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Dardadog
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THIS IS A BIG WINNER.....FROM A DIVIDEND STANDPOINT............

TRFX - TRAFFIX INC (NASDAQ)
Date Open High Low Last Change Volume % Change
06/04/04 7.67 7.74 7.30 7.34 unch 130100 unch%


Composite Indicator
Trend Spotter (TM) Buy

Short Term Indicators
7 Day Average Directional Indicator Buy
10 - 8 Day Moving Average Hilo Channel Buy
20 Day Moving Average vs Price Buy
20 - 50 Day MACD Oscillator Buy
20 Day Bollinger Bands Hold

Short Term Indicators Average: 80% - Buy
20-Day Average Volume - 66760

Medium Term Indicators
40 Day Commodity Channel Index Buy
50 Day Moving Average vs Price Buy
20 - 100 Day MACD Oscillator Buy
50 Day Parabolic Time/Price Buy

Medium Term Indicators Average: 100% - Buy
50-Day Average Volume - 177970

Long Term Indicators
60 Day Commodity Channel Index Buy
100 Day Moving Average vs Price Buy
50 - 100 Day MACD Oscillator Buy

Long Term Indicators Average: 100% - Buy
100-Day Average Volume - 135790

Overall Average: 96% - Buy

Price Support Pivot Point Resistance

7.34 7.02 7.46 7.90


http://quotes.barchart.com/texsnap.asp?sym=TRFX

_____________________________________________________________________________________________________________________________



Traffix Acquires Exclusive License for Home PC Tech Support Service
Thursday April 1, 10:27 am ET
New License Agreement Replaces Proposed Acquisition of LiveOnTheNet


PEARL RIVER, N.Y.--(BUSINESS WIRE)--April 1, 2004--Traffix, Inc. (NASDAQ:TRFX - News) today announced that it has acquired an exclusive license for the operating platform created by LiveOnTheNet.com, Inc. that supports Traffix's new home PC technical support service currently marketed under the brand "ClickHelp." The new license acquired from LiveOnTheNet replaces Traffix's previously announced proposed acquisition of all of the assets of LiveOnTheNet.
Under the terms of the license, Traffix has purchased, for the total sum of $200,000 (payable over 12 months), a 10 year license for LiveOnTheNet's key asset, the integrated operating platform and programs that enable the provision of the home PC technical support service. Among other rights, the license enables Traffix to market the service under its existing "ClickHelp" brand and to private label the product under other brand names. Other than the $200,000 payment, there are no future payment obligations to LiveOnTheNet under the license. The Company noted that the termination of the proposed asset acquisition agreement with LiveOnTheNet was made during the final stages of Traffix's due diligence.

Commenting on the transaction, Mr. Jeffrey Schwartz, Chairman and CEO of Traffix stated, "Under the new arrangement, Traffix has obtained the rights to the LiveOnTheNet asset that Traffix was most interested in acquiring, for significantly less than the proposed acquisition agreement purchase price. In addition, Traffix now has the flexibility to enhance the live technical support program using Traffix's existing resources, without the additional overhead costs associated with the previously announced deal to acquire the whole company."

Mr. Schwartz added, "We are very excited about the tremendous potential we see for this unique technical support service. By purchasing these rights, Traffix is able to improve its operating position with respect to this proprietary business-line with recurring monthly revenues, and build upon its proven success in the marketplace. As we move ahead, our focus will be to continue to grow our portfolio of proprietary on-line businesses while expanding our media reach to targeted channels that will drive growth."

In addition to the new license, Traffix and LiveOnTheNet amended their existing marketing agreement to establish lower minimum and maximum customer acquisition levels for LiveOnTheNet's brand of the service, "Live Tech Support." Under the amended marketing agreement, Traffix will continue to be the exclusive marketer for LiveOnTheNet, Traffix will continue to be paid a fee by LiveOnTheNet for such marketing, and Traffix will maintain its economic interest in the installed base of approximately 100,000 Live Tech Support customers. The Company noted that Traffix's license and marketing rights remain exclusive from LiveOnTheNet for up to 10 years so long as Traffix reaches certain minimum sales targets for the Live Tech Support brand.

Traffix noted that the home PC technical support service provides home computer users with 24/7, live technical support for problems associated with their computer, ranging from removing viruses to connecting a printer. Consumers communicate with the service representatives through an on-line interactive chat window, email, or via an 800 telephone number. The service is billed to consumers either by a monthly recurring bill, or in semi-annual or annual installments.

About Traffix, Inc.:

Traffix is a direct marketing company that generates sales and targeted leads for its clients primarily from its on-line media properties. It owns a variety of websites, and manages a database of millions of permission based, on-line consumers. Traffix also operates proprietary, direct-to-consumer businesses including iMatchup.com, one of the most popular on-line dating sites, and ClickHelp, a live computer technical support service. For more information about Traffix, Inc. visit the website @ www.traffixinc.com.

This release contains certain forward-looking statements and information relating to Traffix that are based on the beliefs of Traffix's management, as well as assumptions made by and information currently available to the Company. Such statements reflect the current views of the Company with respect to future events and are subject to certain assumptions, including those described in this Release. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements prior to announcement of its year-end fiscal 2004 results.

You may register to receive Traffix's future press releases or to download a complete Digital Investor Kit(TM) including press releases, regulatory filings and corporate materials by clicking on the "Digital Investor Kit(TM)" icon at www.kcsa.com.

--------------------------------------------------------------------------------
Contact:
Traffix, Inc.
Joshua B. Gillon, 845-620-1212 ext. 205
joshg@traffixinc.com
or
KCSA
Todd Fromer/ Erika Levy, 212-682-6300 ext. 215/208
todd@kcsa.com/ elevy@kcsa.com
http://www.kcsa.com

--------------------------------------------------------------------------------
Source: Traffix, Inc.


____________________________________________________________________________________________________________________________







Press Release Source: Traffix, Inc.


Traffix, Inc. Fiscal First Quarter 2004 Earnings Release And Conference Call Scheduled For April 14, 2004
Thursday April 8, 9:28 am ET


PEARL RIVER, N.Y.--(BUSINESS WIRE)--April 8, 2004--Traffix, Inc. (NASDAQ:TRFX - News), announced today that it has scheduled the release of its fiscal first quarter 2004 results for Wednesday, April 14, 2004.
Following the announcement, Traffix will host a conference call at 4:00 p.m. EDT on April 14, 2004. On the call, management will discuss its first quarter results and review operational highlights and other business developments.

The Company invites you to participate on the call at the following telephone number:

1-888-335-6974 (Domestic)
1-973-935-2405 (International)

The call will also be available as a webcast on www.kcsa.com.

A replay of the call will be available from Wednesday, April 14, 2004 at 6:00 p.m., EDT, through Wednesday, April 21, 2004 at 11:59 p.m., EDT. To access the replay, please call (877) 519-4471 in the United States or (973) 341-3080 outside the United States. To access the replay, users will need to enter the following code: 4677932.

About Traffix, Inc.

Traffix is a direct marketing company that generates sales and targeted leads for its clients primarily from its on-line media properties. It owns a variety of websites, and manages a database of millions of permission based, on-line consumers. Traffix also operates proprietary, direct-to-consumer businesses including iMatchup.com, one of the most popular on-line dating sites, and ClickHelp, a live computer technical support service. For more information about Traffix, Inc. visit the website at www.traffixinc.com.

This release contains certain forward-looking statements and information relating to Traffix that are based on the beliefs of Traffix's management, as well as assumptions made by and information currently available to the Company. Such statements reflect the current views of the Company with respect to future events and are subject to certain assumptions, including those described in this Release. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements prior to announcement of its fiscal first quarter 2004 results.

You may register to receive Traffix's future press releases or to download a complete Digital Investor Kit(TM) including press releases, regulatory filings and corporate materials by clicking on the "Digital Investor Kit(TM)" icon at www.kcsa.com.

--------------------------------------------------------------------------------
Contact:
Traffix, Inc.
Joshua B. Gillon, 845-620-1212 ext. 205
joshg@traffixinc.com
or
KCSA
Todd Fromer / Erika Levy
212-682-6300 ext. 215 / 208
todd@kcsa.com / elevy@kcsa.com

--------------------------------------------------------------------------------
Source: Traffix, Inc.

