##### Table of Contents

The issuer has filed a Prospectus on April 12, 2007 with the U.S. Securities and Exchanges Commission
(SEC) for the resale of Common Stock. Before you invest in the issuers common shares, you should read such Prospectus, and other documents the issuer has filed with the SEC for more complete information about the issuer and an investment in
its common stock. You may get these documents for free by searching the SEC online database at http://www.sec.gov.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2007



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
|- | --------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 000-51702



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SENDTEC, INC.

(Exact Name Of Small Business Issuer As Specified In Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 43-2053462                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

877 Executive Center Drive W., Suite 300

St. Petersburg, Florida 33702

(Address of Principal Executive Offices)

(727) 576-6630

(Issuer's Telephone Number, Including Area Code)



(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)



---

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

State the
number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 53,102,334 shares at November 12, 2007.

Transitional Small Business Disclosure Format (Check one):    Yes ̈No  x



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##### Table of Contents

SENDTEC, INC. AND SUBSIDIARIES

FORM 10-QSB

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

INDEX



|                               |  |                                                                                                                            |  |     
|------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                            |  | Page
|PART I  FINANCIAL INFORMATION |  |                                                                                                                           
|                               |  |                                                                                                                           
|                               |  | Item 1  Condensed Consolidated Financial Statements (Unaudited)                                                           |  |     
|                               |  |                                                                                                                           
|                               |  | Condensed Consolidated Balance Sheet (Unaudited)As of September 30, 2007                                                   |  | 3   
|                               |  |                                                                                                                           
|                               |  | Condensed Consolidated Statements of Operations (Unaudited)For the Three and Nine Months Ended September 30, 2007 and 2006 |  | 4   
|                               |  |                                                                                                                           
|                               |  | Condensed Consolidated Statement of Stockholders Equity (Unaudited)For the Nine Months Ended September 30, 2007           |  | 5   
|                               |  |                                                                                                                           
|                               |  | Condensed Consolidated Statements of Cash Flows (Unaudited)For the Nine Months Ended September 30, 2007 and 2006           |  | 6   
|                               |  |                                                                                                                           
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                             |  | 7   
|                               |  |                                                                                                                           
|                               |  | Item 2  Management's Discussion and Analysis or Plan of Operation                                                         |  | 25  
|                               |  |                                                                                                                           
|                               |  | Item 3  Controls and Procedures                                                                                           |  | 34  
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                                           
|                               |  |                                                                                                                           
|                               |  | Item 1  Legal Proceedings                                                                                                 |  | 34  
|                               |  |                                                                                                                           
|                               |  | Item 2  Unregistered Sales of Equity Securities and Use of Proceeds                                                       |  | 36  
|                               |  |                                                                                                                           
|                               |  | Item 3  Defaults Upon Senior Securities                                                                                   |  | 36  
|                               |  |                                                                                                                           
|                               |  | Item 4  Submission of Matters to a Vote of Security Holders                                                               |  | 36  
|                               |  |                                                                                                                           
|                               |  | Item 5  Other Information                                                                                                 |  | 37  
|                               |  |                                                                                                                           
|                               |  | Item 6  Exhibits                                                                                                          |  | 37  



2



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##### Table of Contents

SENDTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2007

(Unaudited)



|                                                                                                                       |  |   |             |  
|---------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|ASSETS                                                                                                                 |  |   |             |  
|Current assets                                                                                                         |  |   |             |  
|Cash and equivalents                                                                                                   |  | $ | 2,582,617   |  
|Accounts receivable, less allowance for doubtful accounts of $278,000                                                  |  |   | 10,927,320  |  
|Prepaid expenses                                                                                                       |  |   | 415,894     |  
|                                                                                                                       |  |   |             |  
|Total current assets                                                                                                   |  |   | 13,925,831  |  
|                                                                                                                       | 
|Property and equipment, net                                                                                            |  |   | 1,185,890   |  
|Intangible assets, net                                                                                                 |  |   | 7,266,020   |  
|Goodwill                                                                                                               |  |   | 32,945,787  |  
|Other assets                                                                                                           |  |   | 32,329      |  
|                                                                                                                       |  |   |             |  
|Total assets                                                                                                           |  | $ | 55,355,857  |  
|                                                                                                                       |  |   |             |  
|                                                                                                                       | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                   |  |   |             |  
|Current liabilities                                                                                                    |  |   |             |  
|Accounts payable                                                                                                       |  | $ | 8,372,877   |  
|Debentures payable, net of debt discount of $5,248,136                                                                 |  |   | 27,481,864  |  
|Accrued expenses                                                                                                       |  |   | 3,920,306   |  
|Accrued compensation                                                                                                   |  |   | 293,798     |  
|Accrued penalty  registration rights                                                                                  |  |   | 43,000      |  
|Current portion of capital lease obligations                                                                           |  |   | 88,773      |  
|Deferred revenue                                                                                                       |  |   | 1,271,165   |  
|                                                                                                                       |  |   |             |  
|Total current liabilities                                                                                              |  |   | 41,471,783  |  
|                                                                                                                       | 
|Capital lease obligations, net of current portion                                                                      |  |   | 19,059      |  
|Deferred rent                                                                                                          |  |   | 110,079     |  
|                                                                                                                       |  |   |             |  
|Total liabilities                                                                                                      |  |   | 41,600,921  |  
|                                                                                                                       | 
|Commitments and contingencies                                                                                          |  |   |             |  
|                                                                                                                       | 
|Stockholders equity                                                                                                   |  |   |             |  
|Series A Convertible Preferred stock  $.001 par value; 10,000,000 shares authorized; no shares issued and outstanding |  |   |            |  
|Common stock  $.001 par value; 190,000,000 shares authorized; 53,102,334 shares issued and outstanding                |  |   | 53,102      |  
|Additional paid in capital                                                                                             |  |   | 82,749,789  |  
|Accumulated deficit                                                                                                    |  |   | (69,047,955 | )
|                                                                                                                       |  |   |             |  
|Total stockholders equity                                                                                             |  |   | 13,754,936  |  
|                                                                                                                       |  |   |             |  
|Total liabilities and stockholders equity                                                                             |  | $ | 55,355,857  |  
|                                                                                                                       |  |   |             |  

See notes to unaudited condensed consolidated financial statements.



3



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##### Table of Contents

SENDTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|---------------------------------------------------------------------- |  | --------------------------------------- | ---------- | - | -------------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                                       |  | For the Three Months EndedSeptember 30, |            |   | For the Nine Months EndedSeptember 30, |  
|                                                                       |  | 2007                                    |            |   | 2006                                   |   |            | 2007 |  |   | 2006        |  
|Revenues                                                               |  | $                                       | 7,354,888  |   |                                        | $ | 9,404,920  |      |  | $ | 24,484,984  |   |  | $ | 27,185,118  |  
|                                                                       |  |                                         |            |  
|Cost of revenues                                                       |  |                                         | 3,476,466  |   |                                        |   | 5,380,121  |      |  |   | 12,497,226  |   |  |   | 17,122,725  |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Gross profit                                                           |  |                                         | 3,878,422  |   |                                        |   | 4,024,799  |      |  |   | 11,987,758  |   |  |   | 10,062,393  |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Selling, general and administrative expenses                           |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Salaries, wages and benefits                                           |  |                                         | 2,706,315  |   |                                        |   | 2,552,010  |      |  |   | 8,540,343   |   |  |   | 6,312,879   |  
|Professional fees                                                      |  |                                         | 243,059    |   |                                        |   | 144,516    |      |  |   | 986,789     |   |  |   | 1,220,488   |  
|Restructuring charges                                                  |  |                                         |           |   |                                        |   |           |      |  |   | 491,237     |   |  |   |            |  
|Other general and administrative                                       |  |                                         | 2,240,319  |   |                                        |   | 1,322,699  |      |  |   | 5,369,128   |   |  |   | 3,307,858   |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Total operating expenses                                               |  |                                         | 5,189,693  |   |                                        |   | 4,019,225  |      |  |   | 15,387,497  |   |  |   | 10,841,225  |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|(Loss) income from operations                                          |  |                                         | (1,311,271 | ) |                                        |   | 5,574      |      |  |   | (3,399,739  | ) |  |   | (778,832    | )
|Other income (expense)                                                 |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Registration rights penalty                                            |  |                                         |           |   |                                        |   |           |      |  |   |            |   |  |   | 193,500     |  
|Waiver and covenant fee                                                |  |                                         |           |   |                                        |   |           |      |  |   |            |   |  |   | (1,443,750  | )
|Loss on equity-method investment                                       |  |                                         |           |   |                                        |   |           |      |  |   |            |   |  |   | (153,389    | )
|Gain on disposition of equipment                                       |  |                                         |           |   |                                        |   | 7,471      |      |  |   |            |   |  |   | 7,471       |  
|Interest income                                                        |  |                                         | 26,367     |   |                                        |   | 38,385     |      |  |   | 106,790     |   |  |   | 75,514      |  
|Interest expense                                                       |  |                                         | (3,157,642 | ) |                                        |   | (3,003,827 | )    |  |   | (10,254,723 | ) |  |   | (7,981,398  | )
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Total other expense                                                    |  |                                         | (3,131,275 | ) |                                        |   | (2,957,971 | )    |  |   | (10,147,933 | ) |  |   | (9,302,052  | )
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Loss from continuing operations                                        |  |                                         | (4,442,546 | ) |                                        |   | (2,952,397 | )    |  |   | (13,547,672 | ) |  |   | (10,080,884 | )
|Loss from discontinued operations                                      |  |                                         |           |   |                                        |   | (33,450    | )    |  |   |            |   |  |   | (4,044,099  | )
|Loss on disposal of discontinued operations                            |  |                                         |           |   |                                        |   |           |      |  |   |            |   |  |   | (605,439    | )
|Cumulative effect of change in accounting principle                    |  |                                         |           |   |                                        |   |           |      |  |   | 88,500      |   |  |   |            |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|Net loss                                                               |  | $                                       | (4,442,546 | ) |                                        | $ | (2,985,847 | )    |  | $ | (13,459,172 | ) |  | $ | (14,730,422 | )
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|                                                                       |  |                                         |            |  
|Net loss per common sharebasic and diluted                            |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|- Continuing operations                                                |  | $                                       | (0.08      | ) |                                        | $ | (0.06      | )    |  | $ | (0.25       | ) |  | $ | (0.23       | )
|- Discontinued operations                                              |  | $                                       |           |   |                                        | $ |           |      |  | $ |            |   |  | $ | (0.10       | )
|- Cumulative effect of change in accounting principle                  |  | $                                       |           |   |                                        | $ |           |      |  | $ |            |   |  | $ |            |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|- Total                                                                |  | $                                       | (0.08      | ) |                                        | $ | (0.06      | )    |  | $ | (0.25       | ) |  | $ | (0.33       | )
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  
|                                                                       |  |                                         |            |  
|Weighted average number of common shares outstandingbasic and diluted |  |                                         | 56,333,064 |   |                                        |   | 49,073,244 |      |  |   | 54,139,053  |   |  |   | 45,212,276  |  
|                                                                       |  |                                         |            |   |                                        |   |            |      |  |   |             |   |  |   |             |  

See notes to unaudited condensed consolidated financial statements.



4



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##### Table of Contents

SENDTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(Unaudited)



|                                                                     |  |                 |  |              |  |                  |                          |  |        |                    |   |  |                     |            |   |  |   |             |   |  |   |             |  
|-------------------------------------------------------------------- |  | --------------- |  | ------------ |  | ---------------- | ------------------------ |  | ------ | ------------------ | - |  | ------------------- | ---------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                                     |  | Preferred Stock |  | Common Stock |  |                  | AdditionalPaid-InCapital |  |        | AccumulatedDeficit |   |  | StockholdersEquity |           
|                                                                     |  | Numberof Shares |  | Amount       |  | Number of Shares |                          |  | Amount |                    |   |  |                    
|Balance  January 1, 2007                                            |  |                |  |             |  | 47,495,997       |                          |  | $      | 47,496             |   |  | $                   | 79,541,963 |   |  | $ | (55,588,783 | ) |  | $ | 24,000,676  |  
|Common stock issued upon conversion of Debenture principal           |  |                |  |             |  | 3,700,000        |                          |  |        | 3,700              |   |  |                     | 1,846,300  |   |  |   |            |   |  |   | 1,850,000   |  
|Amortization of stock based compensation                             |  |                |  |             |  |                 |                          |  |        |                   |   |  |                     | 541,650    |   |  |   |            |   |  |   | 541,650     |  
|Common stock issued as partial interest payment to Debenture Holders |  |                |  |             |  | 980,761          |                          |  |        | 980                |   |  |                     | 340,516    |   |  |   |            |   |  |   | 341,496     |  
|Common stock issued in settlement of litigation                      |  |                |  |             |  | 1,200,000        |                          |  |        | 1,200              |   |  |                     | 310,800    |   |  |   |            |   |  |   | 312,000     |  
|Reclassification of shares subject to put right                      |  |                |  |             |  |                 |                          |  |        |                   |   |  |                     | (266,732   | ) |  |   |            |   |  |   | (266,732    | )
|Repurchase and retirement of common stock subject to redemption      |  |                |  |             |  | (274,424         | )                        |  |        | (274               | ) |  |                     | 274        |   |  |   |            |   |  |   |            |  
|Expiration of put rights                                             |  |                |  |             |  |                 |                          |  |        |                   |   |  |                     | 435,018    |   |  |   |            |   |  |   | 435,018     |  
|Net loss                                                             |  |                |  |             |  |                 |                          |  |        |                   |   |  |                     |           |   |  |   | (13,459,172 | ) |  |   | (13,459,172 | )
|                                                                     |  |                 |  |              |  |                  |                          |  |        |                    |   |  |                     |            |   |  |   |             |   |  |   |             |  
|Balance  September 30, 2007                                         |  |                |  |             |  | 53,102,334       |                          |  | $      | 53,102             |   |  | $                   | 82,749,789 |   |  | $ | (69,047,955 | ) |  | $ | 13,754,936  |  
|                                                                     |  |                 |  |              |  |                  |                          |  |        |                    |   |  |                     |            |   |  |   |             |   |  |   |             |  

See notes to unaudited condensed consolidated financial statements.



