FORM 10-K
           UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              (Mark One)
     [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934

              For the fiscal year ended December 31, 2001

                                  OR

     [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934

                     Commission File No. 000-30199


                           CoolSavings, Inc.
        ------------------------------------------------------
        (Exact name of registrant as specified in its charter)

  State of Delaware                          36-4462895
----------------------                 ------------------------
State of Incorporation                 I.R.S. Employer I.D. No.

      360 N. Michigan Avenue, 19th Floor, Chicago, Illinois 60601
                            (312) 224-5000
     ------------------------------------------------------------
     (Address of principal executive offices and telephone number)


                         coolsavings.com inc.
          ---------------------------------------------------
          Former name, former address and former fiscal year,
                     if changed since last report

  Securities Registered Pursuant to Section 12(b) of the Act:   None

      Securities Registered Pursuant to Section 12(g) of the Act:
                    Common Stock, Par Value $0.001

     Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [  X  ]   No [   ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [   ]

     As of March 1, 2002, the aggregate market value of the Registrant's
voting stock held by non-affiliates of the Registrant was approximately
$423,031 based on the closing sales price of $0.13 on such date using
beneficial ownership of stock rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934 to exclude voting stock owned by directors
and officers of the Registrant, some of whom may not be held to be
affiliates upon judicial determination. As of March 1, 2002, there were
39,093,660 shares of the Registrant's common stock issued and outstanding.




<PAGE>


REFERENCES AND FORWARD-LOOKING STATEMENTS

     References made in this annual report to "CoolSavings," the "Company"
or the "Registrant" refer to CoolSavings, Inc.

     This annual report contains forward-looking statements based on our
current expectations, estimates and projections about our industry,
management's beliefs and certain assumptions made by us. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," "may," "will" and variations of these words or similar
expressions are intended to identify forward-looking statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. Such statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict. Therefore, our
actual results could differ materially and adversely from those anticipated
in any forward-looking statements as a result of numerous factors, many of
which are described in the "Factors that may affect future results" section
in Item 1 below. You should carefully consider those risks, in addition to
the other information in this annual report and in our other filings with
the SEC, before deciding to invest in our company or to maintain or
increase your investment. We undertake no obligation to revise or update
publicly any forward-looking statements for any reason.

     We own United States service mark registrations for the mark
COOLSAVINGS, as well as several other service marks, including, among
others, COOLSAMPLES, SAVINGSCENTER, SQUEALS OF THE DAY, COOLCATALOGS,
COOLCAMPUS, COOLCASH, COOLCOLLEGES, COOLDINING, COOLEVENTS, COOLGROCERS,
COOLNEIGHBORHOODS, COOLSUPERMARKETS, DINELINE, EVENTSLINE, REWARDS WHEREVER
YOU SHOP, and our stylized piggy-bank logo. We also own common law rights
in these and other marks. In addition, we have applied for United States
federal registrations of several service marks, including our SAVE. THEN
SHOP., COOLPOINTS, COOLCOINS, COOLSCHOOLS, COOLSTAMPS, SAVE THEN DINE, and
COOLSAVINGS COUPON MANAGER. We have also obtained a trademark registration
in Australia for COOLSAVINGS and have registration applications pending in
the United Kingdom, Australia and Canada.




<PAGE>


                           COOLSAVINGS, INC.

                        Form 10-K Annual Report
                  Fiscal Year Ended December 31, 2001


                           TABLE OF CONTENTS


                                                             Page
                                                             ----

PART I

Item 1.  Business . . . . . . . . . . . . . . . . . . . . .     4

Item 2.  Properties . . . . . . . . . . . . . . . . . . . .    29

Item 3.  Legal Proceedings. . . . . . . . . . . . . . . . .    30

Item 4.  Submission of Matters to a Vote of
         Securities Holders . . . . . . . . . . . . . . . .    31


PART II

Item 5.  Market for the Company's Common Equity and
         Related Shareholder Matters. . . . . . . . . . . .    31

Item 6.  Selected Financial Data. . . . . . . . . . . . . .    32

Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations. . .    35

Item 7A. Quantitative and Qualitative Disclosure
         about Market Risk. . . . . . . . . . . . . . . . .    54

Item 8.  Financial Statements and Supplementary Data. . . .    55

Item 9.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure . . . . . .    92


PART III

Item 10.  Directors and Executive Officers of the Registrant   92

Item 11.  Executive Compensation. . . . . . . . . . . . . .    95

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management. . . . . . . . . . . . . . . . . .   102

Item 13.  Certain Relationships and Related Transactions. .   105


PART IV

Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K . . . . . . . . . . . . . . .   109


Signatures. . . . . . . . . . . . . . . . . . . . . . . . .   110









<PAGE>


                                PART I

ITEM 1.  BUSINESS

OVERVIEW

     CoolSavings is an online direct marketing and media company that
provides smarter solutions to connect marketers to their target consumers
using industry-leading analytics and incentive technology.  Our mission is
to be the leading provider of promotional offers to consumers while most
effectively connecting marketers to their best customers. With a database
of more than 17 million registered consumers as of March 1, 2002, we supply
marketers with a single resource for accessing and engaging a dynamic group
of shoppers. Through our customized, integrated direct marketing and media
products, advertisers can target a wide array of incentives, including
printed and electronic coupons, personalized e-mails, rebates, trial
offers, samples, sales notices and gift certificates, to promote sales of
products or services and drive customers into brick-and-mortar stores or
online web sites. In addition, our proprietary database technology tracks
consumer response, shopping preferences and site behavior at the household
and shopper level to provide our clients with an unprecedented breadth of
sophisticated consumer data from which to make smarter marketing decisions.

     Our web site, coolsavings.com, offers consumers convenient and
personalized incentives for goods and services from a broad range of
advertisers, including brick-and-mortar retailers, online retailers,
consumer packaged goods manufacturers, travel and financial service
providers.

     We were incorporated as Interactive Coupon Marketing Group, Inc. in
Michigan in December 1994. In November 1998, we changed our corporate name
to coolsavings.com inc. In September 2001, we merged with and into
CoolSavings, Inc., a Delaware corporation and our wholly-owned subsidiary.

SIGNIFICANT DEVELOPMENTS

INVESTMENT BY LANDMARK COMMUNICATIONS, INC. IN COOLSAVINGS, INC.

     In 2001, we entered into a series of transactions with Landmark
Communications, Inc. and Landmark Ventures VII, LLC (together, "Landmark")
whereby Landmark made loans to and an equity investment in CoolSavings.
This series of transactions resulted in a change in control of the Company.

Landmark's principal business interests are in the media industry, and it
owns and operates entities engaged in newspaper and other print publishing,
television broadcasting and cable television programming services. Landmark
has experience in building value and improving operating, marketing and
financial performance in companies that it owns or controls.

     SENIOR SECURED NOTE

     Landmark has loaned to us $5.0 million pursuant to a senior secured
note (the "Senior Secured Note"), which loan is due on June 30, 2006 (the
"Senior Secured Loan"). The Senior Secured Note and Senior Secured Loan are
governed by the terms of an amended and restated senior secured loan and
security agreement dated July 30, 2001 (the "Amended and Restated Loan
Agreement").  In connection with the Senior Secured Loan, we also issued
Landmark a warrant to purchase shares of our common stock. The warrant was
exercisable for 10.0 million shares of our common stock at an exercise
price of $0.50 per share at November 12, 2001. The exercise price of the
warrant will increase to $0.75 per share on July 30, 2005 if not previously
exercised. The loan bears interest at 8% per annum, which interest accrues
quarterly and is payable "in-kind".  The in-kind interest payment is
effected by adding the accrued interest to the principal of the Senior
Secured Note and increasing the number of shares of common stock that may
be purchased under the warrant by two shares for each dollar of interest
accrued under the Senior Secured Note. As of December 31, 2001, the
principal and interest owed under the Senior Secured Loan was $5.2 million


<PAGE>


and the related warrant was exercisable for approximately 10.1 million
shares. The Senior Secured Note is secured by a second lien on all of our
assets.

     The Amended and Restated Loan Agreement contains financial covenants
and affirmative and negative covenants that, among other things, restrict
our ability to incur additional indebtedness and take other actions without
the consent of the note holder.

     GRID NOTE

     Landmark has also funded additional amounts to us pursuant to a grid
note, as amended (the "Grid Note"). The Grid Note is also governed by the
terms of the Amended and Restated Loan Agreement.  The Grid Note bears
interest at 8% per annum, is payable on demand, and may evidence up to
$20.0 million in advances.

     In connection with funding the advances under the Grid Note, Landmark
has reserved its rights with respect to defaults by us of certain
provisions of the Purchase Agreement (defined below) and Amended and
Restated Loan Agreement.  We call these defaults the "Existing Defaults."
The Existing Defaults include our failure to initially comply with the
collateral base covenant in our forbearance agreement with American
National Bank and the following defaults that have not been and cannot be
cured (and will result in continuing defaults):

     .     the failure of at least 1.4 million members to access
           our web site in the period between July 19 and
           August 17, 2001 (a requirement of the Purchase Agreement);

     .     our failure to achieve a prescribed amount of billings
           in the month of July 2001 (a requirement of the Amended and
           Restated Loan Agreement); and

     .     our failure to maintain a minimum level of working
           capital and a ratio of cash, cash equivalents and certain
           receivables over current liabilities, in each case as of
           July 31, 2001 (requirements of the Amended and Restated Loan
           Agreement).

     Although its occurrence makes it an Existing Default, we have cured
the default under the forbearance agreement with American National Bank.
Because Landmark has reserved its rights with respect to the Existing
Defaults, and because we cannot cure certain of the Existing Defaults
(because of the nature of such Existing Defaults), Landmark may at any time
terminate the Amended and Restated Loan Agreement and require us to repay
to Landmark all outstanding debt incurred under the Amended and Restated
Loan Agreement (plus accrued and unpaid interest).  Before we can make any
such payments to Landmark, we must pay all amounts owing to American
National Bank under our credit facilities with it or obtain American
National Bank's consent to or waiver of the required payments to Landmark.
In addition, if Landmark terminates the Purchase Agreement and the Amended
and Restated Loan Agreement, our banks can terminate the forbearance
agreements and immediately accelerate the debt we owe them.



<PAGE>


     During the third and fourth quarter of 2001, Landmark loaned to us an
aggregate of $16.5 million under the Grid Note.  On November 12, 2001,
Landmark, pursuant to the Securities Purchase Agreement between Landmark
and us, dated November 12, 2001 (the "Purchase Agreement"), exercised their
right to apply $10 million of the principal and $0.1 million of accrued
interest to the purchase of 65,057,936 shares of our $0.001 par value
Cumulative Convertible Series B Preferred Stock (the "Series B Preferred
Stock").  In February 2002, Landmark loaned us an additional $1.5 million
under the Grid Note, bringing the current outstanding principal balance to
$8.0 million.  Under the terms of the Purchase Agreement, Landmark may
require that any amount funded under the Grid Note be applied to purchase
additional shares of Series B Preferred Stock at $0.1554 per share.

     We have obtained all of our most recent funding from Landmark under
the Grid Note to support our operations.  Landmark was not obligated to
fund those additional advances and did so at its discretion.  Landmark may
demand payment in full under the Grid Note at any time as well as
accelerate and demand payment under the Senior Secured Note as a result of
the Existing Defaults.  Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2001, the Series B Preferred
Stock was redeemable in whole or in part at the holder's election at the
stated value of $0.1554 per share plus accrued but unpaid dividends.

SALE OF SERIES B PREFERRED STOCK

     On November 12, 2001, we issued to Landmark 65,057,936 shares of
Series B Preferred Stock pursuant to the terms of the Purchase Agreement.
Landmark purchased the Series B Preferred Stock, at a purchase price of
$0.1554 per share, by applying $10.0 million of principal and $0.1 million
of interest under the Grid Note to offset the complete purchase price of
the shares of Series B Preferred Stock.  As of March 1, 2002, Landmark
holds 65,780,822 shares of Series B Preferred Stock (and has rights with
respect to accrued dividends thereon), holds a warrant to purchase
10,175,556 shares of our common stock and has the right to apply amounts
funded under the Grid Note and accrued interest to purchase 57,280,571
shares of Series B Preferred Stock.  Landmark's ownership will continue to
grow through the issuance of additional shares of Series B Preferred Stock
and warrants as "in-kind" payments for dividends and interest accruing on
the Series B Preferred Stock and Senior Secured Note, respectively, and
through their ability to purchase additional shares of Series B Preferred
Stock by funding additional advances under the Grid Note.

TERMS OF THE SERIES B PREFERRED STOCK.

     The terms of the Series B Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series B Preferred Stock
ranks senior (with respect to, among other things, dividends, redemption
and liquidation payments) to the Series C Preferred Stock (defined below),
the common stock and any future preferred stock of CoolSavings.  The
following discussion briefly summarizes the preferential rights of the
Series B Preferred Stock.

     DIVIDENDS AND LIQUIDATION PREFERENCE

     Dividends accrue on the shares of Series B Preferred Stock at the
rate of 8% per annum, payable quarterly in additional shares of Series B
Preferred Stock. Dividends are cumulative and will continue to accrue
whether or not declared.  As of December 31, 2001, 722,866 shares of
Series B Preferred Stock are issuable with respect to the accrued, but not
declared, dividends.



<PAGE>


     On liquidation, holders of Series B Preferred Stock are entitled to
be paid the greater of the amount per share that would have been payable if
each share of Series B Preferred Stock had been converted to common stock
or the stated value ($0.1554 at the time of issuance, subject to anti-
dilution adjustments) for each share of Series B Preferred Stock plus the
amount of any accrued but unpaid dividends thereon before holders of the
Series C Preferred Stock and common stock receive a distribution.  At the
election of the holders of the Series B Preferred Stock, a merger or
consolidation that effects our change of control or a sale of all or
substantially all of our assets may be deemed to be a liquidation.

     CONVERSION RIGHTS

     Each share of Series B Preferred Stock, plus any shares issuable as
accrued but unpaid dividends thereon, is convertible at the holder's option
into the number of shares of common stock obtained by dividing the stated
value of a share of Series B Preferred Stock ($0.1554) by the conversion
price ($0.1554 at the time of issuance, subject to anti-dilution
adjustments).

     The conversion price and conversion ratio are subject to "full
ratchet" adjustment upon certain events.  This means, for example (and
excluding exceptions), that if we issue any shares of common stock for less
than the conversion price or issue convertible or derivative securities
with an exercise or conversion price less than the conversion price of the
Series B Preferred Stock, the conversion price and conversion ratio are
reduced to the price at which such new securities were issued.

     REDEMPTION.

     CoolSavings' Election.  Shares of Series B Preferred Stock are
redeemable in whole, at our election, after the seventh anniversary of the
issuance of the Series B Preferred Stock, at their stated value of $0.1554
per share plus accrued but unpaid dividends through the redemption date.
Our ability to redeem the shares of Series B Preferred Stock is subject to
the following:

     .     our common stock must have traded at or above $3.00 per share
           for 20 consecutive trading days (and during at least 60 of the
           80 trading days immediately prior to the redemption date);

     .     we must have on file, or agree to file and make effective
           within 30 days of redemption a registration statement with
           the SEC registering for resale the shares of common stock
           underlying the Series B Preferred Stock;

     .     we shall have paid any outstanding debt to Landmark in
           full; and

     .     there are no securities outstanding that are junior in ranking
           to the Series B Preferred Stock (except common stock).

     Holders' Election. Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2001, the Series B Preferred
Stock was redeemable in whole or in part at the holder's election at the
stated value of $0.1554 per share plus accrued but unpaid dividends.



<PAGE>


     VOTING RIGHTS AND BOARD OF DIRECTORS

     Each share of Series B Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series B Preferred Stock and accrued dividends thereon is convertible,
from time to time. The holders of the Series B Preferred Stock are entitled
to vote together with holders of common stock at any meeting of our
stockholders on any and all matters presented to our stockholders for
consideration.  In addition to their right to vote in the general election
of members of our Board on an as-converted basis, the holders of the
Series B Preferred Stock are entitled to designate, and vote separately as
a single class for the election of, a majority of our Board (and the number
of seats elected exclusively by the Series B Preferred Stock shall be
automatically increased to such greater number as may be proportionate to
the Series B Preferred Stock's percentage ownership interest in the
Company, calculated on an as-converted basis).  The holders of Series B
Preferred Stock also have special voting rights where we are prohibited
from taking certain actions without their consent, including but not
limited to, amending our charter documents, entering into business
transactions, authorizing or issuing securities (except in limited
circumstances), entering into related party transactions, hiring or
terminating key executive officers and amending the terms of our
forbearance agreements with our banks.

SALE OF SERIES C PREFERRED STOCK

     As a condition to the consummation of the Landmark Transaction on
November 12, 2001, we issued to three individuals, two of whom are
directors of the Company, 13.0 million shares of our Series C Convertible
Preferred Stock ("Series C Preferred Stock") in exchange for $2.1 million
of our 8% Senior Subordinated Convertible Notes ("Director Notes"), due
March 1, 2006, accrued interest, and accompanying warrants to purchase
1,050,000 shares of common stock which were previously issued to such
individuals with the Director Notes.

TERMS OF THE SERIES C PREFERRED STOCK

     The terms of the Series C Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series C Preferred Stock
ranks junior (with respect to dividends and liquidation payments) to the
Series B Preferred Stock but senior to the common stock.

     DIVIDENDS

     The Series C Preferred Stock will not accrue dividends. Dividends may
be declared and paid on the Series C Preferred Stock from funds lawfully
available as and when determined by the Board of Directors and subject to
any preferential dividend rights of any then outstanding preferred stock,
including the Series B Preferred Stock.

     CONVERSION RIGHTS

     Each share of Series C Preferred Stock is convertible, at the
holder's option, into the number of shares of common stock obtained by
dividing the stated value of a share of Series C Preferred Stock ($0.1665)
by the conversion price ($0.1665 at the time of issuance, subject to anti-
dilution adjustments).

     The conversion price and conversion ratio are subject to "weighted
average" adjustment upon certain events. This means, for example (and
excluding exceptions), that if we issue common stock for less than the
conversion price or issue convertible or derivative securities with an
exercise or conversion price less than the conversion price of the Series C
Preferred Stock, the conversion price and conversion ratio are reduced to
the price derived from the weighted average of the price at which all such
new securities were issued.



<PAGE>


     REDEMPTION

     Shares of Series C Preferred Stock are redeemable in whole, at our
election, at any time after the shares of Series B Preferred Stock have
been redeemed or after the third anniversary of the date of issuance, if
the holders of a majority of the shares of Series B Preferred Stock
consent, at the stated value ($0.1665 at the time of issuance, subject to
anti-dilution adjustments) for each share of Series C Preferred Stock plus
a cash amount per share equal to eight percent (8%) per annum of the
Series C Preferred Stock stated value.

     VOTING RIGHTS

     Each share of Series C Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series C Preferred Stock is convertible. The holders of Series C
Preferred Stock are entitled to vote together with holders of common stock
at any meeting of our shareholders on any and all matters presented to our
shareholders for consideration.

     LIQUIDATION PREFERENCE

     On liquidation, after the payment of the preferred distribution to
the holders of the Series B Preferred Stock, holders of Series C Preferred
Stock are entitled to be paid the greater of: (1) the amount per share that
would have been payable if each share of Series C Preferred had been
converted to common stock, or (2) the stated value ($0.1665 at the time of
issuance, subject to anti- dilution adjustments) for each share of Series C
Preferred Stock plus a cash amount per share equal to eight percent (8%)
per annum of the Series C Preferred Stock stated value before holders of
our common stock receive a distribution. At the election of the holders of
the Series C Preferred Stock, a change of control of CoolSavings or a sale
of all or substantially all of the assets of CoolSavings may be deemed to
be a liquidation, provided the holders of the Series B Preferred Stock have
elected to have such event constitute a liquidation.

MERGER

     We completed a merger on September 25, 2001 that resulted in our name
changing from coolsavings.com inc. to CoolSavings, Inc. and a change in our
state of incorporation from Michigan to Delaware.  As a result of the
merger, our common and preferred stock changed from no par to $0.001 par
stock.  Also, the number of authorized shares of common stock increased
from 100,000,000 to 379,000,000, and the number of authorized shares of
preferred stock increased from 10,000,000 to 271,000,000.  We have
designated 258,000,000 shares of preferred stock as Series B and 13,000,000
shares of preferred stock as Series C.  Pursuant to the merger agreement,
each share of coolsavings.com inc. common stock issued and outstanding
immediately prior to the merger was converted into one share of common
stock of CoolSavings, Inc.

