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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   OF 1934

  For fiscal year ended December 31, 1999

                                       OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934

  For the transition period from                 to

                          Commission File Number:

                               ----------------
                             LIFEMINDERS.COM, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  Delaware                                       52-1990403
        (State or other jurisdiction                          (I.R.S. Employer
      of incorporation or organization)                     Identification No.)
</TABLE>

                 1110 Herndon Parkway, Herndon, Virginia 20170
                    (Address of principal executive offices)

                                 (703) 707-8261
              (Registrant's telephone number, including area code)

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

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S>                                    <C>
         Title of each class             Name of each exchange on which registered
                 None                                       None
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, Par Value $0.01 Per Share

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

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

   Indicated by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ((S)229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]

   The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on February 22,
2000, as reported on the Nasdaq National Market, was approximately $386,341,937
(affiliates being, for these purposes only, directors, executive officers and
holders of more than 5% of the Registrant's Common Stock.

   As of February 22, 2000, the Registrant had 23,123,101 outstanding shares of
Common Stock.

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<PAGE>

                                     PART I

ITEM 1. BUSINESS.

   This annual report contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate," "continue" and other similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, making projections of our future results of operations of our
financial condition or state other "forward-looking" information. We believe
that it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control. The factors listed in the sections captioned "Additional
Factors That May Affect Future Results" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," as well as any
cautionary language in this annual report, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we described in our forward-looking statements.

Overview

   We are an online direct marketing company that provides personalized content
and advertisements via e-mail to a community of members. Our e-mail messages
contain helpful reminders and tips that enable our members to better organize
and manage their busy lives. Our proprietary information about our members and
highly-precise targeting capabilities provide our advertising partners the
opportunity to more effectively reach their target markets.

   Members can create profiles in one or more of our 14 e-mail categories,
including family, entertainment, home, personal events, automotive, horoscope,
cooking, pet, health, small business, personal finance, sports and recreation,
travel and shopping. On average each member creates profiles in four e-mail
categories and receives an average of eight e-mails per month. We gather member
profile data from several sources, including information provided by our
members during the sign up process and through member preferences and buying
habits automatically collected through interaction with our e-mail messages. We
also supplement our profile data with information obtained from third-party
sources. Our proprietary matching process correlates member profile data to
uniquely identified messages that we personalize and deliver to each member via
e-mail. Using our direct marketing expertise and our proprietary member
database, we create highly-targeted e-mail messages that enable our advertising
partners to reach a receptive audience.

   As of December 31, 1999, we had approximately 7.0 million members. As of the
same date, we had 90 advertising partners. The value of our service to our
members is also evidenced by our growth from 311,000 members at March 31, 1999,
which represents a compound quarterly growth rate of over 180%.

   We were incorporated in Maryland on August 9, 1996 under the name of
MinderSoft, Inc. In January 1999, we changed our name to LifeMinders.com, Inc.
We reincorporated in Delaware on July 2, 1999. From 1996 to 1998, we entered
into arrangements with national retailers to distribute our reminder products
in software form on disk. In late 1998, we revised our strategy to become an
online direct marketing company that provides personalized content and
advertisements via e-mail to a community of members.

Industry Background

 Traditional Direct Marketing and Advertising

   The traditional advertising industry relies on two primary activities: brand
advertising and direct marketing. The Direct Marketing Association, or DMA,
estimates that, of the total of approximately $285.2 billion spent on
advertising in the United States in 1998, approximately $162.7 billion, or 57%,
was spent on direct marketing compared to 43% invested in brand advertising.
The focus of advertising is typically

                                       1
<PAGE>

to build brand awareness by repeating messages with high frequency through
traditional media, including radio, television and print. The purpose of direct
marketing is to generate a specific consumer response or action--generally, the
trial and purchase of a product or service. Direct marketers typically use
direct mail pieces, catalogs, magazine inserts and telemarketing, aimed at
specific and select consumers in an attempt to maximize the number of desired
responses per marketing dollar invested. However, in order to do so, direct
marketers must be able to accurately identify and reach specific consumers and
showcase products and services that are relevant to those consumers. Direct
marketers invest significant resources in obtaining and analyzing critical data
about consumers in order to assess and understand their specific needs. Despite
these efforts, average response rates for untargeted, traditional direct
marketing campaigns range between 1% to 2% according to information gathered by
the American Association of Advertising Agencies in 1999.

   Direct marketers continue to experience major challenges and inefficiencies.
A significant challenge is the inability to target consumers with relevant
advertisements and products, resulting in low response rates, negative consumer
perceptions and low returns on investments. In addition, traditional direct
marketers are constrained by inherent response and analysis delays due to
extended production lead times and lengthy consumer and intermediary response
times.

 Advent of the Internet and E-mail

   The Internet has emerged as a global medium, enabling millions of people
worldwide to share information, communicate and conduct business
electronically. International Data Corporation, or IDC, estimates that the
number of Web users will grow from approximately 142.2 million worldwide in
1998 to approximately 502.4 million worldwide by the end of 2003. E-mail, one
of the most popular and widely used Internet applications, has broadened from a
simple messaging tool to a widely accepted form of communication for both
personal and business use. According to Electronic Mail & Messaging Systems,
there were approximately 450 million electronic mailboxes worldwide as of
December 1999. IDC expects the number of Web sites, as indicated by total
number of Uniform Resource Locators, or URLs, to grow from 925.0 million in
1998 to 13.1 billion by 2003. We believe this increase represents a growing
amount of unique content on the Internet that can be targeted at a growing
number of specific user and interest groups.

 Growth of Internet-Based Direct Marketing and Advertising

   The Internet has emerged as an attractive new medium for advertisers due to
unique features that are unavailable in traditional media. The interactive
nature of the Internet combined with its global reach and rapidly growing
audience enables advertisers to target specific types of users, receive direct
feedback on their advertisements and capture valuable data on user preferences.
Forrester Research estimates that total spending on Internet advertising in the
United States will grow from $2.8 billion in 1999 to $22.2 billion in 2004.

   The Internet represents an even more attractive medium for direct marketers.
Online direct marketing has the potential to increase user response rates and
decrease costs per transaction by targeting campaigns to particular users based
on their demographic profile, interests and online behavior. In addition, the
Internet permits advertisers to receive immediate responses, effectively test
campaigns and direct consumers to a precise point-of-sale. Online direct
marketing is generally conducted through Web-based promotional offers or e-
mail, which has expanded from a simple personal messaging service to a powerful
and cost-effective business tool. The DMA estimates that Internet direct
marketing expenditures will rise from $603.2 million in 1998 to $5.3 billion by
2003.

 Current Limitations of Internet-Based Direct Marketing and Advertising

   While the Internet offers advertisers a number of advantages over
traditional media, there remain significant challenges to realizing the full
potential of online advertising. To date, advertisers have primarily employed
banner advertisements on heavily trafficked and broadbased portals and other
Web content sites, most of which do not have close and trusted relationships
with their users. These portals and content sites often have the ability to
reach wide audiences but are generally unable to offer advertisers an effective
means to identify

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<PAGE>

their target audience largely because they lack precise demographic,
psychographic and navigational data. During the month of November 1999, click
rates for the top banner advertisements averaged just under 0.5% as reported by
The Nielsen//NetRatings Reporter. In response to the poor advertising
performance on broadbased portals, we believe advertisers are increasingly
turning to vertically-oriented portals, organized around specific interests,
including finance, sports or women's issues, in search of more targeted
audiences and higher click through rates.

   In addition, advertisers have expanded their efforts to reach consumers
using online direct marketing. These campaigns have focused primarily on the
mass mailing of unsolicited e-mail messages referred to as "spam." Spam
campaigns have met with considerable negative consumer reaction and low
response rates primarily because the offerings are unsolicited and are often
not relevant to consumers' lives. As a result of the limitations in both online
advertising and direct marketing, advertisers continue to seek more effective
approaches to deliver highly-targeted advertisements in a more personalized and
content-rich editorial environment from which they receive real-time feedback.

 Challenges to the Internet User

   Generally, Internet users have relied on broadbased portals or search
engines to navigate through the mass of information available on the Internet.
Although these portals and search sites have been useful for individuals
seeking to find aggregated Web content, Internet users attempting to locate
detailed, personalized information must navigate through a vast and often
irrelevant array of Web pages and sites. These portals and search sites have
not provided a platform for aggregating and disseminating the rapidly
increasing volume of personalized content on the Web or enabling users to
interact with content and service providers--unique characteristics that
distinguish the Internet from traditional print, radio and television media.

   Many Internet users seeking greater personalized content have increasingly
migrated to vertically-oriented portals and online communities. These online
portals and communities were designed to provide a platform for Internet users
with similar interests to more easily obtain relevant content and to share
experiences and ideas. However, we believe these sites provide a poor context
for Internet users to discover customized and individual content because
Internet users lack the affinity and opportunity to relate personally to their
online experiences. Accordingly, we believe that Internet users have a
significant and growing need for a trusted online service that can
automatically provide relevant, personalized and timely information.

The LifeMinders.com Solution

   Our e-mail messages contain helpful reminders and tips that enable our
members to better organize and manage their busy lives. Our proprietary
information about our members and highly-precise targeting capabilities provide
our advertising partners the opportunity to more effectively reach their target
audiences.

   Our solution offers the following benefits to both our members and our
advertising partners:

 Benefits to Members

  . Highly targeted and relevant content. We deliver highly personalized e-
    mail messages containing useful and relevant information across 14 e-mail
    categories. Our proprietary content matching process correlates uniquely
    identified messages with individual member profiles in an automated
    manner. The more our members interact with us through our e-mail service,
    the more targeted and personalized our e-mails become, thereby enhancing
    the value of our service to our members. We gather profile data about
    each member from several sources, including information provided by the
    members during the sign up process and through member preferences and
    buying habits collected through interaction with our e-mail messages. We
    also supplement the data with information obtained from third-party
    sources.

  . Enhanced personalization and user efficiency. We compose, edit and
    customize each targeted message we send with specific member profile
    data. Our automated and timely messages provide reminders of

                                       3
<PAGE>

   important personal information and events, including birthdays, a child's
   developmental milestones and car maintenance. Our personalized, content-
   rich e-mails on specific interests enable our members to avoid the mass of
   extraneous information received through untargeted e-mails and obtained
   from most search engines and portals. We deliver each message in a brief,
   user-friendly e-mail format, either text or HTML, that we determine is
   most appropriate for each member. Our targeted messages contain imbedded
   URLs that link directly to full-text articles and helpful information.
   These links supplement the content within the messages and provide easily
   accessible information to our members without requiring lengthy and
   potentially unproductive Web searches.

  . Access to e-commerce opportunities. Our proprietary database management
    capabilities and timely, targeted content allow us to deliver highly
    relevant e-commerce opportunities to our members. For example, if a
    member has a child nearing his or her second birthday, then shortly
    before that birthday we might deliver an e-mail that outlines a two-year
    old child's developmental milestones. In addition, we might include an
    offer to purchase an age and developmentally appropriate learning tool
    and display advertisements for other relevant products. Members have also
    benefited from the availability of high-quality offers from our leading
    brand advertising partners, including PETsMART.com, WebMD and Universal
    Studios.

  . Member trust and confidence. By developing close relationships with our
    members and providing content they consider valuable, we become a trusted
    ally. As a matter of corporate policy, we do not sell members' personal
    information to third parties without permission. We are certified by
    TRUSTe, a leading, independent, non-profit organization whose mission is
    to build Internet users' trust and confidence in the Internet by
    promoting the principles of disclosure and informed consent. Our policy
    is not to disseminate personal information and our members choose the
    level of data that they feel comfortable inputting into our database. As
    a result, our members are able to exercise a significant amount of
    control over their experience and tend to provide us with more
    information over time. Our service also allows members to easily
    unsubscribe at any time by clicking through a link appearing at the
    bottom of our e-mail messages and selecting the particular category in
    which they want to unsubscribe.

 Benefits to Advertising Partners

  . Large and targeted member base. As of December 31, 1999, we had
    approximately 7.0 million members. Using our direct marketing expertise
    and our proprietary member database, which contains extensive
    demographic, behavioral and performance information, we create highly-
    targeted e-mail messages that enable our advertising partners to reach a
    large receptive audience.

  . Detailed real-time reporting and proprietary data mining technology. Our
    capabilities include sophisticated data mining techniques and real-time
    reporting technology to evaluate and assess the results of our
    advertising partners' marketing campaigns as they occur. We also actively
    engage in testing on subsets of our member base to determine which
    members are not likely to respond based on shared profile
    characteristics. Based on our capabilities, we offer our advertising
    partners the ability to immediately determine the effectiveness of a
    given advertising campaign and the opportunity to refine their marketing
    messages.

  . Enhanced targeting capability and increased return on advertising
    investment. We offer our advertising partners a cost-effective means to
    deliver targeted online advertisements to consumers. Our enhanced data
    warehouse allows us to target members on over 650 variables that are
    typically unavailable through other direct marketing means. Individual
    member behavior and preferences are tracked at the click and email level.
    Because of our continually improving testing, targeting and profiling
    capabilities, our members typically open their e-mail approximately 22%
    of the time, and members that open our e-mails click through one or more
    of the four or five content or advertising links contained in each e-mail
    at rates of approximately 30%. This highly targeted advertising
    opportunity results in low delivery costs and high response rates,
    generating a return on advertising investment that

                                       4
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   is higher than that achieved by traditional direct response media and
   offline advertising and compares favorably to other online alternatives.

The LifeMinders.com Strategy

   Our objective is to be the leading online direct marketing company that
provides personalized content and advertisements via e-mail to a community of
members. The key elements of this strategy include:

 Aggressively and Cost-Effectively Expanding Our Member Base

   We intend to continue to rapidly increase our member base. By aggregating a
large audience, we plan to take advantage of economies of scale, increase our
attractiveness to advertisers and enhance our ability to enter into strategic
marketing arrangements. We intend to achieve this objective by:

  . continuing to establish distribution partnerships with leading online
    sites, including Lycos, whereby we become an automated component of the
    sign up process within these sites;

  . continuing to invest in large scale, online member acquisition
    activities, including purchasing highly targeted banner advertisements
    and opt-in lists from selected vertically-oriented portals that
    correspond to our members' interests;

  . expanding our offline advertising and promotional activities, including
    national print, outdoor and broadcast placements;

  . expanding our success in viral marketing, whereby existing members refer
    new members through increasing incentives, including cash and merchandise
    rewards; and

  . introducing new e-mail categories and services on a regular basis that
    will appeal to our existing and potential members.

   We will also continue to reduce new member acquisition costs by developing
financial models at the individual level and analyzing behavior to determine
the exact characteristics of a valuable member. In doing this, we will be able
to target the most cost-effective channels to acquire active and valuable
members.

 Improving Member Experience and Retention

   We will continue our efforts to enhance our member experience by constantly
monitoring member interaction, thereby improving the quality of our content.
Our marketing analysis and data mining team will continue to enhance our
service to our members by evaluating behavior related to consumer preferences
and buying habits in support of our efforts to personalize future content
offerings. Our category managers will continually track and analyze member data
in order to better identify and develop relevant and compelling content. We
believe these efforts will continue to result in increased click through rates
and higher customer satisfaction as we enhance our relationships. Information
that has received positive responses from existing members will be distributed
to new members as they join.

   We will further differentiate ourselves with the introduction of each new e-
mail category. As a result, we will not only improve existing member experience
and retention, but will also enhance the LifeMinders.com brand and attract
additional members. We will continue to monitor and survey our members for new
areas of interest and prioritize our new categories based on their direct and
indirect input. We introduced LifeMinders Sports and Recreation, LifeMinders
Cooking and LifeMinders Horoscope in December 1999 and LifeMinders Small
Business in January 2000, and we intend to roll out a number of new categories
each quarter covering a variety of areas, including Spanish language personal
events, weather and fashion.

 Expanding and Pursuing Multiple Revenue Streams

   Our business model allows us the opportunity to pursue revenue from diverse
sources. Advertisers and businesses currently pay us for placement of
advertisements within our e-mail messages, as well as for

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advertising messages placed on our sign up pages. We also intend to pursue
other revenue sources, including various e-commerce, revenue sharing and
content licensing opportunities, which leverage our unique technology
infrastructure, our extensive database of personalized member information, and
our expertise in data analysis and direct marketing. We are planning to develop
our business-to-business services, including the possible outsourcing of our
personalized e-mail targeting service to companies on a private label basis. In
addition, we will expand our existing revenue streams by continuing to develop
new and creative advertising opportunities within our e-mail messages.

 Enhancing Advertiser Effectiveness by Expanding Our Marketing Analysis and
 Data Mining Capabilities

   We will continue to use sophisticated tools and our proprietary technologies
to:

  . increase the efficacy of our advertising partners' marketing campaigns by
    refining the precision of our targeting capabilities and testing new
    concepts on subsets of our member base prior to implementation across our
    entire member community;

  . develop and acquire content that increasingly reflects member preferences
    and lifestyles by collecting data on a variety of detailed consumer
    behavior, such as opening of e-mail messages, click through behavior on
    content, and advertisement responsiveness, including click through and
    follow up purchase activity;

  . enhance our member profiles through interactive quizzes and surveys,
    purchasing additional demographic data and offering cash and prize
    incentives for members to provide more extensive demographic and
    preference information; and

  . maximize reliability and scalability, allowing for the creation and
    distribution of millions of personalized e-mails per week.

 Increasing Awareness and Understanding of the LifeMinders.com Brand

   We believe that establishing and leveraging the LifeMinders.com brand is
critical to our ultimate success. We have already benefited from viral
marketing and word-of-mouth publicity of our brand through interactions between
existing and prospective members. We intend to increase brand equity through
extensive consumer and trade advertising, including national print, outdoor and
broadcast placements, continued public relations campaigns, direct mail,
participation in strategic industry events and sustained consumer
communications campaigns. We also believe that the introduction of new e-mail
categories will increase our brand awareness.

 Pursuing Strategic Acquisitions and Alliances

   We plan to pursue acquisitions, alliances and strategic investments, both
domestically and internationally, to further penetrate and expand our e-mail
categories, leverage the strong relationship we have established with our
members, broaden our member base, capture new distribution channels and
establish new revenue streams. While we do not have any definitive agreements
currently in place, we believe that there exist many opportunities to acquire
or develop strong relationships with complementary businesses.