5



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##### Table of Contents

SENDTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

(Unaudited)



|                                                                                          |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                          |  | 2007 |             |   | 2006 |  
|CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES                                           |  |      |             |   |      |   |             |  
|Net loss - continuing operations                                                          |  | $    | (13,547,672 | ) |      | $ | (10,080,884 | )
|                                                                                          |  |      |             |   |      |   |             |  
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |      |             |   |      |   |             |  
|Depreciation and amortization                                                             |  |      | 1,260,031   |   |      |   | 559,634     |  
|Stock-based compensation                                                                  |  |      | 541,650     |   |      |   | 575,000     |  
|Non-cash interest                                                                         |  |      | 8,712,451   |   |      |   | 6,557,362   |  
|Non-cash restructuring charge                                                             |  |      | 51,818      |   |      |   |            |  
|Waiver and covenant fee                                                                   |  |      |            |   |      |   | 1,443,750   |  
|Provision for bad debt                                                                    |  |      | 229,158     |   |      |   | 197,745     |  
|Loss on equity-method investment                                                          |  |      |            |   |      |   | 153,389     |  
|Registration rights penalty                                                               |  |      |            |   |      |   | (193,500    | )
|Gain on disposition of equipment                                                          |  |      |            |   |      |   | (7,471      | )
|Changes in assets and liabilities:                                                        |  |      |             |   |      |   |             |  
|Accounts receivable                                                                       |  |      | (1,712,168  | ) |      |   | (3,249,221  | )
|Prepaid expenses and other assets                                                         |  |      | (106,402    | ) |      |   | (107,403    | )
|Accounts payable                                                                          |  |      | (1,124,066  | ) |      |   | (2,017,623  | )
|Accrued expenses                                                                          |  |      | 2,341,630   |   |      |   | (24,850     | )
|Accrued compensation                                                                      |  |      | 36,158      |   |      |   | (107,679    | )
|Deferred rent                                                                             |  |      | (21,922     | ) |      |   | (13,787     | )
|Deferred revenue                                                                          |  |      | 163,197     |   |      |   | 1,352,232   |  
|                                                                                          |  |      |             |   |      |   |             |  
|Total adjustments                                                                         |  |      | 10,371,535  |   |      |   | 5,117,578   |  
|                                                                                          |  |      |             |   |      |   |             |  
|Net cash used in continuing operating activities                                          |  |      | (3,176,137  | ) |      |   | (4,963,306  | )
|                                                                                          |  |      |             |   |      |   |             |  
|CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES                                           |  |      |             |   |      |   |             |  
|Cash acquired in business acquisition                                                     |  |      |            |   |      |   | 9,347,155   |  
|Cash received in reconciliation of asset purchase                                         |  |      |            |   |      |   | 318,750     |  
|Purchase of property and equipment                                                        |  |      | (164,870    | ) |      |   | (521,078    | )
|Proceeds from disposition of equipment                                                    |  |      |            |   |      |   | 22,051      |  
|Investment in prospective acquiree                                                        |  |      |            |   |      |   | (194,827    | )
|Cash used in acquisition                                                                  |  |      |            |   |      |   | (20,619     | )
|                                                                                          |  |      |             |   |      |   |             |  
|Net cash (used in) provided by continuing investing activities                            |  |      | (164,870    | ) |      |   | 8,951,432   |  
|                                                                                          |  |      |             |   |      |   |             |  
|CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES                                           |  |      |             |   |      |   |             |  
|Net proceeds from sales of common stock                                                   |  |      |            |   |      |   | 675,000     |  
|Proceeds received upon exercise of warrants                                               |  |      |            |   |      |   | 105,577     |  
|Repurchase and retirement of common stock subject to redemption                           |  |      | (99,667     | ) |      |   |            |  
|Principal payments on capital lease obligations                                           |  |      | (95,497     | ) |      |   | (45,082     | )
|                                                                                          |  |      |             |   |      |   |             |  
|Net cash (used in) provided by continuing financing activities                            |  |      | (195,164    | ) |      |   | 735,495     |  
|                                                                                          |  |      |             |   |      |   |             |  
|CASH FLOWS OF DISCONTINUED OPERATIONS                                                     |  |      |             |   |      |   |             |  
|Net cash used in operating activities                                                     |  |      |            |   |      |   | (1,747,643  | )
|Net cash provided by investing activities                                                 |  |      |            |   |      |   | 1,302,647   |  
|                                                                                          |  |      |             |   |      |   |             |  
|Net cash used in discontinued operations                                                  |  |      |            |   |      |   | (444,996    | )
|                                                                                          |  |      |             |   |      |   |             |  
|Net (decrease) increase in cash and equivalents                                           |  |      | (3,536,171  | ) |      |   | 4,278,625   |  
|Cash and equivalents  beginning of period                                                |  |      | 6,118,788   |   |      |   | 156,472     |  
|                                                                                          |  |      |             |   |      |   |             |  
|Cash and equivalents  end of period                                                      |  | $    | 2,582,617   |   |      | $ | 4,435,097   |  
|                                                                                          |  |      |             |   |      |   |             |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                          |  |      |             |   |      |   |             |  
|Cash paid during the periods for:                                                         |  |      |             |   |      |   |             |  
|Interest                                                                                  |  | $    | 1,297,735   |   |      | $ | 1,604,611   |  
|Income taxes                                                                              |  | $    | 13,170      |   |      | $ |            |  
|Non-cash investing and financing activities                                               |  |      |             |   |      |   |             |  
|Issuance of common stock in connection with partial payments of interest                  |  | $    | 341,496     |   |      | $ |            |  
|Conversion of Debentures Principal into common stock                                      |  | $    | 1,850,000   |   |      | $ |            |  
|Expiration of common stock put rights                                                     |  | $    | 168,305     |   |      | $ |            |  
|Computer equipment capital lease                                                          |  | $    | 36,925      |   |      | $ | 241,538     |  
|Issuance of common stock in connection with consolidation                                 |  | $    |            |   |      | $ | 5,306,022   |  

See notes to unaudited condensed consolidated financial statements.



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SENDTEC, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION AND BUSINESS ORGANIZATION

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles (GAAP) for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, the financial statements do not
include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal
recurring nature. These consolidated financial statements should be read in conjunction with the financial statements for the year ended December 31, 2006 and notes thereto of SendTec, Inc., formerly RelationServe Media, Inc. (the
Company or SendTec) included in the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006. The results of operations for the three and nine months ended September 30, 2007
are not necessarily indicative of the results for the full fiscal year ending December 31, 2007.

The unaudited condensed consolidated financial
statements include the Company and its wholly owned subsidiaries SendTec Acquisition Corp. (STAC) which became a wholly-owned subsidiary under a purchase business combination completed on February 3, 2006, RelationServe Access, Inc.
(Access) and Freindsand.com, Inc. (Friendsand). STAC was 23% owned by the Company for the period October 31, 2005 and through February 1, 2006. Accordingly, the accompanying statements of operations for the nine
months ended September 30, 2006 include the Companys proportionate share of STACs losses for the period of January 1, 2006 through February 2, 2006 in accordance with the provisions of APB 18, The Equity Method of
Accounting for Investments in Common Stock.

On June 15, 2006, the Company sold substantially all of the business and net assets of Access and
ceased the operations of the business of Friendsand. The financial statements for the three and nine months ended September 30, 2006 have been retroactively reclassified to reflect the discontinued operations. All material intercompany balances
and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.

NOTE 2  LIQUIDITY, FINANCIAL
CONDITION, GOING CONCERN AND LEGAL MATTERS

Liquidity, Financial Condition and Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company incurred a
net loss from continuing operations of approximately $13,548,000 for the nine months ended September 30, 2007, which includes an aggregate of approximately $10,743,000 in non-cash charges including non-cash interest of $8,712,000, depreciation
and amortization of $1,260,000, stock based compensation of $542,000, and a provision for bad debts of $229,000. The Company also issued stock in payment of approximately $342,000 of contractual interest expense under its Senior Secured Convertible
Debentures (the Debentures) described in Note 8.

The Debentures, which were amended on November 10, 2006, are required to be repaid by the
Company on March 31, 2008. These Debentures have a remaining principal balance of $32,730,000 as of September 30, 2007. The Company currently does not have sufficient capital resources to repay the Debentures upon their maturity. Accordingly, the
Company must either restructure this obligation or raise replacement capital in order to avoid a default.

As of September 30, 2007, the Company was
required to have a minimum cash balance of $3,500,000 pursuant to the financial covenants the Company is required to maintain under the modified terms of the Securities Purchase Agreement (Securities Purchase Agreement) with the
Debenture holders. As of September 30, 2007, the Company was not in compliance with this requirement. In addition, the Company did not make a required interest payment of approximately $502,000 due on November 1, 2007. The Companys failure to
meet the financial covenants and to make interest payments are events of default under the Debentures.

Subsequent to November 1, 2007 the Company and
Debenture holders representing more than 75%, the required minimum, of the outstanding principal amount of the Debentures, executed a Letter Agreement (Letter Agreement), which among other things, provides that during the period from the
signing of the Letter Agreement until the close of business on November 16, 2007, the Debenture holders forbear their right to declare the Company in default under the Debentures and the Securities Purchase Agreement and their right to demand
acceleration of the Debentures.

If the Company is not able to restructure the Debentures or negotiate a further forbearance, holders of 75% of the
principal amount of the Debentures may elect to declare the Company in default of the Debentures. If the Company is declared in default, the Debenture holders have the right to accelerate the payment of the obligation, and as such the Company will
not have sufficient working capital or cash to repay the outstanding principal and interest due under the Debentures. Since the Company relies on its working capital for day-to-day operations, such a default would have a material adverse effect on
the business, operating results, and financial condition. In such event, the Company may be forced to restructure, file for bankruptcy, sell assets, or cease operations, any of which would put the Company, its investors and the value of its common
stock, at significant risk. Further, the Companys obligations under the Debentures are secured by substantially all of its assets. Failure to fulfill the obligations under the Debentures could lead to loss of these assets, which would be
detrimental to the Company operations. In addition, adverse future developments affecting the Companys pending legal proceedings and other contingencies may also have a material adverse impact on the Companys liquidity. These matters
raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

The Company believes, exclusive of its obligation to repay the Debentures, that its current capital resources combined with revenues it expects to generate during the
next twelve months will enable it to fund its operating activities through September 30, 2008. The



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Company may seek to raise additional capital to fund the growth of its business and believes it has access to capital resources; however, the Company has not
secured any commitments for new financing at this time nor can the Company provide any assurance that it will be successful in its efforts to raise additional capital if considered necessary.

The Company is currently restricted from incurring additional indebtedness other than certain permitted indebtedness specified under the terms of a Securities Purchase
Agreement related to the Debentures described in Note 8 (the Securities Purchase Agreement) and is also required to attain minimum cash balances of $3,750,000 as of December 31, 2007. The amended financial covenants also required
the Company to attain minimum net revenues of $5,700,000 for the three months period ending on December 31, 2007.

Under the Securities Purchase
Agreement, the Company was also required to attain minimum net revenues of $5,450,000 for the three months ended September 30, 2007, which it attained. Net revenues are defined as net revenues calculated in accordance with GAAP as applied by
the Company in its audited financial statements. See Note 3 for a description of the Companys revenue recognition policies.

Legal Proceedings

Other than the actions stated below, the Company is involved in various matters or disputes arising in the ordinary course of the Companys
business. Adverse future developments affecting our pending legal proceedings and other contingencies may also have a material adverse impact on our liquidity.

On April 5, 2006, Ohad Jehassi (Jehassi), the Companys former Chief Operating Officer, filed an action against the Company in the Circuit Court for the 17th Judicial Circuit in Broward County, Florida. Jehassi alleged
that the Company breached an employment agreement and owes him salary and other benefits in connection with such alleged breach. On June 21, 2006, Jehassi filed an Amended Complaint adding a claim for an alleged violation of Floridas
Whistleblower Act, and on August 14, 2006, filed a Third Amended Complaint adding a claim for unpaid wages under a Florida statute. Jehassi seeks damages of approximately $500,000 plus attorneys fees, costs and expenses and shares of the
Companys stock he alleges he is entitled to. The Company has filed an answer to the Third Amended Complaint denying that Jehassi is entitled to any relief and has asserted a counterclaim against Jehassi. In February 2007, Mr. Jehassi
filed a Fourth Amended Complaint (substantially similar to the Third Amended Complaint). The case is now in the discovery phase. The Company believes this action is without merit, and intends to vigorously defend itself with respect to this matter;
however, its outcome or range of possible loss, if any, cannot be predicted at this time. The Company cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial position or results of
operations.

On February 3, 2006, InfoLink Communications Services, Inc, (InfoLink) filed a complaint against the Company and Omni Point
Marketing LLC in the Circuit Court of Miami Dade County, Florida, asserting violation of the federal CAN SPAM ACT of 2003, 15 U.S.C. ss. 7701, and breach of an alleged licensing agreement between Omni Point Marketing LLC and InfoLink. InfoLink seeks
actual damages in an amount of approximately $100,000 and approximately $1,500,000 in statutory damages. The Company does not believe that InfoLink has sufficiently pled any factual basis to support its claim. The Company filed a motion asking the
Court to enter sanctions against InfoLink, including, but not limited to, dismissal of the case with prejudice for InfoLinks failure to comply with a court order to produce discovery materials. The Company intends to vigorously defend itself
with respect to this matter; however, its outcome or range of possible loss, if any, cannot be predicted at this time. The Company cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial
position or results of operations.



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On or about June 15, 2006, R&R Investors Ltd. (R&R) commenced an action in the Supreme Court of
the State of New York, County of New York, against the Company and Come & Stay S.A. asserting a claim for breach of contract related to a purported agreement concerning the sale of RelationServe Access, Inc and Friendsand, Inc. R&R
initially sought an injunction enjoining the transfer of RelationServe Access, Inc. and Friendsand, Inc. stock. The Court denied R&Rs motion. R&R effectuated service of the complaint on the Company in August 2006. The Company has
served an answer to R&Rs complaint denying that R&R is entitled to any relief. This action is now in the discovery phase. The Company intends to vigorously defend itself with respect to this matter; however, its outcome or range of
possible loss, if any, cannot be predicted at this time. The Company cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial position or results of operations.

On or about April 28, 2006, LeadClick Media, Inc. (LeadClick) commenced an action against the Company in the Superior Court for the State of California,
County of San Francisco, alleging breach of contract seeking to recover $379,146, plus interest. During August 2007, the Company reached an agreement settling this matter for $260,000 to be paid to LeadClick Media in three installments and executed
a mutual release with LeadClick. During the nine months ended September 30, 2007, the Company paid $135,000 with respect to this settlement. The accompanying unaudited condensed consolidated balance sheet includes a $125,000 liability for the
remaining amount due under the settlement of this obligation.

Pursuant to an Asset Purchase Agreement, dated as of June 6, 2006, relating to certain
discontinued operations of the Company, the Company believes the purchaser (Come & Stay, S.A.) is required to assume certain liability with respect to this matter, however, the purchaser has contested this fact. As a result, the Company has
commenced an arbitration proceeding before the International Chamber of Commerce seeking to have the purchaser assume liability for amounts that may be due by the Company to Leadclick, as mentioned in the preceding paragraph.

On or about August 31, 2006, an action was commenced in the United States District Court for the Southern District of Florida (Case No. 06-61327) by Richard F.
Thompson, as the putative class representative, against the Company and certain of the Companys former officers and directors alleging securities laws violations in connection with the purchase of the Companys stock during the period of
May 24, 2005 to August 2006. The named plaintiff in the case previously filed suit against the Company, as an individual, in State Court in Indiana, which action was dismissed in July 2006. The Florida District Court permitted the plaintiff to
file an amended complaint and on November 13, 2006, plaintiff filed a First Amended Class Action Complaint (the First Amended Complaint) adding an additional plaintiff, L. Alan Jacoby, who purportedly purchased 10,000
shares of the Companys common stock in the open market, and naming additional former and present officers and directors of the Company and others as defendants. The First Amended Complaint, styled as a class action, alleges violations of
Section 11 and Section 12(2) of the Securities Act and Section 10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated thereunder. In addition to the claims of securities law violations, plaintiffs claim violation of
Section 20(a) of the Exchange Act as to controlling persons of the Company, violations of the Florida Securities Act, violations of the Indiana Securities Act, sales of unregistered, non-exempt securities, violation of anti-fraud provisions
under Indiana law, deception under Indiana law, and fraud. Plaintiffs seek rescission, damages, treble damages, punitive damages, compensatory damages, interest, costs, and attorneys fees.

The District Court dismissed the First Amended Complaint on March 6, 2007 and gave leave to the plaintiffs to file an amended complaint, which was filed on
March 19, 2007. By decision dated June 12, 2007, the District Court dismissed the Second Amended Complaint, with prejudice, and state law claims without prejudice. Plaintiffs have noted their appeal of the June 12, 2007 dismissal of
the Second Amended Complaint.

On September 19, 2007, the parties attended court ordered mediation but were unable to reach a compromise. The Company
filed its answer brief with the Eleventh Circuit of Appeals on September 25, 2007. The Company intends to vigorously defend itself with respect to this matter; however, its outcome or range of possible loss, if any, cannot be predicted at this
time. The Company cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial position or results of operations.

On July 25, 2007, Richard F. Thompson, along with new plaintiffs, Parabolic Investment Fund, Ltd and Gregory Thompson filed a Class Action Compliant in the Circuit Court for the Seventeenth Judicial Circuit in
and for Broward County, Florida, on behalf of themselves, and others similarly situated naming the Company, and certain former officers and directors of the Company, as defendants. The plaintiffs claim violations of certain state laws regarding the
sale of securities by unregistered broker/dealers and failure to report such violations. The Company filed a motion to dismiss the class action on September 14, 2007 and a hearing is set for November 14, 2007. The Company believes that
this action, like those previously filed, is without merit and will vigorously defend itself in this matter.



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On September 28, 2006, Wedbush Morgan Securities, Inc. (Wedbush) commenced arbitration against the
Company seeking $500,000 in damages, plus interest and attorneys fees, as a result of an alleged breach of contract. On October 29, 2007 the arbitrator awarded Wedbush $694,197, which the Company recorded during the quarter ended
September 30, 2007. The Company is presently considering an appeal of this award.

