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================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                    FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2001

                             Commission File Number:

                                e-CENTIVES, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                      52-1988332
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

               6901 ROCKLEDGE DRIVE, 7TH FLOOR, BETHESDA, MD 20817
                    (Address of principal executive offices)

                                 (240) 333-6100
              (Registrant's telephone number, including area code)
                                 ---------------

Securities registered pursuant to Section 12(b) of the Act:   Not Applicable

Securities registered pursuant to Section 12(g) of the Act:   Not Applicable

                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of class)

     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 and (2) has been subject to such filing
requirements for the past 90 days. [ ]Yes [X ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]

     The aggregate market value of common stock held by non-affiliates of the
registrant, based upon the closing price of the registrant's common stock on the
SWX New Market of the SWX Swiss Exchange as of April 1, 2002 is $25,527,830 (1).

(1) Assumes an exchange rate of 1.68501 Swiss Francs per one U.S. Dollar as of
April 1, 2002.

     As of April 1, 2002, there were 37,732,039 shares of the registrant's
common stock outstanding.
================================================================================



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                                e-CENTIVES, INC.
                                    FORM 10-K

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                                     PAGE
<S>                                                                                                     <C>
PART I
          Item 1.    Business.......................................................................      3
          Item 2.    Properties.....................................................................     24
          Item 3.    Legal Proceedings..............................................................     25
          Item 4.    Submission of Matters to a Vote of Security Holders............................     25
PART II
          Item 5.    Market for Registrant's Common Stock and Related Stockholder Matters...........     26
          Item 6.    Selected Financial Data........................................................     28
          Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
                     Operations.....................................................................     29
          Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.....................     42
          Item 8.    Financial Statements and Supplementary Data....................................     42
          Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
                     Disclosure.....................................................................     42
PART III
          Item 10.   Directors and Executive Officers of the Registrant.............................     43
          Item 11.   Executive Compensation.........................................................     45
          Item 12.   Security Ownership of Certain Beneficial Owners and Management.................     47
          Item 13.   Certain Relationships and Related Transactions.................................     48
PART IV
          Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............     51
SIGNATURES..........................................................................................     52

</Table>


              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Except for any historical information, the matters we discuss in this Form
10-K concerning our company contain forward-looking statements. Any statements
in this Form 10-K that are not statements of historical fact, are intended to
be, and are, "forward-looking statements" under the safe harbor provided by
Section 27(a) of the Securities Act of 1933. Without limitation, the words
"anticipates," "believes," "estimates," "expects," "intends," "plans" and
similar expressions are intended to identify forward-looking statements. The
important factors we discuss below and under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as other factors identified in our filings with the SEC and those presented
elsewhere by its management from time to time, could cause actual results to
differ materially from those indicated by the forward-looking statements made in
this Form 10-K. The Company assumes no obligation to update any forward-looking
information to reflect actual results or changes in the factors affecting such
forward-looking information.



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                                e-CENTIVES, INC.

                                     PART I

ITEM 1- BUSINESS

OVERVIEW

     We provide interactive marketing technologies and services. Businesses rely
on our broad range of solutions to acquire and retain customers. We provide
online marketing and commerce capabilities and solutions for companies across a
range of industries including the Internet (portals and destination sites),
retail, banking, insurance, and telecommunications. With our proprietary
technology, we power acquisition and retention solutions for companies that do
business with millions of Internet users every day. Our suite of solutions
includes promotions network, member services, commerce network, commerce engine,
outsourced e-mail marketing and online promotions system.

     o    Our promotions network provides marketers with the ability to deliver
          targeted, personalized offers to millions of consumers across our
          network of partner sites and via e-mail.

     o    Our member services solutions enable leading Internet sites to provide
          their site visitors with easy and convenient access to personalized
          promotional offers. By delivering added value to their consumers, our
          member services solutions have proven to be valuable tools that
          increase registration and encourage return site visits.

     o    Our commerce network allows merchants to reach millions of online
          consumers by integrating their entire product catalog into leading
          search and shopping services used by top Internet sites. Our
          technology and network of sites enable merchants to reach consumers
          where they actively search for products and when they are most likely
          to buy.

     o    Our commerce engine provides Internet sites with leading product
          search and comparison shopping tools. From dynamic e-marketplaces to
          customized product search applications, these solutions help
          businesses provide their users with the support tools they need to
          make smarter purchase decisions.

     o    Our outsourced e-mail marketing solutions enable companies to build
          ongoing, personalized dialogs with their audiences. Our systems can
          maximize effectiveness of e-mail marketing campaigns through testing
          and targeting and are proven to raise response and conversion rates,
          enabling our clients to boost sales, strengthen brands and build
          loyalty with their customers.

     o    Our online promotions system offers solutions for creating, targeting,
          publishing and tracking coupons and promotional incentives. Our system
          can deploy and manage promotions, and track individual consumer's
          responses to offers for manufacturers, retailers, and websites.

     On March 28, 2001, we acquired the Commerce Division from the Inktomi
Corporation in a purchase business combination for approximately $12.9 million,
consisting of 2,168,945 shares of our common stock valued at approximately $11.8
million and about $1.1 million in acquisition costs. A total of 2,551,700 shares
of our common stock were issued with 40% placed into escrow. Thirty eight
percent of the escrow shares, or 382,755, are to be released based upon the
achievement of contractually defined revenue and performance targets for the
Commerce Division. The remaining 637,925 of escrow shares are held in
satisfaction of any potential indemnity claims and will be released within
contractually agreed upon time frames. As part of the purchase price, we also
issued to Inktomi Corporation a warrant to purchase an additional 1,860,577
shares of our common stock upon the achievement of additional revenue targets
for the Commerce Division at the end of 12 months following the closing of this
acquisition. Based upon the revenue through December 31, 2001, we do not
anticipate that Inktomi will be eligible to receive the shares of common stock
and warrants that are contingent upon the achievement of revenue targets for the
Commerce Division. In connection with the acquisition, we entered into a license
agreement and reseller agreement with Inktomi Corporation. Under the terms of
the license agreement, Inktomi Corporation perpetually licensed certain software
and technology to us to be used in the acquired business. Pursuant to the
reseller agreement, Inktomi Corporation will resell certain products of the
acquired business for a period of twelve months from the closing. In addition,
commensurate with the acquisition, we hired 70 of Inktomi's Commerce Division
employees and entered into a sublease agreement with Inktomi Corporation for
approximately 31,000 square feet of office space in Redwood Shores, California.

     On December 3, 2001, we entered into an Asset Purchase Agreement (the
"Agreement") with BrightStreet.com, Inc.


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("BrightStreet.com") whereby we acquired substantially all of BrightStreet.com's
assets and certain liabilities. We acquired BrightStreet.com for approximately
$2.2 million, consisting of approximately $1.7 million in cash, a guaranteed
warrant to purchase 500,000 shares of our common stock valued at approximately
$185,000, a contingent performance-based warrant to purchase up to 250,000
shares of our common stock and about $335,000 in acquisition costs. The cash
payments consisted of an $825,000 payment at closing and approximately $843,000
in cash advances to fund BrightStreet.com's working capital under the terms of a
Management Services Agreement. The guaranteed warrant is exercisable from
June 3, 2002 through December 3, 2005 at an exercise price of $0.5696 per share.
The performance-based warrant is exercisable, in whole or in part, until
December 3, 2005 based upon the achievement of certain performance targets at
an exercise price of $2.44 per share.

     In conjunction with the Agreement, we entered into a Patent Assignment
Agreement (the "Assignment") with BrightStreet.com. Pursuant to the
Assignment, BrightStreet.com has agreed to assign to us all right, title and
interest in and to all the issued and pending BrightStreet.com patents (the
"Patents"), subject to certain pre-existing rights granted by
BrightStreet.com to third parties ("Pre-existing Rights"), provided we make
certain payments to BrightStreet.com by December 3, 2005 (the "Payments"). If
we make such Payments by that date, we shall own all right, title and
interest in and to the Patents, subject to the Pre-existing Rights. Until
such Payments are made, we have, subject to the Pre-existing Rights, an
exclusive, worldwide, irrevocable, perpetual, transferable, and sublicensable
right and license under the Patents. Until we take title to the Patents, we
may not grant an exclusive sublicense to the Patents to any unaffiliated
third party. In the event we do not make the Payments by December 3, 2005, we
shall retain a license to the Patents, but the license shall then convert to
a non-exclusive license.

     In exchange for the rights granted under the Assignment, beginning
December 2002, we are obligated to pay BrightStreet.com ten percent of
revenues received that are directly attributable to (a) the licensing or sale
of products or functionality acquired from BrightStreet.com, (b) licensing or
royalty fees received from enforcement or license of the Patents covered by
the Assignment, and (c) licensing or royalty fees received under existing
licenses granted by BrightStreet.com to certain third parties. If the total
transaction compensation paid, as defined by the Agreement, at any time prior
to December 3, 2005 exceeds $4,000,000, the Payments will be deemed to have
been made. We also have the right, at any time prior to December 3, 2005, to
satisfy the Payments by paying to BrightStreet.com the difference between the
$4,000,000 and the total compensation already paid.

INDUSTRY BACKGROUND

     The Internet has emerged as a powerful marketing medium that allows
millions of consumers and marketers to conduct business and interact with each
other in unprecedented ways. Early online marketing strategies were heavily
focused on customer acquisition, optimizing the emerging medium's inherent
capacity to build brand awareness, advertise products and services, and promote
purchases. With the exponential increases in the volume of sites and the ease
with which consumers could navigate between them, online marketers turned to
customer retention and loyalty-building efforts to differentiate themselves from
the competition.

     The Internet is particularly well suited to direct marketers because of its
ability to access both broad audiences, as well as precisely defined groups. As
a result, the Internet provides marketers with opportunities to identify and
attract customers, as well as target specific types of users and collect data on
their preferences. At the same time, the Internet appeals to consumers because
it offers more individual control over marketing messages. The growth of the
Internet has encouraged both e-commerce and traditional brick and mortar
companies to spend more of their marketing budgets via the Internet. We believe
there is a need for a marketing infrastructure that could satisfy the objectives
of both marketers and consumers, which would enable businesses to acquire and
retain customers, yet operate from a consumer-centric approach that would
provide relevance and meaningful value to the individual user.

OUR SOLUTIONS

    Our PROMOTIONS NETWORK solution makes it easy for merchants to reach
millions of online shoppers and build profitable relationships with them.
It allows merchants to deliver promotions to their target audience from our
database of pre-qualified consumers across our network of Internet sites or
via opt-in e-mail. Our database is composed of millions of online consumers
who have specified their shopping interests and demographics when they
registered at one of our network partner sites. These consumers then receive
and access the merchants' offers right at that network site or via email, so
offers are always ready to redeem when they are ready to shop.

     Our MEMBER SERVICES solution is a sophisticated online promotional
infrastructure that Internet sites can use as a membership benefit to attract
and retain their users. Our web-based application is integrated with Internet
sites in order to give site visitors easy and convenient access to personalized
promotional offers from top merchants. When visitors register at these network
partner sites, they can opt-in for special offers and fill out a personal
profile indicating their shopping preferences and interests. Every person who
signs up for the e-centives service gets their own online organizer, where their
personalized offers are stored and ready to redeem when they are ready to shop.
Our solution can be customized to the site's individual requirements, including
categories, e-mail, and content.

     Our COMMERCE NETWORK keeps merchants' products in front of millions of
online shoppers on some of the Web's well-known sites, including AT&T and
WashingtonPost.com. Using keywords or brand names, consumers can search for
products and immediately receive the most relevant matches that include key
product information, images and the applicable store name. When they are ready
to buy, shoppers click through directly to the merchant's site to complete the
transaction. Our services can also motivate shoppers to buy


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products with our built-in product merchandising capabilities, which can be used
to drive impulse purchases by showcasing featured products across commerce
network sites.

     Our COMMERCE ENGINE is a scalable, outsourced infrastructure that enhances
Internet sites' content offering with a full-service product search and shopping
experience. Users have access to millions of products from hundreds of
merchants, plus helpful information to make more informed purchase decisions.
The COMMERCE ENGINE can be provided a Web-based or wireless commerce application
and is deployed as a private-label hosted solution with fully configurable
functions and features to meet specific needs.

    Our outsourced E-MAIL MARKETING solutions enable businesses to engage
customers and prospects with highly relevant messages that elicit the responses
that they are after. Our system provides a comprehensive technology platform
that leverages consumer data to create campaigns that resonate with the
audiences on an individual level. Our personalization and dynamic messaging
capabilities allow for targeting of content and creates unique messages based
on various selected variables. Our real-time, Web-based activity reports reveal
key details to help measure and evaluate all aspects of campaigns, capturing
activity data down to the user level, enabling the creation of effective
follow-up campaigns based on consumer behavior.

    Our online PROMOTIONS MANAGEMENT is a patented technology for companies to
identify, build and manage consumer databases with precise consumer purchase
profiles. This technology and infrastructure is used for powering a variety of
promotional offerings, including coupons, rebates, sales circulars, surveys,
trial offers and loyalty programs. Our system can deliver secure, customized,
fully trackable marketing programs and promotions that drive offline sales and
help identify various consumer segments and analyze their purchase behavior. Our
system enables businesses to gain insights about their consumer preferences and
motivations, and enhance consumer relationships with rich data modeling and
sophisticated targeting.

OUR PRODUCTS AND SERVICES

    We launched our direct marketing services in November 1998 by delivering
e-centives through our PROMOMAIL, PROMOCAST and PROMOCOMMERCE services. Between
November 1998 and June 1999, while we were introducing our PROMOTIONS NETWORK
system, we allowed marketers to use our direct marketing system at no charge. We
began generating revenue in the third quarter of 1999, with 100% of the revenue
in 1999 generated from the delivery of e-centives. In conjunction with the
acquisition of the Commerce Division, the COMMERCE ENGINE and COMMERCE NETWORK
began generating revenue in late March 2001. In August 2001, we started
producing revenue from our E-MAIL MARKETING technology services, and through the
acquisition of BrightStreet.com in December 2001, we began generating revenue by
providing online PROMOTIONS MANAGEMENT solutions.

                          OUR PROMOTIONS NETWORK SYSTEM

    We maintain a comprehensive direct marketing system designed to enable
marketers to access a database of consumers across the web sites of our network
partners and by e-mail. Our system includes a web-based application that enables
consumers to register to receive promotional offers at our network partners' web
sites or through our web site. Our members provide demographic information and
product category interests in return for targeted offers. Our system then
delivers offers for products and services directly to the member's account or
through e-mail. Our direct marketing system is designed to provide a
comprehensive solution for each of three constituencies: marketers, network
partners and members. We provide proprietary products and services to meet the
needs of each constituency in order to effectively deliver promotions to a
targeted audience.

    SERVICES. Through our PROMOTIONS NETWORK, we offer marketers the following
        direct marketing services: PROMOMAIL, PROMOCAST and PROMOCOMMERCE. When
        marketers purchase any of these services, we assist them in launching
        their promotional campaigns quickly and easily. Marketers typically use
        our client services team to create and distribute their offers. Over the
        past few years, e-mail has become the predominant Internet application
        as measured by the percentage of users and total message volume online.
        Due to its targeting and personalization capabilities, and relatively
        low cost of implementation, the use of e-mail as a marketing vehicle has
        significantly increased as a percentage to total online marketing
        dollars. E-mail marketing is also flexible for both customer acquisition
        and retention. Because of the increased interest in e-mail marketing,
        sales of our PROMOMAIL services has become a much higher percentage of
        our direct marketing services revenue, a trend that we expect to
        continue.

          o    Our PROMOMAIL service consists of targeted e-mails highlighting a
               marketer's specific promotions. Marketers who contract to use the
               PROMOMAIL service participate in mailings to a group of members
               based upon those members' preferences. Marketers can purchase
               this service on a fixed fee basis or on a performance basis. For
               the fixed fee contracts, participating marketers are charged a
               fixed fee for each member to whom the e-mail is sent and revenue


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               related to the service is recognized upon transmission of the
               e-mail. When marketers purchase the PROMOMAIL service on a
               performance basis, revenue is based solely on the actions of our
               members. We earn a contractually specified amount based on the
               number of members who click on the offer or other specified link,
               the number of purchases by our members, or the amount of sales
               generated by our members. Revenue is recognized upon the
               click-through or upon notification by the marketer of the number
               or amount of applicable sales.

          o    Marketers who subscribe to the PROMOCAST service enter into
               fixed-fee contracts for our delivery of either a specified or
               unlimited number of e-centives to the accounts of a targeted
               group of members over the contractual period. Once a member
               receives and clicks on the offer, our system links the member
               directly to the appropriate page within the marketer's site. The
               term of these contracts is typically one year or less. Each
               e-centive has an expiration date, typically 30 days from the date
               the e-centive is placed in a member's account. An e-centive is
               considered delivered when a member visits his or her account.
               Because we have an obligation to maintain the e-centive on our
               system until it expires, we recognize revenue upon expiration of
               the delivered e-centive. Revenue related to delivery of an
               unlimited quantity of e-centives is recognized ratably over the
               expected term of the customer relationship. We currently do not
               guarantee the delivery of the specific number of e-centives that
               the marketer purchases under these contracts. Under these
               contracts, if there are any remaining e-centives not used by the
               marketer at the end of the contract period, those unused
               e-centives are forfeited.

          o    Our PROMOCOMMERCE service consists of several components
               including a PROMOCAST package, a perpetual software license and
               maintenance on such software. Revenue related to the incorporated
               PROMOCAST package is recognized ratably over the expected term of
               the customer relationship. The software components enable the
               subscribing merchant's site to recognize our members when they
               enter into the merchant's web site and automatically detect,
               highlight and apply relevant e-centives during the shopping and
               purchase process. The maintenance component provides subscribing
               merchants with product updates and telephone support services.
               Our customer support contracts typically have a one-year term,
               and revenue is recognized ratably over the expected term of the
               customer relationship.

    MARKETERS. During the year ended December 31, 2001, we delivered e-centives
        for over 60 marketers generating approximately $1.7 million in revenue.
        Below is a list of some of our clients for whom we delivered e-centives
        during the year ended December 31, 2001, none of whom accounted for more
        than 5% of our revenue.

               2nd Story Software     Dell Computer        E*Trade
               eVineyard              Franklin Covey       Gateway
               Hallmark Flowers       Marshalls            Northwest Airlines
               Office Depot           OfficeMax            Overstock.com
               Rogaine                Sears                Sprint
               Staples                Tupperware           Walmart

    NETWORK PARTNERS. We maintain relationships with network partners that
        operate high-traffic portal, content and community web sites. Our
        application provides network partners with the ability to present offers
        to their users without the costs and challenges of building and
        maintaining their own online direct marketing system. We provide and
        maintain the underlying technology, host and serve co-branded pages,
        create and deliver offers and provide consulting services and member
        support.

           Our network partners' users can become e-centives members during the
        registration process of some of our network partners' web sites.
        Alternatively, members can join our system through various other access
        points throughout the network partner's web site. In either case, our
        service is delivered on a co-branded basis maintaining the look and feel
        of the network partner's web site.

           During 2001, we provided services through the following network
        partners:

               AllCommunity              Ask Jeeves          Care2
               Chase Manhattan Bank      Classmates Online   CoVia
               DesktopDollars            Excite              Intuit
               IVillage                  LifeMinders         Prodigy Internet
               ThirdAge Media            Uproar              USATODAY.com
               ZDNet



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    MEMBERS. As of December 31, 2001, we maintained over 12.2 million e-centives
        accounts. We provide our members with control over many aspects of our
        system, including what categories of offers they receive and when those
        offers are redeemed. To join our system, consumers sign-up for and
        personalize their e-centives account through any of our network partner
        web sites or our web site. When creating or updating their account, our
        members provide demographic information and select categories in which
        they have an interest. These categories currently include:

               Automotive             Groceries             Pets
               Baby Stuff             Health & Beauty       Services
               Books & Magazines      Hobbies               Sports & Fitness
               Computers              Home & Gardening      Toys & Games
               Electronics            Special Events        Travel
               Fashion                Music & Video         Luxury & Designer
               Gifts & Gourmet        Office

           Based on this information, we place promotions in the accounts of our
        members. Members may also elect to receive e-mails that highlight
        specific promotions and which are automatically placed in the member's
        account for their convenience.

           Our system then allows members to easily store, review, delete or
        redeem their e-centives. Member accounts are accessible at the web sites
        of the network partners through which the member joined or through our
        web site. Members may also opt to have their e-centives e-mailed to them
        on a periodic basis, the frequency of which is determined by the member.
        Unless they are redeemed or deleted, e-centives are automatically saved
        in the member account until they expire. Members can browse their
        personal account organizer by category or search for specific e-centives
        by marketer name or keyword. Each e-centive includes the marketer's
        logo, a description of the promotion being offered and an expiration
        date. Members click on the e-centive to redeem it and are automatically
        linked to the marketer's web site. If the marketer uses our
        PROMOCOMMERCE solution, the promotion may be automatically applied to
        the purchase.

           We place a high degree of value on maintaining the privacy of our
        members and believe that this commitment is critical to becoming a
        trusted source of promotions online. We do not share any individual
        member information with marketers or other third parties. Marketers only
        receive aggregate information about our membership for purposes of
        targeting promotions to members with certain demographic or purchase
        preference criteria. For example, we may disclose the total number of
        males in the "Computers" interest category to a marketer in connection
        with a promotion. Our members' personal information is digitally encoded
        on our database and remains private, anonymous and secure. In addition,
        we have a license from TRUSTe, an independent, non-profit privacy
        organization dedicated to building users' trust and confidence in the
        Internet. Under TRUSTe's program, we have agreed to adhere to
        established privacy principles and to comply with ongoing oversight and
        consumer resolution procedures.

    MARKETING PARTNERS. During the first two quarters of 2001, we entered into
        several barter transactions (marketing partner transactions) that
        consist of the sale of large quantities of outbound e-mail to marketing
        partners, and the purchase of banner advertisements and outbound e-mail
        services by e-centives from these same partners. We generally enter into
        a contractual relationship with a marketing partner for delivery of a
        specified quantity of targeted e-mails to our membership database or
        other databases, offering promotions and special offers on behalf of the
        marketing partners. In addition, we place orders with the marketing
        partner to purchase a specified volume of banner advertisements, web
        site click-throughs or outbound e-mail. This marketing activity is
        designed to drive the marketing partners' viewers and members to our
        registration page to register for the e-centives service. Revenue and
        expenses from these marketing partner transactions are recorded based
        upon the fair value of the promotional e-mails delivered at a similar
        quantity or volume of e-mails delivered in a qualifying past cash
        transaction. Fair value of promotional e-mails delivered is based upon
        the Company's recent historical experience of cash received for e-mail
        deliveries. Such revenues are recognized when the promotional e-mails
        are delivered. Corresponding expenses are recognized for the
        advertisements received when the Company's advertisements are displayed
        on the reciprocal web sites or properties, which is typically in the
        same period as the delivery of the promotional e-mails and are included
        as part of sales and marketing expense.

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                       OUR COMMERCE PRODUCTS AND SERVICES

    Through the acquisition of the Commerce Division, we acquired a
comprehensive system that provides product search, price comparison and
merchandising services. Our commerce products and services include the COMMERCE
ENGINE and the COMMERCE NETWORK.

    The COMMERCE ENGINE provides portals and other Web site customers, as well
as wireless carriers, with an infrastructure to enable their end users to make
purchase decisions for goods and services. The COMMERCE ENGINE is a
high-performance commerce application designed to handle the challenges of
bringing consumers and merchants together and promoting transactions between
them. The COMMERCE ENGINE is a platform to collect and organize vast amounts of
electronic product information from online merchants and publishers of
comparative product information.

    The COMMERCE ENGINE provides a complete commerce experience for online
consumers, enabling them to search for products, compare features and prices
among products, and locate and purchase these products through participating
online merchants. It is designed to function the way consumers already shop by
integrating all aspects of the online commerce process, from expert advice and
word of mouth comparisons, to bargain hunting and comparison shopping. For
shoppers who generally know what product they want but not the brand or model,
the COMMERCE ENGINE enables end users to evaluate several alternatives.

    Similar to our direct marketing application we provide to our network
partners through our promotions network, we make the COMMERCE ENGINE available
to Internet portals and other Web site customers who can, in turn, provide
commerce services through their sites to end users. We provide and manage all
hardware, software and operational aspects of the COMMERCE ENGINE and the
associated databases of product libraries and purchasing locations. This
includes collecting, organizing, storing and updating vast quantities of
electronic product information, and presenting this information for display to
end users. We also provide our customers with a programming interface and
software tools to enable them to maintain and customize the look and feel of
their commerce service user interface.

    The COMMERCE ENGINE is also designed to track and, in the cases where
merchants have installed our Affiliate Tracking System, confirm purchases made
by end-users of our customers' services and to generate invoices for our
merchants to support performance-based marketing arrangements among multiple
parties.

    Our COMMERCE NETWORK enables merchants to distribute and promote their
products to the end users of our COMMERCE ENGINE customers. Our system collects
product data from merchants, normalizes it into appropriate categories, indexes
it and makes it available for access through our COMMERCE ENGINE customers, and
refreshes it regularly to reflect pricing changes and availability. Our account
managers work closely with merchants to coordinate their involvement within the
network, including product data management, merchandising, analysis and
recommendations. We also provide merchants with detailed performance reports
broken down by site and category, in order to track activity which may range
from click-through to point of purchase.

    Revenue from our commerce technologies and services is generated
primarily through license, support and maintenance fees from Internet portal
and other web site destination customers, as well as fees from the
participating online merchants. Our contracts currently consist of
implementation and information service fees from Internet sites and service
and monthly transaction fees from merchants. Revenue generated from the
merchant transaction fees is recognized when a transaction occurs, revenue
from implementation services is recognized ratably over the expected term of
the customer relationship and revenue from service fees is recognized ratably
over the contract period.

               OUR OUTSOURCED E-MAIL MARKETING TECHNOLOGY SERVICES

    In August 2001, we began offering outsourced E-MAIL MARKETING technology
services to businesses. These services allow companies to outsource their e-mail
marketing campaigns to us. This solution lets businesses cost-effectively
conduct e-mail marketing without having to acquire or develop their own e-mail
infrastructure and manage the process. Our outsourced e-mail marketing solution
consists of list management and hosting, strategy and creative services, e-mail
delivery and management, and tracking and analysis services. Our e-mail
marketing system is designed to help build an ongoing, personalized dialogue
with the client's intended audience and maximize effectiveness through targeting
and testing. Revenue is generated by charging fees for list management and
hosting services, strategy and creative services, e-mail delivery and management
services, as well as tracking and analysis services. Revenue related to the
one-time service charges for setting up the customer is recognized ratably over
the expected term of the customer relationship, while all other revenue is
recognized when the services occur.

                                       8
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                          OUR ONLINE PROMOTIONS SYSTEM

    With the acquisition of BrightStreet.com in December 2001, we started
offering online promotions technology and infrastructure that is used for
powering a variety of promotional offerings, including coupons, rebates, sales
circulars, surveys, trial offers and loyalty programs. This system designs,
deploys, and manages promotions and tracks individual consumer response to
offers for manufacturers, retailers, and websites. It also enables businesses to
gain insights about their consumer preferences and motivations, and enhance
consumer relationships with rich data modeling and sophisticated targeting.
Revenue consists of fees from the sale of licenses and related services, which
are recognized ratably over the contractual period.

SALES AND MARKETING

    We seek to establish relationships with clients principally through our
direct sales force, as well as working with advertising or promotional agencies
to reach their clients. During 2001, we maintained sales personnel in major
metropolitan areas of Washington, D.C., San Francisco and New York, as well as
in the United Kingdom.

    In order to strengthen our existing relationships with clients, we offer
account management, technology integration and consulting services. We assign
account managers with knowledge of direct marketing and commerce to clients with
the goal of increasing the performance of their marketing efforts and overall
satisfaction with our services. Our account managers also provide periodic
reports to clients and help formulate strategies to more effectively market
their products and services.

    Our sales force also focuses on establishing relationships with operators of
portals, content, community and other high-traffic web sites to sell our
commerce engine and to build our partner network for our direct marketing
system. Once the relationship is established, we assign relationship managers to
assist with the day-to-day operation of our systems and enhance our service
offerings.

    We market our products and services primarily through advertising,
tradeshows and public relations. We have marketed our services to potential
clients through a variety of offline and online media including magazines,
newspapers, radio, outdoor and Internet advertisements. We market to consumers
primarily through the relationships with our partners and marketers. Our portal
clients and network partners feature the e-centives brand and logo on their web
sites.

TECHNOLOGY

PROMOTION NETWORK

          We have developed a proprietary and scalable technology infrastructure
     that enables marketers to create, deliver, redeem and track targeted
     e-centives. The e-centives system consists of:

               o    database and user interface servers;
               o    software components for PROMOCOMMERCE; and
               o    CAMPAIGN MANAGER software.

          All e-centives are stored in and accessed from our database servers.
     These databases are developed using standard, high-performance technology
     and are designed for rapid identification of target members. Our database
     server architecture is hardware scalable, which means that we can add new
     hardware servers to increase capacity or improve access times as our
     membership and number of e-centives grow. We have implemented the following
     initiatives to improve performance and decrease system failures:

               o    a backup of membership and application data is completed
                    daily;
               o    individual server failures have been mitigated through the
                    deployment of redundant servers and storage devices;
               o    all database servers have been upgraded to maximize both
                    processor speed and available memory; and
               o    periodic in-house scalability testing and performance tuning
                    of the whole system.

          However, there can be no assurance that these initiatives will be
     successful in preventing future system failures or performance bottlenecks.



                                       9
<Page>

          The user interface servers search our databases and display the
     individual member's e-centives accounts as web pages. These servers control
     the co-branded web pages of our marketers and partners. The user interface
     servers are deployed in a way to permit uninterrupted service in the event
     of a failure of one server. The servers also gather information used for
     member behavior analysis and tracking.

          The software components of PROMOCOMMERCE enable communication between
     a marketer's e-commerce server and our system. This real-time communication
     enables the marketer to recognize our members when they enter the
     marketer's web site and display offers on the site. These components run on
     Sun Solaris and Windows NT and are compatible with most major electronic
     commerce software platforms, such as Microsoft's electronic commerce
     software.

          Our CAMPAIGN MANAGER software manages the creation and presentation of
     e-centives. This software can also manage the dynamic display of offers on
     the web sites of marketers that use our PROMOCOMMERCE solution.

          We monitor and test our system and software, and from time to time
     have identified minor defects. We currently address such defects by
     rewriting software code and, if possible, replacing small portions of our
     proprietary software with commercially available software components. Any
     difficulties in implementing this new software may result in greater than
     expected expense and may cause disruptions to our business.

COMMERCE ENGINE AND COMMERCE NETWORK

          We have developed proprietary and scalable technology infrastructure
     to provide turnkey commerce capabilities for companies in a broad range of
     markets including portals, destination sites, retailers, banks, credit card
     services, insurance providers, telecommunications providers, and wireless
     portals.

          Our flexible platform enables sites to seamlessly blend commerce into
     their user experience, embedding relevant products and content within a
     range of applications including Web search, online banking, and editorial
     content.

          Our core products that make up the Commerce Engine technology include
     PRODUCT FINDER, PRODUCT MERCHANDISER, MARKETPLACE, OMEGA, and PRODUCT
     SPOTLIGHT. All of these systems use a combination of databases, application
     servers, and network equipment which provide a robust infrastructure for
     delivering fast, reliable, and scalable access to our content and services.

          Our content includes product listings, offers, and 3rd party related
     content.

               o    PRODUCT FINDER includes proprietary technology that allows
                    our partners to search through the content of our database
                    returning highly relevant results based on the provided
                    search criteria. A portion of this technology is a result of
                    patented and patent pending technology.

               o    PRODUCT MERCHANDISER uses proprietary technology to target a
                    subset of our content to individuals based on the
                    individuals profiles, portal specifications, merchant
                    specifications, and observed aggregated browsing and buying
                    behavior of users of the system.

               o    MARKETPLACE provides a robust, flexible web site building
                    and hosting solution that allows our partners to customize
                    their consumers shopping experience. This technology is
                    accessible to the consumer as a set of web pages that
                    dynamically serve up a shopping experience. Another portion
                    of the technology is a set of web tools that are used to
                    manage and configure that shopping experience.

               o    OMEGA provides the ability to integrate our product listing
                    content into other companies' standard web search
                    experience.

               o    The PRODUCT SPOTLIGHT service provides for e-mail delivery
                    of our content personalized to an individual.

          In addition to these systems described above, there are additional
     applications and web tools that we provide to our partners to manage and
     interact without the system.



                                       10
<Page>

                    o    The SELLING SYSTEM is a web-based tool that interacts
                         with our systems and databases to enable our merchant
                         partners to selectively publish and promote product
                         offers. This content published by each merchant is then
                         accessible via Product Merchandiser and Marketplace to
                         each of our portal partners.

                    o    The CONTROL PANEL is a web-based tool that interacts
                         with our systems and databases. The tool enables the
                         portal partner to configure aspects of the various
                         commerce engine systems.

                    o    The TAXONOMY MAPPING TOOL is a downloadable application
                         that interacts with our databases and servers, which
                         allows a portal partner to create a custom view on how
                         to navigate through all of our product content.

        All e-centives content is stored in and accessed from our database
    servers. Our database server architecture is hardware scalable, which means
    that we can add new hardware servers to increase capacity or improve access
    times as our membership and traffic grows.

        We monitor and test our system and software, and from time to time have
    identified minor defects. We currently address such defects by rewriting
    software code and, if possible, replacing small portions of our proprietary
    software with commercially available software components. Any difficulties
    in implementing this new software may result in greater than expected
    expense and may cause disruptions to our business.

E-MAIL MARKETING SYSTEM

        We have developed a proprietary and scalable e-mail marketing system.
    This system enables companies to communicate and build relationships with
    their users via e-mail. This correspondence can be single messages or a
    series of messages that are sequenced to form a conversation to facilitate
    building a one to one relationship.

        The e-mail marketing system consists of the following:

                    o    database servers for storing e-mail lists, content and
                         e-mail activity data;
                    o    data collection and transformation servers for
                         importing and exporting both subscriber and e-mail
                         activity data;
                    o    application servers for content management,
                         personalization engine and inbound mail handling;
                    o    web servers to support campaign management and
                         real-time reporting; and
                    o    mail servers for sending and receiving e-mail.

        All of our clients' e-mail lists and content for e-mail campaigns are
    stored in a relational database prior to the sending e-mail campaigns. This
    database is constantly being replicated to a stand-by database for fail over
    purposes and all data are copied to tape nightly for disaster recovery
    purposes.