Services

 Personalized E-mail Messages

   We deliver e-mail messages to our members that contain highly personalized,
timely and relevant content along with related advertisements. Our editorial
staff of 14 searches multiple online and offline sources to identify content
that is relevant to our members' needs. Our staff develops and composes most
all of our e-mail content based on third-party sources. The e-mail messages are
delivered in an attractive, easy-to-read format and contain imbedded URLs that
link directly to relevant information. Our average member has signed up for
four e-mail categories and receives an average of eight e-mails per month. We
also assist our members in organizing and managing their lives by automatically
delivering e-mail reminders that contain important dates, including birthdays,
holidays and car maintenance dates.

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 Advertising and Direct Marketing Opportunities

   We derive revenue from advertising and opt-in arrangements with our
advertising partners. Our advertising arrangements consist primarily of banner
advertisements that we display prominently within the e-mail messages we
provide to members who have indicated an interest in the product or service
being advertised. From each banner advertisement, viewers can hyperlink
directly to our advertising partner's own Web site, thus providing our partner
an opportunity to interact directly with interested members.

   Our opt-in arrangements allow our members to select targeted newsletters and
advertisements during our sign up process, and in return, our opt-in partners
who are promoting these newsletters and advertisements pay us a fee based on
affirmative member response. Representatives of recent opt-in advertisers
include Family Education, Smarter Living and Stockjungle.

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   The following is a description of each e-mail category and a representative
sample of our current advertisers for each e-mail category:

<TABLE>
<CAPTION>
                                                                 Representative
              Category                      Description            Advertisers
              --------                      -----------          --------------
 <C>                                 <S>                        <C>
 LifeMinders Family................. Parenting                  Kimberly-Clark
                                     recommendations, toy       (Huggies Brand)
                                     tips, product recalls
                                     and development
                                     milestones customized by
                                     the age of a member's
                                     child

 LifeMinders Entertainment.......... Reviews and                Universal Studios
                                     notifications of the
                                     latest videos, books,
                                     music, games and more
                                     based on the member's
                                     unique entertainment
                                     interest

 LifeMinders Home................... Seasonal how-to tips and   Homewarehouse.com
                                     climate-specific advice
                                     so member's can get the
                                     most out of their home,
                                     lawn and garden

 LifeMinders Personal Events........ Reminders to help a        Flooz.com
                                     member keep track of
                                     important dates and
                                     inspired gift
                                     suggestions for
                                     birthdays, anniversaries
                                     and holidays

 LifeMinders Automotive............. Maintenance reminders,     InsWeb
                                     recall notices, driving
                                     tips and Blue Book
                                     values based on make,
                                     model year and mileage
                                     of a member's car

 LifeMinders Horoscope.............. Astrological readings      Freeshop.com
                                     specific to each
                                     member's birthday

 LifeMinders Cooking................ Recipes and cooking tips   Cooking.com
                                     customized for each
                                     member based on their
                                     cooking interests

 LifeMinders Pet.................... Pet care, health and       PETsMART.com
                                     training tips customized
                                     for all of our members'
                                     pets

 LifeMinders Health................. Health, nutrition and      Healtheon/WebMD
                                     well-being tips
                                     customized for each
                                     member based on personal
                                     profile

 LifeMinders Small Business......... Expert business advice,    Officeclick.com
                                     critical information and
                                     how-to guides based on a
                                     member's interests and
                                     business type

 LifeMinders Personal Finance....... Advice about banking,      NextCard
                                     family finances,
                                     investing and saving
                                     based on our member's
                                     personal and financial
                                     goals

 LifeMinders Sports and Recreation.. Sports updates, tips and   CNN/SI
                                     recreational ideas based
                                     on members' favorite
                                     sports and recreational
                                     activities

 LifeMinders Travel................. Getaways, destinations     Starwood Hotels
                                     and travel planning tips
                                     tailored to our member's
                                     interests

 LifeMinders Shopping............... Coupons, deals and         Mercata.com
                                     shopping tips specific
                                     to each member's profile
                                     throughout the year,
                                     including special
                                     holiday promotions
</TABLE>

   We have recently entered into several agreements with advertisers with terms
from six months or greater; however, most of our agreements with advertisers
are short-term agreements averaging one to six months in duration. We do not
believe any of the agreements with any of the advertisers listed above are
material.

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<PAGE>

 Business-to-Business Marketing

   We also derive revenue from our recently implemented business-to-business
product that enables Internet retail and content sites to utilize our direct
marketing infrastructure. This Private Label eMarketing Product offers Internet
retail and content sites the ability to send highly-targeted, personalized
electronic mail. It will be offered to current and prospective advertising
partners. Our Private Label eMarketing partners will receive the following
online services:

  . data warehouse management

  . targeting of advertising messages to opt-in member profiles

  . e-mail delivery

  . customized content and responses

  . real time reports and analyses of their e-mail direct marketing campaigns

Sales and Marketing

 Member Acquisition

   We market LifeMinders.com to prospective members primarily through online
media. These marketing efforts consist of developing large-scale, vertically-
targeted advertising campaigns and strategic partnerships with large online
sites such as Lycos. Viral marketing is also an important component of our
member acquisition strategy, as approximately one-third of our members refer us
to other Internet users when completing our sign-up process.

 Advertising Sales

   We sell our advertisements through a direct sales organization dedicated to
developing and maintaining close relationships with top advertisers and leading
advertising agencies nationwide. As of December 31, 1999, we had 19 full-time
employees engaged in direct sales activities based in our Herndon, Virginia
headquarters. We plan to significantly increase the size of our sales force and
have recently opened a sales office in San Francisco, California and New York,
New York. Our sales department is organized around and focuses on selling
advertising within designated e-mail categories. The sales force works
regularly with our advertising partners on the design and placement of their
advertisements, provides advertising partners with advertising measurement
analyses and focuses on providing a high level of client service and
satisfaction.

   Advertisers and advertising agencies typically enter into short-term
agreements--on average one to six months--in which they receive a number of e-
mails delivered containing an advertisement based on a per e-mail basis. Our
standard advertising rate currently ranges from $30 to $150 per thousand per e-
mail delivered, depending upon location of the advertisement within our e-mail
message and the extent to which it is targeted for a particular audience.

Technology and Infrastructure

   Our service offering is supported by our three key proprietary technology
components:

  .Content Creation and Management Software

  .Data Warehouse

  .Member Targeting and Behavior Tracking System

 Content Creation and Management Software

   Our content creation and management software has four components: content
entry, targeting, personalization and formatting.

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<PAGE>

   The content entry component allows our editorial staff to easily input,
revise and test e-mail content items. The content entry software runs on the
Windows platform using an interface similar to the Windows Explorer program.

   The targeting component allows e-mail content items to be sent to members
based on explicit data that members have provided, including important dates
and special interests as well as implicit data based on demographic and
psychographic groups defined by our editorial staff. These groups are defined
based on analyses of member behavior and preferences.

   The personalization component allows our editorial staff to enhance content
by personalizing it for each individual member. For example, the e-mail content
items could contain the name of the child or use gender specific pronouns. The
software will automatically insert the proper pronoun or name based on the
gender or name provided by the member.

   The formatting component allows our editorial staff to compose each e-mail
content item in a single, rich text format which will automatically adjust to
one of three formats (rich text, HTML or America Online) in order to provide
optimum presentation of the content. Members with HTML e-mail, supported by
most current e-mail services and e-mail clients, will receive the highest
quality presentation of our content because it includes images as well as text.
Members using America Online or plain text e-mail receive a version of our
content that is more textual in presentation, but is attractive and easy to
read.

 Data Warehouse

   The advanced data warehouse is a scalable decision support system that
contains 400 gigabytes of historical data and is growing at 20 gigabytes per
week. The data is refreshed daily and accessed through SAS, SQL, and other
sophisticated analysis tools. Individual member behavior and preferences are
tracked at the click and e-mail level which is supplemented with externally
purchased data to create unique member profiles. These profiles consist of over
650 variables which LifeMinders.com utilizes to customize content and ads which
ultimately increases advertising rates.

 Member Targeting and Behavior Tracking System

   This system allows category managers to improve and adjust our e-mail
content over time to reflect the needs and interests of our members. Category
managers can personalize the subject line of an e-mail, content titles and the
physical display of the e-mail.

   Our content targeting and behavior tracking system uses standard Internet
data transmission protocols, combined with proprietary application software, to
measure a wide range of possible member behaviors. These behaviors may include:
opening the e-mail message, clicking through to links, forwarding an e-mail
message, or clicking through to advertisements and select e-commerce
opportunities. This system has been built to be scalable allowing new
categories to be brought online without additional programming. In addition,
this system is based on member profile data that allows categories and
subcategories to be changed to reflect member preferences and lifestyles.

   Tracking individual member activity allows our category managers to measure
the effectiveness and interest level of members in our editorial content. At
the same time, the tracking systems support the measurement of the
effectiveness and efficiency of our advertising and promotional campaigns on
behalf of our advertising partners.

 Scalability

   We have designed our technology platform to be user friendly and to
significantly scale with additional members. We typically send e-mails in most
of our categories to our members on a weekly or bi-weekly basis. Our current
operating plan ensures that we will have approximately twice the capacity
needed to generate and

                                       10
<PAGE>

deliver needed e-mail content during any peak processing load. This assures
capacity for growth and unusual fluctuations in e-mail activity. As our member
base expands, we are increasing our capacity and replicating our infrastructure
to provide increasingly parallel operations. Therefore, we believe there are no
practical technology limits to our growth because our distributed framework
should ensure that failures are isolated to a small portion of our member base.

 Security

   Our technology incorporates a variety of security techniques to protect
confidential member data. We limit member activity, data transmission, and
Internet access to our information to the individual member and to authorized
company representatives. We monitor and protect all outside access to our
resources and data with state-of-the art-technology, and all suspicious
activity is logged and analyzed by qualified staff. Our data center is co-
hosted at a major third-party Internet data center operation, PSINet, that is
constantly monitored and provides both physical and logistical security. This
facility provides redundant network connections and redundant connections to
power grids and diesel generators to ensure continuous operations. In addition,
the facility provides physical security, around-the-clock operations support
and monitoring and network diagnostic support as needed.

 Reliability

   Our technology platform uses industry standard technologies to maximize
reliability. We ensure hardware reliability by a combination of redundancy at
the component level and hot spares for groups of components. We ensure software
and data reliability through a variety of processes and quality assurance
procedures. We have incorporated standard procedures, including daily database
backups, off site storage of critical archives, and incremental backup of
ongoing database modifications into our standard operating discipline.
Additional reliability is provided by our fault tolerant and redundant platform
architecture, which utilizes clustering technology to ensure that Web access to
our service is not interrupted by any single machine failure.

Competition


   We face intense competition from both traditional and online advertising and
direct marketing businesses. We expect that competition will increase due to
the lack of significant barriers to entry in the online advertising market. As
we expand the scope of our services, we may compete with an increasing universe
of media companies across a widening range of advertising and direct marketing
services. Currently, several other companies offer competitive e-mail direct
marketing services, including coolsavings.com, MyPoints.com, NetCreations,
YesMail.com, Digital Impact and Exactis. We may also face competition from
online content providers and list aggregators, as well as established online
portals and community Web sites that engage in direct marketing. Additionally,
traditional advertising agencies and direct marketing companies may seek to
offer online products or services that compete with ours.

   Our ability to compete effectively depends upon many factors, including:

  . the timing and market acceptance of new e-mail categories;

  . the pricing of our services to advertisers;

  . our ongoing ability to demonstrate the effectiveness of our service to
    advertisers;

  . our ability to increase awareness of the LifeMinders.com brand;

  . our ability to increase our member database;

  . our ability to increase the depth of information in our database by
    capturing demographic, behavioral and transactional data about our
    members;

  . the capacity of our technology infrastructure to meet the needs of
    members and advertisers; and

  . the extent and effectiveness of our sales and marketing efforts and those
    of our competitors.

                                       11
<PAGE>

   While we believe that we compare favorably to our competitors based on these
factors, many of our current competitors and potential new competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
These advantages may allow them to respond more quickly to new or emerging
technologies and changes in customer requirements. It may also allow them to
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies, and make more
attractive offers to potential employees, strategic partners and advertisers.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
increase the ability of their products or services to address the needs of our
prospective advertisers and advertising agency customers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of our market share.

Intellectual Property and Proprietary Rights

   Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of patents, copyrights, trade secrets and trademarks. We
have one registered patent. We regularly enter into confidentiality or license
agreements with our employees, consultants and corporate and strategic partners
and generally seek to control access to and distribution of our documentation
and other proprietary information. We pursue the registration of our trade and
service marks in the United States and internationally. We have registered
trademarks for "MinderSoft," "HomeMinder," "EntertainmentMinder" and
"GrowthMinder" in the United States and have filed 22 trademark applications in
the United States, including the name and logo for "LifeMinders.com" and
"backslashSanity." Effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which our services
are distributed or made available through the Internet, and policing
unauthorized use of our proprietary information is difficult.

Current and Potential Government Regulation

 Privacy Issues

   The Federal Trade Commission, or FTC, adopted regulations effective, April
21, 2000, regarding the collection and use of personal identifying information
obtained from individuals when accessing Web sites, with particular emphasis on
access by minors. These regulations include requirements that companies
establish certain procedures prior to April 21, 2000, among other things:

  . give adequate notice to consumers regarding information collection and
    disclosure practices;

  . provide consumers with the ability to have personal identifying
    information deleted from a company's database;

  . provide consumers with access to their personal information and with the
    ability to rectify inaccurate information;

  . clearly identify affiliations or a lack of affiliations with third
    parties that may collect information or sponsor activities for a services
    membership; and

  . obtain express parental consent prior to collecting and using personal
    identifying information obtained from children under 13 years of age.

   These regulations also include enforcement and redress provisions. We are
currently implementing programs designed to comply with these regulations. We
believe, based upon information provided by 38.4% of our current members, that
less than 5% of our members are under the age of 13. We do not believe that
these regulations will result in significant additional costs or that they will
materially affect our ability to obtain new members.


                                       12
<PAGE>

   The FTC has also begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the principles noted above. We may become subject to a
similar investigation, or the FTC's regulatory and enforcement efforts may
adversely affect our ability to collect demographic and personal information
from members. This, in turn, could have an adverse effect on our ability to
provide highly targeted opportunities for advertisers and electronic commerce
marketers.

   The European Union, or EU, has adopted a directive that imposes restrictions
on the collection and use of personal data. Under the directive, EU citizens
are guaranteed rights to access their data, to know where the data originated,
to have inaccurate data corrected, to recourse in the event of unlawful
processing and to withhold permission to use their data for direct marketing.
The directive could, among other things, affect U.S. companies that collect
information over the Internet from individuals in EU member countries, and may
impose restrictions that are more stringent than current Internet privacy
standards in the United States. In particular, companies with offices located
in EU countries will not be allowed to send personal information to countries
that do not maintain adequate standards of privacy. The directive does not,
however, define what standards of privacy are adequate. As a result, the
directive may adversely affect the activities of entities like us that engage
in data collection from users in EU member countries.

 Internet Taxation

   There are currently pending a number of legislative proposals at the
federal, state and local level, and by certain foreign governments, that would
impose additional taxes on the sale of goods and services over the Internet and
certain states already have taken measures to tax Internet-related activities.
Although Congress recently placed a three-year moratorium on state and local
taxes on Internet access or on discriminatory taxes on e-commerce, existing
state or local laws were expressly excepted from this moratorium. Further, once
this moratorium is lifted, one or more federal and/or state taxes may be
imposed upon Internet commerce. This legislation, or other attempts at
regulating commerce over the Internet, may substantially impede the growth of
commerce on the Internet and, therefore, adversely affect our opportunity to
derive financial benefit from those activities.

Jurisdictions

   Although our e-mail transmissions over the Internet originate primarily in
Virginia, due to the global nature of the Internet, it is possible that the
governments of other states, the federal government and governments of foreign
countries might attempt to regulate our transmissions or prosecute us for
purported violations of their laws. These laws may be modified, or new laws
enacted, in the future. Any of the foregoing developments could harm our
business, results of operations and financial condition. In addition, as our
service is available over the Internet in multiple states and foreign
countries, these jurisdictions may claim that we are required to qualify to do
business as a foreign corporation in each of these states or foreign countries.
We are qualified to do business only in Delaware and Virginia, and our failure
to qualify as a foreign corporation in a jurisdiction where we are required to
do so could subject us to penalties and could result in our inability to
enforce contracts in these jurisdictions.

Employees

   As of December 31, 1999, we employed 90 people, including 36 in sales and
marketing, 24 in technology and production, 17 in member experience/marketing
and analysis, and 13 in support, administration, finance, management and human
resources. All employees except 3 are full-time. We believe that we maintain
good relations with our employees.

                                       13
<PAGE>

   The following table sets forth certain information concerning our executive
officers:

<TABLE>
<CAPTION>
             Name           Age                     Position
             ----           ---                     --------
   <C>                      <C> <S>
   Stephen R. Chapin, Jr...  36 President, Chief Executive Officer and Chairman
                                of the Board of Directors
   John A. Chapin..........  34 Senior Vice President, Member Experience,
                                Secretary
   Joseph S. Grabias.......  50 Vice President and Chief Financial Officer
   David N. Mahony.........  39 Vice President and Chief Operating Officer
   Harry A. Layman.........  42 Vice President, Engineering and Chief
                                Technology Officer
   Mark F. Bryant..........  35 Vice President, Business Development and
                                Advertising Sales
   David C. Meade..........  26 Vice President, Member Acquisition
   Timothy D. Hanlon.......  42 Vice President, Marketing and Communications
   Michael N. Brown........  29 Vice President, Marketing Analysis
   Thomas Stockmeyer.......  40 Vice President, Sales Administration
</TABLE>

   Stephen R. Chapin, Jr. co-founded LifeMinders.com in August 1996 and has
served as our President, Chief Executive Officer and Chairman of the Board
since August 1996. Prior to founding LifeMinders.com, from September 1995 to
October 1996, Mr. Chapin served as a Vice President at First USA Bank. From
September 1993 to September 1995, Mr. Chapin was a management consultant at
McKinsey & Company. From 1985 to 1990, Mr. Chapin served in the U.S. Navy, as
the Secretary of the Navy's liaison to Congress and as a naval engineering and
weapons officer. Mr. Chapin graduated from the U.S. Naval Academy and received
his Masters in Business Administration from the Harvard Business School.

