The participatory sports and activities market consists of consumers who actively engage in sports, hobbies, recreational activities and classes. Based on an April 2004 study by the Leisure Intelligence Group, which encompassed the 12 months ended March 2004, 62% of American households registered for a community activity requiring a fee. The study reported that Americans paid fees for over 110 million registrations for individual and team-based sports leagues and events, over 115 million registrations for parks and recreation activities and memberships, over 20 million registrations for camps and over 115 million registrations for continuing education classes. The Leisure Intelligence Group study estimates total registration fees associated with these sports and activities to be over $33 billion. Currently, most of these organized activities use paper-based processing for registration, data collection and data management. The study also estimates that less than 2% of registration fees collected for participatory sports and activities are currently collected through online transaction processing.

he walk-up and mail-based paper processing model can be costly, inefficient and prone to errors. For a participant, event registration involves finding and completing a paper registration form and mailing it to the event or activity organizer or traveling to the registration office and completing a registration form in person. Growing recognition of the benefits associated with online systems is driving organizer and participant demand and increasing the use of online registration. The April 2004 Leisure Intelligence Group study estimates that less than 2% of registration fees associated with participatory sports and activities were collected using online services in 2003. The vast majority of registrations are still executed using either walk-up or mail-based paper processing methods. Although the online market is underdeveloped, participatory sports and activities organizers are demonstrating an increasing desire to use Internet-based services to streamline registration and enhance data management. Additionally, increasing participant acceptance and demand is expected to further accelerate this trend. In a 2002 National Sports Network survey, 80% of all athletes surveyed said they would use online registration, if offered, to register for their next sports activity. General acceptance among consumers of online registration has been demonstrated across other verticals. For example, recent growth in online ticket sales for the fan-based sports and entertainment industry worldwide reached approximately 50% in 2003, according to InterActiveCorp.

The Company’s application services offerings help the customers to reduce administration and marketing costs and to improve operating efficiency. The Company markets its services under three distinct brands: active.com for individual sports, RecWare Safari for park and recreation departments, and eteamz for team sports. The Company’s suite of application services provides organizers the ability to comprehensively manage their events and activities from pre-registration to post-event data usage over its online and offline automated systems. Examples of the Company’s functionality include: registration (event and activity registration, facility reservation, membership and recreation pass management, fundraising, day camp registration, and touch screen point of sale), administration and data management (financial reporting, participant management, roster management, tournament builder, and league scheduling), and website management and communication (website management, website self-publishing tools, messagecast, e-mail communication tools, central marketing, and organization online network)

The Company’s marketing services group provides the customers with promotional marketing services that target active lifestyle consumers. The Company specializes in integrated programs that include online and field marketing services. The Company sells online advertising on its websites. The Company creates custom online advertising, including online banners and buttons, and targeted e-mail newsletter promotions designed to reach active lifestyle consumers. The Company conducts product and market research for its customers, including online surveys, field research and focus group recruiting. The Company works with consumer brand companies to create custom opportunities to promote their products through sponsorships of events or activities. The Company seeks to enable consumer brand companies to reach their desired target demographic and help create or strengthen their desired brand image. The Company coordinates and implements targeted product sampling initiatives for consumer brand companies wishing to reach active lifestyle consumers. The Company’s product sampling initiatives are designed to reach active lifestyle consumers at the most opportune times, such as providing fluid replenishment drinks on-course at a marathon. The Company creates customized events and activities such as soccer clinics, coaching programs and skills tests to introduce its customers’ products to active lifestyle consumers. The Company has enlisted over 1,000 locally recognized amateur athletes to catalyze word-of-mouth marketing at specific events and activities. The Company provides its customers who seek to leverage their traditional mass market advertising campaigns with specific initiatives to reach active lifestyle consumers.

Applications services revenues grew from $6.2 million for the year ended December 31, 2002 to $9.5 million for the year ended December 31, 2003, an increase of $3.3 million, or 54.7%.

Marketing services revenues grew from $2.3 million for the year ended December 31, 2002 to $5.6 million for the year ended December 31, 2003, an increase of $3.3 million, or 147.3%.

Application services cost of revenues increased from $1.3 million for the year ended December 31, 2002 to $2.0 million for the year ended December 31, 2003, an increase of $0.7 million, or 60.2%.

Marketing services cost of revenues increased from $0.2 million for the year ended December 31, 2002 to $1.1 million for the year ended December 31, 2003, an increase of $0.9 million, or 527.8%.