___________________________________________________________________________________________________________________________


Traffix, Inc. Reports First Quarter Results
Wednesday April 14, 8:33 am ET
Board of Directors Declares Dividend of $.08 per share


PEARL RIVER, N.Y.--(BUSINESS WIRE)--April 14, 2004--Traffix, Inc. (NASDAQ: TRFX - News), a leading on-line direct marketing and database management company, today reported results for the fiscal quarter ended February 29, 2004.
Net Revenue for the fiscal quarter ended February 29, 2004 decreased 21% to $7.2 million from $9.1 million for the comparable quarter of fiscal 2003. Income from Operations for the fiscal quarter increased to $103,000 from $9,500 in the comparable quarter of fiscal 2003, representing a 900% increase. Net income for the current first fiscal quarter was $353,000, or $0.03 per diluted share compared to net income of $431,000, or $0.03 per diluted share in the prior year's comparable quarter. The Company noted that the decline in revenue was primarily attributable to the March 2003 sale of its subsidiary, Montvale Management LLC, which contributed approximately $2.2 million in revenue in the first quarter of fiscal 2003.

The Company reported that on a sequential basis, Net Revenue remained relatively stable at $7.2 million when compared to $7.3 million reported in the fourth fiscal quarter of 2003. The Company's Income from Operations decreased 86% to $103,000 from $727,000 in the fourth fiscal quarter of 2003. Additionally, on a sequential basis, the Company's first fiscal quarter diluted earnings per share decreased to $0.03, compared with fourth fiscal quarter diluted earnings per share of $.07.

The Company's Balance Sheet included over $38.5 million in cash and marketable securities, or approximately $2.97 per share, as of February 29, 2004, as compared to $2.96 per share as of November 30, 2003. Net Tangible Book Value Per Share decreased to $3.15 as of February 29, 2004 from $3.18 as of November 30, 2003, representing a less than 1% decline. The Company noted that Net Tangible Book Value was not materially impacted by the payment of the fourth quarter dividend of $0.08 per share, or $1,038,000, in February 2004, which was offset by current earnings of $.03 per share, other comprehensive income of $.01 per share, and proceeds from option exercises of $.01 per share. As of February 29, 2004, the Company's current ratio declined to $6.88 of current assets to $1.00 of current liabilities, compared to $6.97 of current assets to $1.00 of current liabilities, as of November 30, 2003.

The Company announced that the Board of Directors declared a dividend of $.08 per share, payable on May 10, 2004, to shareholders of record as of May 1, 2004.

Commenting on the results for the quarter, Mr. Jeffrey L. Schwartz, Chairman and Chief Executive Officer of Traffix stated, "We reported another profitable quarter, maintained our strong balance sheet, while we continue to build our business. In the quarter, we built EZ-Tracks.com, our new on-line discount music website that features thousands of popular songs available for download, including such genres as classical, rock, jazz, country, children's, club, soundtracks, holiday, religious, and others, all priced significantly lower than other download sites. With this new proprietary business line, which launched in April, Traffix should be able to profitably tap into one of the most pervasive uses of the Internet: downloadable music. We also grew the customer base of our online dating site, Imatchup.com, and we increased the number of subscribers to our live technical support service." Mr. Schwartz added, "During the last year, we focused on building our direct-to-consumer billed businesses by allocating to these business lines a significant portion of our media that we would have otherwise used for clients. As a result, we have built an installed base of customers who generate recurring revenue for the Company. In addition, we believe these proprietary business lines will appeal to the growing base of consumers who are willing to transact on the Internet."

About Traffix, Inc:

Traffix is a direct marketing company that generates sales and targeted leads for its clients primarily from its on-line media properties. It owns a variety of websites, and manages a database of millions of permission based, on-line consumers. Traffix also operates proprietary, direct-to-consumer businesses including iMatchup.com, one of the most popular on-line dating sites, and ClickHelp, a live computer technical support service. For more information about Traffix, Inc. visit the website @ www.traffixinc.com.

This release contains certain forward-looking statements and information relating to Traffix that are based on the beliefs of Traffix's management, as well as assumptions made by and information currently available to the Company. Such statements reflect the current views of the Company with respect to future events and are subject to certain assumptions, including those described in this Release. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements prior to announcement of its fiscal 2004 year-end results.

This release and prior releases are available on the KCSA Public Relations Worldwide Web site at www.kcsa.com.

TRAFFIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE:
(Unaudited)

Three Months Ended
February 29, February 28,
----------------------------
2004 2003
----------- -----------

Net revenue $ 7,170,294 $ 9,117,229
Cost of sales 3,805,954 2,245,930
----------- -----------
Gross profit 3,364,340 6,871,299

Selling expenses 447,930 2,319,559
General and administrative expenses 2,859,577 4,206,037
Bad Debt (recapture) expense (46,457) 336,188
----------- -----------
Income from operations 103,290 9,515

Other income (expense):
Interest income and dividends 108,732 154,601
Realized gains on marketable
securities 11,023 738
Realized gain on prior year sale of
subsidiary 195,000 -
Other non-operating income 46,193 (14,038)
Minority interest (income) loss - (120,328)
----------- -----------

Income before (benefit) provision for
income taxes 464,238 30,488

Provision (benefit) for income taxes 111,347 (a) (401,000) (b)
----------- -----------
Effective tax rate 24.0% 0.0%
Net income $ 352,891 $ 431,488
----------- -----------

Diluted income per share:
Net income $ 0.03 $ 0.03
----------- -----------
Weighted average shares outstanding 13,551,989 13,096,590
----------- -----------

(a) In the quarter ended February 29, 2004, the Company recognized
an effective tax rate of approximately 24%, compared to its
historical effective tax rate of approximately 39%. The
Company recognized tax benefits of approximately $0.2 million
in previously devalued capital loss carryover deferred tax
assets. Such prior year devalued capital loss deferred tax
assets were utilized in the three months ended February 29,
2004 to partially offset the tax expense on the current
period's capital gain income of approximately $0.2 million.

(b) In the quarter ended February 28, 2003, the Company recognized
a tax benefit of approximately $416,500 relating to the
measurement and resulting valuation adjustment to the
Company's deferred tax assets. The Company had applied a
valuation allowance against such deferred tax assets in fiscal
2001 because there was no appreciated capital gain property
held by the Company at such time. In March 2003, the Company
disposed of an interest in a majority-owned subsidiary and
such disposition yielded capital gain income of approximately
$1.25 million. It is this discrete event that caused the
Company to re-evaluate its deferred tax assets during the
quarter ended February 28, 2003, and to correspondingly
recognize the tax benefit of $416,500 referenced above.

-0-

TRAFFIX, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS

February 29, November 30,
Assets 2004 2003
----------- -----------
(Unaudited)

Current assets:
Cash and cash equivalents $10,060,549 $ 9,939,657
Marketable securities 28,521,661 28,272,520
Accounts receivable, trade, net of
allowance for doubtful accounts
of $826,148 at February 29, 2004 and
$872,905 at November 30, 2003 4,144,478 4,076,947
All other current assets 2,279,659 2,361,563
----------- -----------
Total current assets 45,006,347 44,650,687

Total non-current assets 4,720,830 5,299,850
----------- -----------
Total assets $49,727,177 $49,950,537
----------- -----------
Liabilities
Total liabilities - current $ 6,538,592 $ 6,403,804
Total liabilities - non-current - (deferred
taxes payable) 207,820 207,820
Total shareholders' equity 42,980,765 43,338,913
----------- -----------
Total liabilities and shareholders' equity $49,727,177 $49,950,537
----------- -----------

Working Capital (Current assets less
current liabilities) $38,467,755 $38,246,883
Current Ratio $ 6.88 $ 6.97
Combined Cash and Marketable Securities $38,582,210 $38,212,177
Common stock issuable and outstanding after
treasury shares 12,976,202 12,922,166
Tangible Book Value per share $ 3.15 $ 3.18
Combined Cash and Marketable Securities per
share $ 2.97 $ 2.96

Other Unaudited Operations Data for the
period presented: Three Months Ended:
February 29, February 28,
2004 2003
----------- -----------
Income from operations $ 103,290 $ 9,515
Depreciation and amortization 322,638 368,748
----------- -----------
EBITDA (c) $ 425,928 $ 378,263
----------- -----------

(c) EBITDA is net income excluding special charges, interest
expense, interest and dividend income, net gains (losses) on
the sale of marketable securities, realized gains on
subsidiary sales, permanent impairment charges to long lived
assets, other nonoperating income (expense) and minority
interest (income) loss, depreciation, amortization and income
taxes.