DELISTING FROM THE NASDAQ NATIONAL MARKET

     On November 20, 2001, pursuant to the decision of The Nasdaq Listing
Qualification Panel (the "Panel"), we were delisted from The Nasdaq
National Market effective with the open of business on November 21, 2001.
Since November 21, 2001, the Company's shares have traded on the Nasdaq
Over The Counter Bulletin Board ("OTC"), subject to meeting their
continuing requirements.



<PAGE>


THE COOLSAVINGS SOLUTION

     Our web site offers convenient and personalized incentives for goods
and services from a broad range of advertisers, including national brick-
and-mortar chains, consumer packaged goods manufacturers, large consumer
service providers, and online retailers. We offer a wide array of
promotional services for advertisers including printed and electronic
coupons, personalized e-mails, rebates, samples, trial offers, sales
notices, gift certificates, and banner advertisements.

     BENEFITS TO COOLSAVINGS ADVERTISERS

     The benefits to advertisers of using CoolSavings include:

     .     Access to a large audience of qualified, receptive shoppers.
           Advertisers are able to reach millions of active shoppers who
           visit our web site looking for shopping values, and who are
           willing to provide demographic data about themselves and others
           in their households.  Advertisers can reach our database of
           consumers electronically or through traditional direct mail.

     .     Cost-effective performance. We believe we provide advertisers
           with a cost-effective solution for customer acquisition and
           retention. Unlike most other direct marketing providers, we can
           test creative elements of a campaign for effectiveness with
           results available in days. We can immediately learn from each
           campaign, regardless of the promotions used, to make future
           campaigns more effective, to re-target responding members with
           more focused offers and to convert new customers into loyal
           customers. Our advertisers are able to target information about
           ongoing sales promotions and events to the appropriate
           customers at the appropriate times and make rapid improvements
           to that campaign.

     .     Insight into shopping behavior. Most advertisers have only
           limited means of tracking their customers' preferences and
           behavior. With our member's permission, we acquire information
           from the initial member registration, from each visit by a
           member to our web site, or in response to an email offer. As a
           result, we have rich data that we can analyze to provide
           insight into the interests and preferences of an advertiser's
           customers. Advertisers can leverage our consolidated database
           to find predictive correlations that can lead to more effective
           targeting regardless of the types of promotions used. This
           information can be used by our advertisers to acquire new
           customers with appropriate incentives, refine follow-on
           promotions and identify co-promotion opportunities.

     .     Single source online direct marketing solution. We offer
           advertisers a single source for a full range of promotional
           incentives that can be targeted to any stage in the
           customer lifecycle.  Redeemable both online and in-store,
           these tools include printable coupons for brick-and-mortar
           stores, electronic codes for online purchases, targeted
           e-mails, mail-in rebates, lead generation for trial
           subscriptions and samples, notices of ongoing sales where
           no certificate is necessary, promotional contests and banner
           advertisements. Advertisers can also use combinations of
           incentives for customized promotions.



<PAGE>


     .     Ability to coordinate online and offline promotions. For
           advertisers that have both an online and offline presence, we
           can identify prospective customers and then track their
           activities whether shopping online or, with the cooperation of
           the advertiser, in stores. We enable these businesses to
           provide incentives, such as coupons and savings notices,
           redeemable in their offline stores. With the advertiser's
           support, we can track the redemption of in-store coupons by
           scanning their unique bar codes and adding the shopping
           preference information to our database.  We also help
           offline companies without a web presence identify and reward
           customers with online incentives that their customers can bring
           into a store or use on another web site.

     .     Lower total cost of ownership and improved time to market. Our
           investments in infrastructure, technology and technical
           personnel allow our advertisers to deploy their promotional
           campaigns without the need to lease, buy or continually upgrade
           the required hardware and software systems, providing
           significant cost savings over an in-house solution. In
           addition, using both our infrastructure and our targeted
           direct marketing processes and expertise, we enable our
           advertisers to deploy their online marketing campaigns rapidly
           and reliably.  In particular, we power clients' own incentive
           campaign with our proprietary coupon technology solution.
           As a  result, our advertisers can remain focused on their
           core businesses while providing compelling offers to consumers.


THE COOLSAVINGS STRATEGY AND SERVICES

     Our mission is to be the leading provider of promotional offers to
consumers while most effectively connecting marketers to their best
customers.  In pursuit of that mission, the key elements of our strategy
are to:

     .     Extend brand awareness and expand our member and advertiser
           base. We believe strong brand recognition is a powerful tool to
           attract new advertisers and members. We intend to continue to
           promote our brand online, with advertising campaigns on high
           traffic web sites and cooperative campaigns with advertisers
           and affiliate networks. We believe our marketing efforts will
           expand our member base while preserving its current
           demographic characteristics, which will strengthen the
           services we provide to advertisers. As we expand our
           membership, we expect that our services will be attractive to
           additional advertisers, which will in turn make our site more
           attractive to consumers by providing a broader array of
           available promotional offers.

     .     Enhance member profiles. As we make available additional
           promotional offers and services on our web site and through e
           mail, we can tailor online promotions to specific members. As
           our members use our site and respond to advertiser promotions,
           we continually enrich our database and develop deeper data for
           predictive modeling and targeting purposes. We plan to continue
           upgrading our tracking and data mining tools to provide
           additional insight into member interests and shopping
           preferences.

     .     Pursue third-party relationships. We intend to continue to
           pursue relationships to further build our brand, expand our
           reach to consumers and advertisers and enhance our services.



<PAGE>


     DELIVERY OF INCENTIVES

     On behalf of our advertisers, we deliver a variety of promotional
incentives to targeted segments of our member base.  The cost of our
promotional services generally rises with the degree of targeting or
customization we provide because, in our experience, these efforts
generally result in higher response rates for the advertisers. In addition,
we charge some of our advertisers based upon the performance of the
promotional offers that we deliver for them.

     The coolsavings.com web site is a fast, easy to use experience for
finding coupons and special offers from the brands and stores consumers
want.  To use our service, consumers register with us, provide demographic
data about themselves, their household and shopping interests, and choose
whether to receive our direct e-mails.  We track our members' page views of
and responses to promotions in our member database. With an advertiser's
cooperation, we can also track the redemption of incentives.

     The promotional services that we provide our advertisers include:

     .     CoolOffers. Online and offline businesses can deliver incentive
           offers, including printed and electronic coupons, rebates,
           sales notices and gift certificates, to targeted segments of
           our membership via our web site and our targeted e-mail
           programs.

     .     Solo Targeted and Direct E-Mail. Our members can elect to
           receive periodic e-mails notifying them of offers that may be
           of personal interest.  This allows us to send targeted e-mails
           to these members on the basis of their demographic profiles and
           shopping preferences. The e-mails are targeted either through
           pre-selected criteria or using customized models we develop for
           particular campaigns. Member permission is at the heart of our
           e-mail program. Therefore, promotional e-mail is only sent to
           registered members who have opted-in to receive them.  In
           addition, we may allow a marketer to send direct mail campaigns
           to our member data file.

     .     Coupon Technology.  Clients with a need to offer secure,
           trackable print-at-home coupons may do so by licensing the use
           of our Coupon Technology ASP Solution.  This allows the client
           to offer an electronic coupon on their website, their e-mails,
           or their electronic advertisements.  CoolSavings provides the
           technology, reporting, tracking and production services to the
           client.

     .     Lead Generation.  We provide advertisers a method of generating
           leads by providing free samples or trial offers of their
           products or services to our members. These offers are targeted
           to our members by demographic profile and shopping preferences.
           To receive free samples, members voluntarily provide the
           advertiser with contact information such as name, e-mail and
           mailing address, as well as other data about their households.

     .     Category Newsletters. We help our advertisers obtain new
           customers, generate sales and achieve increased brand awareness
           through highly targeted, content-driven monthly e-mails. These
           e-mails present an advertiser's products and services to
           members in conjunction with topical content which they have
           specifically requested.



<PAGE>


     ANALYTIC AND RESEARCH SERVICES

     By analyzing individual, demographic and correlative information in
our database, we provide advertisers several methods to gain insight into
our members' preferences. We can also apply our analytic infrastructure to
analyze the databases of our advertisers upon their request. We use
sophisticated data mining tools to help our advertisers execute effective
promotional campaigns.  We use data mining information to create predictive
models to make future targeting even more effective. Using e-mail, we can
also contact and survey members who have responded to a specific offer.

SALES AND MARKETING

     We have built a sales organization dedicated to developing and
maintaining close relationships with advertisers and advertising agencies.
Our sales force is organized into two groups: Strategic Sales and National
Sales. Strategic Sales focuses on the 200 leading advertisers in the
country, and all of the consumer packaged goods manufacturers. National
Sales focuses on the remaining national and large regional advertisers.
Each of these sales groups is further organized by specific industry and
advertiser segments. We intend to form relationships with companies with
existing local sales forces in order to penetrate local advertising
markets.

     Our marketing department is dedicated to promoting the CoolSavings
brand and acquiring members for our service. In the past, to attract
members and increase brand awareness, we have used a variety of advertising
methods, including a national offline branding campaign that included
television, print, outdoor media and radio. Currently and historically, we
have made heavy use of online advertising consisting primarily of online
banner advertisements on high-traffic web sites such as portals and search
engines. We also have developed network affiliate programs in which other
companies send consumers to the CoolSavings web site and receive a fee per
each resulting member registration. Some of our advertisers provide links
from their own web sites that click through to offers on CoolSavings.

OPERATIONS AND TECHNOLOGY

     We have developed a proprietary system to target and personalize
promotional offers from our advertisers to our members. There are five main
components of our system:

     .     our web server technology, which allows us to display offers of
           interest for each member;

     .     our database, which processes the offers and stores the
           information about our members and their activity on our site;

     .     our data mining and targeting modules, which we use to
           determine the members to whom we will deliver offers and the
           most appropriate offers for each member;

     .     CoolSavings Coupon Manager, our software program that produces
           high-quality coupons and rebate certificates on a member's
           personal computer printer for in-store or mail-in use; and

     .     SavingsCenter software, which we and our advertisers use to
           create, target and control new offers.

     Our system has been designed around industry-standard architecture
and is designed to provide availability 24 hours-a-day, seven days-a-week.
Occasionally in the past, we have disconnected our servers to make upgrades
or maintenance checks on our system, leading to "down time" averaging
approximately two hours per month.



<PAGE>


     Our web servers and the database behind our system as well as our
data mining servers are located at the Exodus Communications data center in
Oak Brook, Illinois. Currently, all site traffic is directed to the Exodus
system and we maintain a redundant version of our entire system at our
Chicago headquarters.

INTELLECTUAL PROPERTY

     We currently hold two United States patents, No. 5,761,648, entitled
"Interactive Marketing Network and Process Using Electronic Certificates"
and No. 5,855,007, entitled "Electronic Coupon Communication System."

     In addition to our patents, we have registered trademarks, service
marks and copyrights in the United States and other countries. We also own
common law rights in several other marks, and have registration
applications pending in the United States and other countries.

     We regard the protection of our intellectual property, including our
patents, copyrights, service marks, trademarks, trade dress and trade
secrets, as important to our future success. We rely on a combination of
these intellectual property rights and contracts to protect the services we
have created and our competitive position in the marketplace. We have
generally entered into confidentiality and invention assignment agreements
with our employees and contractors. Where we have considered it necessary,
we have required nondisclosure agreements with our suppliers and
advertisers in order to protect confidential information about our business
plans and technology. Despite these precautions, these arrangements or the
other steps which we have taken may not protect our trade secrets or
prevent another company from copying important parts of our service. While
we have registered our trademarks and service marks in the U.S. and other
countries, protection of these marks may not be available in every country
where we may do business in the future.

COMPETITION

     The market for online direct marketing and media services is rapidly
evolving and intensely competitive. Barriers to entry for companies in our
market are low, and current and potential competitors can launch new web
sites and/or services at a relatively low cost.

     Our ability to compete depends on many factors, both within and
beyond our control. These factors include:

     .     advertiser identification and retention;

     .     brand recognition and credibility;

     .     pricing of our services;

     .     breadth of our service offerings for advertisers and consumers;

     .     reliability of service and quality of advertiser support;

     .     advertiser and member acquisition costs;

     .     membership size and demographics;

     .     frequency of use and consumer response rates;

     .     technological expertise; and

     .     demand for e-marketing services generally.

     We believe we are well-positioned to compete in our market as a
result of the breadth and sophistication of our services, the size and
demographics of our member audience, our experienced workforce, our
proprietary technology and our established brand recognition.



<PAGE>


     Currently, we compete with direct and promotional marketing companies
in several fields, including:

     .     direct marketers, such as Acxiom and Experian;

     .     promotional marketers, such as Valassis, NewsAmerica, Catalina;
           and

     .     online marketers, such as MyPoints, Yahoo, AOL and YesMail.

     We also compete with the traditional advertising media of television,
radio, cable and print for a share of advertisers' total marketing budgets.
We also encounter competition from a number of other sources, including
content aggregation companies, companies engaged in advertising sales
networks, advertising agencies and other companies that facilitate Internet
advertising.

EMPLOYEES

     As of March 1, 2002, we had 117 full-time employees, 44 of whom were
engaged in technology and product development, 40 in sales and marketing,
15 in client and member services and 18 in finance, administration and
operations. We have never had a work stoppage and our employees are not
covered by any collective bargaining agreement. We consider our relations
with our employees to be good. During the course of 2001, we reduced our
workforce from 321 employees to 119 employees in response to a downturn in
the economy and reduced demand for e-marketing services.

FACTORS THAT MAY AFFECT FUTURE RESULTS

WE MAY NOT BE ABLE TO SECURE FINANCING TO MEET OUR SHORT AND LONG TERM
CAPITAL NEEDS

     At December 31, 2001, we had $5.1 million of cash and cash
equivalents.  We do not have access to sufficient committed capital to meet
our operating needs for the next twelve months.  We are not in compliance
with certain covenants of our credit facilities with our lenders.  Although
Landmark has funded our recent cash needs, Landmark has reserved its rights
with respect to all breaches and defaults, and Landmark is under no
obligation to advance us any additional funds.  If we are unable to obtain
continuing financing from Landmark or other sources, we will be unable to
operate our business.

     We have received a report from our independent auditors for our
fiscal year ended December 31, 2001 containing an explanatory paragraph
that describes the uncertainty as to our ability to continue as a going
concern due to our historical negative cash flow and because, as of the
date they issued their report, we did not have access to sufficient
committed capital to meet our needs for at least the next twelve months.
See "Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."

WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO INCUR NET LOSSES

     We incurred net losses of $29.2 million in 2001, $39.2 million in
2000 and $16.9 million in 1999.  As of December 31, 2001, our accumulated
deficit was $89.6 million.  We expect to continue to incur operating losses
through 2002 as we continue to fund operations.  If we are unsuccessful in
securing additional equity and/or debt financing from Landmark or other
sources or complying with the terms of the forbearance agreements with our
banks, or we fail to achieve and maintain cash flow positive operations, we
will be unable to continue our operations.  See "Item 7 -Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."



<PAGE>


OUR UNPROVEN BUSINESS MODEL MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS

     We launched our web site in February 1997, and operate in a market
that is new and rapidly changing. We face risks, uncertainties, expenses
and difficulties frequently encountered by companies in new and rapidly
evolving markets, including the Internet advertising and direct marketing
market. To address these risks and uncertainties, we must, among other
things:

     .     maintain relationships with existing advertisers and attract
           additional advertisers;

     .     attract members who actively and repeatedly take advantage of
           our offers and make purchases, request information and
           otherwise interact with our advertisers;

     .     attract, integrate, motivate and retain qualified personnel;

     .     enhance our brand recognition;

     .     develop new promotions and services;

     .     continue to upgrade and develop our systems and infrastructure
           to accommodate growth in membership and service enhancements;

     .     anticipate and adapt to the evolving Internet advertising and
           direct marketing market and changes in advertisers' promotional
           needs and policies;

     .     maintain and defend our intellectual property rights; and

     .     respond to changes in government regulations.

     We may not be successful in accomplishing these objectives. Further,
there can be no assurance that we will be able to secure the necessary
funding to achieve these objectives.  See "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources."  Our failure to do so could harm our business,
results of operations and financial condition.

OUR REVENUES MAY BE CONCENTRATED AMONG A LIMITED NUMBER OF ADVERTISERS

     During 2001, approximately 12.7% of our revenues were derived from
First USA Bank, NA, and approximately 26.2% of our revenues were derived
from our five largest advertisers. We believe that a relatively small
number of advertisers may account for a substantial portion of our revenues
in future periods. If any of our major advertisers were to reduce their
advertising purchases substantially or to stop using our services, our
business would be seriously harmed.

OUR COMMON STOCK MAY BE VOLATILE, MAY HAVE LIMITED PUBLIC LIQUIDITY AND MAY
LEAD TO LOSSES BY INVESTORS AND RESULT IN SECURITIES LITIGATION

     On November 20, 2001, pursuant to the decision of The Nasdaq Listing
Qualification Panel (the "Panel"), we were delisted from The Nasdaq
National Market effective with the open of business on November 21, 2001.
Since November 21, 2001, the Company's shares have traded on the Nasdaq
Over The Counter Bulletin Board ("OTC"), subject to meeting their
continuing requirements. Stockholders may have difficulty buying and
selling our stock on the OTC. Since the OTC is a broker driven marketplace,
we are dependent on professional market makers to facilitate trading of our
stock on the OTC. If market makers do not register to trade our stock on
the OTC, stockholders may not have a public market for the purchase and
sale of our securities.



<PAGE>


     The market price of our common stock has been volatile and may be
subject to wide fluctuations.  Since our public offering in May 2000, the
per share price of our common stock has fluctuated from a high of $7.13 per
share to a low of $0.05 per share.  Factors that might cause the market
price of our common stock to fluctuate include:

     .     quarterly variations in our operating results;

     .     operating results that vary from the expectations of securities
           analysts and investors;

     .     interpretation of the effect of the issuance of our Series B
           Preferred Stock and Series C Preferred Stock on our overall
           capital structure;

     .     changes in expectations as to our future financial performance,
           including financial estimates by securities analysts and
           investors;

     .     changes in market valuations of other Internet companies;

     .     governmental regulation of the Internet or Internet
           advertising, including any governmental inquiry of another
           Internet company;

     .     loss of a major advertiser(s);

     .     resolution of our pending or future patent litigation or other
           changes in the status of our intellectual property rights;

     .     pursuit of significant claims or legal proceedings against us;

     .     announcements of technological innovations or new services by
           us or our competitors;

     .     announcements by us or our competitors of significant
           contracts, acquisitions, strategic partnerships, joint ventures
           or capital commitments;

     .     changes in our liquidity position;

     .     departures of key personnel;

     .     future sales of our common stock; and

     .     announcement of material adverse events related to loans.

     The market prices of the securities of Internet-related and
technology companies are often highly volatile and subject to wide
fluctuations that bear little relation to actual operating performance of
these companies. Also, some companies that have experienced volatility in
the market price of their stock have been subject to securities class
action litigation. Securities class action litigation involving CoolSavings
would result in substantial costs and a diversion of senior management's
attention and resources, and would harm our stock price.

WE DERIVE MOST OF OUR REVENUES FROM SHORT-TERM CONTRACTS WITH OUR
ADVERTISERS

     A majority of our current advertising contracts have stated terms of
less than three months. We may be unsuccessful in securing longer
commitments. Some advertisers prefer short-term contracts because they use
our service to promote limited-time promotional events or seasonal products
and services. The limited duration of our advertising contracts makes it
difficult for us to forecast our revenues. If we cannot renew our contracts
or attract new advertisers, our results of operations and financial
condition will be seriously harmed.



<PAGE>


OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL FLUCTUATIONS

     Our operating results are subject to seasonal fluctuations that may
make our stock price more volatile. Advertising sales in traditional media,
such as television and radio, generally are lower in the first and third
calendar quarters of each year. Further, Internet traffic typically
decreases during the summer months, which in turn may reduce the amount of
advertising to sell and deliver. We anticipate that our future revenues
will continue to reflect these seasonal patterns.

WE DEPEND ON COMPELLING PROMOTIONAL OFFERS BY OUR ADVERTISERS

     Our members' usage of our services, and the resulting attractiveness
of our service to advertisers, depends upon the quality of the promotional
offers we deliver and our members' interest in them. In addition, under
some of our advertising contracts, our revenues depend on members'
responsiveness to specific promotions. We currently consult with our
advertisers about the type and frequency of incentives they offer, but we
cannot control their choice of promotions or their fulfillment of
incentives. If our advertisers' promotional offers are not attractive to
our members, we will not be able to maintain or expand our membership or
generate adequate revenues based on the size of our membership or on the
responses we produce. Moreover, if our members are not satisfied with the
offers our advertisers make available to them, or with the products or
services they receive upon redemption of offers, their negative experiences
might result in publicity that could damage our reputation, which would
harm our efforts to attract and retain members and advertisers.