   John A. Chapin co-founded LifeMinders.com in August 1996 and has served as
our Senior Vice President, Member Experience since August 1999. Prior to co-
founding LifeMinders.com, from September 1996 to July 1997, Mr. Chapin worked
in system sales to large corporate clients at Otis Elevator, an elevator
maintenance company. From July 1995 to September 1995, Mr. Chapin served as a
financial analyst at Allied Signal. Mr. Chapin graduated from Georgetown
University and received his Masters in Business Administration from the
University of Virginia, Darden Graduate School of Business Administration.

   Joseph S. Grabias joined LifeMinders.com in August 1999 as Vice President
and Chief Financial Officer. Prior to joining LifeMinders.com, from October
1997 to July 1999, Mr. Grabias was the Vice President and Chief Financial
Officer of Comm Site International, Inc., a provider of tower related services
to the U.S. wireless communications industry. Mr. Grabias was the Chief
Financial Officer and Vice President at KMR Power Corporation from January 1994
to September 1997. Prior to working for KMR Power Corporation, Mr. Grabias was
a self-employed business consultant for seven years. Mr. Grabias graduated from
the University of Notre Dame and received his Masters in Business
Administration from Case Western Reserve University.

   David N. Mahony joined LifeMinders.com in November 1999 as Vice President
and Chief Operating Officer. Prior to joining LifeMinders.com, from June 1994
to November 1999, Mr. Mahony was the Senior Vice President, Finance--Pricing
and Management Information Systems at First USA, Inc., a financial services
company. Prior to working at First USA, from December 1988 to June 1994, Mr.
Mahony was a Project/Process Design Engineer at E.I. Dupont de Nemours & Co.,
Inc. Mr. Mahony graduated from Clemson University and received his Masters of
Business Administration from the University of Delaware.

   Harry A. Layman has served as our Vice President, Engineering and Chief
Technology Officer since March 1999. Prior to joining LifeMinders.com, Mr.
Layman was Executive Director of Software Services at The College Board, an
educational association which provides financial aid services and software. Mr.
Layman joined The College Board in January 1996 upon its acquisition of
Virginia Software Inc., a software development firm that Mr. Layman founded in
January 1986. Prior to founding Virginia Software, Inc., Mr.  Layman worked in
servicing systems and in strategic planning at Sallie Mae and was a consultant
with Arthur Young & Company. Mr. Layman graduated from Columbia University and
received his Master of Science in Technology of Management from the American
University, Graduate School of Management.

                                       14
<PAGE>

   Mark F. Bryant has served as our Vice President, Business Development and
Advertising Sales, since May 1998. Prior to joining LifeMinders.com, Mr. Bryant
served as Chief Operating Officer and Senior Vice President of Marketing and
Sales of System Dynamics, Inc., a database management and targeted direct
communications company, which he joined in 1988. Prior to working at System
Dynamics, Inc., Mr. Bryant was involved in political fundraising and was active
in national and state politics. Mr. Bryant holds an undergraduate degree from
the University of Virginia.

   David C. Meade has served as our Vice President, Member Acquisition, since
June 1999 and served as Product Manager from April 1998 to June 1999.
Previously, from June 1996 to April 1998, Mr. Meade worked as a consultant at
Price Waterhouse LLP (now PricewaterhouseCoopers LLP). He was the Chief
Operating Officer of an independent franchise from May 1995 to September 1995.
Mr. Meade holds an undergraduate degree from Dickinson College.

   Timothy D. Hanlon has served as our Vice President, Marketing and
Communications, since July 1999. Prior to joining LifeMinders.com, from July
1997 to May 1999, Mr. Hanlon was the President of Van Bueren International
where he served as the head of marketing and communications at America's
Promise, a national non-profit organization led by retired General Colin
Powell. From September 1995 to July 1997, Mr. Hanlon was an Account Director at
Bozell Worldwide, and from June 1993 to September 1995 he served as President
and CEO of the Buoniconti Fund to Cure Paralysis, Inc., a $38 million campaign
to build a new research facility for the Miami Project. Prior to that, Mr.
Hanlon was an Account Manager at Saatchi & Saatchi Advertising. Mr. Hanlon
graduated from St. John's University, received his Master of Arts degree from
Georgetown University and holds a degree from the Institute of Advanced
Advertising Studies.

   Michael N. Brown joined LifeMinders.com in May 1999 and has served as our
Vice President, Marketing Analysis since November 1999. From 1995 to April
1999, Mr. Brown served as a Vice President of Marketing Analysis for First USA,
Inc. Prior to that, Mr. Brown worked as a statistical analyst at Chase
Manhattan Bank. Mr. Brown graduated from Rutgers University and received his
Master of Arts in Mathematics and Operations Research from Pennsylvania State
University.

   Thomas Stockmeyer has served as our Vice President, Sales Administration,
since December 1999. Prior to joining LifeMinders.com, Mr. Stockmeyer served as
Regional Vice President and Director, Service Sales, of Inacom Corporation, a
provider of annuity service contracts, which he joined in 1995. Prior to
working at Inacom Corporation, he served as Manager, National Sales Division of
AmeriData from 1994 to 1995. Mr. Stockmeyer graduated from Southeastern
Louisiana University and received his Masters in Business Administration from
Kennesaw State University.

ITEM 2. PROPERTIES.

   Our corporate headquarters facility consists of approximately 19,000 square
feet of office space at three locations in Herndon, Virginia. The lease for
13,000 square feet expires in 2004, the lease for 4,500 square feet expires in
August 2000 and the lease for 1,500 square feet expires in December 2000. We
believe that this existing space will meet out space requirements for the near
future but that we will likely require additional space in late 2000.

ITEM 3. LEGAL PROCEEDINGS.

   As of December 31, 1999, we were not a party to any material litigation.

   However, on February 4, 2000, the Company was sued for breach of contract
and misappropriation of trade secrets. The lawsuit alleges that the Company
breached the terms of a Non-Disclosure Agreement and used confidential business
information in the development of a new service offering. The Company denies
the allegations, believes they are without merit and intends to defend the
lawsuit vigorously. The Company believes that the outcome of the lawsuit will
not have a material impact on the operations, financial position or cash flows
of the Company.

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

   None.

                                       15
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

   Our common stock has been quoted on the Nasdaq National Market under the
symbol "LFMN" since our initial public offering on November 19, 1999. Prior to
the initial public offering, there had been no public market for our common
stock. The following table lists the high and low per share sales prices for
our common stock as reported by the Nasdaq National Market for the periods
indicated:

<TABLE>
<CAPTION>
   Fiscal 1999                                                      High   Low
   -----------                                                     ------ ------
   <S>                                                             <C>    <C>
   Fourth Quarter (November 19 to December 31, 1999).............. $62.50 $15.00
</TABLE>

   As of December 31, 1999, there were 20,299,039 shares of our common stock
outstanding held by 56 stockholders of record.

   We have never declared or paid cash dividends on our capital stock. The
Company currently intends to retain any earnings for use in our business and do
not anticipate paying any cash dividends in the foreseeable future. Future
dividends, if any, will be determined by our Company's Board of Directors.

   During fiscal 1999, we issued an aggregate 112,500 shares of our common
stock to employees pursuant to exercises of stock options (with exercise prices
of $.80 per share) under our 1998 Stock Option Plan which were deemed exempt
from registration under Section 5 of the Securities Act of 1933 in reliance
upon Rule 701 thereunder and 1999 Stock Incentive Plan which were registered
pursuant to a Registration Statement on Form S-8. The recipients of securities
in each such transaction represented their intentions to acquire the securities
for investment only and not with a view to, or for sale in connection with, any
distribution thereof and appropriate legends were affixed to the share
certificates issued in each such transaction.

                                       16
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

   The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in Item 7 of our financial statements and the notes to those
statements included in Item 14 of this Form 10-K.

<TABLE>
<CAPTION>
                                Period
                                 from
                              August 9,
                              1996 (Date
                                  of
                              Inception)
                                  to           Year Ended December 31,
                               December   ------------------------------------
                               31, 1996     1997        1998          1999
                              ----------  ---------  -----------  ------------
<S>                           <C>         <C>        <C>          <C>
Statement of Operations
 Data:
Revenue:
  Advertising...............  $     --    $  67,126  $    56,750  $  9,446,149
  Opt-in....................        --          --           --      4,573,336
                              ---------   ---------  -----------  ------------
    Total revenue...........        --       67,126       56,750    14,019,485
Cost of revenue.............        --       37,249       59,472       965,711
                              ---------   ---------  -----------  ------------
Gross margin (loss).........        --       29,877       (2,722)   13,053,774
                              ---------   ---------  -----------  ------------
Operating expenses:
  Sales and marketing.......     15,965     147,325      868,706    38,416,266
  Research and development..      9,800     240,498      373,788     1,824,518
  General and
   administrative...........      9,308     127,132      726,505     4,326,594
  Stock-based compensation..        --          --           --        625,042
                              ---------   ---------  -----------  ------------
    Total operating
     expenses...............     35,073     514,955    1,968,999    45,192,420
                              ---------   ---------  -----------  ------------
Loss from operations........    (35,073)   (485,078)  (1,971,721)  (32,138,646)
Interest income, net........        --        5,978       24,515       529,124
                              ---------   ---------  -----------  ------------
Net loss....................    (35,073)   (479,100)  (1,947,206)  (31,609,522)
Accretion on mandatorily
 redeemable convertible
 preferred stock............        --          --      (157,037)   (1,155,417)
                              ---------   ---------  -----------  ------------
Net loss available to common
 stockholders...............  $ (35,073)  $(479,100) $(2,104,243) $(32,764,939)
                              =========   =========  ===========  ============
Basic and diluted net loss
 per common share...........  $   (0.04)  $   (0.19) $     (0.64) $      (6.26)
                              =========   =========  ===========  ============
Weighted average common
 shares outstanding
 (basic and diluted)........    798,220   2,530,228    3,275,000     5,230,826
                              =========   =========  ===========  ============
<CAPTION>
                                              December 31,
                              ------------------------------------------------
                                 1996       1997        1998          1999
                              ----------  ---------  -----------  ------------
<S>                           <C>         <C>        <C>          <C>
Balance Sheet Data:
Cash and cash equivalents...  $     163   $ 792,553  $   232,073  $ 55,524,189
Working capital (deficit)...    (25,073)    744,067     (245,267)   60,628,774
Total assets................        163     797,152      278,301    76,857,184
Mandatorily redeemable
 convertible preferred
 stock......................        --      866,338    2,023,375           --
Stockholders' equity
(deficit)...................  $ (25,073)  $(117,672) $(2,222,414) $ 65,676,937
</TABLE>

                                       17
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

   The following discussion should be read in conjunction with the consolidated
financial statements and related notes which appear in Item 14 of this Form 10-
K. The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those discussed below and in the section entitled "Risk Factors" of
this Form 10-K.

Overview

   We provide online direct marketing opportunities to our advertising partners
by delivering personalized e-mail messages to our members. Our e-mail messages
contain helpful reminders and tips that enable our members to better organize
and manage their busy lives. Our proprietary information about our members and
highly-precise targeting capabilities provide our advertising partners the
opportunity to more effectively reach their target audiences.

   We were incorporated in Maryland on August 9, 1996 ("Date of Inception")
under the name of MinderSoft, Inc. In January 1999, we changed our name to
LifeMinders.com, Inc. We reincorporated in Delaware on July 2, 1999. From 1996
to 1998, we entered into arrangements with national retailers to distribute our
reminder products in software form on disk. In late 1998, we revised our
strategy to become an online direct marketing company that provides
personalized content and advertisements via e-mail to a community of members.
Given this significant shift in strategy in late 1998, the historical financial
condition and results of operations prior to 1999 do not necessarily reflect
our business as it is currently being conducted and are not material. See
"Business" for a more comprehensive discussion.

Revenue

   Since the beginning of calendar year 1999, we have generated revenue
primarily through advertising and opt-in services. Our advertising revenue is
subject to the effects of seasonality. If purchasing patterns or timing of
purchasing by advertisers were to change, our operations and quarter-to-quarter
comparisons could be materially affected.

 Advertising

   Our advertising arrangements consist primarily of advertisements that are
displayed within our e-mails. Generally, advertisers pay us and we recognize
revenue on a per e-mail basis, based on the number of e-mails delivered to our
members in which the advertisements are displayed. From time to time, we may
guarantee a minimum number of e-mails to be delivered containing an
advertisement directed at a specific group. Under these contracts, we are not
required to forfeit fees received for e-mails previously delivered. We have
historically fulfilled our guaranteed minimum number of e-mails and have not
had any disputes with advertisers regarding the guaranteed minimum number of e-
mails. Currently, there are no contracts that have a guaranteed minimum number
of e-mails that will generate a material amount of revenues. We may also
guarantee a minimum number of sales orders for the advertiser based on the e-
mails delivered. Under these contracts we defer all revenue until notification
is received from the advertiser that the minimum number of sales orders have
been achieved by the advertiser. Our advertising contracts generally have
average terms ranging from one to six months. In addition, we may provide
advertisers the opportunity for the exclusive right to sponsor advertisements
within a specific e-mail category for a specified period of time for a fixed
fee. Under these contracts we recognize revenue during the period the
advertisement is displayed in our e-mails since there is no obligation to
provide a minimum number of e-mails for that individual advertiser.

   Advertising revenue also includes barter transactions, where we exchange
advertising space on our e-mails for reciprocal advertising space or traffic on
other Web sites. Revenue from these barter transactions is recorded at the
estimated fair value of the advertisements delivered and is recognized when the
advertisements are included in our e-mails. No gain or loss results from these
barter transactions as the revenue recognized equals the advertising costs
incurred. For the year ended December 31, 1999, barter revenue was less than 2%
of net revenues. We did not enter into barter transactions prior to 1999.

                                       18
<PAGE>

 Opt-in Services

   Revenue is recognized when members affirmatively respond to the advertisers'
newsletters and other promotions offered during our sign up process. We derive
revenue from our opt-in services through fees that our opt-in advertising
partners pay. We record revenue net of estimated duplicate member responses to
our opt-in partners' newsletters and other promotions.

   Duplicate member responses are names we provide to opt-in advertising
partners for which our members have previously registered either through our
sign up process or with our opt-in advertising partners directly. For the year
ended December 31, 1999, revenue was recorded net of approximately $618,000 for
estimated duplicate member responses to our opt-in partners' newsletters and
other promotions.

Expenses

 Cost of Revenue

   Cost of revenue consists of salaries, employee benefits and related expenses
of our Member Experience personnel, fees paid to freelance writers of our
content and depreciation of the computer equipment necessary to run our
service. We believe that a significant increase in these expenses will be
necessary as we expand the number of e-mail categories offered to our members.

 Sales and Marketing

   Sales and marketing expenses include salaries, sales commissions, employee
benefits, travel and related expenses of our direct sales force, advertising
and promotional expenses, marketing, and sales support functions. In an effort
to increase our revenue, member base and brand awareness, we expect to increase
significantly the amount of spending on sales and marketing over the next year.
Marketing costs associated with increasing our member base, which to date have
been minimal, are expensed in the period incurred.

 Research and Development

   Research and development costs include expenses for the development of new
or improved technologies designed to enhance the performance of our service,
including the salaries and related expenses for our engineering department, as
well as costs for contracted services, content facilities and equipment. We
believe that a significant level of product development activity is necessary
for our business and intend to increase significantly the amount of spending to
fund this activity.

 General and Administrative

   General and administrative expenses include salaries, employee benefits and
expenses for our executive, finance, legal and human resources personnel. In
addition, general and administrative expenses include fees for professional
services and occupancy costs. We expect general and administrative expenses to
increase in absolute dollars, in part due to the costs associated with being a
public company.

   We do not currently anticipate that inflation will have a material impact on
our cash flows or results of operations.

 Stock-Based Compensation

   In connection with the grant of stock options to employees during the year
ended December 31, 1999, we recorded total deferred compensation of
approximately $5.7 million as a reduction to stockholders' equity (deficit).
This deferred compensation represented the difference between the estimated
fair value of our common stock and the exercise price of these options at the
date of grant prior to our Initial Public Offering. We are amortizing this
amount over the vesting periods of the applicable options.

                                       19
<PAGE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

   Revenue. Revenue increased 24,604% from approximately $57,000 for the year
ended December 31, 1998 to approximately $14.0 million for the year ended
December 31, 1999. Advertising revenue increased approximately $9.4 million and
opt-in revenue increased approximately $4.6 million. The increase in revenue
was the result of our decision to revise our strategy from entering into
arrangements with national retailers as distributors of our software-based
product to an online direct marketing service that provides personalized
content and advertisements via e-mail.

   Cost of revenue. Cost of revenue increased 1,524% from approximately $59,000
for the year ended December 31, 1998 to approximately $966,000 for the year
ended December 31, 1999. Our cost of revenue for the year ended December 31,
1999 primarily consisted of expenses related to the maintenance of existing
member profiles, the expansion of e-mail categories and depreciation of the
computer systems necessary to operate our service. The increase in cost of
revenue was the result of our decision to revise our strategy from entering
into arrangements with national retailers as distributors of our software-based
product to an online direct marketing service that provides personalized
content and advertisements via e-mail.

   Sales and marketing. Sales and marketing expenses increased 4,322% from
approximately $869,000 for the year ended December 31, 1998 to approximately
$38.4 million for the year ended December 31, 1999. This increase was primarily
the result of a major expansion in our efforts to acquire new members through
the purchase of banner advertisements and similar services on the Web, the
increase in our sales and marketing staff, in increase in sales commissions
related to the increase in revenue and an increase in advertising of our
service.

   Research and development. Research and development expenses increased 388%
from approximately $374,000 for the year ended December 31, 1998 to
approximately $1.8 million for the year ended December 31, 1999. This increase
was primarily attributable to our continued research and development of our
service, expansion of technical personnel and related recruiting fees, and an
increase in professional services to house the computer network required to
operate our service.

   Stock based compensation. In connection with the grant of stock options to
employees during the year ended December 31, 1999, we recorded total deferred
compensation of approximately $5.7 million as a reduction of stockholders'
equity (deficit). This deferred compensation represented the difference between
the estimated fair value of our common stock and the exercise price of these
options at the date of grant. We are amortizing this amount over the vesting
periods of the applicable options resulting in an expense of approximately
$625,000 for the year ended December 31, 1999. Annual amortization of deferred
stock compensation for stock options granted at December 31, 1999, is
approximately $1.4 million, $1.4 million, $1.4 million and $800,000, for the
years ending December 31, 2000, 2001, 2002 and 2003, respectively.