--------------------------------------------------------------------------------
Contact:
Traffix, Inc.
Joshua B. Gillon
(845) 620-1212 ext. 205
joshg@traffixinc.com
or
KCSA
Joseph A. Mansi / Todd Fromer
(212) 682-6300 ext. 205/215
jmansi@kcsa.com / tfromer@kcsa.com
http://www.kcsa.com

--------------------------------------------------------------------------------
Source: Traffix, Inc.
___________________________________________________________________________________________________________________________


Form 10-Q for TRAFFIX INC


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

14-Apr-2004

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The matters discussed in the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements and information relating to the Company that are based on the current beliefs, expectations and estimations of Management, as well as assumptions made by and information currently available to the Company. When used in this Management's Discussion and Analysis, and elsewhere in this Form 10-Q, the words "anticipate", "believe", "estimate", "continue", and "expect" variations of such words and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. Such statements are not guarantees of future performance, but reflect the current views of the Company's management with respect to future events and are subject to certain risks, uncertainties and assumptions, which could cause the actual results to differ materially from those reflected in the forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Overview

We are a leading on-line database marketing company that uses our on-line media network to generate leads, customers and sales for our proprietary products and services, and our corporate clients' products and services. We provide complete end-to-end marketing solutions for companies seeking to increase sales and customers through on-line marketing programs, and database development and enhancement programs. The services we offer include the development of a complete creative promotion to be used to market the client's product to consumers, broadcasting a promotion on-line in order to generate new customers for the client, delivery of data files from the results of campaigns, creating and hosting the customized websites or web pages necessary to effect the consumer transaction that drives the client's sales and generating comprehensive reporting in order for the client to analyze the effectiveness of a promotion. We use our websites, on-line promotions, interactive games, email marketing and database of permission-based, profiled

records (and the on-line media of third parties) to generate the customers, sales and leads for our clients, and for our own product and service offers. We are paid by our clients primarily on a success-based model, in that we receive a fee for every lead, customer or sale generated for the client.

In addition to our third-party client-based revenue, we generate revenue directly from consumers from our own products and services. In Fiscal 2003, we expanded our line of direct-to-consumer products and services to include Internet based services, such as iMatchUp.com, our on-line dating service, and TXNet/WorldWebAccess, our ISP, VOIP and email products, which comprise our LEC Billed Products segment. These "direct-to-consumer" generated products and services accounted for approximately $1.5 million, or 22% of our revenue during the three-month period ended February 29, 2004, compared to $0.5 million, or 6% for the three-month period ended February 28, 2003.

We also generate revenues from the sales and rentals (for use both on-line and off-line) of our proprietary, profiled databases.

Background

From our inception in 1993 (under the name "Quintel Entertainment, Inc.") through 1999, we generated the bulk of our revenue from direct marketing using the traditional media of television, postal mail and telemarketing. In 2000, we repositioned our direct marketing business to the on-line media of the Web. Applying the direct marketing disciplines honed from our years of operating in the "off-line" media arena, we have been able to provide enhanced response-based results in a cost-efficient and scaleable manner via on-line marketing. In addition, as a result of our direct marketing background, we have been able to design on-line marketing programs to cost-effectively generate traffic and leads for traditional direct marketing media channels, such as inbound and outbound telemarketing and direct mail.

On-Line Marketing

We own and operate a number of on-line properties, such as our free on-line sweepstakes group of sites (sponsored by our sweepstakes management subsidiary, PrizeDistributors, Inc.) including Prizeamerica.com and GroupLotto.com; our consumer credit site, AtlasCreditGroup.com; our automobile information and lead generation site, AtlasAutomotiveGroup.com; our DVD promotions site, Take 1 Entertainment.com; and our premier on-line dating service, iMatchup.com. We also operate a number of interactive games and promotions such as Direct Deposit Promotions and Prizecade.com. We generate traffic to our websites from cross marketing, marketing to our database and marketing on the media of third parties. Our Web properties and our marketing activities are designed to generate real-time response-based marketing results for our corporate clients, as well as for our own product and service offers. When visiting our on-line properties, consumers are given the opportunity to purchase, sign-up for, ask to be contacted regarding, or simply indicate an interest in, hundreds of offers for various products and services. Specifically, through these interactive Web properties we generate a variety of transactional results ranging from (a) Web traffic, (b) inbound telemarketing calls, (c) outbound telemarketing leads,(d) demographically/psychographically profiled lists of consumers, (e) highly-targeted customized response-based leads, (f) completed applications for products, and (g) sales of products and services.

Websites. Our PrizeDistributors, Inc. sponsored group of websites offers consumers the opportunity to win multiple game promotions of up to $1 million daily in our free, on-line sweepstakes. The sweepstakes grand prizes are indemnified by an independent, third-party agency. In order to play, each consumer must provide complete and accurate registration information and agree to receive ("opt-in") marketing messages from us and our marketing partners (write-ins are accepted). The interactive media on this group of websites include registration pages, banner advertisements and survey questions, the purpose of which is to generate web traffic, leads and sales. Revenue is

generated at this group of websites from our own products and our corporate clients who pay for such traffic, leads and sales. We generate the bulk of our consumer traffic to this group of websites through proprietary and third party permission-based email marketing programs, banner advertisements and other online media.

We own and operate several other websites such as AtlasCreditGroup.com, TheBargainSpot.com, AltasAutomotiveGroup.com, Take 1 Entertainment.com, prizecade.com and jewelclaimcenter.com. Such websites are deployed to generate revenue for our clients in a similar manner as the PrizeDistributor, Inc. model described above. Each of these sites is designed to appeal to a specific consumer interest category that we match with product promotions that appeal to such interest category.

Email Marketing. Each program that we market for our clients can be implemented not only through the websites, interactive games and "pop-ups" discussed above, but also, and often, through email marketing. We currently market to a vast database, which includes consumer data that is either owned by us or is managed by us under our revenue share arrangements.

One of the attractive features for clients and, we believe, a significant competitive advantage, is our ability to create and test a variety of marketing campaigns for prospective and existing corporate clients at no risk to the client. Since we own, and have access to, extensive databases, manage our own internal creative department, and can deliver email at a low cost, we are able to offer prospective and existing clients the opportunity to test market new products, services, price points and creative concepts in order to determine if an on-line campaign works for the client, and which campaigns work most effectively.

Even after campaigns are fully implemented, we further analyze the marketing results to gauge whether the campaigns are continuing to generate

adequate results for the client, whether the media is being utilized cost-efficiently, and to determine whether new and different copy is yielding better overall results. These are traditional direct-marketing disciplines that we apply and that, we believe (when coupled with our proprietary databases, the other databases under our management and our delivery and reporting systems), distinguish us from many of our competitors in the on-line marketing industry.

Syndication. We expend a significant portion of our email resources to generate sales for our own products and services and for traffic to our websites. After we develop a campaign that works efficiently on our own media, we may "syndicate" the program to third-party media. Typically, we have expended time, media and other costs in developing certain campaigns. In exchange for this invested effort, we obtain the right to market those campaigns to other on-line media companies (Syndication). We enter into agreements with these other on-line media companies to run the campaigns, generally on a fee-share arrangement. We believe such media companies obtain a benefit from receiving an immediately marketable, fully-packaged and tested marketing program. As a result, we believe we maintain the ability to leverage campaigns we have developed (including our own products and services) so that in future fiscal periods we can generate additional revenue with reduced costs and risks associated with such business extension.


TRAFFIX'S PRODUCTS AND SERVICES


During the fiscal year ended November 30, 2002, we introduced the on-line marketing of our own products and services through the Thanksmuch.com website which sells gift items (such as DVD's, CD's and costume jewelry) directly to consumers. When a consumer selects a gift item and tenders his

credit card, he is given the opportunity to purchase other, more valuable products and services at special discounts.

We introduced several new business units during the year ended November 30, 2003, including an on-line dating program ("iMatchup.com") and Internet-based service products such as ISP and email accounts that are LEC Billed ("TxNET" and "WorldWideAccess"). These new business units are designed as monthly recurring billing programs, such as memberships to our iMatchUp.com dating sites.

During the three-month period ended February 29, 2004 and February 28, 2003, the combination of all of these newly introduced services generated approximately $1.7 million and $0.8 million, respectively, or approximately 23% and 9%, respectively, of consolidated net revenue.

Our expansion in, and dependence on, our on-line direct marketing efforts, coupled with the potential for state and/or federal legislation limiting our ability to contact consumers on-line (see "Business-Government Regulation") should all be considered when referring to our current fiscal year's quarterly results, as well as prior years' historical results, in evaluating the potential for our future operations, cash flows, and financial position.

Government Regulation

As a direct-to-consumer marketing company we are subject to a variety of State and Federal laws and regulations designed to protect consumers that govern certain of our marketing practices.