WE DEPEND ON THE SUCCESSFUL INTRODUCTION OF NEW SERVICES AND FEATURES

     To retain and attract members and advertisers, we believe that we
will need to continue to introduce additional services and new features on
our web site. These new features and services may require us to spend
significant funds on product development and on educating our advertisers
and consumers about our new service offerings. New services and features
may contain errors or defects that are discovered only after introduction.
Correcting these defects may result in significant costs, service
interruptions, loss of advertisers' and members' goodwill and damage to our
reputation. In addition, our successful introduction of new technologies
will depend on our advertisers' ability to adapt to use these technologies,
over which we have no control. If we introduce a service or feature that is
not favorably received, our current members may use our web site and other
services less frequently, our existing advertisers may not renew their
contracts, and we may be unable to attract new members and advertisers.

WE MUST BE ABLE TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH OPERATORS OF
OTHER WEB SITES TO ATTRACT NEW MEMBERS

     We advertise on third-party web sites using banner advertisements to
attract potential new members. Competition for banner and sponsorship
placements on the highest traffic web sites is intense and we may not be
able to enter into these relationships on commercially reasonable terms, or
at all. Even if we enter into or maintain our current relationships with
other web site operators, those sites may not attract significant numbers
of users or increase traffic to our web site. Our business could be harmed
if we do not establish and maintain relationships with other web site
operators on commercially reasonable terms or if our relationships do not
result in additional member registrations on our web site.



<PAGE>


INTELLECTUAL PROPERTY LITIGATION AGAINST US CAN BE COSTLY AND COULD RESULT
IN THE LOSS OF SIGNIFICANT RIGHTS

     We expect that, as the number of services and competitors in Internet
advertising and direct marketing grows, we will be increasingly subject to
intellectual property infringement, unfair competition and related claims
against us. Third parties may also seek to invalidate our United States
Patents, No. 5,761,648, entitled "Interactive Marketing Network and Process
Using Electronic Certificates" and No. 5,855,007, entitled "Electronic
Coupon Communication System." Currently, we are a defendant in two lawsuits
filed by competitors, each of which alleges that our technology or business
methods infringe on the competitors' patent. The lawsuits seek, among other
things, to prevent us from using methods that allegedly violate the
competitors' patents. In addition, competitors have in the past, and may in
the future, name our customers as defendants in these suits, which may
cause these customers to terminate their relationships with us which, in
turn, could harm our business. While we intend to defend these actions
vigorously, our efforts may not be successful. Our failure to prevail in
this litigation could result in:

     .     our paying monetary damages, which could be tripled if the
           infringement is found to have been willful;

     .     an injunction requiring us to stop offering our services in
           their current form;

     .     our having to redesign our technology and business methods,
           which could be costly and time-consuming even where a redesign
           is feasible; or

     .     our having to pay fees to license intellectual property rights,
           which may result in unanticipated or higher costs.

     Because of the ongoing technical efforts of others in our market and
the relatively recent introduction of our technology, we may continue to be
involved with one or more of our competitors in legal proceedings to
determine the parties' rights to various intellectual property, including
the right to our continued ownership of our existing patents. Our failure
to prevail in these proceedings could harm our business.  See "Item 3 -
Legal Proceedings"

     We cannot predict whether other third parties will assert claims of
infringement or similar charges against us, or whether any past or future
claims will harm our business. We believe that participants in our market
are increasingly attempting to obtain patent protection for their business
methods. We cannot predict when or if patents will result from these
efforts, or whether any of these third parties' patents will cover aspects
of our business. The details of currently pending United States patent
applications are not publicly disclosed either until the patent is issued
or until 18 months from filing, depending on the application filing date.
Any third-party claim, with or without merit, could be time-consuming,
result in costly litigation and damages, cause us to reduce or alter our
services, delay or prevent service enhancements or require us to enter into
royalty or licensing agreements.

     In addition, legal standards regarding the validity, enforceability
and scope of intellectual property in Internet-related businesses are
unproven and continue to evolve. In this legal environment, we may be
required to license other parties' proprietary rights in an effort to
clarify our ability to conduct business or develop new services. Royalty or
licensing agreements, if required, might not be available on terms
acceptable to us, or at all. If there is a successful claim of infringement
against us and we are unable to develop non-infringing technology or
license the infringed or similar technology on a timely basis, our business
could be substantially harmed.



<PAGE>


PROTECTING OUR PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS MAY BE COSTLY AND
MAY DISTRACT OUR MANAGEMENT

     We regard the protection of our patent rights, copyrights, service
marks, trademarks, trade dress and trade secrets as important to our future
success. However, the steps we take to protect these and other proprietary
rights will be costly, may require significant management resources and may
be inadequate. If we are unsuccessful in protecting our proprietary rights,
our business may be seriously harmed.

     PATENTS

     We have two issued United States patents and several pending United
States and foreign patent applications directed to different aspects of our
technology and business processes. Nevertheless, it is possible that:

     .     our United States patents and any other patent we may obtain
           could be successfully challenged by third parties, which could
           limit or deprive us of the right to prevent others from
           exploiting the electronic certificate issuing and processing
           method or other inventions claimed in our current or future
           patents;

     .     current and future competitors could devise new methods of
           competing with our business that are not covered by our issued
           patents or any patents we may obtain, or against which our
           patents and any other patent we may obtain may be ineffective;

     .     our pending patent applications may not result in the issuance
           of patents;

     .     our ability to receive royalties for use of our patents
           by third parties may be limited; and

     .     a third party may have or obtain one or more patents that cause
           specific aspects of our business to be restricted or that
           require us to pay license fees.

     In addition, we cannot predict how recently enacted United States
laws may impact our proprietary rights. For example, the American
Inventor's Protection Act, which became law in October 1999, may grant
partial or full immunity to certain qualified methods of doing business
from the full exclusionary rights otherwise afforded to validly issued
patents. There currently is no substantial judicial precedent addressing
this new law. We are also uncertain as to whether countries other than the
United States will grant patents for inventions pertaining to Internet-
related businesses, or as to the extent of protection those foreign patents
would afford if issued. As in the United States, the legal standards
applied abroad for intellectual property in Internet-related businesses are
evolving and unproven. Any ruling or legislation that reduces the validity
or enforceability of our patents may seriously harm our business.

     We presently have two lawsuits pending against companies we believe
have infringed on our patents.  We believe that we have settled our lawsuit
with one of these companies, and the court in that case has recently issued
an initial report and recommendation concurring with our belief and
specifying proposed settlement terms.  This litigation has been costly,
and, if settlement is not finalized, it is likely to continue over the
course of several years.  The outcome of these lawsuits, as well as any
other lawsuits we may file, may not be favorable to us. We may not prevail
and prevent others from infringing on our patents and using our proprietary
rights. Furthermore, the companies we have sued have filed counterclaims or
separate lawsuits against us seeking damages or to prevent us from using
features of our system or business, and both defendants are taking steps in
the United States Patent and Trademark Office to contest our patent rights.
In one of these cases, the United States District Court for the Northern
District of Illinois ruled we did not infringe the patent.  An appeal is
pending.


<PAGE>


     We expect that, like other participants in our market, we will
increasingly be subject to infringement claims as the number of services
and competitors in our industry segment grows. Any infringement claim,
regardless of its merit, could be time-consuming, result in costly
litigation, cause service modifications or delays or require us to enter
into royalty or licensing agreements. Licenses for third party patents
might not be available on terms that are acceptable to us or at all. As a
result, any claim of infringement could harm our business, results of
operations and financial condition.

     TRADEMARKS, COPYRIGHTS AND TRADE SECRETS

     We rely on a combination of laws and contractual restrictions to
establish and protect our proprietary rights. We generally have entered
into confidentiality and invention assignment agreements with our employees
and contractors, and into non-disclosure agreements with parties with which
we conduct business, in order to limit access to and disclosure of our
proprietary information. These contractual arrangements and other steps we
have taken to protect our intellectual property may not prevent
misappropriation of our proprietary rights or deter independent third-party
development or use of similar intellectual property. In addition, we have
registered and have applied for registration of trademarks and service
marks in the United States and in other countries. However, our pending
registrations might not be issued and our registered marks may not prevent
others from using similar marks.

     DOMAIN NAMES

     We currently hold the Internet domain name coolsavings.com, as well
as various other related names. The requirements for holding domain names
could change. As a result, we may not acquire or maintain the
"coolsavings.com" domain name in all of the countries in which we conduct
business or in which we wish to conduct business in the future. This could
impair our efforts to build brand recognition and to increase traffic to
our web site. We also could be subject to disputes over our ownership of
our domain names, which could be costly and disruptive.

     LICENSES

     In the future, we may license portions of our intellectual property,
including our issued patent or coupon technology.  As of March 1, 2002, we
have granted licenses to eight competitors under our patent, several on the
condition that they restrict their coupon distribution in ways acceptable
to us. Several of these license agreements involve the payment to us of
royalties or license fees.  If the nature or scope of the licenses were
disputed, we would need to institute proceedings to enforce our rights
under these agreements or under our patent.

WE MAY LOSE BUSINESS OR INCUR LIABILITIES TO OUR ADVERTISERS DUE TO
UNCERTAINTIES OR INACCURACIES IN OUR DATABASE INFORMATION

     It is important to our advertisers that we accurately record our
members' demographics, track our delivery of offers and advertisements and,
in some instances, redemptions of incentives offered through CoolSavings.
We have developed systems designed to record information about our members'
demographic profiles, usage of our web site and other member information.
If these systems do not perform as intended, we may not be able to evaluate
accurately our members' household characteristics or the success of an
advertiser's promotional campaign. Advertisers' willingness to purchase our
services depends in part on the size of our membership base. In addition,
in some cases our advertising rates increase as our registered membership
increases and some of our advertising contracts require us to maintain or
attain specified membership or usage levels. It is difficult to report our


<PAGE>


membership numbers accurately because some individuals may register more
than once under different e-mail addresses, and members of households
already registered with us may subsequently register themselves
individually. Many of our members were registered on our web site by other
members of their households and tend to use our web site less frequently
than the members who registered them, if at all. Furthermore, we rely on
the accuracy of the demographic, income and other information provided by
our registering members. If advertisers perceive our tracking and
evaluations to be unreliable or if too much of our members' self-reported
information proves to be inaccurate, we may lose current and potential
advertisers, suffer erosion in our advertising rates or face disputes over
proper advertising charges.

FAILURE TO PROMOTE AND PROTECT OUR BRAND WILL HARM OUR BUSINESS

     We believe that strengthening our brand will be increasingly
important because our market is competitive and has low barriers to entry.
Our ability to promote and position our brand depends on the success of our
marketing efforts and whether we can provide high quality services that
motivate our members to use CoolSavings. If our brand enhancement strategy
is unsuccessful, our business will be harmed.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS

     The market for e-marketing services is new, rapidly evolving and
intensely competitive. Barriers to entry for companies in our market are
low, and current and potential competitors can launch new web sites and e-
marketing services at relatively low cost.

     Currently, we compete with direct and promotional marketing companies
in several fields:

     .     direct marketers, such as Acxiom and Experian;

     .     promotional marketers, such as Valassis, NewsAmerica, Catalina;

     .     online marketers, such as MyPoints, Yahoo, AOL and YesMail.

     We also face competition from traditional direct marketers, including
leading distributors of traditional coupons by mail or newspaper inserts
and from companies offering affinity rewards tied to responses to
advertisements. A leading distributor of traditional newspaper-insert
coupons, which has significant existing relationships with advertisers such
as consumer packaged goods companies, has begun to compete against us
directly by delivering their promotions over the Internet. We also compete
with other web sites, portals and advertising networks, as well as
traditional offline media such as television, radio and print, for a share
of advertisers' total advertising budgets and for consumers' attention.

     Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger customer or user bases, and
significantly greater financial, marketing, technical and other resources
than we do. In addition, our competitors may be acquired by, receive
investments from or enter into other commercial relationships with, larger,
well-established and well-financed companies. Therefore, some of our
competitors may be able to devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing policies and devote
substantially more resources to web site and systems development. They may
also try to attract advertisers by offering free services. Increased
competition may cause us to lose brand recognition and market share
and could otherwise harm our business.



<PAGE>


SOME OF OUR CUSTOMERS ARE INTERNET COMPANIES THAT REPRESENT POTENTIAL
CREDIT RISKS

     Historically, a significant portion of our revenues have been derived
from sales of advertising to online retailers and service providers. Many
of these advertisers have (and continue to) experience financial
difficulties.  If these advertisers fail to achieve commercial success, our
business may continue to suffer.

OUR FAILURE TO ATTRACT, ASSIMILATE AND RETAIN HIGHLY SKILLED PERSONNEL MAY
SERIOUSLY HARM OUR BUSINESS

     Our future success depends on the continued services of our senior
management and other key sales and technical personnel, particularly
Matthew Moog, our President and Chief Executive Officer, David Arney, our
Chief Financial Officer, John J. Adams, our Chief Operating Officer, Ken
Treske, our Chief Marketing Officer, and David Desser, our Vice President
of Business Affairs and General Counsel.

     In the past year, we experienced substantial changes to our senior
management team. Steven M. Golden, formerly our Chairman and Chief
Executive Officer and Paul Case, formerly our Chief Financial Officer, left
the senior management team in July 2001. Mr. Golden remains a member of the
Board of Directors. Mr. Moog has been Chief Executive Officer since July
2001 in addition to his duties as President; the remaining members of the
senior management team either have been hired or promoted to their
positions since July 2001.  Except for an employment agreement and "key
person" life insurance policy with Mr. Moog, we do not have employment
agreements with any of our key personnel and maintain no "key person" life
insurance policies. The loss of the services of any of our senior
management or other key employees would likely have a negative effect on
our business, results of operations and financial condition.  The changes
to our senior management team were disruptive of our business.  If our
senior management team is unable to work together effectively, our business
may be harmed.

     Also in 2001, we experienced a significant contraction in our
workforce necessitated by overall economic conditions, and specifically a
decline in the demand for direct-marketing services. From a peak of 321
employees in March of 2001, we ended 2001 with 119 employees.  Our future
success also depends on our ability to identify, attract, retain and
motivate highly skilled employees. Competition for the best employees in
our industry remains intense. We have occasionally encountered and may
continue to encounter difficulties in hiring and retaining highly skilled
employees, particularly qualified software developers for our web site and
database systems. We may be unable to retain our key employees or identify,
attract, assimilate or retain other highly qualified employees in the
future, which may in turn harm our business.


OUR REPUTATION AND BUSINESS COULD BE DAMAGED IF WE ENCOUNTER SYSTEM
INTERRUPTIONS OR CAPACITY LIMITATIONS

     We seek to generate a high volume of traffic and transactions on our
web site. Our database must also handle a large volume of member data and
information about members' usage of our web site. The satisfactory
performance, reliability and availability of our web site, database systems
and network infrastructure are critical to our reputation and our ability
to attract and retain large numbers of members. Our revenues depend on
promotional offers being readily available for members and our ability to
process their coupon downloads, e-mail responses or other transactions on
our web site. Any system interruptions that result in the unavailability of
our service or reduced member activity would impair the effectiveness of
our service for advertisers. Interruptions of service may also inhibit our
ability to attract and retain members, which in turn will hinder our sales
and marketing efforts. We have experienced periodic system interruptions,
which may occur from time to time in the future.



<PAGE>


     Additionally, acts of sabotage, known as denial of service attacks,
on prominent, high traffic web sites have caused extended interruptions of
service on those web sites. Like other operators of web sites, we could
also face system interruptions or shutdown as a result of a denial of
service attack.  Concerns about the security of transactions conducted on
the Internet and consumer privacy may inhibit the growth of the Internet
generally, and online commerce in particular. Any compromise of security
involving Internet-based transactions could result in negative publicity
and deter people from using the Internet or from using it to conduct
transactions that involve transmitting confidential information, such as
registering for membership or purchasing goods and services. This could
harm our business because most of our advertisers use our services to
encourage people to purchase goods or services on the Internet.

     A substantial increase in rate of traffic on our web site will
require us to expand and upgrade our technology, processing systems and
network infrastructure. Any unexpected upgrades could be disruptive and
costly. In addition, our existing systems may encounter unexpected problems
as our member base expands. Our failure to handle the growth of our
databases could lead to system failures, inadequate response times or
corruption of our data, and could negatively affect our business, results
of operations and financial condition. We may be unable to expand and
upgrade our systems and infrastructure to accommodate this growth in a
timely manner. Any failure to expand or upgrade our systems could damage
our reputation and our business.

     Furthermore, the increased use of the Internet has caused frequent
interruptions and delays in accessing and transmitting data over the
Internet. If the use of the Internet continues to grow rapidly, the
Internet's infrastructure may not continue to support the demands placed on
it and its performance and reliability may decline. Interruptions or delays
in Internet transmissions may disrupt our members' ability to access
advertisers' offers on our web site and our ability to send targeted e-
mail, which may in turn seriously harm our business and financial results.
We also rely on web browser technology to create and target promotional
offers. If access to these web-based systems is interrupted, our ability to
disseminate new offers will be impaired, which could cause lost revenues or
disputes with our advertisers.

WE RELY ON THIRD-PARTY SERVICE AND EQUIPMENT PROVIDERS, AND ANY DISRUPTION
OR FAILURE IN THE SERVICES OR THE COMPUTER HARDWARE THEY PROVIDE WILL HARM
OUR BUSINESS

     We rely on a third-party service provider to provide access to our
web site and support its operation.  Our website infrastructure is co-
located at the suburban Chicago facility of Exodus Communications, which
filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2001.
Any interruption or failure in this service or deterioration in its
performance could disrupt our business. Our support arrangement with this
provider is for a term of one year and may be canceled on 30 days notice in
certain circumstances. In the event this arrangement is terminated, we may
not be able to find alternative service providers on a timely basis, on
terms acceptable to us or at all, which in turn would harm our business. In
addition, we rely on software licenses from third parties. If these
licenses are terminated or if such software is no longer supported by its
manufacturer, we may not be able to find and install satisfactory alternate
software on a timely basis, on terms acceptable to us or at all, which will
harm our business.



<PAGE>


     Our success and our ability to attract new members and motivate our
members to respond to our advertisers' offers depends on the efficient and
uninterrupted operation of our computer and communications hardware
systems. Our web servers and the database behind our system as well as the
servers we use to perform data analysis are currently located at an Exodus
Communications data center in Oak Brook, Illinois. Currently, all site
traffic is directed to the Exodus system and we maintain a fully redundant
version of our entire system at our Chicago headquarters. The computer
systems at each of our two hosting sites are vulnerable to damage or
interruption from floods, fires, power loss, telecommunication failures,
and other natural disasters. In addition, the backup system in our Chicago
facility has only two hours of emergency back-up power. The occurrence of a
natural disaster or other unanticipated problems at our facility or at the
Exodus facility could result in interruptions in or degradation of our
services. Our business interruption insurance may not adequately compensate
us for resulting losses.

     Furthermore, the computer servers running our system are vulnerable
to general mechanical breakdown or component failure, computer viruses,
physical or electronic break-ins, sabotage, vandalism and similar
disruptions, which could lead to loss or corruption of data or prevent us
from posting offers on our web site, sending e-mail notifications of new
offers or delivering coupons or other certificates to our members. System
failure or degradation resulting from under-capacity or from any of these
risks could harm our business.

WE MAY BE SUBJECT TO CLAIMS OR REGULATORY INVESTIGATIONS AS A RESULT OF OUR
DATA ANALYSIS ACTIVITIES

     The information in our database is an integral part of our business.
We have designed our technology infrastructure and services to allow us to
aggregate data regarding specific member behavior. We have a privacy policy
that governs how we use information about our members.  We currently do not
sell member-identifying information to third parties without the consent of
the member and have no plans to do so in the future. Furthermore, our e-
mail notices and newsletters are sent only to members who have elected to
receive them.  However, some people who receive promotions from us may
still be unhappy that we contacted them.  In addition, while we strictly
protect the identity of individual members, we do provide advertisers with
aggregate information regarding member demographics, shopping preferences
and past behavior.