        Once an e-mail campaign is run the e-mails are assembled using our
    applications servers, which are clustered for load balancing and fault
    tolerance. Each e-mail stream can be individually personalized with relevant
    content and targeted offers for the respective recipients. As each message
    is assembled it is sent to a farm of outbound mail servers using a
    load-balancing appliance, which is also fault tolerant. This architecture
    allows us to scale horizontally, simply by adding hardware to the required
    components.

        Once an e-mail campaign has been sent, our data collection component
    collects and aggregates all e-mail activity and provides this to our clients
    via web based real-time reporting.

        All e-mail campaigns are built and managed using our proprietary e-mail
    Content Manager, which has been built to be used by both our account
    management team to provide a full service model to our clients, as well as
    by our clients for a self-service model.

        We host our systems in a data center that provides redundant network
    connectivity and diesel generated backup power. In addition we monitor and
    test our system and as defects are identified they are addressed with
    version and process controlled upgrades.

                                       11
<Page>


    We spent approximately $2.4 million, $2.9 million, and $7.9 million in 1999,
2000 and 2001, respectively, on research, design and development activities.

COMPETITION

    As a provider of online direct-marketing solutions, we generally compete
with marketing and other promotion programs for a portion of a marketer's total
marketing budget. In addition, within the promotions market, we compete with a
variety of businesses.

      Our primary competition can be categorized as follows:

          o    both online and offline direct marketing and promotion companies;
          o    Internet-based marketing technology and services firms; and
          o    other companies that facilitate the marketing of products and
               services on the Internet.


                                       12
<Page>

     Current or potential competitors include vendors that provide:

          o    e-mail marketing solutions;
          o    rewards programs; and
          o    coupon and promotion programs.

     Our ability to compete depends on many factors.

     Factors over which we have some level of control:

          o    success in developing and expanding our membership base;
          o    ability to enter into relationships with network partners and
               marketers;
          o    ability to provide simple, cost-effective and reliable solutions;
          o    timely development and marketing of new services; and
          o    ability to manage rapidly changing technologies, frequent new
               service introductions and evolving industry standards.

      Factors outside our control include:

          o    development, introduction and market acceptance of new or
               enhanced services by our competitors;
          o    changes in pricing policies of our competitors;
          o    entry of new competitors in the market; and
          o    the ability of marketers to provide simple, cost-effective and
               reliable promotions.

    The failure to compete successfully would impair our ability to generate
revenues and become profitable.

    We believe the market for our recently acquired commerce technologies and
services to be rapidly evolving and intensely competitive. In this area, we
mainly compete with comparison-shopping services on the Internet. Some of our
current and potential competitors include:

          o    other providers of commerce technologies and services;
          o    commerce destination sites;
          o    commerce wallet providers;
          o    affiliate services; and
          o    shopping channels of Internet portals and other captive
               marketplace Web sites.

    We believe the principal factors that will draw end-users to an online
commerce application include brand availability, selection, personalized
services, convenience, price, accessibility, customer service, quality of
content, and reliability and speed of fulfillment for products ordered. Because
we serve primarily as a technology and infrastructure provider and not as a
retailer or operator of a search engine, our customers and partners are
responsible for many of these factors, and we have little or no control over
them.

    We believe the market for our recently acquired promotions system to be
rapidly evolving and intensely competitive. In this area, we mainly compete with
providers of promotions and data tracking technologies and services on the
Internet. Some of our current and potential competitors include:

          o    other providers of marketing technologies and services;
          o    coupon providers; and
          o    promotions destination sites.

    We expect competition to intensify as more competitors enter our markets.
Many of our existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical, marketing and
managerial resources than we do. Many of our competitors also generate greater
revenue and are better known than we are. They may compete more effectively and
be more responsive to industry and technological change.




                                       13
<Page>


RISK FACTORS

    We caution you that our performance is subject to risks and uncertainties.
There are a variety of important factors like those that follow that may cause
our future results to differ materially from those projected in any of our
forward-looking statements made in this Annual Report on Form 10-K or otherwise.

                          RISKS RELATED TO OUR BUSINESS

WE HAVE INCURRED NET LOSSES SINCE INCEPTION, EXPECT CONTINUING LOSSES AND MAY
NEVER ACHIEVE PROFITABILITY IN THE FUTURE.

    To date, we have not been profitable. We did not begin to generate revenues
until the third quarter of 1999. As of December 31, 2001, we had an accumulated
deficit of approximately $99.6 million. We incurred net losses in 2001, 2000,
and 1999 of $45.0 million, $29.9 million and $16.2 million, respectively. We
expect to continue to incur significant net losses and negative cash flow for
the foreseeable future. We expect to spend significant financial resources to
expand our business. We have not yet determined the specific amounts of
operating expenses and capital expenditures we expect to incur, although we
currently anticipate spending over the next 12 months approximately $3.5 million
on capital expenditures and expenses associated with expanding our system
capacity. We do not know when or if we will become profitable. If we cannot
achieve operating profitability or positive cash flows from operating
activities, our stock price may decline and we may be unable to continue our
operations.

A GENERAL NATIONAL ECONOMIC DOWNTURN WILL MATERIALLY ADVERSELY AFFECT OUR
BUSINESS AND RESULTS OF OPERATIONS.

    Economic indicators suggest that the U.S. economy has experienced a general
national economic downturn during 2001 and into early 2002. Such downturns
typically result in adverse affects upon advertising and marketing expenditures
and retail sales. The repercussions from any such downturn are likely to have a
direct negative affect on our business and results of operations by reducing the
demand for our services and the amount of any fees we are able to obtain. The
businesses of our clients are likely to be affected by any downturn in such a
manner as to reduce their willingness to make advertising and marketing
expenditures. Consumer demand for goods and services offered by our clients may
similarly weaken as a result of such downturn. Numerous companies engaged in the
provision of goods and services online have recently encountered significantly
reduced revenues, lay-offs of personnel and often bankruptcy and/or liquidation.
The occurrence or continuation of such a general national economic downturn and
any of the resulting effects, including those above, is likely to materially
adversely affect our business and results of operations.

OUR ACQUISITION OF THE COMMERCE DIVISION HAS RESULTED IN A SIGNIFICANT INCREASE
IN OUR RECURRING COSTS AND WE MAY NOT REALIZE THE INTENDED BENEFITS OF THE
ACQUISITION.

    In March 2001, we completed the acquisition of the Commerce Division of
Inktomi Corporation. Through this acquisition, we originally added approximately
70 new employees and our monthly expenses increased by approximately $1.5
million per month. As of December 31, 2001, the Commerce Division had 52
employees and incurred approximately $1.1 million in monthly expenses. Although
we knew that the business of the Commerce Division as operated by Inktomi was
slowing, the business deteriorated more rapidly prior to the closing than we
expected, due to the termination of several major contracts that we would have
acquired. Therefore, this acquisition has resulted in a significant increase in
our expenses without the corresponding increase in our revenues that we had
expected. We may spend significant time and resources trying to increase the
base of large customers and to realize the intended benefits of the acquisition.
We cannot assure you that these efforts will be successful.

WE MAY NOT SUCCESSFULLY INTEGRATE AND MANAGE THE COMMERCE DIVISION AND
BRIGHTSTREET.COM, AND THE INTENDED BENEFITS OF THE ACQUISITIONS MAY NOT BE
REALIZED, WHICH COULD HAVE A NEGATIVE IMPACT ON THE MARKET PRICE OF SHARES OF
OUR COMMON STOCK.

    The acquisitions of the Commerce Division and BrightStreet.com pose risks
for our ongoing operations and the value of shares of our common stock,
including that:

          o    we may fail to successfully integrate the acquired products and
               services into our business operations;
          o    we may incur expenses related to the integration of theses
               businesses into our existing business operations;
          o    we may experience difficulties and incur expenses related to the
               assimilation and retention of employees; and
          o    whether or not successfully integrated, the acquired assets may
               not perform as well as we expect.

    If we fail to successfully integrate the acquired assets and/or fail to
realize intended benefits of the acquisition due to any of the foregoing
reasons, the market price of shares of our common stock could decline.


                                       14
<Page>

OUR FUTURE RESULTS AND THE DEMAND FOR OUR SERVICES ARE UNCERTAIN, AND WE WILL
NOT BECOME PROFITABLE IF OUR SERVICES DO NOT ACHIEVE MARKET ACCEPTANCE.

    We were incorporated in August 1996 and launched our e-centives online
direct marketing system in November 1998. We did not charge for our services and
did not begin to generate revenues until the third quarter of 1999. Since then,
we have started offering additional services, some through acquisitions and
others through the launching of internally developed services. Accordingly, our
future results are uncertain and our results to date may not be representative
of our future results.

    Since some of our services are new, we cannot predict their demand. Demand
for our services is dependent upon many factors.

         Factors over which we have some level of control include:

          o    the number of consumers, network partners, portals and marketers
               we can attract to our systems;
          o    our ability to compete successfully in our market; and
          o    our success in promoting our products and services through our
               sales, marketing and business development personnel.

         Factors outside our control include:

          o    uncertainty about the value and effectiveness of our on-line
               direct marketing personalized services;
          o    our merchants' ability to sell their products and services to the
               consumers who participate in our systems; and
          o    the quality, accuracy and utility of the information provided to
               us that we provide to marketers regarding member demographics,
               member activity and promotional success.

    If our products and services do not achieve market acceptance, our business
will not become profitable.

OUR FINANCIAL RESULTS WILL SUFFER IF OUR DIRECT MARKETING MEMBERS DO NOT
REGULARLY USE OUR SYSTEM.

    Our ability to generate revenue from our direct marketing system depends, in
part, on frequent and regular member activity. During the year ended December
31, 2001, we recognized 33% of our revenue from the delivery of e-centives to
members on behalf of marketers and network partners. Delivering e-centives to
members by e-mail accounted for approximately 30% of our revenue and delivering
e-centives to members' online accounts accounted for approximately 3% of our
revenue during this period. In the case of delivering e-centives to members'
online accounts, we do not recognize revenue from the sale of e-centives unless
our members access their online accounts. If we are unable to increase the
frequency with which our members use our system, our ability to generate
revenues by the delivery of e-centives to member accounts will be adversely
affected and our business will suffer. In addition, if our members do not visit
the web sites of our marketers in response to e-centives, marketers may not
continue to use our system.

OUR INABILITY TO MAINTAIN EXISTING AND ESTABLISH NEW RELATIONSHIPS WITH NETWORK
PARTNERS OPERATING HIGH-TRAFFIC PORTAL, COMMUNITY AND CONTENT WEB SITES WOULD
CAUSE OUR FINANCIAL RESULTS TO SUFFER.

    Our success depends on our ability to establish relationships with and
deliver our direct marketing service through high-traffic portal, community and
content web sites. We rely on these relationships to increase our membership
base and to provide members entry points into our direct marketing system.
Traditionally, we have compensated our network partners for members we acquire
through their web sites either by paying a fee, typically ranging from $0.50 to
$1.00, for new members ("bounty"), by paying a percentage, typically ranging
between 20% and 50%, of the revenue we generate from the delivery of e-centives
to such new members ("revenue share"), by paying both or by paying the higher of
the two methods. For the year ended December 31, 2001, we paid two of our
network partners based on a bounty, eight of our network partners based on a
revenue share, two of our network partners based upon a combination of both and
two of our network partners based upon the higher of the two methods.

    We have no long-term arrangements with our existing network partners, and
none of our agreements with our network partners are for longer than a year. We
cannot assure you that we will be able to maintain our existing relationships or
enter into additional relationships with new network partners, on favorable
terms, if at all. If we are unable to maintain our existing relationship with
our other network partners, or if we fail to establish successful relationships
with new network partners, our membership base may not continue to grow in a
timely manner, or at all, and our business and financial condition would be
adversely affected.



                                       15
<Page>

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.

    The market to provide our services is intensely competitive and rapidly
changing. We expect competition in this market to continue to increase as a
result of:

          o    our market's increasing size;
          o    our market opportunity becoming more visible;
          o    minimal barriers to entry; and
          o    industry consolidation.

    We compete with companies for the dollars that marketers allocate to their
marketing budgets. We compete for these marketing dollars with many online
direct marketers in several fields, principally vendors that provide:

          o    e-mail marketing solutions;
          o    rewards programs; and
          o    coupon and promotions programs.

    We believe the market for our recently acquired COMMERCE ENGINE application
to be rapidly evolving and intensely competitive. Some of our current and
potential competitors include:

          o    other providers of commerce technologies and services;
          o    commerce destination sites;
          o    commerce wallet providers;
          o    affiliate services; and
          o    Internet portals and other captive marketplace Web sites.

    We believe the principal factors that will draw end-users to an online
commerce application include brand availability, selection, personalized
services, convenience, price, accessibility, customer service, quality of search
tools, quality of content, and reliability and speed of fulfillment for products
ordered. Because we serve primarily as a technology and infrastructure provider,
our customers and partners determine many of these factors, and we have little
or no control over them.

    We believe the market for our recently acquired promotions system to be
rapidly evolving and intensely competitive. In this area, we mainly compete with
providers of promotions and data tracking technologies and services on the
Internet. Some of our current and potential competitors include:

          o    other providers of marketing technologies and services;
          o    coupon providers; and
          o    promotions destination sites.

    Many of our other existing and potential competitors have significantly
greater financial, technical, marketing and managerial resources than we do.
Many competitors also generate greater revenue and are better known than we are.
As a result, they may compete more effectively than we do and be more responsive
to industry and technological change than we are. We also compete for marketing
dollars with other online marketing and advertising companies as well as offline
direct marketing and promotion companies. We operate in an intensely competitive
environment with a significant number of existing and potential competitors.

    Our ability to successfully compete depends on many factors.

         Factors over which we have some level of control include:

          o    success in developing and expanding a membership base;
          o    ability to enter into relationships with network partners and
               marketers;
          o    ability to provide simple, cost-effective and reliable solutions;
          o    timely development and marketing of new services; and
          o    ability to manage rapidly changing technologies, frequent new
               service introductions and evolving industry standards.



                                       16
<Page>

         Factors outside our control include:

          o    development, introduction and market acceptance of new or
               enhanced services by our competitors;
          o    changes in pricing policies of our competitors;
          o    entry of new competitors in the market; and
          o    the ability of marketers to provide simple, cost-effective and
               reliable promotions.

    The failure to compete successfully would impair our ability to generate
revenues and become profitable.

OUR E-CENTIVES BRAND MAY NOT ACHIEVE THE LEVEL OF RECOGNITION NECESSARY TO
ATTRACT ADDITIONAL MARKETING CLIENTS, WHICH COULD CAUSE OUR FINANCIAL RESULTS TO
SUFFER.

    To be successful, we must continue to build and increase market recognition
of our corporate brand because our market is competitive with low barriers to
entry. We do not advertise to attract visitors to our web site, but rather are
attempting to build a brand that businesses identify with online marketing. We
believe that the recognition of the e-centives brand is critical to our success
and the importance of this will increase as more companies enter our market and
competition for marketers', network partners' and members' attention increases.
Building recognition of the e-centives brand will require us to expend
significant funds on marketing. The outcome of our marketing efforts is hard to
predict. If we are not successful in our marketing efforts to increase our brand
awareness, our ability to attract marketing clients could be harmed which would
cause our financial results to suffer.

WE ARE DEPENDENT ON MERCHANTS FOR A PORTION OF OUR REVENUE AND OUR INABILITY TO
MAINTAIN EXISTING AND ESTABLISH NEW RELATIONSHIPS WITH MARKETERS WOULD CAUSE OUR
FINANCIAL RESULTS TO SUFFER.

    For the year ended December 31, 2001, 35% of our revenue came from
promotions network merchants and 9% of our revenue came from our commerce
network merchants. Our success in those products and services depends on our
ability to enter into and maintain agreements with merchants. If we do not
continue to enter into new agreements with merchants, we may not be able to
increase our revenues for those products and services, which would materially
affect our financial condition and results of operations.

OUR INABILITY TO PROVIDE OUR MEMBERS WITH ATTRACTIVE PROMOTIONAL OFFERS FROM
MARKETERS COULD HARM OUR FINANCIAL RESULTS.

    We need to continue to attract new marketers to our system in order to
continue to provide our members with new offers on products and services. Member
loyalty and activity, and the resulting attractiveness of our system to
marketers and network partners, depends upon the desirability of the promotions
we deliver. We cannot control the quality or attractiveness of promotions our
marketers offer. If our marketers choose unpopular or unattractive promotions or
we are unable to attract new marketers to our system, we may not be able to
maintain or expand our member base. Moreover, if our members are not satisfied
with the offers, or with the products or services purchased, their negative
experiences might result in decreased usage of our system, which would adversely
affect our financial results.

WE MAY REQUIRE ADDITIONAL CAPITAL TO FINANCE GROWTH OF OUR OPERATIONS, AND IF
SUCH FUNDS ARE NOT AVAILABLE, WE MAY NOT BE ABLE TO FUND OUR PLANNED EXPANSION
OR CONTINUE OPERATIONS.

    We currently anticipate that our existing capital, together with our
funds from operations and the proceeds from the promissory notes associated
with the rights offering, will be sufficient to meet our need for working
capital, capital expenditures and business expansion into the first quarter
of 2003. Friedli Corporate Finance has executed a letter to us confirming its
ability to fund us in the amount of $10.7 million for the outstanding
promissory notes from Pine, Inc. and Venturetec, Inc., entities under its
control. Funds from these promissory notes will be provided to us from April
2002 through June 2002, based on our lack of immediate need for these funds.
As of April 16, 2002, more than 70% of these funds have been received by us.
To the extent that these funds, accompanied by our operating resources, are
not sufficient to enable us to operate through December 31, 2002, Friedli
Corporate Finance is committed to providing the necessary funding to enable
us to continue to operate through December 31, 2002.  See also "Related Party
Transactions" on page 34 for a further discussion of such promissory notes.
Further, we may need to raise additional funds sooner than we expect. For
example, we may need additional financing if we:

          o    are unable to increase our revenues as anticipated;
          o    decide to expand faster than planned;
          o    develop new or enhanced services or products ahead of schedule;
          o    need to respond to competitive pressures; or
          o    need to acquire complementary products, businesses or
               technologies.

    We cannot be certain that additional financing will be available on
acceptable terms, or at all. Numerous companies engaged in the provision of
goods or services online have recently encountered significant difficulty
obtaining funding from the public capital markets as well as through private
transactions. If we raise additional capital through the issuance of equity
securities, the common


                                       17
<Page>

stock interest of investors holding shares prior to such issuance would be
diluted. In addition, we may raise any necessary additional capital through the
issuance of preferred stock, with rights superior to those of the common stock
purchased by investors prior to such issuance. If adequate funds are not
available on acceptable terms, we may not be able to fund our expansion, develop
or enhance our products or services or respond to competitive pressures.

OUR NETWORK INFRASTRUCTURE, COMPUTING SYSTEMS OR SOFTWARE MAY FAIL OR BE
COMPROMISED OR DAMAGED, WHICH COULD HARM OUR BUSINESS, FINANCIAL CONDITION AND
REPUTATION.

    The performance of our hardware and software is critical to our business and
our ability to attract consumer members, marketers and high-traffic portal,
community and content web sites. System failures that cause an interruption in
service or a decrease in responsiveness of our transaction processing or data
storage capabilities could impair our reputation and the attractiveness of our
brand. We have experienced periodic system interruptions, which may occur from
time to time in the future. All disruptions were caused by unique errors in our
software code that were all subsequently corrected and did not have a material
effect on our business. Any significant increase in the frequency or severity of
future disruptions could have an adverse effect on our business.

    The software for our systems is complex and may contain undetected errors or
defects, especially when we implement upgrades to our system. Any errors or
defects that are discovered after our software is released for use could damage
our reputation or result in lost revenues.

    We monitor and test our system and software, and from time to time have
identified minor defects. We currently address such defects by rewriting
software code and, if possible, replacing portions of our proprietary software
with commercially available software components. Any difficulties in
implementing this new software may result in greater than expected expense and
may cause disruptions to our business.

    Exodus Communications and Metromedia Fiber Network host our systems and
provide us with communications links. The delivery of our services is
substantially dependent on our ability and the ability of the providers to
protect our computer hardware and network infrastructure against damage from,
among others:

          o    human error;
          o    fire and flooding;
          o    power loss;
          o    telecommunications failure; and
          o    online or physical sabotage.

    We rely on Exodus for a significant portion of our Internet access as well
as monitoring and managing the power and operating environment for our server
and networking equipment. Any interruption in these services, or any failure of
Exodus to handle higher volumes of Internet use, could result in financial
losses or impair our reputation. In September 2001, Exodus filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code and in
February 2002 Cable and Wireless plc acquired selected assets and a majority of
the business activities of Exodus. There can be no assurance that we will be
able to continue our relationship with Exodus or obtain comparable services on
acceptable terms, if at all.

OUR SYSTEM CAPACITY NEEDS ARE UNTESTED AND OUR FAILURE TO HANDLE THE GROWTH OF
OUR DATABASE MAY DAMAGE OUR BUSINESS OR REQUIRE US TO EXPEND SUBSTANTIAL
CAPITAL.

    The capacity of our system has not been tested and we do not yet know the
ability of our system to manage substantially larger numbers of users and
transactions. A substantial increase in our membership base and a corresponding
increase in the number of data records could strain our servers and storage
capacity, which could lead to slower response time or system failures. We may
not be able to handle our expected user and transaction levels while maintaining
satisfactory performance. System failures or slowdowns adversely affect the
speed and responsiveness of our transaction processing. These would have a
negative impact on the experience for our consumer members and reduce our
system's effectiveness. Such an increase could require us to expand and upgrade
our technology, processing systems and network infrastructure. Any unexpected
upgrades could be disruptive and costly. Our failure to handle the growth of our
databases could lead to system failures, inadequate response times or corruption
of our data, and could negatively affect our business, results of operations and
financial condition. We believe, that on average, our various systems' hardware,
at peak traffic levels, run at approximately 50% of capacity. We may be unable
to expand and upgrade our systems and infrastructure to accommodate this growth
in a timely manner. Any failure to expand or upgrade our systems could damage
our reputation and our business.



                                       18
<Page>

    In addition, if our usage of telecommunications capacity increases, we will
need to purchase additional networking equipment and rely more heavily on our
web hosting providers to maintain adequate data transmission speeds. The
availability of these products or services may be limited or their cost may be
significant.

OUR BUSINESS COULD SUFFER IF INTERNET USERS REDUCE OR BLOCK OUR ACCESS TO THEIR
PERSONAL DATA.

    We collect consumer demographic and purchase preference information from our
members and also collect data regarding the categories of offers viewed and
offers clicked-on by members. Privacy concerns may cause users to resist signing
up for our system, providing us with personal information and allowing us to
monitor their usage. If users were to reduce the information voluntarily
supplied to us or block our access to their data, our ability to improve our
database of consumer information and the value of our service would diminish.

PRIVACY LAWS MAY BE ENACTED OR APPLIED TO US, WHICH COULD RESTRICT OUR ABILITY
TO DISCLOSE CONSUMER DATA WITH THIRD PARTIES, WHICH COULD ADVERSELY AFFECT OUR
BUSINESS.

    We currently report aggregate, but not individual, consumer demographic
information and purchase preference information to network partners about the
members that joined through their service. Marketers only receive aggregate
information about our membership for purposes of targeting promotions to members
with certain demographic or purchase preference criteria. Growing concern about
privacy and the collection, distribution and use of personal information, even
in the aggregate, may lead to the enactment and application of federal or state
laws or regulations that would restrict our ability to provide customer data to
third parties. In addition, several states have proposed legislation that would
limit the uses of customer information gathered online. Consequently, any future
regulation that would restrict our ability to provide information regarding our
members would have a negative impact on our business by restricting our methods
of operation or imposing additional costs.

IF WE ARE NOT SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY OUR BUSINESS
WILL SUFFER.

    We depend heavily on technology to operate our business. Our success depends
on protecting our intellectual property, which is one of our most important
assets.

PROPRIETARY TECHNOLOGY

    We have developed proprietary technology including database and interface
servers, offer creation and presentation software, and software to enable
communication between marketers' e-commerce systems and our system.

     PATENTS: We have four issued U.S. patents and twenty pending U.S. patent
     applications. Our first issued patent is entitled "ELECTRONIC COUPONING
     METHOD AND APPARATUS" and relates to the method and apparatus for
     distributing, generating, and redeeming discount coupons, rebate or gift
     certificates or the like that tracks each coupon using a consumer ID number
     printed on the coupon. Our second issued patent, which is a
     continuation-in-part to our first patent, is entitled "ELECTRONIC DISCOUNT
     COUPONING METHOD AND APPARATUS FOR GENERATING AN ELECTRONIC LIST OF
     COUPONS". Our third issued patent is entitled "METHOD AND SYSTEM FOR
     ELECTRONIC DISTRIBUTION OF PRODUCT REDEMPTION COUPONS" and relates to a
     method and system for the electronic distribution of product redemption
     coupons to remote personal computers. Our fourth issued patent, of the same
     title, is a continuation to our third patent. Our pending patent
     applications seek to protect technology we use or may use in our business.
     We have no issued foreign patents, but we have ten pending foreign patent
     applications in the European Union. It is possible that no patent will
     issue from the currently pending patent applications.

     TRADEMARKS: We have registered the e-centives trademark in the U.S. We have
     filed U.S. trademark registrations for the e-centives logo, PROMOCAST,
     PROMOCOMMERCE, PROMOMAIL, PROMOMAIL EVENT, PROMOMAIL SPOTLIGHT,
     BRIGHTSTREET and BRIGHTSTREET.COM, all of which are pending. We have also
     filed for trademark registration of e-centives, the e-centives logo,
     PROMOCAST, PROMOCOMMERCE and PROMOMAIL in Switzerland and with the European
     Union. We also claim rights in a number of additional tradenames associated
     with our business activities.

     INTERNET DOMAIN NAMES: We hold rights to various web domain names including
     e-CENTIVES.COM and BRIGHTSTREET.COM. Regulatory bodies in the United States
     and abroad could establish additional top-level domains, appoint additional
     domain name registrars or modify the requirements for holding domain names.
     The relationship between regulations governing domain names and laws
     protecting trademarks and similar proprietary rights is unclear. We may be
     unable to prevent third parties from acquiring



                                       19
<Page>

     domain names that are similar to or diminish the value of our trademarks
     and other proprietary rights.

     We have not registered any copyrights in the U.S. or elsewhere related to
our software or other technology.

    If we do not adequately protect our intellectual property, our business,
financial condition and results of operations would be harmed. Our means of
protecting our intellectual property may not be adequate. Unauthorized parties
may attempt to copy aspects of our service or to obtain and use information that
we regard as proprietary. It is also possible that our patents or any potential
future patents may be found invalid or unenforceable, or otherwise be
successfully challenged. If any of our current or future patents are
successfully challenged by a third party, we could be deprived of our right to
prevent others from using the methods covered by such patents. In addition,
competitors may be able to devise methods of competing with our business that
are not covered by our patents or other intellectual property. Although, members
can access our service over the Internet from anywhere in the world, we
currently only have operations in the U.S. The laws of some foreign countries do
not protect our intellectual property rights to as great an extent as do the
laws of the United States. Our competitors may independently develop similar
technology, duplicate our technology or design around any patents that we may
obtain or our other intellectual property.

IF WE INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS OUR BUSINESS AND
FINANCIAL RESULTS COULD BE HARMED.

    There has been a substantial amount of litigation in the software and
Internet industry regarding intellectual property rights. It is possible that,
in the future, third parties may claim that our current or potential future
technologies infringe upon their intellectual property. We expect that software
developers will increasingly be subject to infringement claims as the number of
products and competitors in our industry segment grows. Any such claims, with or
without merit, could be time-consuming, result in costly litigation and
diversion of management resources, or require us to enter into royalty or
licensing agreements. Royalty or licensing agreements, if required, may not be
available on terms acceptable to us or at all, which could seriously harm our
ability to operate our business and our financial condition may suffer.

WE ARE, AND WILL CONTINUE TO BE, CONTROLLED BY OUR CO-FOUNDERS AND BOARD
MEMBERS, WHO MAY APPROVE CORPORATE ACTIONS WITH WHICH YOU MAY DISAGREE.

    We are, and will continue to be, controlled by our co-founders and board
members, who may approve corporate actions with which you may disagree. As of
December 31, 2001, our co-founders, Messrs. Amjadi, Akhavan and Friedli, owned
approximately 63.5% of our outstanding common stock. As a result, they continue
to be able to control most matters requiring stockholder approval. Among other
things, they are able to elect a majority of the directors and approve
significant corporate matters, such as a merger or sale of the business.

WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT OF OUR PROMOTIONS AND OUR WEB
SITE.

    The online promotions developed by our marketers may not comply with
federal, state or local laws governing the content of advertisements and the
sale of products and services. We do not control the content of the promotions
we deliver. Our role in facilitating these promotions may expose us to liability
based on the content of the promotions. We also may face liability if the
promotional information in the promotions is defamatory, inaccurate, or
infringes on proprietary rights of others. Marketers or our employees may make
errors or enter inaccurate information, and we do not proofread or otherwise
verify the information contained in the promotions. We may face civil or
criminal liability for unlawful advertising or other marketer activities. We
could also face claims based on the content that is accessible from our web site
through links to other web sites.

    We may not be adequately insured to cover these claims. Any claims could
require us to spend significant time and money in litigation, even if we
ultimately prevail. In addition, negative publicity caused by these inaccuracies
could damage our reputation and diminish our brand.

OUR BUSINESS MAY BE AFFECTED BY SEASONAL FLUCTUATIONS IN DIRECT MARKETING
SPENDING AND INTERNET USE, WHICH COULD CAUSE OUR OPERATING RESULTS AND STOCK
PRICE TO FLUCTUATE WIDELY.

    Our limited operating history and rapid growth make it difficult for us to
assess the impact of seasonal factors on our business. We expect seasonal
fluctuations will affect our business. We believe that online direct marketing
spending will be highest in the fourth quarter of each calendar year due to
increased consumer spending during the holiday period, and lowest during the
summer months of the third quarter. Because the market for Internet direct
marketing services is emerging, we cannot be certain of these seasonal patterns
and additional patterns may develop in the future as the market matures. This
could cause our operating results and stock price to fluctuate widely.



                                       20
<Page>

IF WE DO NOT MANAGE OUR GROWTH, OUR BUSINESS WILL BE HARMED.

    We may not be successful in managing our rapid growth. We have grown from 60
employees on June 30, 1999 to 153 employees on December 31, 2001. Past growth
has placed, and future growth will continue to place, a significant strain on
our management and resources, related to the successful integration of
personnel. The acquisitions and integrations of the Commerce Division and
BrightStreet.com has and will continue to divert management's attention and
place an additional strain on our management and resources.

    To manage the expected growth of our operations, we will need to improve our
existing and implement new operational and financial systems, procedures and
controls. We will also need to manage our finance, administrative, client
services and operations staff and train and manage our growing employee base
effectively. Our current and planned personnel, systems, procedures and controls
may not be adequate to support our future operations. Our business, results of
operations and financial condition will suffer if we do not effectively manage
our growth.

IF WE LOSE THE SERVICES OF ANY OF OUR KEY PERSONNEL, OUR BUSINESS AND STOCK
PRICE COULD SUFFER.

    Our success depends in large part on the contributions of Kamran Amjadi, our
Chairman and Chief Executive Officer and Mehrdad Akhavan, our President and
Chief Operating Officer, whose understanding of our services, strategy and
relationships would be extremely difficult to duplicate from outside our
company. Although we maintain employment agreements with Messrs. Amjadi and
Akhavan, we do not have and do not currently plan to enter into employment
agreements with any of our other employees. The loss of the services of any of
these key personnel could have a material adverse effect on our business. We do
not maintain "key person" life insurance policies.

IF WE ARE UNABLE TO ATTRACT AND RETAIN HIGHLY SKILLED EMPLOYEES, OUR BUSINESS
MAY BE HARMED.

    Our future success also depends on our ability to identify, attract, retain
and motivate highly skilled employees, particularly additional technical, sales
and marketing personnel. We face intense competition in hiring and retaining
personnel from a number of sectors, including technology and Internet companies.
Many of these companies have greater financial resources than we have to attract
and retain qualified personnel. We have occasionally encountered and expect to
continue to encounter difficulties in hiring and retaining highly skilled
employees, particularly qualified software developers and engineers. We seek
developers and engineers who have experience with the newest software
development tools and Internet technologies. We may be unable to retain our
highly skilled employees or identify, attract, assimilate or retain other highly
qualified employees in the future, which may in turn harm our business.

WE HAVE A SIGNIFICANT AMOUNT OF STOCK-BASED COMPENSATION EXPENSE RELATING TO
STOCK OPTION GRANTS, WHICH WILL DECREASE EARNINGS OVER THE NEXT FOUR YEARS.

    Stock-based compensation represents an expense associated with the
recognition of the difference between the fair market value of common stock at
the time of an option grant and the option exercise price. Stock compensation is
amortized over the vesting period of the options, generally four years. For the
year ended December 31, 2001, the charge relating to stock option grants was
approximately $863,000. We estimate the charge relating to stock option grants
will be $553,000, $561,000 and $175,000 in 2002, 2003, and 2004 respectively.
These charges will dilute earnings for those years and may have a negative
impact on our stock price.

                          RISKS RELATED TO OUR INDUSTRY

THE DEMAND FOR INTERNET DIRECT MARKETING SERVICES IS UNCERTAIN.

    The market for online direct marketing has only recently begun to develop.
Most businesses have little or no experience using the Internet for direct
marketing and promotion. As a result, many businesses have allocated only a
limited portion of their marketing budgets to online direct marketing. In
addition, companies that have invested a significant portion of their marketing
budgets in online marketing may decide after a time to return to more
traditional methods if they find that online marketing is a less effective
method of promoting their products and services than traditional marketing
methods. We cannot predict the amount of direct marketing spending on the
Internet in general, or demand for our targeted direct marketing services in
particular. The demand for online marketing may not develop to a level
sufficient to support our continued operations or may develop more slowly than
we expect.



                                       21
<Page>

MANY OF OUR CLIENTS ARE EMERGING INTERNET COMPANIES THAT REPRESENT CREDIT RISKS.

    Most of our marketer clients are Internet companies, many of which have
significant losses, negative cash flow and limited access to capital. Many of
these companies represent credit risks and could fail. Any financial
difficulties of our clients may result in difficulties in our ability to collect
accounts receivable or lower than expected sales of our products and services.
If our Internet clients continue to have financial difficulties or if such
difficulties worsen, our financial results would suffer. In addition, we have
experienced decreased sales of our products due to the general economic
slowdown, which has particularly impacted the Internet and technology sector.