   Interest income, net. Interest income, net increased 2,058% from
approximately $25,000 for the year ended December 31, 1998 to approximately
$529,000 for the year ended December 31, 1999. This increase was due primarily
to an increase in funds available for investment in short term investments
during the year ended December 31, 1999 as compared to the year ended December
31, 1998. The majority of the increase in funds was attributable to the
approximately $61.7 in net proceeds from our initial public offering in
November 1999.

   Interest expense for the years ended December 31, 1998 and 1999 was
immaterial.

   Income taxes. No income tax benefits have been recorded for any of the
periods presented. We have provided a full valuation allowance on our deferred
tax assets, consisting primarily of net operating loss carryforwards, because
of the uncertainty regarding their potential realization.

   Accretion on mandatorily redeemable convertible preferred stock. Accretion
on mandatorily redeemable convertible preferred stock increased 636% from
approximately $157,000 for the year ended December 31, 1998 to approximately
$1.2 million for the year ended December 31, 1999. The preferred stock carrying
value

                                       20
<PAGE>

for cumulative dividends and a portion of direct issuance costs on Series A,
Series B, Series C, Series D and Series E preferred stock resulted in the
increase. During the year ended December 31, 1998, only shares of Series A and
Series B preferred stock were outstanding. During the year ended December 31,
1999, shares of Series A, Series B, Series C, Series D and Series E preferred
stock were all outstanding for a portion of the year. All shares of Series A,
Series B, Series C, Series D and Series E preferred stock were converted into
common stock concurrent with the our initial public offering in November 1999.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

   Revenue. Our revenue decreased 16% from approximately $67,000 for the year
ended December 31, 1997 to approximately $57,000 for the year ended December
31, 1998. Revenues for this period were all from advertising. No opt-in
revenues were recorded during these periods. Revenue during these periods was
generated from our software-based products. The decrease in revenue was also
the result of our decision to revise our strategy from entering into
arrangements with national retailers as distributors of our software-based
products to an online direct marketing service that provides personalized
content and advertisements via e-mail.

   Cost of revenue. Cost of revenue increased 60%, from approximately $37,000
for the year ended December 31, 1997 to approximately $59,000 for the year
ended December 31, 1998. This increase was primarily the result of expenses
incurred to continue to develop the content of our software-based products.

   Sales and marketing. Sales and marketing expenses increased 490% from
approximately $147,000 for the year ended December 31, 1997 to approximately
$869,000 for the year ended December 31, 1998. This increase was primarily the
result of our expansion of sales and marketing personnel and related travel,
commission and contractor expenses.

   Research and development. Research and development expenses increased 55%
from approximately $240,000 for the year ended December 31, 1997 to
approximately $374,000 for the year ended December 31, 1998. This increase was
primarily attributable to growth in the number of research and development
personnel and the use of an outside vendor to house and maintain the host
servers that support our Web site.

   General and administrative. General and administrative expenses increased
472% from approximately $127,000 for the year ended December 31, 1997 to
approximately $727,000 for the year ended December 31, 1998. Representative of
our growth and expansion, this increase resulted from increases in rent,
utilities, employee fringe benefit expenses and office supplies and the
establishment of an administrative support and finance function in the company.

   Interest income, net. Interest income, net increased 310% from approximately
$6,000 for the year ended December 31, 1997 to approximately $25,000 for the
year ended December 31, 1998. This increase was due primarily to an increase in
available funds for investment in short term investments during 1998 as
compared to 1997. As discussed in the notes to the financial statements, we
raised $1 million in a preferred stock private financing during November 1997
and an additional $1 million in June 1998 from the exercise of preferred stock
warrants. The amount of interest income fluctuates based upon the amount of
funds available for investment and prevailing interest rates.

   Accretion on mandatorily redeemable convertible preferred stock. Accretion
on mandatorily redeemable convertible preferred stock increased approximately
$157,000, or 100% from the year ended December 31, 1997 as a result of the
increase in the preferred stock carrying value for cumulative dividends and a
portion of direct issuance costs on Series A and Series B preferred stock.


                                       21
<PAGE>

Quarterly Results of Operations

   The following table sets forth unaudited quarterly statement of operations
data for the four quarters of 1998 and 1999. We derived this data from
unaudited financial statements, and, in the opinion of our management, they
include all adjustments, which consist only of normal recurring adjustments,
necessary to present fairly the financial results for the periods. The results
of operations for any quarter are not necessarily indicative of the results of
operations for any future period.

<TABLE>
<CAPTION>
                         March 31,  June 30,   Sept. 30,  Dec. 31,    March 31,    June 30,     Sept. 30,     Dec. 31,
                           1998       1998       1998       1998        1999         1999         1999          1999
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
<S>                      <C>        <C>        <C>        <C>        <C>          <C>          <C>          <C>
Revenue:
 Advertising...........  $     --   $     --   $  26,750  $  30,000  $    10,024  $   886,065  $ 3,168,873  $  5,381,187
 Opt-in................        --         --         --         --        13,298      532,834    1,368,399     2,658,805
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
   Total revenue.......        --         --      26,750     30,000       23,322    1,418,899    4,537,272     8,039,992
Cost of revenue........      1,847      9,927     18,726     28,972       98,514      147,399      225,994       493,804
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
Gross margin (loss)....     (1,847)    (9,927)     8,024      1,028      (75,192)   1,271,500    4,311,278     7,546,188
Operating expenses:
 Sales and marketing...     82,242    248,700    260,417    277,347    1,081,501    5,158,985   10,224,520    21,951,260
 Research and
  development..........     77,208    114,856     93,720     88,004      220,075      305,357      487,171       811,915
 General and
  administrative.......    121,101    146,427    218,106    240,871      259,702      747,572    1,331,510     1,987,810
 Stock based
  compensation.........        --         --         --         --        11,055       88,293      169,323       356,371
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
   Total operating
    expenses...........    280,551    509,983    572,243    606,222    1,572,333    6,300,207   12,212,524    25,107,356
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
Loss from operations...   (282,398)  (519,910)  (564,219)  (605,194)  (1,647,525)  (5,028,707)  (7,901,246)  (17,561,168)
Interest income, net...      8,043      5,530      8,977      1,965       22,780       45,443       56,014       404,887
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
Net loss...............   (274,355)  (514,380)  (555,242)  (603,229)  (1,624,745)  (4,983,264)  (7,845,232)  (17,156,281)
Accretion on
 mandatorily redeemable
 convertible preferred
 stock.................    (28,537)   (31,426)   (48,537)   (48,537)    (100,046)    (131,576)    (432,755)     (491,040)
                         ---------  ---------  ---------  ---------  -----------  -----------  -----------  ------------
Net loss available to
 common stockholders...  $(302,892) $(545,806) $(603,779) $(651,766) $(1,724,791) $(5,114,840) $(8,277,987) $(17,647,321)
                         =========  =========  =========  =========  ===========  ===========  ===========  ============
</TABLE>

Seasonality and Quarterly Fluctuations in Operating Results

   We believe that our revenue will be subject to seasonal fluctuations as a
result of general patterns of retail advertising and marketing and consumer
purchasing, which are typically higher during the fourth calendar quarter and
lower in the following quarter. In addition, expenditures by advertisers and
marketers tend to be cyclical, reflecting overall economic conditions and
consumer buying patterns. Due to these and other factors, we believe that
quarter-to-quarter comparisons of our operating results may not be meaningful
and you should not rely upon them as an indication of our future performance.

Recent Events

   On October 21, 1999, we approved a 5 for 4 common stock split, effective
November 17, 1999. The conversion ratio of the mandatorily redeemable
convertible preferred stock was adjusted from a 1 for 1 conversion ratio to a 5
for 4 conversion ratio in connection with the stock split. Our financial
statements, including all share and per share data, have been retroactively
restated to reflect the 5 for 4 common stock split for all periods presented.

   On February 8, 2000 we completed our secondary public offering of 2,767,500
shares of common stock at a public offering price of $33.00 per share and
raised net proceeds of approximately $86.1 million.

   From time to time, the Company evaluates certain acquisition transactions.
No acquisition transactions are probable of occurring at the current time.


                                       22
<PAGE>

Liquidity and Capital Resources

   We have funded our operations since the Date of Inception primarily through
the private placement of preferred equity securities, through which we raised
net proceeds of $36.9 million, and our initial public offering in November
1999, through which we raised net proceeds of $61.7 million. As discussed in
the Notes to the financial statements, we raised $1.0 million in June 1998 from
the exercise of preferred stock warrants. We raised an additional amount of
approximately $3.9 million in a preferred stock private financing in January
1999, approximately $10.5 million in a preferred stock private financing in May
1999 and approximately $20.6 million in a preferred stock private financing in
September 1999. We have also financed our operations through equipment
financing through Imperial Bank. As of December 31, 1999, we had approximately
$55.5 million of cash and cash equivalents and approximately $2.0 million of
marketable securities. Outstanding equipment financing at December 31, 1999
totaled approximately $155,000. The outstanding principal balance of the
equipment financing must be repaid in equal monthly installments through
November 10, 2001.

   Net cash used in operating activities was approximately $428,000 for the
year ended December 31, 1997, approximately $1.5 million for the year ended
December 31, 1998 and approximately $35.5 million for the year ended December
31, 1999. Cash used in operating activities for the year ended December 31,
1997 was primarily the result of net losses. Cash used in operating activities
for the year ended December 31, 1998 was primarily the result of net losses,
which were partially offset by increases in deferred revenue. Cash used in
operating activities for the year ended December 31, 1999 resulted from net
losses and increases in accounts receivable and prepaid expenses, which were
partially offset by increases in accounts payable and accrued expenses. During
the year ended December 31, 1999, we entered into various agreements for future
advertising which aggregate approximately $25.7 million in commitments. As of
December 31, 1999, we had prepaid approximately $6.3 million in connection with
these agreements.

   Net cash used in investing activities was approximately $5,000 for the year
ended December 31, 1997, approximately $50,000 for the year ended December 31,
1998 and approximately $6.2 million for the year ended December 31, 1999. Cash
used in investing activities for the years ended December 31, 1997 and December
31, 1998 was related to purchases of property and equipment. Cash used in
investing activities for the year ended December 31, 1999 was related to the
purchases of property and equipment and the purchases of marketable securities.
The increase in the year ended December 31, 1999 is attributable to the
purchase of substantial computer equipment needed to maintain our database and
deliver targeted e-mails to our rapidly growing member base.

   Net cash provided by financing activities was approximately $1.2 million for
the year ended December 31, 1997, approximately $1.0 million for the year ended
December 31, 1998 and approximately $97.0 million for the year ended December
31, 1999. Cash provided by financing activities for the years ended December
31, 1997 and 1998 resulted almost entirely from sales of preferred stock. Cash
provided by financing activities for the year ended December 31, 1999 resulted
from the sale of preferred stock and the sale of common stock in our initial
public offering in November 1999. Concurrent with the initial public offering,
all series of preferred stock were converted into 1.25 shares of our common
stock. As of December 31, 1999, there were 2,688,177 options outstanding with a
weighted-average exercise price of $7.55. This may result in substantial
dilution in the future.

   While we do not have any commitments for capital expenditures, we anticipate
that we will continue to experience significant capital expenditures consistent
with our anticipated growth in our member base. We anticipate that we will
continue to experience significant growth in our operating expenses for the
foreseeable future and that our operating expenses will be a material use of
our cash resources. Also, we anticipate substantial expenditures and use of
cash resources in our efforts to acquire new members. We believe that our
existing cash, cash equivalents and available credit facilities, will be
sufficient to meet our anticipated cash needs for working capital, member
acquisition expenses and capital expenditures for the foreseeable future.


                                       23
<PAGE>

Year 2000 Compliance

   Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally
and the compliance and remediation work accomplished leading up to 2000 was
effective to prevent any problems. Computer experts have warned that there may
still be residual consequences of the change in centuries.

   We are a comparatively new enterprise, and, accordingly, the majority of
software and hardware we use to manage our business has all been purchased or
developed by us within the last 24 months. While this does not uniformly
protect us against Year 2000 exposure, we believe our exposure is limited
because the information technology we use to manage our business is not based
upon legacy hardware and software systems. Generally, hardware and software
designed within the current decade and the past several years in particular has
given greater consideration to Year 2000 issues. All of the software code we
have internally developed to manage our network and infrastructure is written
with four digits to define the applicable year.

   We rely on software and hardware developed by third parties both for our
network and internal information systems and third party network infrastructure
providers to gain access to the Internet. We did not test any third-party
software or hardware to determine Year 2000 compliance. We have, however,
reviewed certifications from our key suppliers of hardware and networking
equipment for our data centers that this hardware and networking equipment are
Year 2000 compliant. Additionally, we have reviewed certifications from the
providers of key software applications for our internal operations that their
software is Year 2000 compliant. We intend to work with these providers to
address the Year 2000 issue and continue to seek assurances from them that
their products are Year 2000 compliant.

   If we, our third-party providers of hardware and software or our third-party
network providers fail to remedy any Year 2000 issues, the result could be lost
revenue, increased operating costs, the loss of customers and other business
interruptions, any of which could harm our business. Moreover, the failure to
adequately address Year 2000 compliance issues in our products and systems
could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time consuming to
defend.

   The most reasonably likely worst case scenario for us involving Year 2000
issues would include disruptions to Internet communications and connectivity
for a period of time due to failures in hardware and software components that
operate in a degraded state or not at all due to the Year 2000 transition. We
have chosen our Internet connectivity partners, equipment and co-location
service providers to insure that we have at all times multiple connection
points to the Internet. In the event of failure of all connectivity paths, or
all equipment connectivity, sign-up processing will be temporarily unavailable
and end user behaviors will not be recorded during such an interval. Extended
outages will be addressed by repositioning our system on new, readily available
off-the-shelf computer systems and components at an alternative location. We
can install, configure and establish such a reconstructed site, including
restoration of off-site data backups and e-mail capacity, in less than 48
hours.

   We have not yet developed any specific contingency plans. The results of our
testing and the responses received from third-party vendors and service
providers will be taken into account in determining the nature and extent of
any contingency plans.

Recent Accounting Pronouncements

   In June 1998, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The statement requires the recognition of
all derivatives as either assets or liabilities in the balance sheet and the
measurement of those instruments at fair value. The accounting for changes in
the fair value of a derivative depends on the

                                       24
<PAGE>

planned use of the derivative and the resulting designation. In July 1999, SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of Financial Accounting Standards No. 133" was
issued. SFAS 137 deferred the effective date of SFAS 133 from fiscal years
beginning after June 15, 1999 to all fiscal years beginning after June 15,
2000. Because we do not currently hold any derivative instruments and do not
engage in hedging activities, we believe the impact of the adoption of SFAS No.
133 will not have a material impact on our financial position, results of
operations or cash flows.


                                       25
<PAGE>

                                  RISK FACTORS

   In addition to the other information in this Form 10-K, the following
factors should be carefully considered in evaluating LifeMinders.com and our
business. The risks and uncertainties described below are not the only ones
facing our company and there may be additional risks that we do not presently
know of or that we currently deem immaterial. All of these risks may impair our
business operations. This document also contains forward-looking statements
that involve risks and uncertainties and actual results may differ materially
from the results we discuss in the forward-looking statements. If any of the
following risks actually occur, our business, financial condition, cash flow or
results of operations could be materially adversely affected. In such case, the
trading price of our common stock could decline, and you may lose all or part
of your investment.

We have incurred significant losses, we expect losses for the foreseeable
future, and we may never become profitable.

   We have not achieved profitability in any previous quarter and expect to
continue to incur operating losses for the foreseeable future. As of December
31, 1999, we had an accumulated deficit of approximately $34.1 million. We
incurred net losses of approximately $0.5 million, $1.9 million and $31.6
million for the years ended December 31, 1997, 1998 and 1999, respectively.
Although our revenue has grown in recent quarters, we cannot be certain that we
will be able to sustain these growth rates or that we will realize sufficient
revenue to achieve profitability. We also expect to incur significant product
development, sales and marketing and administrative expenses and, as a result,
we expect to continue to incur losses. We will need to generate significant
revenue to achieve profitability. We plan to increase our operating expenses as
we continue to acquire new members, build infrastructure and create brand
awareness. If our revenue growth is slower than we anticipate or our operating
expenses exceed our expectations, our losses will significantly increase.
Moreover, even if we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis.

Due to our limited operating history we may fail to manage our expansion and
expected growth effectively which could strain our resources and could impair
the expansion of our business.

   Although we have continued to expand our member base, if we fail to manage
our growth effectively this could adversely affect our ability to attract and
retain our members and advertising partners. We have increased the scope of our
operations and have increased the number of our employees substantially. In
addition, we have only recently engaged several key members of our executive
management team. We have expanded our technology, sales, administrative and
marketing organizations. These factors have placed and will continue to place a
significant strain on our management systems and resources. We will need to
continue to improve our operational, financial and managerial controls and
reporting systems and procedures to expand, train and manage our workforce in
order to manage our expected growth.

We may not be able to sustain revenue growth or achieve or sustain
profitability if we have to refine or change our business strategy.

   We have only a limited operating history upon which to evaluate our business
and prospects and the online direct marketing industry is relatively new and
rapidly evolving. This presents many risks and uncertainties that could require
us to further refine or change our business strategy. If we are unsuccessful in
addressing these risks and uncertainties, we may not be able to sustain revenue
growth or achieve or sustain profitability. A detailed description of our
business strategy is contained in "Business -- The Lifeminders.com Strategy."

Our quarterly results of operations may fluctuate in future periods and we may
be subject to seasonal and cyclical patterns that may negatively impact our
stock price.

   If we do not successfully anticipate or adjust to quarterly fluctuations in
revenue, our operating results could fall below the expectations of public
market analysts and investors, which could negatively impact our

                                       26
<PAGE>

stock price. We believe that our revenue will be subject to seasonal
fluctuations as a result of general patterns of retail advertising and
marketing, and consumer purchasing, which are typically higher during the
fourth calendar quarter and lower in the following quarter. In addition,
expenditures by advertisers and marketers tend to be cyclical, reflecting
overall economic conditions and consumer buying patterns. Due to these and
other factors, our revenues and operating results may vary significantly from
quarter-to-quarter.