On or about September 26, 2006, the Company received copies of
three consumer complaints filed by Chirag Chaman, Chief Operating Officer of MX Interactive, LLC. These complaints submitted to the SEC, the New York Attorney General, and the Florida Attorney General, and assert various claims with respect to the
failure to issue to MX Interactive LLC 45,454 shares of stock which claimant alleges the Company agreed to transfer pursuant to a written assignment agreement. Claimant asserts that, in July 2005, a third party agreed to transfer rights to receive
shares of Company stock to claimant and failed to do so, and that the Company is under an obligation to transfer such shares and satisfy the obligation under the assignment agreement. The Company believes these claims to be substantially without
merit and intends to vigorously defend itself with respect to this matter, however its outcome or range of possible loss, if any, cannot be predicted at this time. The Company cannot provide any assurance that the outcome of this matter will not
have a material adverse effect on its financial position or results of operations.

The Company received a letter dated August 11, 2006 from counsel
to Sunrise Equity Partners, L.P., demanding return of its $750,000 investment, with interest. Subsequently, counsel to Sunrise Equity Partners, L.P. has made demands for issuance of additional shares of common stock on the same basis as the
amendment to the Companys Debentures and has threatened legal action, although, to date, no action has been taken. The Company has engaged in settlement discussions with counsel for Sunrise after the matter was referred to mediation. During
February 2007, the Company reached a preliminary agreement in principal for settlement of this matter upon the issuance of 650,000 shares of its common stock with a fair value of $169,000 and recorded a liability for the preliminary settlement,
although negotiations continue. The effectiveness of any settlement is subject to approval by the Companys Debenture holders. Subsequent to February 2007, the preliminary agreement was not executed and all talks have ceased. Due to the
uncertainity of this matter, the Company reversed its prior accrual during the nine months ended September 30, 2007 and cannot predict the outcome or range of possible loss, if any. The Company cannot provide any assurance that the outcome of
this matter will not have a material adverse effect on its financial position or results of operations.

On September 14, 2007, the Company filed a
breach of contract and collection of trade receivables action against a former customer, Cosmetique, Inc. The Company is seeking recovery of at least $2.2 million of damages, as of September 30, 2007. This amount includes invoiced advertising
services, as well as other commissions estimated at approximately $0.2 million, as of September 30, 2007. The action is in the initial stage. While it is impossible to predict the outcome of any litigation with certainty, the Company believes
it has valid claims and intends to prosecute them vigorously. The amounts have been reflected as accounts receivable in the accompanying condensed consolidated balance sheet as of September 30, 2007.

Cosmetiques failure to pay its obligations to the Company has caused the Company to delay certain payments for costs the Company incurred in connection with its
work for Cosmetique. Although the Company is not aware of any vendor lawsuits that have been filed, at least one vendor, ValueClick, Inc. has threatened to file suit against the Company.

NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of SendTec, Inc. and its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation. Investments in which the Company has a 20% to 50% ownership interest are accounted for using the equity method.

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commissions Staff Accounting Bulletin (SAB)
104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable,
and collectibility is reasonably assured. The Company, in accordance with Emerging Issues Task Force (EITF) Issue 99-19 Reporting Revenue Gross as a Principal vs. Net as an Agent, reports revenues for transactions in which it
is the primary obligor on a gross basis and revenues in which it acts as an agent on and earns a fixed percentage of the sale on a net basis, net of related costs. Credits or refunds are recognized when they are determinable and estimable. The
following policies reflect specific criteria for the various revenue streams of the Company:



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Internet advertising: Revenue from the distribution of internet advertising, which
principally includes the placement of banner ads and e-mail transmission services, is recognized when internet users visit and complete actions at an advertisers website. Revenue consists of the gross value of billings to clients, including
the recovery of costs incurred to acquire online media required to execute client campaigns. The Company reports these revenues gross because it is responsible for fulfillment of the service, has substantial latitude in setting price and assumes the
credit risk for the entire amount of the sale, and it is responsible for the payment of all obligations incurred with media providers.

Online search: Revenue derived from search engine marketing services, such as search engine keyword buying, is recognized on a net basis in the period when the associated keyword search media is clicked on by a consumer. SendTec
typically earns a media commission equal to a percentage of the keyword search media purchased for its clients. In many cases, the amount SendTec bills to clients significantly exceeds the amount of revenue that is earned due to the existence of
various pass-through charges such as the cost of the search engine keyword media. Amounts received in advance of search engine keyword media purchases are deferred and included in deferred revenue in the accompanying balance sheet. The Company
reports these revenues on a net basis since amounts earned are based on a fixed percentage of the selling price.

Direct response
media: Revenue derived from the purchase and tracking of direct response media, such as television and radio commercials, is recognized on a net basis when the associated media is aired. In many cases, the amount the Company bills to
clients significantly exceeds the amount of revenue that is earned due to the existence of various pass-through charges such as the cost of the television and radio media. Amounts received in advance of media airings are deferred and included in
deferred revenue in the accompanying balance sheet. The Company reports these revenues on a net basis since amounts earned are based on a fixed percentage of the selling price.

Advertising programs: Revenue generated from the production of direct response advertising programs, such as infomercials, is recognized on
the completed contract method when such programs are complete and available for airing. Production activities generally take 8 to 12 weeks and the Company usually collects amounts in advance and at various points throughout the production process.
Amounts received from customers prior to completion of commercials are included in deferred revenue and direct costs associated with the production of commercials in process are also deferred and included in prepaid expenses. In addition, revenues
from creative services, third party research, retainer fees, and strategic consulting are included in this category. The Company reports these revenues gross because it is responsible for the fulfillment of the service.

Revenues by revenue stream are as follows:



|                      |  |                                         |           |                                        |   |           |  |      |            |  |   |           
|--------------------- |  | --------------------------------------- | --------- | -------------------------------------- | - | --------- |  | ---- | ---------- |  | - | ----------
|                      |  | For the Three Months EndedSeptember 30, |           | For the Nine Months EndedSeptember 30,
|                      |  | 2007                                    |           | 2006                                   |   | 2007      |  | 2006
|Internet advertising  |  | $                                       | 4,374,846 |                                        | $ | 6,720,012 |  | $    | 15,790,623 |  | $ | 21,228,140
|Online search         |  |                                         | 1,192,408 |                                        |   | 480,986   |  |      | 3,394,638  |  |   | 1,019,686 
|Direct response media |  |                                         | 707,417   |                                        |   | 621,560   |  |      | 1,938,268  |  |   | 1,457,421 
|Advertising programs  |  |                                         | 1,080,217 |                                        |   | 1,498,144 |  |      | 3,238,426  |  |   | 3,388,401 
|Other                 |  |                                         |          |                                        |   | 84,218    |  |      | 123,029    |  |   | 91,470    
|                      |  |                                         |           |                                        |   |           |  |      |            |  |   |           
|                      |  | $                                       | 7,354,888 |                                        | $ | 9,404,920 |  | $    | 24,484,984 |  | $ | 27,185,118
|                      |  |                                         |           |                                        |   |           |  |      |            |  |   |           

Cash and Equivalents

Cash and equivalents consist of highly liquid investments with original maturities of three months or less.

Accounts Receivable

Accounts receivable are generally due 30 days from the invoice date. The Company has a policy of reserving for uncollectible accounts based on its best estimate of the
amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may
indicate that the realization of an account may be in doubt. Accounts are deemed past due when they are not paid in accordance with contractual terms. Account balances deemed to be uncollectible are charged to the allowance after all



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means of collection have been exhausted and the potential for recovery is considered remote. At September 30, 2007, the Company established, based on a
review of its outstanding balances, an allowance for doubtful accounts in the amount of $278,000.

Property and Equipment

Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in results of operations in the year of disposition. Depreciation and amortization are computed by the
straight-line method over the following estimated useful lives:



|                                         |  |                                              
|---------------------------------------- |  | ---------------------------------------------
|                                         |  | Years                                        
|Leasehold improvements                   |  | Shorter of 4 yearsor the EstimatedUseful Life
|Computer equipment                       |  | 3  5                                        
|Furniture, fixtures and office equipment |  | 5  7                                        
|Software                                 |  | 3                                            

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires
that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. Goodwill represents
the excess of the purchase price over the fair value of net assets acquired in business combinations. SFAS 142, requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment)
on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of
reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. The Company operates a single reporting unit. Significant judgments required to estimate the fair value of
reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

The Companys amortizable intangible assets include customer relationships and covenants not to compete. These costs are being amortized using the
straight-line method over the following estimated useful lives:



|                       |  |      
|---------------------- |  | -----
|                       |  | Years
|Customer relationships |  | 8.5  
|Non-compete agreements |  | 3  5

In accordance with SFAS 144 The Impairment or Disposal of Long-Lived Assets, the Company reviews the
carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to
generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Use of Estimates

The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates during the three and nine months ended
September 30, 2007 and 2006 include the allowance for doubtful accounts, stock-based compensation, the useful life of property and equipment and intangible assets, impairment of intangible assets and goodwill, debenture modification accounting,
and loss contingencies.



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Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. The carrying amounts of
the Companys convertible debentures approximate fair value as such instruments have effective yields that are consistent with instruments of similar risk, when taken together with equity instruments issued to the investors of these
instruments.

Convertible Debentures

The Company accounts for
conversion options embedded in convertible notes in accordance with SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133) and EITF 00-19 Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock (EITF 00-19). SFAS 133 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to
account for them as free standing derivative financial instruments in accordance with EITF 00-19. SFAS 133 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional as that term is described in
the implementation guidance under Appendix A to SFAS 133 and further clarified in EITF 05-2 The Meaning of Conventional Convertible Debt Instrument in Issue No. 00-19 and when conversion options are considered equity.

The Company accounts for convertible notes (deemed conventional) in accordance with the provisions of EITF (EITF) 98-5 Accounting for Convertible
Securities with Beneficial Conversion Features, (EITF 98-5), and EITF 00-27 Application of EITF 98-5 to Certain Convertible Instruments. Accordingly, the Company records, as a discount to convertible notes, the
intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under
these arrangements are amortized over the term of the related debt to their earliest date of redemption.

Common Stock Purchase Warrants and Other
Derivative Financial Instruments

The Company accounts for the issuance of Common Stock purchase warrants and other freestanding derivative financial
instruments in accordance with the provisions of EITF 00-19. Based on the provisions of EITF 00-19, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a
choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash
settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

Registration Rights Agreements

Effective January 1, 2007, the Company
adopted FSP EITF 00-19-2, Accounting for Registration Payment Arrangements. FSP EITF 00-19-2 addresses an issuers accounting for registration payment arrangements. This pronouncement specifies that the contingent obligation to make
future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument, should be separately recognized and accounted for as a
contingency in accordance with SFAS 5 Accounting for Contingencies. The adoption of this pronouncement did not have a material effect on the Companys financial statements.

The Company is currently obligated under two registration rights agreements requiring it maintain the effectiveness of a registration statement covering the resale of
shares underlying previous placements of preferred stock and convertible debt with warrants through at least March 31, 2008 or until all shares have been sold by the selling stockholders in these registrations. The maximum amount of penalty
that Company could incur (payable in cash) as of September 30, 2007 is not substantially different than the amount the Company has recorded. On January 1, 2007, the Company reduced the carrying amount of its liability for estimated
penalties in accordance with FSP EITF 00-19-02 by approximately $89,000. The reduction in the carrying amount of the registration rights liability upon the adoption of FSP EITF 00-19-2 is presented as a cumulative effect of a change in accounting
principle in the accompanying statement of operations for the nine months ended September 30, 2007.

Net Loss Per Share

In accordance with SFAS No. 128 Earnings Per Share, Basic net loss per share is computed by dividing net loss by the weighted average number of shares of
Common Stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock, Common Stock equivalents and potentially dilutive securities outstanding during each
period. Diluted loss per common share is not presented because it is anti-dilutive. The Companys Common Stock equivalents at September 30, 2007 include the following:





|                               |  |           
|------------------------------ |  | ----------
|Options                        |  | 7,112,000 
|Warrants                       |  | 8,697,487 
|Convertible Debentures         |  | 65,460,000
|                               |  |           
|Total common stock equivalents |  | 81,269,487
|                               |  |           



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The Company included 3,230,730 common stock purchase warrants exercisable at $0.01 per share, in the table above in its
determination of basic and diluted loss per share for the three and nine months ended September 30, 2007, since warrants are exercisable for nominal consideration.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes (SFAS No. 109). SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and
tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. SFAS No. 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets.

The Company has not recognized any income tax expense (benefit) in the accompanying financial statements for the three
and nine months ended September 30, 2007 and 2006. Deferred tax assets, which principally arise from net operating losses, are fully reserved due to managements assessment that it is more likely than not that the benefit of these assets
will not be realized in future periods.

As described in Note 12, the Company adopted the Company adopted FASB Interpretation No. 48 
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48),effective January 1, 2007. A discussion of the effect of having adopted FIN 48 is also described in Note
12.

Stock-Based Compensation

Effective January 1, 2006,
the Company adopted SFAS No. 123R Share Based Payments. This statement is a revision of SFAS No. 123, and supersedes APB Opinion No. 25, and its related implementation guidance. SFAS 123R addresses all forms of share
based payment (SBP) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123R, SBP awards result in a cost that is measured at fair value on the
awards grant date, based on the estimated number of awards that are expected to vest. The Company adopted the modified prospective method with respect to accounting for its transition to SFAS 123(R) and measured unrecognized compensation cost
as described in Note 15.

Advertising

The Company expenses
the cost of advertising, which includes print advertising and online advertising, in accordance with the AICPA Accounting Standards Executive Committees Statement of Position (SOP) 93-7, Reporting on Advertising Costs
(SOP 93-7). Advertising costs are expensed the first time the advertisement runs. Online marketing fees and print media placement costs are expensed in the month the advertising appears.

Advertising and promotional expenses are net of amounts reimbursed to the Company by its partners. Advertising costs were approximately $112,700 and $145,000 for the
three months ended September 30, 2007 and 2006, respectively, and were $378,800 and $276,700 for the nine months ended September 30, 2007 and 2006, respectively. Advertising costs are included in other operating expenses in the unaudited
condensed consolidated statements of operations.

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts, which, at times, exceed federally insured limits. At September 30, 2007, the Company had approximately $2,582,000 in United States bank deposits,
which exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2007.



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Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155 Accounting for Certain Hybrid Financial Instruments-an amendment of SFAS No. 133 and 140 (SFAS 155). SFAS 155 addresses the following: a) permits fair
value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS
133; c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; d)
clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and e) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial instrument. The Company adopted SFAS 155 on January 1, 2007. The adoption of this pronouncement did not have an effect on the Companys financial statements.

In March 2006, the FASB issued SFAS 156 Accounting for Servicing of Financial Assets  an amendment of SFAS No. 140 (SFAS
156). SFAS 156 is effective for the first fiscal year beginning after September 15, 2006. SFAS 156 changes the way entities account for servicing assets and obligations associated with financial assets acquired or disposed of. The Company
adopted SFAS 156 on January 1, 2007. The adoption of this pronouncement did not have an effect on the Companys financial statements.

In
September 2006, the FASB issued SFAS 157 Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of
SFAS 157 are effective for the first fiscal year beginning after November 2007. The Company is currently evaluating the impact of adopting SFAS 157 on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB
108). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current years financial
statements are materially misstated. SAB 108 is effective for the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not impact the Companys financial statements.

In November 2006, the EITF reached a final consensus in EITF Issue 06-6 Debtors Accounting for a Modification (or Exchange) of Convertible Debt
Instruments (EITF 06-6). EITF 06-6 addresses the modification of a convertible debt instrument that changes the fair value of an embedded conversion option and the subsequent recognition of interest expense for the associated
debt instrument when the modification does not result in a debt extinguishment pursuant to EITF 96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments. The consensus is applicable to modifications or
exchanges of debt instruments occurring in interim or annual periods beginning after November 29, 2006. The adoption of EITF 06-6 did not have a material impact on the Companys consolidated financial position, results of operations
or cash flows.