Federal legislation was signed into law, effective January 1, 2004, pre-empting, in large part, all existing and pending state e-mail marketing legislation. The CAN-SPAM Act of 2003 requires that certain "opt-out" procedures, including, but not limited to, a functioning return e-mail address (and a time limit of ten (10) days to comply with all opt-out requests sent by consumers), be included in commercial e-mail marketing. The CAN-SPAM Act prohibits the sending of e-mail containing false, deceptive or misleading subject lines, routing information, headers and / or return address information. The CAN-SPAM Act does not permit consumers to file suit against e-mail marketers for violation of such Act. We believe that this may benefit us, as individuals will be more limited in their ability to file frivolous suits against us, as they have in the past. The Federal Trade Commission ("FTC") is empowered by the CAN-SPAM Act to enact regulations, within the next four (4) to twenty-four (24) months, that would implement certain provisions of the CAN-SPAM Act such as standardized subject line labeling, a "bounty" system to compensate consumers for being the first to report a spammer and a potential "do-not-spam registry" If the regulations promulgated by the FTC specifically limit our ability to market our offers, we could potentially realize a material adverse impact in future fiscal period net revenue growth, and, therefore, profitability and cash flows could be adversely affected.


TRANSACTIONS WITH MAJOR CUSTOMERS


Transactions with major customers and related economic dependence information is set forth (1) following our discussion of Liquidity and Capital Resources, (2) in our discussion of Critical Accounting Policy and Accounting Estimate Discussion (immediately following (1) previously mentioned) and (3) under the heading Transactions with Major Customers in Note 1 to the Unaudited Consolidated Financial Statements included herein.

SEGMENT INFORMATION


During the three-month periods ended February 29, 2004 and February 28, 2003, we generated revenue from the following segments: E-Commerce, Off-line Marketing (the subsidiary responsible for this activity was sold on March 7, 2003) and LEC Billed Products. The E-Commerce segment currently represents the core of our business operations. Revenue in the E-commerce segment is generated primarily from marketing of third-party products and services on our websites and through email. The Off-Line Marketing services segment had consisted of revenue generated by us through off-line direct marketing channels. The LEC Billed Products segment consists of our proprietary LEC billed products, marketed under the brands TXNet ISP and WorldWebAccess, Inc. These products were introduced during Fiscal 2003.

Segment information is set forth in Note 6 to the Consolidated Financial Statements referred to in the Financial Statements and Supplementary Data section hereof included herein.


RESULTS OF OPERATIONS


The following is a discussion of our financial condition and results of operations for the three-month periods ended February 29, 2004 and February 28, 2003. It should be read in conjunction with our Form 10-K as filed for the year ended November 30, 2003, the Notes thereto and other financial information included elsewhere in this report.


THREE MONTHS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003


Our net revenues, on a segmental basis, and with disclosure of the components of the individual segments, for each of the three-month periods ended February 29, 2004 and February 28, 2003, are detailed in the following tables:


SEGMENT DATA - NET REVENUES, BY SEGMENT, BY COMPONENT

Three Months Ended
February 29, February 28, Change Change
2004 2003 Inc(Dec) Inc(Dec)
$$$ %%%

E-Commerce components
iMatchUp.com dating sites $ 1,396,611 $ 333,153 $ 1,063,458 319 %
GroupLotto.com and other web
sites 3,589,722 2,733,886 855,836 31 %
Net branch commission fees — 331,760 (331,760 ) -100 %
Email marketing programs 1,401,321 2,217,658 (816,337 ) -37 %
Data sales and rentals 359,411 935,149 (575,738 ) -62 %
Sales of jewelry and gifts 100,855 245,462 (144,607 ) -59 %
Internet game development and
other 198,781 245,861 (47,080 ) -19 %

Total E-commerce 7,046,701 7,042,929 3,772 0 %

Off-line Marketing Service components
Net branch commission fees — 1,879,971 (1,879,971 ) -100 %
Other off-line marketing

Total Off-line Marketing
Service — 1,879,971 (1,879,971 ) -100 %

LEC Billed Products and Services components
TXNet and WWA LEC Products 123,593 194,329 (70,736 ) -36 %

Total LEC Billed Products and
Services 123,593 194,329 (70,736 ) -36 %

Total Consolidated Net Revenue $ 7,170,294 $ 9,117,229 $ (1,946,935 ) -21 %

Net Revenue decreased approximately $1.9 million, or 21%, to $7.2 million for the three months ended February 29, 2004 from $9.1 million in the comparable prior year period. The primary factor contributing to the decline in net revenue was the sale of a majority-owned subsidiary (Montvale Management, LLC) during the quarter ended May 31, 2003. Such subsidiary accounted for approximately $2.2 million, or 24% of our revenue during the three months ended February 28, 2003. Our E-commerce segment's net revenue increased approximately $0.3 million in the Fiscal 2004 first quarter, after consideration of the on-line revenue attributable to Montvale. This net increase was attributable to increases in revenue earned at our dating websites ($1.1 million) and other websites ($0.8 million), offset by a decrease of $1.6 million in our other e-commerce segment components. Net revenue in our LEC Billed Product segment declined $71,000, resulting from a

decreased marketing emphasis during the three months ended February 29, 2004 when compared to February 28, 2003, coupled with increased chargeback rates.

Our cost of sales during the three months ended February 29, 2004 and February 28, 2003 were comprised of (1) direct and indirect marketing costs associated with the acquisition and retention of consumers for our databases, including direct response email marketing costs, data purchases, promotional costs and premium fulfillment costs, and (2) the related contingent-based sweepstakes indemnification expense, billing and collection fees and customer service costs.

Our cost of sales, on a segmental basis, and with disclosure of the components of the individual segments, for each of the three-month periods ended February 29, 2004 and February 28, 2003 are set forth below:

Consolidated Cost of Sales, by Segment, by Component


Three Months Ended
February 29, February 28, Change Change
2004 2003 Inc(Dec) Inc(Dec)
$$$ %%%

E-commerce Advertising, promotion and fulfillment costs Email marketing and related
delivery costs $ 874,691 $ 1,399,933 $ (525,242 ) -38 %
Data and profile purchases,
and premium costs 2,502,548 323,956 2,178,592 672 %
Promotional, creative and
other costs 56,232 125,917 (69,685 ) -55 %


Total E-commerce Advertising $ 3,433,471 $ 1,849,806 $ 1,583,665 86 %

Service Bureau fees Contingent based prize
indemnification costs $ 62,513 $ 69,595 (7,082 ) -10 %

Total E-commerce Cost of Sales $ 3,495,984 $ 1,919,401 $ 1,576,583 82 %

Off-line Marketing Services Advertising, promotion and fulfillment costs Telemarketing, direct mail and
related costs $ — $ 188,040 $ (188,040 ) -100 %

Total Off-line Marketing Cost

of Sales $ — $ 188,040 $ (188,040 ) -100 %

LEC Billed Products and Services
Service Bureau fees Service provision, billing and

collection fees $ 309,970 $ 138,489 171,481 124 %

Total LEC Billed Cost of Sales $ 309,970 $ 138,489 $ 171,481 124 %

Consolidated Cost of Sales $ 3,805,954 $ 2,245,930 $ 1,560,024 69 %

Cost of sales on a consolidated basis increased $1.6 million, or 69%, to $3.8 million for the three months ended February 29, 2004 from $2.2 million in the comparable prior year period.

The significant factor contributing to the increase in cost of sales was an approximate $2.2 million, or 672%, increase in data acquisition costs incurred for customer profiles related to our on-line dating sites, yielding a revenue increase of $1.1 million, or 319% from such sites as recognized in the prior year's comparable period; and increased acquisitions of registrants for our other websites, yielding a revenue increase of $0.9 million, or 31%, at such other sites. The three-month period ended February 28, 2003 included a reversal of a fulfillment accrual from Fiscal 2002 of approximately $0.5 million. The increase in data, profile and premium costs, after adjustment for Fiscal 2002's fulfillment reversal, was approximately $1.7 million.

Other increases in cost of sales related to our LEC Billed Product segment, which amount to approximately $0.2 million, or an increase of 100% when compared to the prior year's comparable period. The increase relates to higher levels of customer service on our existing customer base and initial marketing expenditures incurred in the expansion of the segment in the latter part of the quarter ended February 29, 2004.

The above referenced cost increases were offset by: (a) decreases in email marketing delivery costs of approximately $0.5 million, or 38%, related

to decreased reliance on third-party mailing vendors and an overall decrease in the level of revenue-generating email promotions (with a decline in the corresponding email-marketing revenue of $0.8 million, or 37%); and (b) a decrease in marketing costs associated with our Off-line Marketing segment resulting from the sale of Montvale Management, LLC in March 2003.