     Our use of this aggregated information may cause dissatisfaction
among our members or otherwise lead to negative publicity. There has been
substantial publicity, governmental investigations and litigation regarding
privacy issues involving the Internet and Internet-based advertising. To
the extent that our data mining and/or other activities conflict with any
privacy protection initiatives or if any private or personally identifiable
information is inadvertently made public, we may become a defendant in
lawsuits or the subject of regulatory investigations relating to our
practices in the collection, maintenance and use of information about, and
our disclosure of these information practices to, our members. Litigation
and regulatory inquiries of these types are often expensive and time
consuming and their outcome is uncertain. We may need to spend significant
amounts on our legal defense, senior management may be required to divert
its attention from other portions of our business, and we may be required
to make changes to our present and planned products or services, any of
which could materially and adversely affect our business, financial
condition and results of operations. If, as a result of any of these
proceedings, a judgment is rendered or a decree is entered against us, it
may materially and adversely affect our business, financial condition and
results of operations.



<PAGE>


OUR BUSINESS WILL BE HARMED IF OUR ONLINE SECURITY MEASURES FAIL

     Because our efforts to attract and retain members depend, in part, on
potential members' expectations of privacy in using our services, our
business could be damaged by any security breach of our database or web
site. We may be required to spend significant capital and other resources
to protect against security breaches or to alleviate problems caused by
these breaches. Someone circumventing our security measures could
misappropriate proprietary information, corrupt our database or otherwise
interrupt our operations. We could also be subject to liability as a result
of any security breach or misappropriation of our members' personal data.
This could include claims for unauthorized purchases with credit card
information, impersonation or other similar fraud claims, as well as claims
based upon other misuses of personal information, such as unauthorized
marketing. These claims could result in costly litigation and could limit
our ability to attract and retain advertisers and members. Our security
measures may fail to prevent security breaches. Any failure to prevent
security breaches will damage our reputation and harm our business.

WE MAY BE LIABLE FOR SUPPLYING INACCURATE PROMOTIONAL INFORMATION TO
CONSUMERS

     We may face liability if the promotional information in the offers
available to our members is inaccurate. Our employees may make errors in
posting our advertisers' promotions. Any liabilities which we may incur
because of inaccurate information in the offers that we deliver could harm
our business, results of operations and financial condition. Additionally,
any negative publicity generated as a result of inaccurate information in
the offers we deliver could damage our reputation and diminish the value of
our brand name.

WE MAY BE HARMED IF OUR ADVERTISERS FAIL TO HONOR THEIR PROMOTIONS ON OUR
WEB SITE OR TO COMPLY WITH APPLICABLE LAWS

     Our success depends largely upon retailers honoring our electronic
and printed coupons and upon advertisers reliably delivering and accurately
representing the listed goods and services. We have occasionally received,
and expect to continue to receive, complaints from our members about
retailers' failure to honor our coupons or about the quality of the goods
and services featured in our promotions. These complaints may be
accompanied by requests for reimbursement or threats of legal action
against us. Any resulting reimbursements or related litigation could be
costly for us, divert management attention, increase our costs of doing
business or otherwise harm our business, financial condition or results of
operations. In addition, our advertisers' promotion of their goods and
services may not comply with federal, state and local laws. Our role in
facilitating advertisers' sales activities may expose us to liability under
these laws. If we are exposed to this kind of liability, we could be
required to pay substantial fines or penalties, redesign our web site or
business processes, discontinue some of our services or otherwise spend
resources to limit our liability.

WE DEPEND ON WIDESPREAD ACCEPTANCE OF ONLINE DIRECT MARKETING AND
PROMOTIONS AND THE CONTINUED GROWTH OF ONLINE COMMERCE

     Our success depends on the continued growth and acceptance by both
consumers and advertisers of online direct marketing and other promotional
services available through the Internet. Although incentive promotions and
direct marketing have been provided for many years through newspaper
inserts, direct mailing and other conventional marketing and sales
channels, they have only recently been offered on the Internet. Many of our


<PAGE>


current or potential advertising customers, particularly traditional
offline businesses, have little or no experience using the Internet for
advertising purposes, and may be reluctant to spend money on our services.
As a result, we face a longer sales cycle when dealing with traditional
offline businesses. At times, these sales cycles can last more than a year.
In addition, some traditional retailers may not readily accept our
computer-generated certificates as valid, in part because of their
cashiers' lack of familiarity with them and the perceived risk that these
coupons can be counterfeited. The other services we offer, including the
use of targeted e-mails to alert consumers to savings opportunities, also
represent new marketing methods whose acceptance by consumers and
advertisers is less certain than traditional marketing methods. Although we
do not send unsolicited e-mail, commonly known as "spam," negative public
perception associated with "spam" could reduce the demand for our services.

     In addition, we are dependent upon the continued growth of the
Internet as a medium for commerce. Demand for services and products sold
over the Internet is uncertain for a number of reasons, including concerns
related to the security of transactions, network reliability and poor
performance. Changes in or insufficient availability of telecommunications
services to support the Internet also could result in slower response times
and reduced usage of the Internet. If use of the Internet does not continue
to grow, grows more slowly than expected or does not become a viable
commercial marketplace, our business, results of operations and financial
condition will suffer.

CHANGES IN CONSUMER AND ADVERTISER TRENDS COULD HARM OUR BUSINESS

     We derive substantially all of our revenues from fees charged to
advertisers for our promotional services. Therefore, we will be affected by
changing trends in retail advertising, such as the trend away from periodic
promotions and toward "everyday low prices." In addition, many of our
advertisers are national retailers and suppliers of consumer products and
services. These businesses are affected by the general economy as well as
consumer confidence, which has at times diminished despite otherwise strong
financial conditions. Consumer spending also can be affected by trends
related to lifestyle, such as changing tastes in fashion or entertainment.
Any decline in demand for our services as a result of changes in consumer
or advertiser trends could harm our business, results of operations and
financial condition.

WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL DEVELOPMENTS AND
EVOLVING INDUSTRY STANDARDS

     The Internet is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product
announcements, introductions and enhancements, and changing consumer and
advertiser demands. Our future success will depend on our ability to adapt
our services to rapidly changing technologies and evolving industry
standards and to continually improve the performance, features and
reliability of our services. For example, we may be required to adapt our
services to be compatible with Internet-connected devices other than
traditional personal computers, such as handheld and wireless devices. We
may also need to adapt to evolving standards resulting from the convergence
of the Internet, television and other media. The widespread adoption of new
Internet, networking or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to
modify or adapt our services or infrastructure.

FEDERAL, STATE AND LOCAL GOVERNMENTS MAY FURTHER REGULATE THE INTERNET,
INTERNET ADVERTISING AND PRIVACY WHICH COULD SUBSTANTIALLY HARM OUR
BUSINESS

     The adoption or modification of laws or regulations relating to the
Internet, Internet-based advertising and privacy could harm our business.
In particular, our business could be severely damaged by any regulatory
restrictions on our collection or use of information about our members.



<PAGE>


     Laws and regulations that apply to Internet advertising and
communications and Internet users' privacy are becoming more prevalent. For
example, the United States Congress and Federal Trade Commission have
adopted laws and regulations regarding the online collection and use of
information from children and the content of Internet communications, and
various states regulate e-mail marketing. However, even in areas where
there has been some legislative action, the laws governing the Internet
remain largely unsettled. There is no single government body overseeing our
industry, and some existing state laws have different and sometimes
inconsistent application to our business. It may take years to determine
whether and how existing laws, such as those governing intellectual
property, privacy, libel, taxation and the need to qualify to do business
in a particular state, apply to the Internet and Internet advertising.
Also, we have conducted trivia quizzes and other contests and sweepstakes
on our web site, which may be subject to gaming and sweepstakes laws. Our
attempts to comply with these laws may be inadequate, in part because the
effect of these laws on our activities is often unclear.

     We expect that regulation of the Internet and Internet advertising
will intensify. New laws could slow the growth in Internet use and decrease
the acceptance of the Internet as a commercial medium, which would harm our
business. For example, a number of proposals to restrict the collection of
information about Internet users and to tax Internet-based transactions are
under consideration by federal, state, local and foreign governmental
organizations. A three-year federal moratorium on new taxes on internet
access expired in October 2001, and was extended in November 2001 for two
years. This moratorium does not preempt state tax laws; there is no federal
law preempting the levy of state sales taxes to online e-commerce
activities. The taxation of online transactions or other new regulations
could increase our costs of doing business or otherwise harm us by making
the Internet less attractive for consumers and businesses. In addition,
existing laws such as those governing intellectual property and privacy may
be interpreted to apply to the Internet and Internet advertising.

     Any application of existing laws and regulations to the Internet, new
legislation or regulation that imposes stricter restrictions on privacy,
consumer protection or advertising practices, any government investigation
of our privacy practices or other business methods, or the application of
laws from jurisdictions whose laws do not currently apply to us could:

     .     create uncertainty in the marketplace that could reduce demand
           for our services;

     .     limit our ability to collect and to use data from our members,
           which could prevent us from attracting and retaining
           advertisers;

     .     result in expensive litigation, costly and disruptive efforts
           to respond to governmental investigations and burdensome fines
           or penalties;

     .     require us to redesign our web site, registration process,
           database or targeting methods, any of which could be expensive
           and disruptive to our business;

     .     increase the cost of delivering our services to advertisers;

     .     require us to qualify to do business in additional
           jurisdictions, or subject us to liability for having failed to
           qualify to do business wherever our members reside;

     .     reduce the effectiveness of our targeted promotional services;
           or

     .     in some other manner harm our business, results of operations
           and financial condition.



<PAGE>


OUR SERIES B PREFERRED STOCKHOLDERS BENEFICIALLY OWN APPROXIMATELY 56% OF
OUR OUTSTANDING CAPITAL STOCK AND HAVE THE ABILITY TO EXERCISE SIGNIFICANT
CONTROL OVER US WHICH MAY DETER THIRD PARTIES FROM ACQUIRING US

     As of March 1, 2002, the holders of our Series B Preferred Stock
beneficially owned approximately 56% of our outstanding capital stock and
had the right to acquire additional shares of stock through the exercise of
warrants and purchase options which would, if exercised in full, increase
the holders ownership to approximately 72% of our outstanding capital
stock.  As a result, these stockholders have the ability to control all
matters requiring approval by our stockholders, including the election and
removal of directors and the approval of any merger, consolidation or sale
of all or substantially all of our assets. In addition, pursuant to the
terms of our Certificate of Incorporation, the Series B Preferred
stockholders are entitled to designate not less than a majority of the
Board of Directors of the Company. Among other limitations, without the
approval of the holders of at least a majority of the outstanding shares of
Series B Preferred Stock, we may not act to:

     .     amend our charter document or our bylaws;

     .     merge or consolidate with any other company or sell all or
           substantially all of our assets;

     .     make acquisitions of other businesses or assets or enter into
           joint ventures or partnerships with other entities that would
           involve the payment of consideration of $1 million or more;

     .     purchase, redeem or otherwise acquire for value any shares of
           our capital stock (with certain exceptions); or

     .     authorize or issue equity securities or securities exercisable
           for or convertible into equity securities other than for cash
           and shares issuable upon conversion and exercise of securities
           outstanding on the date of issuance of the Series B Preferred
           Stock and shares issuable under the 2001 Stock Option Plan.

     These restrictions provide the holders of the Series B Preferred
Stock with significant control over us and may well discourage others from
initiating potential merger, or other change of control transactions, which
could cause our stock price to decline.


ITEM 2.  PROPERTIES

     Our executive and operating offices are currently located in Chicago,
Illinois, in a 63,408 square foot facility. We occupy 31,919 square feet,
have sublet 8,224 square feet, and are attempting to sublet the remaining
space.  This lease expires in 2010. We lease 3,251 square feet of office
space in San Francisco, California, which lease expires on July 31, 2005,
and 3,078 square feet of office space in New York City, New York, which
expires on June 30, 2005, each for use as a sales office.




<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

     On October 21, 1998, we instituted a lawsuit in the Northern District
of Illinois against Catalina Marketing International, Inc., and its
affiliate Supermarkets Online, Inc. for infringement of our United States
Patent No. 5,761,648, seeking unspecified damages and a permanent
injunction against further infringement. The defendants have filed
counterclaims alleging invalidity of our patent and are seeking unspecified
damages and injunctive relief. In addition, on February 18, 2000, Catalina
Marketing filed a request for re-examination of our United States Patent
No. 5,761,648 with the United States Patent and Trademark Office, which
request was granted on May 2, 2000. Therefore, our United States Patent No.
5,761,648 will be re-examined, which may result in the patent being
narrowed in scope or found invalid. With the exception of discovery related
to a fraud claim, the court has suspended the lawsuit pending the outcome
of the re-examination of our patent.

     On November 15, 1999, Catalina Marketing filed a separate lawsuit
against us in the United States District Court for the Middle District of
Florida. The complaint alleges that our systems and methods infringe
Catalina Marketing's United States Patent No. 4,674,041, and seeks to
enjoin us from further infringing its patent. After the case was
transferred, the U.S. District Court for the Northern District of Illinois
ruled that we did not infringe the '041 patent.  An appeal is pending.  We
intend to defend the action vigorously.

     On February 12, 2000, Supermarkets Online, an affiliate of Catalina
Marketing, filed a lawsuit against us in the United States District Court
for the Central District of California. The complaint alleges that our
systems and methods infringe its United States Patent No. 6,014,634, and
seeks unspecified damages and injunctive relief. The lawsuit is currently
stayed (except that fact discovery is permitted). This stay may be lifted
at any time.  We have filed with the Patent and Trademark Office a request
for a re-examination of the '634 patent, which request for re-examination
was granted in March 2001.

     On August 23, 1999, we instituted a lawsuit in the Northern District
of Illinois against Brightstreet.com, Inc. ("Brightstreet") for infringe-
ment of our United States Patent No. 5,761,648, seeking unspecified damages
and a permanent injunction against further infringement. The defendant has
filed counterclaims alleging invalidity and unenforceability of our patent
and are seeking unspecified damages and injunctive relief.  We believe that
we have settled our lawsuit with BrightStreet, and the court has recently
issued an initial report and recommendation concurring with our belief and
specifying proposed settlement terms.

     Brightstreet has advised us that it is taking steps in the United
States Patent and Trademark Office to contest our rights in our United
States Patent No. 5,761,648. If Brightstreet is successful, we may lose
some or all of our rights in our United States Patent No. 5,761,648.

     On February 15, 2001, we settled our patent infringement lawsuit
against H.O.T! Coupons, Inc. in the United States District Court for the
Northern District of Illinois for infringement of our Patent No. 5,761,648,
"Interactive Marketing Network and Process Using Electronic Certificates."
Pursuant to the settlement agreement under which H.O.T! Coupons, Inc.
relinquished the right to contest, or assist any person or entity in the
contest of, the validity and enforceability of our '648 patent. H.O.T!
Coupons, Inc. was granted a limited, non-exclusive, royalty-bearing
license.



<PAGE>


     The foregoing pending lawsuits, while pending for at least two years,
are nevertheless at an early stage (except to the extent we may have
reached a settlement in one of the lawsuits) and may not be resolved
favorably to us. For example, we may not prevail and prevent others from
using our proprietary rights. We may be required to alter or stop selling
our services, or to pay costs and legal fees or other damages in connection
with these cases and the various counterclaims that have been asserted
against us. Our patents or future patents may be found invalid or
unenforceable. Furthermore, additional counterclaims, separate lawsuits or
other proceedings may be brought against us to invalidate our patents or
force us to change our services or business methods.

     We may be involved in additional litigation, investigations or other
proceedings in the future. Any litigation, investigation or proceeding,
with or without merit, could be costly and time-consuming and could divert
our management's attention and resources, which in turn could harm our
business and financial results.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.

     On December 10, 2001, the holders of the Series B Preferred Stock
designated and elected R. Bruce Bradley, Guy R. Friddell III and Karl B.
Quist to our Board of Directors.



                                PART II


ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND
         RELATED SHAREHOLDER MATTERS

MARKET INFORMATION

     Our common stock is traded on the Nasdaq Over the Counter Bulletin
Board under the symbol "CSAV.OB".  From May 19, 2000 through November 20,
2001 our common stock was traded on the Nasdaq National Market System under
the symbol "CSAV".  The following table presents the per share high and low
close prices of our common stock for the periods indicated as reported by
the Nasdaq Bulletin Board or the Nasdaq National Market, as the case may
be.

                                                    High       Low
                                                   -----      -----
Fiscal Year Ended December 31, 2001
     First Quarter 2001                            $1.94      $0.42
     Second Quarter 2001                            0.52       0.28
     Third Quarter 2001                             0.42       0.15
     Fourth Quarter 2001                            0.25       0.05

Fiscal Year Ended December 31, 2000
     Second Quarter 2000                            7.13       3.06
     Third Quarter 2000                             6.13       2.13
     Fourth Quarter 2000                            2.75       0.47

     On March 1, 2002, the closing sales price of the common stock was
$0.13 and our common stock was held by approximately 195 holders of record.

     We have never declared nor paid any cash dividends on our common
stock. We currently anticipate that we will retain any future earnings for
the development and operation of our business. In addition, our credit
facility with American National Bank, Chicago, Illinois, currently
prohibits the payment of cash dividends on our capital stock. Accordingly,
we do not anticipate paying cash dividends on our capital stock in the
foreseeable future.


<PAGE>


     The holders of the Series B Preferred Stock are entitled to receive
8% per annum "in-kind" stock dividends.  As of December 31, 2001, 722,886
shares of Series B Preferred Stock are issuable with respect to the
accrued, but not declared, dividends.

RECENT SALES OF UNREGISTERED SECURITIES

     Within the period covered by this report, we have issued and sold
unregistered securities in the amounts, at the times and for the aggregate
amounts of consideration listed as follows:

     In March 2001, the Company issued warrants to purchase 1,050,000
shares of common stock to three accredited investors.  Two of those
investors are members of the Company's Board of Directors.  The warrants
had an exercise price of $1.25 per share and were cancelled on November 12,
2001 in conjunction with the sale of the Series C Preferred Stock.

     In July 2001, we issued warrants to Landmark to purchase shares of
common stock equaling 19.99% of the equity of the Company at that time
(7,818,731 shares).  Pursuant to the terms of the warrant, it automatically
converted into a warrant to purchase an initial 10,000,000 shares of the
common stock of the Company upon Landmark's equity investment in the
Company on November 12, 2001.

     On November 12, 2001, the Company issued to Landmark 65,057,936
shares of $0.001 par value Series B Preferred Stock for an aggregate
purchase price of $10.1 million.  The Series B Preferred Stock is
convertible into common stock initially on a one-for-one basis (with anti-
dilution protection) and has an 8% quarterly dividend payable in additional
shares of Series B Preferred Stock. The Series B Preferred Stock is subject
to certain redemption requirements outside the control of the Company.
Landmark also has an option to apply all advances made and interest accrued
under the Grid Note to the purchase (at a price per share of $0.1554) of
additional shares of Series B Preferred Stock upon the occurrence of
certain events.

     As a condition to the consummation of the Landmark Transaction on
November 12, 2001, the Company issued to three individuals (two of whom are
directors of the Company) 13 million shares of $0.001 par value Series C
Preferred Stock.  The Series C Preferred Stock was given in exchange for
the Director's Notes, the related accrued interest and the accompanying
warrants to purchase 1,050,000 shares of common stock previously issued to
such individuals.

     The recipients of the above securities in each such transaction
represented their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates and
instruments issued in such transactions. All recipients had access, through
their relationship with us, to information about us.  The above shares were
issued in reliance on an exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended.


ITEM 6.  SELECTED FINANCIAL DATA

     The statement of operations data set forth below for the years ended
December 31, 2001, 2000 and 1999 and the balance sheet data as of
December 31, 2001 and 2000 have been derived from audited financial
statements included elsewhere within this document. The statement of
operations data for the period ended December 31, 1998 and 1997 and the
balance sheet data as of December 31, 1999, 1998 and 1997 are derived from
audited financial statements that do not appear in this report.

     You should read the selected financial data set forth below with the
financial statements and related notes and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are
included elsewhere in this report.