In November 2006, the FASB ratified EITF Issue No. 06-7, Issuers Accounting for a Previously Bifurcated Conversion Option in a
Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (EITF 06-7). At the time of issuance, an
embedded conversion option in a convertible debt instrument may be required to be bifurcated from the debt instrument and accounted for separately by the issuer as a derivative under FAS 133, based on the application of EITF 00-19. Subsequent to the
issuance of the convertible debt, facts may change and cause the embedded conversion option to no longer meet the conditions for separate accounting as a derivative instrument, such as when the bifurcated instrument meets the conditions of Issue
00-19 to be classified in stockholders equity. Under EITF 06-7, when an embedded conversion option previously accounted for as a derivative under FAS 133 no longer meets the bifurcation criteria under that standard, an issuer shall disclose a
description of the principal changes causing the embedded conversion option to no longer require bifurcation under FAS 133 and the amount of the liability for the conversion option reclassified to stockholders equity. EITF 06-7 is applicable
to all previously bifurcated conversion options in convertible debt instruments that no longer meet the bifurcation criteria in FAS 133 in interim or annual periods beginning after December 15, 2006, regardless of whether the debt instrument
was entered into prior or subsequent to the effective date of EITF 06-7. The adoption of EITF 06-7 did not have a material impact on the Companys consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159
provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the impact of the adoption of this statement on the Companys
results of operations and financial condition.



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Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not
require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

NOTE 4 
ACQUISITION OF SENDTEC

On August 9, 2005, the Company entered into an asset purchase agreement (the Asset Purchase Agreement), as
amended on August 23, 2005, with theglobe.com, Inc. and its wholly-owned subsidiary, SendTec. The Asset Purchase Agreement provided for the Company to purchase, through SendTec Acquisition Corp. (STAC), the business and assets of
SendTec (the Asset Purchase). The Asset Purchase Agreement ( as amended), and certain other contemporaneous agreements, including the Securities Purchase Agreement described in Note 8 , provided for the mandatory consolidation of STAC,
as defined in the Securities Purchase Agreement (the Consolidation) with the Company upon the attainment of certain contractual milestones (the Consolidation Milestones). The Company owned 23% of STAC (which acquired SendTec
from the globe.com, Inc. in October 31, 2005) for the period of October 31, 2005 through February 3, 2006, the date in which the Company satisfied the Consolidation Milestones and completed its acquisition of 100% of SendTec through
STAC. As described in Note 1, the Company accounted for its investment in STAC, through the date of the consolidation under the equity method prescribed in APB 18. Accordingly, the Company recorded a $1,034,102 charge for its proportionate share of
STACs losses for the period of November 1, 2005 through December 31, 2005, and a $153,389 charge for its proportionate share of STACs losses for the period of January 1, 2006 through February 3, 2006.

The purchase consideration paid by STAC to theglobe.com, Inc. on October 31, 2005 plus transaction expenses amounted to an aggregate of $40,430,000. SendTecs
tangible net assets amounted to $2,744,909. The excess of the purchase consideration plus transaction expenses, which amounted to $37,685,091 was allocated as follows:



|                                                |  |   |           
|----------------------------------------------- |  | - | ----------
|Purchase price in excess of net assets acquired |  | $ | 37,685,091
|Allocated to:                                   |  |   |           
|Customer relationships                          |  |   | 8,729,000 
|Covenant not to compete                         |  |   | 590,000   
|                                                |  |   |           
|Goodwill                                        |  | $ | 28,366,091
|                                                |  |   |           

A reconciliation of the amount of goodwill recorded by STAC upon its acquisition of SendTec on October 31,
2005 to the amount recorded by the Company upon its consolidation with STAC on February 3, 2006, is as follows:



|                                                                                                                                           |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- | -
|Excess of purchase price over net assets acquired by STAC at October 31, 2005 allocated to goodwill                                        |  | $ | 28,366,091 |  
|Net Losses of STAC for the period of November 1, 2005 through January 31, 2006, net of equity loss recognized by the Company of
$1,187,491 |  |   | 3,975,513  |  
|Consolidation Date adjustments to the fair values of:                                                                                      |  |   |            |  
|Senior Secured Convertible Debentures                                                                                                      |  |   | (486,224   | )
|Non-compete agreements                                                                                                                     |  |   | (117,666   | )
|Company Transaction Expenses                                                                                                               |  |   | 1,273,086  |  
|Assumption of registration rights obligation at fair value                                                                                 |  |   | 250,000    |  
|Dividend paid to STAC Preferred Stockholders                                                                                               |  |   | 3,737      |  
|                                                                                                                                           |  |   |            |  
|Excess of purchase price over net assets acquired at February 3, 2006 allocated to goodwill                                                |  |   | 33,264,537 |  
|Less cash received in March 2006 under a purchase price adjustment                                                                         |  |   | (318,750   | )
|                                                                                                                                           |  |   |            |  
|Excess of purchase price over net assets acquired as of June 30, 2007 allocated to goodwill                                                |  | $ | 32,945,787 |  
|                                                                                                                                           |  |   |            |  

On the date of the Consolidation, STACs tangible net assets amounted to $6,079,780, including cash of
$9,347,155, which is presented as cash acquired in business combination in the accompanying unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2006.



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The following unaudited pro-forma information reflects the results of continuing operations of the Company, as if the
acquisition had been consummated as of January 1, 2006:



|                                       |  |                                              |            |   |                                            |   |             |  
|-------------------------------------- |  | -------------------------------------------- | ---------- | - | ------------------------------------------ | - | ----------- | -
|                                       |  | For the three months endedSeptember 30, 2006 |            |   | For the ninemonths endedSeptember 30, 2006 |  
|Revenues                               |  | $                                            | 9,405,000  |   |                                            | $ | 30,061,000  |  
|Net Loss  continuing operations       |  |                                              | (2,986,000 | ) |                                            |   | (10,338,000 | )
|Net Loss per share  basic and diluted |  |                                              | (0.06      | ) |                                            |   | (0.23       | )

NOTE 5  PROPERTY AND EQUIPMENT

At September 30, 2007, property and equipment consist of the following:



|                              |  |   |           |  
|----------------------------- |  | - | --------- | -
|Equipment                     |  | $ | 943,838   |  
|Furniture and fixtures        |  |   | 255,838   |  
|Leasehold improvements        |  |   | 31,394    |  
|Software                      |  |   | 679,274   |  
|                              |  |   |           |  
|Property and equipment        |  |   | 1,910,344 |  
|Less accumulated depreciation |  |   | (724,454  | )
|                              |  |   |           |  
|Property and equipment, net   |  | $ | 1,185,890 |  
|                              |  |   |           |  

Depreciation expense was approximately $127,000 and $106,000 for the three months ended September 30, 2007
and 2006, respectively, and $367,000 and $246,000 for the nine months ended September 30, 2007 and 2006, respectively.

Property and equipment include
$278,500 of equipment purchases that were financed under capital lease obligations as of September 30, 2007, of which $241,500 were purchased during 2006 and $37,000 were purchased during 2007. The accumulated depreciation on these assets
amounted to $119,000 as of September 30, 2007.

NOTE 6  GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS

At September 30, 2007, goodwill and other intangible assets consist of the following:



|                               |  |   |            |  
|------------------------------ |  | - | ---------- | -
|Goodwill                       |  | $ | 32,945,787 |  
|                               |  |   |            |  
|                               | 
|Amortizable Intangible Assets: |  |   |            |  
|Customer relationships         |  | $ | 8,729,000  |  
|Non-compete agreements         |  |   | 590,000    |  
|Less accumulated amortization  |  |   | (2,052,980 | )
|                               |  |   |            |  
|Intangible assets, net         |  | $ | 7,266,020  |  
|                               |  |   |            |  

The Company, as of September 30, 2007, evaluated the carrying amount of its goodwill in accordance with SFAS
142 to determine whether circumstances indicate that the carrying amount of the goodwill exceeds its net realizable value. The Company also evaluated the carrying amounts of its amortizable intangible assets in accordance with SFAS 144 to determine
whether such carrying amounts exceed net realizable value. The Company does not believe that any material events or changes in its circumstances occurred during the nine months ended September 30, 2007 that would indicate that the carrying
amount of its goodwill or amortizable intangibles exceed their fair value.

Making estimates about the carrying values of intangible assets requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect on the financial statements of a condition, situation, or set of circumstances that existed at the date of the financial statements,
which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results regarding estimates of the carrying value of these intangibles could differ materially
from the Companys estimates.

Amortization expense with respect to the customer relationships and non-compete agreements amounted to approximately
$293,700 and $117,700 for the three months ended September 30, 2007 and 2006, respectively, and $892,600 and $313,800 for the nine months



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ended September 30, 2007 and 2006, respectively. During the nine months ended September 30, 2007, the Company wrote off intangible assets with a
net book value of approximately $51,800 as restructuring charges (see Note 16). Amortization expense subsequent to September 30, 2007 is as follows:



|                                                      |  |   |          
|----------------------------------------------------- |  | - | ---------
|Period from October 1, 2007 through December 31, 2007 |  | $ | 293,698  
|Years ending December 31:                             |  |   |          
|2008                                                  |  |   | 1,157,515
|2009                                                  |  |   | 1,071,152
|2010                                                  |  |   | 1,063,783
|2011                                                  |  |   | 1,026,941
|2012                                                  |  |   | 1,026,941
|2013                                                  |  |   | 1,026,941
|2014                                                  |  |   | 599,049  
|                                                      |  |   |          
|                                                      |  | $ | 7,266,020
|                                                      |  |   |          

NOTE 7  ACCRUED EXPENSES

As of September 30, 2007, accrued expenses are comprised of the following:



|                              |  |   |          
|----------------------------- |  | - | ---------
|Legal contingencies liability |  | $ | 1,000,000
|Branded media costs           |  |   | 684,379  
|Interest                      |  |   | 399,506  
|Media costs                   |  |   | 1,566,787
|Other                         |  |   | 269,634  
|                              |  |   |          
|Total accrued expenses        |  | $ | 3,920,306
|                              |  |   |          

NOTE 8  DEBENTURES

As described in Note 4, STAC financed its purchase of SendTec, in part, by issuing the Debentures in the original principal amount of $34,950,000 with an original maturity date of October 30, 2009. The Debenture
provided, among other things, for the Company to assume liability for the Debentures on the date of Consolidation. Accordingly, the Company is obligated under the terms of the Securities Purchase Agreement, as amended, and the Debenture, as amended,
to repay $32,730,000 of the remaining principal balance due on the Debentures on March 31, 2008. Under the modified terms of the Securities Purchase Agreement, the Debentures bear interest at 6% per annum and are convertible into shares of
the Companys common stock at $.50 per share at the option of the Debenture holders.

A summary of the remaining carrying amount of the Debentures at
September 30, 2007, after giving effect to $2,220,000 of principal converted to 4,440,000 shares of common stock, is as follows:



|                                                                       |  |   |            |  
|---------------------------------------------------------------------- |  | - | ---------- | -
|Remaining Principal (due March 31, 2008 with interest at 6% per annum) |  | $ | 32,730,000 |  
|Less unamortized discount                                              |  |   | (5,248,136 | )
|                                                                       |  |   |            |  
|Net Carrying Value                                                     |  | $ | 27,481,864 |  
|                                                                       |  |   |            |  

The difference between the carrying value of the modified debt instrument and the mandatory redemption amount is
being accreted as interest expense over the term of the amended Securities Purchase Agreement through March 31, 2008.

The amended financial covenants
require the Company to attain minimum net revenues of $5,025,000, $5,175,000, $5,450,000, and $5,700,000 for the first, second, third, and fourth quarters of 2007. The Company must also attain minimum cash balances of $3,000,000 at the end of the
first quarter of 2007, $3,250,000 at the end of the second quarter of 2007, $3,500,000 at the end of the third quarter of 2007, and $3,750,000 at the end of the fourth quarter of 2007. Per the amended financial covenants, net revenues are defined as
net revenues calculated in accordance with GAAP as applied by the Company in its audited financial statements. See Note 3 for a description of the Companys revenue recognition policies.

The Debentures were amended on November 10, 2006 to provide for a (i) reduction in the conversion price from $1.50 per share to $.50 per share and
(ii) change the maturity date from October 31, 2009 to March 31, 2008, in exchange for a release of previous



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instances of non-compliance with certain financial covenants. The modification of the Debentures resulted in a constructive extinguishment of this instrument
under its terms prior to the date of the modification. The Debentures, under the original terms, were fully discounted at the time they were assumed by the Company concurrent with its Consolidation of STAC on February 3, 2006. The difference
between the carrying value of the Debentures and their mandatory redemption amount is being accreted as interest expense through March 31, 2008. Interest expense is as follows:



|                                        |  |                                          |           |                                         |   |           |  |      |            |  |   |          
|--------------------------------------- |  | ---------------------------------------- | --------- | --------------------------------------- | - | --------- |  | ---- | ---------- |  | - | ---------
|                                        |  | For the three months ended September 30, |           | For the nine months ended September 30,
|                                        |  | 2007                                     |           | 2006                                    |   | 2007      |  | 2006
|Discount amortization                   |  | $                                        | 2,652,904 |                                         | $ | 2,330,000 |  | $    | 8,712,451  |  | $ | 6,213,333
|Contractual interest                    |  |                                          | 498,411   |                                         |   | 535,901   |  |      | 1,522,142  |  |   | 1,409,653
|Amortization of deferred financing fees |  |                                          | *         |                                         |   | 129,011   |  |      | *          |  |   | 344,029  
|                                        |  |                                          |           |                                         |   |           |  |      |            |  |   |          
|Debenture interest                      |  | $                                        | 3,151,315 |                                         | $ | 2,994,912 |  | $    | 10,234,593 |  | $ | 7,967,015
|                                        |  |                                          |           |                                         |   |           |  |      |            |  |   |          



|* | written off in November 2006 as a result of restructure of the Debentures.
|- | --------------------------------------------------------------------------

As described in Note 2, the Company was not in compliance with the requirement to have a minimum cash balance of $3,500,000 pursuant to the financial covenants the Company is required to maintain under the modified terms of the Securities
Purchase Agreement with the Debenture holders. In addition, the Company did not make a required interest payment of approximately $502,000 due on November 1, 2007. The Companys failure to meet the financial covenants and to make interest
payments are events of default under the Debentures.

Subsequent to November 1, 2007 the Company and Debenture holders representing more than 75%, the
required minimum, of the outstanding principal amount of the Debentures, executed a Letter Agreement (Letter Agreement), which among other things, provides that during the period from the signing of the Letter Agreement until the close
of business on November 16, 2007, the Debenture holders forbear their right to declare the Company in default under the Debentures and the Securities Purchase Agreement and their right to demand acceleration of the Debentures.

If the Company is not able to restructure the Debentures or negotiate a further forbearance, holders of 75% of the principal amount of the Debentures may elect to
declare the Company in default of the Debentures. If the Company is declared in default, the Debenture holders have the right to accelerate the payment of the obligation, and as such the Company will not have sufficient working capital or cash to
repay the outstanding principal and interest due under the Debentures. Since the Company relies on its working capital for day-to-day operations, such a default would have a material adverse effect on the business, operating results, and financial
condition.

NOTE 9  CAPITAL LEASE OBLIGATIONS

During April 2006 and April 2007, the Company entered into various capital leases with an aggregate present value of $278,400. In accordance with SFAS 13, Accounting for Leases (SFAS 13), the present value of the
minimum lease payments was calculated using discount rates ranging from 10% to 17%. Lease payments, including amounts representing interest, amounted to $110,069 for the nine months ended September 30, 2007. The leases require monthly payments
of approximately $13,000 including interest at discount rates ranging from 10% to 17% and are due at various times through May 2010.

Minimum lease
payments due subsequent to September 30, 2007 are as follows:



|                                                      |  |   |         |  
|----------------------------------------------------- |  | - | ------- | -
|Period from October 1, 2007 through December 31, 2007 |  | $ | 39,132  |  
|Years ending December 31:                             |  |   |         |  
|2008                                                  |  |   | 58,204  |  
|2009                                                  |  |   | 12,500  |  
|2010                                                  |  |   | 6,056   |  
|                                                      |  |   |         |  
|Total minimum lease payments                          |  |   | 115,892 |  
|Less amounts representing interest                    |  |   | (8,060  | )
|                                                      |  |   |         |  
|Present value of minimum lease payments               |  |   | 107,832 |  
|Less current portion                                  |  |   | (88,773 | )
|                                                      |  |   |         |  
|Long-term portion                                     |  | $ | 19,059  |  
|                                                      |  |   |         |  

NOTE 10  SIGNIFICANT CUSTOMERS

A significant portion of the Companys revenue is attributable to a small number of customers.

During the three
months ended September 30, 2007, one customers revenues represented approximately 17.6%, respectively, of the Companys revenue.

During
the nine months ended September 30, 2007, one customers revenues represented approximately 25.0% of the Companys revenue and approximately 20.2% of total accounts receivable at September 30, 2007.

