; b) clarifies which interest-only strips and principal-onlystrips are not subject to the requirements of Statement 133; c)establishes a requirement to evaluate interests in securitizedfinancial assets to identify interests that are freestandingderivatives or that are hybrid financial instruments that contain anembedded derivative requiring bifurcation; d) clarifies thatconcentrations of credit risk in the form of subordination are not

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NOTE 3– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

embedded derivatives; and e) amendsStatement 140 to eliminate the prohibition on a qualifyingspecial-purpose entity from holding a derivative financial instrumentthat pertains to a beneficial interest other than another derivativefinancial instrument. FAS 155 is effective for all financialinstruments acquired or issued after the beginning of an entity'sfirst fiscal year that begins after September  15,2006. The Company is currently evaluating the requirements ofFAS 155, but does not expect that the adoption of this pronouncementwill have a material effect on its financialstatements.

In March  2006, the FASB issued SFAS 156– ‘‘Accounting for Servicing of Financial Assets– an amendment of FASB Statement No. 140’’(‘‘SFAS 156’’). SFAS 156 is effective forthe first fiscal year beginning after September  15,  2006.SFAS 156 changes the way entities account for servicing assets andobligations associated with financial assets acquired or disposed of.The Company has not yet completed its evaluation of the impact ofadopting SFAS 156 on its results of operations or financial position,but does not expect that the adoption of SFAS 156 will have a materialimpact.

Other accounting standards that have been issuedor proposed by the FASB or other standards-setting bodies that do notrequire adoption until a future date are not expected to have amaterial impact on the consolidated financial statements uponadoption.

NOTE4 – ACQUISITION

On August  9,  2005,the Company entered into an asset purchase agreement (the‘‘Asset Purchase Agreement’’), as amendedon August  23,  2005, with theglobe.com, Inc. and itswholly-owned subsidiary, SendTec. The Asset Purchase Agreement providedfor the Company to purchase, through Send Tec Acquisition Corp.(‘‘STAC’’), the business and assets ofSendTec (the ‘‘Asset Purchase’’). TheCompany formed STAC solely to purchase the business and assets ofSendTec. The Company made an initial investment in STAC of $10,000,000in exchange for Common Stock representing approximately 23% ofthe voting interests of STAC as described below.

TheAsset Purchase Agreement, as originally contemplated by the parties,provided for the closing of this transaction to occur through STAC, asa wholly-owned or majority-owned subsidiary of the Company, on or priorto October  31,  2005.

As a result of thefinancing arrangement described herein, the Asset Purchase wasrestructured to include certain additional conditions for the Companyto satisfy prior to completing its acquisition of SendTec. Inconnection therewith, the Company, on October  31,  2005assigned its rights under the Asset Purchase Agreement to STAC with theconsent of the sellers in the transaction and entered into certainother agreements providing for the financing of the transaction. As aresult of such financing arrangements, STAC temporarily ceased to be awholly-owned subsidiary of the Company upon closing the Asset Purchaseand upon STAC’s concurrent issuance, in a private placement, ofpreferred stock representing 64% of the aggregate votinginterests in STAC. STAC completed the Asset Purchase on October31,  2005. The purchase consideration (paid by STAC to thesellers) and a breakdown of the excess of the purchase price over thenest assets acquired is as follows:

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NOTE4 – ACQUISITION (continued)

|                                               |  |        |            |         |  |  |
|-----------------------------------------------|--|--------|------------|---------|--|--|
| ConsiderationPaid                             |  | $      | 39,850,000 |    |
| Transactionexpenses                           |  |   | 580,000    |    |
| Totalpurchasecost                             |  | $      | 40,430,000 |    |
| Assetsacquired                                |  |   | 11,458,704 |    |
| Liabilitiesassumed                            |  |   | (8,707,016 | )  |
| Netassetsacquired                             |  |   | 2,751,688  |    |
| Purchaseprice in excess of net assetsacquired |  | $      | 37,678,312 |    |
| Allocatedto                                   |  |   |       |    |
| Covenant not tocompete                        |  |   | 1,866,000  |    |
| Goodwill                                      |  | $      | 35,812,312 |    |
|                                               |

STACfinanced its purchase of SendTec by issuing (a) 10,000,000 shares ofits par value $0.001 Common Stock (‘‘STAC CommonStock’’) to the Company for $10,000,000 in cash and (b)pursuant to a Securities Purchase Agreement (the ‘‘STACDebenture Agreement’’), more fully described in Note 7,$34,950,000 of its 6% Senior Secured Convertible Debentures dueOctober  30,  2009 (the ‘‘STACDebentures’’) to institutional investors (the‘‘Investors’’). In addition, certainInvestors of the STAC Debentures also purchased 279,669 shares ofSTAC’s Series A Redeemable Preferred Stock (the‘‘STAC Preferred Stock’’) at a price of$1.00 per share for net proceeds of approximately $280,000 and STACmanagement purchased 531,700 shares of STAC Common Stock for $531,700.STAC also issued, for no consideration, an additional 4,774,323 sharesof its Common Stock to STAC management concurrent with its purchase ofSend Tec on October  31,  2005. Each share of STACPreferred Stock possessed 100 votes per share, representingapproximately 64% of the total voting interests of STAC. TheCompany retained, through the date of consolidation, approximately23% of the total voting interests in STAC. The remaining votinginterests in STAC were owned by STAC management.

TheAsset Purchase, STAC Debenture Agreement, STAC Preferred Stock,RelationServe Preferred and certain other contemporaneous agreementsentered into with the management of STAC provided for the mandatoryconsolidation of STAC, as defined in the Securities Purchase Agreement(the ‘‘Consolidation’’) with the Companyupon the attainment of certain contractual milestones (the‘‘Consolidation Milestones’’).

Such Consolidation Milestones, as defined in the SecuritiesPurchase and related agreements, principally included the delivery, bythe Company to the Investors and their agent in the transaction, of its(a) audited financial statements for the nine months endedSeptember  30,  2005 (the ‘‘Audited FinancialStatements’’), (b) satisfactory evidence that it hadachieved certain minimum levels of revenue, earnings and cash flow asspecified aforementioned agreements (the ‘‘FinancialCovenants’’), (c) a letter from its legal counselproviding negative assurance that reports the Company has filed withSEC since June  10,  2005 through the date of the lettercontain no material misstatements or omissions of fact and (d)satisfactory evidence that certain former members of Omni Point andAffiliate Company relinquished their equity or other interest in theCompany (as of the time of the Consolidation) and gave the Company ageneral release of all claims and entered into non-competition andnon-solicitation agreements reasonably satisfactory to the purchasersof the STAC Debentures.

The Company, STAC and thepurchasers of debenture investors also entered into an Investor RightsAgreement (the ‘‘Investor RightsAgreement’’) providing, among other things, for theformation of a five member board, including one member to jointlyrepresent the Company and a debenture investor, 

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NOTE4 – ACQUISITION (continued)

and mandatory effectuation of a liquidityevent, as defined, in the event that the Consolidation Milestones andrelated Consolidation had not been completed.

Upon thesatisfaction on the Consolidation Milestones, STAC became awholly-owned subsidiary of the Company in connection with a series oftransactions that took place on the Consolidation Date. Thesetransactions included (i) the automatic conversion of all the STACPreferred Stock into 7,621,991 shares of the Company’s CommonStock (ii) the STAC Debentures becoming automatically convertible intothe Company’s Common Stock and (iii) the exchange of all CommonStock of STAC held by STAC management for 9,506,380 shares of theCompany’s Common Stock.

As described in Note 1, theCompany accounted for its investment in STAC, through the date of theconsolidation under the equity method prescribed in the provisions ofAPB 18. Accordingly, the Company recorded a $1,034,102 charge for itsproportionate share of STAC’s losses for the period ofOctober  31,  2005 through December  31,  2005,and a $153,389 charge for its proportionate share of STAC’slosses for the month ending January  31,  2006.

The Company delivered satisfactory evidence of its completionof the Consolidation Milestones on or about February  1,2006 and completed its consolidation with STAC. The tangible net assetsof STAC at the date of the consolidation are asfollows:

Fair value of tangibleassets:

|                            |  |        |            |        |  |  |
|----------------------------|--|--------|------------|--------|--|--|
| Cash                       |  | $      | 9,347,155  |   |
| Accountsreceivable, net    |  |   | 7,580,221  |   |
| Prepaidexpenses            |  |   | 167,879    |   |
| Property andequipment      |  |   | 842,278    |   |
| Otherassets                |  |   | 15,329     |   |
| Totaltangibleassets        |  |   | 17,952,862 |   |
| Liabilitiesassumed:        |  |   |       |   |
| Accountspayable            |  |   | 9,848,134  |   |
| Accruedexpenses            |  |   | 1,353,229  |   |
| Deferredrevenue            |  |   | 520,513    |   |
| Deferredrent               |  |   | 151,206    |   |
| Totalliabilitiesassumed    |  |   | 11,873,082 |   |
| Nettangible assetsacquired |  | $      | 6,079,780  |   |
|                            |

Areconciliation of the amount of goodwill recorded by STAC upon itsacquisition of SendTec on October  31,  2005 to the amountrecorded by the Company upon its consolidation with STAC is asfollows:

