It is believed that online personals fulfill significant needs for America’s 95.7 million single adults who are looking to meet a companion or date. Traditional methods such as printed personals advertisements, offline dating services and public gathering places often do not meet the needs of time-constrained single people. Online personals services facilitate interaction between singles by allowing them to screen and communicate with a large number of potential companions. With features such as detailed personal profiles, email and instant messaging, this medium allows users to communicate with other singles at their convenience and affords them the ability to meet multiple people in a safe and secure online setting.

According to the Pew Internet & American Life Project, a nonprofit research organization, nearly 63% of the American adult population is now online, and 60 million American adults have high-speed connections at home, up from just 5 million in 2000. On an average day in 2004, 70 million American adults logged onto the Internet, which represents a 37% increase from the 52 million adults who were online on an average day in 2000.

It is believed broadband users have a higher propensity to conduct e-commerce transactions, including the purchase of content and services online, as these Internet connections provide faster, more convenient transaction experiences. According to IDC, worldwide consumer e-commerce spending is expected to grow from $240 billion in 2003 to $700 billion by 2007, implying a compound annual growth rate of 30%. Online personals services continue to gain mainstream acceptance. In 2003, 21% of all United States Internet users browsed online personals and 13% posted their own profiles, according to JupiterResearch. In 2003, the Personals/ Dating category held its position as the largest paid content category, with a market size of $450 million, according to the Online Publishers Association.

The Company provides all paying subscribers with private message centers, dedicated exclusively to communications with other paying subscribers. These personal on-site email boxes offer features such as customizable folders for storing correspondence, the ability to know when sent messages were read, as well as block and ignore functions, which afford a paying subscriber the ability to control future messages from specific paying subscribers. Among the most popular features on the Company’s Web sites, “Hot Lists” enable paying subscribers to see who’s interested in them and to save those favorite members that they are interested in. Paying subscribers can utilize the Company’s exclusive chat rooms to mix and mingle in real-time, building a sense of community through group discussions. Additional features enable users to add customized graphics such as emoticons to their conversations. Members can send pre-packaged opening remarks, referred to on the Web sites as “flirts” and “teases,” to other members or paying subscribers. Paying subscribers can communicate with another paying subscriber or member on a real-time basis. Audio/video functionality is offered on some of the Company’s Web sites. The Company’s patented Click! feature connects members who think they would be compatible with each other.

As a complement to its online services, the Company offers travel and other promotional events which allow individuals to meet in a more personal environment. The Company’s travel and events are typically cruises, dinners or other mixer events designed to facilitate social interaction.

Direct marketing expenses incresed to $31.2 million for the year ended December 31, 2004 from $18.4 for the year ended December 31, 2003.

Operating expenses increased to approximately $45.5 million for the year ended December 31, 2004 from approximately $29.6 million for the year ended December 31, 2003

Customer service expenses increased to $3.4 million for the year ended December 31, 2004 compared to $2.5 million for the year ended December 31, 2003.

Product development expenses increased 109.9%, to $2.0 million for the year ended December 31, 2004 compared to $959,000 for the year ended December 31, 2003.