As more fully described in Note 2, as of September 30, 2007, this customer ended their advertising campaigns, and such revenue will not recur subsequent to
September 30, 2007. The Company has commenced an action to collect all amounts outstanding from this customer.



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During the three months ended September 30, 2006, one customers revenues represented approximately 25.8% of
the Companys revenues.

During the nine months ended September 30, 2006, three customers revenues represented approximately 11.9%, 16.3%,
and 19.4% respectively, of the Companys revenues.

NOTE 11  RELATED PARTY TRANSACTIONS

The CEO and Chairman of the Board of Directors of the Company also serves on the board of directors of a company that is a customer of SendTec. Revenues from this
customer were $6,774 and $136,044 for the three months ended September 30, 2007 and 2006, respectively. Revenues from this customer were $6,901 and $293,180 for the nine months ended September 30, 2007 and 2006. Amounts receivable from
this customer as of September 30, 2007 were $7,322.

The Company pays fees and commissions to a company whose management includes someone who is a
member of the Companys Board of Directors. For the three months ended September 30, 2007 and 2006 the Company incurred $39,252 and $46,805, respectively, in fees and commissions. For the nine months ended September 30, 2007 and 2006
the Company incurred $113,489 and $101,406, respectively, in fees and commissions. At September 30, 2007 $27,326 of such fees and commissions were included in accrued expenses in the accompanying unaudited condensed consolidated balance sheet.

The Company pays fees and commissions to a company whose principal shareholder is a member of the Companys Board of Directors. There were no fees or
commissions for the three months ended September 30, 2007 and $6,000 in fees and commissions for the three months ended September 30, 2006. For the nine months ended September 30, 2007 and 2006 the Company incurred $2,000 and $21,000,
respectively, in fees and commissions. At September 30, 2007 there were no fees and commissions that remained outstanding.

NOTE 12  INCOME
TAXES

As describe in Note 3, the Company adopted FIN 48 effective January 1, 2007. FIN 48 requires companies to recognize in their financial
statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.

The Company and its subsidiaries file consolidated federal and various state income tax returns in which the initial period of tax reporting for these entities
occurred during the year ended December 31, 2005. These income tax returns have not been examined by the applicable Federal and State tax authorities. The Company has filed its income tax returns for the year ended December 31, 2006.

Management does not believe that the Company has any material uncertain tax position requiring recognition or measurement in accordance with the
provisions of FIN 48. Accordingly, the adoption of FIN 48 did not have a material effect on the Companys financial statements. The Companys policy, is to classify penalties and interest associated with uncertain tax positions, if
required as a component of its income tax provision.

The Company has approximately $8 million of net deferred tax assets, a substantial portion of which
includes the tax effects of approximately $18.8 million of net operating loss carry forwards that will expire between the years 2025 and 2026. The utilization of any net operating losses that the Company has generated to date may become, in future
periods, subject to substantial limitations due to the change in ownership provisions under Section 382 of the Internal Revenue Code and similar state provisions.

NOTE 13  COMMITMENTS AND CONTINGENCIES

Legal matters

The Company is involved in various matters that are described in Note 2.

Stock Registration Rights Agreements

The Company is obligated to maintain the effectiveness of certain registration statements it has filed with
the SEC under Registration Rights Agreement with the investors of its Series A Preferred Stock (converted into common stock on February 3, 2006) and the Securities Purchase Agreement described in Note 8. As described in Note 3, the Company
adopted FSP EITF 00-19-2 on January 1, 2006 and reduced its reserve for estimated penalties under registration rights agreements by approximately $89,000 to $43,000, which



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is included in the accompanying unaudited condensed consolidated balance sheet. The reduction in the carrying amount of the registration rights liability
upon the adoption of FSP EITF 00-19-2 is presented as a cumulative effect of a change in accounting principle in the accompanying statement of operations for the nine months ended September 30, 2007.

Operating leases

The Company leases its office facilities under two
non-cancelable leases expiring in February 2010 and December 2009, respectively. Future minimum lease payments are approximately as follows:



|                                                      |  |   |          
|----------------------------------------------------- |  | - | ---------
|Period from October 1, 2007 through December 31, 2007 |  | $ | 101,700  
|Years ending December 31:                             |  |   |          
|2008                                                  |  |   | 415,400  
|2009                                                  |  |   | 426,900  
|2010                                                  |  |   | 60,100   
|                                                      |  |   |          
|Total minimum lease payments                          |  | $ | 1,004,100
|                                                      |  |   |          

Rent expense for the three months ended September 30, 2007 and 2006 was approximately $116,100 and $98,100,
respectively, including $22,600 and $4,500, respectively, for a share of operating expenses. Rent expense for the nine months ended September 30, 2007 and 2006 was approximately $348,000 and $247,500, respectively, including $67,300 and
$15,600, respectively, for a share of operating expenses. Rent expense is being recorded on the straight line basis over the term of the lease in accordance with SFAS No. 13, Accounting for Leases.

NOTE 14  STOCKHOLDERS EQUITY

Common Stock Purchase
Warrants

The Company, upon its Consolidation with STAC, issued to the Debentures investors, seven year Warrants to purchase an aggregate of 10,081,607
shares of the Companys Common Stock exercisable at $0.01 per share in amounts proportionate to the face amount of the Debentures. The Warrants are exercisable from February 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 of issuance through their date of termination (and only in the event that there is not an effective registration or prospectus
covering the resale of the underlying stock), to exercise such Warrants using the cashless exercise feature and/or (b) for an automatic cashless exercise on the date of termination. The Company can consent to a cashless exercise of the Warrants
at the request of the holder at anytime. A cashless exercise will result in a net share settlement of the Warrants based on a formula in which the net shares issuable is based upon the then fair value of the Companys common stock. The Company
evaluated the classification of these Warrants at the date of consolidation and at March 31, 2006 in accordance with EITF 00-19 and determined that they are equity instruments because (a) net share settlement is within the Companys
control and (b) the cashless exercise feature does not potentially result in the issuance of an indeterminate number of shares.

As described below,
Debenture holders to date have elected to exercise an aggregate of 6,850,877 of their common stock purchase warrants resulting in the issuance of an aggregate of 6,821,460 of common stock, including the effects of having net-share settled certain of
the warrants through the holders use of the cashless exercise feature. At September 30, 2007, 3,230,730 warrants remained outstanding with respect to this financing transaction.

On September 27, 2006 the Company issued five year warrants to purchase an aggregate of 250,000 shares of the Companys Common Stock exercisable at $0.60 per
share with an aggregate fair value of $57,500. The Company estimated the fair value of the Warrants using the Black Scholes pricing model with the following assumptions: Fair Value of Common Stock $0.36, Risk Free Interest Rate 4.56%, Volatility
90%, Term 5 years. The warrants are exercisable from September 27, 2006 through September 26, 2011, either through a cash exercise or by use of a cashless exercise provision. The warrants were issued to a consultant for corporate financial
advisory services.

As of September 30, 2007, the Company has 8,697,487 common stock purchase warrants outstanding with a weighted average exercise
price of $0.53 per share. A summary of the Companys outstanding common stock purchase warrants granted through and changes during the period is as follows:



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Common Stock

On
January 31, 2007, a Debenture holder exercised conversion rights on $250,000 of principal, and the Company issued 500,000 shares of the Companys Common Stock.

On February 1, 2007, the Company issued an aggregate of 722,264 shares of Common Stock to Debenture holders representing payment of $266,732 of interest.

On February 12, 2007, a Debenture holder exercised conversion rights on $300,000 of principal, and the Company issued 600,000 shares of the Companys Common
Stock.

On March 31, 2007, two Debenture holders exercised their rights to require the Company to repurchase 253,226 shares of its common stock since
a registration statement covering the resale of such shares was not yet effective. Accordingly, the Company repurchased and retired these shares for an aggregate price of $93,933, including interest of $1,933.

On April 13, 2007, a Debenture holder exercised their rights to require the Company to repurchase 21,198 shares of its common stock since a registration statement
covering the resale of such shares was not yet effective, Accordingly, the Company repurchased and retired these shares for an aggregate price of $7,667, including interest of $21.

On April 16, 2007, a Debenture holder exercised conversion rights on $400,000 of principal, and the Company issued 800,000 shares of the Companys Common Stock.

On May 14, 2007, the Company issued an aggregate of 258,497 shares of Common Stock to Debenture holders representing payment of $74,765 of interest.

On May 18, 2007, a Debenture holder exercised conversion rights on $400,000 of principal, and the Company issued 800,000 shares of the Companys Common Stock.

On May 23, 2007, a Debenture holder exercised conversion rights on $500,000 of principal, and the Company issued 1,000,000 shares of the
Companys Common Stock.

On June 6, 2007, the Company issued 1,200,000 shares of the Companys Common Stock in the settlement of litigation.

NOTE 15  SHARE BASED PAYMENTS

The Company,
since its inception has granted non-qualified stock options to various employees and non-employees at the discretion of the Board of Directors. Substantially all options granted to date have exercise prices equal to the fair value of underlying
stock at the date of grant and terms of ten years. Vesting periods range from fully vested at the date of grant to three years.

A description of each of
the Companys plans that are in effect during the reporting period, including the number of shares reserved for issuance and shares that remain available for grant as of September 30, 2007 is as follows:

2005 Incentive Stock Plan

On June 21, 2005, the Company adopted the
2005 Incentive Stock Plan (the 2005 Plan), which was approved by its stockholders on August 9, 2005. The Plan provides for the grant of options and the issuance of restricted shares. An aggregate of 3,300,000 shares of common stock
is reserved for issuance under the Plan. Both incentive and nonqualified stock options may be granted under the Plan. The Plan terminates on June 21, 2015. The exercise price of options granted pursuant to this plan may not be less than 100% of
the fair market value of the Companys common stock on the date of grant and the term of options granted under this plan may not exceed 10 years. For holders of 10% or more of the combined voting power of all classes of the Companys
stock, options may not be granted at less than 110% of the fair value of the Companys common stock on the date of grant and the term of such options may not exceed 5 years. As of September 30, 2007, an aggregate of 3,260,500 shares and
options have been granted under the plan, leaving an aggregate of 39,500 shares and options available for future issuance.



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2005 Directors Plan

On
August 9, 2005, by written consent, a majority of the Companys stockholders approved the Companys 2005 Non-Employee Directors Stock Option Plan (the 2005 Directors Plan). The Directors Plan provides for the grant of up
to 2,000,000 non-qualified stock options to non-employee directors of the Company. The plan also provides for (a) each newly elected or appointed director (other than the Chairman) to be granted options to purchase 50,000 shares of common
stock, of which 50% would become exercisable on the date which is one year from the date of grant and the remaining 50% would become exercisable on the date which is two years from the date of grant, and (b) for each such director to be an
granted an additional option to purchase 50,000 shares of common stock on the second anniversary of their initial election or appointment of which 50% would become exercisable on the date which is one year from the date of grant and the remaining
50% would become exercisable on the date which is two years from the date of grant. All options granted under the Directors Plan have a maximum term of ten years, subject to accelerated vesting in the event of a change in control of the Company. As
of September 30, 2007, an aggregate of 1,200,000 options have been granted under the plan, leaving an aggregate of 800,000 options available for future issuance.

2006 Incentive Stock Plan

The 2006 Incentive Plan was adopted by the Board of Directors on March 3, 2006 (the
2006 Plan) and received stockholder approval on July 10, 2006. An aggregate of 2,700,000 shares of Common Stock have been reserved for issuance under the 2006 Incentive Plan. Under the 2006 Incentive Plan, the Company is authorized
to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options and restricted stock. The 2006 Incentive Plan is currently administered by the Compensation Committee of the Board of Directors. As
of September 30, 2007, an aggregate of 2,651,500 shares and options have been granted under the plan, leaving an aggregate of 48,500 shares and options available for future issuance.

2007 Incentive Stock Plan

The Companys Board of Directors adopted the
2007 Incentive Stock Plan A and the 2007 Incentive Stock Plan B on November 15, 2006, (the 2007 Plans), which have been approved by the stockholders. The Company has not made any grants under such plans.

Share based payments made during the nine months ended September 30, 2007 are as follows:

On January 16, 2007, the Company granted (under its 2005 Directors Plan) options to purchase an aggregate of 50,000 shares of Common Stock to a director of the Company at an exercise price of $0.35 per
share. These options vest as to 50% one year from the date of grant, and 50% on the second anniversary of the date of grant, and expire on January 15, 2017 or earlier due to board termination.

On January 16, 2007, the Company granted (under its 2006 Incentive Plan) options to purchase an aggregate of 250,000 shares of Common Stock to an officer of the
Company at an exercise price of $0.35 per share. The options vest as to 33% one year from the date of grant, 33% and 34% on the second and third anniversaries of the date of grant, respectively, and expire on January 15, 2017 or earlier due to
employment termination.

On May 21, 2007, the Company granted (under its 2005 Incentive Plan) options to purchase an aggregate of 1,115,000 shares of
Common Stock to employees of the Company at an exercise price of $0.31 per share. The options vest as to 33% one year from the date of grant, 33% and 34% on the second and third anniversaries of the date of grant, respectively, and expire on
May 20, 2017 or earlier due to employment termination.

On September 23, 2007, the Company granted (under its 2005 Incentive Plan) options to
purchase an aggregate of 645,500 shares of Common Stock and (under its 2006 Incentive Plan) options to purchase an aggregate of 447,000 shares of Common Stock to employees of the Company at an exercise price of $0.10 per share. The options vest as
to 33% one year from the date of grant, 33% and 34% on the second and third anniversaries of the date of grant, respectively, and expire on September 23, 2017 or earlier due to employment termination.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2007 is $0.17.

Weighted average assumptions relating to the estimated fair value of stock options that the Company granted during the nine months ended September 30, 2007, are as
follows: riskfree interest rate of 4.69%; expected dividend yield zero percent; expected option life of six years and six and one half years, respectively; and expected volatility of 90%.

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has not paid dividends to date and does not expect to pay
dividends in the foreseeable future due to its substantial accumulated deficit. Accordingly, expected dividends yields are currently zero. Historical cancellations and forfeitures of stock options have been insignificant. Based on



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available data, the Company has assumed that approximately 85% of outstanding options will vest annually. Unamortized compensation cost relating to options
granted prior to January 1, 2006 has been adjusted to reflect this assumption. No options have been exercised to date. The Company continuously monitors its employee terminations, exercises and other factors that could affect its expectations
relating to the vesting of options in future periods. The Companys policy is to adjust its assumptions relating to its expectations of future vesting and the terms of options at such times that additional data indicates that changes in these
assumptions are necessary. Expected volatility is based partly on the historical volatility of the Companys stock and a comparison of volatilities of similarly situated companies in the marketplace.

A summary of the status of the Companys outstanding stock options as of September 30, 2007 and changes during the nine months ended September 30, 2007
are as follows:



|                                          |  |                  |   |  |                              |      |                                                    |     
|----------------------------------------- |  | ---------------- | - |  | ---------------------------- | ---- | -------------------------------------------------- | ----
|                                          |  | Number ofoptions |   |  | Weightedaverageexerciseprice |      | Weightedaverageremainingcontractualterm (in years)
|Outstanding at January 1, 2007            |  | 6,030,000        |   |  | $                            | 1.42 |                                                    |     
|Granted                                   |  | 2,507,500        |   |  | $                            | 0.22 |                                                    |     
|Exercised                                 |  |                 |   |  |                              |     |                                                    |     
|Forfeited or Expired                      |  | (1,425,500       | ) |  | $                            | 0.90 |                                                    |     
|                                          |  |                  |   |  |                              |      |                                                    |     
|Outstanding at September 30, 2007         |  | 7,112,000        |   |  | $                            | 1.10 |                                                    | 8.42
|                                          |  |                  |   |  |                              |      |                                                    |     
|Options exercisable at September 30, 2007 |  | 2,748,121        |   |  | $                            | 1.66 |                                                    | 7.48
|                                          |  |                  |   |  |                              |      |                                                    |     

At September 30, 2007, there was no intrinsic value of options outstanding based on the September 30,
2007 closing price of the Company common stock ($0.09 per share).

NOTE 16  RESTRUCTURING CHARGES

During the nine months ended September 30, 2007 the Company recorded approximately $491,000 in restructuring charges, related to employee termination costs,
accelerated amortization on a non-compete agreement, employee redeployment charges, and other related restructuring charges. There were no restructuring charges incurred during the three months ended September 30, 2007.

