months ended June 30, 2007. These decreases were primarily due to a reduction in compensation and employee related costs as a result of reduced headcount and non-recurrence of severance related costs, a reduction in expenses related to the closure of our international offices in conjunction with our July 2007 reorganization plan, a decrease in advertising, marketing and market research expenses, reductions in legal, accounting, contract labor expenses and outsourced managed services and a reduction in stock-based compensation expense. Compensation and employee related costs during the six months ended June 30, 2007 included severance and other costs related to the departure of our former Chief Technology Officer and our former President and Chief Operating Officer.
Loss from operations was $0.9 million in the three months ended June 30, 2008, compared to loss from operations of $3.3 million in the three months ended June 30, 2007. This decrease in loss from operations was the result of the $3.7 million reduction in operating costs and expenses noted above, offset partially by the $1.3 million decrease in total revenue noted above. Loss from operations was $3.3 million in the six months ended June 30, 2008, compared to loss from operations of $6.7 million in the six months ended June 30, 2007. This decrease in loss from operations was the result of the $6.2 million reduction in operating costs and expenses noted above, offset partially by the $2.8 million decrease in total revenue noted above. The net reduction in loss from operations due to the closure of our international offices was approximately $0.5 million and $0.8 million, respectively, in the three and six months ended June 30, 2008. The net reduction in loss from operations due to non-recurring severance and related costs was approximately $0.5 million in the six months ended June 30, 2008.
Management expects that revenue will decrease for the remainder of fiscal 2008 in comparison to fiscal 2007, primarily as a result of anticipated decreases in subscription services revenue due to reductions in our paid subscriber base, anticipated decreases in advertising services revenue due to the effects of turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices, partially offset by an increase in advertising services revenue due to marketing and advertising services to be provided to Regent.
We expect our operating loss will continue to decrease for the remainder of fiscal 2008 in comparison to fiscal 2007 due to the non-recurrence in fiscal 2008 of impairment charges recognized in fiscal 2007. However, we expect to incur additional expenses in re-designing our technological architecture, rewriting our web applications and deploying a new technology platform and new networks during fiscal 2008.
Results of Operations
Revenue
Advertising Services. We derive online advertising revenue from advertising contracts in which we typically undertake to deliver a minimum number of impressions to users over a specified time period for a fixed fee. Advertising services revenue was $1.8 million in the three months ended June 30, 2008, a decrease of 28% from the three months ended June 30, 2007. Advertising services revenue was $2.9 million in the six months ended June 30, 2008, a decrease of 35% from the six months ended June 30, 2007. These decreases in advertising services revenue were due to turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices in conjunction with our July 2007 reorganization plan, offset partially by $0.3 million of advertising revenue related to marketing and advertising services provided to Regent as part of the binding letter of intent with Regent.
For the remainder of fiscal 2008, we expect advertising services revenue to increase in comparison to fiscal 2007 due to marketing and advertising services to be provided to Regent, offset partially by the effects of turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices. We expect the percentage of our overall revenue attributable to advertising services to increase slightly in 2008 as a result of decreases in our subscription and transaction services revenue.
Subscription Services. We derive online subscription services revenue from paid membership subscriptions to our online media properties. Our subscription services revenue was $3.6 million in the three months ended June 30, 2008, a decrease of 14% from the three months ended June 30, 2007. Our subscription services revenue was $7.3 million in the six months ended June 30, 2008, a decrease of 13% from the six months ended June 30, 2007. These decreases in subscription services revenue were due primarily to a reduction in the number of online subscribers to our Gay.com website and, to a lesser extent, to the closure of our international offices in conjunction with our July 2007 reorganization plan.
For the remainder of fiscal 2008, we expect total subscription services revenue to decrease in comparison to fiscal 2007, as a result of a reduction in online subscribers.
Transaction Services. Transaction services revenue includes revenue generated from the sale of products through our transaction-based websites. Our transaction services revenue totaled $0.1 million and $0.1 million in the three months ended June 30, 2008 and