Our gross profit in terms of dollars, on a segmental basis, and our gross profit percentage, on a segmental basis, for each of the three-month periods ended February 29, 2004 and February 28, 2003, are set forth below:

Consolidated Gross Profit, by Segment


Three Months Ended
February 29, February 28, Change Change
2004 2003 inc(dec) inc(dec)
$$$ %%%
E-commerce $ 3,550,717 $ 5,123,528 $ (1,572,811 ) -31 %

Off-line Marketing services — 1,691,931 (1,691,931 ) 100 %

LEC Billed products and
services (186,377 ) 55,840 (242,217 ) -434 %


CONSOLIDATED TOTALS $ 3,364,340 $ 6,871,299 $ (3,506,959 ) -51 %

Consolidated Gross Profit Percentages, by Segment


Absolute Relative
Three Months Ended percentage percentage
February 29, February 28, change change
2004 2003 inc(dec) inc(dec)
E-commerce 50.4 % 72.7 % -22.4 % -30.7 %

Off-line Marketing services 0.0 % 90.0 % -90.0 % -100.0 %

LEC Billed products and services -150.8 % 28.7 % -179.5 % -624.8 %


CONSOLIDATED GROSS PROFIT


PERCENTAGE 46.9 % 75.4 % -28.4 % -37.7 %

Consolidated Gross Profit Percentage ("Gross Margin") as a percentage of net revenue was 46.9% during the three months ended February 29, 2004, compared to 75.4% in the prior year's comparable fiscal period, representing an absolute percentage point decrease of 28.4%, or a 37.7% decrease on a relative basis.

The decline in gross profit is primarily attributable to (a) increased data acquisition costs for our iMatchUp.com dating sites, (b)increased marketing and related data acquisition costs for our other website properties, and (c) the reintroduction of the LEC Billed Products segment activity, which has a gross profit that is lower than our historical gross profit. The impact on gross profit from our iMatchUp.com dating sites results from the expensing of the costs of customer acquisition during the period we acquire and pay for the free iMatchUp.com membership account, while the recognition of the revenue is dependent upon whether or not the free account converts to a paying membership. The period that a free account may convert to a billable account ranges from one week after acquisition, to as long as fifteen months after acquisition, based on available historical experience. Therefore, predicated on stabilized acquisition costs in future fiscal periods, we expect that the future conversions of free membership acquisitions to billable members, coupled with the revenue deferred for three-month, six-month and annual memberships at February 29, 2004, as well as the anticipated renewal revenues from such acquired customers, should allow us to report improved gross profit margins in our E-commerce segment in future fiscal quarters.

Our Selling Expenses for each of the three months ended February 29, 2004 and February 28, 2003 are presented, on a segmental basis, and with the components of the individual segments, in the tables set forth below:

Segment Data - Consolidated Selling Expenses, by Segment, by Component

Three Months Ended
February 29, February 28, Change - Change -
2004 2003 inc(dec) inc(dec)
$$$ %%%

E-commerce
Fee share commissions $ 213,097 $ 1,053,616 $ (840,519 ) -80 %
Selling salaries and related
expenses 201,966 393,524 (191,558 ) -49 %
Travel and entertainment 32,867 59,384 (26,517 ) -45 %
TOTAL Selling - E-commerce
segment $ 447,930 $ 1,506,524 $ (1,058,594 ) -70 %

Off-line Marketing Services Selling salaries and related
expenses $ — $ 762,407 $ (762,407 ) -100 %
Occupancy and equipment costs — 45,623 (45,623 ) -100 %
Travel and entertainment — 5,005 (5,005 ) -100 %
TOTAL Selling - Off-line
segment $ — $ 813,035 $ (813,035 ) -100 %

Consolidated Totals $ 447,930 $ 2,319,559 $ (1,871,629 ) -81 %

Selling expenses, on a consolidated basis, decreased approximately $1.9 million, or 81%, from $2.3 million during the three months ended February 28, 2003 to $0.4 million during the three months ended February 29, 2004. The decrease was primarily related to an approximate $1.1 million reduction in E-commerce segment selling expenses, of which (a) approximately $0.8 million relates to a decrease in fee share commissions and correlates to our reduced use of third-party databases in the promotion of our email services (note that this decrease relates to the alternative use of capital for data acquisition costs as discussed in the cost of goods sold section above), and (b) approximately $0.2 million relates to decreases in salaries and related costs resulting from cost-cutting reductions to our sales force undertaken in the third and fourth quarters of Fiscal 2003.

Additionally, a portion of the decrease, or $0.8 million, resulted from the sale of our majority-owned subsidiary, Montvale Management, LLC, in March 2003. Such majority-owned subsidiary was active for the entire three months ended February 29, 2003.

Our general and administrative expenses ("G&A") are principally comprised of (i) compensation costs and related expenses for executive, finance, information and operation systems, and general administration personnel, (ii) professional fees (which include legal; audit, accounting and tax; public relations; database management and consulting; and public company related printing costs), (iii) insurance costs, (iv) occupancy and other equipment rental costs, (v) site development, maintenance and modification costs related to our various active segments, and (vi) all other general and miscellaneous corporate expense items.

Our General and Administrative Expenses for the three months ended February 29, 2004 and February 28, 2003 are presented, on a segmental basis, and with the components of the individual segments, in the tables set forth below:

Consolidated General and Administrative Expenses, by segment, by component

Three Months Ended
February 29, February 28, Change - Change -
2004 2003 inc(dec) inc(dec)
$$$ %%%

E-commerce Compensation costs and related
expenses $ 893,099 $ 1,128,644 $ (235,545 ) -21 %
Professional fees 220,613 509,537 (288,924 ) -57 %
Insurance costs 141,759 135,687 6,072 4 %
Occupancy and equipment costs 40,993 88,805 (47,812 ) -54 %
Site development, maintenance
and Modifications 352,782 141,842 210,940 149 %
All other G&A expenses 213,487 425,534 (212,047 ) -50 %
TOTAL G&A - E-commerce segment $ 1,862,733 $ 2,430,049 $ (567,316 ) -23 %

Off-line Marketing Services
Professional fees $ — $ 21,229 $ (21,229 ) -100 %
All other G&A expenses — 691,351 (691,351 ) -100 %
TOTAL G&A - Off-line segment $ — $ 712,580 $ (712,580 ) -100 %

LEC Billed Products and Services Compensation costs and related
expenses $ 56,563 $ — $ 56,563 100 %
Insurance costs 17,888 — 17,888 100 %
Occupancy and equipment costs 13,934 — 13,934 100 %
All other G&A expenses 6,116 — 6,116 100 %
TOTAL G&A - LEC segment $ 94,501 $ — $ 94,501 100 %

Corporate and other Compensation costs and related
expenses $ 499,740 $ 545,821 $ (46,081 ) -8 %
Professional fees 160,993 228,222 (67,229 ) -29 %
Insurance costs 125,410 130,333 (4,923 ) -4 %
All other G&A expenses 116,200 159,032 (42,832 ) -27 %
TOTAL G&A - Corporate and
other $ 902,343 $ 1,063,408 $ (161,065 ) -15 %

Consolidated Totals $ 2,859,577 $ 4,206,037 $ (1,346,460 ) -32 %

General and Administrative expenses ("G&A") on a consolidated basis decreased approximately $1.3 million, or 32%, when comparing G&A of $4.2 million for the three months ended February 28, 2003 to G&A of $2.9 million incurred during the three months ended February 29, 2004. The net decrease was attributable to decreases in our: (a) Off-line Marketing Service segment ($712,000) pursuant to our disposition of our majority-owned subsidiary (Montvale Management, LLC) in March 2003; (b) E-commerce segment ($567,000) and Corporate ($161,000), both relating to reductions in: (i) compensation costs pursuant to cost cutting reductions to our workforce undertaken in the third and fourth quarters of Fiscal 2003, (ii) professional fees reflecting reduced requirements for litigation defense, and (iii) other expenses primarily reflecting the benefit of general cost reduction efforts undertaken in the third and fourth quarters of Fiscal 2003, all being partially offset by an increase in website related costs of approximately $0.2 million.

Feder, Kaszovitz, Issacson, Weber, Skala, Bass and Rhine LLP ("FKIWSBR") provides general legal services to us in the ordinary course of business and litigation services in defense of actions arising from such business activities. Murray L. Skala, a partner in such firm, has been a member of our

Board of Directors since inception. We incurred approximately $102,000 in legal fees (exclusive of disbursements) from FKIWSBR during the three months ended February 29, 2004. We incurred approximately $305,000 in legal fees (exclusive of disbursements) from FKIWSBR during the three months ended February 28, 2003.

Consolidated Bad Debt Expense, by segment

Three Months Ended
February 29, February 28, CHANGE - CHANGE -
For the periods: 2004 2003 INC(DEC) INC(DEC)
$$$ %%%
E-commerce (46,457 ) 336,188 $ (382,645 ) -114 %

Off-line Marketing Services — — 0 %

LEC Billed Products and Services — — 0 %


Consolidated Totals $ (46,457 ) $ 336,188 $ (382,645 ) -114 %

Bad Debt expense decreased approximately $0.4, or 114%, to a recapture of bad debt expense of $46,457 in the three months ended February 29, 2004 from bad debt expense of approximately $0.3 million in the three months ended February 28, 2003. Our bad debt expense recapture resulted from our assessment of the risk of collection embedded in our customer base as a product of the processes described below. When comparing the aging of our receivables, subsequent collections on such receivables and other factors, it was deemed that our allowance for doubtful accounts required a reduction, with such reduction yielding the current quarter's bad debt recapture of approximately $46,000.