We may not be able to generate sufficient revenue if the acceptance of online
advertising, which is new and unpredictable, does not develop and expand as we
anticipate.

   We have to derive a substantial portion of our revenue from online
advertising and direct marketing, including both e-mail and Web-based programs.
If these services do not continue to achieve market acceptance, we may not
generate sufficient revenue to support our continued operations. The Internet
has not existed long enough as an advertising medium to demonstrate its
effectiveness relative to traditional advertising. Advertisers and advertising
agencies that have historically relied on traditional advertising may be
reluctant or slow to adopt online advertising. Many potential advertisers have
limited or no experience using e-mail or the Web as an advertising medium. They
may have allocated only a limited portion of their advertising budgets to
online advertising, or may find online advertising to be less effective for
promoting their products and services than traditional advertising media. If
the market for online advertising fails to develop or develops more slowly than
we expect, we may not sustain revenue growth or achieve or sustain
profitability.

   The market for e-mail advertising in general is vulnerable to the negative
public perception associated with unsolicited e-mail, known as "spam." Public
perception, press reports or governmental action related to spam could reduce
the overall demand for e-mail advertising in general, which could reduce our
revenue and prevent us from achieving or sustaining profitability.

If we do not maintain and expand our member base we may not be able to compete
effectively for advertisers.

   Our revenue has been derived primarily from advertisers seeking targeted
member groups in order to increase their return on advertising investments. If
we are unable to maintain and expand our member base, advertisers could find
our audience less attractive and effective for promoting their products and
services and we could experience difficulty retaining our existing advertisers
and attracting additional advertisers. To date, we have relied on referral-
based marketing activities to attract a portion of our members and will
continue to do so for the foreseeable future. This type of marketing is largely
outside of our control and there can be no assurance that it will generate
rates of growth in our member base comparable to what we have experienced to
date.

   We would also be unable to grow our member base if a significant number of
our current members stopped using our service. Members may discontinue using
our service if they object to having their online activities tracked or they do
not find our content useful. In addition, our service allows our members to
easily unsubscribe at any time by clicking through a link appearing at the
bottom of our e-mail messages and selecting the particular categories from
which they want to unsubscribe.

Our business depends on our ability to develop and maintain relevant and
appealing content in our e-mail messages, if we are not able to continue to
deliver such content we may not be able to maintain and expand our member base,
which could negatively impact our ability to retain and attract the advertisers
we need to sustain revenue growth.

   We have relied on our editorial staff to identify and develop substantially
all of our content utilizing content from third parties. Because our members'
preferences are constantly evolving, our editorial staff may be unable to
accurately and effectively identify and develop content that is relevant and
appealing to our members. As a result, we may have difficulty maintaining and
expanding our member base, which could negatively impact our ability to retain
and attract advertisers. If we are unable to retain and attract advertisers our
revenue will decrease. Additionally, we license a small percentage of our
content from third parties. The

                                       27
<PAGE>

loss of or increase in cost of our licensed content may impair our ability to
assimilate and maintain consistent, appealing content in our e-mail messages or
maintain and improve the services we offer to consumers. We intend to continue
to strategically license a portion of our content for our e-mails from third
parties, including content that is integrated with internally developed
content. These third-party content licenses may be unavailable to us on
commercially reasonable terms, and we may be unable to integrate third-party
content successfully. The inability to obtain any of these licenses could
result in delays in product development or services until equivalent content
can be identified, licensed and integrated. Any delays in product development
or services could negatively impact our ability to maintain and expand our
member base.

We have limited experience with building our brand, and might not effectively
utilize the resources we spend to build our brand, which could negatively
impact our revenue and our ability to maintain and expand our member base and
attract advertisers.

   We have and plan to continue to build our brand through expanded consumer
and trade advertising, including national print, outdoor and broadcast
placements, continued public relations campaigns, direct mail, participation in
strategic industry events and sustained consumer communications campaigns. We
have minimal practical experience with building our brand through these
channels. If the additional resources we expend to build our brand through
these channels do not generate a corresponding increase in revenue, our
financial results could be harmed. We believe that developing a strong brand
identity is critical to our ability to maintain and expand our member base and
retain and attract advertisers. If we do not successfully develop the
LifeMinders.com brand we may not be able to retain and expand our number of
members and advertisers, which would adversely affect our ability to sustain
revenue growth or achieve or sustain profitability.

Competition in the online advertising market industry is intense, and if we do
not respond to this competition effectively it may reduce our ability to retain
and attract advertisers, which would reduce our revenue and harm our financial
results.

   We face intense competition from both traditional and online advertising and
direct marketing businesses. If we do not respond to this competition
effectively, we may not be able to retain current advertisers or attract new
advertisers, which would reduce our revenue and harm our financial results.
Currently, several companies offer competitive e-mail direct marketing
services, including coolsavings.com, MyPoints.com, NetCreations, YesMail.com,
Digital Impact and Exactis. We also expect to face competition from online
content providers, list aggregators as well as established online portals and
community Web sites that engage in direct marketing programs. Additionally, we
may face competition from traditional advertising agencies and direct marketing
companies that may seek to offer online products or services. A more detailed
discussion of the potential competitive disadvantages we face is contained in
"Business--Competition."

We rely heavily on our intellectual property rights and other proprietary
information, failure to protect and maintain these rights and information could
prevent us from competing effectively.

   Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of patent, copyright, trade secret and trademark law, as
well as confidentiality or license agreements with our employees, consultants,
and corporate and strategic partners. If we are unable to prevent the
unauthorized use of our proprietary information or if our competitors are able
to develop similar technologies independently, the competitive benefits of our
technologies, intellectual property rights and proprietary information will be
diminished. Additional discussion of our reliance on our intellectual property
and proprietary rights is contained in "Business--Intellectual Property and
Proprietary Rights."

We depend heavily on our network infrastructure and if this fails it could
result in unanticipated expenses and prevent our members from effectively
utilizing our services, which could negatively impact our ability to attract
and retain members and advertisers.

   Our ability to successfully create and deliver our e-mail messages depends
in large part on the capacity, reliability and security of our networking
hardware, software and telecommunications infrastructure. Failures of

                                       28
<PAGE>

our network infrastructure could result in unanticipated expenses to address
such failures and could prevent our members from effectively utilizing our
services, which could prevent us from retaining and attracting members and
advertisers. The hardware infrastructure on which our system operates is
located at PSINet in Reston, Virginia. We do not currently have fully redundant
systems or a formal disaster recovery plan. Our system is susceptible to
natural and man-made disasters, including earthquakes, fires, floods, power
loss and vandalism. Further, telecommunications failures, computer viruses,
electronic break-ins or other similar disruptive problems could adversely
affect the operation of our systems. Our insurance policies may not adequately
compensate us for any losses that may occur due to any damages or interruptions
in our systems. Accordingly, we could be required to make capital expenditures
in the event of unanticipated damage.

   In addition, our members depend on Internet service providers, or ISPs, for
access to our Web site. Due to the rapid growth of the Internet, ISPs and Web
sites have experienced significant system failures and could experience
outages, delays and other difficulties due to system failures unrelated to our
systems. These problems could harm our business by preventing our members from
effectively utilizing our services.

Our management team has only worked together for a short period of time and the
inability of our management team to function effectively or the loss of any of
our officers or key employees could seriously harm our business by impairing
our ability to implement our business model.

   Many of our executive officers, including our Chief Financial Officer, Chief
Technology Officer, Chief Operating Officer, Vice President, Marketing and
Communications, and Vice President, Sales Administration have joined our
company within the last year. We may not successfully assimilate our recently
hired officers and may not be able to successfully locate, hire, assimilate and
retain qualified key management personnel, which could seriously harm our
business by impairing our ability to implement our business strategy. Our
business is largely dependent on the personal efforts and abilities of our
senior management, including Stephen R. Chapin, Jr., our President, Chief
Executive Officer and Chairman of the Board, and other key personnel. Many of
our officers or employees can terminate their respective employment
relationship at any time. The loss of these key employees or our inability to
attract or retain other qualified employees could seriously harm our business.

We depend on our key personnel to manage our business effectively in a rapidly
changing market and we may not be able to hire or retain skilled employees,
which could prevent us from effectively growing and operating our business.

   Our ability to support the growth of our business will depend, in part, on
our ability to attract and retain highly skilled employees, particularly
management, editorial, sales and technical personnel. In particular, due to the
relatively early stage of our business, we believe that our future success is
highly dependent on Stephen R. Chapin, our founder, President, Chief Executive
Officer and Chairman of the Board of Directors, to provide continuity in the
execution of our growth plans. Furthermore, we rely on highly skilled editorial
personnel to create our e-mail messages, sales and marketing personnel to
maintain and expand our member base and the number of advertisers, and
technical personnel to maintain and improve our technological capabilities. If
we are unable to hire or retain key employees, our ability to operate and grow
our business will be adversely affected. Competition for employees with these
skills and experience is intense. As a result, we may be unable to retain our
key employees or to attract other highly qualified employees in the future. We
have experienced difficulty from time to time in attracting the personnel
necessary to support the growth of our business, and we may experience similar
difficulty in the future.

Our results of operations and financial condition may be adversely affected if
we do not successfully integrate future acquisitions into our operations.

   In order to respond to the competitive pressures of the online direct
marketing industry and support our intended growth, we intend to focus on
acquiring, or making significant investments in, additional companies, products
and technologies that complement our business. We do not have any present
understanding, nor are

                                       29
<PAGE>

we having any discussions, relating to any significant acquisition or
investment. Our ability to compete effectively and support our intended growth
may be adversely affected if we are not able to identify suitable acquisition
candidates or investments or acquire companies or make investments on
acceptable terms or at acceptable times. In addition, acquiring companies,
products, services or technologies involves many potential difficulties and
risks, including:

  . difficulty in assimilating them into our operations;

  . disruption of our ongoing business and distraction of our management and
    employees;

  . negative effects on reported results of operations due to acquisition-
    related charges and amortization of acquired technology and other
    intangibles; and

   .potential dilutive issuances of equity or equity-linked securities.

   These potential difficulties and risks could adversely affect our ability to
realize the intended benefits of an acquisition and could result in
unanticipated expenses and disruptions in our business, which could harm our
operations, cash flows and financial condition.

We may have to obtain additional capital to grow our business, which could
result in significant costs and dilution that could adversely affect our stock
price.

   Maintaining and expanding our member base and the number of our advertisers
will require significant cash expenditures. If the cash on hand, cash generated
from operations and existing loan and credit arrangements are not sufficient to
meet our cash requirements, we will need to seek additional capital, which
could result in significant costs and dilute the ownership interest of our
stockholders and thereby adversely affect our stock price. Additional financing
may not be available on terms favorable to us, or at all, which could result in
significant costs to obtain the necessary capital and limit our ability to
maintain and expand our member base and number of advertisers, or otherwise
respond to competitive pressures. In addition, if we raise additional funds
through the issuance of equity or equity-linked securities, the percentage
ownership of our stockholders would be reduced. These securities may have
rights, preferences or privileges senior to those of our stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a discussion of working
capital and capital expenditures.

We plan to increase our international sales activities significantly, which
will subject us to additional business risks.

   An element of our growth strategy is to introduce our online marketing
services in international markets. Our participation in international markets
will be subject to a number of risks, including relative low levels of Internet
usage in foreign countries, foreign government regulations, export license
requirements, tariffs and taxes, fluctuations in currency exchange rates,
introduction of the European Union common currency, difficulties in managing
foreign operations and political and economic instability. To the extent our
potential international members are impacted by currency devaluations, general
economic crises or other negative economic events, the ability of our members
to utilize our services could be diminished.

The content contained in our e-mails may subject us to significant liability
for negligence, copyright or trademark infringement or other matters.

   If any of the content that we create and deliver to our members or any
content that is accessible from our e-mails through links to other Web sites
contains errors, third parties could make claims against us for losses incurred
in reliance on such information. In addition, the content contained in or
accessible from our e-mails could include material that is defamatory, violates
the copyright or trademark rights of third parties, or subjects us to liability
for other types of claims. Our general liability insurance may not cover claims
of these types or may not be adequate to indemnify us for all liability that
may be imposed. Any imposition of liability, particularly liability that is not
covered by insurance or is in excess of insurance coverage, could result in
significant costs and expenses and damage our reputation.

                                       30
<PAGE>

   We also enter into agreements with certain e-commerce partners under which
we may be entitled to receive a share of certain revenue generated from the
purchase of goods and services through direct links to our e-commerce partners
from our e-mails. These agreements may expose us to additional legal risks and
uncertainties, including potential liabilities to consumers of those products
and services by virtue of our involvement in providing access to those products
or services, even if we do not provide those products or services. Any
indemnification provided to us in our agreements with these parties, if
available, may not adequately protect us.

Sweepstakes regulation may limit our ability to conduct sweepstakes and other
contests, which could negatively impact our ability to attract and retain
members.

   The conduct of sweepstakes, lotteries and similar contests, including by
means of the Internet, is subject to extensive federal, state and local
regulation, which may restrict our ability to offer contests and sweepstakes in
some geographic areas or altogether. Any restrictions on these promotions could
adversely affect our ability to attract and retain members.

We are subject to potential disruptions and costs associated with the Year 2000
problem, any of which may prevent us from achieving or sustaining
profitability.

   Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally
and the compliance and remediation work accomplished leading up to 2000 was
effective to prevent any problems. Computer experts have warned that there may
still be residual consequences of the change in centuries and any such
difficulties could result in a decrease in our revenue, an increase in
allocation of resources to address Year 2000 problems of our third party
providers of hardware and software and our third party network providers
without additional revenue commensurate with such dedication of resources, or
an increase in litigation costs relating to losses suffered by our third party
providers of hardware and software and our third party network providers due to
such Year 2000 problems.

If our stock price remains volatile, we may become subject to securities
litigation, which is expensive and could divert our resources.

   In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Many companies in our industry have been subject to this type of litigation. If
the market value of our stock experiences adverse fluctuations, and we become
involved in this type of litigation, regardless of the outcome, we could incur
substantial legal costs and our management's attention could be diverted,
causing our business to suffer.

Our executive officers and directors have and may continue to have substantial
voting control which will allow them to influence the outcome of matters
submitted to stockholders for approval in a manner that may be adverse to your
interests.

   Our executive officers, our directors and entities affiliated with them, in
the aggregate, beneficially own approximately 60.1% of our outstanding common
stock as of December 31, 1999. As a result, these stockholders will retain
substantial control over matters requiring approval by our stockholders,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the effect of
delaying or preventing a change in control, which could have an adverse affect
on our stock price.

                                       31
<PAGE>

Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company, which could adversely
affect our stock price.

   Our Restated Certificate of Incorporation and Bylaws may discourage, delay
or prevent a merger or acquisition that a stockholder may consider favorable by
authorizing the issuance of "blank check" preferred stock and providing for a
classified board of directors with staggered, three-year terms. Certain
provisions of Delaware law may also discourage, delay or prevent someone from
acquiring or merging with us. These anti-takeover provisions could adversely
affect our stock price.

                     Risks Related to the Internet Industry

Our business is in the online direct marketing industry and if we fail to adapt
to rapid change in this industry or our internally developed systems cannot be
modified properly for increased traffic or volume, our services may become
obsolete and unmarketable.

   The online direct marketing industry is characterized by rapid change. The
introduction of products and services embodying new technologies, the emergence
of new industry standards and changing consumer needs and preferences could
render our existing services obsolete and unmarketable. If we do not respond
effectively to rapidly changing technologies, industry standards and customer
requirements, the quality and reliability of the services we provide to our
members and advertisers may suffer. We may experience technical difficulties
that could delay or prevent the successful development, introduction or
marketing of new products and services. In addition, any new enhancements to
our products and services must meet the requirements of our current and
prospective users. As a result, we could incur substantial costs to modify our
services or infrastructure to adapt to rapid change in our industry, which
could harm our financial results.

Concerns about, or breaches of, the security of our member database could
prevent us from sustaining revenue growth and achieving or sustaining
profitability by adversely affecting our ability to attract and retain members
and develop our member profiles, resulting in significant expenses to prevent
breaches, and subjecting us to liability for failing to protect our members'
information.

   We maintain a database containing information on our members, including
their account balances. Our database may be accessed by unauthorized users
accessing our systems remotely. If the security of our database is compromised,
current and potential members may be reluctant to use our services or provide
us with the personal data we need to adequately develop and maintain individual
member profiles, which could prevent us from retaining and attracting the
advertisers we require to sustain revenue growth. In addition, as a result of
these security and privacy concerns, we may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by
security breaches, and we may be unable to effectively target direct marketing
offers to members or may be subject to legal claims of members if unauthorized
third parties gain access to our system and alter or destroy information in our
database. Also, any public perception that we engaged in the unauthorized
release of member information, whether or not correct, would adversely affect
our ability to attract and retain members.

The unauthorized access of confidential member information that we transmit
over public networks could adversely affect our ability to attract and retain
members.

   Our members transmit confidential information to us over public networks and
the unauthorized access of such information by third parties could harm our
reputation and significantly hinder our efforts to attract and retain members.
We rely on a variety of security techniques and authentication technology
licensed from third parties to provide the security and authentication
technology to effect secure transmission of confidential information, including
customer credit card numbers. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments may result in a
compromise or breach of the technology used by us to protect customer
transaction data.

                                       32
<PAGE>

Problems with the performance and reliability of the Internet infrastructure
could adversely affect the quality and reliability of the products and services
we offer our members and advertisers which could prevent us from sustaining
revenue growth.

   We depend significantly on the Internet infrastructure to deliver
attractive, reliable and timely e-mail messages to our members. If Internet
usage grows, the Internet infrastructure may not be able to support the demands
placed on it by this growth, and its performance and reliability may decline,
which could adversely affect our ability to sustain revenue growth. Among other
things, continued development of the Internet infrastructure will require a
reliable network backbone with necessary speed, data capacity and security.
Currently, there are regular failures of the Internet network infrastructure,
including outages and delays, and the frequency of these failures may increase
in the future. These failures may reduce the benefits of our products and
services to our members and undermine our advertising partners' and our
members' confidence in the Internet as a viable commercial medium. In addition,
the Internet could lose its viability as a commercial medium due to delays in
the development or adoption of new technology required to accommodate increased
levels of Internet activity or due to government regulation.