            ADDITIONAL RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

ALTHOUGH OUR COMMON STOCK IS LISTED ON THE SWX NEW MARKET OF THE SWX SWISS
EXCHANGE, IT IS THINLY TRADED. THE MARKET PRICE OF OUR COMMON STOCK, LIKE THE
MARKET PRICES OF STOCKS OF OTHER INTERNET-RELATED COMPANIES, MAY FLUCTUATE
WIDELY AND RAPIDLY.

    Prior to our rights offering, trading in our common stock has been low.
Although our common stock has been listed on the SWX New Market of the SWX Swiss
Exchange since October 3, 2000, there is no assurance that more trading activity
in the common stock will develop.

    In addition, the market price of our common stock, like the market prices of
stocks of other Internet-related companies, may fluctuate widely and rapidly.
The market price and trading volume of our common stock, since our initial
public offering has been and may continue to be highly volatile. Factors such as
variations in our revenue, earnings and cash flow and announcements of new
service offerings, technological innovations, strategic alliances and/or
acquisitions involving competitors or price reductions by us, our competitors or
providers of alternative services could cause the market price of our common
stock to fluctuate substantially. Also, broad market fluctuations, including
fluctuations of the SWX New Market of the SWX Swiss Exchange, which result in
changes to the market prices of the stocks of many companies but are not
directly related to the operating performance of those companies, could also
adversely affect the market price of our common stock.

THE LISTING OF OUR SHARES ON THE SWX NEW MARKET OF THE SWX SWISS EXCHANGE MAY
LIMIT OUR ABILITY TO RAISE CAPITAL AND COULD ADVERSELY AFFECT OUR STOCK PRICE.

    We are the first U.S. company to list solely on the SWX Swiss Exchange. We
are not listed on any U.S. exchange. Because we are the first U.S. company to do
this, we are uncertain what effect, if any, our listing on only the SWX New
Market of the SWX Exchange will have upon our ability to raise additional
financing in the U.S. capital markets. If the listing of our shares solely on
the SWX New Market of the SWX Swiss Exchange is received by investors with
uncertainty, the listing may discourage potential investors and could hinder our
ability to raise necessary financing on acceptable terms. In addition, after the
expiration of the various lock-up periods entered into by our current
stockholders in connection with our initial public offering, all of the shares
of our common stock will be eligible for trading on the SWX New Market. If a
significant amount of such shares are offered for sale on the SWX New Market
after the lock-up periods expire, it could decrease our stock price.

STOCKHOLDERS HAVE EXPERIENCED SUBSTANTIAL DILUTION IN THEIR EQUITY OWNERSHIP AND
VOTING POWER IN OUR COMPANY WHETHER OR NOT THEY EXERCISED THEIR BASIC
SUBSCRIPTION RIGHTS, AND THEY MAY EXPERIENCE FURTHER DILUTION IF WE OFFER SHARES
OF OUR COMMON STOCK FOR SALE IN FUTURE MONTHS.

    Stockholders who did not exercise their basic subscription rights under the
rights offering will experience substantial dilution of their percentage of
equity ownership interest and voting power in our company. Even if our
stockholders exercised their basic subscription rights in full, they will
nevertheless still experience substantial dilution in their voting rights and in
their proportional interest in our future net earnings due to the purchase of
common stock by standby purchasers. In addition, it is possible that it may be
necessary or appropriate for us to seek to raise additional equity capital in
the future and shares of common stock may be offered for sale in the future. In
that event, the relative voting power and equity interests of persons who
purchased the common stock in the rights offering could be reduced. No assurance
can be given that such future sale will not occur, and, if it did, at what price
or other terms.


                                       22
<Page>


INTELLECTUAL PROPERTY RIGHTS

    A large part of our success depends on protecting our intellectual property,
which is one of our most important assets. If we do not adequately protect our
intellectual property, our business, financial condition and results of
operations would be seriously harmed.

    We have developed proprietary technology including database and interface
servers, offer creation and presentation software, and software to enable
communication between marketers' e-commerce systems and our system. All of our
marketer clients who desire to use our software sign our standard form license
agreement. In addition, we require employees, contractors and other persons with
access to our proprietary information to execute confidentiality and non-compete
agreements. We seek to protect our software, documentation and other written
materials under trade secret and other intellectual property laws, which afford
only limited protection. We have not registered any copyrights in the U.S. or
elsewhere related to our software or other technology.

    We have four issued U.S. patents and twenty pending U.S. patent
applications. Our first issued patent is entitled "ELECTRONIC COUPONING METHOD
AND APPARATUS" and relates to the method and apparatus for distributing,
generating, and redeeming discount coupons, rebate or gift certificates or the
like that tracks each coupon using a consumer ID number printed on the coupon.
Our second issued patent, which is a continuation-in-part to our first patent,
is entitled "ELECTRONIC DISCOUNT COUPONING METHOD AND APPARATUS FOR GENERATING
AN ELECTRONIC LIST OF COUPONS". Our third issued patent is entitled "METHOD AND
SYSTEM FOR ELECTRONIC DISTRIBUTION OF PRODUCT REDEMPTION COUPONS" and relates to
a method and system for the electronic distribution of product redemption
coupons to remote personal computers. Our fourth issued patent, of the same
title, is a continuation to our third patent. Our pending patent applications
seek to protect technology we use or may use in our business. We have no issued
foreign patents, but we have ten pending foreign patent applications in the
European Union. It is possible that no patents will be issued from the currently
pending patent applications. It is also possible that our patents or any
potential future patents may be found invalid or unenforceable, or otherwise be
successfully challenged. Also, any patent we have currently or that is issued to
us may not provide us with any competitive advantages. We may not develop future
proprietary products or technologies that are patentable, and the patents of
others may seriously limit our ability to do business.

    We have registered the e-centives trademark in the U.S. We have filed U.S.
trademark registrations for PROMOCAST, PROMOCOMMERCE, PROMOMAIL, PROMOMAIL
EVENT, PROMOMAIL SPOTLIGHT, BRIGHTSTREET and BRIGHTSTREET.COM, all of which are
pending. We have also filed for trademark registration of e-centives, the
e-centives logo, PROMOCAST, PROMOCOMMERCE, and PROMOMAIL in Switzerland and with
the European Union. We also claim rights in a number of additional tradenames
associated with our business activities.

    We hold rights to various web domain names including e-CENTIVES.COM and
BRIGHTSTREET.COM. Regulatory bodies in the United States and abroad could
establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. The relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. We may be unable to prevent third parties
from acquiring domain names that are similar to or diminish the value of our
trademarks and other proprietary rights.

    We have not registered any copyrights in the United States or elsewhere
related to our software or other technology.

    Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and, while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Our means of protecting our proprietary rights may not be adequate, and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us or our other intellectual property.

    There has been a substantial amount of litigation in the software industry
regarding intellectual property rights. In fact, we settled litigation with one
of our competitors regarding our intellectual property (see Item 3 -- Legal
Proceedings on page 25). It is possible that in the future, other third parties
may claim that our current or potential future products infringe upon their
intellectual property. We expect that software developers will increasingly be
subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry
segments overlaps. Any claims, with or without merit, could be time-consuming to
defend, result in costly litigation or require us to enter into royalty or
licensing agreements. These agreements, if required, may not be available on
terms acceptable to us or at all, which could seriously harm our business,
financial condition and results of operations.



                                       23
<Page>

    We integrate third-party software from vendors such as Oracle Corporation
into the software we use in our business. The third-party software may not
continue to be available to us on commercially reasonable terms. We may not be
able to renew these agreements or develop alternative technology. If we cannot
maintain licenses to key third-party software, develop similar technology or
license similar technology from another source on a timely or commercially
feasible basis, our business, financial condition and results of operations
could be seriously harmed.

EMPLOYEES

    As of December 31, 2001, we had a total of 153 employees, of whom 144 were
based in the United States and 9 were based internationally. Of these, 43 were
sales and marketing, 94 were product development, and 16 were general and
administrative personnel. None of our employees are represented by a labor
union, nor have we ever experienced a work stoppage. We believe our employee
relations are good. The table below reflects the growth in our employee
headcount at December 31 for each of the years below:

                         1997       16
                         1998       31
                         1999       74
                         2000      110
                         2001      153

RECENT DEVELOPMENTS

(a) NOTES RECEIVABLE FROM STOCKHOLDERS

    On January 22, 2002, Pine, Venturetec and InVenture, all companies under
common control, reallocated their share purchases and/or related promissory
notes associated with the October 2001 rights offering. Please see our "Item 5
-- Market for Registrant's Common Stock and Related Stockholder Matters --
Rights Offering" section on page 26. The CHF 2,500,000 (approximately
$1,538,462) in cash originally indicated as originating from Venturetec has been
reallocated as follows:

     o    InVenture purchased from Pine in a private sale 1,041,667 of the
          shares of common stock originally purchased by Pine pursuant to the
          rights offering for CHF 2,083,334, at CHF 2.00 a share. As part of
          this transaction, Pine was credited with paying us CHF 2,083,334
          (approximately $1,282,052) and delivered to us an amended and restated
          secured promissory note dated as of October 19, 2001, in the principal
          amount of CHF 6,604,196 (approximately $4,064,121), with 2% interest,
          with an original March 31, 2002 maturity date that was subsequently
          extended to May 15, 2002. We simultaneously returned Pine's original
          CHF 8,687,530 promissory note.

     o    Venturetec paid us CHF 416,666 (approximately $256,410) and delivered
          to us an amended and restated secured promissory note dated as of
          October 19, 2001, in the principal amount of CHF 10,583,334
          (approximately $6,512,821), with 2% interest, with an original March
          31, 2002 maturity date that was subsequently extended to June 30,
          2002. This CHF 10,583,334 reflects an increase in Venturetec's secured
          promissory note to CHF 11,000,000 (approximately $6,769,231),
          reflecting Venturetec's original subscription price for the shares of
          our common stock for which it subscribed under the rights offering
          minus the CHF 416,666 payment. We simultaneously returned Venturetec's
          original CHF 8,500,000 promissory note.

(b) POTENTIAL ACQUISITION

    We are currently in negotiations to acquire the assets of another company
and have executed an Asset Purchase Agreement regarding the proposed
acquisition, with an expected settlement date of April 30, 2002.

ITEM 2 - PROPERTIES

    We do not currently own any real estate. Our headquarters and principal
administrative, finance, legal, sales and marketing operations are located in
approximately 47,000 square feet of leased office space in Bethesda, Maryland, a
suburb of Washington, D.C. This lease is for a term of five years and expires in
September 2005. Our monthly rent payment under this lease is approximately
$136,000, with increases of 3% per year.

    During 2001, we also maintained offices in Redwood Shores, California, Santa
Monica, California, Denver, Colorado, New York,



                                       24
<Page>

New York and London, England. Our offices in Santa Monica and Denver were closed
prior to December 31, 2001. In association with the acquisition of the Commerce
Division, we sub-lease approximately 30,724 square feet of office space in
Redwood Shores, California. The monthly rent payments are approximately $137,000
and increase for each year of the nine year lease term by fixed dollar amounts
that approximates 3% per year. We do not expect to add any significant
additional office space in the foreseeable future.

ITEM 3 - LEGAL PROCEEDINGS

    On October 8, 2001, we were notified by coolsavings.com that a payment of
$250,000 was due to coolsavings because a summary judgment motion, relating to a
separate litigation between coolsavings and Catalina Marketing Corporation, was
not granted within one year from the date of entry of the Stipulated Order of
Dismissal, which was October 3, 2000. Our settlement with coolsavings is
summarized below.

         The terms of the settlement with coolsavings provide for a
      cross-license between us and coolsavings, for each of the patents
      currently in dispute. There are no royalties or other incremental payments
      involved in the cross-license. Pursuant to this settlement, we may have to
      make payments of up to $1.35 million to coolsavings as follows:

               -    $650,000, which was paid to coolsavings on September 29,
                    2000, was due at the signing of the settlement documents;

               -    $250,000, which was accrued for as of December 31, 2001, was
                    due if, within one year from the date of entry of the
                    Stipulated Order of Dismissal, Catalina Marketing
                    Corporation prevailed in a motion for summary judgment in a
                    separate litigation between it and coolsavings, involving
                    the coolsavings' patent currently in dispute; and

               -    up to $450,000 if and to the extent the coolsavings' patent
                    currently in dispute survives the pending reexamination
                    proceedings at the Patent and Trademark Office that were
                    initiated by a third party. This component of the settlement
                    arrangement has not been accrued for because our possibility
                    of having to make this payment continues to remain remote.

    Other than the $250,000 payment due to coolsavings, there were no material
additions to, or changes in status of, any ongoing, threatened or pending legal
proceedings during the year ended December 31, 2001.

    From time to time, we are a party to various legal proceedings incidental to
our business. None of these proceedings is considered by management to be
material to the conduct of our business, operations or financial condition.

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

    On November 7, 2001, our board of directors unanimously approved, subject to
stockholder approval, (i) an amendment of our Restated Certificate of
Incorporation, as amended ("Restated Certificate of Incorporation"), to increase
our total authorized capital stock from 50,000,000 shares to 130,000,000 shares
in connection with an increase in our authorized common stock from 40,000,000
shares to 120,000,000 shares (this amendment will not effect a change to our
10,000,000 shares of authorized preferred stock); and (ii) an amendment to our
Amended and Restated Stock Option and Incentive Plan, as amended (the "Stock
Option Plan"), to increase the maximum number of shares available for issuance
from 5,000,000 to 21,000,000. On November 30, 2001, holders of a majority of the
outstanding shares of our common stock executed a written stockholder consent
approving the amendment of our Restated Certificate of Incorporation and the
amendment to our Stock Option Plan. Under applicable federal securities laws,
the amendments cannot be effective until at least 20 days after this information
statement is sent or given to our stockholders. This information statement was
to be mailed to stockholders on or about December 31, 2001.


                                       25
<Page>


                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

A. MARKET INFORMATION

    Since our initial public offering on October 3, 2000, our common stock has
traded on the SWX New Market of the SWX Swiss Exchange under the symbol "ECEN."
The following table reflects the high and low sales prices, in Swiss Francs and
U.S. Dollars, reported on the SWX New Market of the SWX Swiss Exchange for each
quarter listed. The amounts listed in U.S. Dollars reflect the relevant exchange
rate as of the date of such high or low price.

<Table>
<Caption>

             PERIOD                      SWISS FRANCS                    US DOLLARS                   EXCHANGE RATES
             ------                   -------------------            -------------------           --------------------

                                      HIGH            LOW            HIGH            LOW            HIGH            LOW
                                      ----            ---            ----            ---            ----            ---
<S>                                 <C>            <C>              <C>             <C>            <C>            <C>
              2000
              ----
Quarter ended December 31, 2000     CHF 21.80      CHF 11.75        $12.46          $7.04          0.57140        0.59900

              2001
              ----
Quarter ended March 31, 2001        CHF 15.25       CHF 8.50         $9.35          $4.92          0.61310        0.57857
Quarter ended June 30, 2001         CHF 8.50        CHF 1.87         $4.87          $1.05          0.57346        0.55921
Quarter ended September 30, 2001    CHF 2.57        CHF 0.80         $1.50          $0.50          0.58485        0.61985
Quarter ended December 31, 2001     CHF 1.15        CHF 0.85         $0.71          $0.52          0.60897        0.60713

</Table>

B. RECENT SALE OF UNREGISTERED SECURITIES

    During the year ended December 31, 2001, we granted options to purchase a
total of 1,596,250 shares of common stock under our stock incentive plan to
certain of our employees and directors. During that period, 4 optionees
exercised options to purchase 11,875 shares of common stock, and options to
purchase 1,236,895 shares of common stock were forfeited by employees leaving
the company.

C. HOLDERS

    The number of holders of our common stock as of December 31, 2001 was in
excess of 90 record and beneficial owners.

D. DIVIDENDS

    In December 2000, we declared dividends of $1,235,688 on our preferred
Series A convertible preferred stock, which was paid out in early 2001. We have
never declared or paid any cash dividends on our common stock. We intend to
retain future earnings, if any, to finance the expansion of our business, and do
not expect to pay any cash dividends in the foreseeable future. Please see our
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources" section on page 39.

    The declaration of dividends is within the discretion of our board of
directors and subject to limitations set forth in the Delaware General
Corporation Law. Our certificate of incorporation provides that if dividends are
paid, they must be paid equally on each share of outstanding common stock.
Payment of any dividends on our common stock is subject to the rights of any
preferred stock then outstanding.

E. RIGHTS OFFERING

    Based on a resolution of the board of directors dated August 31, 2001, we
granted each holder of our common stock as of August 31, 2001 the right to
purchase one share of our common stock for each share of common stock held of
record on that date, and offered any remaining shares to certain standby
purchasers. This rights offering consisted of 20,000,000 shares of our common
stock at a subscription price of CHF 2.00 ($1.23) per share. In October 2001, we
closed this CHF 40,000,000 (approximately $24,600,000) rights offering with
subscriptions for all 20,000,000 shares. Each subscriber in the rights offering
also received, for no additional



                                       26
<Page>

consideration, based upon such subscriber's participation in the rights
offering, a pro-rata portion of 2,000,000 shares of our Series A convertible
preferred stock (convertible on a 10-for-1 basis into 20,000,000 shares of
common stock under certain circumstances).

    As part of the rights offering, we sold shares of our common stock to
Venturetec, Inc. and Pine, Inc. Peter Friedli, one of our stockholders and
directors, serves as the investment advisor to both Venturetec and Pine, and
also serves as President of Venturetec and its parent corporation, New
Venturetec AG. Venturetec and Pine each delivered to us a promissory note dated
as of October 19, 2001, with a maturity date of March 31, 2002, as consideration
for the subscription price for the shares of common stock for which each company
subscribed under the rights offering. Venturetec's note (which was only partial
consideration for the purchase of the shares; the remainder was paid in cash)
was in the principal amount of CHF 8,500,000 ($5,230,769) and Pine's note was in
the principal amount of CHF 8,687,530 ($5,346,172). In January 2002, Pine,
Venturetec and InVenture, reallocated their share purchases and/or related
promissory notes associated with the rights offering. Please see our "Item 1 --
Business -- Recent Developments" section on page 24.

    We issued a global share certificate representing all the shares purchased
in the rights offering after the closing, which shares shall be held in escrow
for a period of approximately three months from the date of closing, during
which time such shares shall not be tradable. No physical share certificates
will be issued by us or delivered to the subscribers in the rights offering.
Once such shares are registered with the U.S. Securities and Exchange Commission
and properly listed with the SWX New Market, such shares shall be released to
the respective subscribers. This process was completed in late February 2002.

    We engaged Friedli Corporate Finance, Inc., a venture capital firm of which
one of our stockholders and directors, Peter Friedli, is the principal, to
support us in connection with the rights offering. In connection with this
support, we agreed to extend the consulting agreement with Friedli Corporate
Finance for three years and to reimburse Friedli Corporate Finance $100,000 in
expenses for rights offering support.

    swissfirst Bank AG and certain affiliate entities ("swissfirst") acted as
our financial advisor and limited placement agent in connection with the rights
offering pursuant to a Mandate Agreement between us and swissfirst. For
effecting arrangements with purchasers under the rights offering, we agreed to
pay swissfirst a fee of 6.5% of the total sales under the offering made by them
to investors with whom swissfirst had directly and actively engaged in sales and
marketing efforts for the purpose of placing shares in the rights offering
("direct placement efforts"). For those sales, that swissfirst did not utilize
direct placement efforts, the commission rate was 2.0%. In addition, swissfirst
was paid a 0.5% handling fee based upon all funds raised in this rights offering
actually received by swissfirst and held for our benefit, provided that there
shall be no such handling fee paid on funds raised by our board of directors and
their affiliates. We also agreed to and paid a fee of 7% to other firms involved
in the rights offering.



                                       27
<Page>


ITEM 6 - SELECTED FINANCIAL INFORMATION

                      SELECTED CONSOLIDATED FINANCIAL DATA
                (IN U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

    You should read the selected financial data shown below together with our
consolidated financial statements and related notes and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial data included elsewhere in this annual report. Our consolidated
statements of operations data for each of the years ended December 31, 1999,
2000 and 2001 and the consolidated balance sheet data as of December 31, 2000
and 2001, are derived from our consolidated financial statements that have been
audited by KPMG LLP, independent certified public accountants, included
elsewhere in this annual report. Our statement of operations data for the years
ended December 31, 1997 and 1998 and the balance sheet data as of December 31,
1997, 1998 and 1999 have been derived from our audited financial statements not
included in this annual report.


<Table>
<Caption>

                                                   YEAR ENDED DECEMBER 31,
                                                   -----------------------

                                  1997             1998            1999            2000          2001
                              ------------     ------------    ------------    ------------   ----------

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<S>                            <C>             <C>             <C>             <C>             <C>
Revenue ....................   $       --      $       --      $        740    $     10,230    $     5,054
Cost of revenue ............           --              --             1,028           2,208          8,395
Product development,
  exclusive of stock-based
  compensation .............            814           1,160           2,427           2,873          7,933
General and administrative,
  exclusive of stock-based
  compensation .............            753           1,237           4,083           8,765         12,592
Sales and marketing,
  exclusive of stock-based
  compensation .............          1,105           2,480           7,889          19,006          9,997
Network partner fees .......           --              --               730           6,354            986
Restructuring and impairment
  charges...................           --              --              --              --            9,876
Stock-based compensation:
  Product development ......           --              --               283             822            201
  General and administrative           --              --               297             333            362
  Sales and marketing ......           --              --               475             558            300
                               ------------    ------------    ------------    ------------    ------------
Loss from operations .......         (2,672)         (4,877)        (16,472)        (30,689)       (45,588)
Interest expense ...........           --              --              --              --               (4)
Interest income, net .......            187             310             268             694            608
Other income ...............           --              --                34              50           --
                               ------------    ------------    ------------    ------------    ------------
     Loss before income
       taxes ...............         (2,485)         (4,567)        (16,170)        (29,945)       (44,984)
Income taxes ...............           --              --              --              --              (19)
                               ------------    ------------    ------------    ------------    ------------
     Net loss ..............         (2,485)         (4,567)        (16,170)        (29,945)       (45,003)
Preferred stock dividend
  requirements and accretion
  of convertible redeemable
  preferred stock ..........           (180)           (383)           (383)           (552)          --
                               ------------    ------------    ------------    ------------    ------------
Net loss applicable to
  common stockholders ......   $     (2,665)   $     (4,950)   $    (16,553)   $    (30,497)   $   (45,003)
                               ============    ============    ============    ============    ============
Basic and diluted loss per
  common share .............   $      (0.56)   $      (1.02)   $      (3.40)   $      (4.09)   $     (2.68)
Shares used to compute basic
  and diluted net loss per
  common share .............      4,726,882       4,860,000       4,869,601       7,460,272     16,810,366

</Table>


<Table>
<Caption>
                                                          AS OF DECEMBER 31,
                                                          ------------------
                                          1997       1998       1999        2000        2001
                                       ---------- ---------- ----------  ----------- -------

<S>                                      <C>        <C>          <C>        <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.........       7,084      2,377        427        27,062       8,902
Working capital...................       6,916      2,117        872        26,094       2,177
Total assets......................       7,390      3,031      5,490        36,377      27,829
Deferred revenue..................          --         --        791           904       2,524
Stockholders' equity..............       7,154      2,587        995        30,834      10,533
</Table>




                                       28
<Page>


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

    YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH "SELECTED CONSOLIDATED FINANCIAL DATA"
AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE FINANCIAL
STATEMENTS ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO HISTORICAL
INFORMATION, THIS DISCUSSION CONTAINS FORWARD-LOOKING INFORMATION THAT
INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED BY SUCH FORWARD-LOOKING INFORMATION DUE TO COMPETITIVE
FACTORS, RISKS ASSOCIATED WITH OUR EXPANSION PLANS AND OTHER FACTORS
DISCUSSED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT.

OVERVIEW

    We provide interactive marketing technologies and services. Businesses rely
on our broad range of solutions to acquire and retain customers. We provide
online marketing and commerce capabilities and solutions for companies across a
range of industries including the Internet (portals and destination sites),
retail, banking, insurance, and telecommunications. With our proprietary
technology, we power acquisition and retention solutions for companies that do
business with millions of Internet users every day. Our suite of solutions
includes promotions network, member services, commerce network, commerce engine,
outsourced e-mail marketing, and online promotions system.

    We were established on August 2, 1996 as Imaginex, Inc., through
incorporation in the State of Delaware. During October 1996, we amended our
articles of incorporation to change our name to Emaginet, Inc. and in March
1999, we again amended our articles of incorporation to change our name to
e-centives, Inc. From inception until June 1999, our principal activities
included:

          o    designing and developing our online direct marketing system,
               including our infrastructure;
          o    developing and protecting our intellectual property;
          o    establishing relationships with marketers and high-traffic
               Internet sites;
          o    expanding the number of consumer members and building our
               database of consumer information; and
          o    securing financing for working capital and capital expenditures.

    We launched our direct marketing service in November 1998 by delivering
e-centives through our PROMOMAIL, PROMOCAST and PROMOCOMMERCE services. Between
November 1998 and June 1999, while we were introducing our direct marketing
service, we allowed marketers to use our direct marketing system at no charge.
We began generating revenue in the third quarter of 1999. In conjunction with
the acquisition of the Commerce Division, our commerce products and services
began generating revenue in late March 2001. In August 2001, we started
producing revenue from our e-mail marketing technology services and through the
acquisition of BrightStreet.com in December 2001, we began generating revenue by
providing online promotions management solutions. For the year ended December
31, 2001, we generated 62% of our revenue from our direct marketing services,
35% from our commerce products and services, 2% from our outsourced e-mail
services and 1% from our online promotions management services. During the year
ended December 31, 2000, we generated 100% of our revenue from our direct
marketing services, with 13% from the delivery of e-mails for ZDNet and 9% from
the purchase of e-centives by Excite for the purpose of resale.

    Our direct marketing system is designed to enable marketers to access a
database of consumers across the web sites of our network partners and by
e-mail. Our system includes a web-based application that enables consumers to
register to receive promotional offers ("e-centives") at our network partners'
web sites or through our web site. Our members provide demographic information
and product category interests in return for targeted offers. Our system then
delivers offers for products and services directly to the member's account or
through e-mail. We primarily deliver e-centives through our PROMOMAIL, PROMOCAST
and PROMOCOMMERCE services. Over the past few years, e-mail has become the
predominant Internet application as measured by the percentage of users and
total message volume online. Due to its targeting and personalization
capabilities, and relatively low cost of implementation, the use of e-mail as a
marketing vehicle has significantly increased as a percentage to total online
marketing dollars. E-mail marketing is also flexible for both customer
acquisition and retention. Because of the increased interest in e-mail
marketing, sales of our PROMOMAIL services has become a much higher percentage
of our direct marketing services revenue, a trend that we expect to continue.

          o    Our PROMOMAIL service consists of targeted e-mails highlighting a
               marketer's specific promotions. Marketers who contract to use the
               PROMOMAIL service participate in mailings to a group of members
               based upon those members' preferences. Marketers can purchase
               this service on a fixed fee basis or on a performance basis. For
               the fixed fee contracts, participating marketers are charged a
               fixed fee for each member to whom the e-mail is sent and revenue
               related to the service is recognized upon transmission of the
               e-mail. When marketers purchase the PROMOMAIL service on a
               performance basis, revenue is based solely on the actions of our
               members. We earn a contractually specified



                                       29
<Page>

               amount based on the number of members who click on the offer or
               other specified link, the number of purchases by our members, or
               the amount of sales generated by our members. Revenue is
               recognized upon the click-through or upon notification by the
               marketer of the number or amount of applicable sales.

          o    Marketers who subscribe to the PROMOCAST service enter into
               fixed-fee contracts for our delivery of either a specified or
               unlimited number of e-centives to the accounts of a targeted
               group of members over the contractual period. Once a member
               receives and clicks on the offer, our system links the member
               directly to the appropriate page within the marketer's site. Each
               e-centive has an expiration date, typically 30 days from the date
               the e-centive is placed in a member's account. An e-centive is
               considered delivered when a member visits his or her account.
               Because we have an obligation to maintain the e-centive on our
               system until it expires, we recognize revenue upon expiration of
               the delivered e-centive. Revenue related to delivery of an
               unlimited quantity of e-centives is recognized ratably over the
               expected term of the customer relationship.

          o    Our PROMOCOMMERCE service consists of several components
               including a PROMOCAST package, a perpetual software license and
               maintenance on such software. Revenue related to the incorporated
               PROMOCAST package is recognized ratably over the expected term of
               the customer relationship. The software components enable the
               subscribing merchant's site to recognize our members when they
               enter into the merchant's web site and automatically detect,
               highlight and apply relevant e-centives during the shopping and
               purchase process. The maintenance component provides subscribing
               merchants with product updates and telephone support services.
               Revenue is recognized ratably over the expected term of the
               customer relationship.

          o    During the first two quarters of 2001, we entered into several
               barter transactions (marketing partner transactions) that consist
               of the sale of large quantities of outbound e-mail to marketing
               partners, and the purchase of banner advertisements and outbound
               e-mail services by e-centives from these same partners. We
               generally enter into a contractual relationship with a marketing
               partner for delivery of a specified quantity of targeted e-mails
               to our membership database or other databases, offering
               promotions and special offers on behalf of the marketing
               partners. In addition, we place orders with the marketing partner
               to purchase a specified volume of banner advertisements, web site
               click-throughs or outbound e-mail. This marketing activity is
               designed to drive the marketing partners' viewers and members to
               our registration page to register for the e-centives service.
               Revenue and expenses from these marketing partner transactions
               are recorded based upon the fair value of the promotional e-mails
               delivered at a similar quantity or volume of e-mails delivered in
               a qualifying and comparable size past cash transaction. Fair
               value of promotional e-mails delivered is based upon the
               Company's recent historical experience of cash received for
               e-mail deliveries. Such revenues are recognized when the
               promotional e-mails are delivered. Corresponding expenses are
               recognized for the advertisements received when the Company's
               advertisements are displayed on the reciprocal web sites or
               properties, which is typically in the same period as the delivery
               of the promotional e-mails and are included as part of sales and
               marketing expense.

        On March 28, 2001, we acquired the Commerce Division from Inktomi
Corporation in a purchase business combination for approximately $12.9 million,
consisting of 2,168,945 shares of our common stock valued at approximately $11.8
million and about $1.1 million in acquisition costs. A total of 2,551,700 shares
of our common stock were issued with 40% placed into escrow. Thirty eight
percent of the escrow shares, or 382,755, are to be released based upon the
achievement of contractually defined revenue and performance targets for the
Commerce Division. The remaining 637,925 of escrow shares are held in
satisfaction of any potential indemnity claims and will be released within
contractually agreed upon time frames. As part of the purchase price, we also
issued to Inktomi Corporation a warrant to purchase an additional 1,860,577
shares of our common stock upon the achievement of additional revenue targets
for the Commerce Division at the end of 12 months following the closing of this
acquisition. Based upon the revenue through December 31, 2001, we do not
anticipate the Inktomi will be eligible to receive the shares of common stock
and warrants that are contingent upon the achievement of revenue targets for the
Commerce Division. In connection with the acquisition, we entered into a license
agreement and reseller agreement with Inktomi Corporation. Under the terms of
the license agreement, Inktomi Corporation will perpetually license certain
software and technology to us to be used in the acquired business. Pursuant to
the reseller agreement, Inktomi Corporation will resell certain products of the
acquired business for a period of twelve months from the closing. Subsequent to
December 31, 2001, certain of these reseller agreements were terminated.

    Through the acquisition of the Commerce Division, we acquired a
comprehensive system that provides product search, price comparison and
merchandising services. Our commerce products and services include the COMMERCE
ENGINE and the COMMERCE NETWORK. Revenue from our commerce technologies and
services is generated primarily through license, support and maintenance fees
from Internet portal and other web site destination customers, as well as fees
from the participating online merchants. Our contracts



                                       30
<Page>

consist of implementation and annual information service fees from Internet
sites and annual service and monthly transaction fees from merchants. Revenue
generated from the merchant transaction fees is recognized when earned, while
revenue for all other services is recognized ratably over the expected term
of the customer relationship.

          o    Similar to our direct marketing application we provide to our
               network partners through our promotions network, we make the
               COMMERCE ENGINE available to Internet portals and other Web site
               customers who can, in turn, provide commerce services through
               their sites to end users. We provide and manage all hardware,
               software and operational aspects of the COMMERCE ENGINE and the
               associated databases of product libraries and purchasing
               locations. The COMMERCE ENGINE is also designed to track and, in
               the cases where merchants have installed our Affiliate Tracking
               System, confirm purchases made by end-users of our customers'
               services and to generate invoices for our merchants to support
               performance-based marketing arrangements among multiple parties.

          o    Our COMMERCE NETWORK enables merchants to distribute and promote
               their products to the end users of our COMMERCE ENGINE customers.
               Our system collects product data from merchants, normalizes it
               into appropriate categories, indexes it and makes it available
               for access through our COMMERCE ENGINE customers, and refreshes
               it regularly to reflect pricing changes and availability. Our
               account managers work closely with merchants to coordinate their
               involvement within the network, including product data
               management, merchandising, analysis and recommendations. We also
               provide merchants with detailed performance reports broken down
               by site and category, in order to track activity which may range
               from click-through to point of purchase.

    In August 2001, we began offering outsourced e-mail marketing technology
services to businesses. These services allow companies to outsource their e-mail
marketing campaigns to us. This solution lets businesses cost-effectively
conduct e-mail marketing without having to acquire or develop their own e-mail
infrastructure and manage the process. Our outsourced e-mail marketing solution
consists of list management and hosting, strategy and creative services, e-mail
delivery and management, and tracking and analysis services. Our e-mail
marketing system is designed to help build an ongoing, personalized dialogue
with the client's intended audience and maximize effectiveness through targeting
and testing. Revenue is generated by charging fees for list management and
hosting services, strategy and creative services, e-mail delivery and management
services, as well as tracking and analysis services. Revenue related to the
one-time service charges for setting up the customer is recognized ratably over
the expected term of the customer relationship, while all other revenue is
recognized when the services occur.