In April 2007, as a result of the loss of the Companys sole contract in the branded media line of business, the Company restructured operations and began to
reallocate resources of the Company. As part of this reallocation plan, the Company terminated certain employees, incurring approximately $376,000 in termination related costs, and redeployed other employees incurring approximately $33,000 in
employee costs. In connection with employee terminations the Company accelerated the amortization of a non-compete agreement for which the underlying employment agreement was terminated, and recorded a non-cash charge of approximately $52,000.

Other costs incurred in connection with the restructuring totaled approximately $30,000 and relate to the termination of certain service provider
agreements.



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FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007 contains forward-looking statements within the meaning 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 or the negative thereof or comparable terminology are intended to identify forward-looking statements which include, but are not limited to, statements
concerning the Companys expectations regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the SEC from
time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. The Company undertakes no
obligation to update these forward-looking statements. In addition, the forward-looking statements in this Quarterly Report on Form 10-QSB involve known and unknown risks, uncertainties and other factors that could cause the actual results,
performance or achievements of the Company to differ materially from those expressed in or implied by the forward-looking statements contained herein.

An
investment in the Companys Common Stock involves a high degree of risk. Stockholders and prospective purchasers should carefully consider the risk factors in the Companys Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2006, filed with the SEC on March 29, 2007, and other pertinent information contained in the Registration Statement on Form SB-2 of the Company, as amended, filed with the SEC, which became effective on April 12, 2007, as
well as other information contained in the Companys other periodic filings with the SEC. If any of the risks described therein actually occur, the Companys business could be materially harmed.



|ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|------- | ----------------------------------------------------------

Overview

We are a holding company organized for the purpose of acquiring, owning, and managing various marketing and advertising
businesses, primarily involving the Internet. Since February 2006, the SendTec direct response marketing services business of our wholly-owned subsidiary, SendTec Acquisition Corp. (STAC), has been our sole line of business. On
March 17, 2006, our Board of Directors authorized us to change our name to SendTec, Inc. and, on July 10, 2006, our stockholders approved the name change. Our results of operations for the three and nine months ended September 30,
2007 consist of STAC and the Company.

The unaudited condensed consolidated financial statements contained herein include, commencing February 1,
2006, the results of STAC, which became our wholly-owned subsidiary on February 3, 2006. On October 31, 2005, STAC acquired the assets of SendTec, Inc. from theglobe.com, Inc. As of October 31, 2005, and through February 1, 2006,
we retained approximately 23% of the total voting interests in STAC. Accordingly, from October 31, 2005 through February 1, 2006, we accounted for our investment in STAC in accordance with the provisions of APB 18, The Equity
Method of Accounting for Investments in Common Stock, which provides for companies to record, in results of operations, their proportionate share of earnings or losses of investees when they are deemed to influence but not control the
affairs of the investee enterprise. We recorded a $153,389 charge for our proportionate share of STACs losses for the month ended January 31, 2006. The results of operations for the three and nine months ended September 30, 2006 of
RelationServe Access, Inc. (Access), and Friendsand.com, Inc. (Friendsand) have been reflected as discontinued operations in our statement of operations.

Results of Operations

Three months ended September 30, 2007 compared to three months ended
September 30, 2006

Revenues were approximately $7.4 million for the three months ended September 30, 2007, as compared to revenues of $9.4
million for the three months ended September 30, 2006, a decrease of $2.0 million or 21.8%. A summary of the components of our revenue are as follows:



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|                      |  |                                          |           |                     |   |           |  |   |            |   |  |                  |    |  |       |   
|--------------------- |  | ---------------------------------------- | --------- | ------------------- | - | --------- |  | - | ---------- | - |  | ---------------- | -- |  | ----- | --
|                      |  | For the three months ended September 30, |           | Increase (Decrease) |  
|                      |  | 2007                                     |           | 2006                |   | Amount    |  |   | %          |   |  | % oftotalrevenue |   
|Internet advertising  |  | $                                        | 4,374,846 |                     | $ | 6,720,012 |  | $ | (2,345,166 | ) |  | (34.9            | )% |  | (24.9 | )%
|Online search         |  |                                          | 1,192,408 |                     |   | 480,986   |  |   | 711,422    |   |  | 147.9            | %  |  | 7.6   | % 
|Direct response media |  |                                          | 707,417   |                     |   | 621,560   |  |   | 85,857     |   |  | 13.8             | %  |  | 0.9   | % 
|Advertising programs  |  |                                          | 1,080,217 |                     |   | 1,498,144 |  |   | (417,927   | ) |  | (27.9            | )% |  | (4.4  | )%
|Other                 |  |                                          |          |                     |   | 84,218    |  |   | (84,218    | ) |  | (100.0           | )% |  | (0.9  | )%
|                      |  |                                          |           |                     |   |           |  |   |            |   |  |                  |    |  |       |   
|Revenues              |  | $                                        | 7,354,888 |                     | $ | 9,404,920 |  | $ | (2,050,032 | ) |  | (21.8            | )% |  | (21.8 | )%
|                      |  |                                          |           |                     |   |           |  |   |            |   |  |                  |    |  |       |   



| |  |  | Our internet advertising revenues decreased because one of our largest clients in 2006 ended their advertising campaign in August 2006. Accordingly, this revenue
did not recur in 2007. During September 2007, our largest internet advertiser ended their advertising campaign. For the three months ended September 30, 2007 this revenue totaled $1.3 million, and we do not expect this revenue to recur in
subsequent periods.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our online search revenues increased 147.9% from the prior year, principally from the addition of new clients.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Our direct response media revenues increased in part from additional advertising from existing clients and the addition of a few new clients.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our advertising program revenues decreased due to fewer projects being completed during the three months ended September 30, 2007 as compared to the prior year
period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Costs of revenues were approximately $3.5 million for the three months ended September 30, 2007. Costs of revenues
principally include the costs of media providers and direct production costs. The cost of revenues of our internet advertising was $3.1 million, and $0.4 million was from our offline advertising programs. There are no costs of revenues from online
search, direct response media, and branded media, since those revenue streams are reported as revenue net of related costs. Costs of revenues were approximately $5.4 million for the three months ended September 30, 2006. The cost of revenues of
our internet advertising was $5.0 million, and $0.4 million was from our offline advertising programs.

Gross profit decreased approximately $0.1 million
to $3.9 million for the three months ended September 30, 2007 from gross profit of $4.0 million for the comparable prior year period. Gross profit was approximately $3.9 million for the three months ended September 30, 2007, or 52.7% of
revenues. The decrease in gross profit is due in part to the decrease in revenue and in part due to the change in the mix of components of our revenues. Gross profit from our internet advertising business was $1.3 million, or 29.4% of our internet
advertising revenues for the three months ended September 30, 2007, while our gross profit from offline advertising programs was $0.7 million, or 64.1% of offline advertising program revenue. Gross profit from our other revenue sources were
$1.2 million for online search, and $0.7 million for direct response media. Gross profit was approximately $4.0 million for the three months ended September 30, 2006, or 42.8% of revenues. Gross profit from our internet advertising business was
$1.7 million, or 25.4% of our internet advertising revenues for the three months ended September 30, 2006, while our gross profit from offline advertising programs was $1.1 million, or 75.7% of offline advertising program revenue. Gross profit
from our other revenue sources were $0.5 million for online search, $0.6 million for direct response media, and $0.1 million from other sources.

Salaries,
wages and benefits expenses were approximately $2.7 million for the three months ended September 30, 2007, as compared to $2.6 million for the comparable prior year period, an increase of $0.1 million, or 6.0%. The increase is primarily due to
the increase in staff in the areas of sales, account management, operations, and information technology. As a percentage of net revenues, salaries, wages and benefits increased to 36.8% of revenues for the three months ended September 30, 2007
from 27.1% of revenues for the comparable prior year period.

Professional fees increased approximately $0.1 million to $0.2 million for the three months
ended September 30, 2007 as compared to $0.1 million for the comparable prior year period. The increase is primarily due to higher professional fees related to litigation costs.

Other, general and administrative expenses increased approximately $0.9 million to $2.2 million for the three months ended September 30, 2007, as compared to $1.3 million for the comparable prior year period. The
increase is primarily due to the increase in loss contingencies related to the settlements of our law suits. Our other general and administrative expenses as a percentage of revenues were 30.1% for the three months ended September 30, 2007, as
compared to 14.1% of revenues for the comparable prior year period.



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The components of other general and administrative expenses were as follows:



|                                                |  |                                          |           |      |   |          
|----------------------------------------------- |  | ---------------------------------------- | --------- | ---- | - | ---------
|                                                |  | For the three months ended September 30,
|                                                |  | 2007                                     |           | 2006
|Depreciation and amortization                   |  | $                                        | 420,388   |      | $ | 223,404  
|Travel                                          |  |                                          | 137,304   |      |   | 113,184  
|Marketing expenses                              |  |                                          | 112,667   |      |   | 145,028  
|Rent                                            |  |                                          | 116,227   |      |   | 98,062   
|Internet bandwidth                              |  |                                          | 78,780    |      |   | 122,692  
|Commissions                                     |  |                                          | 132,287   |      |   | 114,098  
|Bad debts expense                               |  |                                          | 95,639    |      |   | 30,245   
|Other                                           |  |                                          | 1,147,027 |      |   | 475,986  
|                                                |  |                                          |           |      |   |          
|Total other general and administrative expenses |  | $                                        | 2,240,319 |      | $ | 1,322,699
|                                                |  |                                          |           |      |   |          

Operating losses increased approximately $1.3 million to an operating loss of $1.3 million for the three months
ended September 30, 2007, from $5,574 for the three months ended September 30, 2006. The increase in the operating loss is the result of the decrease in our gross profit of $0.1 million, the increase in our salaries wages and benefits of
$0.1 million, the increase in our professional fees of $0.1 million, and the increase in our selling, general and administrative expenses of $0.9 million.

Other income (expense) increased $0.2 million to $3.1 million for the three months ended September 30, 2007 from $2.9 million for the comparable prior year period. It is comprised of the following:



| |  |  | Interest income  we earned approximately $26,000 in interest on bank deposits for the three months ended September 30, 2007, as compared to $38,000 for
the three months ended September 30, 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest expense  interest expense increased $0.2 million to $3.2 million for the three months ended September 30, 2007 from $3.0 million for the
comparable prior year period. The increase is due to amortization of the debt discount as a result of the restructuring of our Debentures in November 2006. We incurred total interest expense on the debentures of approximately $3.1 million for the
three months ended September 30, 2007. Included in interest expense is $0.5 million of interest that will require payment to our Debenture holders and a non-cash interest charge of $2.6 million to amortize the debt discount. We incurred total
interest expense on the Debentures of approximately $3.0 million for the three months ended September 30, 2006. Included in interest expense is $0.5 million of interest that will require payment to our Debenture holders and a non-cash interest
charge of $2.5 million to amortize the debt discount and the deferred finance fees.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our provision for income taxes (benefits) is zero in
both periods. For the three months ended September 30, 2007 and 2006, a provision for income taxes was not made because after evaluating all available evidence, we believe that a valuation allowance is necessary to offset against any potential
deferred tax assets.

We reported a loss from continuing operations of approximately $4.4 million for the three months ended September 30, 2007,
compared to a loss from continuing operations of approximately $3.0 million for the three months ended September 30, 2006. Continuing operations included the operations of SendTec and the Company. Included in the loss from continuing operations
for the three months ended September 30, 2007 and 2006 are non-cash expenses totaling $3.3 million and $3.0 million, respectively.

In June 2006, we
sold the business and substantially all of the net assets of Access and ceased the operations of Friendsand. The operations of Access and Friendsand for the three months ended September 30, 2006 was a net loss of approximately $33,000, which is
presented as discontinued operations for comparability.

We reported a net loss of approximately $4.4 million for the three months ended September 30,
2007, compared to a net loss of $3.0 million for the three months ended September 30, 2006. Included in the net loss for the three months ended September 30, 2007 are non-cash expenses totaling $3.3 million. Included in the net loss for
the three months ended September 30, 2006 are non-cash expenses totaling $3.0 million, and a loss from discontinued operations of $33,000.

Nine
months ended September 30, 2007 compared to nine months ended September 30, 2006

Our unaudited condensed consolidated statements of
operations for the nine months ended September 30, 2007 contain nine months of operations of STAC, whereas the nine months ended September 30, 2006 contain eight months of operations of STAC, which



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became our wholly-owned subsidiary on February 3, 2006. Primarily for this reason, each category of our results of operations for the nine months ended
June 30, 2007 is higher than the comparative prior year period.

Revenues were approximately $24.5 million for the nine months ended
September 30, 2007, as compared to revenues of $27.2 million for the nine months ended September 30, 2006, a decrease of $2.7 million or 9.9%. A summary of the components of our revenue are as follows:



|                      |  |                                         |            |                     |   |            |  |   |            |   |  |                  |    |  |       |   
|--------------------- |  | --------------------------------------- | ---------- | ------------------- | - | ---------- |  | - | ---------- | - |  | ---------------- | -- |  | ----- | --
|                      |  | For the nine months ended September 30, |            | Increase (Decrease) |  
|                      |  | 2007                                    |            | 2006                |   | Amount     |  |   | %          |   |  | % oftotalrevenue |   
|Internet advertising  |  | $                                       | 15,790,623 |                     | $ | 21,228,140 |  | $ | (5,437,517 | ) |  | (25.6            | )% |  | (20.0 | )%
|Online search         |  |                                         | 3,394,638  |                     |   | 1,019,686  |  |   | 2,374,952  |   |  | 232.9            | %  |  | 8.7   | % 
|Direct response media |  |                                         | 1,938,268  |                     |   | 1,457,421  |  |   | 480,847    |   |  | 33.0             | %  |  | 1.8   | % 
|Advertising programs  |  |                                         | 3,238,426  |                     |   | 3,388,401  |  |   | (149,975   | ) |  | (4.4             | )% |  | (0.6  | )%
|Other                 |  |                                         | 123,029    |                     |   | 91,470     |  |   | 31,559     |   |  | 34.5             | %  |  | 0.1   | % 
|                      |  |                                         |            |                     |   |            |  |   |            |   |  |                  |    |  |       |   
|Revenues              |  | $                                       | 24,484,984 |                     | $ | 27,185,118 |  | $ | (2,700,134 | ) |  | (9.9             | )% |  | (9.9  | )%
|                      |  |                                         |            |                     |   |            |  |   |            |   |  |                  |    |  |       |   



| |  |  | Our internet advertising revenues decreased because one of our largest clients in 2006 ended their advertising campaign in August 2006. Accordingly, this revenue
did not recur in 2007. During September 2007, our largest internet advertiser ended their advertising campaign. For the three months ended September 30, 2007 this revenue totaled $1.3 million, and we do not expect this revenue to recur in
subsequent periods.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our online search revenues increased 232.9% from the prior year principally from the addition of .new clients.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Our direct response media revenues increased in part from additional advertising from existing clients and the addition of a few new clients.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our other revenues are principally from branded media, which ended in April 2007.
| | - |  | ---------------------------------------------------------------------------------

Costs of revenues were approximately $12.5 million for the nine months ended September 30, 2007. Costs of revenues principally include the costs of media providers and direct production costs. The cost of
revenues of our internet advertising was $11.3 million, and $1.2 million was from our offline advertising programs. There are no costs of revenues from online search, direct response media, and branded media, since those revenue streams are reported
as revenue net of related costs. Costs of revenues were approximately $17.1 million for the nine months ended September 30, 2006. The cost of revenues of our internet advertising was $16.3 million, and $0.8 million was from our offline
advertising programs.

Gross profit increased $1.9 million to $12.0 million for the nine months ended September 30, 2007 from gross profit of $10.1
million for the comparable prior year period. Gross profit was approximately $12.0 million for the nine months ended September 30, 2007, or 49.0% of revenues. The increase in gross profit is primarily due to the increase in gross profit from
our online search, which is reported on the net basis. Gross profit from our internet advertising business was $4.5 million, or 28.3% of our internet advertising revenues for the nine months ended September 30, 2007, while our gross profit from
offline advertising programs was $2.1 million, or 63.8% of offline advertising program revenue. Gross profit from our other revenue sources were $3.4 million for online search, $2.0 million for direct response media, and $0.1 million for branded
media. Gross profit was approximately $10.1 million for the nine months ended September 30, 2006, or 37.0% of revenues. Gross profit from our internet advertising business was $4.9 million, or 23.3% of our internet advertising revenues for the
nine months ended September 30, 2006, while our gross profit from offline advertising programs was $2.6 million, or 75.4% of offline advertising program revenue. Gross profit from our other revenue sources were $1.0 million for online search,
$1.5 million for direct response media, and $0.1 million for branded media.