2007, respectively. Our transaction services revenue totaled $0.1 million and $0.3 million in the six months ended June 30, 2008 and 2007, respectively. The decrease in transactions services revenue was due to a decrease in sales of products on our transaction-based website properties.
For the remainder of fiscal 2008, we expect transaction services revenue to continue to decrease slightly in comparison to fiscal 2007.
Operating Costs and Expenses
Cost of Revenue. Cost of revenue primarily consists of payroll and related benefits associated with supporting our subscription-based services, the development and expansion of site operations and support infrastructure and producing and maintaining content for our various websites. Other expenses directly related to generating revenue included in cost of revenue include transaction processing fees, computer equipment maintenance, occupancy costs, co-location and Internet connectivity fees, purchased content and cost of goods sold. Cost of revenue was $2.1 million in the three months ended June 30, 2008, decreasing 39% from cost of revenue of $3.5 million in the three months ended June 30, 2007. Cost of revenue was $4.6 million in the six months ended June 30, 2008, decreasing 26% from cost of revenue of $6.2 million in the six months ended June 30, 2007. Cost of revenue was 39% as a percentage of total revenue for the three months ended June 30, 2008, down from 51% in the three months ended June 30, 2007. Cost of revenue was 44% as a percentage of total revenue for the six months ended June 30, 2008, down from 47% in the six months ended June 30, 2007. These decreases were due to decreases in consumer marketing, credit card fees and advertising servicing costs, along with a reduction in expenses due to the closing of our international offices in conjunction with our July 2007 reorganization plan, an overall decrease in compensation and employee related costs as a result of reduced headcount and non-recurrence of severance related costs, and a decrease in consulting services. Compensation and employee related costs during the six months ended June 30, 2007 included severance and other costs related to the departure of our former Chief Technology Officer.
For the remainder of fiscal 2008, we expect cost of revenue and cost of revenue as a percentage of revenue to increase over fiscal 2007 as we deploy a new core technology platform for our websites.
Sales and Marketing. Sales and marketing expense primarily consists of payroll and related benefits for employees involved in sales, advertising client service, customer service, marketing and other support functions; product, service and general corporate marketing and promotions; and occupancy costs. Sales and marketing expenses were $1.5 million in the three months ended June 30, 2008, decreasing 35% from sales and marketing expenses of $2.4 million in the three months ended June 30, 2007. Sales and marketing expenses were $3.1 million in the six months ended June 30, 2008, decreasing 35% from sales and marketing expenses of $4.9 million in the six months ended June 30, 2007. Sales and marketing expenses as a percentage of revenue were 28% for the three months ended June 30, 2008, down from 35% in the three months ended June 30, 2007. Sales and marketing expenses as a percentage of revenue were 31% for the six months ended June 30, 2008, down from 37% in the six months ended June 30, 2007. These decreases were primarily due to a reduction in expenses related to the closing of our international offices in conjunction with our July 2007 reorganization plan, decreased advertising and market research expenses, decreased compensation and employee related costs as a result of reduced headcount, a decrease in stock-based compensation expenses and decreases in contract labor expenses.
For the remainder of fiscal 2008, we expect sales and marketing expenses and sales and marketing as a percentage of revenue to vary in comparison to fiscal 2007 depending on the timing of planned advertising to coincide with certain product development milestones.
General and Administrative. General and administrative expense consists primarily of payroll and related benefits for executive, finance, administrative and other corporate personnel, occupancy costs, professional fees, insurance and other general corporate expenses. Our general and administrative expenses were $1.7 million for the three months ended June 30, 2008, decreasing 42% from general and administrative expenses of $2.9 million in the three months ended June 30, 2007. Our general and administrative expenses were $3.7 million for the six months ended June 30, 2008, decreasing 39% from general and administrative expenses of $6.1 million in the six months ended June 30, 2007. General and administrative expenses as a percentage of revenue were 31% for the three months ended June 30, 2008, down from 42% in the three months ended June 30, 2007. General and administrative expenses as a percentage of revenue were 36% for the six months ended June 30, 2008, down from 47% in the six months ended June 30, 2007. These decreases were due to decreases in legal and accounting expenses, compensation and employee related costs as a result of reduced headcount and non-recurrence of severance related costs, contract labor expense, stock-based compensation expense and a reduction in expenses due to the closing of our international offices in conjunction with our July 2007 reorganization plan. Compensation and employee related costs during the six months ended June 30, 2007 included severance and other costs related to the departure of our former President and Chief Operating Officer.
For the remainder of fiscal 2008, we expect general and administrative expenses to decrease from fiscal 2007 primarily due to