<PAGE>


<table>

<caption>
                                                             Year Ended December 31,
                                 ----------------------------------------------------------------------
                                        2001          2000           1999         1998          1997
                                     ----------    ----------     ----------   ----------    ----------
                                             (in thousands, except share and per share data)

                                 <c>           <c>            <c>          <c>           <c>
Statement of Operations Data:
  Net revenues. . . . . . . . . .    $   22,173    $   39,866     $   12,916   $    1,143    $      110
  Cost of revenues. . . . . . . .         5,656         7,028          1,818          428           148
                                     ----------    ----------     ----------   ----------    ----------
  Gross profit (loss) . . . . . .        16,517        32,838         11,098          715           (38)
                                     ----------    ----------     ----------   ----------    ----------
  Operating expenses:
    Sales and marketing . . . . .        17,446        41,607         17,838        2,494         1,202
    Product development . . . . .         5,868         7,764          4,503        1,217           719
    General and administrative. .        18,859        22,845          5,890        2,350           766
                                     ----------    ----------     ----------   ----------    ----------
      Total operating expenses. .        42,173        72,216         28,231        6,061         2,687
                                     ----------    ----------     ----------   ----------    ----------
      Loss from operations. . . .       (25,656)      (39,378)       (17,133)      (5,346)       (2,725)
      Interest income (expense),
        net . . . . . . . . . . .          (583)          138            265           40            (3)
      Amortization of debt
       discount . . . . . . . . .        (3,096)        --             --            (435)           (4)
      Other settlement expense. .          (219)        --             --           --            --
      Extraordinary gain. . . . .           327         --             --           --            --
                                     ----------    ----------     ----------   ----------    ----------
      Net loss. . . . . . . . . .    $  (29,227)   $  (39,240)    $  (16,868)  $   (5,741)   $   (2,732)
                                     ==========    ==========     ==========   ==========    ==========

    Loss applicable to common
      shareholders. . . . . . . .    $  (30,658)   $  (59,108)    $  (16,868)  $   (5,741)   $   (2,732)
                                     ==========    ==========     ==========   ==========    ==========
    Historical loss per common
      share, basic and diluted. .    $    (0.78)   $    (1.63)    $    (0.57)  $    (0.27)   $    (0.15)
                                     ==========    ==========     ==========   ==========    ==========
    Weighted average shares used
      to compute historical basic
      and diluted loss per
      common share. . . . . . . .    39,093,660    36,313,759     29,804,681   21,547,177    18,266,572
                                     ==========    ==========     ==========   ==========    ==========



<PAGE>


                                                                December 31,
                                 ----------------------------------------------------------------------
                                        2001          2000           1999         1998          1997
                                     ----------    ----------     ----------   ----------    ----------
                                                             (in thousands)
Balance Sheet Data:
  Cash and cash equivalents . . .    $    5,144     $   7,041     $   17,489   $    4,895    $       64

  Working capital (deficit) . . .       (10,761)       (1,623)        15,703        3,788          (886)

  Total assets. . . . . . . . . .        17,964        29,150         29,590        6,371           353

  Long-term debt,
    including current portion . .        14,281         4,389            878          300           241

  Total convertible redeemable
    preferred stock . . . . . . .        12,058         --             --           --            --

  Total shareholders' equity
    (deficit) . . . . . . . . . .       (15,023)        9,743         19,120        4,594          (775)




</table>


<PAGE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS

     You should read the following discussion of our financial condition
and results of operations with the financial statements and the related
notes included elsewhere in this report. This discussion contains forward-
looking statements based on our current expectations, assumptions,
estimates and projections.  These forward-looking statements involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of numerous
factors, many of which are described in the "Factors That May Affect Future
Results" section and elsewhere in this report.  We are under no duty to
update any of the forward-looking statements after the date of this report
to conform these statements to actual results, unless required by
applicable securities laws.

OVERVIEW

     CoolSavings is an online direct marketing and media company that
provides smarter solutions to connect marketers to their target consumers
using industry-leading analytics and incentive technology.  Our mission is
to be the leading provider of promotional offers to consumers while most
effectively connecting marketers to their best customers. With a database
of more than 17 million registered consumers as of March 1, 2002, we supply
marketers with a single resource for accessing and engaging a dynamic group
of shoppers. Through our customized, integrated direct marketing and media
products, advertisers can target a wide array of incentives, including
printed and electronic coupons, personalized e-mails, rebates, trial
offers, samples, sales notices and gift certificates, to promote sales of
products or services and drive customers into brick-and-mortar stores or
online web sites. In addition, our proprietary database technology tracks
consumer response, shopping preferences and site behavior at the household
and shopper level to provide our clients with an unprecedented breadth of
sophisticated consumer data from which to make smarter marketing decisions.

     Our web site, coolsavings.com, offers consumers convenient and
personalized incentives for goods and services from a broad range of
advertisers, including brick-and-mortar retailers, online retailers,
consumer packaged goods manufacturers, travel and financial service
providers.

     We were incorporated as Interactive Coupon Marketing Group, Inc. in
Michigan in December 1994. In November 1998, we changed our corporate name
to coolsavings.com inc. In September 2001, we merged with and into
CoolSavings, Inc., a Delaware corporation and our wholly-owned subsidiary.

RECENT DEVELOPMENTS

     In 2001, we entered into a series of transactions with Landmark
Communications, Inc. and Landmark Ventures VII, LLC (together, "Landmark")
whereby Landmark made loans to and an equity investment in CoolSavings.
This series of transactions resulted in a change in control of the Company.

Landmark's principal business interests are in the media industry, and it
owns and operates entities engaged in newspaper and other print publishing,
television broadcasting and cable television programming services. It has
experience in building value and improving operating, marketing and
financial performance in companies that it owns or controls.

     SENIOR SECURED NOTE

     Landmark has loaned to us $5.0 million pursuant to a senior secured
note (the "Senior Secured Note"), which loan is due on June 30, 2006 (the
"Senior Secured Loan"). The Senior Secured Note and Senior Secured Loan are
governed by the terms of an amended and restated senior secured loan and
security agreement dated July 30, 2001 (the "Amended and Restated Loan
Agreement").  In connection with the Senior Secured Loan, we also issued
Landmark a warrant to purchase shares of our common stock. The warrant was


<PAGE>


exercisable for 10.0 million shares of our common stock at an exercise
price of $0.50 per share at November 12, 2001. The exercise price of the
warrant will increase to $0.75 per share on July 30, 2005 if not previously
exercised. The loan bears interest at 8% per annum, which interest accrues
quarterly and is payable "in-kind".  The in-kind interest payment is
effected by adding the accrued interest to the principal of the Senior
Secured Note and increasing the number of shares of common stock that may
be purchased under the warrant by two shares for each dollar of interest
accrued under the Senior Secured Note. As of December 31, 2001, the
principal and interest owed under the Senior Secured Loan was $5.2 million
and the related warrant was exercisable for approximately 10.1 million
shares. The Senior Secured Note is secured by a second lien on all of our
assets.

     The Amended and Restated Loan Agreement contains financial covenants
and affirmative and negative covenants that, among other things, restrict
our ability to incur additional indebtedness and take other actions without
the consent of the note holder.

     GRID NOTE

     Landmark has also funded additional amounts to us pursuant to a grid
note, as amended (the "Grid Note"). The Grid Note is also governed by the
terms of the Amended and Restated Loan Agreement.  The Grid Note bears
interest at 8% per annum, is payable on demand, and may evidence up to
$20.0 million in advances.

     In connection with funding the advances under the Grid Note, Landmark
has reserved its rights with respect to defaults by us of certain
provisions of the Purchase Agreement (defined below) and Amended and
Restated Loan Agreement.  We call these defaults the "Existing Defaults."
The Existing Defaults include our failure to initially comply with the
collateral base covenant in our forbearance agreement with American
National Bank and the following defaults that have not been and cannot be
cured (and will result in continuing defaults):

     .     the failure of at least 1.4 million members to access our
           web site in the period between July 19 and August 17, 2001
           (a requirement of the Purchase Agreement);

     .     our failure to achieve a prescribed amount of billings in
           the month of July, 2001 (a requirement of the Amended and
           Restated Loan Agreement); and

     .     our failure to maintain a minimum level of working capital
           and a ratio of cash, cash equivalents and certain receivables
           over current liabilities, in each case as of July 31, 2001
           (requirements of the Amended and Restated Loan Agreement).

     Although its occurrence makes it an Existing Default, we have cured
the default under the forbearance agreement with American National Bank.
Because Landmark has reserved its rights with respect to the Existing
Defaults, and because we cannot cure certain of the Existing Defaults
(because of the nature of such Existing Defaults), Landmark may at any time
terminate the Amended and Restated Loan Agreement and require us to repay
to Landmark all outstanding debt incurred under the Amended and Restated
Loan Agreement (plus accrued and unpaid interest).  Before we can make any
such payments to Landmark, we must pay all amounts owing to American
National Bank under our credit facilities with it or obtain American
National Bank's consent to or waiver of the required payments to Landmark.
In addition, if Landmark terminates the Purchase Agreement and the Amended
and Restated Loan Agreement, our banks can terminate the forbearance
agreements and immediately accelerate the debt we owe them.



<PAGE>


     During the third and fourth quarter of 2001, Landmark loaned to us an
aggregate of $16.5 million under the Grid Note.  On November 12, 2001,
Landmark, pursuant to the Securities Purchase Agreement between us and
Landmark, dated November 12, 2001 (the "Purchase Agreement"), exercised
their right to apply $10 million of the principal and $0.1 million of
accrued interest to the purchase of 65,057,936 shares of our $0.001 par
value Cumulative Convertible Series B Preferred Stock (the "Series B
Preferred Stock").  In February 2002, Landmark loaned to us an additional
$1.5 million under the Grid Note, bringing the current outstanding
principal balance to $8.0 million.  Under the terms of the Purchase
Agreement, Landmark may require that any amount funded under the Grid Note
be applied to purchase additional shares of our Series B Preferred Stock at
$0.1554 per share.

     We have obtained all of our most recent funding from Landmark under
the Grid Note to support our operations.  Landmark was not obligated to
fund those additional advances and did so at its discretion.  Landmark may
demand payment in full under the Grid Note at any time as well as
accelerate and demand payment under the Senior Secured Note as a result of
the Existing Defaults.  Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2001, the Series B Preferred
Stock was redeemable in whole or in part at the holder's election at the
stated value of $0.1554 per share plus accrued but unpaid dividends.


SALE OF SERIES B PREFERRED STOCK

     On November 12, 2001, we issued to Landmark 65,057,936 shares of our
Series B Preferred Stock pursuant to the terms of the Purchase Agreement.
Landmark purchased the Series B Preferred Stock, at a purchase price of
$0.1554 per share, by applying $10.0 million of principal and $0.1 million
of interest under the Grid Note to offset the complete purchase price of
the shares of our Series B Preferred Stock.  As of March 1, 2002, Landmark
holds 65,780,822 shares of Series B Preferred Stock (and has rights with
respect to accrued dividends thereon), holds a warrant to purchase
10,175,556 shares of our common stock and has the right to apply amounts
funded under the Grid Note and accrued interest to purchase 57,280,571
shares of our Series B Preferred Stock.  Landmark's ownership will continue
to grow through the issuance of additional shares of Series B Preferred
Stock and warrants as "in-kind" payments for dividends and interest
accruing on the Series B Preferred Stock and Senior Secured Note,
respectively, and through their ability to purchase additional shares of
Series B Preferred Stock by funding additional advances under the Grid
Note.

TERMS OF THE SERIES B PREFERRED STOCK.

     The terms of the Series B Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series B Preferred Stock
ranks senior (with respect to, among other things, dividends, redemption
and liquidation payments) to the Series C Preferred Stock (defined below),
the common stock and any future preferred stock of CoolSavings.  The
following discussion briefly summarizes the preferential rights of the
Series B Preferred Stock.

     DIVIDENDS AND LIQUIDATION PREFERENCE

     Dividends accrue on the shares of Series B Preferred Stock at the
rate of 8% per annum, payable quarterly in additional shares of Series B
Preferred Stock. Dividends are cumulative and will continue to accrue
whether or not declared.  As of December 31, 2001, 722,866 shares of Series
B Preferred Stock are issuable with respect to accrued, but not declared,
dividends.



<PAGE>


     On liquidation, holders of Series B Preferred Stock are entitled to
be paid the greater of the amount per share that would have been payable if
each share of Series B Preferred Stock had been converted to common stock
or the stated value ($0.1554 at the time of issuance, subject to anti-
dilution adjustments) for each share of Series B Preferred Stock plus the
amount of any accrued but unpaid dividends thereon before holders of the
Series C Preferred Stock and common stock receive a distribution.  At the
election of the holders of the Series B Preferred Stock, a merger or
consolidation that effects our change of control or a sale of all or
substantially all of our assets may be deemed to be a liquidation.

     CONVERSION RIGHTS

     Each share of Series B Preferred Stock, plus any shares issuable as
accrued but unpaid dividends thereon, is convertible at the holder's option
into the number of shares of common stock obtained by dividing the stated
value of a share of Series B Preferred Stock ($0.1554) by the conversion
price ($0.1554 at the time of issuance, subject to anti-dilution
adjustments).

     The conversion price and conversion ratio are subject to "full
ratchet" adjustment upon certain events.  This means, for example (and
excluding exceptions), that if we issue any shares of common stock for less
than the conversion price or issue convertible or derivative securities
with an exercise or conversion price less than the conversion price of the
Series B Preferred Stock, the conversion price and conversion ratio are
reduced to the price at which such new securities were issued.

     REDEMPTION.

     CoolSavings' Election.  Shares of Series B Preferred Stock are
redeemable in whole, at our election, after the seventh anniversary of the
issuance of the Series B Preferred Stock, at their stated value of $0.1554
per share plus accrued but unpaid dividends through the redemption date.
Our ability to redeem the shares of Series B Preferred Stock is subject to
the following:

     .     our common stock must have traded at or above $3.00 per share
           for 20 consecutive trading days (and during at least 60 of the
           80 trading days immediately prior to the redemption date);

     .     we must have on file, or agree to file and make
           effective within 30 days of redemption a registration statement
           with the SEC registering for resale the shares of common stock
           underlying the Series B Preferred Stock;

     .     we shall have paid any outstanding debt to Landmark
           in full; and

     .     there are no securities outstanding that are junior in ranking
           to the Series B Preferred Stock (except common stock).

     Holders' Election. Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2001, the Series B Preferred
Stock was redeemable in whole or in part at the holder's election at the
stated value of $0.1554 per share plus accrued but unpaid dividends.



<PAGE>


     VOTING RIGHTS AND BOARD OF DIRECTORS

     Each share of Series B Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series B Preferred Stock and accrued dividends thereon is convertible,
from time to time. The holders of the Series B Preferred Stock are entitled
to vote together with holders of common stock at any meeting of our
stockholders on any and all matters presented to our stockholders for
consideration.  In addition to their right to vote in the general election
of members of our Board on an as-converted basis, the holders of the Series
B Preferred Stock are entitled to designate, and vote separately as a
single class for the election of, a majority of our Board (and the number
of seats elected exclusively by the Series B Preferred Stock shall be
automatically increased to such greater number as may be proportionate to
the Series B Preferred Stock's percentage ownership interest in the
Company, calculated on an as-converted basis).  The holders of Series B
Preferred Stock also have special voting rights where we are prohibited
from taking certain actions without their consent, including but not
limited to, amending our charter documents, entering into business
transactions, authorizing or issuing securities (except in limited
circumstances), entering into related party transactions, hiring or
terminating key executive officers and amending the terms of our
forbearance agreements with our banks.

SALE OF SERIES C PREFERRED STOCK

     As a condition to the consummation of the Landmark Transaction on
November 12, 2001, we issued to three individuals, two of whom are
directors of the Company, 13.0 million shares of the Company's Series C
Convertible Preferred Stock ("Series C Preferred Stock") in exchange for
$2.1 million of our 8% Senior Subordinated Convertible Notes ("Director
Notes"), due March 1, 2006, accrued interest, and warrants to purchase
1,050,000 shares of common stock which were previously issued to such
individuals with the Director Notes.

TERMS OF THE SERIES C PREFERRED STOCK

     The terms of the Series C Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series C Preferred Stock
ranks junior (with respect to dividends and liquidation payments) to the
Series B Preferred Stock but senior to the common stock.

     DIVIDENDS

     The Series C Preferred Stock will not accrue dividends. Dividends may
be declared and paid on the Series C Preferred Stock from funds lawfully
available as and when determined by the Board of Directors and subject to
any preferential dividend rights of any then outstanding preferred stock,
including the Series B Preferred Stock.

     CONVERSION RIGHTS

     Each share of Series C Preferred Stock is convertible, at the
holder's option, into the number of shares of common stock obtained by
dividing the stated value of a share of Series C Preferred Stock ($0.1665)
by the conversion price ($0.1665 at the time of issuance, subject to anti-
dilution adjustments).

     The conversion price and conversion ratio are subject to "weighted
average" adjustment upon certain events. This means, for example (and
excluding exceptions), that if we issue common stock for less than the
conversion price or issue convertible or derivative securities with an
exercise or conversion price less than the conversion price of the Series C
Preferred Stock, the conversion price and conversion ratio are reduced to
the price derived from the weighted average of the price at which all such
new securities were issued.



<PAGE>


     REDEMPTION

     Shares of Series C Preferred Stock are redeemable in whole, at our
election, at any time after the shares of Series B Preferred Stock have
been redeemed or after the third anniversary of the date of issuance, if
the holders of a majority of the shares of Series B Preferred Stock
consent, at the stated value ($0.1665 at the time of issuance, subject to
anti-dilution adjustments) for each share of Series C Preferred Stock plus
a cash amount per share equal to eight percent (8%) per annum of the Series
C Preferred Stock stated value.

     VOTING RIGHTS

     Each share of Series C Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series C Preferred Stock is convertible. The holders of Series C
Preferred Stock are entitled to vote together with holders of common stock
at any meeting of our shareholders on any and all matters presented to the
shareholders for consideration.

     LIQUIDATION PREFERENCE

     On liquidation, after the payment of the preferred distribution to
the holders of the Series B Preferred Stock, holders of Series C Preferred
Stock are entitled to be paid the greater of: (1) the amount per share that
would have been payable if each share of Series C Preferred had been
converted to common stock, or (2) the stated value ($0.1665 at the time of
issuance, subject to anti- dilution adjustments) for each share of Series C
Preferred Stock plus a cash amount per share equal to eight percent (8%)
per annum of the Series C Preferred Stock stated value before holders of
common stock receive a distribution.  At the election of the holders of the
Series C Preferred Stock, a change of control of CoolSavings or a sale of
all or substantially all of our assets may be deemed to be a liquidation,
provided the holders of the Series B Preferred Stock have elected to have
such event constitute a liquidation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our significant accounting policies are more fully described in
Note 1 of our Notes to Financial Statements.  The financial statements have
been prepared with generally accepted accounting principles.  However,
certain of our accounting policies are particularly important to the
portrayal of our financial position and results of operations and require
significant judgements by our management.  The preparation of the financial
statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods.  Management bases its estimates and judgements on historical
experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgements about the carrying value of assets and liabilities that are not
readily apparent from other sources. Our critical accounting policies are
as follows:

     .     revenue recognition

     .     estimating sales credits and the allowance for doubtful
           accounts

     .     capitalization of website development costs

     .     valuation of long-lived and intangible assets



<PAGE>


     Revenue recognition.  We recognize revenue from the sale of products
and services when a contract has been signed, the product or service has
been provided, the fee is fixed and determinable and the collection of the
resulting receivable is reasonably assured.   We assess whether the fee is
fixed and determinable based on contract terms for particular products and
services.  If the product or service being provided is derived from
activity recorded on our website, we are able to determine the quantity and
value based on contract terms.  If the product or service is exclusively
dependent on tracking from a customer's website, the revenue is recognized
upon confirmation of the product or service delivered from the customer.
Revenue subject to time-based contracts is recognized ratably over the
duration of the contract.  Deferred revenue represents the portion of
revenue that has not been recognized related to time based contracts.  For
contracts based on certain performance or delivery criteria, revenue is
recognized in the month performance is delivered to the customer.

     Estimating sales credits and the allowance for doubtful accounts.
Sales credits arise in the ordinary course of business.  Adjustments to the
actual billing may arise due to variances in the systems tracking devices
between us and our customers.  We estimate this difference to be
approximately 1% of sales and therefore have established a credit memo
reserve as a reduction to the recorded revenue on a monthly basis.  The
adequacy of this reserve is monitored and adjusted as customer trends and
economic trends develop.  We perform ongoing credit evaluations of our
customers and adjust credit limits based upon payment history and
customer's current credit worthiness, as determined by our review of their
current credit information.  We continuously monitor collections and
payments, current economic trends and changes in payment terms when
evaluating the adequacy of the allowance for doubtful accounts.  Many of
these customers have and continue to experience financial difficulties. If
these customers fail to achieve or maintain commercial success, our
business may continue to suffer.

     Capitalization of website development costs.  The cost of developing
and enhancing the functionality of the website, including costs incurred to
ensure links to databases and media sources are working properly, are
capitalized and amortized over 24 months.  Management performs periodic
reviews of the continued use of web site functionality in future periods
and the related development costs that are being or have been capitalized.
Write-offs of current and previously capitalized costs and the related
amortization are recognized in the period management decides there is no
future need for the functionality.  This write-off could have a significant
negative impact on our earnings.