Salaries, wages and benefits expenses were approximately $8.5 million for the
nine months ended September 30, 2007, as compared to $6.3 million for the comparable prior year period, an increase of $2.2 million, or 35.3%. The increase is primarily due to the increase in staff in the areas of sales, account management,
operations, and information technology. As a percentage of revenues, salaries, wages and benefits increased to 34.9% of revenues for the nine months ended September 30, 2007 from 23.2% of revenues for the comparable prior year period.



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Professional fees decreased approximately $0.2 million to $1.0 million for the nine months ended September 30, 2007,
as compared to $1.2 million for the comparable prior year period. The decrease is primarily due to lower professional fees related to the filing of registration statements and lower litigation costs.

As a result of the loss of our sole contract in the branded media line of business in April 2007, we restructured operations and incurred $0.5 million in costs related
to severance arrangements and the redeployment of personnel for the nine months ended September 30, 2007. There were no restructuring costs during the nine months ended September 30, 2006.

Other, general and administrative expenses increased approximately $2.1 million to $5.4 million for the nine months ended September 30, 2007, as compared to $3.3
million for the comparable prior year period. The increase is primarily due to the increase in loss contingencies related to the settlements of our law suits. Our other general and administrative expenses as a percentage of revenues were 23.9% for
the nine months ended September 30, 2007, as compared to 12.2% of revenues for the comparable prior year period.

The components of other general and
administrative expenses were as follows:



|                                                |  |                                         |           |      |   |          
|----------------------------------------------- |  | --------------------------------------- | --------- | ---- | - | ---------
|                                                |  | For the nine months ended September 30,
|                                                |  | 2007                                    |           | 2006
|Depreciation and amortization                   |  | $                                       | 1,260,031 |      | $ | 559,634  
|Travel                                          |  |                                         | 467,480   |      |   | 287,475  
|Marketing expenses                              |  |                                         | 378,753   |      |   | 276,744  
|Rent                                            |  |                                         | 348,102   |      |   | 247,466  
|Internet bandwidth                              |  |                                         | 297,927   |      |   | 285,524  
|Commissions                                     |  |                                         | 490,186   |      |   | 280,612  
|Bad debts expense                               |  |                                         | 229,158   |      |   | 197,745  
|Other                                           |  |                                         | 1,897,491 |      |   | 1,172,658
|                                                |  |                                         |           |      |   |          
|Total other general and administrative expenses |  | $                                       | 5,369,128 |      | $ | 3,307,858
|                                                |  |                                         |           |      |   |          

Operating losses increased $2.6 million to an operating loss of $3.4 million for the nine months ended
September 30, 2007, from $0.8 million for the nine months ended September 30, 2006. The increase in the operating loss is the result of the increase in gross profit of $1.9 million, reduced by the increases in wages of $2.2 million,
restructuring charges of $0.5, increases in our selling, general and administrative expenses of $2.1 million, net of a decrease in professional fees of $0.2 million.

Other income (expense) increased $0.8 million to $10.1 million for the nine months ended September 30, 2007 from $9.3 million for the comparable prior year period. It is comprised of the following:



| |  |  | Registration rights penalty  we entered into an agreement to register the resale of the shares of common stock held by our Debenture holders, and preferred
stockholders, as well as those shares that would be issuable if our Debenture holders converted our Debentures and exercised warrants that they hold into shares of our common stock. The agreement stipulated that if the registration statement was not
filed and declared effective within certain contractual timeframes we would be subject to a registration rights penalty. The registration statement for the shares was declared effective on July 14, 2006. A new registration statement for the
additional shares of common stock issuable upon conversion of our Debentures as a result of the restructuring, effective November 10, 2006, described above was declared effective on April 12, 2007. As of September 30, 2007, management
believes the probability of such penalty is minimal and has reduced the estimated amount of the penalty by $89,000 to $43,000. During the nine months ended September 30, 2006, we recognized income of $193,500 in connection with the registration
rights agreement. The reduction in the registration rights penalty for the nine months ended September 30, 2007 has been presented as a cumulative effect of a change in accounting principle in the accompanying unaudited condensed consolidated
statement of operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest income  we earned approximately $106,800 in interest on bank deposits for the nine months ended September 30, 2007, as compared to $75,500 for
the nine months ended September 30, 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest expense  interest expense increased $2.3 million to $10.3 million for the nine months ended September 30, 2007 from $8.0 million for the
comparable prior year period. The increase is due in part to amortization of the debt discount as a result of the restructuring of our Debentures in November 2006, and in part to an acceleration of the amortization of the debt discount in connection
with conversions of Debentures into shares of our Common Stock. We incurred total interest expense on the Debentures of approximately $10.2 million for the nine months ended September 30, 2007. Included in interest expense is $1.5 million of
interest that will require payment to our Debenture holders and a non-cash interest charge of $8.7 million to amortize
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | +the debt discount. We incurred total interest expense on the Debentures of approximately $8.0 million for the nine months ended September 30, 2006.
Included in interest expense is $1.4 million of interest that will require payment to our Debenture holders and a non-cash interest charge of $6.6 million to amortize the debt discount and the deferred finance fees.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our provision for income taxes (benefits) is zero in both periods. For the nine months ended September 30, 2007 and 2006, a provision for income taxes was not made
because after evaluating all available evidence, we believe that a valuation allowance is necessary to offset against any potential deferred tax assets.

We reported a loss from continuing operations of approximately $13.5 million for the nine months ended September 30, 2007, compared to a loss from continuing operations of approximately $10.1 million for the nine months ended
September 30, 2006. Continuing operations included the operations of SendTec and the Company. Included in the loss from continuing operations for the nine months ended September 30, 2007 and 2006 are non-cash expenses totaling $10.7
million and $9.3 million, respectively.

In June 2006, we sold the business and substantially all of the net assets of Access and ceased the operations of
Friendsand. The operations of Access and Friendsand for the nine months ended September 30, 2006 was a net loss of approximately $4.6 million, which is presented as discontinued operations for comparability.

We reported a net loss of approximately $13.5 million for the nine months ended September 30, 2007 compared to a net loss of $14.7 million for the nine months ended
September 30, 2006. Included in the net loss for the nine months ended September 30, 2007 are non-cash expenses totaling $10.7 million. Included in the net loss for the nine months ended September 30, 2006 are non-cash expenses
totaling $9.3 million, and a loss from discontinued operations of $4.6 million.

Liquidity and Capital Resources

We incurred approximately a $13.5 million loss from continuing operations for the nine months ended September 30, 2007, which includes an aggregate of approximately
$10.7 million in non-cash charges relating to non-cash interest of $8.7 million, depreciation and amortization of $1.3 million, stock based compensation of $0.5 million, and a provision for bad debts of $0.2 million. We also issued stock in payment
of approximately $0.3 million of contractual interest expense under our Debentures.

We are required to repay our Debentures on March 31, 2008, which have
a face value of $32,730,000 as of September 30, 2007. We are in the process of formulating a plan to restructure this obligation and believe we have access to capital and other resources to do so. As of September 30, 2007 we were not in
compliance with the requirement to have a minimum cash balance of $3,500,000 pursuant to the financial covenants we are required to maintain under the modified terms of the Securities Purchase Agreement with the Debenture holders. In addition, we
did not make a required interest payment of approximately $502,000 due on November 1, 2007. Our failure to meet the financial covenants and to make interest payments are events of default under the Debentures.

Subsequent to November 1, 2007 the Company and Debenture holders representing more than 75% of the outstanding principal amount of the Debentures, executed a Letter
Agreement (Letter Agreement), which among other things, provides that during the period from the signing of the Letter Agreement until the close of business on November 16, 2007, the Debenture holders forbear their right to declare us in
default under the Debentures and the Securities Purchase Agreement and their right to demand acceleration of the Debentures.

If we are not able to
restructure the Debentures or negotiate a further forbearance, holders of 75%, the required minimum, of the principal amount of the Debentures may elect to declare our Company in default of the Debentures. If we are declared in default, the
Debenture holders have the right to accelerate the payment of the obligation, and as such we will not have sufficient working capital or cash to repay the outstanding principal and interest due under the Debentures. Since we rely on our working
capital for day-to-day operations, such a default would have a material adverse effect on the business, operating results, and financial condition. In such event, we may be forced to restructure, file for bankruptcy, sell assets, or cease
operations, any of which would put us, our investors and the value of its common stock, at significant risk. Further, our obligations under the Debentures are secured by substantially all of our assets. Failure to fulfill the obligations under the
Debentures could lead to loss of these assets, which would be detrimental to our operations. In addition, adverse future developments affecting our pending legal proceedings and other contingencies may also have a material adverse impact on our
liquidity. These matters raise substantial doubt about our Companys ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary should our Company be unable to continue as a going
concern.

We integrated our newly acquired business, STAC, into our existing operations and believe that our current capital resources and resources
available from STAC will enable us to sustain operations through September 30, 2008, exclusive of Debenture repayments. We may look to raise additional capital to fund the expansion of our business and believe we have access to capital
resources; however, we have not secured any commitments for new financing at this time nor can we provide any assurance that we will be successful in our efforts to raise additional capital if considered necessary, in the near term. We are
restricted from incurring additional indebtedness, other than certain permitted indebtedness, as long as our Debentures remain outstanding.

In July 2006
and April 2007, we successfully completed registrations for resale of certain shares of common stock, as required pursuant to our agreements with our Debenture holders and holders of our Series A Preferred Stock. We are required to maintain the
effectiveness of these registration statements through at least March 31, 2008 or until such time that all of the registered shares have been sold by the selling stockholders. As a result, we expect to see cost savings in the area of
registration costs.

We were not in compliance with certain financial covenants we were required to maintain under the terms of our Securities Purchase
Agreement with our Debenture holders. On September 27, 2006, the Company and the Debenture holders entered into an agreement to amend the financial covenants contained in the Securities Purchase Agreement and, among other things, reduced the
conversion price of the Debentures to $0.50 per share from $1.50 per share. On November 10, 2006, our stockholders approved an increase in our authorized capital to meet the requirements of all potential conversions of our Debentures and other
derivate instruments into common stock, which had the effect of making the revised Debenture agreement effective.



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The amended financial covenants required us to attain minimum net revenues of $4,675,000 for each of the third and fourth
quarters of 2006 and $5,025,000, $5,175,000 and $5,450,000 for the first, second, and third quarters of 2007, respectively, which requirements were satisfied. We are required to attain $5,700,000 for the fourth quarter of 2007. We were also required
to attain a minimum cash balance of $3,250,000 as of June 30, 2007, which we attained.

Under the Securities Purchase Agreement, we were also required
to attain minimum net revenues $5,450,000 for the three months ended September 30, 2007, which we attained. Per the amended financial covenants, net revenues are defined as net revenues calculated in accordance with GAAP as applied by us in our
audited financial statements. See Note 3 for a description of our revenue recognition policies.



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We anticipate that we will seek to raise additional capital during 2007 and 2008 to fund additional growth of the
business and provide cash for operations if necessary; however, there are no specific financing transactions planned at this time. We also cannot provide any assurance that in the event we seek to raise additional capital that such capital will be
available on acceptable terms, if at all.

Net cash flows used in operating activities for the nine months ended September 30, 2007 were $3.2 million,
as compared to net cash used in operating activities of $5.0 million for the nine months ended September 30, 2006. For the nine months ended September 30, 2007, our net loss from continuing operations of approximately $13.5 million,
adjusted for non-cash items totaling $10.7 million, including depreciation and amortization of $1.3 million, stock-based compensation of $0.5 million, non-cash interest of $8.7 million, and a provision for bad debts of $0.2 million used $2.8 million
in cash. Changes in assets and liabilities used $0.4 million in cash. For the nine months ended September 30, 2006, our net loss from continuing operations of approximately $10.1 million, adjusted for non-cash items totaling $9.3 million,
including depreciation and amortization of $0.5 million, stock-based compensation of $0.6 million, stock issued to satisfy a waiver and covenant fee of $1.4 million, non-cash interest of $6.6 million, a provision for bad debts of $0.2 million, and a
loss on an equity-method investment of $0.2 million, net of non-cash income of $0.2 million from the reduction of the registration rights penalty used $0.8 million in cash. Changes in assets and liabilities used $4.2 million in cash.

Net cash flows used in investing activities for the nine months ended September 30, 2007 were $0.2 million, as compared to net cash provided by investing activities
of $8.9 million for the nine months ended September 30, 2006. For the nine months ended September 30, 2007 we used cash to purchase $0.2 million of property and equipment. For the nine months ended September 30, 2006, we acquired $9.3
million of cash in the SendTec consolidation, and we received $0.3 million in the reconciliation of the purchase of net assets of SendTec, Inc. from theglobe.com, Inc. We used cash to purchase property and equipment of $0.5 million, and incurred
$0.2 in transaction expenses.

Net cash flows used in financing activities for the nine months ended September 30, 2007 were $0.2 million, as compared
to net cash provided by financing activities of $0.7 million for the nine months ended September 30, 2006. For the nine months ended September 30, 2007, we repurchased and retired common stock that was subject to redemption of $0.1
million, and we made principal payments on capital lease obligations of $0.1 million. For the nine months ended September 30, 2006, we received net proceeds from the sale of Common Stock and exercise of warrants of $0.7 million.

There were no discontinued operations for the nine months ended September 30, 2007. Discontinued operations used $1.7 million of net cash in operating activities
and provided $1.3 million from investing activities for the nine months ended September 30, 2006.

We reported a net decrease in cash for the nine
months ended September 30, 2007 of $3.5 million as compared to a net increase in cash of $4.3 million for the nine months ended September 30, 2006. At September 30, 2007 we had cash on hand of $2.6 million.

Critical Accounting Policies

Our financial statements and
accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (GAAP), which requires management to exercise its judgment. We exercise considerable judgment with respect to establishing
sound accounting policies and in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of commitments and contingencies at the date of the financial statements.

On an ongoing basis, we evaluate our estimates and judgments. Areas in which we exercise significant judgment include, but are not limited to, our valuation of accounts
receivable, revenue recognition, depreciation, amortization, recoverability of long-lived assets, income taxes, equity transactions and contingencies. We have also adopted certain policies with respect to our recognition of revenue that we believe
are consistent with the guidance provided under Securities and Exchange Commission Staff Bulletin No. 104.



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We base our estimates and judgments on a variety of factors including our historical experience, knowledge of the
business and industry, current and expected economic conditions, the attributes of our products and services, regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions
with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary.

While we believe that the factors we
evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual
results could differ from such estimates.

A description of significant accounting policies that require us to make estimates and assumptions in the
preparation of our consolidated financial statements is as follows:

Revenue Recognition  We follow the guidance of the SECs Staff Accounting
Bulletin 104 for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and
collectibility is reasonably assured. Certain of our revenue is reported on a gross basis, while certain other revenue is reported on a net basis, net of related costs. Credits or refunds are recognized when they are determinable and estimable.
The following policies reflect specific criteria for our various revenues streams:

Internet advertising: Revenue from the
distribution of internet advertising, which principally includes the placement of banner ads and e-mail transmission of services is recognized when internet users visit and complete actions at an advertisers website. Revenue consists of the
gross value of billings to clients, including the recovery of costs incurred to acquire online media required to execute client campaigns. We report these revenues gross because we are responsible for fulfillment of the service, have substantial
latitude in setting price and assume the credit risk for the entire amount of the sale, and we are responsible for the payment of all obligations incurred with media providers.

Online search: Revenue derived from search engine marketing services, such as search engine keyword buying, is recognized on a net basis in
the period when the associated keyword search media is clicked on by a consumer. We typically earn a media commission equal to a percentage of the keyword search media purchased for our clients. In many cases, the amount we bill to clients
significantly exceeds the amount of revenue that is earned due to the existence of various pass-through charges such as the cost of the search engine keyword media. Amounts received in advance of search engine keyword media purchases are deferred
and included in deferred revenue in the accompanying balance sheet.