     On December 3, 2001, we entered into an Asset Purchase Agreement (the
"Agreement") with BrightStreet.com, Inc. whereby we acquired substantially all
of BrightStreet.com's assets and certain liabilities. We acquired
BrightStreet.com for approximately $2.2 million, consisting of approximately
$1.7 million in cash, a guaranteed warrant to purchase 500,000 shares of our
common stock valued at approximately $185,000, a contingent performance-based
warrant to purchase up to 250,000 shares of our common stock and about $335,000
in acquisition costs. The cash payments consisted of approximately $843,000 in
cash advances to fund BrightStreet.com's working capital under the terms of a
Management Services Agreement and an $825,000 payment at closing. The guaranteed
warrant is exercisable from June 3, 2002 through December 3, 2005 at an exercise
price of $0.5696 per share. The performance-based warrant is exercisable, in
whole or in part, beginning June 4, 2003 until December 3, 2005 based upon the
achievement of certain performance targets at an exercise price of $2.44 per
share.

    In conjunction with the Agreement, we entered into a Patent Assignment
Agreement (the "Assignment") with BrightStreet.com. Pursuant to the Assignment,
BrightStreet.com has agreed to assign to us all right, title and interest in
and to all the issued and pending BrightStreet.com patents (the "Patents"),
subject to certain pre-existing rights granted by BrightStreet.com to third
parties ("Pre-existing Rights"), provided we make certain payments to
BrightStreet.com by December 3, 2005 (the "Payments"). If we make such
Payments by that date, we shall own all right, title and interest in and to
the Patents, subject to the Pre-existing Rights. Until such Payments are
made, we have, subject to the Pre-existing Rights, an exclusive, worldwide,
irrevocable, perpetual, transferable, and sublicensable right and license
under the Patents. Until we take title to the Patents, we may not grant an
exclusive sublicense to the Patents to any unaffiliated third party. In the
event we do not make the Payments by December 3, 2005, we shall retain a
license to the Patents, but the license shall then convert to a non-exclusive
license.

    In exchange for the rights granted under the Assignment, beginning December
2002, we are obligated to pay BrightStreet.com ten percent of revenues
received that are directly attributable to (a) the licensing or sale of
products or functionality acquired from BrightStreet.com, (b) licensing or
royalty fees received from enforcement or license of the Patents covered by
the Assignment, and (c) licensing or royalty fees received under existing
licenses granted by BrightStreet.com to certain third parties. If the total
transaction compensation paid, as defined by the Agreement, at any time prior
to December 3, 2005 exceeds $4,000,000, the Payments will be deemed to have
been made. We also have the right, at any time prior to December 3, 2005, to
satisfy the Payments by paying to BrightStreet.com the difference between the
$4,000,000 and the total compensation already paid.

    With the acquisition of BrightStreet.com, we started offering online
promotions technology and infrastructure that is used for powering a variety of
promotional offerings, including coupons, rebates, sales circulars, surveys,
trial offers and loyalty programs. This system designs, deploys, and manages
promotions and tracks individual consumer response to offers for manufacturers,
retailers, and websites. It also enables businesses to gain insights about their
consumer preferences and motivations, and enhance consumer



                                       31
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relationships with rich data modeling and sophisticated targeting. Revenue
consists of fees from the sale of licenses and related services, which are
recognized ratably over the contractual period.

    To date we have not been profitable, incurring net losses in 2001, 2000, and
1999 of $45.0 million, $29.9 million and $16.2 million, respectively. We have
undertaken a series of cost-cutting measures to preserve cash and will continue
to examine ways to cut costs in the future. During 2001, management approved
restructuring actions to respond to the global economic downturn and to improve
our cost structure by streamlining operations and prioritizing resources in
strategic areas of our business. We recorded restructuring and impairment
charges of $9.9 million to reflect these actions. This charge consisted of
severance and other employee benefits related to the planned termination of
approximately 63 employees, costs related to the consolidation of excess
facilities in our Bethesda, Maryland and Redwood Shores, California locations,
as well as a revaluation of the intangible assets associated with the Commerce
Division. We have similarly undertaken efforts to reduce marketing and general
overhead expenses, and are continually looking prudently at all expenditures in
order to reduce our ongoing operating costs.

CRITICAL ACCOUNTING POLICIES

    Our critical accounting policies are as follows:

          o    Revenue recognition
          o    Estimating valuation allowance for doubtful accounts
          o    Valuation of long-lived intangible assets
          o    Restructuring charge

    (a) REVENUE RECOGNITION

           Revenue is generated by providing promotions marketing and outsourced
        e-mail services, licensing our software products, as well as providing
        other services, such as maintenance support, technical support and
        consulting. Our products and services principally include PROMOMAIL,
        PROMOCAST, PROMOCOMMERCE, COMMERCE ENGINE, e-mail Marketing, and the
        licensing of our Promotions Management Systems software.

           PROMOMAIL is a service that consists of targeted e-mails highlighting
        specific e-centives. Marketers can purchase this service on a fixed fee
        basis or on a performance basis. For the fixed fee contracts,
        participating marketers are charged a fixed fee for each member to whom
        the e-mail is sent and revenue related to the service is recognized upon
        transmission of the e-mail. When marketers purchase the PROMOMAIL
        service on a performance basis, revenue is based solely on the actions
        of our members. We earn a contractually specified amount based on the
        number of members who click on the offer or other specified link, the
        number of purchases by our members, or the amount of sales generated by
        our members. Revenue is recognized upon the click-through or upon
        notification by the marketer of the number or amount of applicable
        sales.

           Marketers who subscribe to the PROMOCAST service enter into fixed-fee
        contracts for delivery of either a specified or unlimited number of
        e-centives to the accounts of a targeted group of members over the
        contractual period, not to exceed one year. Each e-centive has an
        expiration date, typically 30 days from the date the e-centive is placed
        in a member's account. An e-centive is considered delivered when a
        member visits their account. Because we have an obligation to maintain
        the e-centive on our system until it expires, we recognize revenue upon
        expiration of the delivered e-centive. Revenue related to delivery of an
        unlimited quantity of e-centives is recognized ratably over the expected
        term of the customer relationship.

           The PROMOCOMMERCE service is a fixed-fee contract consisting of
        several components, including a PROMOCAST package, a perpetual software
        license and maintenance on the accompanying software. We have not sold
        software or maintenance separately; therefore, vendor specific objective
        evidence has not been established. The related revenue is recognized
        ratably over the expected term of the customer relationship.

           Revenue generated from the COMMERCE ENGINE is primarily through
        license, support and maintenance fees from Internet portal and other web
        site destination customers. We also generate revenue from participating
        online merchants. The contracts related to the COMMERCE ENGINE typically
        consist of implementation and information service fees from Internet
        sites and service and monthly transaction fees from merchants. Revenue
        generated from the merchant transaction fees is recognized when a
        transaction occurs, revenue from implementation services is recognized
        ratably over the expected term of the customer relationship and
        revenue from service fees is recognized ratably over the contract
        period.


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<Page>

           Our outsourced e-mail marketing technology allows businesses to
        conduct e-mail marketing without having to acquire or develop their own
        e-mail infrastructure. Revenue is generated by charging fees for list
        management and hosting services, strategy and creative services, e-mail
        delivery and management services, as well as tracking and analysis
        services. Revenue related to the one-time service charges for setting up
        the customer is recognized ratably over the expected term of the
        customer relationship, while all other revenue is recognized when the
        services occur.

           With the acquisition of BrightStreet.com in December 2001, we started
        offering online promotions management solutions for creating, targeting,
        publishing and tracking coupons and promotional incentives. This system
        designs, deploys, and manages promotions and tracks individual consumer
        response to offers for manufacturers, retailers, and websites. This
        technology includes an operating system for delivering promotions and
        promotion management tools. Revenue consists of fees from the sale of
        licenses, which are recognized ratably over the contractual period.

           Marketers may also contract for consulting services, such as
        assistance with promotions planning. Revenue related to these consulting
        services is recognized as the related services are provided.

           Revenue for the first two quarters of 2001 also includes barter
        revenues, which represent exchanges of promotional e-mail deliveries for
        reciprocal advertising space or traffic on other web sites ("marketing
        partner transactions"). Revenues and expenses from these marketing
        partner transactions are recorded based upon the fair value of the
        promotional e-mails delivered at a similar quantity or volume of e-mails
        delivered in a qualifying past cash transaction. Fair value of
        promotional e-mails delivered is based upon our recent historical
        experience of cash received for similar e-mail deliveries. Such revenues
        are recognized when the promotional e-mails are delivered. Corresponding
        expenses are recognized for the advertisements received when our
        advertisements are displayed on the reciprocal web sites or properties,
        which is typically in the same period as delivery of the promotional
        e-mails and are included in sales and marketing expense.

    (b) ESTIMATING VALUATION ALLOWANCE FOR DOUBTFUL ACCOUNTS

           The preparation of financial statements requires us to make estimates
        and assumptions that affect the reported amount of assets and disclosure
        of contingent assets and liabilities at the date of the financial
        statements and the reported amounts of revenues and expenses during the
        reported period. We analyze historical bad debts, customer
        concentrations, customer credit-worthiness, and current economic trends
        when evaluating the adequacy of the allowance for doubtful accounts.
        Historically, a portion of our customer base included customers with a
        limited operating history that are subject to many of the risks and
        uncertainties that we are, including rapid changes in technology, no
        established markets for their products, and intense competition, among
        others. In addition, many of these companies required significant
        infusions of capital to continue operations. The availability of such
        capital has been curtailed during 2001 and some of these companies were
        not able to raise sufficient funds to continue their operations. As a
        result, we recorded bad debt expense of approximately $863,000 for the
        year ended December 31, 2001. As of December 31, 2001, our accounts
        receivable balance was $2.1 million, net of allowance for doubtful
        accounts of approximately $148,000. One customer accounted for 69% of
        the gross accounts receivable balance at December 31, 2001, and the
        customer subsequently paid the amount in February 2002. We recorded bad
        debt expense of approximately $490,000 during the year ended December
        31, 2000. Bad debt expense in 1999 was not significant.

    (c) VALUATION OF LONG-LIVED INTANGIBLE ASSETS

           During 2001 we recorded approximately $3.8 million in intangible
        assets related to our acquisitions. We perform an on-going analysis of
        the recoverability of our goodwill and other intangibles in accordance
        with FAS 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
        LONG-LIVED ASSETS TO BE DISPOSED OF. Based on quantitative and
        qualitative measures, we assess the need to record impairment losses on
        long-lived assets used in operations when impairment indicators are
        present. The impairment conditions evaluated by us may change from
        period to period, given that we operate in a volatile business
        environment.

           During 2001, we took an impairment charge on our intangible assets,
        associated with a revaluation of the Commerce Division, which we
        acquired in March 2001. Although we knew that the business of the
        Commerce Division as operated by Inktomi was slowing, the business
        deteriorated more rapidly due to the termination of several major
        contracts that we would have acquired. In addition, subsequent to
        finalizing the acquisition, several of the clients that were up for
        renewal did not renew their agreements. Therefore, the acquisition
        resulted in a significant increase in our expenses without the
        corresponding increase in our revenues that we had expected at the time
        the original intangibles were valued. Due to the decline in the




                                       33
<Page>

        customer base and the reduction in the workforce, we concluded that
        the benefits derived from the related intangible assets that had been
        acquired in connection with the purchase of the Commerce Division
        would not generate sufficient cash flow to support its carrying value.
        Accordingly, we wrote-down the acquired intangible assets to their
        fair value, a reduction of approximately $469,000. In 2002, we will be
        required to adopt FAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS. See
        our "Recently Enacted Accounting Pronouncements" section on page 41
        for further discussion.

           Because the conditions underlying the factors we use to evaluate our
        acquisitions changes from time to time, we could determine that it is
        necessary to take additional material impairment charges in future
        periods.

    (d) ESTIMATION OF RESTRUCTURING ACCRUALS

           During 2001, we implemented an expense reduction plan as part of our
        strategy focused on improving operational efficiencies and strengthening
        the financial performance of our business. In addition, we implemented
        other measures to reduce planned expenses. These efforts resulted in the
        consolidation of excess facilities and elimination of redundant
        positions. As a result of this restructuring plan, we recorded charges
        during 2001 of approximately $9.4 million. These charges related mainly
        to the consolidation of two facilities and workforce reductions of 63
        positions. Facility consolidation costs of approximately $9.0 million
        included expected losses on subleases, brokerage commissions and other
        costs. Employee separation costs of approximately $431,000 included
        severance and other benefits. As of December 31, 2001, the accrued
        liability related to the restructuring was approximately $9.1 million.

           Calculation of the restructuring accrual related to expected losses
        on subleases required us to make estimates concerning: (1) the expected
        length of time to sublease the facility; (2) the expected rental rates
        on subleases; and (3) estimated brokerage expenses associated with
        executing the sublease. We used the assistance of independent real
        estate brokerage firms in the making these estimates and our estimates
        may be impacted by future economic trends. If the actual results differ
        from our estimates we may be required to adjust our restructuring
        accrual related to expected losses on subleases, including recording
        additional losses.

RELATED PARTY TRANSACTIONS

    As part of our October 2001 rights offering, we sold 4,343,765 shares of our
common stock to Pine, Inc., 4,950,000 shares of our common stock to InVenture,
Inc., 5,500,000 shares of our common stock to Venturetec, Inc., and 2,050,000
shares of our common stock to Peter Friedli. Mr. Friedli is an existing
stockholder and one of our directors, and he serves as the President of Pine,
InVenture, Venturetec and its parent corporation, New Venturetec AG. Venturetec
and Pine each delivered to us a promissory note dated as of October 19, 2001,
each with maturity dates of March 31, 2002, in the principal amount of CHF
8,500,000 ($5,230,769) and CHF 8,687,530 ($5,346,172), respectively, as
consideration for certain or all, as the case may be, of the subscription price
for shares of our common stock for which they subscribed under the rights
offering. Subsequent to December 31, 2001, Pine, Venturetec and InVenture, all
companies under common control, reallocated their share purchases and/or related
promissory notes. See our "Recent Developments" section on page 36 for further
details.

     Mr. Friedli also has relationships with several other of our other
stockholders. He serves as the investment advisor to Joyce, Ltd., Savetech,
Inc., Spring Technology Corp. and USVentech, Inc.

    In July 1996, we entered into a consulting agreement with Friedli Corporate
Finance, Inc. ("FCF"), whereby Mr. Friedli provides us with financial consulting
services and investor relations advice. Pursuant to this agreement, FCF is paid
$4,000 per month plus reimbursement of expenses related to Mr. Friedli's
services. In addition, the Company engaged FCF to support the Company in
connection with the 2001 rights offering and agreed to reimburse FCF up to
$100,000 in expenses for such rights offering support.

COMMERCE INTERNET PORTAL AGREEMENTS

    Similar to our direct marketing application we provide to our network
partners through our promotions network, we make the COMMERCE ENGINE available
to Internet portals and other Web site customers who can, in turn, provide
commerce services through their sites to end users. We provide and manage all
hardware, software and operational aspects of the COMMERCE ENGINE and the
associated databases of product libraries and purchasing locations.



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<Page>

        Effective June 27, 2001, we signed a Market Place Agreement with Vizzavi
Europe Limited ("Vizzavi") to provide Internet and mobile commerce and
merchandising services to Vizzavi's portals across Europe. Vizzavi is a joint
venture between Vodafone Group plc, a leading global mobile network operator,
and Vivendi Universal, one of the world's leading media companies. Vizzavi
operates portals across Europe delivering aggregated content and services
through a range of devices, including personal computers, mobile telephones,
personal digital assistants and interactive TV. Unless terminated earlier, based
upon defined criteria provided in the agreement, the agreement has an initial
term of two years, with an automatic extension for a third year. Pursuant to the
agreement, e-centives will deliver the Commerce Engine shopping system,
including customized product search and merchandising. The agreement entails
e-centives launching the shopping service on Vizzavi's portals across Europe.
The shopping service was launched in the United Kingdom, The Netherlands and
France in August 2001, November 2001, and February 2002 respectively, with a
targeted launch in the second quarter of 2002 for Germany. In addition, there is
the possibility of additional launches in other countries such as Spain, Italy,
Portugal and Greece. We anticipate that this agreement with Vizzavi will
generate revenue through annual license fees, consulting fees, merchant
transaction fees and various other commerce and merchandising service fees.

RIGHTS OFFERING

    Based on a resolution of the board of directors dated August 31, 2001, we
granted each holder of our common stock as of August 31, 2001 the right to
purchase one share of our common stock for each share of common stock held of
record on that date, and offered any remaining shares to certain standby
purchasers. This rights offering consisted of 20,000,000 shares of our common
stock at a subscription price of CHF 2.00 ($1.23) per share. In October 2001, we
closed this CHF 40,000,000 (approximately $24,600,000) rights offering with
subscriptions for all 20,000,000 shares. Each subscriber in the rights offering
also received, for no additional consideration, based upon such subscriber's
participation in the rights offering, a pro-rata portion of 2,000,000 shares of
our Series A convertible preferred stock (convertible on a 10-for-1 basis into
20,000,000 shares of common stock under certain circumstances).

    As part of the rights offering, we sold shares of our common stock to
Venturetec, Inc. and Pine, Inc. Peter Friedli, one of our stockholders and
directors, serves as the investment advisor to both Venturetec and Pine, and
also serves as President of Venturetec and its parent corporation, New
Venturetec AG. Venturetec and Pine each delivered to us a promissory note dated
as of October 19, 2001, with a maturity date of March 31, 2002, as consideration
for the subscription price for the shares of common stock for which each company
subscribed under the rights offering. Venturetec's note (which was only partial
consideration for the purchase of the shares; the remainder was paid in cash)
was in the principal amount of CHF 8,500,000 ($5,230,769) and Pine's note was in
the principal amount of CHF 8,687,530 ($5,346,172). In January 2002, Pine,
Venturetec and InVenture, reallocated their share purchases and/or related
promissory notes associated with the rights offering. Please see our "Recent
Developments" section below.

    We issued a global share certificate representing all the shares purchased
in the rights offering after the closing, which shares shall be held in escrow
for a period of approximately three months from the date of closing, during
which time such shares shall not be tradable. No physical share certificates
will be issued by us or delivered to the subscribers in the rights offering.
Once such shares are registered with the U.S. Securities and Exchange Commission
and properly listed with the SWX New Market, such shares shall be released to
the respective subscribers. This process was completed in late February 2002.

    In addition, we engaged Friedli Corporate Finance, Inc., a venture capital
firm of which one of our stockholders and directors, Peter Friedli, is the
principal, to support us in connection with the rights offering. In connection
with this support, we agreed to extend the consulting agreement with Friedli
Corporate Finance for three years and to reimburse Friedli Corporate Finance
$100,000 in expenses for rights offering support.

    swissfirst Bank AG and certain affiliate entities ("swissfirst") acted as
our financial advisor and limited placement agent in connection with the rights
offering pursuant to a Mandate Agreement between us and swissfirst. For
effecting arrangements with purchasers under the rights offering, we agreed to
pay swissfirst a fee of 6.5% of the total sales under the offering made by them
to investors with whom swissfirst had directly and actively engaged in sales and
marketing efforts for the purpose of placing shares in the rights offering
("direct placement efforts"). For those sales, that swissfirst did not utilize
direct placement efforts, the commission rate was 2.0%. In addition, swissfirst
was paid a 0.5% handling fee based upon all funds raised in this rights offering
actually received by swissfirst and held for our benefit, provided that there
shall be no such handling fee paid on funds raised by our board of directors and
their affiliates. We also agreed to and paid a fee of 7% to other firms involved
in the rights offering.



                                       35
<Page>

RECENT DEVELOPMENTS

(a) Promissory notes from stockholders

    As of January 22, 2002, Pine, Venturetec and InVenture, all companies under
common control, reallocated their share purchases and/or related promissory
notes associated with the October 2001 rights offering. Please see our "Item 5
-- Market for Registrant's Common Stock and Related Stockholder Matters --
Rights Offering" section on page 26. The CHF 2,500,000 (approximately
$1,538,462) in cash originally indicated as originating from Venturetec has been
reallocated as follows:

     o    InVenture purchased from Pine in a private sale 1,041,667 of the
          shares of common stock originally purchased by Pine pursuant to the
          rights offering for CHF 2,083,334, at CHF 2.00 a share. As part of
          this transaction, Pine was credited with paying us CHF 2,083,334
          (approximately $1,282,052) and delivered to us an amended and restated
          secured promissory note dated as of October 19, 2001, in the principal
          amount of CHF 6,604,196 (approximately $4,064,121), with 2% interest,
          with an original March 31, 2002 maturity date that was subsequently
          extended to May 15 2002. We simultaneously returned Pine's original
          CHF 8,687,530 promissory note.

     o    Venturetec paid us CHF 416,666 (approximately $256,410) and delivered
          to us an amended and restated secured promissory note dated as of
          October 19, 2001, in the principal amount of CHF 10,583,334
          (approximately $6,512,821), with 2% interest, with an origianl March
          31, 2002 maturity date that was subsequently extended to June 30,
          2002. This CHF 10,583,334 reflects an increase in Venturetec's secured
          promissory note to CHF 11,000,000 (approximately $6,769,231),
          reflecting Venturetec's original subscription price for the shares of
          our common stock for which it subscribed under the rights offering
          minus the CHF 416,666 payment. We simultaneously returned Venturetec's
          original CHF 8,500,000 promissory note.

     As of April 16, 2002, 70% of the above-referenced note funds have been
received.

(b) Potential Acquisition

    The Company is currently in negotiations to acquire certain assets and
liabilities of a U.S. based internet company in exchange for e-centives' stock.
The Company has executed an Asset Purchase Agreement regarding the proposed
acquisition, with an expected settlement date of April 30, 2002.


RESULTS OF OPERATIONS

    The following presents our financial position and results of operation as of
and for the years ended December 31, 2001, 2000 and 1999.

YEARS ENDED DECEMBER 31, 2001 AND 2000.

        REVENUE. Revenue decreased by $5,176,000 to $5,054,000 for the year
    ended December 31, 2001, compared to $10,230,000 for the year ended December
    31, 2000. While revenue for 2001 includes $1.4 million in marketing partner
    transactions, as well as approximately $2.0 million in revenue from our
    commerce related services and other new business lines, lower revenue from
    our direct marketing services more than offset these additional sources of
    revenue. Fixed fee PROMOMAIL revenue decreased by $4.5 million, PROMOCAST
    and PROMOCOMMERCE related revenue decreased by $2.3 million, and the ZDNet
    agreement to deliver monthly e-mails, which generated approximately $1.3
    million in revenue in 2000, expired in late 2000 and therefore had no
    revenue impact in 2001.

        COST OF REVENUE. Cost of revenue consists primarily of expenses related
    to providing our services, including related personnel costs, depreciation
    of servers, network and hosting charges, and revenue share payments.
    Although revenue declined from 2000 to 2001, cost of revenue increased
    primarily due to the additional depreciation expense and network and hosting
    charges associated with the acquisition of the Commerce Division. Cost of
    revenue increased by $6,187,000 to $8,395,000 for the year ended December
    31, 2001, compared to $2,208,000 for the year ended December 31, 2000.
    Approximately $4.3 million or 69% of the increase can be attributed to the
    acquisition of the Commerce Division. Also contributing to the increase is
    the one-time purchase of $1.3 million of data and e-mail services from
    Matchlogic, a wholly owned subsidiary of Excite, in connection with a
    renegotiation of our network partner related agreement with Excite. In
    addition, the year ended December 31, 2001 had higher depreciation charges
    for fixed assets associated with providing our services. The increase in
    cost of revenue can also be attributed to the shift from paying our Network
    Partners a fixed fee per new member, to revenue share arrangements.

        PRODUCT DEVELOPMENT. Product development consists primarily of expenses
    related to the development and enhancement of our technology and services,
    including payroll and related expenses for personnel, as well as other
    associated expenses for our technology department. We expense product
    development costs as we incur them. Product development expenses increased
    by $5,060,000 to $7,933,000 for the year ended December 31, 2001, compared
    to $2,873,000 for the year ended December 31,




                                       36
<Page>

    2000. Approximately $3.5 million or 69% of the increase is the direct
    result of the acquisition of the Commerce Division, with the remaining
    portion of the increase due to increased product development personnel
    costs associated with the development and improvement of our systems,
    including its infrastructure and computer software.

        GENERAL AND ADMINISTRATIVE. General and administrative expenses include
    payroll and related expenses for accounting, finance, legal, human
    resources, and administrative personnel, as well as selected executives. In
    addition, general and administrative expenses include fees for professional
    services, occupancy related costs, and all other corporate costs, including
    depreciation and amortization. General and administrative expenses increased
    by $3,827,000 to $12,592,000 for the year ended December 31, 2001, compared
    to $8,765,000 for the year ended December 31, 2000. A large portion of the
    increase, about $2.6 million, is due to higher rent expense, primarily
    associated with the increased office space in Bethesda, Maryland and the new
    office space in Redwood Shores, California. The acquisition of the Commerce
    Division added approximately $1.4 million in depreciation and amortization
    expense for 2001. Although general and administrative expenses have
    increased, primarily due to the acquisition of the Commerce Division, we
    have taken steps to reduce our ongoing expenditures.

        SALES AND MARKETING. Sales and marketing expenses consist primarily of
    payroll, sales commissions and related expenses for personnel engaged in
    sales, marketing and customer support, as well as advertising and
    promotional expenditures. Sales and marketing expenses decreased by
    $9,009,000 to $9,997,000 for the year ended December 31, 2001, compared to
    $19,006,000 for the year ended December 31, 2000. Although the year ended
    December 31, 2001 included approximately $1.6 million of expenses related
    to the Commerce Division, there was an overall decrease in marketing and
    sales expenditures when compared to the year ended December 31, 2000.
    Broadcast media, on-line media, printed publication and out-of-home media,
    expenditures were lower by $2.5 million, $2.4 million, $2.0 million and
    $1.3 million, respectively. In addition, 2001 had lower salary related
    costs, public relation expenditures and commissions than 2000. These
    lower costs are primarily the result of our cost reduction efforts.

        NETWORK PARTNER FEES. Network partner fees include the fees we pay our
    network partners for members, advertising and exclusivity on the network
    partners' site. Network partner fees decreased by $5,368,000 to $986,000 in
    year ended December 31, 2001, compared to $6,354,000 in the year ended
    December 31, 2000. This decrease is primarily the result of the termination
    of the Co-Branding Agreement with Excite, which resulted in an approximate
    $4.5 million decrease in expense, and a shift from paying our partners a
    fixed fee per new member, to revenue share arrangements that are classified
    as cost of revenue

        RESTRUCTURING AND IMPAIRMENT CHARGES. During 2001, management took
    certain actions to better align our costs with revenues and to position us
    for profitable growth in the future. In April 2001 and July 2001 we
    eliminated 21 and 25 positions, respectively, incurring a total charge of
    approximately $344,000. During December 2001, we announced a restructuring
    plan that involved scaling back the Commerce Division, which resulted in a
    reduction of our workforce by 17, and an assessment of the carrying value of
    the intangible assets associated with the Commerce Division. Due to the
    decline in the Commerce Division's customer base and the reduction in the
    Commerce Division's workforce, we concluded that the benefits derived from
    the related intangible assets that had been acquired in connection with the
    purchase of the Commerce Division would not generate sufficient cash flow to
    support its carrying value. Accordingly, we wrote-down the acquired
    intangible assets to their fair value, a reduction of approximately
    $469,000. In addition, we decided to consolidate and more efficiently use
    our facilities, leaving approximately 50% of the office space in both the
    Bethesda, Maryland and the Redwood Shores, California locations unoccupied
    and available for sub-lease. As a consequence of this plan, we recorded a
    $9.0 million charge to operations during the fourth quarter of 2001.

        STOCK-BASED COMPENSATION. Stock-based compensation expense consists of
    the accrual of the difference between the fair value of our common stock and
    the exercise price of certain performance-based options prior to the
    measurement date and the accrual of the difference between the estimated
    fair value of our common stock and the exercise price of stock options
    issued to employees. Stock-based compensation expenses decreased by $851,000
    to $863,000 for the year ended December 31, 2001, compared to $1,714,000 for
    the year ended December 31, 2000. This decrease can be attributed to
    performance-based options that fully vested in 2000 and therefore did not
    impact 2001, as well as historical stock-based compensation expense incurred
    for terminated employees in excess of the expense pertaining to options
    vested through termination. We estimate the charge relating to stock option
    grants will be $553,000, $561,000 and $175,000 in 2002, 2003, and 2004,
    respectively.

        INTEREST INCOME. Net interest income consists of income on our cash
    balances. Net interest income decreased by $86,000 to $608,000 for the year
    ended December 31, 2001, compared to $694,000 for the year ended December
    31, 2000. The Company earned less interest in 2001 due to lower cash
    balances and lower interest rates resulting from general economic
    conditions.

        NET LOSS. Net loss increased by $15,058,000 to $45,003,000 for the year
    ended December 31, 2001, compared to $29,945,000 for the year ended December
    31, 2000. This increase in net loss is the result of the decrease in revenue
    of $5.2 million, the increase in cost of revenue of $6.2 million and the
    restructuring and severance charges of $9.9 million, offset by lower
    operating expenses of about $6.3 million.



                                       37
<Page>

YEARS ENDED DECEMBER 31, 2000 AND 1999.

        REVENUE. Revenue for the years ended December 31, 2000 and 1999 was
    $10,230,000 and $740,000, respectively. We attribute the increase primarily
    to the expansion of our operations and to the fact that we did not begin to
    charge for our services until the second half of 1999. We forged several new
    strategic alliances with network partners during 2000. Contracts we entered
    into with ZDNet, Excite, Uproar and LifeMinders, Inc. contributed
    approximately 48% of the increase in revenue from 1999 to 2000.

        COST OF REVENUE. Cost of revenue represents expenses related to
    providing online promotions for our marketers, including a portion of the
    salaries, benefits and related expenses of our client services, network
    operations and technical services personnel as well as revenue sharing
    payments to network partners. Cost of revenue increased by $1,180,000 to
    $2,208,000 in the year ended December 31, 2000 compared to $1,028,000 in the
    year ended December 31, 1999. We attribute this increase primarily to the
    additional salaries resulting from an increase in the number of personnel.

        PRODUCT DEVELOPMENT. Product development costs include expenses we incur
    for research, design and development of our proprietary online promotion
    technology. We expense product development costs as we incur them. Product
    development expenses increased by $446,000 to $2,873,000 in the year ended
    December 31, 2000, compared to $2,427,000 in the year ended December 31,
    1999. The majority of this increase resulted from increased product
    development personnel costs associated with the development of our online
    direct marketing system, including its infrastructure and computer software.

        GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
    of salaries for executive and selected senior management, finance and
    administrative personnel and associated employee benefits, facilities costs,
    computer and office equipment operating leases, training, and all other
    corporate costs, including depreciation and amortization. General and
    administrative expenses increased by $4,682,000 to $8,765,000 in the year
    ended December 31, 2000, compared to $4,083,000 in the year ended December
    31, 1999. This increase resulted principally from an increase of $1,295,000
    from the increase in the number of general and administrative personnel and
    includes increases of $558,000 from increased legal costs and $598,000 from
    increased rent for additional office space. In addition, we have experienced
    increased depreciation of fixed assets of $631,000 for the year ended
    December 31, 2000 in connection with our increased capital expenditures for
    computer equipment. Further, the increase in general and administrative
    expenses for the year ended December 31, 2000 includes a $650,000 payment to
    coolsavings.com as part of the settlement of certain patent litigation.

        SALES AND MARKETING. Sales and marketing expenses consist primarily of
    salaries, associated benefits and travel expenses for our sales and
    marketing personnel and promotional expenses. Sales and marketing expenses
    increased by $11,117,000 to $19,006,000 in the year ended December 31, 2000,
    compared to $7,889,000 in the year ended December 31, 1999. We attribute
    this increase mainly to increased marketing expenditures of $15.1 million
    targeted at attracting more marketers and network partners to our direct
    marketing system.

        NETWORK PARTNER FEES. Network partner fees include the fees we pay our
    network partners for members, advertising and exclusivity on the network
    partners' site. Network partner fees increased by $5,623,000 to $6,354,000
    in the year ended December 31, 2000, compared to $731,000 in the year ended
    December 31, 1999. We attribute this increase mainly to the payments made to
    Excite.

        STOCK-BASED COMPENSATION. Stock-based compensation expenses consist of
    the accrual of the difference between the fair value of our common stock and
    the exercise price of certain performance-based options prior to the
    measurement date and the accrual of the difference between the estimated
    fair value of our common stock and the exercise price of stock options
    issued to employees. Stock-based compensation expenses increased by $660,000
    to $1,714,000 in the year ended December 31, 2000, compared to $1,054,000
    for the year ended December 31, 1999. The increase resulted principally from
    additional options granted to employees at exercise prices less than fair
    market value.

        INTEREST INCOME. Interest income, net consists of income on our cash
    balances less interest expense on long-term debt. Net interest income
    increased by $426,000 to $694,000 in the year ended December 31, 2000,
    compared to $268,000 for the year ended December 31, 1999. This fluctuation
    was due to an increase in interest income resulting from an increase in cash
    balances from the Series C funding and the IPO.



                                       38
<Page>

        NET LOSS. Net loss increased by $13,775,000 to $29,945,000 in the year
    ended December 31, 2000, compared to $16,170,000 for the year ended December
    31, 1999. The increase is primarily attributed to the increase in operating
    costs of $22.5 million to $38.7 million in the year ended December 31, 2000,
    compared to $16.2 million for the year ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

    Since inception through December 31, 2000, we funded our operations
primarily from the private sale of our convertible preferred stock and common
stock, as well as our initial public offering. Through these financing
activities, we raised net proceeds of approximately $82.5 million. During 2001,
we received approximately $12.6 million in net proceeds from our rights
offering, with additional net proceeds of $9.9 million due by the end of the
second quarter of 2002, relating to the promissory notes from Venturetec and
Pine, net of the associated commission fees.

     o    Initial public offering: On October 3, 2000, we completed an initial
          public offering in Switzerland for shares of our common stock, which
          are listed on the SWX New Market Segment of the SWX Swiss Exchange
          (the "Swiss IPO"). After deducting expenses and underwriting
          discounts, we received approximately $36.7 million in proceeds from
          this transaction. Upon closing of the Swiss IPO, all of our shares of
          preferred stock automatically converted to common stock.

     o    Rights offering: On October 19, 2001, we closed a CHF 40.0 million
          (approximately $24.6 million) rights offering with subscriptions for
          20,000,000 shares of common stock and a pro-rata portion of 2,000,000
          shares of Series A convertible preferred stock. After deducting
          expenses and underwriting discounts, the net proceeds from this
          transaction were approximately $22.5 million, with $12.6 million
          received by December 31, 2001 and the remainder due by the end of the
          second quarter of 2002.