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NOTE4 – ACQUISITION (continued)

|                                                                                                                                              |  |        |            |         |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------------|--|--------|------------|---------|--|--|
| Excessof purchase price over net assets acquired by STAC at October31,  2005 allocated togoodwill                                            |  | $      | 35,812,312 |    |
| Net Losses of STAC forthe period of November  1,  2005 through January31,  2006, net of equity loss recognized by RelationServe of$1,187,491 |  |   | 3,975,513  |    |
| Reclassification ofequity relating to value assigned to warrants from October31,  2005transaction                                            |  |   | (486,224   | )  |
| RelationServe MediaTransaction Expenses                                                                                                      |  |   | 1,252,468  |    |
| Change invaluation of registration rights penaltyaccrual                                                                                     |  |   | 250,000    |    |
| Dividend paid to preferredstockholders                                                                                                       |  |   | 3,737      |    |
| Excessof purchase price over net assets acquired at February  3,2006 allocated to goodwill                                                   |  |   | 40,807,806 |    |
| Cashreceived in March  2006 adjusting the October  31,2005transaction                                                                        |  |   | (318,750   | )  |
| Excessof purchase price over net assets acquired as of March31,  2006 allocated togoodwill                                                   |  | $      | 40,489,056 |    |
|                                                                                                                                              |

Thefollowing unaudited pro-forma information reflects the results ofcontinuing operations of the Company as if the acquisitions had beenconsummated as of January  1,2006:

|                           |  |                                   |            |         |      |        |            |        |  |  |
|---------------------------|--|-----------------------------------|------------|---------|------|--------|------------|--------|--|--|
|                      |  | Forthe three months endedMarch31, |
|                      |  | 2006                              |            | 2005    |
| Revenues                  |  | $                                 | 11,400,000 |    |      | $      | 11,700,000 |   |
| NetIncome(Loss)           |  |                              | (5,400,000 | )  |      |   | 1,400,000  |   |
| NetIncome (Loss) pershare |  | (0.14)                            |            |    | 0.11 |   |
|                           |

TheCompany’s allocation of its purchase price to the net assets ofSendTec and presentation of the pro forma results is preliminary. Thisinformation, which is based on significantly limited information, isbeing presented for illustration purposes only and is not indicative ofthe results that the Company would have achieved or could potentiallyachieve in future periods had it completed this transaction as of thedates indicated. The allocation of the purchase price is preliminaryand is based on management’s valuation estimates. The Companywill commission a formal valuation study and the results of such studycould differ significantly from management’sestimates.

 NOTE5 – PROPERTY AND EQUIPMENT

At March31,  2006, property and equipment consist of thefollowing:

|                              |  |        |           |         |  |  |
|------------------------------|--|--------|-----------|---------|--|--|
| Computerequipment            |  | $      | 952,009   |    |
| Officeequipment              |  |   | 167,266   |    |
| Furniture andfixtures        |  |   | 478,150   |    |
| Leaseholdimprovements        |  |   | 148,905   |    |
| Software                     |  |   | 500,417   |    |
| Propertyand equipment        |  |   | 2,246,747 |    |
| Less accumulateddepreciation |  |   | (518,193  | )  |
| Property andequipment,net    |  | $      | 1,728,554 |    |
|                              |

Depreciationexpense was approximately $109,000 and $45,000 for the three monthsended March  31,  2006 and 2005,respectively.

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NOTE6 – INTANGIBLE ASSETS

At March  31,2006, intangible assets consist of thefollowing:

|                              |  |        |            |         |  |  |
|------------------------------|--|--------|------------|---------|--|--|
| Emaildatabase                |  | $      | 3,509,316  |    |
| Webproperties                |  |   | 155,273    |    |
| Non-competeagreements        |  |   | 1,748,334  |    |
| Deferred financingfees       |  |   | 2,064,172  |    |
| Intangibleassets             |  |   | 7,477,095  |    |
| Less accumulatedamortization |  |   | (1,660,593 | )  |
| Intangibleassets,net         |  | $      | 5,816,502  |    |
|                              |

Amortizationexpense was approximately $455,000 and $115,000 for the three monthsended March  31,  2006 and 2005, respectively, includingapproximately $287,000 and $115,000, respectively, relating to theamortization of the email database that is included in cost ofsales.

Amortization expense subsequent to the threemonths ended March  31,  2006 is approximately asfollows:

|                                                      |  |        |           |        |  |  |
|------------------------------------------------------|--|--------|-----------|--------|--|--|
| Periodfrom April  1,  2006 through December  31,2006 |  | $      | 1,425,000 |   |
| Years endingDecember31:                              |  |   |      |   |
| 2007                                                 |  |   | 1,664,000 |   |
| 2008                                                 |  |   | 1,320,000 |   |
| 2009                                                 |  |   | 665,000   |   |
| 2010                                                 |  |   | 189,000   |   |
| Thereafter                                           |  |   | 554,000   |   |
|                                                 |  | $      | 5,817,000 |   |
|                                                      |

NOTE7 – DEBENTURES

STAC financed its purchase ofSendTec, in part, by issuing $34.95  million of Senior SecuredConvertible Debentures due October  30,  2009. As a resultof the Consolidation with STAC, on February  3,  2006, theDebentures, initially convertible at $1.00 per share into STAC CommonStock, became convertible into Company Common Stock at a conversionprice of $1.50 per share. The Debenture Holders maintain a firstpriority security interest in all of the Company’s assets and inthe assets of its subsidiaries. For as long as the Debentures remainoutstanding, the Company is restricted from incurring additionalindebtedness other than certain permitted indebtedness consisting of(i) a working capital credit facility of up to $3,000,000 which mayhave a second priority interest in our accounts receivables andinventory, (ii) trade payables and indebtedness consisting ofcapitalized lease obligations and purchase money indebtedness incurredin connection with the acquisition of capital assets and obligationsunder sale-leaseback arrangements with respect to newly acquired orleased assets and (iii) such obligations which are not secured by lienson any of our assets or STAC assets existing as of the date that theDebentures were originally issued. To the extent that additional debtfinancing is required for us to conduct our operations, therestrictions from incurring additional indebtedness in the Debenturescould materially adversely impact our ability to achieve ouroperational objective.

The STAC Debenture provided, amongother things, for the Company to assume liability for the STACDebentures on the date of Consolidation. The Securities PurchaseAgreement relating to the purchase of the STAC Debenture also requiredSTAC, and the Company beginning on the date of 

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NOTE7 – DEBENTURES (continued)

Consolidation to comply with certainfinancial covenants and provide for the Debenture holders toparticipate in subsequent financing transactions. The Company and STACwere not in compliance with the financial covenants stipulated in theSecurities Purchase Agreement prior to and as of the date ofconsolidation.

On February  3,  2006, theCompany and the Debenture holders entered into a letter agreementpursuant to which the debenture holders agreed to (a) forbear to call acovenant default of STAC’s breach of the financial covenants,(b) amend the STAC Debenture to substantially eliminate the requirementfor the Company to comply with the financial covenants at any time upto the date of consolidation and during the year ended December31,  2006 and (c) consent to the Company’s sale of CommonStock to Sunrise Equity Partner (Note 11), in exchange for 525,000shares of Common Stock with an aggregate fair value of 1,443,750.

The amended financial covenants require the Company to attainminimum EBITDA of $8,434,000 for the year ended December31,  2006 including EBITDA of at least $1,257,000, $2,013,000,$2,324,000 and $2,824,000 for the first quarter, second quarter, thirdquarter and fourth quarter of 2006, respectively, and quarterly EBITDAthereafter of $2,840,000 until the Debentures are paid in full. Inaddition, the Company is restricted from making capital expenditures inexcess of $550,000, $375,000 and $300,000 during each of the quartersended March  31,  2006, June  30,  2006 andSeptember  30,  2006, respectively, and $250,000 perquarter thereafter, until the Debentures are paid in full. The Companymust also maintain minimum cash balances of $2,500,000 in the firstquarter of 2006, $2,750,000 in the second quarter of 2006, $3,000,000in each of the third and fourth quarters of 2006 and $4,000,000thereafter until the Debentures are paid in full.

Asdescribed in Note 2, the Company was not in compliance with certainfinancial covenants it is required to maintain under the terms of theSecurities Purchase Agreement with the Debenture holders. As ofMay  19, 2006, at least 75% of the debenture investorswaived the Company’s breach of these covenants pursuant to aletter agreement dated May  19, 2006. Under the terms of thiswaiver, the debenture investors have agreed to permanently forbeartheir right to (a) declare the Company in default of the debentures and(b) demand acceleration of the loan, however, such waiver relatessolely to the Company’s noncompliance with the covenants as ofMarch  31,  2006. The waiver does not amend any other termsof the debenture agreement nor does it waive the requirement for theCompany to maintain compliance with any covenants contained in theSecurities Purchase Agreement at any other times subsequent toMarch  31,  2006.

The Company is takingcertain measures to avoid future instances of non-compliance of thefinancial covenants in the Securities Purchase Agreement, which includeengaging in discussions with the debenture investors to amend suchcovenants to amounts that would better enable the Company to comply infuture periods and/or making changes in the cost structure of businessto reduce operating expenses and cash outlays that affect its resultsof operations. However, the Company cannot provide any assurance thatin the event it is unable to maintain compliance with such covenants,the debenture investors will issue a waiver to the Company in thefuture.

The Company is in the process of negotiating amendmentsto the financial covenants required to be maintained under theSecurities Purchase Agreement. However, the Company has not reached anagreement with its Debenture holders to revise such financialcovenants. In the event that we fail to comply with our financial orother covenants in the future, the Debenture holders could declare ourDebentures to be in default, and accelerate the maturity of theDebentures, plus interest, and impose default penalties. Because all ofour subsidiaries' assets are pledged to the Debenture holders andthey also are guarantors of such debt, acceleration of the debt and itsrequired repayment prior to the due date thereof would have a materialadverse effect on our business and operations unless we are immediatelyable to refinance such debt. We currently have no agreement orunderstanding with any 

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NOTE7 – DEBENTURES (continued)

party to refinance our debt. Accordingly,acceleration and repayment would make it unlikely that we would be ableto continue to operate. Under the terms of the Debentures, and relatedagreements, if the Company is unable to satisfy the financial covenantsin the Securities Purchase Agreement, it could be considered an eventof default under the Debentures.