decreased compensation and employee related costs as a result of decreases in headcount and decreased legal costs.
Depreciation and Amortization. Depreciation and amortization expense was $1.0 million for the three months ended June 30, 2008, decreasing 25% from depreciation and amortization expense of $1.4 million in the three months ended June 30, 2007. Depreciation and amortization expense was $2.1 million for the six months ended June 30, 2008, decreasing 18% from depreciation and amortization expense of $2.6 million in the three months ended June 30, 2007. These decreases were primarily due to a decrease in depreciable assets in service during the three and six months ended June 30, 2008 compared to the prior year periods.
For the remainder of fiscal 2008, we expect depreciation and amortization expense will increase over fiscal 2007 as our existing work in progress, including the re-launch of our websites, is placed into service and as a result of additional capital investments to support our on-going product development.
Other Income and Expenses
Interest Expense. Interest expense was $37,000 and $445,000 for the three months ended June 30, 2008 and 2007, respectively. Interest expense was $80,000 and $814,000 for the six months ended June 30, 2008 and 2007, respectively. Interest expense in the three and six months ended June 30, 2007 included $392,000 and $706,000, respectively, of interest expense and amortization of the loan discount on notes payable that were repaid in full in July 2007.
Other Income, Net. Other income, net consists primarily of interest earned on cash, cash equivalents, short-term investments and restricted cash. Other income, net was $44,000 and $94,000 in the three months ended June 30, 2008 and 2007, respectively. Other income, net was $111,000 and $254,000 in the six months ended June 30, 2008 and 2007, respectively. These decreases were primarily due to decreases in interest income resulting from lower cash balances.
Discontinued Operations
In an effort to simplify our business model, we discontinued our Travel and Events businesses during 2007. In March 2007, we sold our membership interest in DSW, a joint venture, to the minority interest partner. In December 2007, we sold substantially all of the assets of RSVP. In April 2008, we entered into a binding letter of intent with Regent to sell our Publishing business to Regent, which includes the operations of LPI and SpecPub. As a result of the sale of our interest in DSW, the sale of substantially all the assets of RSVP, the agreement to sell substantially all of the assets of LPI and SpecPub and our decision to exit our Publishing and Travel and Events businesses, we have reported the results of operations and financial position of RSVP, DSW, LPI and SpecPub as discontinued operations within the condensed consolidated financial statements for the three and six months ended June 30, 2007 and 2008 in accordance with FAS
144. We have reported the financial position of LPI and SpecPub as assets and liabilities of discontinued operations on the condensed consolidated balance sheets as of December 31, 2007 and June 30, 2008. In addition, we have segregated the cash flow activity of RSVP, DSW, LPI and SpecPub from the condensed consolidated statements of cash flows for the six months ended June 30, 2007 and 2008. The results of operations of RSVP and DSW were previously reported and included in the results of operations and financial position of our Travel and Events segment. The results of operations of LPI and SpecPub were previously reported and included in the results of operations and financial position of our Publishing segment. As a result of the agreement to sell LPI, we reduced the net carrying value of the LPI reporting unit by $2.0 million in the three months ended March 31, 2008 to the estimated amount attributable to the sale of this reporting unit. As a result of the agreement to sell SpecPub, we reduced the net carrying value of the SpecPub reporting unit $4.3 million in the three months ended March 31, 2008 to the estimated amount attributable to the sale of this reporting unit. These reductions in carrying value are reflected in impairment of goodwill and intangible assets in the results of discontinued operations. We reviewed the carrying values of the LPI and SpecPub reporting units at June 30, 2008 and deemed that no impairment had occurred in the three months ended June 30, 2008. In estimating the reduction in carrying value of these reporting units, we relied on a number of estimates in calculating the amounts attributable to the consummation of this sales transaction. There are inherent uncertainties related to these estimates and our judgment in applying them to the estimated impairment. Accordingly, we may revise our estimates of the impairment. The results of discontinued operations for the three months ended June 30, 2007 were as follows (in thousands):