    On December 31, 2000 and 2001, we had $27,176,531 and $8,902,259,
respectively, of cash, cash equivalents, and short-term investments. In
addition, as of December 31, 2000 and 2001, we had $542,984 and $1,456,861,
respectively, of restricted cash.

         Our net cash used in operating activities improved by $2.8 million from
the $27,590,000 for the year ended December 31, 2000 to $24,769,000 for the year
ended December 31, 2001. While the net cash flows from operating activities for
each period directly reflect our net losses, the decrease year over year can be
partially attributed to our concerted efforts to decrease our expenditures and
increase our accounts receivables collection efforts.

    Cash used in investing activities was $4,773,000 for the year ended December
31, 2001 and $3,081,000 for the year ended December 31, 2000, an increase of
$1,692,000. While our purchases of property and equipment decreased by about
$1.6 million, we spent $1.1 million and $1.9 million on the Commerce Division
and BrightStreet.com acquisitions, respectively, in 2001. In addition,
restricted cash increased by $914,000, primarily the result of the letter of
credit required for our office space in Redwood Shores, California.

    Cash provided by financing activities was $11,382,000 for the year ended
December 31, 2001, while it was $57,306,000 for the year ended December 31,
2000. About $12.6 million of the cash provided by financing activities for the
year ended December 31, 2001 was the result of our October 2001 rights offering,
with net proceeds of $9.9 million due by the end of the second quarter of 2002,
in conjunction with the promissory notes issued by two of our stockholders.
Cash provided by financing activities for the year ended December 31, 2001 also
reflects the payment of $1.2 million in dividends declared on our preferred
Series A convertible preferred stock in December 2000. Cash provided by
financing activities for the year ended December 31, 2000 primarily reflects the
$36.7 million in proceeds from the Swiss IPO and the $20.5 million in proceeds
from private sales of our convertible preferred stock.

    Friedli Corporate Finance has executed a letter to us confirming its ability
to fund us in the amount of $10.7 million for the outstanding promissory notes
from entities under its control (Pine and Venturetec). Funds from these
promissory notes will be provided to us from April 2002 through June 2002, based
on our lack of immediate need for these funds. To the extent that these funds,
accompanied by our operating resources, are not sufficient to enable us to
operate through December 31, 2002, Friedli Corporate Finance is committed to
providing the necessary funding to enable us to continue to operate through
December 31, 2002. Additionally, management has developed a series of
contingency plans for the purpose of conserving working capital should actual
revenues fall short of our internal projections. These contingency plans can be
enacted quickly and will eliminate significant amounts of variable costs, and
enhance our overall liquidity position. Variable costs account for approximately
70% of the our total operating expenses, and include payroll and related
benefits, bonuses and commissions, travel and entertainment, marketing, certain
professional service fees. Fixed costs consist of lease commitments for hosting
and office equipment, office space leases, certain insurance programs, software
maintenance and support fees, and royalty fee obligations, and represent the
remainder of our operating expenses.


                                       39
<Page>

    We believe that the net proceeds from the October 2001 rights offering,
together with our existing cash resources and the proceeds from our promissory
notes, will be sufficient to meet our anticipated cash needs for working capital
and capital expenditures into the first quarter of 2003. However, we may need
to raise additional funds sooner to fund our planned expansion, to develop
new or enhanced products or services, to respond to competitive pressures or to
make acquisitions. We cannot be certain that additional financing will be
available to us on acceptable terms, or at all. If adequate funds are not
available, or not available on acceptable terms, we may not be able to expand
our business.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

    We are obligated to make significant payments under a variety of contracts
and other commercial arrangements, including the following:

    NETWORK PARTNER AGREEMENTS:

           In connection with our direct marketing services, we maintain
        relationships with network partners that operate high-traffic portals,
        content and community web sites. Our application provides network
        partners with the ability to present offers to their users without the
        costs and challenges of building and maintaining their own online direct
        marketing system. We provide and maintain the underlying technology,
        host and serve co-branded pages, create and deliver offers and provide
        consulting services and member support. Our network partners' users can
        become e-centives members during the registration process of some of our
        network partners' web sites. Alternatively, members can join our system
        through various other access points throughout the network partner's web
        site. In either case, our service is delivered on a co-branded basis
        maintaining the look and feel of the network partner's web site.

           On March 31, 2001, we terminated our Co-Branding Agreement with
        Excite@Home ("Excite"), dated as of February 16, 2000 and as amended on
        December 30, 2000. The termination agreement relieved us of all of our
        future obligations, including payments of up to $13 million to Excite
        over the next two years. In connection with the termination agreement,
        we purchased $1.3 million worth of data and e-mail services from
        Matchlogic, a wholly owned subsidiary of Excite. Effective April 1,
        2001, we entered into a new one-year agreement with Excite, whereby
        Excite provided us with access to e-mail and other subscriber
        information, and in exchange for this information, we were to pay Excite
        a percentage of the revenue generated from these subscribers. However,
        this restructured agreement resulted in no revenue share payments to
        Excite. As of November 5, 2001, this agreement was terminated, as Excite
        filed for bankruptcy protection.

           In June 2001, we entered into an Online Services Agreement with
        Classmates.com, a dominant online reunion destination site with
        approximately 20 million members. The strategic alliance allows
        Classmates.com members to receive e-centives' targeted special offers
        and promotions based upon their self-described interests and will
        provide us with access to e-mail and other subscriber information. In
        exchange for this information, we pay Classmates.com a percentage of the
        revenue generated from these subscribers.

    LEASE OBLIGATIONS:

           In association with the acquisition of BrightStreet.com, effective
        November 1, 2001, we entered into a Modification, Assignment and
        Assumption Agreement with Pentech Financial Services, Inc. ("Pentech")
        and BrightStreet.com regarding the Master Equipment Lease ("Lease") that
        BrightStreet.com had entered into with Pentech in May 2000. Per the
        agreement, with the consent of Pentech, BrightStreet.com assigned the
        Lease to us with certain modifications to the terms and conditions of
        the Lease. In addition, we agreed to defend, indemnify, save and hold
        harmless BrightStreet.com from and against any and all claims, demands,
        costs, and any other damages which BrightStreet.com may sustain as a
        result of any failure or delay by the Company in performing the assumed
        obligations.

           We are obligated under non-cancelable capital leases, for certain
        computer equipment, that expire during 2004. In addition, we are
        obligated under non-cancelable operating leases, primarily for office
        space, which expire on various dates through 2010.



                                       40
<Page>

           As of December 31, 2001, future minimum lease payments under
non-cancelable leases are as follows:

<Table>
<Caption>

YEAR ENDING DECEMBER 31,                   CAPITAL LEASES  OPERATING LEASES
------------------------                   --------------  ----------------
<C>                                         <C>              <C>
2002                                        $   243,461      $ 3,513,165
2003                                            243,552        3,622,705
2004                                            254,235        3,688,856
2005                                                 --        3,086,863
2006                                                 --        1,926,526
Thereafter                                           --        7,276,386
                                            -----------     ------------
   Total                                        741,248     $ 23,114,501
                                                            ============
Less: amount representing interest
    (rates approximating 8.3%)                  (56,460)
                                            ------------
Present value of net minimum lease
    payments                                    684,788
Less: current installments                     (208,331)
                                           -------------
Obligation under capital leases,
excluding current portion                   $   476,457
                                            ===========
</Table>

        Rent expense under operating leases was approximately $357,000, $955,000
    and $3,541,000 for the years ended December 31, 1999, 2000 and 2001,
    respectively.

RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS

    In June 2001, the FASB issued Statement No. (FAS) 141, BUSINESS
COMBINATIONS, and FAS 142, GOODWILL AND OTHER INTANGIBLE Assets. FAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, as well as all purchase method
business combinations completed after June 30, 2001. FAS 141 also specifies
criteria that intangible assets acquired in a purchase method business
combination must meet in order to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled workforce may
not be accounted for separately. FAS 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead be
tested for impairment, at least annually, in accordance with the provisions of
FAS 142. FAS 142 also requires that intangible assets with definite useful lives
be amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with FAS 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF.

    The Company adopted the provisions of FAS 141 as of July 1, 2001 and FAS 142
is effective January 1, 2002. Furthermore, any goodwill and any intangible asset
determined to have an indefinite useful life that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized, but
will continue to be evaluated for impairment in accordance with the appropriate
pre-FAS 142 accounting literature. Goodwill and intangible assets acquired in
business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of FAS 142.

    FAS 141 requires, upon adoption of FAS 142, that the Company evaluate its
existing intangible assets and goodwill that were acquired in a prior purchase
business combination, and to make any necessary reclassifications in order to
conform with the new criteria in FAS 141 for recognition apart from goodwill.
Upon adoption of FAS 142, the Company will be required to reassess the useful
lives and residual values of all intangible assets acquired in purchase business
combinations, and make any necessary amortization period adjustments by the end
of the first interim period after adoption. In addition, to the extent an
intangible asset is identified as having an indefinite useful life, the Company
will be required to test the intangible asset for impairment in accordance with
the provisions of FAS 142 within the first interim period. Any impairment loss
will be measured as of the date of adoption and recognized as the cumulative
effect of a change in accounting principle in the first interim period. In
connection with the transitional goodwill impairment evaluation, FAS 142
requires the Company to perform an assessment of whether there is an indication
that goodwill is impaired as of the date of adoption. To accomplish this, the
Company must identify its reporting units and determine the carrying value of
each reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting units as of the date
of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with FAS 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
operations.

    As of the date of adoption, the Company expects to have unamortized
identifiable intangible assets in the amount of approximately $3,103,000, which
will be subject to the transition provisions of FAS 141 and 142. Because of the
extensive effort needed to comply


                                       41
<Page>

with adopting FAS 141 and 142, it is not practicable to reasonably estimate the
impact of adopting these statements on the Company's financial statements at the
date of this report, including whether any transitional impairment losses will
be required to be recognized as the cumulative effect of a change in accounting
principle.

    In August 2001, the Financial Accounting Standards Board issued FAS 144,
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which supercedes
both FAS 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF and the accounting and reporting provisions
of APB Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS-REPORTING THE EFFECTS
OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND
INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a segment of
a business (as previously defined in that Opinion). FAS 144 retains the
fundamental provisions in FAS 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while also resolving significant implementation issues associated with
FAS 121. For example, FAS 144 provides guidance on how a long-lived asset that
is used as part of a group should be evaluated for impairment, establishes
criteria for when a long-lived asset is held for sale, and prescribes the
accounting for a long-lived asset that will be disposed of other than by sale.
FAS 144 retains the basic provisions of APB 30 on how to present discontinued
operations in the income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business). Unlike FAS 121, an
impairment assessment under FAS 144 will never result in a write-down of
goodwill. Rather, goodwill is evaluated for impairment under FAS 142, Goodwill
and Other Intangible Assets. The Company is required to adopt FAS 144 no later
than the year beginning after December 15, 2001, and plans to adopt its
provisions for the quarter ending March 31, 2002. Management does not expect the
adoption of FAS 144 for long-lived assets held for use to have a material impact
on the Company's financial statements because the impairment assessment under
FAS 144 is largely unchanged from FAS 121. The provisions of the Statement for
assets held for sale or other disposal generally are required to be applied
prospectively after the adoption date to newly initiated disposal activities.
Therefore, management cannot determine the potential effects that adoption of
FAS 144 will have on the Company's financial statements.


ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in forward-looking statements. We maintain instruments subject to
interest rate and foreign currency exchange rate risk. We categorize all of our
market risk sensitive instruments as non-trading or other instruments.

    (a) INTEREST RATE SENSITIVITY

        We maintain a portfolio of cash equivalents in a variety of securities.
    Substantially all amounts are in money market and certificates of deposit,
    the value of which is generally not subject to interest rate changes. We
    believe that a 10% increase or decline in interest rates would not be
    material to our interest income or cash flows.

    (b) FOREIGN RATE SENSITIVITY

    We primarily operate in the United States; however, we have expanded
operations including a sales office in London, United Kingdom. As a result, we
may have sales in foreign currencies exposing us to foreign currency rate
fluctuations. For the year ended December 31, 2001, we recorded insignificant
sales in a foreign currency. We are exposed to the impact of foreign currency
changes, associated with the British Pound, for our London subsidiary's
financial instruments, which are limited to cash and cash equivalents. It is the
policy of management to fund foreign operations on a monthly basis, thus
minimizing average cash and overnight investments in the Pound. At December 31,
2001, our London subsidiary maintained cash and cash equivalents of
approximately (pound)102,000 or approximately $148,000. We believe that a 10%
increase or decline in the Pound exchange ratio would not be material to cash
and cash equivalent balances, interest income, or cash flows from consolidated
operations.


ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements and supplementary data of the Company required by
this item are attached as pages F-1 to F-23 and are listed under Item 14(A)(1)
and (2).

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

    None.



                                       42
<Page>


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The following table presents information about each of our executive
officers, key employees and directors as of December 31, 2001.

<Table>
<Caption>

              NAME               AGE             POSITION(S) WITH COMPANY
    -------------------------    ---  ----------------------------------------------------------
<S>                               <C> <C>
    Kamran Amjadi............     38  Chairman and Chief Executive Officer
    Mehrdad Akhavan..........     38  President, Chief Operating Officer, Secretary and Director
    David Samuels............     40  Senior Vice President, Chief Financial Officer and Treasurer
    Lawrence Brand...........     48  Senior Vice President of Sales and Business Development
    Scott Wills..............     48  Senior Vice President
    Jason Karp...............     33  General Counsel and Assistant Secretary
    Ira Becker...............     34  Vice President of Strategic Alliances
    Alex Sukhenko............     33  Vice President of Engineering, Messaging & Data Warehouse
    Peter Friedli............     47  Director
</Table>

    KAMRAN AMJADI has served as our Chairman and Chief Executive Officer since
he co-founded our business in August 1996. From September 1990 until August
1996, Mr. Amjadi was the Executive Vice President and Director of United States
Operations for MP Technologies, a software company. From July 1986 until August
1990, Mr. Amjadi was a software engineer with the Hewlett-Packard Corporation.

    MEHRDAD AKHAVAN has served as our President and Chief Operating Officer
since October 1999, having served as our Executive Vice President and Secretary
since he co-founded our business in August 1996. Mr. Akhavan was elected to our
board of directors in October 1996. From November 1994 until August 1996, Mr.
Akhavan was President of TechTreK, a children's computer entertainment and
education center. From January 1991 until November 1994, Mr. Akhavan was
President of Trident Software, a company he co-founded, which digitized works of
art.

    DAVID SAMUELS joined us as Senior Vice President, Chief Financial Officer
and Treasurer in April of 2001. Prior to joining e-centives, Mr. Samuels served
as Vice President of Finance for Teligent International where, as a member of
the senior management team, he played a pivotal role orchestrating the financial
management and funding initiatives for multiple joint venture businesses in
Europe, Asia, and Latin America. He also spent more than a decade with Host
Marriott Services Corporation, serving most recently as Vice President of
Finance, Development and Operations for New Markets. He began his career as an
auditor with KPMG LLP.

    LAWRENCE BRAND joined us in November 1997 as our Vice President of Sales. He
became our Senior Vice President of Sales and Business Development in November
1999. From September 1990 until April 1997, Mr. Brand was the Executive Vice
President and General Manager of InterBase Software, a division of Borland
International, a developer of application, tools and relational databases. From
July 1984 until February 1990, Mr. Brand held various positions with Oracle
Corporation, serving most recently as National Director of Financial Services.

    SCOTT WILLS joined us as a Senior Vice President, when we acquired
BrightStreet.com in December 2001. At BrightStreet.com, Mr. Wills held the
position of Chief Executive Officer. Mr. Wills started his career in packaged
goods, working on some of the most publicized brand-battles for such companies
as Procter & Gamble and Pepsi-Cola Company. In early 1996, he joined Netcom
Online Communications, where he served as Senior Vice President of Business
Development and Strategic Planning until March 1998, when the company was sold.
Upon leaving Netcom, Mr. Wills was a founder and CEO of Wills and Evans, a New
York-based advertising agency that represented major media distributors and
networks. In May 1998, he joined NetValue, Inc., which was later renamed
BrightStreet.com.

    JASON KARP was an e-centives' employee from March 2000 through October 2001,
serving as our Vice President, General Counsel and Assistant Secretary. Since
his termination of employment, he joined Kelley, Drye & Warren, LLP, however he
continues to serve as General Counsel and Assistant Secretary. From July 1998 to
March 2000, Mr. Karp held several positions with Net2000 Communications, Inc.,
an integrated provider of local, long distance, data and internet access
services, and served most recently as Assistant Vice President of Legal and
Regulatory Affairs. From October 1996 to June 1998, Mr. Karp held several
management positions with MCI Communications. From December 1994 to September
1996, Mr. Karp was a senior attorney in the Common Carrier Bureau of the FCC.



                                       43
<Page>

    IRA BECKER joined us in September 1998 as Director of Business Development
and was promoted to Vice President of Strategic Alliances in May 1999. From
November 1997 until September 1998, Mr. Becker was Director of Sales Development
at PointCast, an Internet news and information company. From September 1995
until September 1997, Mr. Becker was Vice President of Sales of inquiry.com, an
Internet resource for information technology professionals. From September 1989
until September 1995, Mr. Becker was a manager with Ziff-Davis Publishing.

    ALEX SUKHENKO, our Vice President of Engineering, Messaging & Data
Warehouse, joined us in March 1999. Before joining e-centives, Alex served as
District Manager of AT&T Solutions for Advanced Networking Solutions and prior
to AT&T Solutions, Alex served as a consulting manager for Noblestar Systems.
Alex has also served as a senior scientist for Vector Research Inc. He began his
career at Eastman Kodak, focusing on process re-engineering for Kodak's circuit
board manufacturing operations.

     PETER FRIEDLI co-founded our business in August 1996. Mr. Friedli was
elected to our board of directors in October 1996. Mr. Friedli has been the
principal of Friedli Corporate Finance, Inc., a venture capital firm, since its
inception in 1986. Prior to joining Friedli Corporate Finance, Mr. Friedli
worked as an international management consultant for service and industrial
companies in Europe and the U.S. Mr. Friedli also serves as the President of New
Venturetec, Inc., a publicly traded Swiss venture capital investment company and
currently serves as a director of VantageMed Corporation, a publicly traded
provider of healthcare information services.

BOARD OF DIRECTORS

    Our board of directors currently consists of Kamran Amjadi, Mehrdad Akhavan,
and Peter Friedli. Kamran Amjadi is the Chairman of our board of directors.

     BOARD COMMITTEE: Our board of directors currently has a compensation
committee. The compensation committee determines the salaries and incentive
compensation of our officers and provides recommendations for the salaries and
incentive compensation of other employees and consultants. The compensation
committee also administers our various incentive compensation, stock and benefit
plans. The compensation committee consists of Mr. Friedli, the committee's
chairman, and Mr. Amjadi.

    DIRECTOR COMPENSATION: We do not currently compensate our directors who are
also employees. Each non-employee director currently is reimbursed for
reasonable travel expenses for each board meeting attended. In addition, each
non-employee director receives 10,000 stock options per year of service, with
vesting one year from the date of grant.

    COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
board of directors or compensation committee.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

    Our certificate of incorporation provides that our directors will not be
personally liable to us, or our stockholders, for monetary damages for breach of
their fiduciary duties as a director, except for liability:

          o    for any breach of the director's duty of loyalty to us or our
               stockholders;
          o    for acts or omissions not in good faith or which involve
               intentional misconduct or a knowing violation of law;
          o    under a provision of Delaware law relating to unlawful payment of
               dividends or unlawful stock purchase or redemption of stock; or
          o    for any transaction from which the director derives an improper
               personal benefit.

    As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.

    Our bylaws provide for the indemnification of our directors and officers and
any person who is or was serving at our request as a director, officer,
employee, partner or agent of another corporation or of a partnership, joint
venture, limited liability company, trust or other enterprise. This
indemnification is provided to the fullest extent authorized by, and subject to
the conditions set forth in, the Delaware General Corporation Law. This
indemnification will include the right to be paid the expenses by us in advance
of any



                                       44
<Page>

proceeding for which indemnification may be had in advance of its final
disposition.


ITEM 11 - EXECUTIVE COMPENSATION

    The following table sets forth the compensation paid to our Chief Executive
Officer, our four other most highly compensated executive officers who were
serving as executive officers of the Company as of December 31, 2001, and the
two most highly compensated executive officers who served as executive officers
during the year ended December 31, 2001, but who were not serving as executive
officers at December 31, 2001 (collectively, the "Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>

                                                                                        LONG-TERM
                                                                                       COMPENSATION
                                                                 ANNUAL COMPENSATION     SECURITIES
                                                             -------------------------  UNDERLYING
        NAME AND PRINCIPAL POSITION(S)                 YEAR   SALARY ($)    BONUS($)     OPTIONS
 --------------------------------------------         ------ ------------ ------------ -----------
 <S>                                                   <C>    <C>           <C>          <C>
 Kamran Amjadi
   Chairman and Chief Executive Officer......          2001   $170,000      $      0           --
                                                       2000   $170,000      $ 40,000      275,000

 Mehrdad Akhavan
   President, Chief Operating Officer, Secretary
   and Director                                        2001   $150,000      $      0           --
                                                       2000   $150,000      $ 40,000      275,000

 David Samuels
   Chief Financial Officer and Treasurer.....          2001   $123,958      $      0      100,000

 Michael Sullivan (1)
   Chief Financial Officer and Treasurer.....          2001   $107,035      $      0           --
                                                       2000   $139,375      $ 20,000       50,000
 Jason Karp (2)
   Vice President, General Counsel, and Assistant
   Secretary                                           2001   $116,989      $  5,000       65,000
                                                       2000   $139,375      $ 20,000           --

 Lawrence Brand
   Senior Vice President of Sales and Business
   Development                                         2001   $150,000      $ 25,000           --
                                                       2000   $150,000      $ 50,000       49,564

 Homayoon Tajalli (3)
   Senior Vice President of Products and Engineering   2001   $122,825      $ 10,000           --
                                                       2000   $150,000      $ 30,000           --
</Table>

----------

(1)  Michael Sullivan served as our Chief Financial Officer and Treasurer from
     May 1999 until March 2001.
(2)  Jason Karp was our employee until October 2001; he continues to serve as
     our General Counsel and Assistant Secretary.
(3)  Homayoon Tajalli served as our Senior Vice President of Products and
     Engineering from October 1999 until June 2001.


                              EMPLOYMENT AGREEMENTS

    Kamran Amjadi and Mehrdad Akhavan are employed under employment agreements
that terminate on August 31, 2002. Mr. Amjadi and Mr. Akhavan's employment
agreements provide for annual base salaries of $170,000 and $150,000,
respectively, subject to increase by the board of directors. Each of Mr. Amjadi
and Mr. Akhavan is eligible for an annual bonus of $50,000. We may terminate,
without cause, Messrs. Amjadi and Akhavan at any time provided that we are
required to pay the full balance of their salaries for the term. If we are taken
over, sold, or involved in a merger or acquisition of any kind and the same
salary is not offered to Messrs. Amjadi and Akhavan for the remaining term of
their agreements then they shall be entitled to payment of the full balance of
their salaries for the term. Each of Messrs. Amjadi and Akhavan has agreed for a
period of one year not to compete directly with or be employed by any person or
organizations that compete directly with our products or services developed or
in development at the time of their termination.



                                       45
<Page>

                        OPTION GRANTS IN LAST FISCAL YEAR

    The following table summarizes the options granted to each of our named
executive officers during the fiscal year ended December 31, 2001.

<Table>
<Caption>

                                         INDIVIDUAL GRANTS
                    -------------------------------------------------------
                      NUMBER OF    PERCENT OF
                     SECURITIES   TOTAL OPTIONS                               POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF
                     UNDERLYING    GRANTED TO                                      STOCK PRICE APPRECIATION FOR OPTION TERM (1)
                       OPTIONS    EMPLOYEES IN     EXERCISE      EXPIRATION    --------------------------------------------------
       NAME            GRANTED     FISCAL YEAR       PRICE          DATE              0%                 5%                 10%
-----------------    ----------  ----------------------------  -------------  ------------------ ------------------ -----------
<S>                    <C>             <C>          <C>          <C>                 <C>             <C>                <C>
David Samuels....      100,000         6.26%        $ 3.40       04/09/11            $  --           $ 213,824          $ 541,873
</Table>

----------
     (1)  The potential realizable value is calculated based on the 10-year term
          of the option at the time of grant. The 0% assumed annual rate of
          stock price appreciation is indicative of the difference between the
          exercise price per share and the estimated fair value of our common
          stock on the date of grant.


                          FISCAL YEAR-END OPTION VALUES

    The following table presents information with respect to stock options owned
by each of our named executive officers at December 31, 2001.

<Table>
<Caption>
                         NUMBER OF SECURITIES UNDERLYING       VALUE OF UNEXERCISED
                             UNEXERCISED OPTIONS AT           IN-THE-MONEY OPTIONS AT
                                DECEMBER 31, 2001                DECEMBER 31, 2001
                        -------------------------------  -------------------------
       NAME                EXERCISABLE    UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
-----------------       --------------- -------------------------------- ---------------
<S>                         <C>             <C>                  <C>             <C>
Kamran Amjadi........       375,000         100,000              $ --            $ --
Mehrdad Akhavan......       375,000         100,000                --              --
David Samuels........            --         100,000                --              --
Michael Sullivan (1).            --              --                --              --
Jason Karp (2).......        40,625          24,375                --              --
Lawrence Brand.......       220,800         180,673                --              --
Homayoon Tajalli (3).            --              --                --              --
</Table>

----------
     (1)  Michael Sullivan served as our Chief Financial Officer and Treasurer
          from May 1999 until March 2001.
     (2)  Jason Karp was our employee until October 2001; he continues to serve
          as our General Counsel and Assistant Secretary.
     (3)  Homayoon Tajalli served as our Senior Vice President of Products and
          Engineering from October 1999 until June 2001.

STOCK INCENTIVE AND OPTION PLAN

    Our Amended and Restated Stock Incentive and Option Plan provides for the
grant of options, restricted stock and other stock-based compensation to our
employees, consultants and advisors. As of December 31, 2001, there were
5,000,000 shares of common stock reserved for issuance and there where 3,162,330
options to purchase shares of common stock outstanding at a weighted average
exercise price of $5.34 per share. Options granted under the plan typically vest
over time, usually ratably over four years from the date of grant, subject to
acceleration in the event of a change of control of e-centives. Typically, an
option granted under the plan expires ten years after it is granted. In
addition, the plan allows for grants of options the vesting of which is tied to
the employee's performance. As of December 31, 2001, our board of directors has
issued only stock options under the plan. The plan provides for the granting of
both incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and non-statutory options.

    Our compensation committee administers our plan. The compensation committee
is authorized to determine:

     o    which eligible individuals receive option grants or share issuances;
     o    the number of shares under each option grant or share issuance;
     o    the exercise price per share under each option;
     o    the term of each option; and
     o    the vesting schedule for individual option grants or share issuances.

401(k) PLAN

    We have a tax-qualified employee savings plan, which covers all of our
employees. Eligible employees may defer up to 25% of their pre-tax earnings,
subject to the Internal Revenue Service's annual contribution limit. Our 401(k)
plan permits us to make additional discretionary matching contributions on
behalf of all participants in our 401(k) plan in an amount determined by us. Our


                                       46
<Page>

401(k) plan is intended to qualify under Section 401 of the Internal Revenue
Code of 1986 so that contributions by employees or by us to our 401(k) plan, and
income earned on plan contributions, are not taxable to employees until
withdrawn from the plan, and so that contributions by us, if any, will be
deductible by us when made.


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table presents information regarding the beneficial ownership
of common stock as of March 15, 2002:

     o    each person, or group of affiliated persons, who is the beneficial
          owner of more than five percent of our outstanding common stock;
     o    each of our named executive officers;
     o    each of our directors; and
     o    all of our executive officers and directors as a group.

     Unless otherwise indicated, the address of each person identified is c/o
e-centives, Inc., 6901 Rockledge Drive, 7th Floor, Bethesda, Maryland 20817.

    Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a stockholder vote. The persons named in this table
have sole voting power for all shares of our common stock shown as beneficially
owned by them, subject to community property laws where applicable and except as
indicated in the footnotes to this table. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to options and warrants
held by that person that are currently exercisable or exercisable within 60 days
after the date of this annual report are deemed outstanding. These shares,
however, are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.

<Table>
<Caption>
                                                 SHARES
                                              BENEFICIALLY
                                                  OWNED    PERCENT OF
                    NAME                         NUMBER      CLASS
-------------------------------------------   -----------    -----
<S>                                            <C>            <C>
Kamran Amjadi (1)..........................    1,971,000      4.9
Mehrdad Akhavan (2)........................    1,035,000      2.6
Peter Friedli (3)..........................   22,088,106     55.4
      c/o Friedli Corporate Finance AG
      Freigutstrasse 5
      8002 Zurich, Switzerland
Venturetec, Inc. ..........................    9,196,080     23.1
      c/o Friedli Corporate Finance AG
      Freigutstrasse 5
      8002 Zurich, Switzerland
InVenture, Inc. ...........................    5,991,667     15.0
      c/o Friedli Corporate Finance AG
      Freigutstrasse 5
      8002 Zurich, Switzerland
Pine, Inc. (4).............................    3,577,098      9.0
      c/o Friedli Corporate Finance AG
      Freigutstrasse 5
      8002 Zurich, Switzerland
David Samuels (5)..........................       43,750       *
Lawrence Brand (6).........................      180,673       *
Jason Karp (7).............................            0       *
Michael Sullivan (8).......................            0       *
Homayoon Tajalli (9).......................            0       *
All executive officers and directors as a
    group (8 persons) (10).................   25,318,529     63.6
</Table>

----------

    * Less than 1% of the outstanding shares of common stock.

(1) Includes 375,000 shares issuable upon exercise of vested stock options.

(2) Includes 375,000 shares issuable upon exercise of vested stock options.

(3) Includes 40,000 shares issuable upon exercise of vested stock options and
    110,000 shares issuable upon exercise of warrants to purchase held by Mr.
    Friedli



                                       47
<Page>

     individually, as well as shares of common stock and common stock underlying
     warrants held by entities over which Mr. Friedli has control, as follows:
     Joyce, Ltd. -- 235,000 shares of common stock; Pine Inc. -- 3,577,098
     shares of common stock and 20,000 warrant shares; Savetech, Inc. -- 165,383
     shares of common stock; Spring Technology Corp. -- 177,520 shares of common
     stock and 200,000 warrant shares; Venturetec, Inc. -- 9,168,080 shares of
     common stock; InVenture, Inc. -- 5,991,667 shares of common stock; and
     USVentech -- 145,750 shares of common stock. As investment advisor to these
     entities, Mr. Friedli has voting and investment power with respect to these
     shares. See "Related Party Transactions -- Stock Purchases and Related
     Matters" for a description of Mr. Friedli's relationships with these
     entities. New Venturetec AG may be deemed to control Venturetec by virtue
     of its ownership of 100% of Venturetec's capital stock and its
     corresponding right to elect Venturetec's directors, and, therefore, our
     capital stock owned by Venturetec may also be deemed to be beneficially
     owned by New Venturetec.

(4) Includes 20,000 shares issuable upon exercise of warrants.

(5) Includes 43,750 shares issuable upon exercise of vested stock options.

(6) Includes 180,673 shares issuable upon exercise of vested stock options.

(7) Jason Karp was our employee until October 2001; he continues to serve as our
    Vice President, General Counsel and Assistant Secretary.

(8) Michael Sullivan served as our Chief Financial Officer and Treasurer from
    May 1999 until March 2001.

(9) Homayoon Tajalli served as our Senior Vice President of Products and
    Engineering from October 1999 until June 2001.

(10)Includes 1,014,423 shares issuable upon exercise of vested stock options
    and 330,000 shares issuable upon exercise of warrants.


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCK PURCHASES AND RELATED MATTERS

    As part of our October 2001 rights offering, we sold 4,343,765 shares of
our common stock to Pine, Inc., 4,950,000 shares of our common stock to
InVenture, Inc., 5,500,000 shares of our common stock to Venturetec, Inc., and
2,050,000 shares of our common stock to Peter Friedli. Mr. Friedli is an
existing stockholder and one of our directors, and he serves as the President of
Pine, InVenture, Venturetec and its parent corporation, New Venturetec AG.

    Venturetec and Pine each delivered to us a promissory note dated as of
October 19, 2001, in the principal amount of CHF 8,500,000 ($5,230,769) and CHF
8,687,530 ($5,346,172), respectively, as consideration for certain or all, as
the case may be, of the subscription price for shares of our common stock for
which they subscribed under the rights offering. The notes' maturity dates are
March 31, 2002.

    As of January 22, 2002, Pine, Venturetec and InVenture, all companies under
common control, reallocated their share purchases and/or related promissory
notes. The CHF 2,500,000 in cash originally indicated as originating from
Venturetec has been reallocated as follows:

          o    InVenture purchased from Pine in a private sale 1,041,667 of the
               shares of common stock originally purchased by Pine pursuant to
               the rights offering for CHF 2,083,334 (CHF 2.00 a share). As part
               of this transaction, Pine was credited with paying us CHF
               2,083,334 and delivered to us an amended and restated secured
               promissory note dated as of October 19, 2001, in the principal
               amount of CHF 6,604,196 (approximately $4,064,121), with 2%
               interest, with an original March 31, 2002 maturity date that was
               subsequently extended to May 15, 2002. We simultaneously returned
               Pine's original CHF 8,687,530 promissory note.

          o    Venturetec paid us CHF 416,666 and delivered to us an amended and
               restated secured promissory note dated as of October 19, 2001, in
               the principal amount of CHF 10,583,334 (approximately
               $6,512,821), with 2% interest, with an original March 31, 2002
               maturity date that was subsequently extended to June 30, 2002.
               This CHF 10,583,334 reflects an increase in Venturetec's secured
               promissory note to CHF 11,000,000 (reflecting Venturetec's
               original subscription price for the shares of our common stock
               for which it subscribed under the rights offering) minus the CHF
               416,666 payment. We simultaneously returned Venturetec's original
               CHF 8,500,000 promissory note.

    Mr. Friedli also has relationships with several other of our other
stockholders. He serves as the investment advisor to Joyce, Ltd., Savetech,
Inc., Spring Technology Corp. and USVentech, Inc. The information below
summarizes related party transactions through December 2000.