We continuously evaluate the potential of the collectibility of trade receivables by reviewing such factors as deterioration in the operating results, financial condition or bankruptcy filings of our customers. As a

result of this review process, we record adjustments to bad debt provisions to reflect the related receivables' carrying amount to amounts that estimate their probable realizable value. Provisions for bad debts are also recorded resulting from the review of other factors, including (a) length of time the receivables are past due, (b) historical experience and other factors obtained during collection efforts. If circumstances related to specific customers change, our estimates for bad debt provisions could be further increased or decreased.


OTHER INCOME (EXPENSE)


The components of our "Other income (expense)" for the three months ended February 29, 2004 and February 28, 2003 are set forth below:

Three Months Ended
February 29, February 28, Change Change
2004 2003 Inc(Dec) Inc(Dec)
$$$ %%%

Other income (expense):

Interest income and dividends $ 108,732 $ 154,601 (45,869 ) -30 %
Realized gains on sale of
marketable securities 11,023 738 10,285 1394 %
Realized gain on prior year
sale of subsidiary 195,000 — 195,000 100 %
Other non-operating income
(expense):
Other miscellaneous
income(expense) 16,335 (6,697 ) 23,032 -344 %
Foreign Currency Exchange Rate
Fees (4,323 ) (7,341 ) 3,018 -41 %
Reduction of prior year's LEC
reserve 34,181 — 34,181 100 %
Minority interest (income)
loss (120,328 ) 120,328 -100 %
Total Consolidated Other
Income (Expense) $ 360,948 $ 20,973 339,975 1,621 %

Consolidated Other Income (Expense) increased approximately $0.3 million, from approximately $21,000 for the three months ended February 28, 2003, to approximately $0.4 million for the three months ended February 29, 2004.

The primary factors contributing to the net increase, in the order of the table set forth above, are as follows:

(a) We recognized a decrease in interest and dividend income of approximately $46,000 resulting from decreases in the interest rates available on short-term commercial paper during the three months ended February 29, 2004 when compared with interest rates available on short-term commercial paper during the three months ended February 28, 2003;

(b) We recognized an increase in gains realized through the sale of marketable securities of approximately $10,000 in the three months ended February 29, 2004;

(c) We recognized an increase in realized gains of approximately $195,000 arising from the sale of Montvale Management, LLC, (see Note 7 to the attached financial statements) and a reduction to Minority interest in (income) from such subsidiary; and

(d) We recognized an increase of approximately $60,000 in other non-operating income (expense) during the three months ended February 29, 2004 relating to: (i) collections of approximately $16,000 for marketing program tests and residual receipts from terminated promotions; (ii) a decrease in foreign currency exchange rate fees of $3,000 paid on at our Canadian subsidiary; and (iii) a receipt of a prior year's LEC segment chargeback reserve that exceeded our receivable for such reserve by approximately $34,000.


PROVISION FOR INCOME TAXES


Quarterly income taxes are calculated in accordance with the Interim Financial Reporting requirements as set forth in the Accounting Principal Board's Opinion 28. Such Opinion considers interim quarterly periods as an integral part of the annual period, with interim quarterly tax periods reflecting the estimated annual effective tax rate. We believe that we have adequately provided for tax-related matters. We are subject to examination by taxing authorities in various jurisdictions. Matters raised upon audit may involve substantial amounts and could be material. Management considers it

unlikely that resolution of any such matters would have a material adverse effect upon our consolidated financial statements.

The three months ended February 29, 2004 reflects a tax expense of approximately $111,000 on pre-tax income of $464,238. This effective tax rate of 24% differs from our historically recognized effective tax rate of approximately 39%. We recognized tax benefits from the use of approximately $0.2 million in previously devalued capital loss carryover deferred tax assets. Such prior year devalued capital loss deferred tax assets were utilized in the three months ended February 29, 2004 to offset the tax expense on the current period's capital gain income of approximately $0.2 million.


LIQUIDITY AND CAPITAL RESOURCES


As of February 29, 2004, we had aggregate working capital of $38.5 million compared to aggregate working capital of $38.2 million as of November 30, 2003. We had available cash, cash equivalents and readily available marketable debt securities of $36.8 million as of February 29, 2004 compared to available cash, cash equivalents and readily available marketable debt securities of $36.7 million as of November 30, 2003. The equity component of our marketable securities was $1.8 million at February 29, 2004 compared to $1.6 million at November 30, 2003.

Cash provided by operating activities was approximately $0.8 million for the three months ended February 29, 2004, compared to approximately $0.3 million in cash used in operating activities in the three months ended February 28, 2003, representing an approximate $1.1 million increase in cash provided by operating activities. The significant components giving rise to the increase in cash provided by operating activities relate to the changes in our other operating assets and liabilities, whereby such changes in the three months ended February 29, 2004 absorbed approximately $1.1 million less in

cash than the comparable prior year period. The comparable prior year period included significant vendor payments, coupled with increases in account receivable when compared to the three months ended February 29, 2004.

Cash provided by investing activities was approximately $0.2 million during the three months ended February 29, 2004, compared to $14.5 million used in financing activities during the prior year's comparable quarter. The primary source of cash from investing activities related to the collection of approximately $0.2 million on installments from the prior year's sale of one of our subsidiaries, offset by approximately $19,000 paid for capital expenditures. The prior year's comparable quarter used cash of approximately $14.5 million, approximately $14.3 million of which was used for the acquisition of short-term marketable debt securities purchased for us by our professional money managers and approximately $0.2 million of which was paid for capital expenditures.

Cash used for financing activities was approximately $0.9 million for the three months ended February 29, 2004, compared to $26,267 provided by financing activities for the three months ended February 28, 2003. During the three months ended February 29, 2004 we declared and paid a quarterly dividend, amounting to approximately $1.0 million and offset such outflow with approximately $0.2 million in proceeds from stock options exercised. For further discussion of our dividend policy, see Note 10. - Subsequent Events included in the accompanying unaudited financial statements.

Our days-sales-outstanding ("DSO") in accounts receivable at February 29, 2004 was 52 days, compared to 46 days at November 30, 2003, 49 days at August 31, 2003, 54 days at May 31, 2003, and 52 days at February 28, 2003. The increase in the current quarter's DSO compared to the third and fourth quarter of the prior fiscal year relates to the longer collection cycles attributable to our recently reinstated LEC Billed Products and Services segment activities, offset by improved collection cycles on our client billed business. Our DSO may rise above 52 days in future fiscal periods primarily in the event of growth in revenues from the Company's LEC Billed Products and Services segment.

The majority of our customers are extended 30-day credit terms. In limited instances, credit is extended to ranges approximating 90 days. Currently, one such customer accounts for approximately $0.9 million, or 21.6%, of our accounts receivable at February 29, 2004, such extension of credit also contributes to our increased DSO referenced above. We continually monitor customer adherence to their credit terms and constantly strive to improve the effectiveness of our collection efforts with the goal of achieving a DSO in the 40-day range. Future fiscal periods might not reflect this goal of a 40-day DSO, and might exceed the 52-day DSO recognized in the three-month period ended February 29, 2004.

Historically, our primary cash requirements have been used to fund the cost of advertising and promotion and test-marketing new products, services and promotions, with additional funds having been used in the purchasing of equipment and services in connection with the commencement of new business lines, further development of businesses being test marketed and for the development of the equipment infrastructure of subsidiaries organized in Fiscal 2002.

In Fiscal 2000, we executed our on-line direct marketing strategy. Our future plans and business strategy may continue to call for our Internet-based E-commerce segment to be our primary operating focus, with such segment generating the material portion of our revenues for the three months ended February 29, 2004. We may, in future fiscal periods, continue to invest considerable amounts capital into our E-commerce segment ($1.5 million in Fiscal 2003, $1.9 million in Fiscal 2002, less than $20,000 in the three months ended February 29, 2004). If the E-commerce segment's activities fail to generate sufficient revenue, we could realize a material adverse impact on our capital and liquidity resources resulting from expenditures necessary to generate such revenue, including, but not limited to, expenditures for (a) marketing campaigns, (b) product development costs, (c) site development and maintenance and related technology based costs, (d) potential on-line, and/or

off-line, business acquisitions, (e) costs associated with developing alternative means of email promotion delivery, or (f) other unexpected and/or currently unidentifiable costs.