If the Company breachsits covenants or otherwise defaults on its obligations under theDebentures and the due date is accelerated, the amount required to paysuch Obligation will most likely come out of the Company'sworking capital and cash balances. Since the Company relies on itsworking capital for its day-to-day operations, such a default wouldhave a material adverse effect on the Company's business,operating results, and financial condition. In such event, the Companymay be forced to restructure, file for bankruptcy, sell assets, orcease operations, any of which would put the Company, its investors andthe value of our Common Stock, at significant risk. Further, theCompany's obligations under the Debentures are secured bysubstantially all of its assets. Failure to fulfill the Company'sobligations under the Debentures and related agreements could lead toloss of these assets, which would be detrimental to itsoperations.

The Company also issued 10,081,607 CommonStock purchase warrants (the ‘‘Warrants’’)to the debenture holders, exercisable at $0.01 per share on theConsolidation Date. In accordance with APB 14 and ETIF 00-27, all ofthe $34,950,000 of the proceeds received upon the issuance of theConvertible Debentures are allocable, to the Common Stock purchasewarrant, based on the relative fair value of the Convertible Debenturesand the Warrants and the beneficial conversion feature embedded in theConvertible Debentures. The warrant value will accrete to the carryingvalue of the Debentures as a non-cash charge to interest expense overthe term of the Debentures.

Accretion of the discount onthe debentures amounted to $1,553,333 during the three months endedMarch  31,  2006 and is included as a component of interestexpense in the accompanying statement of operations. Contractualinterest expense on the debentures amounted to $343,675 during thethree months ended March  31,  2006 and is included as acomponent of interest expense in the accompanying statement ofoperations.

NOTE 8 –RELATED PARTY TRANSACTIONS

For the three months endedMarch  31,  2006, the Company incurred consulting expensesfrom one company related to a stockholder of the Company aggregating$10,000. As of March  31,  2006 all amounts due to thiscompany had beenpaid.

NOTE9 – SIGNIFICANT CUSTOMERS

A significant portion ofthe Company’s revenue is attributable to a small number ofcustomers. During the three months ended March  31,  2006,three customers accounted for approximately 41.5% of theCompany’s net revenue. Three customers represented approximately33.8% of total accounts receivable at March  31,2006.

NOTE10 – COMMITMENTS ANDCONTINGENCIES

Employmentagreements

As part of the SendTec acquisitiontransaction, certain executives of SendTec entered into new employmentagreements with SendTec. The employment agreements each have a term offive years and automatically renew for an additional year at expirationunless either party provides the requisite notice of non-renewal. Theagreements also contain certain non-compete provisions for periods asspecified by the agreements. The $1.8  million value assigned tothe non-compete agreements is being amortized on a straight-line basisover five years. Annual amortization expense of the non-competeagreements is estimated to be $431,000 in 2006, $471,000 in 2007,$430,000 in 2008, $227,000 in 2009, and $189,000 in 2010.

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NOTE10 – COMMITMENTS ANDCONTINGENCIES (continued)

Effective February3,  2006, the Company entered into an employment agreement withits Chief Executive Officer for an initial five-year term, which willbe renewed for additional one-year terms thereafter, unless writtennotice is provided by either party. The agreement provides for anannual base salary of no less than $400,000, as well as such incentivecompensation and bonuses as the Board of Directors may determine and towhich he may become entitled to pursuant to an incentive compensationor bonus program.

Effective February  3,2006, The Company entered into an employment agreement with its ChiefFinancial Officer for an initial five-year term, which will be renewedfor additional one-year terms thereafter, unless written notice isprovided by either party. The agreement provides for an annual basesalary of no less than $225,000, as well as such incentive compensationand bonuses as the Board of Directors may determine and to which he maybecome entitled to pursuant to an incentive compensation or bonusprogram.

Effective February  3,  2006, theCompany entered into an employment agreement with its President for aninitial five-year term, which will be renewed for additional one-yearterms thereafter, unless written notice is provided by either party.The    agreement provides for an annual base salary of no less than$325,000, as well as such incentive compensation and bonuses as theBoard of Directors may determine and to which he may become entitled topursuant to an incentive compensation or bonusprogram.

RelationServe Preferred Stock RegistrationRights Agreement

The Company entered into aRegistration Rights Agreement with each of the purchasers of theRelationServe Preferred. The Registration Rights Agreement providesthat the Company will file a registration statement with the SecuritiesExchange Commission (‘‘SEC’’) within 45days following either the closing of the Consolidation or a publicannouncement of the abandonment of the Consolidation. If theregistration statement filed with the SEC is not declared effectivewithin 120 days of filing or does not remain effective while the sharesof RelationServe Common Stock underlying the RelationServe Preferredremain outstanding the Company will pay such holder monthly in cash aspartial liquidated damages 1% of the aggregate purchase pricepaid by such holder for the RelationServe Preferred. The Company filedsuch registration statement on March  20,  2006 as requiredunder the registration rights agreement. The Company reduced itsestimate of the fair value of the accrued registration rights penaltyby $60,000 which is presented in other income (loss) of theaccompanying statement of operations for the three months endedMarch  31,  2006.

The Company, upon theconsolidation with STAC, also assumed the registration rightsobligation under the Securities Purchase Agreement with the Debentureholders, which has an estimated fair value of $250,000. This amountresulted in an increase to the amount recorded by the Company on thedate of its consolidation with STAC.

ManagementAgreements

On October  31,  2005, theCompany entered into certain agreements with members of STAC managementunder which the members of STAC management received, in the aggregate9.5% of the outstanding shares of STAC Common Stock givingeffect to the conversion as of October  31,  2005. Upon theConsolidation, members of STAC management, pursuant to an exchangeagreement, exchanged their STAC Common Stock for 9,506,380 shares, inthe aggregate, of the Company’s Common Stock, and becameemployees of the Company and accordingly are now eligible to receiveawards under the Company’s stock option plans, (the‘‘Exchange Agreement’’). The Companyaccounted for its issuance of these shares as an increase in the basisof its investment in STAC that has been eliminated in consolidation(Note 11).

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NOTE10 – COMMITMENTS ANDCONTINGENCIES (continued)

Private Placement Consent andWaiver

In connection with the June30,  2005 private placement, the Company was in default ofcertain registration obligations to purchasers in such offering thatprovided for the Company to register such private placement securitiesfor resale within 45 days following the termination of the offering. Asa result of the transactions described herein, on October31,  2005 the Board of Directors of the Company ratified waiversobtained from a majority of the purchasers in the June30,  2005 offering and entered into new Consent and WaiverAgreements containing amended registration obligations of the Company.The Company is in the process of seeking the registration of the resaleof the securities sold in the June  30,  2005 privateplacement contemporaneously with the registration of the securitiesissued in connection with the financing of the Asset Purchase;provided, however, if the Company receives notice from at least50% of the holders of the securities sold in the June30,  2005 private placement then the Company shall usecommercially reasonable efforts to file a registration statement assoon as practicable.

LegalProceedings

Through March  31,  2006,the Company and/or Omni Point have been named as defendants in threeseparate claims made by customers arising in the ordinary course of itsbusiness and one employment related claim. The Company believes it hassubstantial defenses and intends to vigorously defend itself againstany and all actions taken by the plaintiffs in these matters. TheCompany does not believe that any potential damages that could arisefrom these claims will have a material adverse effect on its financialcondition or the results of its operations.

Omni Point hasbeen named as a defendant in a certain employment related claim whichto date has not been asserted against the Company. Although the Companyis not a defendant in this matter at this time, there can be noassurance that the plaintiffs will not attempt to assert this claimagainst the Company in the future or that such claim, if asserted, willnot result in a material loss to the Company. The range of loss withrespect to this matter, if any, cannot be quantified.

OnApril  5,  2006, Mr.  Ohad  Jehassi, theCompany’s former Chief Operating Officer, filed an actionagainst the Company in the Circuit Court for the 17th Judicial Circuitin Broward County, Florida. Mr.  Jehassi alleges in the Complaintthat the Company breached its Employment Agreement with Mr.Jehassi, and that the Company owes Mr.  Jehassi at least the sumof $15,000 under the Employment Agreement.

On March6,  2006 Boston Meridian LLC (‘‘BostonMeridian’’) filed a complaint in the United StatesDistrict Court, District of Massachusetts, alleging it is owed certainfees and expense reimbursements in connection with the acquisition ofthe business of SendTec from theglobe.com Inc. On March 21, 2006, theCompany filed a complaint in the Supreme Court of the State of NewYork, County of New York against Boston Meridian and Sage CapitalGrowth, Inc. (‘‘Sage’’), alleging thatBoston Meridian circulated financial information which containedinaccuracies and unauthorized representations, and that Boston Meridianand Sage acted together to ruin the Company’s planned financingdeal. On April  3,  2006, Boston Meridian amended theComplaint adding Michael Brauser, the Company’s Chairman of theBoard of Directors, as an additional defendant. Boston Meridian allegesthat it expended time and effort to assist the Company with itsacquisition of the business of SendTec, specifically that it preparedpresentations, hosted conference calls with potential investors,traveled with and met with potential investors and provided advisoryservices to the Company. Boston Meridian alleges that Mr.Brauser tortiously interfered with Boston Meridian’s contractwith the Company. Boston Meridian seeks an aggregate of $917,302 infees and expenses and 100,000 shares of Common Stock. The Companyintends to vigorously defend against the complaint. The Company cannotprovide any assurance that the outcome of this matter will not have amaterial adverse effect on its financial position or results ofoperations.