     Valuation of long-lived and intangible assets. We assess the
impairment of identifiable intangibles and long-lived assets whenever
events or changes in circumstances indicate that the carrying value may not
be recoverable.   If the future cash flows (undiscounted and without
interest) expected to result from the use of the related assets are less
than the carrying value of such assets, an impairment has incurred and a
loss is recognized to reduce the carrying value of the long-lived assets to
fair value, which is determined by discounting estimated future cash flows.

Although we have not recorded any impairment losses to date, there can be
no assurance that we will not record one in the future.  See "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."



<PAGE>


HOW WE GENERATE REVENUE

     ONLINE DIRECT MARKETING SERVICES REVENUE

     We generate substantially all of our revenues by providing online
marketing services to our advertisers.

     We charge our advertisers on a variety of bases, the most common of
which include:

     .     the number of offers delivered to members, commonly sold on a
           cost per thousand, or CPM, basis;

     .     the number of times members click on an incentive linking the
           member to the advertiser's web site (known as a click-through
           response);

     .     the number of purchases made or qualified leads generated; and

     .     the number of registered members in our database.

     Our pricing depends upon a variety of factors, including, without
limitation, the degree of targeting, the duration of the advertising
contract and the number of offers delivered. The degree of targeting refers
to the number of identified household or member attributes, such as gender,
age, or product or service preferences, used to select the audience for an
offer.  Generally, the rates we charge our advertisers increase as the
degree of targeting and customization increases.  Revenues subject to time-
based contracts are recognized ratably over the duration of the contract.
For contracts based on certain performance or delivery criteria, revenues
are recognized in the month performance is delivered to the customer.  Most
of our advertising contracts have stated terms of less than one year and
may include earlier termination provisions.  In 2001, our largest
advertiser accounted for 12.7% of our revenues and our top five advertisers
together accounted for approximately 26.2% of our revenues.

     Our revenues for each period depend on a number of factors, including
the number of advertisers sending promotional offers to our members, the
size of our membership base and the responsiveness of our members to each
promotion.  We believe that our revenues will be subject to seasonal
fluctuations in accordance with general patterns of retail advertising
spending, which is typically highest during the fourth quarter. In
addition, expenditures by advertisers tend to be cyclical, reflecting
overall general economic conditions and consumer buying patterns. If
purchasing patterns or timing of purchasing by advertisers were to change,
our operations and quarter-to-quarter comparisons could be materially
affected.

     Online direct marketing services revenue also includes barter
transactions, where we exchange advertising space on our web site or in e-
mails for reciprocal advertising space or traffic on other web sites.
Revenue from these barter transactions is recorded at the estimated fair
value of the advertisements delivered and is recognized when the
advertisements are included on our web site or in our e-mails. Prior to
January 2000, barter transactions were recorded at the fair value of the
goods or services provided or received, whichever was more readily
determinable in the circumstances. In January 2000, the Company adopted
Emerging Issues Task Force ("EITF") 99-17, "Accounting for Advertising
Barter Transactions". In accordance with EITF 99-17, barter transactions
have been valued based on similar cash transactions which have occurred
within six months prior to the date of the barter transaction. For the year
ended December 31, 2001, barter revenue was less than 5% of net revenues.



<PAGE>


     LICENSING REVENUE

     We license portions of our intellectual property, including our
issued patents, to third parties.  Approximately 1% of our revenues were
generated from royalty and license fees and other miscellaneous sources
during the year ended December 31, 2001.

     BARTER REVENUE

     We recognize barter revenue from transactions in which we exchange
promotion or direct marketing services for advertising.  Barter revenue is
recognized based upon similar cash transactions which have occurred within
the last six months prior to the date of the barter transaction.

EXPENSES

     COST OF REVENUES

     Our cost of revenues consists primarily of Internet connection
charges, web site equipment depreciation, salaries of operations personnel,
fulfillment costs related to member loyalty incentives and other related
operations costs.

     SALES AND MARKETING

     Sales and marketing expenses include salaries, sales commissions,
employee benefits, travel and related expenses of our direct sales force,
advertising and promotional expenses, marketing, and sales support
functions. Marketing costs associated with increasing our member base are
expensed in the period incurred.

     PRODUCT DEVELOPMENT

     Product development costs include expenses for the development of new
or improved technologies designed to enhance the performance of our
service, including the salaries, amortization of capitalized website
development costs, and related expenses for our technology department, as
well as costs for contracted services and equipment.

     GENERAL AND ADMINISTRATIVE

     General and administrative expenses include salaries, employee
benefits and expenses for our executive, finance, legal and human resources
personnel. In addition, general and administrative expenses include fees
for professional services and occupancy costs.

     RESULTS OF OPERATIONS

     We have incurred significant losses since our inception.  As of
December 31, 2001, our accumulated deficit was approximately $89.6 million.

We expect to continue to incur operating losses during 2002, See "-
Liquidity and Capital Resources" below, and "Item 1. Business - Factors
That May Affect Future Results" above.

     The following statements of operations are presented on a percentage
of net revenues basis.

                                         For the Year Ended
                                             December 31,
                                -----------------------------------
                                     2001       2000        1999
                                  ---------- ----------  ----------
Net revenues. . . . . . . . . . .     100.0%     100.0%      100.0%
Cost of revenues. . . . . . . . .      25.5%      17.6%       14.1%
                                  ---------- ----------  ----------
Gross profit. . . . . . . . . . .      74.5%      82.4%       85.9%
                                  ---------- ----------  ----------



<PAGE>


                                         For the Year Ended
                                             December 31,
                                -----------------------------------
                                     2001       2000        1999
                                  ---------- ----------  ----------
Operating expenses:
  Sales and marketing . . . . . .      78.7%     104.4%      138.1%
  Product development . . . . . .      26.5%      19.5%       34.9%
  General and administrative,
   inclusive of $3.7 million of
   expense related to forgiveness
   of notes receivable, including
   interest, for 2001 and $4.0
   million of compensation
   related to stock options
   for 2000 . . . . . . . . . . .      85.0%      57.3%       45.6%
                                  ---------- ----------  ----------
Total operating expenses. . . . .     190.2%     181.2%      218.6%
                                  ---------- ----------  ----------

Loss from operations. . . . . . .    -115.7%     -98.8%     -132.7%

Other income (expense):
  Interest and other income . . .       1.2%       2.9%        3.8%
  Interest expense. . . . . . . .      -3.8%      -1.1%       -1.7%
  Other settlement expense. . . .      -1.0%        --          --
  Amortization of debt discount .     -14.0%        --          --
  Interest expense representing
    beneficial conversion
    feature of convertible debt .        --       -1.4%         --
                                  ---------- ----------  ----------
Total other income (expense). . .     -17.6%       0.4%        2.1%
                                  ---------- ----------  ----------

Loss before income taxes and
  extraordinary gain. . . . . . .    -133.3%     -98.4%     -130.6%

Income taxes. . . . . . . . . . .        --         --          --
                                  ---------- ----------  ----------
Loss before extraordinary gain. .    -133.3%     -98.4%     -130.6%

Extraordinary gain. . . . . . . .       1.5%        --          --
                                  ---------- ----------  ----------
Net loss. . . . . . . . . . . . .    -131.8%     -98.4%     -130.6%

Deemed dividend representing
 the beneficial conversion
 feature of Series A Preferred
 Stock. . . . . . . . . . . . . .        --      -49.9%         --
Accretion of convertible
 redeemable Series B Preferred
 Stock to redemption value. . . .      -6.0%        --          --
Cumulative dividend on Series B
  Preferred Stock . . . . . . . .      -0.3%        --          --
Accretion of PIK dividend on
  Series B Preferred Stock. . . .      -0.2%        --          --
                                  ---------- ----------  ----------
Loss applicable to common
  shareholders. . . . . . . . . .    -138.3%    -148.3%     -130.6%
                                  ========== ==========  ==========



<PAGE>


YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     NET REVENUES

     Net Revenue decreased 44% to $22.2 million in 2001 compared with
$39.9 million in 2000.  The revenue decrease was attributable to the
slowing economy, which caused reduced advertising spending in general,
increased downward pricing pressure from competitors, and our cash
constraints, which reduced our ability to invest in marketing to attract
new members.  Barter revenue and corresponding advertising costs of $1,070,
were recognized in 2001 compared to $2,300 in 2000.

     COST OF REVENUES AND GROSS PROFIT

     Cost of Revenues decreased to $5.7 million in 2001 from $7.0 million
in 2000, or a decrease of 19%.  Gross profit decreased as a percentage of
net revenues to 75% in 2001, from 82% in 2000.  The decrease in gross
profit reflects the downward pricing pressure.  In addition, our cost
reduction efforts did not keep pace with the decrease in revenue. The full
impact of our cost reduction efforts during the second half of 2001 will
not be realized until 2002.

     OPERATING EXPENSES

     Sales and Marketing.  Sales and marketing expenses decreased to $17.4
million in 2001 from $41.6 million in 2000, or a decrease of 58%.  We
eliminated the spending on broadcast and cable television advertising which
contributed $10.9 million of savings in 2001.  We reduced spending on
advertising to attract new members in 2001 by $9.9 million.  The remaining
expense reduction was achieved through personnel and personnel-related cost
reductions.

     Product Development.  Product development expenses decreased to $5.9
million in 2001 from $7.8 million in 2000, or a decrease of 24%.  We
eliminated the spending on outside consulting for our website development
efforts in the first half of 2001 resulting in a $4.4 million cost
reduction.  This reduction was offset by the full year impact of
amortization expense related to our capitalized website development costs
of $1.5 million and the write off of website development costs of $0.8
million.  The remaining expense reduction was achieved through personnel
and personnel related cost reductions.

     General and Administrative.  General and administrative expenses
decreased to $18.9 million in 2001 from $22.8 million in 2000, or a
decrease of 17%.  The decrease is attributable to a decrease in salaries
and bonuses of $2.4 million, a decrease in professional fees of $2.0
million, a decrease in recruiting costs of $1.9 million and $1.7 million in
gains on settlements of accounts payable.  These expense reductions were
partially offset by a $1.0 million severance obligation to a former
executive, third party transaction costs incurred of $0.7 million,
increases in bad debt expense of $0.7 million and increases in facility
costs of $0.6 million.  The 2001 general and administrative expenses
included a charge of $3.7 million related to the forgiveness of notes
receivable to current and former Directors of the Company.  The 2000
general and administrative expenses includes a stock-based compensation
charge of $4.0 million related to the termination and consulting agreement
with a former President.  The remaining difference was achieved through a
reduction in general office expenses.

     OTHER INCOME (EXPENSES), NET

     Net Interest Expense.  During 2001, we incurred net interest expense
of $0.6 million as compared to net interest income of $0.1 million in 2000,
which included a $0.6 million beneficial conversion charge related to our
convertible debt.  During 2001, we earned significantly lower interest
income due to the reduced capital available for investment compared to
2000.  Also, during 2001, we incurred interest expense related to the
Senior Subordinated Convertible Notes, the Senior Secured Loan and the Grid
Note in the amount of $0.4 million.


<PAGE>


     Amortization of Debt Discount.  During 2001, we were in default of
the debt covenants in our debt agreement with Landmark.  Therefore, the
debt discount of $3.0 million was immediately amortized to reflect the debt
at its callable value.  Additionally, we recorded $0.1 million in
amortization expense related to the debt discount on the Director Notes.

     Other Expense Settlement.  In 2001, we accepted a mediation award
with a non-operating business related lawsuit pursuant to which the Company
paid the plaintiff the sum of $0.2 million.

     INCOME TAXES

     On November 12, 2001, as result of the issuance of Series B Preferred
Stock to Landmark, the Company triggered tax rules at Section 382 of the
Code, which limit the ability of the Company to offset taxable income
earned subsequent to this date with the Company's pre-November 12, 2001 net
operating losses.  No pre-November 12, 2001 net operating losses can be
utilized by us to offset taxable income in future periods.  As of the
period ended December 31, 2001, we had cumulative tax net operating losses
of $3.4 million.  For financial reporting purposes, the entire amount of
deferred tax assets has been offset by a valuation allowance due to
uncertainty regarding realization of the asset. Accordingly, there is no
provision for income taxes for the years ended December 31, 2001, 2000 and
1999, respectively.

     EXTRAORDINARY GAIN

     Contemporaneously with the Landmark Transaction, the Convertible
Subordinated Promissory Notes and warrants of $2.1 million of face value
plus accrued interest of $0.2 million were converted to Series C Preferred
Stock.  The fair market value of the Series C Preferred Stock was
determined to be $2.0 million resulting in an extraordinary gain of $0.3
million to the Company for early extinguishment of debt.

     NON-CASH CHARGES

     During 2001, we incurred $1.4 million in charges related to the
accretion of convertible redeemable Series B Preferred Stock to its
redemption value, the recording of the paid-in-kind dividend accrual on the
Series B Preferred Stock and the accretion of the paid-in-kind dividend
accrual.  During 2000, we incurred a $19.9 million charge for the
beneficial conversion of our pre-initial public offering shares of Series A
convertible preferred stock into post initial public offering common stock.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     NET REVENUES

     Net revenues increased 209% to $39.9 million in 2000 from $12.9
million in 1999.  The revenue increase was attributable to our continued
ability to rapidly expand our member base, to sign up additional offline
and online advertisers, and to expand programs with existing advertisers
into more comprehensive promotion programs, including targeted e-mail,
category newsletters, printable coupons, e-coupons, savings notices,
rebates, lead generation, loyalty points and free samples.  Our member base
grew to approximately 12 million registered members at December 31, 2000
from approximately 5 million at December 31, 1999.



<PAGE>


     COST OF REVENUES AND GROSS PROFIT

     Cost of revenues increased to $7.0 million in 2000, from $1.8 million
in 1999. Gross profit decreased as a percentage of net revenues to 82% in
2000, from 86% in 1999.  The absolute dollar increase in cost of revenues
was primarily due to increased costs for incentive points and gift
certificates, costs related to building our server and networking
infrastructure in response to the growth in activity by our members, and
the hiring of additional operations personnel to service our increased
advertiser base.

     OPERATING EXPENSES

     Sales and Marketing. Sales and marketing expenses increased to $41.6
million, or 104% of net revenues in 2000, from $17.8 million, or 138% of
net revenues, in 1999. The $23.8 million increase in sales and marketing
expenses was primarily due to increased expenses associated with
promotional and marketing efforts, member acquisition costs, the hiring of
additional sales and marketing personnel, and increased sales commissions.
These marketing efforts enabled us to more than double our registered
member base.  We spent approximately $30.2 million for combined online and
offline advertising in 2000, up from approximately $13.5 million in 1999.
Throughout fiscal year 2000, we were able to achieve significant reductions
in the average cost of registering new members.  This was primarily due to
our brand awareness and our ability to negotiate lower cost per acquisition
rates with other web sites.  Sales and marketing expenses as a percentage
of net revenues decreased due to the growth in net revenues.

     Product Development. Product development expenses increased to $7.8
million, or 20% of net revenues, in 2000, from $4.5 million, or 35% of net
revenues, in 1999.  On July 1, 2000 we adopted the provisions of EITF 00-2
("Accounting for Web Site Development Costs") and capitalized $2.7 million
of web site development costs incurred on projects in process at December
31, 2000. For prior periods through June 30, 2000, all product development
expenditures were expensed as incurred. The absolute dollar increase in
product development expenses was primarily due to expenditures related to
third-party technical consultants and the hiring of additional personnel to
enhance the features and functionality of our web site, less the effect of
capitalized web site development costs. The decrease in product development
expenses as a percentage of net revenues is a result of the growth in net
revenues and the capitalization of web site development costs in 2000.

     General and Administrative.  General and administrative expenses
increased to $22.8 million, or 57% of net revenues, in 2000, from $5.9
million, or 46% of net revenues, in 1999. The absolute dollar increase in
general and administrative expenses was primarily due to a $4.0 million
stock compensation charge recorded in 2000 and the hiring of additional
personnel to support the growth of our business and recruiting costs
related to filling key management positions, as well as increased legal
fees, costs associated with our initial public offering, and additional
provisions for doubtful accounts. General and administrative expenses
increased as a percentage of net revenues due to slightly faster growth in
expenses than the growth in net revenues.  In 2000, we incurred higher
occupancy expense associated with our move to a larger office space and we
expanded our administrative systems to support our growth and operations as
a public company.  On December 30, 1999, we entered into a termination and
consulting agreement with our former President.  In conjunction with the
termination and consulting agreement, we agreed, effective January 6, 2000,
to extend the expiration date of the former president's options to purchase
an aggregate of 661,250 shares of the Company's common stock at a price of
$2.17 per share until the first anniversary of the termination of the
consulting agreement. The extension of the stock option agreements resulted
in a remeasurement of the compensation cost associated with the stock
options. Accordingly, a total non-cash compensation charge of $4.0 million
was recognized on a straight-line basis during 2000.



<PAGE>


     Interest Income, Net.  Interest income, net, includes income from our
cash and investments and expenses related to our financing obligations.
Interest income, net, decreased to $0.1 million in 2000, from $0.3 million
in 1999.  The decrease in net interest income is attributable to higher
interest expense on borrowings under our credit facilities and a beneficial
conversion charge of $0.6 million, partially offset by interest earned on
excess cash invested.

     INCOME TAXES

     As of December 31, 2000, we had approximately $63.2 million of
federal and state net operating loss carryforwards.

     NON-CASH CHARGES

     During the fiscal year 2000, we incurred a $19.9 million charge for
the beneficial conversion of our pre-initial public offering shares of
Series A convertible preferred stock into post initial public offering
common stock, and a $0.6 million charge for the beneficial conversion of
our pre-initial public offering convertible subordinated notes into post
initial public offering common stock.

LIQUIDITY AND CAPITAL RESOURCES

     LIQUIDITY AND CAPITAL RESOURCES

     Since our inception we have financed our operations primarily through
the sale of our stock and the issuance of notes payable.  In May 2000, we
completed an initial public offering of 3.3 million shares of our common
stock, resulting in net proceeds to us of approximately $20.0 million.  In
March 2001, we received the proceeds from the sale of our convertible
subordinated promissory notes and warrants in the amount of $2.1 million.
In June and July 2001, we received the proceeds of $5.0 million in loans
from Landmark.  In addition, Landmark funded an additional $10.0 million
through October 31, 2001 to us under the Grid Note, which amount plus
accumulated interest was applied to the purchase of 65,057,936 shares of
Series B Preferred Stock on November 12, 2001.  This transaction resulted
in Landmark becoming a related party.  As of December 31, 2001, Landmark
has voting control of the Company.  In addition, we are in default under
the covenants of the Stock Purchase Agreement and Loan Agreement, thereby
giving Landmark the right to demand repayment of the outstanding Senior
Secured Note and the Grid Note borrowings.  The Series B Preferred Stock
issued is redeemable at Landmark's option at any time.  We received
proceeds of $4.0 million and $2.5 million in additional borrowings from
Landmark under the Grid Note on November 30, 2001 and December 24, 2001,
respectively.  At December 31, 2001 we had approximately $5.1 million in
cash and cash equivalents.

     Our operations have generated negative cash flows in each year of our
existence. In the fourth quarter of fiscal year 2000 we implemented a cost
reduction plan. This plan included a significant decrease in offline
marketing expenditures and a reduction in salaried personnel and third
party technical consultants. We further reduced salaried personnel and
marketing expenditures in the second half of 2001. We believe that this
plan will significantly reduce operating expenses and have a positive
effect on cash flow.



<PAGE>


     However, even with our cost reduction plan in place we do not expect
to reach our goal of cash positive operations during 2002 unless market
conditions in our industry improve significantly and we are successful in
our efforts to increase our revenues while we maintain or increase our
profit margins.  As a result, we expect that we will require additional
debt or equity financing during 2002. On February 28, 2002, we borrowed
$1.5 million from Landmark under the Grid Note. Although Landmark has
funded our cash needs it is under no obligation to continue to do so and
there can be no assurance that we will be successful in obtaining adequate
funds for operations in the future. Our independent auditors have issued
their report on our financial statements for 2001 with an explanatory
paragraph. This paragraph describes the uncertainty as to our ability to
continue as a going concern. If adequate funds are not available to us on
acceptable terms, or if Landmark exercises its rights to accelerate payment
under our obligations to Landmark, we will be unable to operate our
business.  See "Item 1. Business - Factors That May Affect Future Results"
above.

     Net cash used in operating activities was $16.5 million in 2001 and
$25.5 million in 2000.

     Net cash used in investing activities was $3.2 million in 2001 and
$9.6 million in 2000.  In both periods, net cash used in investing
activities resulted from purchases of property and equipment and amounts
used in developing our website.