We may have to litigate to protect our intellectual property and other
proprietary rights or to defend claims of third parties, and such litigation
may subject us to significant liability and be time consuming and expensive.

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

Government regulation and legal uncertainties of doing business on the Internet
could significantly increase our costs and expenses.

   Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent and these laws and regulations could
significantly increase the costs we incur in using the Internet to conduct our
business. Recently, the United States Congress enacted Internet legislation
regarding children's privacy, copyright and taxation. The European Union
recently adopted a directive addressing data privacy that may result in limits
on the collection and use of member information. A number of other laws and
regulations may be adopted that regulate the use of the Internet, including
user privacy, pricing, acceptable content, taxation, use of the
telecommunications infrastructure and quality of products and services. The
laws governing the Internet remain largely unsettled, even in areas where there
has been some legislative action. It may take years to determine whether and
how existing laws, including those governing intellectual property, privacy,
libel and taxation apply to the Internet and Internet advertising. In addition,
the growth and development of the market for Internet commerce may prompt calls
for more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on companies conducting business
over the Internet. As a result of these uncertainties, we may incur
unanticipated, significant costs and expenses that could harm our financial
results and condition. For additional discussion of potential governmental
intervention, please see "Business-Government Regulation."

                                       33
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   We do not currently hold any derivative instruments and do not engage in
hedging activities and currently do not enter into any transactions denominated
in a foreign currency. Thus, our exposure to foreign exchange fluctuations is
minimal.

Interest Rate Risk

   Our exposure to market risk for changes in interest rates relate primarily
to our short-term investments, which generally have maturities of three months
or less. We do not use derivative financial instruments for speculative or
trading purposes. We invest our excess cash in short-term, fixed income
financial instruments with an investment strategy to buy and hold to maturity.
These fixed rate investments are subject to interest rate risk and may fall in
value if market interest rates increase. If market interest rates were to
increase immediately and uniformly by 10 percent from the levels at December
31, 1999, the fair value of the portfolio would decline by an immaterial
amount. We have the ability to hold our fixed income investments until
maturity, and therefore we do not expect our operating results or cash flows to
be materially affected by a sudden change in market interest rates on our
investment portfolio.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

   The information required by this item is included in Part IV Item 14 (a) (1)
and (2).

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE.

   None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   The information with respect to directors and executive officers required by
this Item 10 is incorporated herein by reference to the information set forth
under the caption "Directors and Executive Officers of the Company" in our
Proxy Statement for the 2000 Annual Meeting of Stockholders or the "2000 Proxy
Statement", which is expected to be filed with the Commission within 120 days
after the close of our fiscal year. Information relating to certain filings on
Forms 3, 4, and 5 of the Company is contained in the 2000 Proxy Statement under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance".

ITEM 11. EXECUTIVE COMPENSATION

   The information required by this Item 11 is incorporated herein by reference
to the information set forth under the caption "Executive Compensation" in the
2000 Proxy Statement. The sections entitled "Compensation Committee Report on
Executive Compensation" and "Comparative Stock Performance Graph" in the 2000
Proxy Statement are not incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by this Item 12 is incorporated herein by reference
to the information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 2000 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   The information required by this Item 13 is incorporated herein by reference
to the information set forth under the caption "Certain Relationships and
Related Transactions" in the 2000 Proxy Statement.

                                       34
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

    (a) The following documents are filed as part of this Form 10-K:

   1. Financial Statements. The following financial statements of
LifeMinders.com, Inc. are filed as a part of this Form 10-K on the pages
indicated:

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Report of Independent Accountants........................................ F-1
Balance Sheets as of December 31, 1998 and 1999.......................... F-2
Statements of Operations for each of the years ended December 31, 1997,
 1998 and 1999........................................................... F-3
Statements of Changes in Stockholders' Equity (Deficit) for each of the
 years ended December 31, 1997, 1998 and 1999............................ F-4
Statements of Cash Flows for each of the years ended December 31, 1997,
 1998 and 1999........................................................... F-5
Notes to Financial Statements............................................ F-6
</TABLE>

   2. Financial Statement Schedule. The following financial statement schedule
of LifeMinders.com, Inc. is filed as a part of this Form 10-K on the pages
indicated:

<TABLE>
<S>                                                                          <C>
Report of Independent Accountants on Financial Statement Schedule........... S-1
Schedule II--Valuation and Qualifying Accounts.............................. S-2
</TABLE>

   3. Exhibits required by Item 601 of Regulation S-K.

<TABLE>
<CAPTION>
 Exhibit No.                       Description                         Page No.
 ----------- -------------------------------------------------------   --------
 <C>         <S>                                                       <C>
     3.1     Restated Certificate of Incorporation.*................

     3.2     Bylaws.*...............................................

     4.1     Second Amended and Restated Registration Rights
             Agreement, dated as of September 23, 1999, among the
             Company and the Series E investors.**

    10.1     E-Commerce Agreement between the Company and Lycos,
             Inc. dated as of August 25, 1999. (Portions of this
             exhibit have been omitted pursuant to a request for
             confidential treatment and have been filed separately
             with the Commission)**.................................

    10.2     Office Building Lease Agreement between the Company and
             Sovran Limited Company dated June 11, 1999.**..........

    10.3     Trustee License Agreement between the Company and Trust
             Universal Standards in Electronic Transactions dated
             March 12, 1999.**......................................

    10.4     Starter Kit Loan and Security Agreement, as amended,
             between the Company and Imperial Bank dated November
             10, 1998.**............................................

    10.5     Employment Agreement between the Company and Stephen R.
             Chapin, Jr. dated November 12, 1997.**.................

    10.6     Employment Agreement between the Company and John
             Chapin dated November 1, 1997.**.......................

    10.7     Release and Settlement dated July 15, 1999 among the
             Company, Frans Kok and Johan Hekeelar, Inc.**..........

    10.8     Consulting Agreement between the Company and Lordhill
             Company dated June 1, 1997, as amended on November 18,
             1997, as amended on March 27, 1998, and as amended on
             January 29, 1999.**....................................

    10.9     The Company's 1998 Stock Option Plan.**................
</TABLE>


                                       35
<PAGE>

<TABLE>
 <C>   <S>                                                                   <C>
 10.10 Form of Lock-up Agreement between the Company and Hambrecht & Quist
       LLC, FleetBoston Robertson Stephens Inc., Thomas Weisel Partners
       LLC and PaineWebber Incorporated.**................................

 23.1  Consent of PricewaterhouseCoopers LLP, independent accountants.....

 24    Power of Attorney (filed as part of signature page)................

 27    Financial Data Schedule............................................
</TABLE>
--------
  * Incorporated by reference to the Company's Registration Statement on Form
    S-1 as filed with the SEC on September 24, 1999. (File No. 333-87785).

 ** Incorporated by reference to Amendment No. 1 to the Company's Registration
    Statement on Form S-1 as filed with the SEC on October 29, 1999 (File No.
    3233-87785).

*** Incorporated by reference to Amendment No. 3 to the Company's Registration
    Statement on Form S-1 as filed with the SEC on November 17, 1999 (File No.
    333-87785).

    (b) Reports required to filed on Form 8-K:

   None.

                                       36
<PAGE>

                             LIFEMINDERS.COM, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                       Page(s)
                                                                       -------
<S>                                                                    <C>
Report of Independent Accountants.....................................   F-2
Balance Sheets as of December 31, 1998 and 1999.......................   F-3
Statements of Operations for the years ended December 31, 1997, 1998
 and 1999.............................................................   F-4
Statements of Changes in Stockholders' Equity (Deficit) for the years
 ended
 December 31, 1997, 1998 and 1999.....................................   F-5
Statements of Cash Flows for the years ended December 31, 1997, 1998
 and 1999.............................................................   F-6
Notes to Financial Statements.........................................   F-7
</TABLE>

                                      F-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
LifeMinders.com, Inc.:

   In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows present
fairly, in all material respects, the financial position of LifeMinders.com,
Inc. (the Company) at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

                                          /s/ PricewaterhouseCoopers LLP

McLean, Virginia
February 10, 2000

                                      F-2
<PAGE>

                             LIFEMINDERS.COM, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           December 31,
                                                     -------------------------
                                                        1998          1999
                                                     -----------  ------------
<S>                                                  <C>          <C>
                       Assets
Current assets:
  Cash and cash equivalents......................... $   232,073  $ 55,524,189
  Marketable securities.............................         --      1,968,203
  Accounts receivable, net..........................         --      6,526,264
  Prepaid expenses and other current assets.........         --      6,769,673
                                                     -----------  ------------
    Total current assets............................     232,073    70,788,329
  Property and equipment, net.......................      46,228     5,379,992
  Other assets......................................         --        688,863
                                                     -----------  ------------
    Total assets.................................... $   278,301  $ 76,857,184
                                                     ===========  ============

  Liabilities, mandatorily redeemable convertible
                 preferred stock and
           stockholders' equity (deficit)
Current liabilities:
  Accounts payable.................................. $    42,368  $  3,121,247
  Accrued expenses..................................      79,972     5,989,850
  Deferred revenue..................................     355,000       243,354
  Note payable......................................         --         80,993
  Capital lease obligation..........................         --        724,111
                                                     -----------  ------------
    Total current liabilities.......................     477,340    10,159,555
Note payable, net of current portion................         --         74,243
Capital lease obligation, net of current portion....         --        906,034
Deferred rent.......................................         --         40,415
                                                     -----------  ------------
    Total liabilities...............................     477,340    11,180,247
Commitments and contingencies
Mandatorily redeemable convertible preferred stock:
  Series A, $.01 par value; 1,000,000 shares
   authorized, issued and outstanding at December
   31, 1998.........................................     980,486           --
  Series B, $.01 par value; 1,000,000 shares
   authorized, issued and outstanding at December
   31, 1998.........................................   1,042,889           --
                                                     -----------  ------------
    Total mandatorily redeemable convertible
     preferred stock................................   2,023,375           --
                                                     -----------  ------------
Stockholders' equity (deficit):
  Preferred stock, $.01 par value; no and 9,665,240
   shares authorized at December 31, 1998 and 1999,
   respectively, no shares issued and outstanding at
   December 31, 1998 and 1999.......................         --            --
  Common stock, $.01 par value; 6,550,000 and
   60,000,000 shares authorized at December 31, 1998
   and 1999, respectively; 3,274,998 and
   20,299,039 shares issued and outstanding at
   December 31, 1998 and 1999, respectively.........      32,750       202,990
  Additional paid-in capital........................     206,215   104,621,740
  Deferred compensation on employee stock options...         --     (5,076,892)
Accumulated deficit.................................  (2,461,379)  (34,070,901)
                                                     -----------  ------------
    Total stockholders' equity (deficit)............  (2,222,414)   65,676,937
                                                     -----------  ------------
    Total liabilities, mandatorily redeemable
     convertible preferred stock and stockholders'
     equity (deficit)............................... $   278,301  $ 76,857,184
                                                     ===========  ============
</TABLE>

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

                                      F-3
<PAGE>

                             LIFEMINDERS.COM, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          For the year ended December 31,
                                         ------------------------------------
                                           1997        1998          1999
                                         ---------  -----------  ------------
<S>                                      <C>        <C>          <C>
Revenue:
  Advertising........................... $  67,126  $    56,750  $  9,446,149
  Opt-in................................       --           --      4,573,336
                                         ---------  -----------  ------------
    Total revenue.......................    67,126       56,750    14,019,485
Cost of revenue.........................    37,249       59,472       965,711
                                         ---------  -----------  ------------
Gross margin (loss).....................    29,877       (2,722)   13,053,774
                                         ---------  -----------  ------------
Operating expenses:
  Sales and marketing...................   147,325      868,706    38,416,266
  Research and development..............   240,498      373,788     1,824,518
  General and administrative............   127,132      726,505     4,326,594
  Stock-based compensation..............       --           --        625,042
                                         ---------  -----------  ------------
    Total operating expenses............   514,955    1,968,999    45,192,420
                                         ---------  -----------  ------------
Loss from operations....................  (485,078)  (1,971,721)  (32,138,646)
Interest income, net....................     5,978       24,515       529,124
                                         ---------  -----------  ------------
  Net loss..............................  (479,100)  (1,947,206)  (31,609,522)
Accretion on mandatorily redeemable
 convertible preferred stock............       --      (157,037)   (1,155,417)
                                         ---------  -----------  ------------
Net loss available to common
 stockholders........................... $(479,100) $(2,104,243) $(32,764,939)
                                         ---------  -----------  ------------
Basic and diluted net loss per common
 share..................................    $(0.19)      $(0.64)       $(6.26)
                                         ---------  -----------  ------------
Weighted average common shares and
 common share equivalents (basic and
 diluted)............................... 2,530,228    3,275,000     5,230,826
                                         =========  ===========  ============
</TABLE>




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


                                      F-4
<PAGE>

                             LIFEMINDERS.COM, INC.

            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                   Deferred
                                                                                    stock
                                      Common stock   Common stock                compensation                 Treasury
                     Common stock        Class A        Class B     Additional   on employee                   stock
                  ------------------- -------------- -------------   paid-in        stock      Accumulated   ---------------
                    Shares    Amount  Shares  Amount Shares Amount   capital       options       deficit     Shares   Amount
                  ---------- -------- ------  ------ ------ ------ ------------  ------------  ------------  -------  ------
<S>               <C>        <C>      <C>     <C>    <C>    <C>    <C>           <C>           <C>           <C>      <C>
Balance,
December 31,
1996............                       1,250   $13                 $      9,987                $    (35,073)
Issuance of
Class B common
stock...........                                       374   $  4        52,561
Conversion of
Class B common
stock to Series
A common stock..                         536     5    (374)    (4)           (1)
Issuance of
1,618.6144
shares of common
stock for each
Class A common
stock share and
cancellation of
Class A common
stock...........   2,891,248 $ 28,913 (1,786)  (18)                     (28,895)
Conversion of
note payable to
common stock....     321,250    3,212                                   196,788
Issuance of
stock options to
purchase common
stock in
connection with
the Series A
convertible
preferred stock
issuance........                                                         38,000
Issuance of
common stock....      62,500      625                                      (525)
Issuance of
warrants in
connection with
the Series A
convertible
preferred stock
issuance........                                                         51,000
Contribution by
stockholder.....                                                         20,200
Forgiveness of
loan payable to
stockholders in
lieu of
contributions...                                                         24,636
Net loss........                                                                                   (479,100)
                  ---------- -------- ------   ---    ----   ----  ------------  -----------   ------------  -------  -----
Balance,
December 31,
1997............   3,274,998   32,750                                   363,751                    (514,173)
Acquisition of
treasury stock..                                                                                              62,500  $(500)
Exercise of
stock option in
connection with
the preferred
stock offering..                                                           (499)                             (62,500)   500
Accretion on
mandatorily
redeemable
convertible
preferred
stock...........                                                       (157,037)
Net loss........                                                                                 (1,947,206)
                  ---------- -------- ------   ---    ----   ----  ------------  -----------   ------------  -------  -----
Balance,
December 31,
1998............   3,274,998   32,750                                   206,215                  (2,461,379)
Accretion on
mandatorily
redeemable
convertible
preferred
stock...........                                                     (1,155,417)
Exercise of
stock options...     112,500    1,125                                    88,875
Issuance of
stock options in
exchange for
services........                                                          9,000
Issuance of
common stock,
net of issuance
costs...........   4,830,000   48,300                                61,667,154
Conversion of
Series A, B, C,
D and E
preferred stock
to common
stock...........  12,081,541  120,815                                38,103,979
Deferred
compensation....                                                      5,701,934  $(5,701,934)
Amortization of
deferred
compensation....                                                                     625,042
Net loss........                                                                                (31,609,522)
                  ---------- -------- ------   ---    ----   ----  ------------  -----------   ------------  -------  -----
Balance,
December 31,
1999 ...........  20,299,039 $202,990          $             $     $104,621,740  $(5,076,892)  $(34,070,901)          $
                  ========== ======== ======   ===    ====   ====  ============  ===========   ============  =======  =====
<CAPTION>
                     Total
                  ------------
<S>               <C>
Balance,
December 31,
1996............  $   (25,073)
Issuance of
Class B common
stock...........       52,565
Conversion of
Class B common
stock to Series
A common stock..
Issuance of
1,618.6144
shares of common
stock for each
Class A common
stock share and
cancellation of
Class A common
stock...........
Conversion of
note payable to
common stock....      200,000
Issuance of
stock options to
purchase common
stock in
connection with
the Series A
convertible
preferred stock
issuance........       38,000
Issuance of
common stock....          100
Issuance of
warrants in
connection with
the Series A
convertible
preferred stock
issuance........       51,000
Contribution by
stockholder.....       20,200
Forgiveness of
loan payable to
stockholders in
lieu of
contributions...       24,636
Net loss........     (479,100)
                  ------------
Balance,
December 31,
1997............     (117,672)
Acquisition of
treasury stock..         (500)
Exercise of
stock option in
connection with
the preferred
stock offering..            1
Accretion on
mandatorily
redeemable
convertible
preferred
stock...........     (157,037)
Net loss........   (1,947,206)
                  ------------
Balance,
December 31,
1998............   (2,222,414)
Accretion on
mandatorily
redeemable
convertible
preferred
stock...........   (1,155,417)
Exercise of
stock options...       90,000
Issuance of
stock options in
exchange for
services........        9,000
Issuance of
common stock,
net of issuance
costs...........   61,715,454
Conversion of
Series A, B, C,
D and E
preferred stock
to common
stock...........   38,224,794
Deferred
compensation....
Amortization of
deferred
compensation....      625,042
Net loss........  (31,609,522)
                  ------------
Balance,
December 31,
1999 ...........  $65,676,937
                  ============
</TABLE>