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE10 – COMMITMENTS ANDCONTINGENCIES (continued)

On March  3,  2006,Richard F. Thompson, Thompson Family Wealth Management, DwightThompson, Greg Thompson and Parabolic Investment Fund, L.P. commencedan action in the State Court of Indiana, County of Hamilton, againstAnthony D. Altavilla, Summit Financial Partners, LLC, Barron Partners,LP, US MedSys Corp. and RelationServe Media, Inc. The plaintiffs inthis action assert a variety of claims against non-related defendants.As against the Company, plaintiffs seek rescission of the 110,000shares of Company’ Common Stock they purchased in July2005 (plaintiffs also received warrants for 55,000 shares of RSMICommon Stock), alleging that the shares they received were notregistered as required under Indiana Law, and that the Company failedto disclose a commission. The Company intends to file a motion todismiss this action because the shares did not need to be registeredunder Indiana Law, as they were exempt from registration as a‘‘federal covered security.’’ Mr.Altavilla did not sell shares on the Company’s behalf.Mr.  Altavilla did receive, in addition to other compensation, afinder’s fee in the amount of 7% of total gross fundingprovided for introductions made by him to investors not already havinga preexisting relationship with the Company.

The Companybelieves this action is without merit, and intends to vigorously defenditself with respect to this matter; however, its outcome or range ofpossible loss, if any, cannot be predicted at this time. The Companycannot provide any assurance that the outcome of this matter will nothave a material adverse effect on its financial position or results ofoperations.

On February  17,  2006, the LawOffices of Robert H. Weiss PLLC (‘‘Weiss’’)filed a complaint in the Superior Court of the District of Columbia,Civil Division, against the Company and Omni Point for fraud, breach ofcontract, unjust enrichment, and violation of the Uniform DeceptivePractices Act. Weiss seeks compensatory damages in an amount no lessthan approximately $80,000 in addition to punitive and exemplarydamages with no specified amount. The Company also has accountsreceivable due from Weiss of approximately $387,000 which are fullyreserved. This case is in its initial stages. The Company intends tovigorously defend itself with respect to this matter; however, itsoutcome or range of possible loss, if any, cannot be predicted at thistime. The Company cannot provide any assurance that the outcome of thismatter will not have a material adverse effect on its financialposition or results of operations.

On February3,  2006, InfoLink Communications, Services, Inc, (InfoLink)filed a complaint against the Company and Omni Point in the CircuitCourt of Miami Dade County, Florida, for allegedly violating thefederal CAN SPAM ACT of 2003, 15 U.S.C. ss. 7701, and breach of analleged licensing agreement between Omni Point and InfoLink. TheCompany does not believe that Info Link has sufficiently pled anyfactual basis to support its claim. Info Link seeks actual damages inan amount of approximately $100,000 and approximately $1,500,000 instatutory damages. This case is in its initial stages. The Companyintends to vigorously defend itself with respect to this matter;however, its outcome or range of possible loss, if any, cannot bepredicted at this time. The Company cannot provide any assurance thatthe outcome of this matter will not have a material adverse effect onits financial position or results of operations.

OnDecember  15,  2004, the Federal Bureau of Investigationserved Omni Point with a search warrant regarding the alleged use ofunlicensed software and seized certain e-mail servers with a net bookvalue of approximately $135,000. Management believes the investigationresulted from a former independent contractor of the Company using thealleged unlicensed software on the Company’s behalf and withoutthe Company’s knowledge. Management and legal counsel arecurrently unaware of any additional developments in the investigation.The United States Attorney’s Office had then indicated that itwould contact the Company’s legal counsel as the investigationcontinues. The 

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE10 – COMMITMENTS ANDCONTINGENCIES (continued)

Company has not received any furthercommunications with respect to this matter, however, there can be noassurance that this matter; if further investigated, will not have amaterial effect on theCompany.

NOTE11 – STOCKHOLDERS’ EQUITY

CommonStock

During January  2006, warrants topurchase 50,000 shares of Company Common Stock were exercised at anexercise price of $0.25.

On February  3,2006, and as a result of the Consolidation (Notes and ), the Companyalso issued seven-year warrants to the holders of the Debentures topurchase 10,081,607 shares of the Company's Common Stock inamounts proportional to the face amount of the Debentures exercisableat $0.01 per share. The warrants will be exercisable fromFebruary  3,  2006 through October  30,  2012.The warrants feature a cashless exercise provision, which provides (a)the holder with the right, any time after one year from their date ofissuance through their date of termination (and only in the event thatthere is not an effective registration or prospectus covering theresale of the underlying stock), to exercise such warrants using suchcashless exercise feature and/or (b) for an automatic cashless exercisein the date of termination. The Company can consent to a cashlessexercise of the warrants at the request of the holder at anytime. Acashless exercise will result in a net share settlement of the warrantsbased on a formula in which the net shares issuable is based upon thethen fair value of the Company’s common stock. The Companyevaluated the classification of these warrants at the date ofconsolidation and at March  31,  2006 in accordance withEITF 00-19 and determined that they are equity instruments because (a)net share settlement is within the Company’s control and (b) thecashless exercise feature does not potentially result in the issuanceof an indeterminate number of shares.

On February3,  2006, pursuant to the Securities Exchange Agreement, sharesof STAC Common Stock owned by STAC management were exchanged for anaggregate of 9,506,380 shares of Company Common Stock.

OnFebruary  3,  2006, pursuant to a letter agreement betweenthe Company and the Debenture holders, the Company issued 525,000shares of Company Common Stock to the holders pro rata in accordancewith their respective ownership of the Debentures.

OnFebruary  3,  2006, the Company and Sunrise EquityPartners, L.P. (‘‘Sunrise’’) entered in aSecurities Purchase Agreement pursuant to which the Company soldSunrise 500,000 shares of Company Common Stock for $750,000, of whichthe Company received net proceeds of $675,000 after deducting fees andexpenses of $75,000. The Company granted Sunrise unlimited andcustomary ‘‘piggyback’’ registration rightsas well as registration rights similar to the registration rightsgranted by the Company in connection with that certain RegistrationRights Agreement dated October  31,  2005 with its thenholders of Series A Preferred Stock. As a result, the Company isobligated to file a Registration Statement on or before 45 days afterthe Consolidation pursuant to the Registration Rights Agreementdescribed above. The registration rights will survive until such timeas the Company Common Stock may be sold without volume restrictionspursuant to Rule 144(k) of the Securities Act.

OnFebruary  7,  2006, holders of the seven-year $0.01warrants to purchase shares of Company Common Stock exercised 2,673,948warrants and as a result of the cashless exercise feature, the Companyissued 2,664,398 shares of the Company’s Common Stock.

On February  10,  2006 warrants to purchase200,000 shares of Company Common Stock were exercised at an exerciseprice of $0.25.

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE11 – STOCKHOLDERS’ EQUITY (continued)

On February  3, 2006, inconnection with the SendTec acquisition, the Company granted10,081,607  warrants to purchase 10,081,607  shares ofCommon Stock at $0.01  per share. The warrants expire onOctober  31, 2012.

On March  10,  2006,the Company granted (under its 2005 option plan) options to purchase anaggregate of 1,690,000 shares of Common Stock to employees of theCompany. The options are exercisable at $1.80 per share, which was thefair market value of the Common Stock at the grant date. In accordancewith SFAS 123 (R), the Company recorded stock based compensationexpense in the amount of approximately $49,000 during the three monthsended March  31,  2006 based on estimates of optionsexpected to vest. The options vest as to 33% of such shares onthe date one year following the date of grant, 33% and34% of the second and third anniversaries of the date of grant,respectively, and expire on March  9,  2016 or earlier dueto employment termination.

2006 Incentive StockPlan

The 2006 Incentive Plan was adopted by the Boardof Directors on March  3,  2006 (the ‘‘2006Plan’’) but is still subject to approval by ourstockholders. Grants under the 2006 Plan are not conditioned onstockholder approval. An aggregate of 2,700,000 shares of Common Stockhave been reserved for issuance under the 2006 Incentive Plan. Thepurpose of the 2006 Incentive Plan is to provide an incentive to retainin the employ of and as directors, officers, consultants, advisors andemployees of our company, persons of training, experience and ability,to attract new directors, officers, consultants, advisors and employeeswhose services are considered valuable, to encourage the sense ofproprietorship and to stimulate the active interest of such personsinto our development and financial success. Under the 2006 IncentivePlan, we are authorized to issue incentive stock options intended toqualify under Section 422 of the Code, non-qualified stock options andrestricted stock. The maximum number of shares of Common Stock that maybe subject to options granted under the 2006 Incentive Plan to anyindividual in any calendar year shall not exceed 1,000,000 shares inorder to qualify as performance-based compensation under Section 162(m)of the Code. The 2006 Incentive Plan is currently administered by theBoard or a Committee of the Board of Directors.

OnMarch  28,  2006, the Company granted options to purchaseand aggregate of 200,000 shares of Common Stock to employees of theCompany. The options are exercisable at $1.70 per share, which was thefair market value of the Common Stock at the grant date. In accordancewith SFAS 123 (R), the Company recorded stock based compensationexpense in the amount of approximately $1,000 during the three monthsended March  31,  2006 based on estimates of optionsexpected to vest. The options vest as to 33% of such shares onthe date one year following the date of grant, 33% and34% of the second and third anniversaries of the date of grant,respectively, and expire on March  27,  2016 or earlier dueto employment termination.