     Net cash provided from financing activities was $17.9 million in 2001
and $24.6 million in 2000.  Net cash provided from financing activities in
2001 can be attributed to the net proceeds of the issuance of our
convertible subordinated promissory notes in the amount of $2.1 million,
$1.2 million of proceeds from borrowings under our lines of credit, $0.3
million in loans from one of our directors and $21.5 million in proceeds
from Landmark -- $5.0 million under the Senior Secured Loan, $10.0 million
in connection with its purchase of Series B Preferred Stock, and $6.5
million under the Grid Note.  We invest these proceeds in cash equivalents
with maturities not exceeding 90 days.  We intend to continue investing our
excess cash in various short-term securities until used.

     We have two separate credit facilities under which we had an
aggregate of $1.9 million borrowed, and $2.0 million in letters of credit
outstanding at December 31, 2001.

     Under the credit facility with American National Bank (the "ANB
Facility") we have one term loan and one $3.0 million revolving credit
line. The term loan, which had an outstanding balance of $0.4 million at
December 31, 2001, is payable in installments.  The revolving credit line,
which had an outstanding balance of $1.2 million at December 31, 2001, is
also payable in installments.  The outstanding balance under the term loan
bears interest at the bank's prime rate plus 1.25% (6.00% at December 31,
2001).  The borrowings outstanding under the revolving line of credit bear
interest at the bank's prime rate plus 1.00% (5.75% at December 31, 2001).
Additionally, we had $1.7 million (net of restricted cash requirements) of
letters of credit outstanding under the line to collateralize lease
deposits on its office facilities.  These letters of credit reduce the
amount of borrowings available to the Company under the line dollar for
dollar.  We have $0.1 million available under the revolving credit line as
of December 31, 2001.  Borrowings are collateralized by substantially all
of our assets.



<PAGE>


     On June 15, 2001, we entered into a Forbearance and Reaffirmation
Agreement with American National Bank, which was amended by a letter
agreement dated July 27, 2001 ("ANB Forbearance Agreement"), wherein
American National Bank agreed to forbear from accelerating borrowings under
the ANB Facility for certain stated defaults based on the continued
compliance with the terms of the ANB Forbearance Agreement.  The terms
included an accelerated principal payment schedule with respect to the ANB
Facility.  This accelerated payment schedule requires us to pay an
additional $0.2 million in principal per month and the entire indebtedness
on or before December 31, 2002.

     Under the credit facility with Midwest Guaranty Bank (the "Midwest
Facility"), we have a $1.0 million equipment line of credit.  At
December 31, 2001, there was $0.3 million outstanding under this line.  The
weighted average interest rate on the outstanding borrowings under this
line at December 31, 2001 was 9.0%.  Borrowings are collateralized by the
specific equipment purchased and are payable in installments.

     On June 12, 2001, we entered into a Forbearance Letter Agreement with
Midwest Guaranty Bank, and on July 27, 2001, we entered into a Loan
Forbearance and Reaffirmation Agreement with Midwest Guaranty Bank
(collectively, the "Midwest Forbearance Agreement").  Midwest Guaranty Bank
agreed to forbear from accelerating the Midwest Facility for certain stated
defaults based on our continued compliance with the terms of the Midwest
Forbearance Agreement, which include an accelerated principal payment
schedule of $5,000 per month.  The entire indebtedness under the Midwest
facility is to be paid on or before October 31, 2002.

     The Senior Secured Loan due to related party, Landmark, is payable on
June 30, 2006 and bore interest at 12.0% per annum until November 12, 2001
at which time the interest rate was reduced to 8.0% per annum.  The
interest is paid quarterly in arrears in the form of additional notes and
warrants (described below).  We have the right to prepay the Senior Secured
Loan on or after the third anniversary if certain conditions are met.  The
agreement also contains financial covenants and negative and affirmative
covenants that, among other things, restrict our ability to incur
additional indebtedness and take other actions without the consent of
Landmark.

     At December 31, 2001, we were not in compliance with certain
financial covenants of the Senior Secured Loan.  This failure to comply
constitutes an event of default.  Consequently, the loan is immediately due
and payable at the option of Landmark, including accrued interest.
Accordingly, we have reclassified the Senior Secured Loan as currently
payable as of December 31, 2001, including the paid-in-kind interest which
has been compounded on the principal balance, totaling $5.2 million.

     In connection with the Senior Secured Loan, we issued a warrant to
Landmark (the "Landmark Warrant").  The Landmark Warrant has a term of
eight years and may be exercised in whole or in part immediately.  The
warrant contains a net exercise feature and was exercisable for 10.0
million shares of our common stock at an exercise price of $0.50 per share
at November 12, 2001 (increasing to $0.75 per share on July 30, 2005 if not
previously exercised).  We are obligated to increase the number of shares
exercisable under the Landmark Warrant by two shares of common stock for
each dollar of interest accrued on the Senior Secured Loan as paid-in-kind
interest.  Under APB 14, we assigned a $2.4 million value to the Landmark
Warrant and recorded it as additional paid-in-capital.  The entire discount
of $3.0 million (including loan issuance costs of $0.6 million) from the
Senior Secured Loan was amortized immediately to expense in 2001.  This was
due to our covenant violations which caused the entire loan to be
immediately due and payable at the option of Landmark.



<PAGE>


     During the second half of 2001, Landmark loaned to us under an
amended and restated commercial demand grid note (the "Grid Note") an
aggregate of $17.2 million, of which $16.5 million related to cash advances
(in several separate drawdowns) and $0.7 million related to transaction
costs reimbursed to Landmark under the Purchase Agreement.  The principal
balance outstanding under the Grid Note bears interest at 8.0% per annum.
The Grid Note is immediately due and payable at the option of Landmark,
including accrued interest.  This agreement is cross-collateralized with
the Senior Secured Loan and contains the same covenants as the Senior
Secured Loan. The entire $0.7 million was expensed in 2001 and is included
as general and administrative expense.

     The following summarizes our contractual obligations at December 31,
2001, and the effect such obligations are expected to have on our liquidity
and cash flow in future periods.

December 31                                             There-
(in thousands)        2002   2003   2004   2005   2006  after   Total
--------------      ------- ------ ------ ------ ------ ------ ------

Related party
 debt (1)           $12,402                                    12,402
Third party
 debt                 1,962                                     1,962
Non-cancelable
 operating lease
 obligations          2,098  2,071  2,076  1,922  1,730  5,981 15,878
Licenses and
 settlements            824    697    382     35   --     --    1,938
                    -------  -----  -----  -----  -----  ----- ------
Total contractual
 cash obligations   $17,286  2,768  2,458  1,957  1,730  5,981 32,180
                    ======= ======  =====  =====  =====  ===== ======

     (1)   These obligations relate to the Landmark Transaction.  They are
           categorized as currently due with respect to our defaults under
           the Senior Secured Loan, the Grid Note and the Amended and
           Restated Loan and Security Agreement as described above.


MERGERS AND ACQUISITIONS

     We completed a merger on September 25, 2001 that resulted in our name
changing from coolsavings.com inc. to CoolSavings, Inc. and a change in our
state of incorporation from Michigan to Delaware.  As a result of the
merger, our common and preferred stock changed from no par to $0.001 par
stock.  Also, the number of our authorized shares of common stock increased
from 100,000,000 to 379,000,000, and the number of our authorized shares of
preferred stock increased from 10,000,000 to 271,000,000.  We have
designated 258,000,000 shares of preferred stock as Series B and 13,000,000
shares of preferred stock as Series C.  Pursuant to the merger agreement,
each share of coolsavings.com inc. common stock issued and outstanding
immediately prior to the merger was converted into one share of common
stock of CoolSavings, Inc.



<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 141
"Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142").  SFAS 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase method
of accounting.  It also defines the criteria for identifying intangible
assets for recognition apart from goodwill.  SFAS 142 address the
recognition and measurement of goodwill and other intangible assets
subsequent to their acquisition.  This statement requires that intangible
assets with finite useful lives be amortized and intangible assets with
indefinite lives and goodwill no longer be amortized, but instead tested
for impairment at least annually.  We do not anticipate that the adoption
of SFAS No. 141 and 142 will have a material effect on our existing assets
as of December 31, 2001.

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," ("SFAS 143") which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.  SFAS No. 143
is required to be adopted for fiscal years beginning after June 15, 2002.
We do not expect the adoption of SFAS 143 will have a material impact on
our financial position or results of operations.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets"("SFAS 144") which is effective
for fiscal years beginning after December 15, 2001.  SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-
lived assets and supersedes SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" while
retaining many of the provisions of that statement.  We do not expect the
adoption of SFAS 144 to have a material impact on our financial position or
results of operations.

FACTORS AFFECTING OPERATING RESULTS

     Our results of operations have varied widely in the past and we
expect that they will continue to vary significantly in the future due to a
number of factors, including those set forth in Item 1 of this report. You
should read the section titled "Business - Factors That May Affect Future
Results" and "Business -Risks Related to the Internet Industry" in Item 1
of this report carefully.



<PAGE>


QUARTERLY FINANCIAL DATA

     The following are unaudited quarterly results:

                             For the three months ended
                ----------------------------------------------------
                   March 31,   June 30,   September 30, December 31,
                     2001        2001          2001         2001
                  ----------- ----------- ------------- ------------
                    (in thousands, except share and per share data)

Net revenues. . .  $    6,334  $    5,263    $    4,295   $    6,281
Gross profit. . .       4,432       3,751         2,976        5,358
Operating
 expenses . . . .      12,903      13,629         7,932        7,709
Loss from
 operations . . .      (8,471)     (9,878)       (4,956)      (2,351)
Loss before extra-
 ordinary gain. .      (8,432)    (10,174)       (8,280)      (2,668)
Net loss. . . . .      (8,432)    (10,174)       (8,280)      (2,341)
Extraordinary
 item . . . . . .       --          --            --             327
Loss applicable
 to common
 shareholders
 (a). . . . . . .      (8,432)    (10,174)       (8,280)      (3,772)
Weighted
 average share
 outstanding. . .  39,093,660  39,093,660    39,093,660   39,093,660
Basic and
 diluted earn-
 ings per share .       (0.22)      (0.26)        (0.21)       (0.10)


                             For the three months ended
                ----------------------------------------------------
                   March 31,   June 30,   September 30, December 31,
                     2000        2000          2000         2000
                  ----------- ----------- ------------- ------------
                    (in thousands, except share and per share data)

Net revenues. . .  $    8,086  $    8,948    $   11,294   $   11,538
Gross profit. . .       7,018       7,585         9,092        9,143
Operating
 expenses . . . .      15,720      17,945        18,913       19,638
Loss from
 operations . . .      (8,702)    (10,360)       (9,821)     (10,495)
Loss before extra-
 ordinary gain. .      (8,628)    (10,673)       (9,534)     (10,405)
Net loss. . . . .      (8,628)    (10,673)       (9,534)     (10,405)
Extraordinary
 item . . . . . .       --          --            --           --
Loss applicable
 to common share-
 holders (b). . .     (13,595)    (25,574)       (9,534)     (10,405)
Weighted
 average shares
 outstanding. . .  31,729,705  35,281,040    39,093,660   39,093,660
Basic and
 diluted earn-
 ings per share .       (0.43)      (0.72)        (0.24)       (0.27)

(a)  Loss applicable to common shareholders is increased by $1,318
     related to the accretion of the convertible redeemable Series B
     Preferred Stock to redemption value, by $63 related to the cumulative
     dividend on the Series B Preferred Stock and by $50 related the
     accretion of the paid-in-kind dividend on the Series B Preferred
     Stock all in the quarter ended December 31, 2001.


<PAGE>


(b)  Loss applicable to common shareholders is increased by $4,967
     and $14,901 related to a deemed dividend representing the beneficial
     conversion feature of preferred stock in the quarters ended
     March 31, 2000 and June 30, 2000, respectively.



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We had no holdings of derivative financial or commodity instruments
at December 31, 2001. However, we are exposed to financial market risks
associated with fluctuations in interest rates. Because all of the amounts
in our investment portfolio and related income would not be significantly
impacted by increases or decreases in interest rates due mainly to the
short-term nature of our investment portfolio, we believe our portfolio is
at fair value. If market rates were to increase immediately by 10 percent
from levels on December 31, 2001, the fair value of this investment
portfolio would decline by an immaterial amount. A sharp decline in
interest rates could reduce future interest earnings of our investment
portfolio. If market rates were to decrease immediately by 10 percent from
levels on December 31, 2001, the resultant decrease in interest earnings of
our investment portfolio would not have a material impact on our earnings
as a whole.  We have both fixed and variable rate debt as described in
Note 6.





<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                     INDEX TO FINANCIAL STATEMENTS






                                                                Page
                                                                ----


Report of Independent Accountants . . . . . . . . . . . .         56


Financial Statements:

  Balance Sheets. . . . . . . . . . . . . . . . . . . . .         57

  Statements of Operations. . . . . . . . . . . . . . . .         60

  Statements of Changes in Convertible Redeemable
  Preferred Stock and Stockholders' (Deficit) Equity. . .         62

  Statements of Cash Flows. . . . . . . . . . . . . . . .         67

  Notes to Financial Statements . . . . . . . . . . . . .         69




<PAGE>










                   REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and
Shareholders of CoolSavings, Inc.:


     In our opinion, the financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
CoolSavings, Inc. (the "Company") at December 31, 2001 and 2000, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States
of America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

     The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has negative working capital, is
in non-compliance with certain terms and covenants of its credit facilities
and other agreements and has sustained losses and negative cash flows from
operations since its inception, which raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The accompanying
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.







PricewaterhouseCoopers LLP


Chicago, Illinois
February 14, 2002





<PAGE>


                           COOLSAVINGS, INC.
                            BALANCE SHEETS
            (in thousands, except share and per share data)



                                          December 31,December 31,
                                             2001        2000
                                          ----------- ------------

ASSETS
Current assets:
  Cash and cash equivalents . . . . . . .  $    5,144   $    7,041
  Restricted certificates of deposit. . .         231           28
  Accounts receivable, net of allowance
    of  $881 and $1,318 at December 31,
    2001 and December 31, 2000,
    respectively. . . . . . . . . . . . .       3,610        9,330
  Prepaid assets  . . . . . . . . . . . .         320          723
  Other assets. . . . . . . . . . . . . .         144          662
                                           ----------   ----------

          Total current assets. . . . . .       9,449       17,784
                                           ----------   ----------

Property and equipment. . . . . . . . . .      10,593        9,445
Capitalized software costs. . . . . . . .       1,490        1,490
Capitalized web site costs. . . . . . . .       3,152        2,667
                                           ----------   ----------

          Total . . . . . . . . . . . . .      15,235       13,602

Less accumulated depreciation
  and amortization. . . . . . . . . . . .      (7,151)      (2,913)
                                           ----------   ----------

                                                8,084       10,689
Intangible assets, patents and licenses,
  net of accumulated amortization
  of $245 and $148 at December 31, 2001
  and December 31, 2000, respectively . .         431          677
                                           ----------   ----------

          Total assets. . . . . . . . . .  $   17,964   $   29,150
                                           ==========   ==========























The accompanying notes are an integral part of the financial statements


<PAGE>


                           COOLSAVINGS, INC.
                      BALANCE SHEETS - CONTINUED
            (in thousands, except share and per share data)

                                          December 31,December 31,
                                             2001        2000
                                          ----------- ------------
LIABILITIES
Current liabilities:
  Accounts payable, including amounts
    due to related parties of $110 and
    $180 at December 31, 2001 and
    December 31, 2000, respectively . . .  $    2,902   $    6,730
  Cash overdraft. . . . . . . . . . . . .       --           1,335
  Accrued marketing expense . . . . . . .         266        2,289
  Accrued compensation. . . . . . . . . .         440        2,230
  Accrued interest, including amounts due
    to related parties of $113 at
    December 31, 2001 . . . . . . . . . .         125        --
  Accrued expenses, including amounts due
    to related parties of $405 and $35
    at December 31, 2001 and December 31,
    2000, respectively. . . . . . . . . .       1,845        1,282
Deferred revenue  . . . . . . . . . . . .         351        1,152
Notes payable due to related party. . . .       7,249        --
Current maturities of long-term debt. . .       1,879        1,728
Senior secured note payable due to
  related party reclassified as
  currently payable . . . . . . . . . . .       5,153        --
Long-term debt reclassified as
  currently payable . . . . . . . . . . .      --            2,661
                                           ----------   ----------
          Total current liabilities . . .      20,210       19,407

Long-term liabilities:
  Deferred revenue  . . . . . . . . . . .         241        --
  Accrued expenses due to related parties         478        --
                                           ----------   ----------
          Total long-term liabilities . .         719        --
                                           ----------   ----------
Commitments and contingencies (Note 7)

Convertible redeemable cumulative Series B
  Preferred Stock, $0.001 par value,
  258,000,000 shares authorized and
  65,057,936 issued and outstanding at
  December 31, 2001 (liquidation pre-
  ference of $0.1554 per share at
  December 31, 2001). . . . . . . . . . .      10,108        --
Convertible redeemable Series C Preferred
  Stock, $0.001 par value, 13,000,000
  shares authorized and 13,000,000 shares
  issued and outstanding at December 31,
  2001 (liquidation preference of
  $0.1665 per share at December 31, 2001)       1,950        --













The accompanying notes are an integral part of the financial statements


<PAGE>


                           COOLSAVINGS, INC.
                      BALANCE SHEETS - CONTINUED
            (in thousands, except share and per share data)

                                          December 31,December 31,
                                             2001        2000
                                          ----------- ------------
STOCKHOLDERS' (DEFICIT) EQUITY
  Convertible Series A Preferred Stock,
    no par value, 10,000,000 shares
    authorized at December 31, 2000 and
    no shares issued or outstanding at
    December 31, 2001 and 2000. . . . . .       --           --
  Common stock, $0.001 par value per
    share, 379,000,000 shares authorized
    at December 31, 2001; no par value
    per share, 100,000,000 shares
    authorized at December 31, 2000;
    39,093,660 shares issued and
    outstanding at December 31, 2001 and
    December 31, 2000, respectively . . .          39       73,659
Additional paid-in capital  . . . . . . .      74,517          (47)
Accumulated deficit . . . . . . . . . . .     (89,579)     (60,352)
Notes receivable from related parties . .      --           (3,517)
                                           ----------   ----------
          Total stockholders' (deficit)
            equity. . . . . . . . . . . .     (15,023)       9,743
                                           ----------   ----------
          Total liabilities, convertible
            redeemable  preferred stock
            and stockholders' (deficit)
            equity. . . . . . . . . . . .  $   17,964   $   29,150
                                           ==========   ==========



































The accompanying notes are an integral part of the financial statements


<PAGE>


                           COOLSAVINGS, INC.
                       STATEMENTS OF OPERATIONS
            (in thousands, except share and per share data)



                                    For the Year Ended December 31,
                                 ------------------------------------
                                       2001       2000        1999
                                   ----------  ----------  ----------
Revenue:
  e-marketing services. . . . . .  $   21,874  $   39,049  $   12,909
  License royalties . . . . . . .         299         817           7
                                   ----------  ----------  ----------
Net revenues. . . . . . . . . . .      22,173      39,866      12,916
Cost of revenues. . . . . . . . .       5,656       7,028       1,818
                                   ----------  ----------  ----------
Gross profit. . . . . . . . . . .      16,517      32,838      11,098
                                   ----------  ----------  ----------
Operating expenses:
  Sales and marketing . . . . . .      17,446      41,607      17,838
  Product development . . . . . .       5,868       7,764       4,503
  General and administrative,
    inclusive of $3.7 million of
    expense related to forgive-
    ness of notes receivable,
    including interest, for 2001
    and $4.0 million of compen-
    sation related to stock
    options for 2000. . . . . . .      18,859      22,845       5,890
                                   ----------  ----------  ----------
        Total operating expenses.      42,173      72,216      28,231
                                   ----------  ----------  ----------

Loss from operations. . . . . . .     (25,656)    (39,378)    (17,133)

Other income (expense):
  Interest and other income . . .         258       1,158         494
  Interest expense. . . . . . . .        (841)       (465)       (229)
  Other settlement expense. . . .        (219)      --          --
  Amortization of debt discount .      (3,096)      --          --
  Interest expense representing
    beneficial conversion
    feature of convertible debt .      --            (555)      --
                                   ----------  ----------  ----------
        Total other income
          (expense) . . . . . . .      (3,898)        138         265
                                   ----------  ----------  ----------
Loss before income taxes and
  extraordinary gain. . . . . . .     (29,554)    (39,240)    (16,868)