                                       48
<Page>

     o    In October 1996, we sold 235,000 shares of our common stock to Joyce,
          35,000 shares of our common stock to Pine, 10,000 shares of our common
          stock to Peter Friedli and 720,000 shares of our common stock to
          Savetech, Inc. at a price of $0.25 per share. At the same time, we
          granted to Peter Friedli warrants exercisable for 56,000 shares of our
          common stock at an exercise price of $0.10 per share.

     o    In December 1996, we sold 200,000 shares of our common stock to Pine,
          120,000 shares of our common stock to Spring Technology and 172,000
          shares of our common stock to USVentech at a price of $1.00 per share.

     o    In February 1997, we sold 700,000 shares of our common stock to
          Venturetec at a price of $2.50 per share.

     o    In June 1997, we sold 1,700,000 shares of our Series A convertible
          preferred stock at a per share price of $4.50 for an aggregate
          consideration of $7.7 million to raise capital to finance our
          operations. Each share of Series A convertible preferred stock
          automatically converted into one share of common stock upon the
          completion of our initial public offering on October 3, 2000. The
          following table summarizes purchases, valued in excess of $60,000, of
          shares of our Series A convertible preferred stock by our directors,
          executive officers and 5% stockholders, including the number of shares
          of Series A convertible preferred stock bought, the aggregate
          consideration paid for the shares and the aggregate value of the
          shares at the time of our initial public offering based upon the
          offering price of $11.03 per share. These affiliates purchased the
          securities described below at the same price and on the same terms and
          conditions as the unaffiliated investors in the private financing. In
          connection with this offering, we granted warrants exercisable for
          50,000 shares, 100,000 shares and 20,000 shares, respectively, of our
          common stock to Mr. Friedli, Spring Technology and Pine at an exercise
          price of $4.50 per share.


<Table>
<Caption>
                                      NUMBER OF
                                      SHARES OF
                                       SERIES          AGGREGATE
                                     A PREFERRED   STOCKHOLDER PRICE    AGGREGATE
                                       STOCK            PAID           VALUE AT IPO
                                     -----------   -----------------  -------------
             <S>                      <C>              <C>             <C>
             Venturetec..........     800,000          $ 3,600,000     $ 8,824,000
             Spring Technology...     140,000              630,000       1,544,200

</Table>

     o    In February 1999, we sold 2,500,000 shares of our Series B convertible
          preferred stock at a per share price of $6.00 for an aggregate
          consideration of $15.0 million. Each share of Series B convertible
          preferred stock automatically converted into one share of common stock
          upon the closing of our initial public offering on October 3, 2000.
          The following table summarizes purchases, valued in excess of $60,000,
          of shares of our Series B convertible preferred stock by our
          directors, executive officers and 5% stockholders, including the
          number of shares of Series B convertible preferred stock bought, the
          aggregate consideration paid for the shares and the aggregate value of
          the shares, assuming the conversion of the shares into our common
          stock and the offering price of $11.03 per share. Venturetec purchased
          the shares of our Series B convertible preferred stock in this
          offering at the same price and on the same terms as the unaffiliated
          investors in this private financing. In connection with this offering,
          we granted warrants exercisable for 4,000 shares and 100,000 shares,
          respectively, of our common stock to Peter Friedli and Spring
          Technology at an exercise price of $6.00 per share.

<Table>
<Caption>

                                NUMBER OF
                             SHARES OF SERIES     AGGREGATE
                                B PREFERRED   STOCKHOLDER PRICE    AGGREGATE
                                   STOCK            PAID         VALUE AT IPO
                              ---------------  ----------------  -------------
             <S>              <C>             <C>              <C>
             Venturetec       2,000,000       $12,000,000      $ 22,060,000
</Table>


     o    In February 2000, we sold 2,328,434 shares of our Series C convertible
          redeemable preferred stock at a price of $10.20 per share for an
          aggregate consideration of $23.8 million to raise capital to finance
          our operations. Each share of Series C convertible redeemable
          preferred stock automatically converted into one share of common stock
          upon the completion of our initial public offering on October 3, 2000.
          The following table summarizes purchases, valued in excess of $60,000,
          of shares of our Series C convertible preferred stock by our
          directors, executive officers and 5% stockholders, including the
          number of shares of Series C convertible redeemable preferred stock
          bought, the aggregate consideration paid for the shares and the
          aggregate value of the shares at the time of our initial public
          offering based upon the offering price of $11.03 per share. These
          affiliates purchased the securities described above at the same price
          and on the same terms and conditions as the unaffiliated investors in
          the private financing. We also sold 367,648 shares at the same price
          in this



                                       49
<Page>

          offering to Excite, Inc., one of our Direct Marketing System
          network partners.

<Table>
<Caption>
                                     NUMBER OF
                                 SHARES OF SERIES      AGGREGATE
                                   C PREFERRED      STOCKHOLDER PRICE    AGGREGATE
                                       STOCK            PAID            VALUE AT IPO
                                 -----------------  -----------------   ---------------
<S>                                   <C>               <C>            <C>
             Venturetec.......        196,080           $2,000,016     $ 2,162,762
             Spring Technology         49,020              500,004         540,691
             Peter Friedli....         49,608              506,002         547,176

</Table>

    Each of the warrants we have granted entitles its registered holder to
"piggyback" registration rights for the common stock underlying the warrants in
certain public offerings of our securities, subject to underwriter restrictions.

    Our board of directors determined the respective per share purchase prices
for the above-listed transactions based on the respective prices of our
securities sold contemporaneously to third parties who were not affiliated with
us.

LOANS TO MEMBERS OF MANAGEMENT AND BOARD OF DIRECTORS

    We do not have any outstanding loans to officers or the board of directors,
other than as set forth in the "Stock Purchases and Related Matters" section
above.

OTHER TRANSACTIONS

    In July 1996, we entered into a consulting agreement with Friedli Corporate
Finance, Inc. ("FCF"), whereby Mr. Friedli provides us with financial consulting
services and investor relations advice. Pursuant to this agreement, FCF is paid
$4,000 per month plus reimbursement of expenses related to Mr. Friedli's
services. Consulting expense under the FCF agreement was approximately $87,000,
$63,000 and $63,000 for the years ended December 31, 1999, 2000 and 2001,
respectively. In addition, under this agreement, we granted:

     o    a preemptive right to purchase any debt or equity securities issued by
          us in a financing transaction;
     o    a preemptive right to allocate 10% of the share offering in our
          initial public offering;
     o    a veto right on a single capital expenditure of $500,000 or more
          until our initial public offering; and
     o    a seat on our board of directors and its compensation committee.

    In October 2000, FCF permanently waived its rights to purchase shares of
common stock in our initial public offering and our future offerings.

    During 1999, the Company issued a convertible long-term debt instrument for
$1,000,000 to an investment group controlled by FCF. This instrument was
converted into common stock upon consummation of the IPO in October 2000.

    In addition, the Company engaged FCF to support the Company in connection
with the 2001 rights offering. In association with this support, the Company
agreed to extend the consulting agreement with FCF for 3 years and to reimburse
FCF up to $100,000 in expenses for such rights offering support.

    Friedli Corporate Finance executed a letter to the Company confirming its
ability to fund the Company in the amount of $10.7 million for the
outstanding promissory notes from Pine, Inc. and Venturetec, Inc., entities
under its control. Funds from these promissory notes will be provided to us
from April 2002 through June 2002, based on our lack of immediate need for
these funds. As of April 16, 2002, more than 70% of these funds have been
received by us. To the extent that these funds, accompanied by our operating
resources, are not sufficient to enable us to operate through December 31,
2002, Friedli Corporate Finance is committed to providing the necessary
funding to enable us to continue to operate through December 31, 2002.
See also "Related Party Transactions" on page 34 for a further discussion
of such promissory notes.


                                       50
<Page>


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

a)       1.  FINANCIAL STATEMENTS

             The following financial statements required by this item are
             submitted in a separate section beginning on page F-1 of this
             report.

                            INDEX TO FINANCIAL STATEMENTS

<Table>

<S>                                                                     <C>
               Independent Auditors' Report.........................  F-1
               Consolidated Balance Sheets..........................  F-2
               Consolidated Statements of Operations................  F-3
               Consolidated Statements of Stockholders' Equity......  F-4
               Consolidated Statements of Cash Flows................  F-5
               Notes to Consolidated Financial Statements...........  F-6
               </Table>


2.       FINANCIAL STATEMENT SCHEDULE

             See Schedule II attached.

b)       REPORTS ON FORM 8-K

             On December 18, 2001 we filed a Current Report on Form 8-K
             announcing that we had acquired certain assets of BrightStreet.com,
             Inc. and assumed various liabilities associated with the acquired
             assets.

             On January 3, 2002 we filed an amended Current Report on Form
             8-K/A, amending the Current Report on Form 8-K that was filed on
             December 18, 2001, which reported that we had completed the
             acquisition of BrightStreet.com, Inc. and did not include the
             requisite financial statements with that report on Form 8-K.

             On January 30, 2002 we filed an amended Current Report on Form
             8-K/A, announcing a press release of the same date providing
             guidance on our expected performance for the fourth quarter of
             2001.

             On February 26, 2002 we filed an amended Current Report on Form
             8-K/A, amending the amended Current Report on Form 8-K/A that was
             filed on January 3, 2002, which supplemented the earlier filings by
             providing the required financial statements and the pro forma
             financial information.

             On March 28, 2002 we filed a Current Report on Form 8-K, announcing
             that the maturity dates of promissory notes receivable from two of
             our stockholders had been extended. See also Item 13 (Stock
             Purchases and Related Matters) on page 48 for a further discussion.

c)       EXHIBITS

         See Exhibit Index attached.




                                       51
<Page>


                                   SIGNATURES


    Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Bethesda, State of
Maryland, on April 16, 2002.

                                            e-CENTIVES, INC.

                                         By: /s/ KAMRAN AMJADI
                                            ------------------------------------
                                            Kamran Amjadi
                                            CHAIRMAN AND CHIEF EXECUTIVE OFFICER

    Pursuant to the requirements of the Securities Act of 1934, this annual
report has been signed by the following persons on April 15, 2002 in the
capacities and on the date indicated.

<Table>
<Caption>
                 NAME                                        TITLE                                 DATE
                 ----                                        -----                                 ----


<S>                                               <C>                                       <C>

/s/ KAMRAN AMJADI                                 Chairman and Chief Executive                   April 16, 2002
-------------------------------------               Officer (Principal Executive Officer)
Kamran Amjadi                                       and Director


/s/ MEHRDAD AKHAVAN                               President, Chief Operating                     April 16, 2002
-------------------------------------                Officer, Secretary and Director
Mehrdad Akhavan


/s/ DAVID SAMUELS                                 Chief Financial Officer (Principal             April 16, 2002
------------------------------------                 Financial and Accounting Officer)
David Samuels


/s/ PETER FRIEDLI                                 Director                                       April 16, 2002
------------------------------------
Peter Friedli


</Table>



                                       52
<Page>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
e-centives, Inc.:

    We have audited the accompanying consolidated balance sheets of e-centives,
Inc. and subsidiary as of December 31, 2000 and 2001, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss and cash flows for each of the years in the three-year period ended
December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of e-centives,
Inc. and subsidiary as of December 31, 2000 and 2001 and the results of their
operations and cash flows for each of the years in the three-year period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

    As discussed in Note 2 to the consolidated financial statements, effective
July 1, 2001, the Company adopted the provisions of Statement of Financial
Accounting Standards No. ("FAS") 141, "Business Combinations," and certain
provisions of FAS 142, "Goodwill and Other Intangible Assets," as required for
goodwill and intangible assets resulting from business combinations consummated
after June 30, 2001.

/s/ KPMG LLP
McLean, Virginia
February 1, 2002, except as to Note 15(a), which is as of April 16, 2002



                                      F-1
<Page>



                         e-CENTIVES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS


<Table>
<Caption>
                                                                     DECEMBER 31,
                                                             --------------------------
                                                                2000             2001
                                                             ----------       ---------

<S>                                                          <C>             <C>
                            ASSETS

Current assets:
  Cash and cash equivalents..........................        $ 27,062,040    $  8,902,259
  Short-term investments.............................             114,491              --
  Accounts receivable, net of allowance for doubtful
     accounts of $252,016 and $148,127 at December 31,
     2000 and 2001 respectively......................           3,007,426       2,162,114
  Other receivables..................................               4,209         612,710
  Prepaid expenses...................................           1,339,185         336,834
  Restricted cash....................................             108,597          89,916
                                                             ------------    ------------
          Total current assets.......................          31,635,948      12,103,833
Property and equipment, net..........................           2,993,413      11,154,158
Intangible assets, net...............................           1,250,000       3,102,955
Restricted cash......................................             434,387       1,366,945
Other assets.........................................              62,917         100,772
                                                             ------------    ------------
          Total assets...............................        $ 36,376,665    $ 27,828,663
                                                             ============    ============

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................................           2,440,372       1,992,776
  Accrued expenses...................................             962,159       2,718,781
  Accrued restructuring costs........................                  --       2,170,206
  Deferred revenue...................................             904,218       2,523,729
  Dividends payable..................................           1,235,688              --
  Current portion of capital leases..................                  --         208,331
  Other liabilities..................................                  --         312,627
                                                             ------------    ------------
          Total current liabilities..................           5,542,437       9,926,450
Capital leases, net of current portion...............                  --         476,457
Accrued restructuring costs, net of current portion .                  --       6,892,744
                                                             ------------    ------------
          Total liabilities..........................           5,542,437      17,295,651
                                                             ------------    ------------
Commitments and contingencies........................                  --              --
Stockholders' equity:
  Series A convertible preferred stock (voting), $.01
    par value, 10,000,000 shares authorized, 0 and
    2,000,000 shares issued and outstanding at
    December 31, 2000 and 2001, respectively.........                  --          20,000
  Common stock, $.01 par value, 40,000,000 shares
     authorized, 15,168,434 and 37,732,009 shares
     issued and outstanding at December 31,
     2000 and 2001, respectively.....................             151,684         373,493
  Additional paid-in capital.........................          85,282,822     120,337,200
  Notes receivable from stockholders.................                  --     (10,576,941)
  Accumulated other comprehensive loss...............                  --         (16,997)
  Accumulated deficit................................         (54,600,278)    (99,603,743)
                                                             ------------    ------------
          Total stockholders' equity ................          30,834,228      10,533,012
                                                             ------------    ------------
          Total liabilities and stockholders' equity.        $ 36,376,665    $ 27,828,663
                                                             ============    ============

</Table>


          See accompanying notes to consolidated financial statements.



                                       F-2
<Page>



                         e-CENTIVES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>


                                                 YEAR ENDED DECEMBER 31,
                                           1999           2000           2001
                                      -------------  -------------  ---------

<S>                                    <C>            <C>            <C>
Revenue.......................         $    740,305   $ 10,230,035   $  5,053,624
Cost of revenue...............            1,027,696      2,207,855      8,395,162
Operating expenses:
  Product development, exclusive
    of stock-based compensation           2,426,695      2,872,572      7,933,192
  General and administrative,
    exclusive of stock-based
    compensation..............            4,083,459      8,764,830     12,591,620
  Sales and marketing, exclusive
    of stock-based  compensation          7,889,517     19,005,844      9,997,131
  Network partner fees........              730,550      6,353,937        985,593
  Restructuring and impairment
    charges...................                   --             --      9,876,123
  Stock-based compensation:...
    Product development.......              282,538        822,052        200,822
    General and administrative              297,155        333,215        362,365
    Sales and marketing.......              474,503        558,382        299,932
                                       ------------   ------------   ------------
         Loss from operations.          (16,471,807)   (30,688,652)   (45,588,316)
Interest expense..............                   --             --         (3,630)
Interest income...............              267,712        693,312        607,957
Other income..................               33,764         50,000             --
                                       ------------   ------------   ------------
         Loss before income taxes       (16,170,331)   (29,945,340)   (44,983,989)
Income taxes..................                   --             --        (19,476)
                                       ------------   ------------   -------------
         Net loss.............          (16,170,331)   (29,945,340)   (45,003,465)
Preferred stock dividend requirement
  and accretion of convertible
  redeemable preferred stock..             (382,500)      (551,773)            --
                                       ------------   ------------   ------------
Net loss applicable to common
  stockholders................         $(16,552,831)  $(30,497,113)  $(45,003,465)
                                       ============   ============   ============
Basic and diluted net loss per
  common share................         $      (3.40)  $      (4.09)  $      (2.68)
Shares used to compute basic and
  diluted net loss per common share       4,869,601      7,460,272     16,810,366

</Table>


          See accompanying notes to consolidated financial statements.


                                       F-3




<Page>


                         e-CENTIVES, INC. AND SUBSIDIARY

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS

<Table>
<Caption>


                                         SERIES A                SERIES B
                                        CONVERTIBLE           CONVERTIBLE                                                  NOTES
                                      PREFERRED STOCK         PREFERRED STOCK          COMMON STOCK       ADDITIONAL    RECEIVABLE
                                 ----------------------- ----------------------- -----------------------    PAID-IN         FROM
                                    SHARES      AMOUNT      SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL    STOCKHOLDERS
                                 ----------- ----------- ----------- ----------- ----------- ----------- -----------   ------------


<S>                             <C>           <C>         <C>        <C>          <C>        <C>         <C>           <C>
Balance, January 1, 1999.         1,700,000  $  17,000           --  $      --    4,860,000  $  48,600   $  9,769,900  $         --
Issuance of Series B
  convertible preferred
  stock..................                --         --    2,500,000     25,000           --         --     13,475,000            --
Exercise of stock options                --         --           --         --       14,375        144         24,544            --
Stock-based compensation.                --         --           --         --           --         --      1,054,196            --
Net loss.................                --         --           --         --           --         --             --            --

Comprehensive loss.......
                                 ----------  ---------   ----------  ---------   ----------  ---------   ------------  ------------
Balance, December 31, 1999        1,700,000     17,000    2,500,000     25,000    4,874,375     48,744     24,323,640            --

Issuance of warrants related
 to convertible redeemable
 preferred stock.........                --         --           --         --           --         --        773,068            --
Issuance of common stock in
 connection with initial public
 offering, net of offering
  costs..................                --         --           --         --    3,700,000     37,000     36,667,896            --
Exercise of stock options                --         --           --         --       65,625        656        144,031            --
Conversion of Series A
 preferred stock to common
 stock...................        (1,700,000)   (17,000)          --         --    1,700,000     17,000             --            --
Conversion of Series B
 preferred stock to common
 stock...................                --         --   (2,500,000)   (25,000)   2,500,000     25,000             --            --
Conversion of Series C
convertible redeemable
preferred stock to common stock          --         --           --         --    2,328,434     23,284     21,925,436            --
Stock-based compensation.                --         --           --         --           --         --      1,713,649            --
Accretion of convertible
 redeemable preferred stock
 to redemption value.....                --         --           --         --           --         --       (264,898)           --
Declaration of dividends                 --         --           --         --           --         --            --             --
Net loss.................                --         --           --         --           --         --            --             --

Comprehensive loss.......
                                 ----------  ----------  ----------  ----------    --------    -------   ------------  ------------
Balance, December 31, 2000               --         --          --          --   15,168,434    151,684     85,282,822            --

Rights offering..........         2,000,000     20,000          --          --   20,000,000    200,000     22,222,571   (10,576,941)
Exercise of stock options                --         --          --          --       11,875        119         28,006            --
Acquisition of Commerce
  Division..............                 --         --          --          --    2,168,945     21,690     11,755,682            --
Acquisition of
  BrightStreet.com ......                --         --          --          --          --          --        185,000            --
Stock-based compensation.                --         --          --          --          --          --        863,119            --
Foreign currency translation
  adjustment.............                --         --          --          --          --          --             --            --
Net loss.................                --         --          --          --          --          --             --            --

Comprehensive loss.......
                                 ----------  ---------   ----------  ---------   ----------  ---------   ------------  ------------
Balance, December 31, 2001        2,000,000  $   20,000          --  $      --   37,349,254 $  373,493   $120,337,200  $(10,576,941)
                                 ==========  ==========  ==========  ==========  ==========  =========   ============  =============

</Table>

<Table>
<Caption>

                                                  ACCUMULATED
                                                      OTHER                        TOTAL
                                  COMPREHENSIVE   COMPREHENSIVE  ACCUMULATED    STOCKHOLDERS'
                                      LOSS            LOSS          DEFICIT       EQUITY
                                 ------------    ------------  -------------  --------------


<S>                             <C>             <C>            <C>             <C>
Balance, January 1, 1999.        $         --    $         --  $  (7,248,919)  $   2,586,581
Issuance of Series B
  convertible preferred
  stock..................                  --              --             --      13,500,000
Exercise of stock options                  --              --             --          24,688
Stock-based compensation.                  --              --             --       1,054,196
Net loss.................        (16,170,331)              --    (16,170,331)    (16,170,331)
                                -------------
Comprehensive loss.......        (16,170,331)
                                =============   -------------  -------------     -----------
Balance, December 31, 1999                                 --    (23,419,250)        995,134

Issuance of warrants related
 to convertible redeemable
 preferred stock.........                 --               --             --         773,068
Issuance of common stock in
 connection with initial public
 offering, net of offering
 costs...................                 --               --             --      36,704,896
Exercise of stock options                 --               --             --         144,687
Conversion of Series A
 preferred stock to common
 stock...................                 --               --             --             --
Conversion of Series B
 preferred stock to common
 stock...................                 --               --             --             --
Conversion of Series C
 convertible redeemable
 preferred stock to common stock          --               --             --      21,948,720
Stock-based compensation.                 --               --             --       1,713,649
Accretion of convertible
 redeemable preferred stock
 to redemption value.....                 --               --             --        (264,898)
Declaration of dividends                  --               --     (1,235,688)     (1,235,688)
Net loss.................         (29,945,340)             --    (29,945,340)    (29,945,340)
                                 ------------
Comprehensive loss.......         (29,945,340)
                                =============   -------------  -------------    ------------
Balance, December 31, 2000                                 --    (54,600,278)     30,834,228

Rights offering..........                 --               --             --      11,865,630
Exercise of stock options                 --               --             --          28,125
Acquisition of Commerce
  Division..............                  --               --             --      11,777,372
Acquisition of
  BrightStreet.com ......                 --               --             --        185,000
Stock-based compensation.                 --               --             --        863,119
Foreign currency translation
  adjustment.............             (16,997)        (16,997)            --        (16,997)
Net loss.................         (45,003,465)             --    (45,003,465)   (45,003,465)
                                 ------------
Comprehensive loss.......        $(45,020,462)
                                 ============  --------------  -------------   ------------
Balance, December 31, 2001                     $      (16,997) $ (99,603,743)  $ 10,533,012
                                               ==============  =============   ============

</Table>

          See accompanying notes to consolidated financial statements.

                                      F-4

<Page>


<Table>
<Caption>



                         e-CENTIVES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       YEAR ENDED DECEMBER 31,
                                            --------------------------------------
                                                 1999           2000           2001
                                            -------------  -------------   -------------

<S>                                         <C>            <C>            <C>
Cash flows from operating activities:
  Net loss........................           $(16,170,331)  $(29,945,340)  $(45,003,465)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
       Depreciation and amortization            1,170,829      2,093,804      6,182,141
       Stock-based compensation...              1,054,196      1,713,649        863,119
       Provision for doubtful accounts                --         489,973        493,168
       Non-cash restructuring and                     --              --        469,397
         impairment charge........
       (Increase) decrease in:
          Accounts receivable.....               (793,490)    (2,703,909)       481,335
          Prepaid expenses and other             (214,031)    (1,049,519)     1,002,351
            assets................
          Other receivable........                    --              --        146,613
       Increase (decrease) in:
          Accounts payable........              1,170,441      1,079,024       (447,594)
          Deferred revenue........                791,027        113,191        795,724
          Accrued expenses and other
            liabilities..........                  89,304        619,296     10,248,497
                                             ------------   ------------   ------------

       Net cash used in operating
         activities..............             (12,902,055)   (27,589,830)   (24,768,714)
                                             ------------   ------------   ------------

Cash flows from investing activities:
  Purchases of short-term investments              (4,390)        (5,472)           --
  Maturities of short-term investments                --              --        114,491
  Acquisition of property and equipment        (1,566,307)    (2,502,944)      (895,323)
  Purchase of intangible asset....             (3,000,000)           --             --
  Increase in security deposits...                 (2,054)       (29,991)       (37,855)
  Increase in restricted cash.....                    --        (542,984)      (913,877)
  Acquisition of Commerce Division                    --              --     (1,115,955)
  Acquisition of BrightStreet.com.                    --              --     (1,924,380)
                                             ------------   ------------   ------------
        Net cash used in investing
          activities..............             (4,572,751)    (3,081,391)    (4,772,899)
                                             ------------   ------------   ------------

Cash flows from financing activities:
  Payments on obligations under capital
    lease.........................                     --            --        (16,621)
  Proceeds from issuance of debt..              2,000,000            --             --
  Proceeds from rights offering ..                     --            --     12,606,016
  Payment of dividends............                     --            --     (1,235,688)
  Issuance of common stock........                     --     36,704,896             --
  Issuance of Series B convertible
    preferred stock...............             13,500,000             --             --
  Issuance of Series C convertible
    redeemable....................                     --     20,456,891             --
    preferred stock...............
  Exercise of stock options.......                 24,688        144,687         28,125
                                             ------------   ------------   ------------
        Net cash provided by financing
          activities                           15,524,688     57,306,474     11,381,832
                                             ------------   ------------   ------------

        Net increase (decrease) in cash
          and cash equivalents....             (1,950,118)    26,635,253    (18,159,781)
Cash and cash equivalents, beginning of
  period..........................              2,376,905        426,787     27,062,040
                                             ------------   ------------   ------------

Cash and cash equivalents, end of period     $    426,787   $ 27,062,040   $  8,902,259
                                             ============   ============   ============


Supplemental disclosure of cash flow
  information:
    Cash paid during the year for interest  $         --   $         --   $      3,630

</Table>

Supplemental disclosure of non-cash investing and financing activities:

     In conjunction with the acquisition of BrightStreet.com, Inc. in December
          2001, the Company issued warrants, valued at $185,000, for the
          purchase of 500,000 shares of common stock and a contingent
          performance-based warrant to purchase up to 250,000 shares of the
          Company's common stock.
     In conjunction with the acquisition of the Commerce Division in March
          2001, the Company issued 2,168,945 shares of common stock, valued at
          $11,755,682, and a contingent performance-based warrant to purchase
          1,860,577 shares of the Company's common stock.
     In conjunction with the issuance of Series C convertible redeemable
          preferred stock in 2000, the Company issued warrants, valued at
          $773,068, for the purchase of 119,485 shares of common stock.
     In September 2000, the Company declared dividends of $1,235,688 on Series
          A convertible preferred stock.
     Each share of Series A and Series B convertible preferred stock and Series
          C convertible redeemable preferred stock automatically converted into
          one share of common stock subsequent to closing of the Company's
          initial public offering on October 10, 2000.
     In February 2000, the long-term debt was converted into 196,078 shares of
          Series C convertible redeemable preferred stock at $10.20 per share.
     In conjunction with the issuance of Series B convertible preferred stock
          in 1999, the Company issued warrants for the purchase of 250,000
          shares of common stock.

          See accompanying notes to consolidated financial statements.

                                      F-5

<Page>



                         e-CENTIVES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION

     e-centives, Inc. ("e-centives" or the "Company") was established as
Imaginex, Inc. on August 2, 1996, through incorporation in the State of
Delaware. During October 1996, the Company amended its articles of incorporation
to change its name to Emaginet, Inc. In March 1999, the Company amended its
articles of incorporation to change its name to e-centives, Inc. In March 2001,
the company expanded its international operations by establishing a subsidiary,
e-centives Limited, in the United Kindom.

     The Company provides interactive marketing technologies and services. The
Company's products and services are intended to assist its clients with customer
acquisitions and retention. The Company provides online marketing and commerce
capabilities and solutions for companies across a range of industries including
the Internet (portals and destination sites), retail, banking, insurance, and
telecommunications.

     The Company operates in a highly competitive environment and inherent in
the Company's business are various risks and uncertainties including its limited
operating history and unproven business model. The Company's success may depend
in part upon the continuance of the Internet as a communications medium,
prospective product and service development efforts, and the acceptance of the
Company's offerings by the marketplace. The Company expects to expand its
operations through continued capital investment. The Company has been dependent
upon its stockholders to fund working capital deficiencies. Management
believes that the net proceeds from the October 2001 rights offering,
together with its existing cash resources and the proceeds from its
promissory notes, will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures through into the first quarter of
2003. Friedli Corporate Finance has executed a letter to the Company confirming
its ability to fund the Company in the amount of $10.7 million for the
outstanding promissory notes from Pine, Inc. and Venturetec, Inc., entities
under its control. Funds from these promissory notes will be provided to the
Company from April 2002 through June 2002, based on the Company's lack of
immediate need for these funds. To the extent that these funds, accompanied
by the Company's operating resources, are not sufficient to enable the
Company to operate through December 31, 2002, Friedli Corporate Finance is
committed to providing the necessary funding to enable the Company to
continue to operate through December 31, 2002. Additionally, management has
developed a series of contingency plans for the purpose of conserving working
capital should actual revenues fall short of the Company's internal
projections. These contingency plans can be enacted quickly and will
eliminate significant amounts of variable costs, and enhance the Company's
overall liquidity position. However, the Company may need to raise additional
funds sooner to fund its planned expansion, to develop new or enhanced products
or services, to respond to competitive pressures or to make acquisitions.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION

          The accompanying consolidated financial statements include the
     accounts of the Company and its subsidiary. All significant intercompany
     accounts and transactions have been eliminated in consolidation.

(b) USE OF ESTIMATES

          The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect the reported
     amount of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results may differ from those estimates.

          Estimates are used in accounting for, among other things, allowances
     for uncollectible receivables, recoverability of long-lived assets and
     investments, depreciation and amortization, employee benefits,
     restructuring accruals, taxes and contingencies. Estimates and assumptions
     are reviewed periodically and the effects of revisions are reflected in the
     consolidated financial statement in the period they are determined to be
     necessary.

(c) RECLASSIFICATION

          Certain amounts in prior years' consolidated financial statements have
     been reclassified to conform to the current year presentation.

(d) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

          All highly liquid investments with maturities of three months or less
     when purchased are considered cash equivalents. Those investments with
     maturities less than twelve months at the balance sheet date are considered
     short-term investments. Cash and cash equivalents consist of cash on
     deposit with banks and money market funds stated at cost, which
     approximates fair value. In accordance with Statement of Financial
     Accounting Standards No. ("FAS") 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN
     DEBT AND EQUITY SECURITIES, the Company classifies all short-term
     investments as available-for-sale. Accordingly, these investments are
     carried at fair value. The fair value of such securities approximates cost
     and there were no material unrealized gains or losses at December 31, 2000
     or 2001. The Company's portfolio of short-term investments, which consisted
     of certificates of deposits at December 31, 2000 matured during 2001.

                                      F-6


<Page>

(e) PROPERTY AND EQUIPMENT

          Property and equipment are stated at cost and equipment under capital
     leases are stated at the present value of minimum lease payments.
     Depreciation is calculated using the straight-line method over the
     estimated useful lives of the assets, which range from three to seven
     years. Equipment under capital leases and leasehold improvements are
     capitalized and amortized using the straight-line method over the shorter
     of their estimated useful life or the term of the respective lease.

          Expenditures for maintenance and repairs are charged to expense as
     incurred. Expenditures for major renewals and betterments that extend the
     useful lives of property and equipment are capitalized and depreciated over
     the remaining useful lives of the asset. When assets are retired or sold,
     the cost and related accumulated depreciation are removed from the accounts
     and any resulting gain or loss is recognized in the results of operations.

(f) INTANGIBLE ASSETS

          Intangible assets consist of licensed technology, which was acquired
     in connection with the BrightStreet.com acquisition, an assembled work
     force and a customer list, which were acquired in connection with the
     purchase of the Commerce Division, as well as a purchased patent.
     Intangible assets are being amortized over the expected period of two
     to three years. All intangible assets are reviewed for impairment whenever
     the facts and circumstances indicate that the carrying amount may not be
     recoverable.

(g) DEFERRED REVENUE

          Deferred revenue represents billings or collections on contracts in
     advance of performance of services and is amortized into revenue as the
     related service is performed based upon the applicable revenue recognition
     methodology.

(h) REVENUE RECOGNITION

          Revenue is generated by providing promotions marketing and outsourced
     e-mail services, licensing the Company's software products, as well as
     providing other services such as maintenance support, technical support and
     consulting. The Company's products and services principally include
     PROMOMAIL, PROMOCAST, PROMOCOMMERCE, the COMMERCE ENGINE, outsourced
     e-mail, and the licensing of online promotions management solutions
     software.

          PROMOMAIL is a service that consists of targeted e-mails highlighting
     specific e-centives. Marketers can purchase this service on a fixed fee
     basis or on a performance basis. For the fixed fee contracts, participating
     marketers are charged a fixed fee for each member to whom the e-mail is
     sent and revenue related to the service is recognized upon transmission of
     the e-mail. When marketers purchase the PROMOMAIL service on a performance
     basis, revenue is based solely on the actions of the Company's members. The
     Company earns a contractually specified amount based on the number of
     members who click on the offer or other specified link, the number of
     purchases by the Company's members, or the amount of sales generated by the
     Company's members. Revenue is recognized upon the click-through or upon
     notification by the marketer of the number or amount of applicable sales.

          Marketers who subscribe to the PROMOCAST service enter into fixed-fee
     contracts for delivery of either a specified or unlimited number of
     e-centives by the Company to the accounts of a targeted group of members
     over the contractual period, not to exceed one year. Each e-centive has an
     expiration date, typically 30 days from the date the e-centive is placed in
     a member's account. An e-centive is considered delivered when a member
     visits their account. Because the Company has an obligation to maintain the
     e-centive on its system until it expires, the Company recognizes revenue
     upon expiration of the delivered e-centive. Revenue related to delivery of
     an unlimited quantity of e-centives is recognized ratably over the expected
     term of the customer relationship.

          The PROMOCOMMERCE service is a fixed-fee contract consisting of
     several components, including a PROMOCAST package, a perpetual software
     license and maintenance on the accompanying software. The Company has not
     sold software or maintenance separately; therefore, vendor specific
     objective evidence has not been established. The related revenue is
     recognized ratably over the expected term of the customer relationship.

          Revenue generated from the COMMERCE ENGINE is primarily through
     license, support and maintenance fees from Internet portal and other web
     site destination customers. The Company also generates revenue from
     participating online merchants. The contracts related to the COMMERCE
     ENGINE typically consist of implementation and information service
     fees from Internet sites and service and monthly transaction fees
     from merchants. Revenue generated from the merchant transaction fees is
     recognized when earned, revenue from implementation services is recognized
     ratably over the expected term of the customer relationship and revenue
     from service fees is recognized over the contract period.