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE11 – STOCKHOLDERS’ EQUITY (continued)

A summary of the status of theCompany's outstanding stock options granted to employees and aformer director as of March  31,  2006 and changes duringthe period ending on that date is asfollows:    

|                                                     |  |                 |            |                               |  |        |        |        |  |  |
|-----------------------------------------------------|--|-----------------|------------|-------------------------------|--|--------|--------|--------|--|--|
|                                                |  | Numberofoptions |            | Weighted averageexerciseprice |
| Outstanding at December  31,2005                    |  |            | 2,688,000  |                          |  | $      | 2.98   |   |
| Granted                                             |  |            | 1,890,000  |                          |  | $      | 1.79   |   |
| Exercised                                           |  |            | —    |                          |  |   |   |   |
| Forfeited                                           |  |            | (1,275,500 | )                        |  | $      | 3.85   |   |
| Outstandingat March  31,2006                        |  |            | 3,302,500  |                          |  | $      | 1.81   |   |
| Optionsexercisable at end ofperiod                  |  |            | 1,071,500  |                          |  | $      | 1.19   |   |
| Weighted-averagefair value granted during theperiod |  |            |       |                          |  | $      | 1.79   |   |
|                                                     |

Thefollowing information applies to options outstanding at March31,2006:    

|                         |  |                   |           |                                                |  |                              |       |                  |  |                              |      |        |  |        |           |        |  |        |         |        |  |  |
|-------------------------|--|-------------------|-----------|------------------------------------------------|--|------------------------------|-------|------------------|--|------------------------------|------|--------|--|--------|-----------|--------|--|--------|---------|--------|--|--|
|                    |  |              |           | Optionsoutstanding                             |  | Optionsexercisable           |
| Range ofexercise prices |  | Number of options |           | Weightedaverageremainingcontractuallife(years) |  | Weightedaverageexerciseprice |       | Number ofoptions |  | Weightedaverageexerciseprice |
| $1.00                   |  |              | 1,000,000 |                                           |  |                         | 4.21  |             |  | $                            | 1.00 |   |  |   | 1,000,000 |   |  | $      | 1.00    |   |
| $3.85                   |  |              | 986,000   |                                           |  |                         | 9.23  |             |  | $                            | 3.85 |   |  |   | 71,500    |   |  | $      | 3.85    |   |
| $3.85                   |  |              | 100,000   |                                           |  |                         | 9.67  |             |  | $                            | 3.85 |   |  |   | —   |   |  |   | — |   |
| $1.80                   |  |              | 1,690,000 |                                           |  |                         | 9.95  |             |  | $                            | 1.80 |   |  |   | —   |   |  |   | — |   |
| $1.70                   |  |              | 200,000   |                                           |  |                         | 10.00 |             |  | $                            | 1.80 |   |  |   | —   |   |  |   | — |   |
|                         |

CommonStock Warrants

A summary of the status of theCompany's outstanding stock warrants granted as of March 31, 2006and changes during the period is as follows:

|                                                     |  |                   |            |                                |  |        |         |        |  |  |
|-----------------------------------------------------|--|-------------------|------------|--------------------------------|--|--------|---------|--------|--|--|
|                                                |  | Numberof warrants |            | Weighted average exerciseprice |
| Outstanding at December 31,2005                     |  |              | 6,786,757  |                           |  | $      | 0.70    |   |
| Granted                                             |  |              | 10,081,607 |                           |  | $      | 0.01    |   |
| Exercised                                           |  |              | (2,923,948 | )                         |  | $      | 0.03    |   |
| Forfeited                                           |  |              | —    |                           |  |   | — |   |
| Outstandingat March 31,2006                         |  |              | 13,944,416 |                           |  | $      | 0.29    |   |
| Weighted-averagefair value granted during theperiod |  |              |       |                           |  | $      | 0.01    |   |
|                                                     |

NOTE12 – SUBSEQUENT EVENTS

Issuances ofSecurities

On April 4, 2006, a holder of ten-yearwarrants to purchase shares of Company Common Stock exercised $0.25warrants resulting in the issuance of 353,452 shares of Company CommonStock. Such exercise was effectuated through the cashless exerciseprovision of $0.25 warrants equaling 56,548 shares of Company CommonStock underlying the $0.25 warrants.

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RELATIONSERVEMEDIA, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTSMARCH 31,2006

NOTE12 – SUBSEQUENT EVENTS (continued)

On April 9, 2006, a holder ofseven-year $0.01 warrants to purchase shares of Company Common Stockexercised 1,037,985 warrants and as a result of the cashless exercisefeature, the Company issued 1,031,245 shares of the Company'sCommon Stock.

On April 19, 2006, a holder of ten-yearwarrants to purchase shares of Company Common Stock exercised $0.25warrants resulting in the issuance of 250,139 shares of Company CommonStock. Such exercise was effectuated through the cashless exerciseprovision of $0.25 warrants equaling approximately 49,861 shares ofCompany Common Stock underlying the $0.25 warrants.

OnApril 20, 2006, a holder of seven-year $0.01 warrants to purchaseshares of Company Common Stock exercised 326,479 warrants and as aresult of the cashless exercise feature, the Company issued 324,359shares of the Company's Common Stock.

On May 1,2006, a holder of ten-year warrants to purchase shares of CompanyCommon Stock exercised $0.25 warrants resulting in the issuance of53,967 shares of Company Common Stock. Such exercise was effectuatedthrough the cashless exercise provision of $0.25 warrants equalingapproximately 17,033 shares of Company Common Stock underlying the$0.25 warrants.

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FORWARD LOOKINGSTATEMENTS

This Quarterly Report on Form 10-QSB for thequarterly period ended March  31,  2006 contains‘‘forward-looking statements’’ within themeaning of Section 27A of the Securities Act of 1933, as amended.Generally, the words ‘‘believes’’,‘‘anticipates,’’‘‘may,’’‘‘will,’’‘‘should,’’‘‘expect,’’‘‘intend,’’‘‘estimate,’’‘‘continue,’’ and similar expressions orthe negative thereof or comparable terminology are intended to identifyforward-looking statements which include, but are not limited to,statements concerning the Company’s expectations regarding itsworking capital requirements, financing requirements, businessprospects, and other statements of expectations, beliefs, future plansand strategies, anticipated events or trends, and similar expressionsconcerning matters that are not historical facts. Such statements aresubject to certain risks and uncertainties, including the matters setforth in this Quarterly Report or other reports or documents theCompany files with the SEC from time to time, which could cause actualresults or outcomes to differ materially from those projected. Unduereliance should not be placed on these forward-looking statements whichspeak only as of the date hereof. The Company undertakes no obligationto update these forward-looking statements. In addition, theforward-looking statements in this Quarterly Report on Form 10-QSBinvolve known and unknown risks, uncertainties and other factors thatcould cause the actual results, performance or achievements of theCompany to differ materially from those expressed in or implied by theforward-looking statements contained herein.

An investmentin the Company’s Common Stock involves a high degree of risk.Stockholders and prospective purchasers should carefully consider therisk factors in the Company’s Annual Report on Form 10-KSB forthe fiscal year ended December  31,  2005, filed with theSEC on March  20,  2006, and other pertinent informationcontained in the Registration Statement on Form SB-2 of the Company, asamended, initially filed with the SEC on March  20,  2006,and on Form SB-2/A as filed with the SEC on May  1,  2006,as well as other information contained in the Company’s otherperiodic filings with the SEC. If any of the risks described thereinactually occur, the Company’s business could be materiallyharmed.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSISOR PLAN OF OPERATIONS

Overview

The Company is aholding company organized for the purpose of acquiring, owning, andmanaging various marketing and advertising businesses, primarilyinvolving the Internet. The Company operates two primary businesses andsince February  2006 the Company's SendTec(‘‘SendTec’’) marketing services businesshas become its dominant operation. On March  17,  2006, ourBoard of Directors authorized that our name be changed to SendTec,Inc., subject to stockholder approval. SendTec is a marketing company,primarily involved in direct response marketing. In addition toSendTec, the Company also owns and operates two smaller businesses,RelationServe Access, and Friendsand.com.

The unauditedcondensed consolidated financial statements contained herein includecommencing February  1,  2006 the results of STAC whichbecame a wholly-owned subsidiary of the Company as of February3,  2006. On October  31,  2006, STAC acquired theassets of SendTec, Inc. As of October  31,  2006 andthrough February  1,  2006 the Company retainedapproximately 23% of the total voting interests in STAC.Accordingly from October  31,  2006 through February1,  2006, the Company accounted for its investment in STAC inaccordance with the provision of APB 18, ‘‘The EquityMethod of Accounting for Investments in Common Stock,’’which provides for companies to record, in results of operations, theirproportionate share of earnings or losses of investees when they aredeemed to influence but not control the affairs of the investeeenterprise. The Company recorded a $1,034,102 charge for itsproportionate share of STAC’s losses for the period ofOctober  31,  2005 through December  31,  2005,and a $153,389 charge for its proportionate share of STAC’slosses for the month ending January  31,2006.

The results of operations for the three months endedMarch  31,  2005 consist of Omni Point Marketing,Friendsand and the Company.