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

                                      F-5
<PAGE>

                             LIFEMINDERS.COM, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                            For the year ended December 31,
                                          -------------------------------------
                                             1997        1998          1999
                                          ----------  -----------  ------------
<S>                                       <C>         <C>          <C>
Cash flows from operating activities:
Net loss................................  $ (479,100) $(1,947,206) $(31,609,522)
Adjustments to reconcile net loss to net
 cash used in operating activities:
  Depreciation..........................         271        8,234       537,892
  Allowance for doubtful accounts
   receivable...........................         --           --        493,992
  Amortization of deferred compensation
   on employee stock options............         --           --        625,042
  Issuance of common stock and stock
   options in exchange for services.....       2,565          --          9,000
Changes in assets and liabilities:
  Accounts receivable...................         --           --     (7,020,256)
  Prepaid expenses and other assets.....         --           --     (7,458,536)
  Accounts payable......................         --        42,368     3,078,879
  Accrued expenses......................      48,486       31,486     5,909,878
  Deferred revenue......................         --       355,000      (111,646)
  Deferred rent.........................         --           --         40,415
                                          ----------  -----------  ------------
   Net cash used in operating
    activities..........................    (427,778)  (1,510,118)  (35,504,862)
                                          ----------  -----------  ------------
Cash flows from investing activities:
Acquisition of property and equipment...      (4,870)     (49,863)   (4,241,511)
Purchase of marketable securities.......         --           --     (1,968,203)
                                          ----------  -----------  ------------
   Net cash used in investing
    activities..........................      (4,870)     (49,863)   (6,209,714)
                                          ----------  -----------  ------------
Cash flows from financing activities:
Proceeds from borrowings on notes
 payable to stockholders................      53,319          --            --
Payments on notes payable to
 stockholders...........................     (53,919)         --            --
Issuance of preferred stock, net of
 issuance costs.........................     955,338          --     35,046,002
Proceeds from the exercise of Series B
 preferred warrants.....................         --     1,000,000           --
Proceeds from issuance of note payable..     200,000          --        161,986
Payments of note payable................         --           --         (6,750)
Purchase of treasury stock..............         --          (500)          --
Proceeds from issuance of common stock,
 net of issuance costs..................      50,100            1    61,715,454
Exercise of stock options...............         --           --         90,000
Stockholder cash capital contribution...      20,200          --            --
                                          ----------  -----------  ------------
   Net cash provided by financing
    activities..........................   1,225,038      999,501    97,006,692
                                          ----------  -----------  ------------
Net increase (decrease) in cash and cash
 equivalents............................     792,390     (560,480)   55,292,116
Cash and cash equivalents, beginning of
 year...................................         163      792,553       232,073
                                          ----------  -----------  ------------
Cash and cash equivalents, end of year..  $  792,553  $   232,073  $ 55,524,189
                                          ==========  ===========  ============
Supplemental disclosures of non-cash
 investing and financing activities:
Conversion of note payable to common
 stock..................................  $  200,000  $       --   $        --
                                          ==========  ===========  ============
Forgiveness of notes payable to
 stockholders...........................  $   24,636  $       --   $        --
                                          ==========  ===========  ============
Issuance of common stock in exchange for
 services...............................  $    2,565  $       --   $        --
                                          ==========  ===========  ============
Issuance of warrants in connection with
 Series A convertible preferred stock
 issuance...............................  $   51,000  $       --   $        --
                                          ==========  ===========  ============
Issuance of stock options in exchange
 for services...........................  $      --   $       --   $      9,000
                                          ==========  ===========  ============
Accretion of mandatorily redeemable
 convertible preferred stock............  $      --   $   157,037  $  1,155,417
                                          ==========  ===========  ============
Purchase of computer equipment through
 capital lease..........................  $      --   $       --   $  1,630,145
                                          ==========  ===========  ============
</TABLE>

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

                                      F-6
<PAGE>

                             LIFEMINDERS.COM, INC.

                         NOTES TO FINANCIAL STATEMENTS

1. Nature of Business and Financing of Start-Up Operations

   LifeMinders.com is an online direct marketing company that provides
personalized content and advertisements via e-mail to a community of members.
E-mail messages contain reminders and tips that enable the Company's members to
better organize and manage their lives. Proprietary member information and
targeting capabilities provide advertising partners the opportunity to more
effectively reach their target audiences.

   The Company was incorporated in Maryland on August 9, 1996 (Date of
Inception) under the name of MinderSoft, Inc. In January 1999, the Company
changed its name to LifeMinders.com, Inc. The Company was reincorporated in
Delaware in July 1999. From 1996 to 1998, the Company entered into arrangements
with national retailers to distribute reminder products in software form on
disk. In late 1998, the Company revised its strategy to become an online direct
marketing company which provides personalized content and advertisements via e-
mail to a loyal community of members.

   On October 21, 1999, the Board of Directors approved a 5 for 4 common stock
split in connection with the filing of an initial public offering. The
conversion ratio of the mandatorily redeemable convertible preferred stock was
adjusted from a 1 for 1 conversion ratio to a 5 for 4 conversion ratio in
connection with the stock split. The financial statements of the Company,
including all share and per share data, have been retroactively restated to
reflect the 5 for 4 common stock split for all periods presented.

   The Company was considered to be in the development stage from inception
through March 31, 1999 as it was devoting substantially all of its efforts to
establishing a new business, developing the design of its database marketing
product, raising capital, financial planning and market development. Although
revenue commenced in 1997 and continued during 1998, this revenue was generated
from distribution arrangements for its software based products and not from
planned principal operations. Subsequent to March 31, 1999, the Company ceased
being a development stage enterprise generating revenue from planned principal
operations which consisted of Internet related services.

   On November 19, 1999, the Company completed its initial public offering
issuing 4,830,000 shares of common stock at an initial public offering price of
$14.00 and raised net proceeds of approximately $61.7 million.

2. Summary of Significant Accounting Policies

   The significant accounting policies followed by the Company in the
preparation of these financial statements are as follows:

 Use of Estimates

   The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from these estimates.

 Cash and Cash Equivalents

   Highly liquid investments having original maturities of 90 days or less at
the date of acquisition are classified as cash equivalents. The carrying value
of cash equivalents approximate fair value.

                                      F-7
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 Marketable Securities

   Marketable securities include investments in commercial paper whose original
maturity dates exceed three months. Marketable securities are classified as
held-to-maturity and are accounted for at amortized cost. Accordingly, no
unrealized gain or loss has been reflected in the Company's financial
statements. At December 31, 1999 the cost of marketable securities approximates
their fair value.

 Property and Equipment

   Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to five years. When property and equipment is retired or
otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in
operations.

 Research and Development Costs

   Research and development costs are expensed as incurred.

 Revenue Recognition

   During 1997 and 1998, the Company's revenue was generated from distribution
agreements for software-based products. Revenue from these agreements has been
recognized as the services were performed.

   During 1999, revenue was generated primarily by advertising and opt-in
services.

 Advertising

   Advertising arrangements consist primarily of advertisements that are
displayed within the Company's e-mails. Generally, advertisers pay the Company
and the Company recognizes revenue on a per e-mail basis, based on the number
of e-mails delivered to members in which the advertisements are displayed. From
time to time, the Company may guarantee a minimum number of e-mails to be
delivered containing an advertisement directed at a specific group. Under these
contracts, the Company is not required to forfeit fees received for e-mails
previously delivered. The Company has historically fulfilled the guaranteed
minimum number of e-mails and have not had any disputes with advertisers
regarding the guaranteed minimum number of e-mails. Currently, there are no
contracts that have a guaranteed minimum number of e-mails which generate a
material amount of revenues. The Company may also guarantee a minimum number of
sales orders for the advertiser based on the e-mails delivered. Under these
contracts the Company defers all revenue until notification is received from
the advertiser that the minimum number of sales orders have been achieved by
the advertiser. In addition, the Company may provide advertisers the
opportunity for the exclusive right to sponsor advertisements within a specific
e-mail category for a specified period of time for a fixed fee. Under these
contracts the Company recognizes revenue during the period the advertisement is
displayed in the Company's e-mails since there is no obligation to provide a
minimum number of e-mails for that individual advertiser during the specific
period. The Company's advertising contracts generally have average terms
ranging from one to six months.

   Advertising revenue also includes barter transactions, where the Company
exchanges advertising space on their e-mails for reciprocal advertising space
or traffic on other Web sites. Revenue from these barter transactions is
recorded at the estimated fair value of the advertisements delivered and is
recognized when the advertisements are included in the Company's e-mails. No
gain or loss results from these barter transactions as the revenue recognized
equals the advertising costs incurred. For the year ended December 31, 1999,
barter revenue was less than 2% of net revenues. The Company did not enter into
barter transactions prior to 1999.

                                      F-8
<PAGE>

                             LIFEMINDERS.COM, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


 Opt-in Services

   Revenue is recognized as affirmative member responses to the advertisers'
newsletters and other promotions offered during the Company's sign up process.
The Company derives revenue from its services through fees that its opt-in
advertising partners pay. The Company records revenue net of estimated
duplicate member responses to its opt-in partners' newsletters and other
promotions. Duplicate member responses are names the Company provides to opt-
in advertising partners for which the Company's members have previously
registered either through the Company's sign up process or with the Company's
opt-in advertising partners directly. For the year ended December 31, 1999,
revenue was recorded net of approximately $618,000 for estimated duplicate
member responses to the Company's opt-in partners' newsletters and other
promotions.

   Cash received in advance of advertising and opt-in services is recorded as
deferred revenue and recognized as revenue as services are performed.

 Concentration of Credit Risk

   Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash and cash equivalents, marketable
securities and accounts receivable.

   The Company's cash and cash equivalents are maintained at three U.S.
financial institutions. Deposits held with banks may exceed the amount of
insurance provided on such deposits. The majority of the Company's cash
equivalents are invested in short-term commercial paper.

   Revenue for the years ended December 31, 1997 and 1998 were concentrated as
follows (amounts represent the percentage of total revenue and accounts
receivable), respectively:

<TABLE>
<CAPTION>
                                                                     Revenue
                                                                  --------------
                                                                  For the year
                                                                      ended
                                                                  December 31,
                                                                  --------------
                                                                   1997    1998
                                                                  ------  ------
     <S>                                                          <C>     <C>
     Lowes.......................................................   100%    *
     The Home Depot..............................................   *       88.1%
     Netcentives.................................................   *       *
     PETsMART.com................................................   *       *
</TABLE>
--------
* Represents less than 10% of total.

   No one customer exceeded 10% of the Company's revenue and accounts
receivable at December 31, 1999.

 Advertising Costs

   Costs related to advertising and promotion of services is charged to sales
and marketing expense as incurred. Cash paid in advance of advertising and
services received is recorded as prepaid expenses which is amortized as
services are received. Advertising costs for the years ended December 31, 1997
and 1998 were considered immaterial. Advertising costs for the year ended
December 31, 1999 were approximately $33,906,000. At December 31, 1999,
approximately $6,312,000 of prepaid advertising expense is included in
prepaids and other current assets.

                                      F-9
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 Income Taxes

   Prior to November 1997, the Company was organized as an S Corporation and
taxable income was included in the individual tax returns of the stockholders.
In conjunction with the Company's preferred stock financing during 1997, the
Company terminated its Subchapter S corporation election for tax. The Company,
now a C corporation, is subject to federal and state income taxes and
recognizes deferred taxes using the liability approach under which deferred
income taxes are calculated based on the differences between the financial and
tax bases of assets and liabilities based upon enacted tax laws and rates
applicable to the periods in which the taxes become payable. The Company
provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.

   The provision for income taxes consists of the Company's current tax
provision (benefit) for federal and state income taxes and the changes in the
deferred tax asset and liability during the period.

 Stock Based Compensation

   The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Under the intrinsic value method of accounting
for stock-based compensation, when the exercise price of options granted to
employees is less than the estimated fair value of the underlying stock on the
date of grant, deferred compensation is recognized and is amortized to
compensation expense over the applicable vesting period.

 Impairment of Long-lived Assets

   The Company evaluates the recoverability of the carrying value of its long-
lived assets periodically. The Company considers historical performance and
anticipated future results in its evaluation of potential impairment.
Accordingly, when indicators of impairment are present, the Company evaluates
the carrying value of these assets in relation to the operating performance of
the business and future discounted and undiscounted cash flows expected to
result from the use of these assets. Impairment losses are recognized when the
sum of expected future cash flows are less than the assets' carrying value. No
such impairment losses have been recognized to date.

 Basic and Diluted Net Loss Per Common Share

   Basic net loss per common share is based on the weighted average number
shares of common stock outstanding during each year. Diluted net loss per
common share is based on the weighted average number of shares of common stock
outstanding during each year, adjusted for the effect of common stock
equivalents arising from the assumed exercise of stock options, if dilutive.

 Comprehensive Income

   The Company has adopted the accounting treatment prescribed by SFAS 130,
Comprehensive Income. The adoption of this statement had no impact on the
Company's financial statements because the Company did not have any other
comprehensive income components.

 Certain Risks and Uncertainties

   The Company is subject to all the risks inherent in an early stage business
in the technology industry. The risks include, but are not limited to, limited
operating history, limited management resources, reliance on

                                      F-10
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

distribution arrangements for software based products for revenue where
acceptance of the Company's service on the Internet is uncertain, reliance on
relationships with a limited number of customers, dependence on the Internet
and related security risks and the changing nature of the Internet industry.

 Segment Reporting

   In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 supercedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise, replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
No. 131 also requires disclosures about products and services, geographic areas
and major customers. The adoption of SFAS No. 131 did not have a material
effect on the results of operations or financial position. The Company operates
in the Internet and related services segment.

3. Accounts Receivable

<TABLE>
<CAPTION>
                                                                    December 31,
                                                                        1999
                                                                    ------------
     <S>                                                            <C>
     Accounts receivable...........................................  $7,020,256
     Allowance for doubtful accounts...............................    (493,992)
                                                                     ----------
     Accounts receivable, net......................................  $6,526,264
                                                                     ==========
</TABLE>

4. Property and Equipment

   Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                               December 31,
                                                            -------------------
                                                             1998       1999
                                                            -------  ----------
     <S>                                                    <C>      <C>
     Furniture and fixtures................................ $22,204  $  485,224
     Computer equipment and software.......................  32,529   4,918,138
     Leasehold improvements................................     --      523,027
                                                            -------  ----------
                                                             54,733   5,926,389
     Less: accumulated depreciation........................  (8,505)   (546,397)
                                                            -------  ----------
     Property and equipment, net........................... $46,228  $5,379,992
                                                            =======  ==========
</TABLE>

5. Borrowings

 Line of Credit

   In November 1998, the Company entered into a $600,000 working capital line
of credit with a bank. The line of credit was increased to $1,000,000 upon the
receipt of $4,000,000 from institutional venture capital investors in January
1999 in connection with the issuance of Series C mandatorily redeemable
convertible preferred stock. The interest rate on the line is the bank's prime
rate plus 1.0% per annum (8.75% at December 31, 1998 and 9.50% at December 31,
1999). The line of credit is collateralized by substantially all the Company's
assets, including intangible assets and future proceeds from such assets. Prior
to amendment in August 1999, the credit line included financial and other
covenants, including a requirement to maintain a monthly quick ratio of 1 to 1.
In March 1999, the working capital line of credit of $1,000,000 was reduced by
$150,000 which was allocated for a bank credit line.

                                      F-11
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   On August 19, 1999, the Company amended the $1,000,000 line of credit, which
includes $850,000 for working capital expenditures and $150,000 for a business
credit line, to be increased to $1,350,000 which includes $1,000,000 for
working capital expenditures, $250,000 for a business credit line, and a
$100,000 letter of credit for leased office space. On November 19, 1999, the
Company amended their line of credit, to be increased to $4,000,000 which
includes $3,650,000 for working capital expenditures, $250,000 for a business
credit line and a $100,000 letter of credit. The amended line expires on
November 17, 2000. No borrowings were outstanding under the line of credit as
of December 31, 1999.

   In connection with the amendment, the Company is no longer required to
maintain a monthly quick ratio financial covenant of 1 to 1. Fees paid to the
bank in relation to the amendment of the line and waiver of the quick ratio
financial covenant totaled $50,000.

 Note Payable

   On March 3, 1999, the Company entered into a $200,000 promissory note with
the same bank that the Company has the line of credit, for the purpose of
equipment and software purchases and general working capital. On November 10,
1999, the outstanding principal balance of the borrowings during the draw
period are payable monthly in 24 equal principal payments commencing on
December 10, 1999, bearing interest at 9.5% annually. All remaining principal
and accrued but unpaid interest is due on maturity of November 9, 2001. The
promissory note is collateralized under the same terms of the line of credit
discussed earlier and includes financial and other covenants, including a
requirement to maintain a minimum monthly quick ratio of 1.25 to 1. At December
31, 1999, $155,236 was outstanding under this agreement.

   On November 19, 1999, the Company entered into a $2,000,000 promissory note
with the same bank that the Company has a line of credit and $200,000
promissory note for the purpose of equipment and software purchases and general
working capital. The Company may draw from the note through August 19, 2000
(draw period). Interest during the draw period is due monthly beginning
December 19, 1999 at an annual interest rate of the bank's prime rate plus
0.5%. On August 20, 2000, the outstanding principal balance of the borrowing
during the draw period are payable monthly in 24 equal principal payments
beginning September 19, 2000. All remaining principal and accrued but unpaid
interest is due on maturity of August 19, 2002. The promissory note is
collateralized by the Company's accounts with the bank including checking,
savings, or other accounts and future accounts.

6. Mandatorily Redeemable Convertible Preferred Stock and Stockholders' Equity
(Deficit)

 Common Stock

   On August 9, 1996, the founders of the Company purchased 1,250 shares of the
Company's Class A common stock for $10,000 in connection with the Company's
formation.

   In June 1997, the founders were issued 374 shares of Class B common stock
for a combination of $50,000 in cash and services valued at $2,565. The
estimated fair value of services provided was determined by the Board of
Directors.

   On October 15, 1997, the Company completed a plan of recapitalization which
converted the 374 shares of Class B common stock to 536 shares of Class A
common stock. Subsequent to the conversion the Class B common stock was
retired.

   On November 12, 1997, the Company issued 1,618.6144 shares of common stock
for each share of Class A common stock held by stockholders at such date. Upon
the issuance of the 2,891,248 shares of common stock, 1,786 shares of Class A
common stock were retired.

                                      F-12
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   On November 12, 1997, the Company converted a $200,000, 7% Nonassignable
Convertible Note into 321,250 shares of common stock.

   On November 12, 1997, the Company issued one non-employee options to
purchase 62,500 shares of common stock for $100 in connection with a consulting
agreement for services to raise capital for the Company. These options had a
fair value of $38,000 which were recorded as direct issuance costs and offset
against the proceeds. The options were exercised on November 12, 1997. The
estimated fair value of the options were determined using the American Black-
Scholes Model.