On April 1, 2004, we announced that we had acquired an exclusive license for an operating platform created by LiveOnTheNet.com, Inc. (LOTN), a privately held company. We had announced in February 2004 that we had entered into an agreement to acquire all of the assets of LOTN. The asset acquisition plans were discarded in favor of a license agreement resulting from our final stages of due diligence.

In March 2003, we sold our 51% majority-owned subsidiary, Montvale Management LLC ("Montvale"), to Mortgage Industry Consultants, LLC ("MIC") for $1.6 million, plus our investment. We had obtained our 51% interest in September 1999 through an initial investment of approximately $50,000. The terms of the agreement included an initial payment of $1 million (received in March 2003) followed by an additional $600,000 to be paid in 24 monthly installments of $25,000 each. As of April 7, 2004, nine installments were received and recorded as realized gain on sale of subsidiary. Based on management's assessment of Montvale's future cash flows, after taking into consideration Montvale's increased obligations with respect to the note obligations due us, we have deemed it prudent to defer recognition of income on the unpaid portion of the note. Recognition will therefore take place in future periods under the cost recovery method.

In May 2003, we received approximately $299,000, representing our GAAP basis capital account in such majority-owned subsidiary as at November 30, 2002, pursuant to the terms of the agreement. We also entered into a two-year Media Purchase Agreement whereby we agreed to provide certain media lead generation and related services to the continuing owners of Montvale for consideration of $40,000 per month over the term of the agreement. As of April 7, 2004, we have collected the requisite nine payments, for a total of $360,000.

In the fiscal year ended November 30, 1999, the adoption of our Internet

business plan and strategy prompted us to terminate the marketing of our legacy products and services, which were active at that time. Accordingly, this legacy activity has contributed in a significantly decreasing degree, to our cash flows and results of operations for the three-year fiscal period, December 1, 1999 to November 30, 2002, and did not contribute at all to the operations of Fiscal 2003. This should be considered when using our historical results in evaluating future operations, cash flows and financial position. Nevertheless, we will continue to explore opportunities to offer other Off-line marketing services, and expect to expand our activities within our LEC Billed Products segment.

Under currently proposed operating plans and assumptions, management believes that projected cash flows from operations and available cash resources and working capital, as described above, will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months. Our known identifiable short-term and long-term obligations are described below in the "Obligations and Commitments" disclosure as required by the Securities and Exchange Commission's (the "Commission") Release Nos. 33-8056 and 34-45321 and FR-61, as issued on January 22, 2002.

Additionally, as we seek to further extend our reach into the E-commerce and LEC Billed Product arenas, as well as identifying new and other consumer oriented products and services in the off-line arena, we may use existing cash reserves, enter into long-term financing arrangements, or employ other means to finance such diversification, none of which is specifically identifiable or measurable at this time.


OBLIGATIONS AND COMMITMENTS

We are not aware of any specific factors, outside of those described in the following table, and those "potential factors" described in the "Critical Accounting Policy and Accounting Estimate Discussion" which is set forth

below, that are reasonably likely to cause a material impact, either positive or negative, on our liquidity trends. Additionally, we do not have off-balance sheet arrangements, other than those described in the following table, and do not engage in trading activities involving non-exchange traded contracts.

A summary table of future contractual commitments, for future minimum lease payments under non-cancelable operating leases and employment contracts are set forth below:


Total Contractual
Operating Leases Employment agreements Obligations
Domestic Foreign Domestic Foreign Domestic Foreign

2004 $ 331,600 $ 72,220 $ 1,484,500 $ 246,177 $ 1,816,100 $ 318,396
2005 322,500 30,091 12,850 268,556 335,350 298,648
2006 215,000 — — 290,936 215,000 290,936
2007 3,679 — 3,679
Thereafter — — — —
$ 869,100 $ 102,311 $ 1,497,350 $ 809,348 $ 2,366,450 $ 911,659


RELATED PARTIES

Feder, Kaszovitz, Issacson, Weber, Skala, Bass and Rhine LLP ("FKIWSBR") provides general legal services to us in the ordinary course of business and litigation services in defense of actions arising from such business activities. Murray L. Skala, a partner in such firm, has been a member of our Board of Directors since inception. FKIWSBR legal services are billed on an arms length transaction basis. We incurred approximately $102,000 in legal fees (exclusive of disbursements) from FKIWSBR during the three months ended February 29, 2004. We incurred approximately $305,000 in legal fees (exclusive of disbursements) from FKIWSBR during the three months ended February 28, 2003.


TRANSACTIONS WITH MAJOR CUSTOMERS


During the three months ended February 29, 2004, we had one customer in our E-commerce segment accounting for approximately $1.0 million, or 13.5% of consolidated net revenue. Approximately $0.4 million, or 9.5% of consolidated net accounts receivable, was attributable to such major customer as of February 29, 2004. Regarding the balance of our customer base, no single customer had net revenues that equaled or exceeded 9% of consolidated net revenues for the three months ended February 29, 2004. During the three months ended February 28, 2003 no single customer had net revenues that equaled or exceeded 8% of consolidated net revenues for such period.

Currently, 21.2% of the Company's revenue is derived for its proprietary products; 19.5% from iMatchUp.com, the Company's online dating sites, and 1.7% from our LEC segment's proprietary products.


CRITICAL ACCOUNTING POLICY AND ACCOUNTING ESTIMATE DISCUSSION


We have set forth below what we believe to be the most pervasive accounting policies and estimates that could have a material effect on our Company's results of operations and cash flows, if general business conditions or individual customer financial circumstances change in an adverse way relative to the policies and estimates used in the attached financial statements or in any "forward looking" statements contained herewith.


FACTORS THAT COULD EFFECT FUTURE RESULTS


Continuation of trend relative to decreasing revenues and increasing overhead

The following chart and subsequent discussion provide the details of a known trend in revenue deterioration, and the effect of the potential continuation of such trend. Our quarterly net revenues for the prior nine quarterly periods are set forth in the table below:


% change
Quarterly from previous
period ended net revenue quarter

February 28, 2002 $ 12,370,897 -11.95 %(1)
May 31, 2002 10,804,538 -12.66 %(1)
August 31, 2002 10,664,246 -1.30 %(1)
November 30, 2002 10,203,244 -4.32 %(1)
February 28, 2003 9,117,229 -10.64 %(1)
May 31, 2003 7,422,604 -18.59 %(1)
August 31, 2003 8,503,267 14.56 %
November 30, 2003 7,345,752 -13.61 %
February 29, 2004 7,170,294 -2.39 %

(1) Our majority owned subsidiary, Montvale management, LLC, was sold in March 2003. Such subsidiary contributed to quarterly revenue as follows:

Quarterly period ended

February 28, 2002 $ 866,408 May 31, 2002 1,387,903 August 31, 2002 1,876,069 November 30, 2002 1,941,270 February 28, 2003 2,211,731 May 31, 2003 (activity sold in March 2003) 161,475


We have been able to replace a portion of Montvale's revenue through: (a) the expansion of its direct-to-consumer based proprietary products and services; (b) the expansion of existing client relationships; and (c) the client contact strategies.

Our quarterly overhead, which is the combination of selling expenses, general and administrative expenses, and bad debt expense, for the prior nine quarterly periods are set forth in the table below:


Quarterly Selling G&A Bad Debt Total
period ended expense Expense expense Overhead

February 28, 2002 $ 3,168,568 $ 3,578,591 $ 329,334 $ 7,076,493 (1)
May 31, 2002 2,370,775 3,949,851 109,172 6,429,798 (1)
August 31, 2002 3,133,682 3,665,681 48,941 6,848,304 (1)
November 30, 2002 2,799,663 4,057,299 160,428 7,017,390 (1)
February 28, 2003 2,319,559 4,206,037 336,188 6,861,784 (1)
May 31, 2003 1,777,890 3,978,704 153,860 5,910,454 (1)
August 31, 2003 1,480,191 2,946,741 117,382 4,544,314
November 30, 2003 918,284 2,515,042 (31,080 ) 3,402,246
February 29, 2004 447,930 2,859,577 (46,457 ) 3,261,050

(1) Our majority owned subsidiary, Montvale management, LLC, was sold in

March 2003. Such subsidiary contributed to quarterly Selling and G&A expenses as follows:

Quarterly period ended

February 28, 2002 $ 638,358 May 31, 2002 890,686 August 31, 2002 1,130,917 November 30, 2002 1,233,823 February 28, 2003 1,525,615 May 31, 2003 (activity sold in March 2003) 33,607


Should the trend of quarterly decreases in net revenue, as recognized to February 29, 2004, continue in future quarterly fiscal periods, and the corresponding overhead environment remain stable, or be subject to increases necessary to generate revenues, our liquidity trends and our capital resources could be adversely affected.