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Results of Operations

Threemonths ended March  31,  2006 compared to three monthsended March  31,  2005

Net revenues increasedapproximately $5.8  million, or 216.3%, to $8.5million for the three months ended March  31,  2006 from$2.7  million for the comparable prior year period. The additionof SendTec accounted for $7.2  million of this increase fromdirect response marketing, whereas the net revenues from other productsdecreased $1.4  million. The decrease in other product netrevenue is partially the result of a reduction in sales representativesfrom 30 to 15. Our online lead generation product revenues decreased$0.3  million to $0.3  million for the three months endedMarch  31,  2006 from $0.6  million for thecomparable prior year period. Our append and data services productrevenues decreased $0.8  million to $0.6  million for thethree months ended March  31,  2006 from $1.4million for the comparable prior year period. Our email product revenuedecreased $0.3  million to $0.4  million for the threemonths ended March  31,  2006 from $0.7  million forthe comparable prior year period.

Costs of revenuesincreased approximately $5.3  million to $5.8  million forthe three months ended March  31,  2006 from $0.5million for the comparable prior year period, an increase of1,129.1%. The addition of SendTec accounted for $4.8million of the increase from the direct response marketing business andcost of revenues from other products accounted for $0.5  millionof the increase. Costs of revenues principally include the costs ofmedia providers, but also include certain salaries and contract laborcosts for our technology department, costs associated with our internetbroadcast bandwidth, and non-capitalized costs associated withmaintaining our databases and outsourcing data information from outsidevendors.

Gross profit increased approximately $0.5million, or 22.9%, to $2.7  million for the three monthsended March  31,  2006 from $2.2  million for thecomparable prior year period. Our gross profit for the three monthsended March  31,  2006 was 32.1% of net revenues ascompared to gross margin of 82.5% of net revenues for the threemonths ended March  31,  2005. Gross profit from our directresponse marketing business was $2.5  million, or 34.1% ofour net direct response marketing revenues for the three months endedMarch  31,  2006, while our gross profit from otherproducts was $0.3  million, or 20.7% of other productrevenue, a decrease of $2.0  million due in part to lower netrevenues and higher cost of revenues.

Salaries expenseincreased approximately $1.4  million to $1.7  million forthe three months ended March  31,  2006 from $0.3million for the comparable prior year period, an increase of416.1%. The acquisition of SendTec represents $1.1million of the increase. The remaining increase or $0.3  millionis due to the hiring of the Chairman of the Board of directors, a chiefoperating officer and additional administrative staff.

Baddebt expenses decreased approximately $44,000 to $256,000 for the threemonths ended March  31,  2006, from $300,000 for thecomparable year period, a decrease of 14.8%. Bad debts as apercent of net revenues was 3.0% and 11.1% for the threemoths ended March, 31 2006 and 2005, respectively. The decrease is duein part to tougher credit policies relating to our direct responsemarketing business and in part to lower net revenues from otherproducts which historically has experienced a high uncollectiblerate.

Commission expense decreased approximately$0.3  million to $0.2  million for the three months endedMarch  31,  2006 as compared to $0.5  million for thecomparable prior year period, a decrease of 68.2%. The decreaseis due in part to a lower commission rate on our direct responsemarketing business and a reduction of sales representatives.

Professional fees increased approximately $0.5  millionto $0.5  million for the three months ended March31,  2006 as compared to $22  thousand for the comparableprior year period. The increase is primarily the result of higher legaland accounting fees in connection with potential financing, potentialacquisitions and SEC filings.

Advertising and trade showexpense decreased approximately $0.1  million to $42thousand for the three months ended march 31, 2006 as compared to$0.1  million for the comparable prior year period, a decrease of68.8%, primarily due to advertising efforts delayed to futureperiods.

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Depreciation and amortizationincreased approximately $0.2  million to $0.3  million forthe three months ended March  31,  2006 as compared to$45  thousand for the comparable prior year period, an increaseof 510.9%. The increase is due in part to additionalamortization relating to our non-compete agreements and deferredfinance fees, and in part to increased depreciation resulting fromadditions to property and equipment.

Other general andadministrative expenses increased approximately $1.2  million to$1.5  million for the three months ended March  31,2006 as compared to $0.3  million for the comparable prior yearperiod, an increase of 369.4%. Our other general andadministrative expenses as a percentage of net revenues, were17.5% and 11.8% for the three months ended March31,  2006 and 2005, respectively.

The components ofother general and administrative were asfollows:

|                                               |  |                                   |           |        |  |        |         |        |  |  |
|-----------------------------------------------|--|-----------------------------------|-----------|--------|--|--------|---------|--------|--|--|
|                                          |  | Forthe three monthsended March31, |
|                                          |  | 2006                              |           | 2005   |
| Rent                                          |  | $                                 | 176,685   |   |  | $      | 56,716  |   |
| Consultingfees                                |  |                              | 446,759   |   |  |   | — |   |
| Payrolltaxes                                  |  |                              | 179,534   |   |  |   | 19,679  |   |
| Insurance                                     |  |                              | 122,491   |   |  |   | 44,636  |   |
| Other                                         |  |                              | 566,756   |   |  |   | 196,839 |   |
| Totalother general and administrativeexpenses |  | $                                 | 1,492,225 |   |  | $      | 317,870 |   |
|                                               |

Forthe three months ended March  31,  2006, we had anoperating loss of approximately $1.7  million, an increase inoperating loss of $2.3  million from an operating profit of$0.6  million for the three months ended March  31,2005.

Other income (expense) for the three months endedMarch  31,  2006 was an expense of approximately$3.5  million, as compared to zero for the comparable prior yearperiod. It is comprised of thefollowing:

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Registrationrights penalty – we entered into an agreement to register theresale of shares of Common Stock held by Debenture holders as well asthose shares that would be issuable if the debenture holders convertedthe debentures and warrants they hold into shares of our Common Stock.If the resale of such shares are not registered the debenture holdershave certain registration rights and we would be subject to a penalty.Management believes the probability of such penalty to be remote andhave estimated the net change in the penalty to be income of$60,000. |

|              |                                                                                                                                                                                                                                                                                                                           |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Covenant penalty– we were not in compliance with certain covenants in thedebenture agreement for the fourth quarter of 2005. As a result, onFebruary  3,  2006 we issued 525,000 shares of Common Stockwith a fair value of approximately $1.4  million to the Debentureholders. This expense is non-cash innature. |

|              |                                                                                                                                                                                                                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Loss on equity-methodinvestment – prior to consolidation of SendTec, we owned23% of SendTec and accounted for this investment by the equitymethod, in which we recorded 23% of SendTec’s net lossfor January  2006, resulting in an expense of approximately$153,000. This expense is non-cash innature. |

|              |                                                                                     |
|--------------|-------------------------------------------------------------------------------------|
| •  | Interest income– we earned approximately $18,000 in interest on bankdeposits. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Interest expense– we incurred total interest expense on the debentures ofapproximately $1.9  million for the three months endedMarch  31,  2006. Included in interest expense is$0.3  million of interest that will require payment to thedebenture holders and a non-cash interest charge of $1.6  millionto amortize the fair value of the warrants issued in conjunction withthe debentures. |

Our provision for income taxes (benefits)is zero in both periods. For the three months ended March31,  2006 a provision for tax income tax benefits was not madebecause after evaluating all available evidence, we believe that avaluation allowance is necessary to offset against any potential

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tax assets. For the three months endedMarch  31,  2005, the Company was organized as a limitedliability company and had made an election to have its income or losstaxed directly to its members as a partnership for income tax purposes.As a result, no income taxes have been recognized in the financialstatements for the three months ended March  31,  2005. Ifa provision for income taxes had been made at the statutory tax rate of38%, the provision for income taxes would have been $0.2million for the three months ended March  31,  2005.

We reported a net loss of approximately $5.1  millionfor the three months ended March  31,  2006 as compared tonet income of $0.6  million for the three months endedMarch  31,  2005. Included in the net loss for the threemonths ended March  31,  2006 are non-cash expensestotaling $3.2  million.

Liquidity and CapitalResources

The Company incurred a $5.1  million lossfor the three months ended March  31,  2006, which includesan aggregate of approximately $3.7  million in non-cash chargesrelating to stock issued to satisfy a covenant breach of $1.4million, non-cash interest of $1.6  million, stock basedconsulting fees of $0.3  million, depreciation and amortizationof $0.3  million, and stock based compensation of$0.1million.

The Company is in the process of integratingits newly acquired business (SendTec) into its existing operations andbelieves that its current capital resources and resources availablefrom SendTec will enable it to sustain operations through March 31,2007. The Company intends to raise additional capital to fund theexpansion of its business and believes it has access to capitalresources; however, the Company has not secured any commitments for newfinancing at this time nor can the Company provide any assurance thatit will be successful in its efforts to raise additional capital ifconsidered necessary, in the future.

In addition, due tothe requirement in its agreements with the Debenture holders that theCompany must register 130% of the shares of Common Stock thatthe Debenture holders currently hold or are entitled to receive underthe Debentures or the warrants they hold, the Company currently doesnot have sufficient authorized Common Stock to issue, or reserve forissuance, Common Stock in connection with any proposed equitytransaction involving its Common Stock. Moreover, so long as theDebentures remain outstanding, we are restricted from incurringadditional indebtedness other than certain permittedindebtedness.

The Company is in the process of evaluatingseveral strategic alternatives regarding the Access and Friendsandoperations, including implementing significant cost cutting measures.To date, the Company has not committed to any specific plan of action.If no action is taken with respect to the Access and Freindsandoperations, the Company estimates that it will require approximately$8.9  million to operate the business through March 31, 2007,including $330,000 for investments in data, software and computerequipment. The Company estimates that funds it currently has availableplus operating cash flow it expects to generate during the next twelvemonths will amount to approximately $6  million. The Companyexpects that a significant portion of its liquidity needs will befunded through the operations of STAC.

If theCompany’s implementation of cost cutting measures isinsufficient to reduce or eliminate operating losses, the Companyestimates that it will have to raise additional funds to meet itsliquidity needs through the end of March 2007.