                                       F-7
<Page>


          The Company's outsourced e-mail marketing technology allows businesses
     to conduct e-mail marketing without having to acquire or develop their own
     e-mail infrastructure. Revenue is generated by charging fees for list
     management and hosting services, strategy and creative services, e-mail
     delivery and management services, as well as tracking and analysis
     services. Revenue related to the one-time service charges for setting up
     the customer is recognized ratably over the expected term of the customer
     relationship, while all other revenue is recognized when the services
     occur.

          With the acquisition of BrightStreet.com in December 2001, the Company
     started offering online promotions management solutions for creating,
     targeting, publishing and tracking coupons and promotional incentives. This
     system designs, deploys, and manages promotions and tracks individual
     consumer response to offers for manufacturers, retailers, and websites.
     This technology includes an operating system for delivering promotions and
     promotion management tools. Revenue consists of fees from the sale of
     licenses, which are recognized ratably over the contractual period.

          Marketers may also contract for consulting services, such as
     assistance with promotions planning. Revenue related to these consulting
     services is recognized as the related services are provided.

          Revenue for the first two quarters of 2001 also includes barter
     revenues, which represent exchanges by the Company of promotional e-mail
     deliveries for reciprocal advertising space or traffic on other web sites
     ("marketing partner transactions"). Revenues and expenses from these
     marketing partner transactions are recorded based upon the fair value of
     the promotional e-mails delivered at a similar quantity or volume of
     e-mails delivered in a qualifying past cash transaction. Fair value of
     promotional e-mails delivered is based upon the Company's recent historical
     experience of cash received for similar e-mail deliveries. Such revenues
     are recognized when the promotional e-mails are delivered. Corresponding
     expenses are recognized for the advertisements received when the Company's
     advertisements are displayed on the reciprocal web sites or properties,
     which is typically in the same period as delivery of the promotional
     e-mails and are included in sales and marketing expense.

(i) COST OF REVENUE

          Cost of revenue consists primarily of expenses related to providing
     the Company's services, including personnel costs associated with providing
     its services, depreciation of servers, network and hosting charges, and
     network partner revenue share payments.

(j) PRODUCT DEVELOPMENT COSTS

          Product development consists primarily of expenses related to the
     development and enhancement of the Company's technology and services,
     including payroll and related expenses for personnel, as well as other
     associated expenses for the Company's technology department. The Company
     expenses product development costs as we incur them.

          Development costs related to the software product marketed by the
     Company are accounted for in accordance with FAS 86, ACCOUNTING FOR THE
     COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED. Under
     this standard, capitalization of software development costs begins upon the
     establishment of technological feasibility, subject to net realizable value
     considerations. To date, the period between achieving technological
     feasibility and the general availability of such software has been short;
     therefore, software development costs qualifying for capitalization have
     been insignificant. Accordingly, the Company has not capitalized any
     software development costs and has charged all such costs to product
     development expense.

(k) SALES AND MARKETING COSTS

          Sales and marketing expenses consist primarily of payroll, sales
     commissions and related expenses for personnel engaged in sales, marketing
     and customer support, as well as advertising and promotional expenditures.
     Such costs are expensed as incurred.

(l) ADVERTISING COSTS

          Advertising costs are expensed as incurred. Advertising expense was
     approximately $3,739,000, $12,537,000 and $4,309,000 during 1999, 2000, and
     2001, respectively.

(m) STOCK-BASED COMPENSATION

          The Company applies the intrinsic value-based method of accounting
     prescribed by Accounting Principles Board ("APB")

                                       F-8
<Page>

     Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
     interpretations including FASB Interpretation No. 44, ACCOUNTING FOR
     CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION AN INTERPRETATION OF APB
     OPINION NO. 25, issued in March 2000, to account for its fixed plan stock
     options. Under this method, compensation expense is recorded on the date of
     grant only if the current market price of the underlying stock exceeded the
     exercise price. FAS 123, ACCOUNTING FOR STOCK-BASED Compensation,
     established accounting and disclosure requirements using a fair value-based
     method of accounting for stock-based employee compensation plans. As
     allowed by FAS 123, the Company has elected to continue to apply the
     intrinsic value-based method of accounting described above, and has adopted
     the disclosure requirements of FAS 123.

(n) INCOME TAXES

          The Company uses the asset and liability method of accounting for
     income taxes. Under the asset and liability method, deferred tax assets and
     liabilities are recognized for future tax consequences attributable to
     differences between the financial statement carrying amounts of existing
     assets and liabilities and their respective tax bases and operating and tax
     loss carryforwards. Deferred tax assets and liabilities are measured using
     enacted tax rates expected to apply to taxable income in the years in which
     those temporary differences are expected to be recovered or settled. The
     effect on deferred tax assets and liabilities of a change in tax rates is
     recognized in income in the period that includes the enactment date. The
     Company records a valuation allowance to reduce the deferred tax assets to
     the amount that is more likely than not to be recognized.

(o) NET INCOME (LOSS) PER SHARE

          The Company computes net income (loss) applicable to common
     stockholders in accordance with FAS 128, EARNINGS PER SHARE, and SEC Staff
     Accounting Bulletin No. ("SAB") 98. Under the provisions of FAS 128 and SAB
     98, basic net income (loss) available per share is computed by dividing the
     net income (loss) available to common stockholders for the period by the
     weighted average number of common shares outstanding during the period.
     Diluted net income (loss) available per share is computed by dividing the
     net income (loss) for the period by the weighted average number of common
     and dilutive common equivalent shares outstanding during the period. As the
     Company had a net loss in each of the periods presented, basic and diluted
     net income (loss) available per share is the same.

(p) FAIR VALUE OF FINANCIAL INSTRUMENTS

          The Company considers the carrying value of the Company's financial
     instruments, which include cash equivalents, short-term investments,
     accounts receivable, accounts payable, and accrued expenses to approximate
     fair value at December 31, 2000 and 2001 because of the relatively short
     period of time between origination of the instruments and their expected
     realization or settlement.

          The Company also maintained letters of credit, which represent
     off-balance sheet financial instruments. The approximate fair value, as
     determined by the related commitment fees, is immaterial.

(q) CONCENTRATION OF CREDIT RISK

          Financial instruments, which potentially subject the Company to
     concentrations of credit risk, consist of cash and cash equivalents,
     short-term investments and accounts receivable. The Company maintains its
     cash and cash equivalents and short-term investments with high quality
     financial institutions. At times, these accounts may exceed federally
     insured limits. The Company has not experienced any losses in such bank
     accounts.

          There has been a significant slowdown in the Internet sector in the
     United States, particularly with respect to retail Internet companies. Many
     retail Internet companies had difficulties raising capital, borrowing money
     and otherwise funding their operating losses, and a some have gone out of
     business. Some of the Company's marketer clients are retail Internet
     companies, many of which have significant losses, negative cash flow and
     limited access to capital. These clients are experiencing even greater cash
     flow problems due to this slowdown. Therefore, many of the Company's
     clients could fail. As a result of the difficulties of some of the
     Company's clients, the Company has had to expend additional effort to
     collect its accounts receivable, and in certain cases had to settle for
     less than the total amount owed. In the year ended December 31, 2001, the
     Company incurred charges related to bad debt of approximately $493,000.
     While the Company believes that its allowance for doubtful accounts as of
     December 31, 2001 is adequate to cover any difficulties with the collection
     of its accounts receivable balance, there can be no assurance that the
     allowance will be adequate to cover any receivables later deemed to be
     uncollectible.

          The Company believes it is not exposed to significant credit risk
     related to cash and cash equivalents and short-term investments.

                                       F-9
<Page>

          There was one customer that accounted for 69% of the Company's
     accounts receivable at December 31, 2001 and two customers that accounted
     for 15% and 18%, respectively, of the Company's accounts receivable at
     December 31, 2000. For the years ended December 31, 1999, 2000 and 2001, no
     one customer accounted for more than 10% of revenue. The accounts
     receivable that accounted for 69% of the balance at December 31, 2001, was
     subsequently received in February 2002.


(r) LONG-LIVED ASSETS

          The Company assesses the recoverability of long-lived assets,
     including identifiable intangible assets, whenever adverse events or
     changes in circumstances or business climate indicate that the carrying
     value of the asset may not be recoverable. If the future undiscounted cash
     flows expected to result from the use of the related assets are less than
     the carrying value of such assets, an impairment has been incurred and a
     loss is recognized to reduce the carrying value of the long-lived assets to
     fair value. In connection with the restructuring plans adopted during 2001,
     certain assets were deemed to be impaired. Accordingly, the Company
     recorded an impairment charge of approximately $469,000 during 2001 (Note
     8).

(s) RETIREMENT PLAN

          The Company sponsors a defined contribution retirement plan
     established under the provisions of Internal Revenue Code 401(k). Eligible
     employees may defer up to 25% of their pre-tax earnings, subject to the
     Internal Revenue Service's annual contribution limit. The 401(k) plan
     permits the Company to make additional discretionary matching contributions
     on behalf of all participants in the 401(k) plan in an amount determined by
     the Company; however, no contributions have been made for the years
     presented.

(t) FOREIGN CURRENCY TRANSLATION

          The functional currency of the Company's international operation is
     the local currency. Accordingly, all assets and liabilities of the
     subsidiary are translated using exchange rates in effect at the end of the
     period, and revenue and costs are translated using weighted average
     exchange rates for the period. The related translation adjustments are
     reported in accumulated other comprehensive income (loss) in stockholders'
     equity (deficit). For the year ended December 31, 2001, the Company
     recorded foreign currency translation losses of approximately $17,000.
     There were no gains or losses resulting from foreign currency translations
     in 1999 or 2000.

          Transaction gains and losses arising from transactions denominated in
     a currency other than the functional currency of the entity involved are
     included in the consolidated statement of operations. For the year ended
     December 31, 2001, the Company recorded foreign currency transaction losses
     of approximately $43,000. There were no gains or losses resulting from
     foreign currency transactions in 1999 or 2000.

(u) COMPREHENSIVE INCOME (LOSS)

          Effective January 1, 1998, the Company adopted the provisions of FAS
     130, REPORTING COMPREHENSIVE INCOME. FAS 130 establishes standards for
     reporting comprehensive income and its components in financial statements.
     Other comprehensive income (loss) recorded by the Company is comprised of
     accumulated currency translation adjustments.

(v) SEGMENT INFORMATION

          The Company operates in a single reportable segment and will evaluate
     additional segment disclosure requirements as it expands its operations.

(w) RECENT ACCOUNTING PRONOUNCEMENTS

          In June 2001, the FASB issued FAS 141, BUSINESS COMBINATIONS, and FAS
     142, GOODWILL AND OTHER INTANGIBLE ASSETS. FAS 141 requires that the
     purchase method of accounting be used for all business combinations
     initiated after June 30, 2001, as well as all purchase method business
     combinations completed after June 30, 2001. FAS 141 also specifies criteria
     intangible assets acquired in a purchase method business combination must
     meet in order to be recognized and reported apart from goodwill, noting
     that any purchase price allocable to an assembled workforce may not be
     accounted for separately. FAS 142 requires that goodwill and intangible
     assets with indefinite useful lives no longer be amortized, but instead be
     tested for impairment, at least annually, in accordance with the provisions
     of FAS 142. FAS 142 also requires that intangible assets with definite
     useful lives be amortized

                                       F-10
<Page>

     over their respective estimated useful lives to their estimated residual
     values, and reviewed for impairment in accordance with FAS 121, ACCOUNTING
     FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
     DISPOSED OF.

          The Company adopted the provisions of FAS 141 as of July 1, 2001 and
     FAS 142 is effective January 1, 2002. Furthermore, any goodwill and any
     intangible asset determined to have an indefinite useful life that are
     acquired in a purchase business combination completed after June 30, 2001
     will not be amortized, but will continue to be evaluated for impairment in
     accordance with the appropriate pre-FAS 142 accounting literature. Goodwill
     and intangible assets acquired in business combinations completed before
     July 1, 2001 will continue to be amortized prior to the adoption of FAS
     142.

          FAS 141 requires, upon adoption of FAS 142, that the Company evaluate
     its existing intangible assets and goodwill that were acquired in a prior
     purchase business combination, and to make any necessary reclassifications
     in order to conform with the new criteria in FAS 141 for recognition apart
     from goodwill. Upon adoption of FAS 142, the Company will be required to
     reassess the useful lives and residual values of all intangible assets
     acquired in purchase business combinations, and make any necessary
     amortization period adjustments by the end of the first interim period
     after adoption. In addition, to the extent an intangible asset is
     identified as having an indefinite useful life, the Company will be
     required to test the intangible asset for impairment in accordance with the
     provisions of FAS 142 within the first interim period. Any impairment loss
     will be measured as of the date of adoption and recognized as the
     cumulative effect of a change in accounting principle in the first interim
     period. In connection with the transitional goodwill impairment evaluation,
     FAS 142 requires the Company to perform an assessment of whether there is
     an indication that goodwill is impaired as of the date of adoption. To
     accomplish this, the Company must identify its reporting units and
     determine the carrying value of each reporting unit by assigning the assets
     and liabilities, including the existing goodwill and intangible assets, to
     those reporting units as of the date of adoption. The Company will then
     have up to six months from the date of adoption to determine the fair value
     of each reporting unit and compare it to the reporting unit's carrying
     amount. To the extent a reporting unit's carrying amount exceeds its fair
     value, an indication exists that the reporting unit's goodwill may be
     impaired and the Company must perform the second step of the transitional
     impairment test. In the second step, the Company must compare the implied
     fair value of the reporting unit's goodwill, determined by allocating the
     reporting unit's fair value to all of its assets (recognized and
     unrecognized) and liabilities in a manner similar to a purchase price
     allocation in accordance with FAS 141, to its carrying amount, both of
     which would be measured as of the date of adoption. This second step is
     required to be completed as soon as possible, but no later than the end of
     the year of adoption. Any transitional impairment loss will be recognized
     as the cumulative effect of a change in accounting principle in the
     Company's statement of operations.

          As of the date of adoption, the Company expects to have unamortized
     identifiable intangible assets in the amount of approximately $3,103,000,
     which will be subject to the transition provisions of FAS 141 and 142.
     Because of the extensive effort needed to comply with adopting FAS 141 and
     142, it is not practicable to reasonably estimate the impact of adopting
     these statements on the Company's financial statements at the date of this
     report, including whether any transitional impairment losses will be
     required to be recognized as the cumulative effect of a change in
     accounting principle.

          In August 2001, the Financial Accounting Standards Board issued FAS
     144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which
     supercedes both FAS 121 and the accounting and reporting provisions of APB
     Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS-REPORTING THE EFFECTS
     OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND
     INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a
     segment of a business (as previously defined in that Opinion). FAS 144
     retains the fundamental provisions in FAS 121 for recognizing and measuring
     impairment losses on long-lived assets held for use and long-lived assets
     to be disposed of by sale, while also resolving significant implementation
     issues associated with FAS 121. For example, FAS 144 provides guidance on
     how a long-lived asset that is used as part of a group should be evaluated
     for impairment, establishes criteria for when a long-lived asset is held
     for sale, and prescribes the accounting for a long-lived asset that will be
     disposed of other than by sale. FAS 144 retains the basic provisions of APB
     30 on how to present discontinued operations in the income statement but
     broadens that presentation to include a component of an entity (rather than
     a segment of a business). Unlike FAS 121, an impairment assessment under
     FAS 144 will never result in a write-down of goodwill. Rather, goodwill is
     evaluated for impairment under FAS 142. The Company is required to adopt
     FAS 144 no later than the year beginning after December 15, 2001, and plans
     to adopt its provisions for the quarter ending March 31, 2002. Management
     does not expect the adoption of FAS 144 for long-lived assets held for use
     to have a material impact on the Company's financial statements because the
     impairment assessment under FAS 144 is largely unchanged from FAS 121. The
     provisions of the Statement for assets held for sale or other disposal
     generally are required to be applied prospectively after the adoption date
     to newly initiated disposal activities. Therefore, management cannot
     determine the potential effects that adoption of FAS 144 will have on the
     Company's financial statements.

(3) EQUITY OFFERINGS

(a) INITIAL PUBLIC OFFERING


                                       F-11
<Page>

          On October 3, 2000, the Company completed its initial public offering
     ("IPO") in which it sold 3,700,000 shares of its common stock to investors
     in Switzerland, resulting in proceeds to the Company of approximately $36.7
     million, after deducting underwriters' commissions and other
     offering-related expenses. In connection with the IPO, 1,700,000 shares of
     Series A convertible preferred stock, 2,500,000 shares of Series B
     convertible preferred stock, and 2,328,434 shares of Series C convertible
     redeemable preferred stock were converted to common stock on a one-for-one
     basis.

(b) RIGHTS OFFERING

          On October 19, 2001, the Company closed a rights offering for
     approximately $24.6 million with subscriptions for 20,000,000 shares. Each
     subscriber in the rights offering also received, for no additional
     consideration, based upon such subscriber's participation in the rights
     offering, a pro-rata portion of 2,000,000 shares of the Company's Series A
     convertible preferred stock (convertible on a 10-for-1 basis into
     20,000,000 shares of common stock under certain circumstances). After
     deducting expenses and underwriting discounts, the net proceeds from this
     transaction will be approximately $22.5 million, with $12.6 million of the
     net proceeds received by December 31, 2001 and the remaining $9.9 million
     due by the end of the second quarter of 2002.

(4) ACQUISITIONS

(a) COMMERCE DIVISION

          On March 28, 2001, the Company acquired the Commerce Division of
     Inktomi Corporation ("Commerce Division") in a purchase business
     combination for approximately $12.9 million, consisting of 2,168,945 shares
     of the Company's common stock valued at approximately $11.8 million and
     about $1.1 million in acquisition costs. A total of 2,551,700 shares of the
     Company's common stock, or 14.4% of the Company's outstanding common stock,
     were issued with 40% placed into escrow. Thirty eight percent of the escrow
     shares, or 382,755, are to be released based upon the achievement of
     contractually defined revenue and performance targets for the Commerce
     Division. The remaining 637,925 of escrow shares are held in satisfaction
     of any potential indemnity claims and will be released within contractually
     agreed upon time frames. As part of the purchase price, the Company also
     issued to Inktomi Corporation a warrant to purchase an additional 1,860,577
     shares of the Company's common stock upon the achievement of additional
     revenue targets for the Commerce Division at the end of 12 months following
     the closing of this acquisition. Based upon the revenue through December
     31, 2001, the Company does not anticipate that Inktomi will be eligible to
     receive the shares of common stock and warrants that are contingent upon
     the achievement of revenue targets for the Commerce Division.

          In connection with the acquisition, the Company entered into a license
     agreement and reseller agreement with Inktomi Corporation. Under the terms
     of the license agreement, Inktomi Corporation will perpetually license
     certain software and technology to the Company to be used in the acquired
     business. Pursuant to the reseller agreement, Inktomi Corporation will
     resell certain products of the acquired business for a period of twelve
     months from the closing. Subsequent to December 31, 2001, the reseller
     agreement was terminated.

          In addition, commensurate with the acquisition, the Company hired 70
     of Inktomi's Commerce Division employees and entered into a sublease
     agreement with Inktomi Corporation for approximately 31,000 square feet of
     office space in Redwood Shores, California. The term of the sublease is for
     9 years and the base rent is $132,236 per month, which increases annually
     in July of each year. Inktomi Corporation provided the Company with certain
     transition services and support with respect to certain facilities and
     functions for six months following the acquisition.

          The acquisition was accounted for under the purchase method of
     accounting and, accordingly, the purchase price was allocated to the assets
     acquired and liabilities assumed based on their estimated fair values at
     the acquisition date. The Company engaged an independent third-party
     appraiser to perform a valuation of the tangible and intangible assets
     associated with the acquisition. The Company is amortizing the identifiable
     intangible assets on a straight-line basis over 2-3 years. Based upon the
     valuation, the total purchase price of $12,893,326 was allocated as
     follows:

<Table>
<Caption>


<S>                                                                <C>
                                Current assets                      $    984,542
                                Fixed assets, net                      5,657,205
                                Internally developed software          5,549,168
                                Intangible assets                      1,626,433
                                Deferred revenue                        (924,022)
                                                                    ------------
                                        Total consideration         $ 12,893,326
                                                                    ============
</Table>

(b) BRIGHTSTREET.COM
                                       F-12
<Page>



          On December 3, 2001, the Company entered into an Asset Purchase
     Agreement (the "Agreement") with BrightStreet.com, Inc.
     ("BrightStreet.com"), whereby the Company acquired substantially all of
     BrightStreet.com's assets and certain liabilities. The Company acquired
     BrightStreet.com for approximately $2.2 million, consisting of
     approximately $1.7 million in cash, a guaranteed warrant to purchase
     500,000 shares of its common stock valued at approximately $185,000, a
     contingent performance-based warrant to purchase up to 250,000 shares of
     its common stock and about $335,000 in acquisition costs. The cash payments
     consisted of approximately $843,000 in cash advances to fund
     BrightStreet.com's working capital under the terms of a Management Services
     Agreement and an $825,000 payment at closing. The guaranteed warrant is
     exercisable from June 3, 2002 through December 3, 2005 at an exercise price
     of $0.5696 per share. The performance-based warrant is exercisable, in
     whole or in part, beginning June 4, 2003 until December 3, 2005 based upon
     the achievement of certain performance targets at an exercise price of
     $2.44 per share.

          In conjunction with the Agreement, the Company entered into a Patent
     Assignment Agreement (the "Assignment") with BrightStreet.com. Pursuant
     to the Assignment, BrightStreet.com has agreed to assign to the Company
     all right, title and interest in and to all the issued and pending
     BrightStreet.com patents (the "Patents"), subject to certain pre-existing
     rights granted by BrightStreet.com to third parties ("Pre-existing
     Rights"), provided the Company makes certain payments to BrightStreet.com
     by December 3, 2005 (the "Payments"). If the Company makes such Payments
     by that date, the Company shall own all right, title and interest in and
     to the Patents, subject to the Pre-existing Rights. Until such Payments
     are made, the Company has, subject to the Pre-existing Rights, an
     exclusive, worldwide, irrevocable, perpetual, transferable, and
     sublicensable right and license under the Patents. Until the Company
     takes title to the Patents, the Company may not grant an exclusive
     sublicense to the Patents to any unaffiliated third party. In the event
     the Company does not make the Payments by December 3, 2005, the Company
     shall retain a license to the Patents, but the license shall then convert
     to a non-exclusive license.

          In exchange for the rights granted under the Assignment, beginning
     December 2002, the Company is obligated to pay BrightStreet.com ten percent
     of revenues received that are directly attributable to (a) the licensing or
     sale of products or functionality acquired from BrightStreet.com,
     (b) licensing or royalty fees received from enforcement or license of the
     Patents covered by the Assignment, and (c) licensing or royalty fees
     received under existing licenses granted by BrightStreet.com to certain
     third parties. If the total transaction compensation paid, as defined by
     the Agreement, at any time prior to December 3, 2005 exceeds $4,000,000,
     the Payments will be deemed to have been made. The Company also has the
     right, at any time prior to December 3, 2005, to satisfy the Payments by
     paying to BrightStreet.com the difference between the $4,000,000 and the
     total compensation already paid.

          The acquisition was accounted for under the purchase method of
     accounting and, accordingly, the preliminary purchase price was allocated
     to the assets acquired and liabilities assumed based on their estimated
     fair values at the acquisition date. The Company is amortizing the
     identifiable intangible assets on a straight-line basis over 3 years. The
     preliminary total purchase price of $2,187,647 was allocated as follows:

<Table>
<Caption>


<S>                                                                <C>
                                Fixed assets, net                   $    742,301
                                Licensed technology                    2,194,807
                                Capital lease obligations               (701,409)
                                Other liabilities                        (48,063)
                                                                    ------------
                                        Total consideration         $  2,187,647
                                                                    ============
</Table>



(c) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

          The following unaudited pro forma results of operations for the years
     ended December 31, 2000 and 2001 are presented as though the Commerce
     Division and BrightStreet.com had been acquired at the beginning of the
     respective periods presented, after giving effect to purchase accounting
     adjustments relating to amortization of intangible assets and other
     acquisition related adjustments. The pro forma results of operations are
     not necessarily indicative of the combined results that would have occurred
     had the acquisitions been consummated at the beginning of the period, nor
     are they necessarily indicative of future operating results.
<Table>
<Caption>

                                                  YEAR ENDED DECEMBER 31,
                                                --------------------------
                                                    2000             2001
                                                ------------     ------------

<S>                                             <C>               <C>
Revenue                                         $  25,286,000     $12,077,000
Net loss                                        $ (55,896,000)   $(54,757,000)
Net loss applicable to common stockholders      $ (56,448,000)   $(54,757,000)
Weighted average shares of common stock
    outstanding                                     9,629,217      17,342,259
Basic and diluted net loss per common share     $       (5.86)   $      (3.16)
</Table>


(5) LETTERS OF CREDIT

    As part of the amended and modified lease agreement, dated June 29, 2000,
for the Company's headquarters office space lease in

                                       F-13
<Page>

Bethesda, Maryland, the Company is required to have an irrevocable letter of
credit as a security deposit throughout the lease term. In the event that the
letter of credit is executed, the Company has established a certificate of
deposit, for an equivalent amount, which serves as collateral for the letter of
credit. The letter of credit for the first year was $542,984 and was reduced to
$449,579 on June 29, 2001, the first day of the second lease year and will
continue to be reduced by 20% on the anniversary of each subsequent lease year.

     Commensurate with the acquisition of the Commerce Division, the Company
entered into a sublease agreement with Inktomi Corporation for office space in
Redwood Shores, California. As part of the sublease agreement, the Company is
required to have an irrevocable letter of credit in the amount of $1,007,282 as
a security deposit throughout the lease term and has therefore established a
certificate of deposit for this amount.

(6) PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<Table>
<Caption>


                                                              DECEMBER 31,
                                                       ------------------------
                                                           2000         2001
                                                       -----------  -----------
<S>                                                    <C>          <C>
          Computer equipment........................   $ 4,041,020  $15,953,315
          Furniture and equipment...................       501,506    1,181,338
          Leasehold improvements....................       153,946      405,818
                                                       -----------  -----------
                                                         4,696,472   17,540,471
          Less: accumulated depreciation............    (1,703,059)  (6,386,313)
                                                       -----------  -----------
                                                       $ 2,993,413  $11,154,158
                                                       ===========  ===========
</Table>

(7) INTANGIBLE ASSETS

    In association with the acquisition of BrightStreet.com in December 2001,
the Company acquired licensed technology. The intangible asset was recorded at
its estimated fair value on the date of the acquisition and is being amortized
on a straight-line basis over three years.

    Intangible assets consisting of an assembled work force and a customer list,
were acquired in connection with the purchase of the Commerce Division in March
2001. The intangible assets were recorded at their estimated fair value on the
date of the acquisition and are being amortized on a straight-line basis over
three and two years, respectively.

    The Company acquired a patent for "Electronic couponing method and
apparatus" in April 1999 from SellectSoft, a software developer, for $3,000,000.
The patent is being amortized on a straight-line basis over three years.

    Intangible assets consist of the following:

<Table>
<Caption>


                                                             DECEMBER 31,
                                                     --------------------------
                                                          2000          2001
                                                     ------------  ------------
<S>                                                   <C>           <C>
                     Licensed technology.........     $        --   $ 2,194,807
                     Assembled work force........              --     1,000,745
                     Customer list...............              --       156,290
                     Patent......................       3,000,000     3,000,000
                                                      -----------   -----------
                                                        3,000,000     6,351,842
                     Less: accumulated amortization    (1,750,000)   (3,248,887)
                                                     ------------  ------------
                                                      $ 1,250,000   $ 3,102,955
                                                      ===========   ===========
</Table>

(8) RESTRUCTURING AND IMPAIRMENT CHARGES

     In 2001, the Company's management approved restructuring actions to respond
to the global economic downturn and to improve the Company's cost structure by
streamlining operations and prioritizing resources in strategic areas of the
Company's business. The Company recorded a restructuring charge of approximately
$9.9 million to reflect these actions. This charge consisted of severance and
other employee benefits related to the planned termination of approximately 63
employees, across many business functions and job classes, as well as costs
related to the consolidation of excess facilities and a revaluation of the
intangible assets associated with the Commerce Division. As of December 31,
2001, the Company had paid out approximately $344,000 of the accrued costs and
recorded non-cash charges of approximately $469,000. The Company expects to pay
out approximately $2.2 million of the accrual in 2002, with the remainder to be
paid out through 2010. As of December 31, 2001, the balance of the accrued
restructuring charges recorded in 2001 consisted of the following:

                                       F-14
<Page>

<Table>
<Caption>


                                               EMPLOYEE SEVERANCE                  REVALUATION OF
                                              AND OTHER BENEFIT      FACILITY        INTANGIBLE
                                  TOTAL         RELATED COSTS     CONSOLIDATIONS       ASSETS
                              --------------- ------------------- ----------------- ---------------
<S>                          <C>             <C>                  <C>                 <C>
  Balance at January 1, 2001  $           --  $           --      $           --  $           --
  Restructuring charges, net       9,876,123         430,750           8,975,976         469,397
  Cash payments                     (343,776)       (343,776)                 --              --
  Non-cash charges                  (469,397)             --                  --        (469,397)
                              --------------- ------------------- ----------------- ---------------
  Balance at December 31,
    2001                      $     9,062,950 $       86,974      $    8,975,976              --
                              =============== =================== ================= ===============
</Table>

     Calculation of the restructuring accrual related to expected losses on
subleases required the Company to make estimates concerning: (1) the expected
length of time to sublease the facility; (2) the expected rental rates on
subleases; and (3) estimated brokerage expenses associated with executing the
sublease. The Company used the assistance of independent real estate brokerage
firms in making these estimates and the estimates may be impacted by future
economic trends. If the actual results differ from the estimates the Company may
be required to adjust the restructuring accrual related to expected losses on
subleases, including recording additional losses.

(9) INCOME TAXES

     The Company has incurred operating losses since its inception and has
recognized no current or deferred tax provision or benefit in the United States.

    The components of income tax expense attributable to operations are as
follows:

<Table>
<Caption>

                                                   YEAR ENDED DECEMBER 31,
                                                ------------------------------
                                                     2000            2001
                                                --------------  --------------
<S>                                             <C>             <C>
Current.....................................    $           --  $           --
     Federal................................                --              --
     State..................................                --              --
     Foreign................................                --          19,476
                                                --------------  --------------
        Total current ......................                --              --
                                                --------------  --------------

Deferred....................................                --              --
     Federal................................                --              --
     State..................................                --              --
     Foreign................................                --              --
                                                --------------  --------------
        Total deferred .....................                --              --
                                                --------------  --------------

Total tax expense...........................    $           --  $       19,476
                                                ==============  ==============
</Table>


     The provision for income taxes is different from that which would be
obtained by applying the statutory federal income tax rate to loss before income
taxes. The items causing this difference are as follows:

<Table>
<Caption>


                                                     YEAR ENDED DECEMBER 31,
                                                --------------  ----------------
                                                     2000             2001
                                                --------------  ----------------
<S>                                             <C>              <C>
  Expected tax benefit (expense) at
   statutory rate...........................    $   10,181,416   $   15,294,556
  State tax, net of federal.................         1,375,744        1,136,850
  Stock-based compensation, not deductible..          (797,050)        (259,800)
  Foreign tax rate differential.............                --           16,102
  Other, net................................            84,335         (230,151)
  Increase in valuation allowance...........       (10,844,445)     (15,977,033)
                                                --------------      ------------
    Tax (expense) benefit...................    $           --   $      (19,476)
                                                ==============      ============
</Table>


    Temporary differences and carryforwards that give rise to deferred tax
assets and liabilities are as follows:

<Table>
<Caption>

                                                        YEAR ENDED DECEMBER 31,
                                                      --------------------------
                                                          2000          2001
                                                      ------------  ------------
<S>                                                  <C>            <C>
         Deferred tax assets:
          Net operating loss and general business
            credits carryforwards...................   $16,742,577   $29,241,385
          Restructuring reserve.....................            --     3,401,895
          Start-up costs and organizational costs...     2,600,287     1,812,416
          Deferred compensation.....................        19,946       135,682
          Intangible assets.........................       543,753     1,165,338
          Accrued expenses..........................        45,023       210,054
          Allowance for doubtful accounts receivable        97,882        56,140
          Property and equipment....................         8,222        11,813
                                                       -----------   -----------
                  Total gross deferred tax assets...    20,057,690    36,034,723
                  Valuation allowance...............   (20,057,690)  (36,034,723)
                                                       ------------  -----------
                                                       $        --   $        --
                                                       ===========   ===========
</Table>

                                       F-15
<Page>


     The net change in the valuation allowance for the years ended December 31,
2000 and December 31, 2001 was an increase of $10,844,445 and $15,977,033,
respectively. The valuation allowances at December 31, 2000 and December 31,
2001 are results of the uncertainty regarding the ultimate realization of the
tax benefits related to the deferred tax assets. The federal net operating loss
is $76,696,000 as of December 31, 2001. The net operating loss carryforward
period expires commencing in 2011 through the year 2021. Further, as a result of
certain financing and capital transactions, an annual limitation on the future
utilization of a portion of the net operating loss carryforward may occur. As a
result, the net operating loss carryforward may not be fully utilized before
expiration.

     No deferred taxes have been provided for the income tax liability, if any,
which would be incurred on repatriation of the undistributed earnings of the
Company's foreign subsidiary because the Company intends to reinvest these
earnings outside the United States.

(10) COMMITMENTS AND CONTINGENCIES

(a) LEASES

          In association with the acquisition of BrightStreet.com, effective
     November 1, 2001, the Company entered into a Modification, Assignment and
     Assumption Agreement with Pentech Financial Services, Inc. ("Pentech") and
     BrightStreet.com regarding the Master Equipment Lease ("Lease") that
     BrightStreet.com had entered into with Pentech in May 2000. Per the
     agreement, with the consent of Pentech, BrightStreet.com assigned the Lease
     to the Company with certain modifications to the terms and conditions of
     the Lease. In addition, the Company agreed to defend, indemnify, save and
     hold harmless BrightStreet.com from and against any and all claims,
     demands, costs, and any other damages which BrightStreet.com may sustain as
     a result of any failure or delay by the Company in performing the assumed
     obligations.

          The Company is obligated under non-cancelable capital leases, for
     certain computer equipment, that expire during 2004. In addition, the
     Company is obligated under non-cancelable operating leases, primarily for
     office space, which expire on various dates through 2010.