                                                 Three months ended June 30, 2007
                                            LPI        SpecPub        RSVP         Total
    Total revenue                        $   5,196     $  1,745     $  4,773     $  11,714
    Operating costs and expenses:
    Cost of revenue                          3,456        1,090        5,621        10,167
    Sales and marketing                      1,298          376          506         2,180
    General and administrative                 805          287          104         1,196
    Depreciation and amortization              249          123           89           461
    Impairment of goodwill                  15,700        5,400        3,800        24,900

    Total operating costs and expenses      21,508        7,276       10,120        38,904

    Loss from operations                   (16,312 )     (5,531 )     (5,347 )     (27,190 )
    Other income (expense), net                (99 )        (43 )         11          (131 )

    Loss from discontinued operations    $ (16,411 )   $ (5,574 )   $ (5,336 )   $ (27,321 )

The results of discontinued operations for the three months ended June 30, 2008 were as follows (in thousands):

                                                     Three months ended June 30, 2008
                                                 LPI          SpecPub      RSVP       Total
 Total revenue                                $   4,754       $  1,091     $   -     $ 5,845
 Operating costs and expenses:
 Cost of revenue                                  3,378            866        (8 )     4,236
 Sales and marketing                              1,338            276       (20 )     1,594
 General and administrative                         613             43         1         657
 Depreciation and amortization                       19              1         -          20
 Impairment of goodwill                               -              -         -           -

 Total operating costs and expenses               5,348          1,186       (27 )     6,507

 Income (loss) from operations                     (594 )          (95 )      27        (662 )
 Other income (expense), net                         (6 )            -         -          (6 )

 Income (loss) from discontinued operations   $    (600 )     $    (95 )   $  27     $  (668 )

The results of discontinued operations for the six months ended June 30, 2007 were as follows (in thousands):

                                                          Six months ended June 30, 2007
                                        LPI           SpecPub           RSVP           DSW            Total
Total revenue                        $   9,714        $  3,322        $  9,168        $    2        $  22,206
Operating costs and expenses:
Cost of revenue                          6,631           2,052          11,035             -           19,718
Sales and marketing                      2,534             770           1,195            37            4,536
General and administrative               1,707             433             251             1            2,392
Depreciation and amortization              504             249             169             -              922
Impairment of goodwill and
intangible assets                       15,700           5,400           3,800             -           24,900

Total operating costs and
expenses                                27,076           8,904          16,450            38           52,468

Loss from operations                   (17,362 )        (5,582 )        (7,282 )         (36 )        (30,262 )
Other income (expense), net               (225 )           (99 )            18             -             (306 )

Loss from discontinued
operations                           $ (17,587 )      $ (5,681 )      $ (7,264 )      $  (36 )      $ (30,568 )

The results of discontinued operations for the six months ended June 30, 2008 were as follows (in thousands):

                                                       Six months ended June 30, 2008
                                                  LPI        SpecPub      RSVP       Total
 Total revenue                                  $  8,759     $  2,224     $   -     $ 10,983
 Operating costs and expenses:
 Cost of revenue                                   6,866        1,818       (20 )      8,664
 Sales and marketing                               2,706          594       (19 )      3,281
 General and administrative                        1,234          158         3        1,395
 Depreciation and amortization                        71            3         -           74
 Impairment of goodwill and intangible assets      1,978        4,294         -        6,272

 Total operating costs and expenses               12,855        6,867       (36 )     19,686

 Income (loss) from operations                    (4,096 )     (4,643 )      36       (8,703 )
 Other income (expense), net                         (12 )          1         -          (11 )

 Income (loss) from discontinued operations     $ (4,108 )   $ (4,642 )   $  36     $ (8,714 )

Liquidity and Capital Resources
Cash provided by operating activities for the six months ended June 30, 2008 was $1.7 million, due primarily to decreases in accounts receivable and increases in deferred revenue and non-cash charges related to depreciation and amortization, offset partially by our loss from continuing operations of $3.3 million and net cash used in operating activities of discontinued operations of $0.8 million. Cash used in operating activities for the six months ended June 30, 2007 was $4.4 million, and was primarily attributable to our loss from continuing operations of $7.3 million and net cash used in operating activities of discontinued operations of $2.6 million, partially offset by non-cash charges related to depreciation and amortization expense and a decrease in accounts receivable.
Cash used in investing activities in the six months ended June 30, 2008 was . . .