Based on data from the 2004 Public Relations Client Survey prepared by Thomas L. Harris/ Impulse Research, the average PR budget for responding organizations in 2004 was approximately $3.1 million. This budget includes spending for both internal and outsourced PR functions, and includes corporate communications, product PR, online communications, public affairs and government relations. Based on the Thomas L. Harris Survey, it is estimated that the annual PR budget for these organizations increased at a compounded rate of 15.5% per year from 2001 to 2004. Based on the Survey’s breakdown of average PR budgets by categories of organizations’ total annual revenues, and the number of organizations in each of these categories as reported by Dun and Bradstreet, it is estimated that the aggregate annual PR budgets for organizations with annual revenues of at least $10 million were approximately $110 billion in 2004. In addition, the U.S. Department of Labor Statistics projects that the employment of public relations specialists will increase faster than the average for all occupations through 2012.

The characteristics of the PR market make it well-suited for the on-demand software business model. As news distribution and communication services continue to move from manual, paper-based systems to automated digital services, the Internet and the on-demand model provide an efficient and collaborative platform for PR professionals to access, manage and share information and resources. The simple user interface and rapid deployment of web-based software make it ideally suited for users with little or no technology background. On-demand software provides a dedicated, modern and sophisticated technology infrastructure to PR departments that would otherwise typically receive limited internal IT resources. Finally, in contrast to sensitive customer or financial data, organizations are generally comfortable with PR content residing on an external hosted platform.

As part of its solution, the Company provides an extensive database of over 800,000 records, including journalists, analysts, public officials, media outlets and publicity opportunities. The Company’s information database is integrated with its suite of on-demand modules that together address the communications life-cycle, from identifying key contacts, to distributing information, to closing the loop with digitized feedback and management analytics.

Currently the Company offers its software suite in three pre-packaged editions. The Company’s public relations professional edition is designed primarily to meet the needs of small to mid-sized organizations and provides contact management, news management and reporting. The Company’s public relations enterprise edition provides increased flexibility and functionality typically required by large organizations. Enterprise edition includes all of the functionality of the professional edition, along with project management, collateral management, expanded reporting and configuration capabilities. The Company’s government relations edition is designed to meet an organization’s government relations needs, including communications with public officials and grassroots advocates, compliance reporting and issues and legislation management.

The Company was an early pioneer in hosted, multi-tenant, on-demand software, launching its first version in 1999. The Company’s on-demand software is built on a single code base that leverages a highly scalable, multi-tenant application written in Visual Basic and C# for the .NET framework. The Company uses commercially available hardware and a combination of proprietary and commercially available software, including Microsoft SQL Server and Microsoft Windows.

The Company’s customer support group is responsible for new client implementations, training and general help desk services. Support services are available to customers on-site, by telephone, via email and via live chat over the Internet. The Company also offers basic and advanced training classes either on-site or via the Internet through live or pre-recorded web-based classes. The Company has a comprehensive technical support program to assist its customers in the use of its on-demand software and to identify, analyze and solve any problems or issues. The support program includes on-site, email and telephone support, as well as shared best practices for implementation and use.

Cost of revenues for the three months ended March 31, 2005 was $1.5 million, an increase of $510.0 thousand, or 54%, over cost of revenues of $947.0 thousand for the three months ended March 31, 2004.

Sales and marketing expenses for the three months ended March 31, 2005 were $3.4 million, an increase of $676.0 thousand, or 25%, over sales and marketing expenses of $2.7 million for the three months ended March 31, 2004.

Research and development expenses for the three months ended March 31, 2005 were $596.0 thousand, an increase of $125.0 thousand, or 27%, over research and development expenses of $471.0 thousand for the three months ended March 31, 2004.