Direct response media: Revenue derived from the purchase
and tracking of direct response media, such as television and radio commercials, is recognized on a net basis when the associated media is aired. In many cases, the amount we bill to clients significantly exceeds the amount of revenue that is earned
due to the existence of various pass-through charges such as the cost of the television and radio media. Amounts received in advance of media airings are deferred and included in deferred revenue in the accompanying balance sheet.

Advertising programs: Revenue generated from the production of direct response advertising programs, such as infomercials, is recognized on
the completed contract method when such programs are complete and available for airing. Production activities generally take eight to 12 weeks and we usually collect amounts in advance and at various points throughout the production process. Amounts
received from customers prior to completion of commercials are included in deferred revenue and direct costs associated with the production of commercials in process are deferred and included within other current assets in the accompanying balance
sheet. In addition, revenues from creative services, third party research, retainer fees, and strategic consulting are included in this category. We report these revenues gross because we are responsible for the fulfillment of the service.

Intangible assets consist of customer relationships, covenants not to compete, and deferred financing fees. Non-compete agreements are amortized
straight-line over the lives of the underlying employment agreements. Deferred financing fees are amortized straight-line over the life of the Debentures. We review the carrying value of intangibles and other long-lived assets for impairment at
least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. With respect to the valuation of our goodwill, we considered a variety of factors including our market capitalization
adjusted for a control premium and a discounted cash flow forecast to determine the enterprise value of our business using the income approach. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted
cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market
value.



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Stock Based Compensation  Effective January 1, 2006, we adopted FASB Statement of Financial Accounting
Standard (SFAS) No. 123R Share Based Payment.. This statement is a revision of SFAS Statement No. 123, and supersedes APB Opinion No. 25, and its related implementation guidance. SFAS 123R addresses all
forms of share based payment (SBP) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123R, SBP awards result in a cost that will be measured at
fair value on the awards grant date, based on the estimated number of awards that are expected to vest that will result in a charge to operations. Consequently, during the year ended December 31, 2006 we recognized approximately
$1,099,000 in expenses.



|ITEM 3. | CONTROLS AND PROCEDURES
|------- | -----------------------

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

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

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

Other than the actions stated below, we are
involved in various matters or disputes arising in the ordinary course of our business. Adverse future developments affecting our pending legal proceedings and other contingencies may also have a material adverse impact on our liquidity.

On April 5, 2006, Mr. Ohad Jehassi, our former Chief Operating Officer, filed an action against us in the Circuit Court for the 17th Judicial Circuit in
Broward County, Florida in connection with his termination by the Company (the Jehassi Complaint). Mr. Jehassi alleged that we breached an Employment Agreement and owe him salary and other benefits in connection with such alleged
breach. On June 21, 2006, Mr. Jehassi filed an Amended Complaint adding a claim for violation of the Florida Whistleblowers Act, and on August 14, 2006, filed a Fourth Amended Complaint adding a claim for unpaid wages under a
Florida statute. In February 2007, Mr. Jehassi filed a Fourth Amended Complaint (substantially similar to the Third Amended Complaint). Mr. Jehassi seeks damages of approximately $500,000 plus attorneys fees, costs and expenses and
shares of our common stock he alleges he is entitled to. We have filed an answer to the Third Amended Complaint denying that Mr. Jehassi is entitled to any relief and have asserted a counterclaim against Mr. Jehassi. This action is now in
the discovery phase. We believe this action is without merit, and intend to vigorously defend ourselves with respect to this matter; however, its outcome or range of possible loss, if any, cannot be predicted at this time. We cannot provide any
assurance that the outcome of this matter will not have a material adverse effect on our financial position or results of operations.

On February 3,
2006, InfoLink Communications Services, Inc, (InfoLink) filed a complaint against us and Omni Point Marketing LLC in the Circuit Court of Miami Dade County, Florida, asserting violation of the federal CAN SPAM ACT of 2003, 15 U.S.C. ss.
7701, and breach of an alleged licensing agreement between Omni Point Marketing LLC and InfoLink. InfoLink seeks actual damages in an amount of approximately $100,000 and approximately $1,500,000 in statutory damages. We do not believe that InfoLink
has sufficiently pled any factual basis to support its claim. We filed a motion asking the court to enter sanctions against InfoLink, including, but not limited to, dismissal of the case with prejudice for InfoLinks failure to comply with a
court order to produce discovery materials. We intend to vigorously defend ourselves with respect to this matter; however, its outcome or range of possible loss, if any, cannot be predicted at this time. We cannot provide any assurance that the
outcome of this matter will not have a material adverse effect on our financial position or results of operations.

On or about June 15, 2006, R&R
Investors Ltd. (R&R) commenced an action in the Supreme Court of the State of New York, County of New York, against us and Come & Stay S.A. asserting a claim for breach of contract related to a purported agreement concerning
the sale of RelationServe Access, Inc and Friendsand, Inc. R&R initially sought an injunction enjoining the transfer of RelationServe Access, Inc. and Friendsand, Inc. stock. The Court denied R&Rs motion. R&R effectuated service of
the complaint on us in August 2006. We have served an answer to R&Rs complaint denying that R&R is entitled to any relief. This action is now in



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the discovery phase. We intend to vigorously defend ourselves with respect to this matter; however, its outcome or range of possible loss, if any, cannot be
predicted at this time. We cannot provide any assurance that the outcome of this matter will not have a material adverse effect on our financial position or results of operations.

On or about April 28, 2006, LeadClick Media, Inc. commenced an action against us in the Superior Court for the State of California, County of San Francisco, alleging breach of contract seeking to recover
$379,146, plus interest. During August 2007, we reached an agreement settling this matter for $260,000 to be paid in three installments and executed a mutual release with LeadClick. During the nine months ended September 30, 2007, we paid
$135,000 with respect to this settlement. The accompanying unaudited consolidated balance sheet includes a $125,000 liability for the remaining amount due under the settlement of this obligation.

Pursuant to an Asset Purchase Agreement, dated as of June 6, 2006, relating to certain discontinued operations of the Company, we believe the purchaser
(Come & Stay, S.A.) is required to assume certain liability with respect to this matter, however, the purchaser has contested this fact. As a result, we have commenced an arbitration proceeding before the International Chamber of Commerce
seeking to have the purchaser assume liability for amounts that may be due by us to Leadclick, as mentioned in the preceding paragraph.

On or about
August 31, 2006, an action was commenced in the United States District Court for the Southern District of Florida (Case No. 06-61327) by Richard F. Thompson, as the putative class representative, against us and certain of our former
officers and directors alleging securities laws violations in connection with the purchase of our stock during the period of May 24, 2005 to August 2006. The named plaintiff in the case previously filed suit against us, as an individual, in
state court in Indiana, which action was dismissed in July 2006. The Florida District Court permitted the plaintiff to file an amended complaint and on November 13, 2006, plaintiff filed a First Amended Class Action Complaint (the
First Amended Complaint) adding an additional plaintiff, L. Alan Jacoby, who purportedly purchased 10,000 shares of our common stock in the open market, and naming additional former and present officers and directors of our company and
others as defendants. The First Amended Complaint, styled as a class action, alleges violations of Section 11 and Section 12(2) of the Securities Act and Section 10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated
thereunder. In addition to the claims of securities law violations, plaintiffs claim violation of Section 20(a) of the Exchange Act as to controlling persons of the Company, violations of the Florida Securities Act, violations of the Indiana
Securities Act, sales of unregistered, non-exempt securities, violation of anti-fraud provisions under Indiana law, deception under Indiana law, and fraud. Plaintiffs seek rescission, damages, treble damages, punitive damages, compensatory damages,
interest, costs, and attorneys fees.

The District Court dismissed the First Amended Complaint on March 6, 2007 and gave leave to the plaintiffs
to file an amended complaint, which was filed on March 19, 2007. By decision dated June 12, 2007, the District Court dismissed the Second Amended Complaint, with prejudice, and state law claims without prejudice. Plaintiffs have noted
their appeal of the June 12, 2007 dismissal of the Second Amended Complaint.

On September 19, 2007, the parties attended court ordered mediation
but were unable to reach a compromise. We filed our answer brief with the Eleventh Circuit Court of Appeals on September 25, 2007. The Company intends to vigorously defend itself with respect to this matter; however, its outcome or range of
possible loss, if any, cannot be predicted at this time. The Company cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial position or results of operations.

On July 25, 2007, Richard F. Thompson, along with new plaintiffs, Parabolic Investment Fund, Ltd and Gregory Thompson filed a Class Action Compliant in the Circuit
Court for the Seventeenth Judicial Circuit in and for Broward County, Florida, on behalf of themselves, and others similarly situated naming the Company, and certain former officers and directors of the Company, as defendants. The plaintiffs claim
violations of certain state laws regarding the sale of securities by unregistered broker/dealers and failure to report such violations. We filed a motion to dismiss the class action on September 14, 2007 and a hearing is set for
November 14, 2007. The Company believes that this action, like those previously filed, is without merit and will vigorously defend itself in this matter.

On September 28, 2006, Wedbush Morgan Securities, Inc. (Wedbush) commenced arbitration against us seeking $500,000 in damages as a result of an alleged breach of contract. On October 29, 2007, the arbitrator awarded
Wedbush $694,197, which we recorded during the quarter ended September 30, 2007. We are presently considering an appeal of this award.



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On or about September 26, 2006, we received copies of three consumer complaints filed by Chirag Chaman, Chief
Operating Officer of MX Interactive, LLC. These complaints submitted to the Securities and Exchange Commission the New York Attorney General, and the Florida Attorney General, make various claims with respect to the failure to issue to MX
Interactive LLC 45,454 shares of stock which claimant alleges we agreed to transfer pursuant to a written assignment agreement. Claimant asserts that, in July 2005, a third party agreed to transfer rights to receive shares of our common stock to
claimant and failed to do so, and that we are under an obligation to transfer such shares and satisfy the obligation under the assignment agreement. We believe these claims to be substantially without merit and intend to vigorously defend ourselves
with respect to this matter, however its outcome or range of possible loss, if any, cannot be predicted at this time. We cannot provide any assurance that the outcome of this matter will not have a material adverse effect on our financial position
or results of operations.

We received a letter dated August 11, 2006 from counsel to Sunrise Equity Partners, L.P., demanding return of its $750,000
investment, with interest. Subsequently, counsel to Sunrise Equity Partners, L.P. has made demands for issuance of additional shares of common stock on the same basis as the amendment to our Debentures and has threatened legal action, although, to
date, no action has been taken. We are engaged in settlement discussions with counsel for Sunrise after the matter was referred to mediation. During February 2007, we reached an agreement in principle for settlement of this matter upon issuance of
650,000 shares of our common stock, although negotiations continue. Subsequent to February 2007, the preliminary agreement was not executed and all talks have ceased. Due to the uncertainity of this matter, we reversed our prior accrual during the
nine months ended September 30, 2007 and cannot predict the outcome or range of possible loss, if any. We cannot provide any assurance that the outcome of this matter will not have a material adverse effect on its financial position or results
of operations.

On September 14, 2007, we filed a breach of contract and collection of trade receivables action against a former customer, Cosmetique, Inc.
We are seeking recovery of at least $2.2 million of damages, as of September 30, 2007. This amount includes invoiced advertising services, as well as other commissions estimated at approximately $0.2 million, as of September 30, 2007. The action is
in the initial stage. While it is impossible to predict the outcome of any litigation with certainty, we believe we have valid claims and intend to prosecute them vigorously. The amounts have been reflected as accounts receivable in the accompanying
condensed consolidated balance sheet as of September 30, 2007.

Cosmetiques failure to pay its obligations to us has caused us to delay certain
payments for costs we incurred in connection with our work for Cosmetique. Although we are not aware of any vendor lawsuits that have been filed, at least one vendor, ValueClick, Inc., has threatened to file suit against us.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

As of September 30, 2007, the
Company was required to have a minimum cash balance of $3,500,000 pursuant to the financial covenants the Company is required to maintain under the modified terms of the Securities Purchase Agreement with the Debenture holders. As of September 30,
2007, the Company was not in compliance with this requirement. In addition, the Company did not make a required interest payment of approximately $502,000 due on November 1, 2007. The Companys failure to meet the financial covenants and to
make interest payments are events of default under the Debentures.

Subsequent to November 1, 2007 the Company and Debenture holders representing more than
75%, the required minimum, of the outstanding principal amount of the Debentures, executed a Letter Agreement (Letter Agreement), which among other things, provides that during the period from the signing of the Letter Agreement until
the close of business on November 16, 2007, the Debenture holders forbear their right to declare the Company in default under the Debentures and the Securities Purchase Agreement and their right to demand acceleration of the Debentures.

If the Company is not able to restructure the Debentures or negotiate a further forbearance, holders of 75% of the principal amount of the Debentures may elect to
declare the Company in default of the Debentures. If the Company is declared in default, the Debenture holders have the right to accelerate the payment of the obligation, and as such the Company will not have sufficient working capital or cash to
repay the outstanding principal and interest due under the Debentures. Since the Company relies on its working capital for day-to-day operations, such a default would have a material adverse effect on the business, operating results, and financial
condition. In such event, the Company may be forced to restructure, file for bankruptcy, sell assets, or cease operations, any of which would put the Company, its investors and the value of its common stock, at significant risk. Further, the
Companys obligations under the Debentures are secured by substantially all of its assets. Failure to fulfill the obligations under the Debentures could lead to loss of these assets, which would be detrimental to the Company operations.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

The
Companys Annual Meeting of Stockholders was held on August 29, 2007. The following business was transacted during the meeting:



|1. | Election of Directors:
|-- | ----------------------



|                  |  |         |  |            |  |               |  |  |  |  |  |  |  | 
|----------------- |  | ------- |  | ---------- |  | ------------- |  |  |  |  |  |  |  | 
|                  |  |         |  | Votes For  |  | VotesWithheld |  |  |  |  |  |  |  | 
|Paul Soltoff      |  | Elected |  | 34,133,621 |  | 350,775       |  |  |  |  |  |  |  | 
|Anthony Abate     |  | Elected |  | 34,148,621 |  | 335,775       |  |  |  |  |  |  |  | 
|Vincent Addonisio |  | Elected |  | 34,148,621 |  | 335,775       |  |  |  |  |  |  |  | 
|Robert Beauregard |  | Elected |  | 34,148,621 |  | 335,775       |  |  |  |  |  |  |  | 
|Robert Hussey     |  | Elected |  | 34,148,621 |  | 335,775       |  |  |  |  |  |  |  | 



|2. | The proposal to ratify the appointment of Gregory, Sharer & Stuart as the Companys independent registered public accounting firm for the year ending December 31,
2007 was approved. The Company received 34,037,253 votes for the proposal, 163,836 votes against the proposal, and 283,306 votes abstained from voting.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|3. | The proposal to adopt the SendTec Incentive Stock Plan A was approved. The Company received 15,702,543 votes for the proposal, 729,980 votes against the proposal, and 54,000 votes
abstained from voting.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | The proposal to adopt the SendTec Incentive Stock Plan B was approved. The Company received 15,688,243 votes for the proposal, 744,280 votes against the proposal, and 54,000 votes
abstained from voting.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

None.



|ITEM 6. | EXHIBITS
|------- | --------

A. Exhibits



|     |  |                                                                     
|---- |  | --------------------------------------------------------------------
|31.1 |  | Section 302 Certification of the Chief Executive Officer*           
|     | 
|31.2 |  | Section 302 Certification of the Chief Financial Officer*           
|     | 
|32.1 |  | Section 906 Certification of Chief Executive Officer*               
|     | 
|32.2 |  | Section 906 Certification of Chief Financial and Accounting Officer*

---

|* | Filed herewith
|- | --------------



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SIGNATURES

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



|                  |  |  |  |               |  |                              
|----------------- |  |  |  | ------------- |  | -----------------------------
|                  |  |  |  | SendTec, Inc.
|                  |  |  | 
|November 16, 2007 |  |  |  | By:           |  | /s/ Paul Soltoff             
|                  |  |  |  |               |  | Paul Soltoff                 
|                  |  |  |  |               |  | Chief Executive Officer      
|                  |  |  |  |               |  | (Principal Executive Officer)
|                  |  |  | 
|November 16, 2007 |  |  |  | By:           |  | /s/ Donald Gould             
|                  |  |  |  |               |  | Donald Gould                 
|                  |  |  |  |               |  | (Principal Financial Officer)



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