          Amounts related to assets under non-cancelable capital leases that
     have been capitalized as property and equipment as of December 31, 2001 are
     as follows:

<Table>
<Caption>


<S>                                          <C>
Computer equipment                           $   407,412
Less: accumulated depreciation                   (11,317)
                                             ------------
                                             $   396,095
                                             ============
</Table>



          As of December 31, 2001, future minimum lease payments under
     non-cancelable leases are as follows:

<Table>
<Caption>


YEAR ENDING DECEMBER 31,                   CAPITAL LEASES    OPERATING LEASES
------------------------                   --------------   -----------------
<S>                                         <C>                 <C>
2002                                        $   243,461         $ 3,513,165
2003                                            243,552           3,622,705
2004                                            254,235           3,688,856
2005                                                 --           3,086,863
2006                                                 --           1,926,526
Thereafter                                           --           7,276,386
                                           --------------   -----------------
   Total                                        741,248        $ 23,114,501
                                                            =================
Less: amount representing interest
(rates approximating 8.3%)                      (56,460)
                                           --------------
Present value of net minimum lease
   payments                                     684,788
Less: current installments                     (208,331)
                                           --------------
Obligation under capital leases,
   excluding current portion                $   476,457
                                           ==============
</Table>

          Rent expense under operating leases was approximately $357,000,
     $955,000 and $3,541,000 for the years ended December 31, 1999, 2000 and
     2001, respectively.

(b) PARTNER PAYMENTS

          The Company compensates its network partners for members acquired
     through their web sites by paying a fee for new

                                       F-16
<Page>

     members, by paying a percentage of the revenue the Company generates from
     the delivery of e-centives to such new members, by paying both or by paying
     the higher of the two methods.

          On March 31, 2001, the Company terminated its Co-Branding Agreement
     with Excite@Home ("Excite"), dated as of February 16, 2000 and amended
     December 30, 2000. The termination agreement relieved the Company of all of
     its future obligations, including making payments of up to $13 million to
     Excite over the next two years. In connection with the Termination
     Agreement, the Company also purchased $1.3 million worth of data and e-mail
     services from Matchlogic, a wholly owned subsidiary of Excite. Effective
     April 1, 2001, the Company entered into a new one-year agreement with
     Excite, whereby Excite provided the Company with access to e-mail and other
     subscriber information, and in exchange for this information, the Company
     was to pay Excite a percentage of the revenue generated from these
     subscribers. However, this restructured agreement resulted in no revenue
     share payments to Excite. As of November 5, 2001, this agreement was
     terminated, as Excite filed for bankruptcy protection.

          During June 2001, the Company entered into an Online Services
     Agreement with Classmates.com, an online reunion destination site with 20
     million members. The strategic alliance allows Classmates.com members to
     receive e-centives' targeted special offers and promotions based upon their
     self-described interests and will provide the Company with access to e-mail
     and other subscriber information. In exchange for this information, the
     Company pays Classmates.com a percentage of the revenue generated from
     these subscribers.

          As of December 31, 2001, the Company was party to agreements with
     seven network partners and has no future fixed commitments relating to
     these agreements related to these partner agreements.

(c) LITIGATION

          On October 8, 2001, the Company was notified by coolsavings.com that a
     payment of $250,000 was due to coolsavings because a summary judgment
     motion, relating to a separate litigation between coolsavings and Catalina
     Marketing Corporation, was not granted within one year from the date of
     entry of the Stipulated Order of Dismissal, which was October 3, 2000. The
     settlement with coolsavings is summarized below.

               The terms of the settlement with coolsavings provide for a
          cross-license between the Company and coolsavings, for each of the
          patents currently in dispute. There are no royalties or other
          incremental payments involved in the cross-license. Pursuant to this
          settlement, the Company may have to make payments of up to $1.35
          million to coolsavings as follows:

          o    $650,000, which was paid to coolsavings on September 29, 2000,
               was due at the signing of the settlement documents;

          o    $250,000, which was accrued for as of December 31, 2001, was due
               if, within one year from the date of entry of the Stipulated
               Order of Dismissal, Catalina Marketing Corporation prevailed in a
               motion for summary judgment in a separate litigation between it
               and coolsavings, involving the coolsavings' patent currently in
               dispute; and

          o    up to $450,000 if and to the extent the coolsavings' patent
               currently in dispute survives the pending reexamination
               proceedings at the Patent and Trademark Office that were
               initiated by a third party. This component of the settlement
               arrangement has not been accrued for because the possibility of
               the Company having to make this payment continues to remain
               remote.

          From time to time, the Company is a party to various legal proceedings
     incidental to its business. None of these proceedings is considered by
     management to be material to the conduct of its business, operations or
     financial condition.

(d) EMPLOYMENT AGREEMENTS

          The Company has employment agreements with certain officers and
     employees. The Company also has bonus agreements with

                                       F-17
<Page>

     certain officers and employees as defined in the agreements.

(11) STOCKHOLDERS' EQUITY

(a) PREFERRED STOCK

          On November 30, 2001, the Company's proposal to amend and restate its
     Articles of Incorporation to authorize 10,000,000 shares of preferred stock
     was approved by a majority of the stockholders. As of December 31, 2001,
     there were 2,000,000 shares of Series A convertible preferred stock
     authorized. As part of the Company's October 2001 rights offering of
     20,000,000 shares of common stock, additional securities were issued to
     each of the stockholders who purchased shares, in an amount proportional to
     their participation in the rights offering. The additional securities
     consisted of 2,000,000 shares of Series A convertible preferred stock,
     convertible into 20,000,000 shares of common stock upon certain
     circumstances. The Company did not receive any additional consideration for
     such Series A convertible preferred stock beyond such consideration
     received for the shares of common stock purchased in the rights offering.

          VOTING:
               The holders of Series A preferred stock shall vote with the
          holders of common stock on all matters submitted to the stockholders.
          Each share of Series A preferred stock shall entitle the holder
          thereof to a number of votes equal to the number of shares of common
          stock into which it is then convertible.

          DIVIDENDS:
               No dividends will be paid on the Series A preferred stock.

          VOLUNTARY CONVERSION:
               Each share of Series A preferred stock will be convertible into
          the Company's common stock, beginning one year after issuance, at the
          option of the holder. The number of shares calculated will be ten
          common shares for one preferred share held at the time of conversion.

          MANDATORY CONVERSION:
               The Series A preferred stock shall automatically convert into
          shares of the Company's common stock (at a ten for one basis) at the
          conversion price then in effect upon the earlier to occur of: (1) the
          date when the average trading price of the Company's common stock for
          15 consecutive trading days is equal to or greater than CHF 6.00; (2)
          the consummation by the Company of a public offering of equity
          securities with proceeds in excess of CHF 40,000,000 million or
          equivalent in USD; (3) change of control; or (4) two years from the
          date of issuance.

          LIQUIDATION:
               Upon any liquidation, dissolution or winding up of the Company,
          each holder of Series A preferred stock shall be entitled to receive,
          prior to any distribution with respect to the Company's common stock,
          an amount equal to: all cash available for distribution to all classes
          of stockholders, calculated as if the Series A preferred stock had
          been converted into common stock immediately prior to the liquidation,
          up to but not to exceed CHF 25.00 per share of such common stock.
          Seven percent of the total amount of cash available for distribution
          to all classes of stockholders shall, however, be distributed to the
          Company's management (pursuant to a formulation to be determined by
          the board of the Company) prior to the calculation of the liquidation
          preference in favor of the Series A preferred stockholders.

(b) NOTES RECEIVABLE FROM STOCKHOLDERS

          As part of the October 2001 rights offering, the Company sold shares
     of its common stock to Venturetec, Inc. and Pine, Inc. Peter Friedli, one
     of the Company's stockholders and directors, serves as the investment
     advisor to both Venturetec and Pine, and also serves as President of
     Venturetec and its parent corporation, New Venturetec AG. Venturetec and
     Pine each delivered to the Company a promissory note dated as of October
     19, 2001, with a maturity date of March 31, 2002, as consideration for the
     subscription price for the shares of common stock for which each company
     subscribed under the rights offering. Venturetec's note (which was only
     partial consideration for the purchase of the shares; the remainder was
     paid in cash) was in the principal amount of CHF 8,500,000 (approximately
     $5,230,769) and Pine's note was in the principal amount of CHF 8,687,530
     (approximately $5,346,172).

        In January 2002, Pine, Venturetec and InVenture, reallocated their share
    purchases and/or related promissory notes associated with the rights
    offering. Please see "Note 15 -- Subsequent Events" section on page F-22.

                                       F-18
<Page>

(c) STOCK INCENTIVE AND OPTION PLAN

          The Company's Amended and Restated Stock Incentive and Option Plan
     provides for the grant of options, restricted stock and other stock-based
     compensation to its employees, consultants and advisors. As of December 31,
     2001, there were 5,000,000 shares of common stock reserved for issuance and
     there were 3,162,330 options to purchase shares of common stock outstanding
     at a weighted average exercise price of $5.34 per share. Options granted
     under the plan typically vest over time, usually ratably over four years
     from the date of grant, with some subject to acceleration in the event of a
     change of control of e-centives. Typically, an option granted under the
     plan expires ten years after it is granted. In addition, the plan allows
     for grants of options the vesting of which is tied to the employee's
     performance. As of the December 31, 2001, the board of directors has issued
     only stock options under the plan. The plan provides for the granting of
     both incentive stock options within the meaning of Section 422 of the
     Internal Revenue Code of 1986 and non-statutory options.

          During 1997 and 1998, 100,018 performance-based option grants were
     made to certain key employees at an exercise price of $2.50. During 1999,
     160,400 additional performance-based option grants were made to certain key
     employees, with an exercise price of $2.50 for 50,000 of these options and
     $3.50 for the remaining 110,400 options. No performance-based option grants
     were made in 2000, while 25,000 performance-based options priced at $3.40
     were granted in 2001. Compensation expense related to these options of
     $733,137 and ($302,304) was recorded in 2000 and 2001, respectively. The
     credit for 2001 reflects the reversal of historical stock-based
     compensation expense, related to terminated employees, that was recorded in
     excess of the expense pertaining to their options vested through
     termination.

          The Company has elected to follow APB 25 and related interpretations
     in accounting for its employee stock options rather than the alternative
     fair value accounting method allowed by FAS 123. APB 25 provides that
     compensation expense relative to the Company's employee stock options is
     measured based upon the intrinsic value of the stock option. FAS 123
     requires companies that continue to follow APB 25 to provide pro forma
     disclosure of the impact of applying the fair value method of FAS 123.

          In 1999, 2000 and 2001, the Company recorded equity-based compensation
     expense of $372,224, $980,512 and $1,165,423, respectively relating to
     options to purchase 960,800 shares granted in 1999 and 1,517,564 shares
     granted in 2000 equal to the difference between the fair value of the
     Company's common stock on the grant date and the exercise price of the
     options. Additionally, the Company expects to incur approximately $1.6
     million of compensation expense during the period 2002 through 2004
     relating to these options. The expense will be recognized ratably over the
     vesting period of the options, which is generally 4 years.

          Had compensation expense for the Company's stock option plan been
     determined based upon the fair value methodology under FAS 123, the
     Company's net loss would have increased to these pro forma amounts:

<Table>
<Caption>


                                                                          YEAR ENDED DECEMBER 31,
                                                                -------------------------------------------
                                                                     1999           2000          2001
                                                                -------------  -------------  -------------
<S>                                                             <C>           <C>             <C>
                  Net loss applicable to common stockholders:
                    As reported..........................       $(16,552,831)  $(30,497,113)  $(45,003,465)
                    Pro forma............................        (16,682,893)   (31,675,819)   (46,577,415)
                  Basic and diluted net loss per share:
                    As reported..........................       $      (3.40) $       (4.09) $       (2.68)
                    Pro forma............................              (3.43)         (4.25)         (2.77)
</Table>


          The fair value of these options was estimated at the date of grant
     using the Black-Scholes option pricing model on the date of grant using the
     following assumptions:

<Table>
<Caption>

                                                                          YEAR ENDED
                                                                         DECEMBER 31,
                                                                    --------------------
                                                                     1999   2000    2001
                                                                    ------ ------  -----
                                          <S>                         <C>    <C>     <C>
                                          Risk-free interest rates    6.4%   5.0%    5.0%
                                          Expected lives (in
                                             years).............      5.0    5.0     5.0
                                          Dividend yield........      --     --      --
                                          Expected volatility (1)     --    100%    100%

</Table>

----------
     (1) 0% expected volatility was used for all options granted prior to the
initial public offering on October 3, 2000.

          The weighted-average fair value of stock options granted during 1999,
     2000 and 2001 was $4.46, $5.78 and $3.02, respectively.

          A summary of the Company's stock option activity and weighted average
     exercise price is as follows:

                                       F-19
<Page>
<Table>
<Caption>

                                                                                   WEIGHTED
                                                                       NUMBER OF   AVERAGE
                                                                         SHARES    EXERCISE
                                                                                     PRICE
                                                                       ---------   --------
                                       <S>                             <C>         <C>
                                       Balance, January 1, 1999..        647,236   $  2.37
                                       Granted...................      1,183,300      2.95
                                       Exercised.................        (14,375)     1.72
                                       Canceled..................        (65,125)     2.33
                                                                       ---------
                                       Balance, December 31, 1999      1,751,036      2.77
                                       Granted...................      1,570,064      8.28
                                       Exercised.................        (65,625)     2.11
                                       Canceled..................       (440,625)     2.98
                                                                      ----------
                                       Balance, December 31, 2000      2,814,850      5.82
                                       Granted...................      1,596,250      3.93
                                       Exercised.................        (11,875)     2.37
                                       Canceled..................     (1,236,895)     4.66
                                                                      ----------
                                       Balance, December 31, 2001      3,162,330   $  5.34
                                                                      ==========
</Table>

          The following table summarizes information concerning currently
     outstanding and exercisable options at December 31, 2001:
<Table>
<Caption>


                                                              OPTIONS OUTSTANDING
                                                          -------------------------
                                                                          WEIGHTED-
                                                             NUMBER        AVERAGE      OPTIONS
                                         RANGE OF          OUTSTANDING    REMAINING   EXERCISABLE
                                         EXERCISE              AT        CONTRACTUAL      AT
                                          PRICES            12/31/01         LIFE       12/31/01
                                         --------------     ----------   -----------  ----------
                                         <S>                <C>           <C>         <C>
                                         $ 0.25 - $0.65      472,000     9.9 years        3,750
                                         $ 1.27 - $1.88       21,000     9.5 years            0
                                         $ 2.50              603,486     7.0 years      505,813
                                         $ 3.40 - $3.77      451,094     8.6 years      197,688
                                         $ 4.18 - $4.87       16,000     9.3 years            0
                                         $ 5.15 - $5.55      682,750     9.2 years            0
                                         $ 6.11 - $6.72      326,500     8.5 years      100,875
                                         $ 8.02 - $8.75       12,000     9.0 years        2,125
                                         $ 9.37               12,000     9.0 years        3,000
                                         $10.70                5,000     8.8 years        1,250
                                         $11.01 - $11.21       7,500     8.8 years        1,875
                                         $12.18 - $12.46       3,000     8.8 years          750
                                         $13.00              550,000     8.5 years      350,000
                                                           ---------                  ---------
                                                           3,162,330     8.6 years    1,167,126
                                                           =========                  =========
</Table>


(d) WARRANTS

          The Company has issued warrants to purchase common shares in
     connection with several equity issuances: the 1997 grant was in connection
     with the issuance of Series A convertible preferred stock, the 1999 grant
     was in connection with the issuance of Series B convertible preferred
     stock, and the 2000 grant was in connection with the issuance of Series C
     convertible redeemable preferred stock. The warrants granted in 2001 were
     in conjunction with the acquisition of the Commerce Division and
     BrightStreet.com, with rights to purchase common shares of 1,860,577 and
     750,000, respectively.

          The warrant issued to Inktomi Corporation as part of the Commerce
     Division acquisition is a contingent performance-based warrant that Inktomi
     is eligible to exercise based upon the achievement of revenue targets for
     the Commerce Division at the end of 12 months following the closing of the
     acquisition. Based upon the revenue through December 31, 2001, the Company
     does not anticipate that Inktomi will be eligible to exercise this warrant.

          The warrants issued in conjunction with the BrightStreet.com
     acquisition consist of a guaranteed warrant to purchase 500,000 shares of
     the Company's common stock and a contingent performance-based warrant to
     purchase up to 250,000 shares of the Company's common stock. The
     performance-based warrant is based upon the achievement of a revenue target
     of $7 million for BrightStreet.com during the 18 months following the
     closing of the acquisition.

          The following table sets forth the warrants outstanding, their
     underlying common shares and their weighted average exercise price per
     share:

<Table>
<Caption>


                                                                        SHARES    PRICE
                                                                       ---------  -------
                                      <S>                             <C>        <C>
                                      Balance, January 1, 1999..         230,000  $ 3.35
                                      Granted...................         250,000    6.00
                                      Exercised.................              --      --
                                                                       ---------
                                      Balance, December 31, 1999         480,000    4.73
                                      Granted...................         119,485   10.20
                                      Exercised.................             --
                                                                       ---------      --
                                      Balance, December 31, 2000         599,485    5.82
                                      Granted...................       2,610,577    4.27
                                      Exercised.................             --       --
                                                                       ---------
                                      Balance, December 31, 2001       3,210,062  $ 4.56
                                                                       =========
</Table>

                                       F-20
<Page>

          All warrants granted through December 31, 1999 expire on December 31,
     2003, the warrant granted during the year ended December 31, 2000 expires
     on February 18, 2005, the warrant granted to Inktomi expires on January 18,
     2006 and the two warrants granted to BrightStreet.com expire on December 3,
     2005.

(e) AUTHORIZED CAPITAL

          On November 7, 2001, the Company's board of directors unanimously
     approved, subject to stockholder approval, (i) an amendment of the
     Company's Restated Certificate of Incorporation, as amended ("Restated
     Certificate of Incorporation"), to increase the total authorized capital
     stock from 50,000,000 shares to 130,000,000 shares in connection with an
     increase in the authorized common stock from 40,000,000 shares to
     120,000,000 shares (this amendment will not effect a change to the
     10,000,000 shares of authorized preferred stock); and (ii) an amendment to
     the Company's Amended and Restated Stock Option and Incentive Plan, as
     amended (the "Stock Option Plan"), to increase the maximum number of shares
     available for issuance from 5,000,000 to 21,000,000. On November 30, 2001,
     holders of a majority of the outstanding shares of the Company's common
     stock executed a written stockholder consent approving the amendment of the
     Company's Restated Certificate of Incorporation and the amendment to the
     Company's Stock Option Plan. Under applicable federal securities laws, the
     amendments is not effective until at least 20 days after this information
     statement is sent or given to the Company's stockholders. This information
     statement was to be mailed to stockholders on or about December 31, 2001.

(12) RELATED PARTY TRANSACTION

     In July 1996, the Company entered into a consulting agreement with Friedli
Corporate Finance, Inc. ("FCF"). Peter Friedli, President of FCF, is related to
the Company through his significant direct and indirect ownership of common
stock, options and warrants and is one of the Company's directors. Under the
agreement, FCF provides services to the Company in the form of consultation,
advice and other assistance upon the Company's request. Such services may
include, but are not limited to, (a) providing general business, financial and
investment advice to the Company during the term of the agreement, and (b)
serving as liaison between FCF clients/investors and the Company by
disseminating information to such investors on behalf of the Company. Consulting
expense under the FCF agreement was approximately $87,000, $63,000 and $63,000
for the years ended December 31, 1999, 2000 and 2001, respectively. In addition,
the Company engaged FCF to support the Company in connection with the October
2001 rights offering. In association with this support, the Company agreed to
extend the consulting agreement with FCF for 3 years and to reimburse FCF up to
$100,000 in expenses for such rights offering support.

     During 1999, the Company issued a convertible long-term debt instrument for
$1,000,000 to an investment group controlled by FCF. This instrument was
converted into common stock upon consummation of the IPO in October 2000.

     As part of the Company's October 2001 rights offering, the Company sold
4,343,765 shares of its common stock to Pine, Inc., 4,950,000 shares of its
common stock to InVenture, Inc., 5,500,000 shares of its common stock to
Venturetec, Inc., and 2,050,000 shares of its common stock to Peter Friedli.
Peter Friedli serves as the President of Pine, InVenture, Venturetec and its
parent corporation, New Venturetec AG. Venturetec and Pine each delivered to the
Company a promissory note dated as of October 19, 2001, with maturity dates of
March 31, 2002, in the principal amount of CHF 8,500,000 ($5,230,769) and CHF
8,687,530 ($5,346,172), respectively, as consideration for certain or all, as
the case may be, of the subscription price for shares of the Company's common
stock for which they subscribed under the rights offering. Subsequent to
December 31, 2001, Pine, Venturetec and InVenture, all companies under common
control, reallocated their share purchases and/or related promissory notes. See
"Note 15 -- Subsequent Events" on page F-22.

     Mr. Friedli also has relationships with several other of the Company's
other stockholders. He serves as the investment advisor to Joyce, Ltd.,
Savetech, Inc., Spring Technology Corp. and USVentech, Inc.

(13) BASIC AND DILUTED NET LOSS PER SHARE

     The Company computes net income (loss) per share in accordance FAS 128,
EARNINGS PER SHARE, which requires certain disclosures relating to the
calculation of earnings (loss) per common share. The following represents a
reconciliation of the numerators and denominators of the basic and diluted
earnings per common share computations for net income (loss).


                                       F-21
<Page>

<Table>
<Caption>


                                                                            YEAR ENDED DECEMBER 31,
                                                                  ----------------------------------------
                                                                       1999          2000           2001
                                                                  ------------- -------------  ------------
                       <S>                                        <C>           <C>            <C>
                       Net loss...............................    $(16,170,331) $(29,945,340)  $(45,003,465)
                       Preferred stock dividend requirements..        (382,500)     (551,773)            --
                                                                  ------------  ------------   ------------
                       Net loss applicable to common
                         stockholders.........................    $(16,552,831) $(30,497,113)  $(45,003,465)
                                                                  ============  ============   ============
                       Weighted average shares of common stock
                         outstanding..........................       4,869,601     7,460,272     16,810,366
                                                                  ============  ============   ============
                       Basic and diluted net loss per common
                         share................................    $     (3.40)  $     (4.09)   $     (2.68)
                                                                  ============= =============  =============

</Table>

     Diluted net loss applicable to common stockholders for the year ended
December 31, 1999 excludes convertible preferred stock, stock options, and
warrants due to their antidilutive effect and diluted net loss applicable to
common stockholders for the years ended December 31, 2000 and 2001 excludes
stock options and warrants due to their antidilutive effect.

(14) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following tables contain unaudited Statement of Operations information
for each quarter of 1999, 2000 and 2001. The Company believes that the following
information reflects all normal recurring adjustments necessary for a fair
presentation of the information for the periods presented. The operating results
for any quarter are not necessarily indicative of results for any future period.

<Table>
<Caption>


                                                                     1999
                                           ---------------------------------------------------------
                                             1ST QUARTER    2ND QUARTER   3RD QUARTER    4TH QUARTER
                                           -------------- ------------- -------------- -------------
<S>                                        <C>            <C>           <C>            <C>
Revenues...............................     $        --    $        99   $   143,963    $   596,243
Operating loss.........................      (1,850,320)    (3,748,920)   (4,320,993)    (6,551,574)
Loss before income tax.................      (1,746,041)    (3,644,176)   (4,250,886)    (6,529,228)
Net loss applicable to common
   stockholders........................      (1,841,666)    (3,739,801)   (4,346,511)    (6,624,853)
Basic and diluted net loss per common
   share...............................     $     (0.38)   $     (0.77)  $     (0.89)   $     (1.42)

</Table>
<Table>
<Caption>

                                                                     2000
                                           ---------------------------------------------------------
                                             1ST QUARTER    2ND QUARTER   3RD QUARTER    4TH QUARTER
                                           -------------- ------------- -------------- -------------
<S>                                        <C>            <C>           <C>            <C>
Revenues...............................     $ 1,042,150    $ 2,161,416   $ 2,424,909    $ 4,601,560
Operating loss.........................      (6,562,743)    (8,330,604)   (8,994,421)    (6,800,884)
Loss before income tax.................      (6,445,446)    (8,183,997)   (8,913,903)    (6,401,994)
Net loss applicable to common
   stockholders........................      (6,594,051)    (8,385,581)   (9,115,487)    (6,401,994)
Basic and diluted net loss per common
   share...............................     $     (1.35)   $     (1.72)  $     (1.81)   $     (0.43)

</Table>
<Table>
<Caption>


                                                                     2001
                                           ---------------------------------------------------------
                                             1ST QUARTER    2ND QUARTER   3RD QUARTER    4TH QUARTER
                                           -------------- ------------- -------------- -------------
<S>                                        <C>            <C>           <C>            <C>
Revenues...............................     $ 1,802,575   $  1,403,293   $   735,086   $  1,112,670
Operating loss.........................      (7,786,645)   (11,158,778)   (8,065,224)   (18,577,669)
Loss before income tax.................      (7,456,198)   (10,997,034)   (8,004,793)   (18,525,964)
Net loss applicable to common                (7,456,198)   (10,997,034)   (8,004,793)   (18,545,440)
stockholders...........................
Basic and diluted net loss per common
   share...............................     $     (0.49)  $      (0.63)  $     (0.46)  $      (1.07)

</Table>

(15) SUBSEQUENT EVENTS

(a) NOTES RECEIVABLE FROM STOCKHOLDERS

          On January 22, 2002, Pine, Venturetec and InVenture, all companies
     under common control, reallocated their share purchases and/or related
     promissory notes associated with the October 2001 rights offering. The CHF
     2,500,000 (approximately $1,538,462) in cash originally indicated as
     originating from Venturetec has been reallocated as follows:

          o    InVenture purchased from Pine in a private sale 1,041,667 of the
               shares of common stock originally purchased by Pine pursuant to
               the rights offering for CHF 2,083,334, at CHF 2.00 a share. As
               part of this transaction, Pine was credited with paying us CHF
               2,083,334 (approximately $1,282,052) and delivered to the Company
               an amended and restated secured promissory note dated as of
               October 19, 2001, in the principal amount of CHF 6,604,196
               (approximately $4,064,121), with 2% interest, with an original
               March 31, 2002 maturity date that was subsequently extended to
               May 15, 2002. The Company simultaneously returned Pine's original
               CHF 8,687,530 promissory note.


                                       F-22
<Page>


          o    Venturetec paid the Company CHF 416,666 (approximately $256,410)
               and delivered to the Company an amended and restated secured
               promissory note dated as of October 19, 2001, in the principal
               amount of CHF 10,583,334 (approximately $6,512,821), with 2%
               interest, with an original March 31, 2002 maturity date that was
               subsequently extended to June 30, 2002. This CHF 10,583,334
               reflects an increase in Venturetec's secured promissory note to
               CHF 11,000,000 (approximately $6,769,231), reflecting
               Venturetec's original subscription price for the shares of the
               Company's common stock for which it subscribed under the rights
               offering minus the CHF 416,666 payment. The Company
               simultaneously returned Venturetec's original CHF 8,500,000
               promissory note.


(b) POTENTIAL ACQUISITION

               The Company is currently in negotiations to acquire certain
          assets and liabilities of a U.S. based internet company in
          exchange for e-centives' stock. The Company has executed an Asset
          Purchase  Agreement regarding the proposed acquisition, with an
          expected settlement date of April 30, 2002.


                                      F-23
<Page>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
e-centives, Inc.:

     Under date of February 1, 2002, except as to Note 15(a), of the
consolidated financial statements, which is as of April 16, 2002, we reported
on the consolidated balance sheets of e-centives, Inc. and subsidiary as of
December 31, 2000 and 2001 and the related consolidated statements of
operations, stockholders' equity and comprehensive loss and cash flows for
each of the years in the three-year period ended December 31, 2001 which are
included in this Annual Report on Form 10-K. In connection with our audits
of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this consolidated financial
statement schedule based on our audits.

     In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

    As discussed in Note 2 to the consolidated financial statements, effective
July 1, 2001, the Company adopted the provisions of Statement of Financial
Accounting Standards No. ("FAS") 141, "Business Combinations," and certain
provisions of FAS 142, "Goodwill and Other Intangible Assets," as required for
goodwill and intangible assets resulting from business combinations consummated
after June 30, 2001.


/s/ KPMG LLP

McLean, Virginia
February 1, 2002, except as to Note 15(a), of
the consolidated financial statements, which
is as of April 16, 2002


<Page>



                                                                     SCHEDULE II

<Table>
<Caption>
                                                   E-CENTIVES, INC.

                                    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                     YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

           COLUMN A                       COLUMN B                 COLUMN C                         COLUMN D        COLUMN E
-----------------------------           -----------  --------------------------------------        ----------     -----------
                                                       ADDITIONS                                                   BALANCE
                                        BALANCE AT    CHARGED TO                    CHARGED         AMOUNTS         AT END
                                         BEGINNING     COSTS AND                   TO OTHER         WRITTEN           OF
CLASSIFICATION                           OF PERIOD     EXPENSES      CASH  PAID    ACCOUNTS            OFF          PERIOD
--------------                         -----------  ------------     ----------    --------        ----------    ------------
<S>                                   <C>            <C>            <C>           <C>             <C>           <C>
Year ended December 31, 1999:
   Allowance for doubtful accounts     $      --     $       --      $     --     $   27,125 (1)   $     --     $     27,125
                                       ============  ============    ==========   ==========      ===========     ============
   Valuation allowance on deferred
     tax asset                         $ 2,936,382   $  6,276,863    $     --     $     --         $     --     $  9,213,245
                                       ============  ============    ==========   ==========      ===========     ============
Year ended December 31, 2000:
   Allowance for doubtful accounts     $     27,125  $    489,973    $     --     $                $  265,082    $    252,016
                                       ============  ============    ==========   ==========      ===========     ============
   Valuation allowance on deferred
     tax asset                         $  9,213,245  $ 10,844,445    $     --     $     --         $     --      $ 20,057,690
                                       ============  ============    ==========   ==========      ===========     ============
Year ended December 31, 2001:
   Allowance for doubtful accounts     $    252,016  $    493,168    $     --     $ (210,000)(2)  $   387,057     $    148,127
                                       ============  ============    ==========   ==========      ===========     ============
   Valuation allowance on deferred
     tax asset                         $ 20,057,690  $ 15,977,033    $     --      $    --        $     --        $ 36,034,723
                                       ============  ============    ==========   ==========      ===========     ============
   Accrued restructuring charge        $       --    $  9,406,726    $ (343,776)   $    --        $     --        $  9,062,950
                                       ============  ============    ==========   ==========      ===========     ============
</Table>

----------

(1) deferred revenue
(2) accrued expenses


<Page>



                                INDEX TO EXHIBITS

         EXHIBIT
         NUMBER                         DESCRIPTION
         --------  ---------------------------------------------------------

            2.1     Asset Purchase Agreement, dated January 18, 2001, by and
                    between e-centives, Inc. and Inktomi Corporation
                    (incorporated herein by reference to Exhibit 2.1 to the
                    Current Report on Form 8-K filed by e-centives on April 11,
                    2001)
            2.2     Asset Purchase Agreement, dated December 3, 2001, by and
                    between e-centives, Inc. and BrightStreet.com, Inc.
                    (incorporated herein by reference to Exhibit 2.1 to the
                    Current Report on Form 8-K filed by e-centives on December
                    18, 2001)
            2.3     Amended and Restated Asset Purchase Agreement, dated
                    December 26, 2001, by and between e-centives, Inc. and
                    BrightStreet.com, Inc. (incorporated herein by reference to
                    Exhibit 2.1 to the Amended Current Report on Form 8-K/A
                    filed by e-centives on January 3, 2002)
            3.1(1)  Restated Certificate of Incorporation of e-centives, Inc.
            3.3(1)  Amended and Restated Bylaws of e-centives, Inc.
            4.1(1)  Specimen certificate representing the Common Stock.
            4.2(1)  Registration Rights Agreement, dated February 18, 2000, by
                    and among e-centives, Inc. and certain stockholders named
                    therein.
            4.3(2)  Common Stock Purchase Warrant, dated as of March 28, 2001,
                    between e-centives, Inc. and Inktomi Corporation.
            4.4(2)  Warrant to Purchase Common Stock, dated as of December 3,
                    2001, between e-centives, Inc. and BrightStreet.com, Inc.
            4.5(2)  Warrant to Purchase 500,000 Shares of Common Stock, dated
                    as of December 3, 2001, between e-centives, Inc. and
                    BrightStreet.com, Inc.
            10.1(1) 1996 Stock Incentive Plan.
            10.2(1) e-centives-- Excite@Home Co-Branding Agreement, dated
                    February 16, 2000, by and between e-centives, Inc. and At
                    Home Corporation.
            10.3(1) Technology and Marketing Agreement, dated May 13, 1999, by
                    and between e-centives, Inc. and ZDNet, as amended.
            10.4(1) Internet Data Center Services Agreement, dated March 23,
                    1998, by and between e-centives, Inc. and Exodus
                    Communications, Inc.
            10.5(1) Employment Agreement for Kamran Amjadi, dated May 8, 1998,
                    as amended.
            10.6(1) Employment Agreement for Mehrdad Akhavan, dated May 8, 1998,
                    as amended.
            10.7(1) Lease Agreement, dated September 23, 1997, by and between
                    e-centives, Inc. and Democracy Associates Limited
                    Partnership, as amended and modified on June 29, 2000.
            10.8    Amended and Restated Stock Option and Incentive Plan
                    (incorporated herein by reference to Exhibit 99.2 to the
                    e-centives' Registration Statement on Form S-8 (Registration
                    No. 333-58244))
            10.9    Technology License Agreement, dated March 28, 20001, between
                    e-centives and Inktomi Corporation (incorporated herein by
                    reference to Exhibit 10.1 to the Current Report on Form 8-K
                    filed by e-centives on April 11, 2001)
            10.10(2)Sublease Agreement, dated April 1, 2001, by and between
                    e-centives, Inc. and Inktomi Corporation, as amended on
                    August 28, 2001.
            10.11(2)e-centives Marketplace Agreement, dated June 27, 2001, by
                    and between e-centives, Inc. and Vizzavi Europe Limited.
            10.12(2)Modification, Assignment and Assumption Agreement, dated
                    November 1, 2001, by and among e-centives, Inc.,
                    BrightStreet.com, Inc. and Pentech Financial Services, Inc.
            10.13(2)Internet Services Master Services Agreement, effective
                    as of December 14, 2001, between e-centives, Inc. and
                    SiteSmith, Inc.
            23.1(2) Consent of KPMG LLP.

----------

(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-42574).
(2) Filed herewith.