The Companywas not in compliance with certain financial covenants it is requiredto maintain under the terms of its debenture agreements. As ofMay  19,  2006, the debenture investors waived theCompany’s breach of these covenants pursuant to a letteragreement dated May  19,  2006. Under the terms of thiswaiver, the debenture investors have agreed to permanently forbeartheir right to (a) declare the Company in default of the debentures and(b) demand acceleration of the loan; however, such waiver relatessolely to the Company’s noncompliance with the covenants as ofMarch  31,  2006. The waiver does not amend any other termsof the debenture agreement nor does it waive the requirement for theCompany to maintain compliance with such covenants at any other timessubsequent to March  31,  2006.

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Net cash flows used in operatingactivities for the three months ended March  31,  2006 were$(4.9) million as compared to net cash provided by operating activitiesof $0.4  million for the three months ended March31,  2005. For the three months ended March  31,2006, our net loss of $5.1  million, adjusted for non-cash itemstotaling $4.3  million, including depreciation and amortizationof $0.6  million, stock-based compensation and consulting of$0.4  million, non-cash interest of $1.5  million, covenantpenalty of $1.4  million, a provision for bad debt of $0.2million and an equity loss of $0.2  million, used $0.8million in cash. Changes in assets and liabilities used $4.0million.

Net cash flows provided from investing activitiesfor the three months ended March  31,  2006 were$9.2  million as compared to net cash used in investingactivities of $0.4  million for the three months endedMarch  31,  2005. For the three months ended March31,  2006, we acquired $9.3  million of cash in the SendTecconsolidation, and received $0.3  million in the reconciliationof the purchase of net assets of SendTec, Inc. from theglobe.com. Weused cash to purchase property and equipment of $0.2  million,and incurred $0.2 in transaction expenses. For the three months endedMarch  31,  2005, cash was principally used to acquireproperty, equipment and intangible assets of $0.4  million.

Net cash flows provided by financing activities for the threemonths ended March  31,  2006 were $0.7  million ascompared to net cash used by financing activities of $0.1million for the three months ended March  31,  2005. Forthe three months ended March  31,  2006, we received netproceeds from the sale of Common Stock and exercise of warrants of$0.7  million. For the three months ended March  31,2005, we repaid notes payable of $0.1  million.

Wereported a net increase in cash for the three months ended March31,  2006 of $5.1  million as compared to a net decrease incash of $0.1  million for the three months ended March31,  2005. At March  31,  2006 we had cash on hand of$5.3  million.

Critical AccountingPolicies

Our financial statements and accompanying notesare prepared in accordance with GAAP. Preparing financial statementsrequires management to make estimates and assumptions that affect thereported amounts of assets, liabilities, revenue and expenses. Theseestimates and assumptions are affected by management'sapplications of accounting policies. Our critical accounting policiesinclude revenue recognition, the useful life of our intangible assets,and accounting for stock based compensation.

RevenueRecognition – We follow the guidance of the SEC’s StaffAccounting Bulletin 104 for revenue recognition. In general, werecord revenue when persuasive evidence of an arrangement exists,services have been rendered or product delivery has occurred, the salesprice to the customer is fixed or determinable, and collectibility isreasonably assured. The following policies reflect specificcriteria for the various revenues streams of theCompany:

Internet advertising:    Revenue fromthe distribution of internet advertising is recognized when internetusers visit and complete actions at an advertiser's website.Revenue consists of the gross value of billings to clients, includingthe recovery of costs incurred to acquire online media required toexecute client campaigns. Recorded revenue is based upon reportsgenerated by the Company's trackingsoftware.

Online search:    Revenue derivedfrom search engine marketing services, such as search engine keywordbuying, is recognized on a net basis in the period when the associatedkeyword search media is clicked on by a consumer. SendTec typicallyearns a media commission equal to a percentage of the keyword searchmedia purchased for its clients. In many cases, the amount SendTecbills to clients significantly exceeds the amount of revenue that isearned due to the existence of various pass-through charges such as thecost of the search engine keyword media. Amounts received in advance ofsearch engine keyword media purchases are deferred and included indeferred revenue in the accompanying balance sheet.

Direct response media:    Revenue derived from thepurchase and tracking of direct response media, such as television andradio commercials, is recognized on a net basis when the associatedmedia is aired. In many cases, the amount the Company bills to clientssignificantly exceeds the amount of revenue that is earned due to theexistence of various pass-through charges such as the 

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cost of the television and radio media.Amounts received in advance of media airings are deferred and includedin deferred revenue in the accompanying balancesheet.

Advertising programs:    Revenuegenerated from the production of direct response advertising programs,such as infomercials, is recognized on the completed contract methodwhen such programs are complete and available for airing. Productionactivities generally take eight to 12 weeks and the Company usuallycollects amounts in advance and at various points throughout theproduction process. Amounts received from customers prior to completionof commercials are included in deferred revenue and direct costsassociated with the production of commercials in process are deferredand included within other current assets in the accompanying balancesheet.

Email append Services:    TheCompany’s email append solution allows marketers to augmenttheir existing customer database with the Company’spermission-based email data. When a match is confirmed, thecustomer’s email address is added to the client’s file.Revenue is recognized upon completion of the email append service andthe delivery of the updated customer database is delivered to theclient.

Electronic change of address:    TheCompany’s electronic change of address service enables clientsto update their email databases. Revenue is recognized upon delivery ofthe updated customer database is delivered to the client.

Lead generation:    The Company offers leadgeneration programs to assist a variety of businesses with customeracquisition. The Company pre-screens the leads through its onlinesurveys to meet its clients’ exact criteria. Revenue isrecognized upon delivery of a lead database to the client.

Direct Mail and postal list advertisement:    TheCompany compiles an exclusive Internet responders’ postalmailing list. This list is sourced from online registration andindividuals who have responded to the Company’s onlinecampaigns. These consumers are responsive to offers and purchaseproducts and services through online and offline channels. Revenue isrecognized upon delivery of the respective list to the client.

Online market research:    The Company hasdeveloped a consumer survey. The Company offers a variety of targetedleads generated from its ongoing survey responses. The Company alsooffers marketers the opportunity to add specific questions to thesurvey. The Company then sells the response information to the marketeron a cost per response basis. If a marketer or a market researchcompany needs a full survey completed, the Company will broadcast itsclient’s survey to a designated responder list on a cost perthousand basis. Revenue is recognized upon delivery of the respectivesurvey is delivered to the designated responder.

Intangible assets consist of a database of email addressesacquired during normal operations and costs associated with thedevelopment of our various websites. Costs to develop new emaildatabases, which primarily represent direct external costs, arecapitalized and are amortized straight-line over the expected lives ofthe databases. We review the carrying value of intangibles and otherlong-lived assets for impairment at least annually or whenever eventsor changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of long-lived assets ismeasured by comparison of its carrying amount to the undiscounted cashflows that the asset or asset group is expected to generate. If suchassets are considered to be impaired, the impairment to be recognizedis measured by the amount by which the carrying amount of the property,if any, exceeds its fair market value.

Stock BasedCompensation – Prior to January 1, 2006, the Companyaccounted for employee stock transactions in accordance with AccountingPrinciple Board, APB Opinion No. 25, ‘‘Accountingfor Stock Issued to Employees.’’ The Company has adoptedthe pro forma disclosure requirements of Statement of FinancialAccounting Standards No. 123, ‘‘Accounting ForStock-Based Compensation.’’

EffectiveJanuary  1,  2006, the Company adopted FASB Statement ofFinancial Accounting Standard (‘‘SFAS’’)No. 123R ‘‘Share BasedPayment’’. This statement is a revision of SFASStatement No. 123, and supersedes APB Opinion No. 25, andits related implementation guidance. SFAS 123R addresses all forms ofshare based payment (‘‘SBP’’) awardsincluding shares issued under employee stock 

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purchase plans, stock options, restrictedstock and stock appreciation rights. Under SFAS 123R, SBP awards resultin a cost that will be measured at fair value on the awards’grant date, based on the estimated number of awards that are expectedto vest that will result in a charge to operations. Consequently,during the three months ended March  31,  2006 the Companyrecognized approximately $91,000 in expenses.

ITEM3.    CONTROLS AND PROCEDURES

Our principal executiveofficer and principal financial officer evaluated the effectiveness ofour disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended) asof the end of the period covered by this report. Based on thisevaluation, our principal executive officer and principal financialofficer have concluded that our controls and procedures areeffective.

There was no change in our internal controlsover financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)under the Securities Exchange Act of 1934), that has materiallyaffected, or is reasonably likely to materially affect, our internalcontrols over financial reporting.

PART II – OTHERINFORMATION

ITEM 1.    LEGALPROCEEDINGS

Through March  31,  2006,the Company and/or Omni Point have been named as defendants in threeseparate claims made by customers arising in the ordinary course of itsbusiness and one employment related claim. The Company believes it hassubstantial defenses and intends to vigorously defend itself againstany and all actions taken by the plaintiffs in these matters. TheCompany does not believe that any potential damages that could arisefrom these claims will have a material adverse effect on its financialcondition or the results of its operations.

Omni Point hasbeen named as a defendant in a certain employment related claim whichto date has not been asserted against the Company. Although the Companyis not a defendant in this matter at this time, there can be noassurance that the plaintiffs will not attempt to assert this claimagainst the Company in the future or that such claim, if asserted, willnot result in a material loss to the Company. The range of loss withrespect to this matter, if any, cannot be quantified.