   In June 1998, the Company purchased 62,500 shares of common stock at $0.01
per share from the founders of the Company. These treasury shares were re-
issued as result of one non-employee exercising a stock option granted during
1997 in the Series A mandatorily redeemable convertible preferred stock
issuance. The total exercise price was $1.00.

   On November 19, 1999, the Company sold 4,830,000 shares of common stock at
an initial offering price of $14.00 and raised net proceeds of $61,715,454.

 Mandatorily Redeemable Convertible Preferred Stock

   As of December 31, 1998, the Company had authorized two classes of
mandatorily redeemable convertible preferred stock: Series A and Series B.

   The Company issued 1,000,000 shares of Series A mandatorily redeemable
convertible preferred stock on November 12, 1997 for $1.00 per share. In
conjunction with this preferred stock sale, the Company issued warrants to
purchase 1,000,000 shares of Series B mandatorily redeemable convertible
preferred stock at $1.00 per share with an estimated fair value of $51,000
determined using the American Black-Scholes Model.

   On June 17, 1998, the Company issued 1,000,000 shares of Series B preferred
stock at $1.00 per share for total proceeds of $1,000,000 resulting from the
exercise of the Series B preferred stock warrants granted in 1997.

   On January 29, 1999, the Company issued 2,620,373 shares of Series C
convertible preferred stock at an approximate price of $1.53 per share and
total proceeds of $4,000,000.

   On May 28, 1999, the Company Amended and Restated its Articles of
Incorporation to authorize 2,252,874 shares of Series D mandatorily redeemable
convertible preferred stock and issued 2,252,874 shares of Series D convertible
preferred stock at an approximate price of $4.71 per share and total proceeds
of $10,600,000.

   On September 22, 1999, the Company amended and restated its Articles of
Incorporation to authorize 2,791,993 shares of Series E mandatorily redeemable
convertible preferred stock. On September 23, 1999, the Company issued
2,791,993 shares of Series E mandatorily redeemable convertible preferred stock
at an approximate price of $8.09 per share for total proceeds of approximately
$22.6 million.

   All series of manditorily redeemable convertible preferred stock had the
same redemption date and rights. The redemption price was equal to the original
issuance price, plus all accrued but unpaid dividends. For the years ended
December 31, 1998 and 1999, the preferred stock carrying value has been
accreted to increase the carrying value for cumulative dividends and a portion
of direct issuance costs. All series of mandatorily redeemable convertible
preferred stock had cumulative preferred dividends of $0.08 per share annually.

                                      F-13
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   On November 19, 1999, concurrent with the Company's initial public offering,
the Company converted all outstanding shares of Series A, B, C, D and E
preferred stock. At December 31, 1998 the conversion ratio was 1 to 1. During
1999, the conversion ratio was adjusted to 5 for 4, giving effect to the
October 21, 1999 common stock split.

7. Stock Options

 Stock Option Plan for Employees and Non-employees

   During 1998, the Company adopted the 1998 Stock Option Plan (the Plan),
under which incentive stock options and nonstatutory stock options may be
granted to employees, directors and consultants of the Company.

   The Plan is administered by a committee appointed by the Board of Directors.
The options are not transferable and are subject to various restrictions
outlined in the Plan. The committee determines the number of options granted to
employees, directors, or consultants, the vesting period and the exercise
price. The exercise price for stock options granted shall not be less than the
fair value per share of common stock on the date of such grant for incentive
stock options and not less than 85% of the fair value per share of common stock
on the date of such grant for nonstatutory stock options.

   The Board of Directors had reserved originally 776,250 shares of common
stock to grant options under the Plan. Options granted under the Plan vest over
a four year period and expire ten years after the grant date. In the January
29, 1999 and May 28, 1999 Amendments to the Articles of Incorporation, the
number of common stock shares reserved under the Plan was increased to
1,420,070 and 2,045,070 shares, respectively. The reserved shares were further
increased by 875,000 shares effective September 22, 1999 resulting in a total
of 2,920,070 shares of common stock available and reserved for issuance under
the plan.

 Accounting for Stock Options Issued to Employees

   The following table summarizes stock option activity for option grants:

<TABLE>
<CAPTION>
                                                                    Option Price
                                        Number of  Weighted Average  Range Per
                                         Shares     Exercise Price     Share
                                        ---------  ---------------- ------------
   <S>                                  <C>        <C>              <C>
   December 31, 1997...................       --        $ --        $        --
   Grants..............................   469,000        0.80               0.80
   Exercises...........................       --          --                 --
   Cancellations.......................   (15,625)       0.80               0.80
                                        ---------       -----       ------------
   December 31, 1998...................   453,375        0.80               0.80
   Grants.............................. 2,971,684        7.15         0.80-35.50
   Exercises...........................  (112,500)       0.80               0.80
   Cancellations.......................  (624,382)       1.99         0.80-10.00
                                        ---------       -----       ------------
   December 31, 1999................... 2,688,177       $7.55       $0.80-$35.50
                                        =========       =====       ============
</TABLE>

   These options will expire if not exercised at specific dates ranging from
March 2008 to December 2009 and the weighted-average remaining contractual life
of the options outstanding is approximately ten years. At December 31, 1998,
there were no outstanding options which were exercisable. At December 31, 1999,
392,883 outstanding options were exercisable. Management estimates that stock
options granted prior to December 31, 1998 have been either equal to or in
excess of the estimated fair value of the underlying common stock and therefore
no compensation expense was recognized. During 1999 and prior to the Initial
Public Offering, the Company has estimated the fair value of the underlying
common stock on the date of grant

                                      F-14
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

was, in some instances, in excess of the exercise price for the options granted
during the year ended December 31, 1999. As a result, the Company recorded
deferred compensation of $5,701,934 for the year ended December 31, 1999. This
amount was recorded as a reduction to stockholders' equity (deficit) and is
being amortized as a charge to operations over the vesting period of the stock
options. For the year ended December 31, 1999, the Company recognized $625,042
of employee stock compensation expense related to these options.

   Annual amortization of deferred stock compensation for stock options
outstanding as of December 31, 1999, is approximately $1,425,500, $1,425,500,
$1,425,500, and $800,400, for the years ending December 31, 2000, 2001, 2002
and 2003, respectively.

   For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the American Black-Scholes option-pricing
model with the following weighted average assumptions used for stock options
granted in 1998 and 1999; no annual dividends, volatility of 0% and 207%, risk-
free interest rate ranging from 4.66% to 6.06% and expected life of one to four
years. The weighted-average fair value of the stock options granted in 1998 and
1999 were $0.80 and $7.55, respectively.

   Under the above model, the total value of the stock options granted in 1998
and 1999, respectively was $53,704 and $3,660,770, respectively, which would be
amortized on a pro forma basis over the option vesting period. SFAS No. 123
"Accounting for Stock-Based Compensation" encourages adoption of a fair value
based method for valuing the cost of stock-based compensation. However, it
allows companies to continue to use the intrinsic value method for options
granted to employees and disclose pro forma net loss per share and loss per
share. Had the Company determined compensation cost for this plan in accordance
with SFAS No. 123, the Company's pro forma net loss for the years ended
December 31, 1998 and 1999, would have been $1,956,067, and $32,213,549,
respectively, and the pro forma basic and diluted loss per common share would
have been $0.65, and $6.38, respectively.

8. Income Taxes

   The provision (benefit) for income taxes consists of the following for the
following periods:

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                             ----------------------------------
                                               1997       1998         1999
                                             ---------  ---------  ------------
   <S>                                       <C>        <C>        <C>
   Current provision........................ $     --   $     --   $        --
   Deferred benefit.........................  (153,363)  (638,315)  (11,864,132)
                                             ---------  ---------  ------------
                                              (153,363)  (638,315)  (11,864,132)
   Change in valuation allowance............   153,363    638,315    11,864,132
                                             ---------  ---------  ------------
   Total provision for income taxes......... $     --   $     --   $        --
                                             =========  =========  ============
</TABLE>

   The Company's deferred tax assets at December 31, 1998 and 1999, which
consist primarily of net operating loss carryforwards are $791,678, and
$12,655,810 respectively, are offset by a full valuation allowance. Based upon
the Company's limited operating history and management's expectation of future
profitability, management believes, based upon the evidence available, that a
full valuation allowance is necessary. The Company's net operating loss
carryforwards of $1,922,365 and $28,074,856 at December 31, 1998 and 1999,
respectively, begin expiring in 2012.

                                      F-15
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


9. Leases

   During June 1999, the Company entered into a lease for office space in
Herndon, Virginia. The lease ends August 31, 2004 and has minimum annual lease
payments of $226,695 for the first year and are increased an annual rate of
3.0%. In accordance with the lease agreement, the Company is required to have a
letter of credit as a security deposit throughout the lease term. On June 18,
1999, the Company entered into a letter of credit for $100,000, which expires
November 11, 2000. The letter automatically renews on an annual basis if notice
is not received within 60 days of the anniversary date until final expiration
on November 11, 2004.

   In addition, during August 1999, the Company entered into a one-year lease
for office space in Herndon, Virginia which has minimum annual payments of
$51,600 and ends during August 2000. This lease was previously a month-to-month
lease.

   In addition, during December 1999, the Company entered into a one-year lease
for office space in Herndon, Virginia which has minimum annual payments of
$30,563 and ends during December 2000.

   Future minimum lease payments under non-cancelable operating leases as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                        Amount
                                                                      ----------
      <S>                                                             <C>
      2000........................................................... $  291,042
      2001...........................................................    237,290
      2002...........................................................    244,409
      2003...........................................................    251,741
      2004...........................................................    149,793
                                                                      ----------
                                                                      $1,174,275
                                                                      ==========
</TABLE>

   Rent expense was $0, $38,317, and $177,930 for the years ended December 31,
1997, 1998 and 1999, respectively.

   In December 1999, the Company entered into a capital lease agreement for
approximately $1.6 million in exchange for server equipment. The lease term
commenced in December 1999 and terminates on January 5, 2002. Upon the
expiration of the lease term, the Company has the option to purchase the leased
equipment for $1. Monthly payments are $75,476 commencing on January 5, 2000.
The Company is obligated for the following minimum capital lease payments that
have non-cancelable lease terms in excess of one year:

<TABLE>
<CAPTION>
                                                                       Amount
                                                                     ----------
      <S>                                                            <C>
      2000.......................................................... $  905,708
      2001..........................................................    981,185
                                                                     ----------
      Total minimum lease payments..................................  1,886,893
        Less: amount representing interest..........................    256,748
        Less: current portion.......................................    724,111
                                                                     ----------
      Long-term portion of capital lease obligation................. $  906,034
                                                                     ==========
</TABLE>

10. Related Party Transactions

   During 1997, two stockholders loaned $53,319 to assist the Company in paying
its obligations. The Company repaid $53,919 during 1997. At December 31, 1997,
an outstanding loan balance of $24,636 was forgiven by the stockholders and
recorded as additional paid-in capital by the Company.

                                      F-16
<PAGE>

                             LIFEMINDERS.COM, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   During 1998 and 1999, the Company incurred $84,000 and $84,000,
respectively, in contractor expenses from a company in which a shareholder of
the Company is also the President of the company which that provided the
services.

   During 1998 and 1999, the Company incurred $18,000 and $202,644,
respectively, in consulting expenses from a company in which a shareholder of
the Company is also the President of the company which provided the services.
During 1999, the Company paid $150,000 to terminate the consulting agreement.

11. Basic and Diluted Loss per Common Share:

   The Company implemented SFAS No. 128, Earnings Per Share, in 1998, which
requires certain disclosures relating to the calculation of earnings per common
share. The following is a reconciliation of the numerators and denominators of
the basic and diluted loss per common share computations.

   Basic and diluted net loss per common share:

<TABLE>
<CAPTION>
                                              Year ended December 31,
                                         ------------------------------------
                                           1997        1998          1999
                                         ---------  -----------  ------------
      <S>                                <C>        <C>          <C>
      Net loss available to common
       stockholders..................... $(479,100) $(2,104,243) $(32,764,939)
                                         =========  ===========  ============
      Weighted-average shares of common
       stock shares outstanding......... 2,530,228    3,275,000     5,230,826
                                         =========  ===========  ============
      Basic and diluted net loss per
       common share..................... $   (0.19) $     (0.64) $      (6.26)
                                         =========  ===========  ============
</TABLE>

   For the year ended December 31, 1997, 1,000,000 shares of preferred stock,
which are convertible into 1,250,000 shares of common stock, are not included
in the computation of diluted earnings per share as a result of their
antidilutive effect. For the year ended December 31, 1998 and 1999, options to
purchase 453,375 and 2,688,177 shares of common stock at weighted average
exercise prices of $0.80 and $7.55 per share, respectively. For the year ended
December 31, 1998, 2,000,000 shares of preferred stock, which are convertible
into 2,500,000 shares of common stock, are not included in the computation of
diluted earnings per share as a result of their antidilutive effect.

12. Commitments

   During the year ended December 31, 1999, the Company entered into various
agreements for future advertising which aggregate to approximately $25.7
million. As of December 31, 1999, the Company has prepaid approximately $6.3
million in connection with these agreements. The term of the agreements range
from one to nine months.

13. Subsequent Events

 Secondary Public Offering

   On February 8, 2000, the Company completed its secondary public offering of
2,767,500 shares of common stock at a public offering price of $33.00 per share
and raised net proceeds of approximately $86.1 million.

 Legal Proceeding

   On February 4, 2000, the Company was sued for breach of contract and
misappropriation of trade secrets. The lawsuit alleges that the Company
breached the terms of a Non-Disclosure Agreement and used confidential business
information in the development of a new service offering. The Company denies
the allegations, believes they are without merit and intends to defend the
lawsuit vigorously. The Company believes the outcome of this lawsuit will not
have a material impact on its operations, cash flows or financial position.

                                      F-17
<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of LifeMinders.com, Inc.:

   Our audits of the financial statements referred to in our report dated
February 10, 2000, appearing in this Annual Report on Form 10-K of
LifeMinders.com, Inc. also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.

                                          /s/ PricewaterhouseCoopers LLP
McLean, Virginia
February 10, 2000



                                      S-1
<PAGE>

                                  SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
                           Balance at Additions
                           Beginning  Charged to            Balance at End
       Description         of Period   Expenses  Deductions   of Period
       -----------         ---------- ---------- ---------- --------------
<S>                        <C>        <C>        <C>        <C>
Allowance for doubtful
 accounts
  December 31, 1997.......   $  --    $     --     $ --       $     --
  December 31, 1998.......      --          --       --             --
  December 31, 1999.......      --      493,992      --         493,992
</TABLE>

                                      S-2
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Herndon,
Virginia on the 24th day of February 2000.

                                          LIFEMINDERS.COM, INC.

                                               /s/ Stephen R. Chapin, Jr.
                                          By: _________________________________
                                                   Stephen R. Chapin, Jr.
                                               President and Chief Executive
                                                          Officer

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Stephen R. Chapin, Jr. and Joseph S.
Grabias and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Annual Report Form 10-K, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
             Signature                           Title                   Date
             ---------                           -----                   ----

<S>                                  <C>                           <C>
   /s/ Stephen R. Chapin, Jr.        Chairman of the Board         February 24, 2000
____________________________________  President and Chief
       Stephen R. Chapin, Jr.         Executive Officer
                                      (Principal Executive
                                      Officer)

     /s/ Joseph S. Grabias           Vice President and Chief      February 24, 2000
____________________________________  Financial Officer
         Joseph S. Grabias            (Principal Financial
                                      Officer)

    /s/ E. Rogers Novak, Jr.         Director                      February 24, 2000
____________________________________
        E. Rogers Novak, Jr.

      /s/ B. Gene Riechers           Director                      February 24, 2000
____________________________________
          B. Gene Riechers

    /s/ Douglas A. Lindgren          Director                      February 24, 2000
____________________________________
        Douglas A. Lindgren

      /s/ Philip D. Black            Director                      February 24, 2000
____________________________________
          Philip D. Black

   /s/ Jonathan B. Bulkeley          Director                      February 24, 2000
____________________________________
        Jonathan B. Bulkeley
</TABLE>

<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit                                                                   Page
   No.                             Description                             No.
 -------                           -----------                             ----
 <C>     <S>                                                               <C>
   3.1   Restated Certificate of Incorporation.*

   3.2   Bylaws.*

   4.1   Second Amended and Restated Registration Rights Agreement,
          dated as of September 23, 1999, among the Company and the
          Series E investors.**

  10.1   E-Commerce Agreement between the Company and Lycos, Inc. dated
          as of August 25, 1999. (Portions of this exhibit have been
          omitted pursuant to a request for confidential treatment and
          have been filed separately with the Commission)**

  10.2   Office Building Lease Agreement between the Company and Sovran
          Limited Company dated June 11, 1999.**

  10.3   Trustee License Agreement between the Company and Trust
          Universal Standards in Electronic Transactions dated March 12,
          1999.**

  10.4   Starter Kit Loan and Security Agreement, as amended, between
          the Company and Imperial Bank dated November 10, 1998.**

  10.5   Employment Agreement between the Company and Stephen R. Chapin,
          Jr. dated November 12, 1997.**

  10.6   Employment Agreement between the Company and John Chapin dated
          November 1, 1997.**

  10.7   Release and Settlement dated July 15, 1999 among the Company,
          Frans Kok and Johan Hekeelar, Inc.**

  10.8   Consulting Agreement between the Company and Lordhill Company
          dated June 1, 1997, as amended on November 18, 1997, as
          amended on March 27, 1998, and as amended on January 29,
          1999.**

  10.9   The Company's 1998 Stock Option Plan.**

  10.10  Form of Lock-up Agreement between the Company and Hambrecht &
          Quist LLC, FleetBoston Robertson Stephens Inc., Thomas Weisel
          Partners LLC and PaineWebber Incorporated.**

  23.1   Consent of PricewaterhouseCoopers LLP, independent accountants.

  24     Power of Attorney (filed as part of signature page).

  27     Financial Data Schedule.
</TABLE>
--------
  * Incorporated by reference to the Company's Registration Statement on Form
    S-1 as filed with the SEC on September 24, 1999. (File No. 333-87785).

 ** Incorporated by reference to Amendment No. 1 to the Company's Registration
    Statement on Form S-1 as filed with the SEC on October 29, 1999 (File No.
    3233-87785).

*** Incorporated by reference to Amendment No. 3 to the Company's Registration
    Statement on Form S-1 as filed with the SEC on November 17, 1999 (File No.
    333-87785).