Revenue Recognition, Variable Costs and Bad Debts

We currently earn the most significant portion of our revenue from the E-commerce segment pursuant to marketing agreements with marketing partners and corporate customers. The provisions of each agreement determine the type and timing of revenue to be recorded. We invoice our customers in accordance with the terms of the underlying agreement. Revenue is recognized at the time the marketing activity is delivered, or service is provided, net of estimated contractually specified data qualification allowances, when applicable. Such data qualification allowances may include duplications, invalid addresses, and age restrictions, and are recorded as contra-revenue. Our revenues are adjusted in later fiscal periods if actual allowances vary from amounts previously estimated. Historically, the variance between actual allowances and previously estimated allowances has been immaterial. If events were to occur that would cause actual allowances (which are recorded as offsets against

gross revenue, as contra-revenues, in arriving at reported net revenue) to vary significantly from those originally estimated and reflected in the financial statements, we could suffer material deterioration in future fiscal period gross margins, and, therefore, our profitability, cash flows and capital resources could be adversely affected.

Certain revenue related obligations are recorded at the time revenue is recognized. They include costs payable to other on-line, as well as off-line, media companies for generating registered users and consumer data for us, database fee sharing costs under third-party database use agreements, email message delivery costs, contingent-based prize indemnification coverage (i.e., sweepstakes payout indemnification), estimated premium fulfillment costs related to the respective promotion (if applicable) and all other variable costs directly associated with completing our obligations relative to the revenue being recognized. Our actual premium fulfillment estimates have varied from that which were accrued at the time of recording the related revenue. This is deemed a change in management's estimate, and we take the additional cost, or benefit, on the accrual adjustment in the fiscal period that the variance is determinable. The three months ended February 28, 2003 included a benefit of approximately $507,000 on the adjustment of the premium fulfillment accruals from November 30, 2002.

Should the Internet operating landscape change resulting in (a) higher costs of acquiring consumer data and registered users for our websites; (b) higher costs of acquiring data for our marketing partners, compromising such marketing partners' ability to maintain adequate sized databases to allow for continued third-party database use agreements; (c) the InfiKnowledge asset acquisition failing to maintain a lower cost of our email delivery activities and web development and web hosting service costs as compared to our competitors, or us being required to depend on third-party emailing service

bureaus, to a degree higher, and/or at a cost in excess of our anticipated internally-generated costs, than that currently utilized during the three months ended February 29, 2004, or other currently unknown third party influences on our ability to deliver email messages to the records in our databases, or the records in our marketing affiliates' databases; (d) our contingent-based prize indemnification premiums for indemnification coverage increasing due to an increase in the number of prize winners at the sites, or as a result of the insurance industry in general, or other currently unknown factors; (e) our accruals for fulfillment obligations arising out of promotions proving to be less than the actual redemptions processed in subsequent fiscal periods; or (f) unpredictable technology changes or commercial technology applications; then, if any one, or a combination, of the above factors were to materialize we could suffer material deterioration in future fiscal period revenue growth and gross margins and, therefore, our profitability, cash flows and capital resources could be materially adversely affected.

Revenue recognition is also subject to provisions based on the probability of collection of the related trade accounts receivable. We continuously evaluate the potential of the collectibility of trade receivables by reviewing such factors as deterioration in the operating results, financial condition, or bankruptcy filings, of our customers. As a result of this review process, we record bad debt provisions to adjust the related receivables' carrying amount to an estimated realizable value. Provisions for bad debts are also recorded due to the review of other factors, including the length of time the receivables are past due, historical experience and other factors obtained during the conduct of collection efforts. If circumstances change regarding our specific customers on an individual basis, or if demand for Internet direct marketing softens, or if the U.S. economy stumbles, our estimates for bad debt provisions could be further increased, which could adversely affect

our operating margins, profitability, cash flows and capital resources.

Major Customers and Disposition of Majority-owned Subsidiary

During the three months ended February 29, 2004, one customer in our E-commerce segment accounted for approximately $1.0 million, or 13.5% of consolidated net revenue. Approximately $0.4 million, or 9.5% of consolidated net accounts receivable, was attributable to such major customer as of February 29, 2004. No other single customer had net revenues that equaled or exceeded 9% of consolidated net revenues for the three months ended February 29, 2004. During the three months ended February 28, 2003, no single customer had net revenues that equaled or exceeded 8% of consolidated net revenues for such period.

Currently, 21.2% of our revenue is derived from our proprietary products; 19.5% from iMatchUp.com, our online dating sites, and 1.7% from our LEC Billed Product segment.

In March 2003, we sold our interest in our majority-owned subsidiary, Montvale Management LLC, for $1.6 million, plus our investment. Pursuant to the terms of the sale, we received $1 million in cash at closing on March 7, 2003. Additionally, we received a note from the Purchaser for $600,000, payable in 24 monthly installments of $25,000. We have also received approximately $299,000, representing our GAAP basis capital account in such majority-owned subsidiary as at November 30, 2002. We also entered into a two-year Media Purchase Agreement whereby we agreed to provide certain media lead generation and related services to the continuing owners of Montvale for consideration of $40,000 per month over the term of the agreement. We estimate that the cash flow from the Media Purchase Agreement will equal or exceed the cash flows surrendered pursuant to the disposition of the majority-owned subsidiary.

Our revenues and profitability from operations have historically varied.

Our revenues, cost of providing revenues, profit margins and overhead expenses have varied historically among segments, as well as on a consolidated basis. The revenue allocation among our segments in future periods will most probably be different than our current revenue allocation due to several factors, including consumer tastes, business opportunities, regulatory issues that may exist in future periods, and other currently unknown factors that could impact our revenue generating cycle or cost structure. Therefore, it is difficult to predict revenue and gross margin trends, and their corresponding impact on liquidity and capital resources. Actual trends may cause us to adjust our operating emphasis, which could result in continued period-to-period fluctuations in our results of operations. Historically, we have been able to rapidly react to changes in the business environment within which we operate. Management responds to these changes as deemed appropriate at the time of change, and as dictated by the nature of such changes. Management's reaction to such changes could cover a broad range of business-related adjustments, ranging from product mix repositioning and staff reductions, to entire business model overhauls. Based on our current operations and marketing methods, as well as the dynamic, ever changing status of the Internet marketing environment, it is conceivable that we would institute changes to our business practices in future fiscal periods. There can be no assurance that any such potential change would be successful in its implementation, and there can be no assurance that any such implementation would benefit our operating margins, profitability, cash flows or capital resources.

Impairment of Goodwill, Other Intangibles and investment Portfolio Could Impact net Income

We carry goodwill and other identifiable intangibles on our balance sheet arising from prior-year acquisitions. We are required to review, at least annually, such goodwill and other identifiable intangibles for any asset impairment. If the review of the goodwill and other identifiable intangibles related to the subsidiaries organized to acquire such assets determines that

such assets are impaired, then we will be required to recognize an impairment charge on such goodwill and other identifiable intangibles necessary to reduce the carrying value of the assets to their net realizable value. Should events occur that would give rise to such impairment charge, we would recognize decreased profitability to the extent of such adjustment. Cash flows would not be directly affected by the impairment charge, but cash flows would, most likely, be adversely affected as a result of the facts and circumstances that created the impairment charge.

Market Fluctuation and Debt Repayment Risk of Marketable Securities Investment Portfolio

We maintain an investment portfolio that is managed by prominent financial institutions. The portfolio includes high-grade corporate commercial paper and auction rate securities, and common stock equities, all of which are held for varying periods of time, pursuant to maturity dates, market conditions and other factors. The fair value of our investments in the common stock of publicly traded companies as of February 29, 2004 amounted to approximately $1.8 million. These investments are subject to market price volatility, in addition to the potential for business failure at the company level. Moreover, due to the economic downturn and difficulties that may be faced by some of the companies in which we have investments, our investment portfolio could be further impaired by the failure of such companies to fulfill their responsibility of adhering to the repayment of principal upon maturity. Additionally, our cash flows and interest income could be negatively impacted by continued Federal Reserve Bank interest rate reductions.

___________________________________________________________________________________________________________________________

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daclyyay[pb50!b20][vc60][iUb14!La12,26,9]&pref=G]http://stockcharts.com/def/servlet/SC.web?c=trfx,uu[m,a]daclyyay[pb50! b20][vc60][iUb14!La12,26,9]&pref=G


This is a long haul money maker.......................................just my dogged opinion.

------------------
Due Da Due......But Be Quick About It!!!!!


DaDog

[This message has been edited by dardadog (edited June 05, 2004).]


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