OnApril  5,  2006, Mr.  Ohad  Jehassi, theCompany’s former Chief Operating Officer, filed an actionagainst the Company in the Circuit Court for the 17th Judicial Circuitin Broward County, Florida. Mr.  Jehassi alleges in the Complaintthat the Company breached its Employment Agreement with Mr.Jehassi, and that the Company owes Mr.  Jehassi at least the sumof $15,000 under the Employment Agreement.

On March6,  2006 Boston Meridian LLC (‘‘BostonMeridian’’) filed a complaint in the United StatesDistrict Court, District of Massachusetts, alleging it is owed certainfees and expense reimbursements in connection with the acquisition ofthe business of SendTec from theglobe.com Inc. On March 21, 2006, theCompany filed a complaint in the Supreme Court of the State of newYork, County of New York against Boston Meridian and Sage CapitalGrowth, Inc. (‘‘Sage’’), alleging thatBoston Meridian circulated financial information which containedinaccuracies and unauthorized representations, and that Boston Meridianand Sage acted together to ruin the Company’s planned financingdeal. On April  3,  2006, Boston Meridian amended theComplaint adding Michael Brauser, the Company’s Chairman of theBoard of Directors, as an additional defendant. Boston Meridian allegesthat it expended time and effort to assist the Company with itsacquisition of the business of SendTec, specifically that it preparedpresentations, hosted conference calls with potential investors,traveled with and met with potential investors and provided advisoryservices to the Company. Boston Meridian alleges that Mr.Brauser tortiously interfered with Boston Meridian’s contractwith the Company. Boston Meridian seeks an aggregate of $917,302 infees and expenses and 100,000 shares of Common Stock. The Companyintends to vigorously defend against the complaint. The Company cannotprovide any assurance that the outcome of this matter will not have amaterial adverse effect on its financial position or results ofoperations.

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On March  3,  2006,Richard F. Thompson, Thompson Family Wealth Management, DwightThompson, Greg Thompson and Parabolic Investment Fund, L.P. commencedan action in the State Court of Indiana, County of Hamilton, againstAnthony D. Altavilla, Summit Financial Partners, LLC, Barron Partners,LP, US MedSys Corp. and RelationServe Media, Inc. The plaintiffs inthis action assert a variety of claims against non-related defendants.As against the Company, plaintiffs seek rescission of the 110,000shares of Company’ Common Stock they purchased in July2005 (plaintiffs also received warrants for 55,000 shares of RSMICommon Stock), alleging that the shares they received were notregistered as required under Indiana Law, and that the Company failedto disclose a commission. The Company intends to file a motion todismiss this action because the shares did not need to be registeredunder Indiana Law, as they were exempt from registration as a‘‘federal covered security.’’ Mr.Altavilla did not sell shares on the Company’s behalf.Mr.  Altavilla did receive, in addition to other compensation, afinder’s fee in the amount of 7% of total gross fundingprovided for introductions made by him to investors not already havinga preexisting relationship with the Company.

The Companybelieves this action is without merit, and intends to vigorously defenditself with respect to this matter; however, its outcome or range ofpossible loss, if any, cannot be predicted at this time. The Companycannot provide any assurance that the outcome of this matter will nothave a material adverse effect on its financial position or results ofoperations.

On February  17,  2006, the LawOffices of Robert H. Weiss PLLC (‘‘Weiss’’)filed a complaint in the Superior Court of the District of Columbia,Civil Division, against the Company and Omni Point for fraud, breach ofcontract, unjust enrichment, and violation of the Uniform DeceptivePractices Act. Weiss seeks compensatory damages in an amount no lessthan approximately $80,000 in addition to punitive and exemplarydamages with no specified amount. The Company also has accountsreceivable due from Weiss of approximately $387,000 which are fullyreserved. This case is in its initial stages. The Company intends tovigorously defend itself with respect to this matter; however, itsoutcome or range of possible loss, if any, cannot be predicted at thistime. The Company cannot provide any assurance that the outcome of thismatter will not have a material adverse effect on its financialposition or results of operations.

On February3,  2006, InfoLink Communications, Services, Inc, (InfoLink)filed a complaint against the Company and Omni Point in the CircuitCourt of Miami Dade County, Florida, for allegedly violating thefederal CAN SPAM ACT of 2003, 15 U.S.C. ss. 7701, and breach of analleged licensing agreement between Omni Point and InfoLink. TheCompany does not believe that Info Link has sufficiently pled anyfactual basis to support its claim. Info Link seeks actual damages inan amount of approximately $100,000 and approximately $1,500,000 instatutory damages. This case is initial stages. The Company intends tovigorously defend itself with respect to this matter; however, itsoutcome or range of possible loss, if any, cannot be predicted at thistime. The Company cannot provide any assurance that the outcome of thismatter will not have a material adverse effect on its financialposition or results of operations.

On December15,  2004, the Federal Bureau of Investigation served Omni Pointwith a search warrant regarding the alleged use of unlicensed softwareand seized certain e-mail servers with a net book value ofapproximately $135,000. Management believes the investigation resultedfrom a former independent contractor of the Company using the allegedunlicensed software on the Company’s behalf and without theCompany’s knowledge. Management and legal counsel are currentlyunaware of any additional developments in the investigation. The UnitedStates Attorney’s Office had then indicated that it wouldcontact the Company’s legal counsel as the investigationcontinues. The Company has not received any further communications withrespect to this matter; however, there can be no assurance that thismatter; if further investigated, will not have a material effect on theCompany.

ITEM 2.    UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS

DuringJanuary  2006, warrants to purchase 50,000 shares of CompanyCommon Stock were exercised at an exercise price of$0.25.

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On February  3,  2006,and as a result of the Consolidation, Debentures ($34,950,000) issuedby STAC on October  31,  2005 and initially convertibleinto STAC Common Stock, became convertible into the Company'sCommon Stock at a conversion price of $1.50 per share. On such date theCompany also issued seven-year warrants to the holders of theDebentures to purchase 10,081,607 shares of the Company's CommonStock in amounts proportional to the face amount of the Debenturesexercisable at $0.01 per share. The warrants will be exercisable fromFebruary  3,  2006 through October  30,2012.

On February  3,  2006, pursuant to theSecurities Exchange Agreement, shares of STAC Common Stock owned bySTAC management were exchanged for an aggregate of 9,506,380 shares ofCompany Common Stock.

On February  3,  2006,pursuant to a letter agreement between the Company and the Debentureholders, the Company issued 525,000 shares of Company Common Stock tothe holders pro rata in accordance with their respective ownership ofthe Debentures.

On February  3,  2006,pursuant to a Securities Purchase Agreement the Company sold to an‘‘accredited investor,’’ 500,000 shares ofCompany Common Stock for $750,000. In connection with this transaction,we paid a finder's fee of $25,000.

OnFebruary  7,  2006, holders of the seven-year warrants topurchase shares of Company Common Stock, exercised warrants to purchasean aggregate of 2,664,398 shares of the Company Common Stock. Suchexercise was effectuated through the cashless exercise provision of thewarrants equaling 9,549.81 shares in the aggregate of Company CommonStock underlying the warrants.

On February10,  2006 warrants to purchase 200,000 shares of Company CommonStock were exercised at an exercise price of $0.25.

ITEM3.    DEFAULTS UPON SENIOR SECURITIES

The STACDebenture provides, among other things, for the Company to assumeliability for the STAC Debentures on the date of Consolidation. TheSTAC Debenture also required STAC, and the Company beginning on thedate of Consolidation to comply with certain financial covenants andprovide for the Debenture holders to Participate in subsequentfinancing transactions. The Company and STAC were not in compliancewith financial covenants stipulated in the STAC Debenture prior to andas of, respectively the date of consolidation.

OnFebruary  3,  2006, the Company and the Debenture holdersentered into a letter agreement pursuant to which the debenture holdersagreed to (a) forbear to call a covenant default of STAC's breachof the financial covenants, (b) amend the STAC Debenture tosubstantially eliminate the requirement for the Company to comply withthe financial covenants at any time up to the date of consolidation andduring the year ended December  31,  2006 and (c) consentto the Company's sale of Common Stock to ‘‘anaccredited investor’’ described above, in exchange for525,000 shares of Common Stock with an aggregate fair value of1,443,750.

ITEM 6.    EXHIBITS

A.    Exhibits

|            |                                                         |
|------------|---------------------------------------------------------|
| 31.1  | Section 302Certification of the Chief ExecutiveOfficer* |

|            |                                                         |
|------------|---------------------------------------------------------|
| 31.2  | Section 302 Certificationof the Chief FinancialOfficer* |

|            |                                                     |
|------------|-----------------------------------------------------|
| 32.1  | Section 906 Certificationof Chief ExecutiveOfficer* |

|            |                                                                    |
|------------|--------------------------------------------------------------------|
| 32.2  | Section 906 Certificationof Chief Financial and AccountingOfficer* |

|  |
|--|
|  |  |
|  |

|   |               |
|---|---------------|
| * | Filedherewith |

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SIGNATURES

Inaccordance with the requirements of the Exchange Act, the registranthas caused this report to be signed on its behalf by the undersignedthereunto dulyauthorized.

|              |  |                         |  |                                                                                  |  |  |  |  |  |  |
|--------------|--|-------------------------|--|----------------------------------------------------------------------------------|--|--|--|--|--|--|
|         |  | RelationServeMedia,Inc. |
|         |  |                    |  |                                                                             |
| May22, 2006  |  | By:                     |  | /s/ Shawn McNamaraShawnMcNamaraSenior Vice President(Principal ExecutiveOfficer) |
| May  22,2006 |  | By:                     |  | /s/ Steve StowellSteveStowell(Principal FinancialOfficer)                        |
|              |

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