Income taxes. . . . . . . . . . .       --          --          --
                                   ----------  ----------  ----------
Loss before extraordinary gain. .     (29,554)    (39,240)    (16,868)

Extraordinary gain (Note 3c). . .         327       --          --
                                   ----------  ----------  ----------

        Net loss. . . . . . . . .     (29,227)    (39,240)    (16,868)









The accompanying notes are an integral part of the financial statements


<PAGE>


                           COOLSAVINGS, INC.
                 STATEMENTS OF OPERATIONS - CONTINUED
            (in thousands, except share and per share data)


                                    For the Year Ended December 31,
                                 ------------------------------------
                                       2001       2000        1999
                                   ----------  ----------  ----------

Deemed dividend representing the
  beneficial conversion feature
  of Series A Preferred Stock . .      --         (19,868)      --
Accretion of convertible redeem-
  able Series B Preferred Stock
  to redemption value . . . . . .      (1,318)      --          --
Cumulative dividend on Series B
  Preferred Stock . . . . . . . .         (63)      --          --
Accretion of PIK dividend on
  Series B Preferred Stock. . . .         (50)      --          --
                                   ----------  ----------  ----------
Loss applicable to common
  shareholders. . . . . . . . . .  $  (30,658) $  (59,108) $  (16,868)
                                   ==========  ==========  ==========


Basic and diluted loss per share
  before extraordinary gain . . .  $    (0.79) $    (1.63) $    (0.57)
Extraordinary gain. . . . . . . .        0.01       --          --
                                   ----------  ----------  ----------
Basic and diluted net loss
  per share . . . . . . . . . . .  $    (0.78) $    (1.63) $    (0.57)
                                   ==========  ==========  ==========

Weighted average shares used in
  the calculation of basic and
  diluted net loss per share. . .  39,093,660  36,313,759  29,804,681
                                   ==========  ==========  ==========






























The accompanying notes are an integral part of the financial statements


<PAGE>


<table>
                                              COOLSAVINGS, INC.
     STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
                               (in thousands, except share and per share data)

<caption>
                                                                      Stockholders' (Deficit) Equity
                                                               ------------------------------------------
                         Series B Redeemable Series C Redeemable      Series A
                           Preferred Stock     Preferred Stock     Preferred Stock       Common Stock
                        ---------------------------------------- ----------------------------------------
                          Shares     Amount    Shares    Amount    Shares     Amount    Shares    Amount
                        ----------  -------- ---------- --------  ---------  -------- ---------- --------

                     <c>         <c>      <c>        <c>       <c>        <c>      <c>        <c>
Balances,
 December 31, 1998. . .      --     $  --         --    $  --         --     $  --    24,614,899 $ 13,501

Issuance of preferred
 stock, net of issuance
 costs. . . . . . . . .                                           2,197,650     --         --       --
Issuance of common stock                                                               4,906,594    8,500
Exercise of options
  and warrants. . . . .                                                                1,507,190    2,844
Issuance of common stock
  for advertising . . .                                                                  686,766    3,000
Net loss. . . . . . . .
                        ----------  -------- ---------- --------   --------  -------- ---------- --------
Balances,
 December 31, 1999. . .      --        --         --       --     2,197,650     --    31,715,449   27,845

Issuances of common
 stock, net of issuance
 costs. . . . . . . . .                                                                3,300,000   19,625
Common stock issued for
  convertible preferred
  stock . . . . . . . .                                          (2,197,650)   --      2,822,096   19,868
Deemed dividend repre-
  senting the beneficial
  conversion feature of
  preferred stock . . .
Common stock issued for
  convertible subordinated
  notes . . . . . . . .                                                                  793,068    4,996
Deemed dividend repre-
  senting the beneficial
  conversion feature of
  convertible subordinated
  notes . . . . . . . .


                   The accompanying notes are an integral part of the financial statements


<PAGE>


                                              COOLSAVINGS, INC.
STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
                               (in thousands, except share and per share data)


                                                                      Stockholders' (Deficit) Equity
                                                               ------------------------------------------
                         Series B Redeemable Series C Redeemable      Series A
                           Preferred Stock     Preferred Stock     Preferred Stock       Common Stock
                        ---------------------------------------- ----------------------------------------
                          Shares     Amount    Shares    Amount    Shares     Amount    Shares    Amount
                        ----------  -------- ---------- --------  ---------  -------- ---------- --------
Deferred stock compensa-
  tion. . . . . . . . .
Amortization of compensa-
  tion expense. . . . .
Compensatory stock
  option. . . . . . . .
Issuance of common stock
  for patent rights . .                                                                   83,334      500
Exercise of stock
  options . . . . . . .                                                                  379,730      825
Redemption of fractional
  shares. . . . . . . .                                                                      (17)
Net loss. . . . . . . .
                        ----------  -------- ---------- --------   --------  -------- ---------- --------
Balances,
  December 31, 2000 . .      --        --         --       --         --        --    39,093,660   73,659

Issuances of detachable
  warrants. . . . . . .
Forgiveness of notes
  receivable. . . . . .
Conversion from no par
  to $0.001 par common
  stock . . . . . . . .                                                                           (73,620)
Issuance of Series B
  Preferred Stock, net
  of issuance  costs of
  $1.3 million. . . . . 65,057,936     8,790
Accretion of Series B
  Preferred to redemption
  value . . . . . . . .                1,318
Cumulative dividend on
  Series B Preferred
  Stock . . . . . . . .
Accretion of PIK dividend
  on Series B Preferred
  Stock . . . . . . . .

                   The accompanying notes are an integral part of the financial statements


<PAGE>


                                              COOLSAVINGS, INC.
STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
                               (in thousands, except share and per share data)


                                                                      Stockholders' (Deficit) Equity
                                                               ------------------------------------------
                         Series B Redeemable Series C Redeemable      Series A
                           Preferred Stock     Preferred Stock     Preferred Stock       Common Stock
                        ---------------------------------------- ----------------------------------------
                          Shares     Amount    Shares    Amount    Shares     Amount    Shares    Amount
                        ----------  -------- ---------- --------  ---------  -------- ---------- --------

Exchange of notes payable,
  accrued interest and
  warrants for Series C
  Preferred Stock . . .                      13,000,000    1,950
Net loss. . . . . . . .
                        ----------  -------- ---------- --------   --------  -------- ---------- --------

Balances,
  December 31, 2001 . . 65,057,936  $ 10,108 13,000,000 $  1,950      --     $  --    39,093,660 $     39
                        ==========  ======== ========== ========   ========  ======== ========== ========

























<fn>
                   The accompanying notes are an integral part of the financial statements
</table>


<PAGE>


<table>                                       COOLSAVINGS, INC.
STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
                               (in thousands, except share and per share data)
<caption>
                                                                                Notes           Total
                         Additional                                           Receivable     Stockholders'
                          Paid-In       Deferred Stock       Accumulated     From Related     (Deficit)
                          Capital        Compensation          Deficit         Parties          Equity
                         ----------     -------------        -----------     ------------    ------------

                      <c>            <c>                  <c>             <c>             <c>
Balances,
  December 31, 1998 . .  $   (4,664)       $    --             $  (4,244)      $    --         $    4,593

Issuance of preferred
 stock, net of issuance
 costs. . . . . . . . .      19,868                                                                19,868
Issuance of common
  stock . . . . . . . .                                                                             8,500
Exercise of options
  and warrants. . . . .                                                            (2,817)             27
Issuance of common stock
  for advertising . . .                                                                             3,000
Net loss. . . . . . . .                                          (16,868)                         (16,868)
                         ----------        ----------         ----------       ----------      ----------
Balances,
 December 31, 1999. . .      15,204             --               (21,112)          (2,817)         19,120

Issuances of common
 stock, net of issuance
 costs. . . . . . . . .                                                                            19,625
Common stock issued for
  convertible preferred
  stock . . . . . . . .                                                                            19,868
Deemed dividend repre-
  senting the beneficial
  conversion feature of
  preferred stock . . .     (19,868)                                                              (19,868)
Common stock issued for
  convertible subordinated
  notes . . . . . . . .                                                                             4,996
Deemed dividend repre-
  senting the beneficial
  conversion feature of
  convertible subordinated
  notes . . . . . . . .         555                                                                   555
Deferred stock compensa-
  tion. . . . . . . . .       3,960            (3,960)                                              --
Amortization of compensa-
  tion expense. . . . .                         3,960                                               3,960
Compensatory stock
  option. . . . . . . .         102                                                                   102


<PAGE>


                                              COOLSAVINGS, INC.
STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
                               (in thousands, except share and per share data)
                                                                                Notes           Total
                         Additional                                           Receivable     Stockholders'
                          Paid-In       Deferred Stock       Accumulated     From Related     (Deficit)
                          Capital        Compensation          Deficit         Parties          Equity
                         ----------     -------------        -----------     ------------    ------------
Issuance of common stock
  for patent rights . .                                                                               500
Exercise of stock
  options . . . . . . .                                                              (700)            125
Redemption of fractional
  shares. . . . . . . .                                                                             --
Net loss. . . . . . . .                                          (39,240)                         (39,240)
                         ----------        ----------         ----------       ----------      ----------
Balances,
  December 31, 2000 . .         (47)            --               (60,352)          (3,517)          9,743

Issuances of detachable
  warrants. . . . . . .       2,762                                                                 2,762
Forgiveness of notes
  receivable. . . . . .                                                             3,517           3,517
Conversion from no par
  to $0.001 par common
  stock . . . . . . . .      73,620                                                                 --
Issuance of Series B
  Preferred Stock, net
  of issuance  costs of
  $1.3 million. . . . .
Accretion of Series B
  Preferred to redemption
  value . . . . . . . .      (1,318)                                                               (1,318)
Cumulative dividend on
  Series B Preferred
  Stock . . . . . . . .         (63)                                                                  (63)
Accretion of PIK dividend
  on Series B Preferred
  Stock . . . . . . . .         (50)                                                                  (50)
Exchange of notes payable,
  accrued interest and
  warrants for Series C
  Preferred Stock . . .        (387)                                                                 (387)
Net loss. . . . . . . .                                          (29,227)                         (29,227)
                         ----------        ----------         ----------       ----------      ----------
Balances,
  December 31, 2001 . .  $   74,517        $    --            $  (89,579)      $    --         $  (15,023)
                         ==========        ==========         ==========       ==========      ==========
<fn>
                   The accompanying notes are an integral part of the financial statements
</table>


<PAGE>


                           COOLSAVINGS, INC.
                        STATEMENTS OF CASH FLOWS
                            (in thousands)



                                     For the Year Ended December 31,
                                   ----------------------------------
                                        2001       2000       1999
                                    ----------  ---------- ----------
Cash flows used in operating
 activities:
  Net loss. . . . . . . . . . . . . $  (29,227) $  (39,240)$  (16,868)
Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation and amortization . .      5,064       2,482        651
  Loss on disposal of property
    and equipment . . . . . . . . .        120         286      --
  Write-off related to website
    project costs . . . . . . . . .        781       --         --
  Write-off related to people soft
    asset . . . . . . . . . . . . .        150       --         --
  Forgiveness of notes receivable
    and interest from directors . .      3,666       --         --
  Provision for doubtful accounts .      2,432       1,638        123
  Amortization of debt discount . .      3,096         555      --
  Interest payment in kind. . . . .        379       --         --
  Extraordinary gain on exchange
    of debt for preferred stock . .       (327)      --         --
  Landmark transaction costs
    (Note 6b) . . . . . . . . . . .        749       --         --
  Stock option compensation . . . .      --          3,960      --
  Amortization of prepaid
    advertising . . . . . . . . . .      --          1,519      --

Changes in assets and liabilities:
  (Increase) decrease in restricted
    certificates of deposit . . . .       (204)         67        (28)
  Decrease (increase) in accounts
    receivable. . . . . . . . . . .      3,413      (6,586)    (4,222)
  Decrease (increase) in prepaid
    and other current assets. . . .        645         774       (136)
  (Decrease) increase in accounts
    payable . . . . . . . . . . . .     (3,828)      4,386      1,611
  (Decrease) increase in deferred
    revenue . . . . . . . . . . . .       (560)        734        197
  (Decrease) increase in accrued
    and other liabilities . . . . .     (2,863)      3,968      1,310
                                    ----------  ---------- ----------
Net cash flows used in
  operating activities. . . . . . .    (16,514)    (25,457)   (17,362)
                                    ----------  ---------- ----------

Cash flows used in investing
 activities:
  Purchases of property and
    equipment . . . . . . . . . . .     (1,691)     (6,715)    (2,215)
  Sale of property and equipment. .         29         121      --
  Cash paid for intangible assets .      --           (325)     --
  Capitalized software costs. . . .      --          --        (1,444)
  Capitalized web site development
    costs . . . . . . . . . . . . .     (1,579)     (2,668)     --
                                    ----------  ---------- ----------
Net cash used in
  investing activities. . . . . . .     (3,241)     (9,587)    (3,659)
                                    ----------  ---------- ----------

The accompanying notes are an integral part of the financial statements


<PAGE>


                           COOLSAVINGS, INC.
                  STATEMENTS OF CASH FLOWS - CONTINUED
                            (in thousands)


                                    For the Year Ended December 31,
                                 ------------------------------------
                                        2001       2000       1999
                                    ----------  ---------- ----------
Cash flows from financing activities:
  Proceeds from short-term debt . .      1,552       --         --
  Repayment of debt obligations . .     (4,258)       (621)     --
  Advances on notes payable . . . .     23,879       4,132        579
  Proceeds from exercise of stock
    options . . . . . . . . . . . .      --            125         27
  Proceeds from convertible notes
    payable . . . . . . . . . . . .      --          --         4,996
  Proceeds from issuance of
    preferred stock . . . . . . . .      --          --        20,000
  Proceeds from issuance of
    common stock. . . . . . . . . .      --         23,100      8,500
  Cash overdraft. . . . . . . . . .     (1,335)      1,335      --
  Financing costs . . . . . . . . .     (1,980)     (3,475)      (487)
                                    ----------  ---------- ----------
Net cash provided by
  financing activities. . . . . . .     17,858      24,596     33,615
                                    ----------  ---------- ----------

Net (decrease) increase in cash . .     (1,897)    (10,448)    12,594
Cash and cash equivalents,
  beginning of period . . . . . . .      7,041      17,489      4,895
                                    ----------  ---------- ----------
Cash and cash equivalents,
  end of period . . . . . . . . . . $    5,144  $    7,041 $   17,489
                                    ==========  ========== ==========

Supplemental schedule of cash
 flow information:
  Cash paid for interest. . . . . . $      355  $      228 $      226

Noncash Investing and Financing
 Activity:
  Common stock issued in exchange
    for patent rights . . . . . . . $    --     $      500 $    --
  Common stock issued upon
    conversion of Series A
    Preferred Stock . . . . . . . .      --         19,868      --
  Common stock issued upon
    conversion of subordinated
    notes . . . . . . . . . . . . .      --          4,996      --
  Issuance of common stock in
    exchange for shareholder notes
    upon exercise of stock options
    and warrants. . . . . . . . . .      --            700      2,817
  Issuance of common stock in
    exchange for advertising. . . .      --          --         3,000
  Issuance of stock options for
    consulting services . . . . . .      --            102      --
  Conversion of notes to Series B
    Preferred stock . . . . . . . .      8,790       --         --
  Conversion of notes and Warrants
    to Series C Preferred stock . .      1,950       --         --
  Accretion of Series B Preferred
    Stock . . . . . . . . . . . . .      1,318       --         --




The accompanying notes are an integral part of the financial statements.


<PAGE>


                           COOLSAVINGS, INC.
                     NOTES TO FINANCIAL STATEMENTS
            (in thousands, except share and per share data)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     a.    THE COMPANY:  The Company is an online direct marketer and
media company that provides solutions to connect marketers to their target
consumers using analytics and incentive technology.  Under our established
brand, advertisers can deliver, target and track a wide array of
incentives, including printed and electronic coupons, personalized e-mails,
rebates, samples, trial offers, sales notices, and gift certificates to
promote sales of products or services in stores or online.

     These financial statements are prepared on a going-concern basis in
accordance with accounting principles generally accepted in the United
States. This preparation requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Estimates are used for, but not limited to, depreciation,
amortization, sales credits, the accounting for doubtful accounts, unearned
revenue, taxes and contingencies. Actual results could differ from those
estimates.

     b.    PROFITABILITY UNCERTAIN AND LIQUIDITY CONSTRAINTS:  The Company
has negative working capital and has sustained significant net losses and
negative cash flows from operations since inception. In addition, the
Company is not in compliance with certain covenants of its credit
facilities and other agreements. Landmark Communications, Inc. and Landmark
VII, LLC (together, "Landmark") has the right to accelerate payment of
obligations due to Landmark and require redemption of the Convertible
Redeemable Cumulative Series B Preferred Stock.  The Company's ability to
meet its obligations in the ordinary course of business is dependent upon
management's ability to establish profitable operations and obtain
continuing financing from Landmark Communications, Inc. (described in Note
2 below) or other sources with equally acceptable terms and conditions.

     If management is unable to secure additional equity and/or debt
financing or comply with the terms of the Landmark financing or the
forbearance agreements with the banks, or if the Company fails to achieve
and maintain cash flow positive operations, the Company's ability to
continue to operate the business will be jeopardized.  There can be no
assurance that the Company will obtain necessary financing.  The ultimate
recoverability of property and equipment and other assets is dependent
upon, among other things, the success of the Company in establishing
profitable operations, the attainment of which cannot be presently assured.

Since there is no assurance that management will complete their plans,
there is substantial doubt about the Company's ability to continue as a
going concern.  The financial statements do not include any adjustments
that may result from the outcome of this uncertainty.

     c.    CASH AND CASH EQUIVALENTS:  The Company considers all highly
liquid investments with an original maturity of three months or less to be
cash equivalents. Cash equivalents consist primarily of deposits in money
market funds and certificates of deposit.  Checks issued but not presented
to the banks for payment may create negative book balances.  Such negative
cash balances are recorded in "Cash overdraft" in the accompanying balance
sheets.



<PAGE>


     d.    CONCENTRATION OF CREDIT RISK:  Financial instruments that
potentially subject the Company to a concentration of credit risk consist
of cash and cash equivalents and accounts receivable. Cash and cash
equivalents are deposited with high credit quality financial institutions.
The Company's accounts receivable are derived from revenue earned from
customers located primarily in the U.S. and are denominated in U.S.
dollars. For the year ended December 31, 2001, the Company had one customer
that accounted for approximately 12.7% of net revenues.  For the year ended
December 31, 2000, the Company had one customer that accounted for
approximately 10.3% of net revenues.  For the year ended December 31, 1999
there were no customers accounting for more than 10% of net revenues.
Additionally, no customers accounted for more than 10% of the Company's net
receivables for any period presented.

     e.    FAIR VALUE OF FINANCIAL INSTRUMENTS:  The Company's financial
instruments, including cash and cash equivalents, accounts receivable and
accounts payable are carried at cost, which approximates their fair value
because of the short-term maturity of these instruments. The carrying value
for all long-term debt outstanding at the end of all periods presented
approximates fair value.

     f.    PROPERTY AND EQUIPMENT:  Property and equipment are recorded at
cost. Depreciation and amortization are computed using primarily the
straight-line method over the estimated useful lives of the assets. Useful
lives for computer hardware and software are 3 to 5 years, and 5 to 7 years
for furniture and fixtures. Leasehold improvements are amortized over the
term of the lease or the estimated useful life, whichever is shorter. Upon
sale or retirement of property and equipment, the cost and related
accumulated depreciation or amortization are eliminated from the respective
accounts, and the resulting gain or loss is included in the determination
of net income. Maintenance and repair costs are expensed as incurred.

     g.    INTANGIBLE ASSETS:  Intangible assets are comprised of various
licenses and patents that are recorded at cost.  Amortization is computed
using the straight-line method over the estimated useful life of the asset
or the license period, whichever is shorter.  Amortization periods range
from 2 to 7 years.

     h.    LONG-LIVED ASSETS:  The Company assesses the recoverability of
long-lived assets at the entity level, whenever adverse events or changes
in circumstances or business climate indicate that an impairment may have
occurred. If the future cash flows (undiscounted and without interest)
expected to result from the use of the related assets are less than the
carrying value of such assets, an impairment has incurred and a loss is
recognized to reduce the carrying value of the long-lived assets to fair
value, which is determined by discounting estimated future cash flows. The
Company has not recognized an impairment loss in any of the periods
presented.

     i.    REDEEMABLE PREFERRED STOCK:  The carrying value of redeemable
convertible preferred stock is increased by periodic accretions so that the
carrying amount will equal the redemption amount at the redemption date.
The accretion is recorded as a dividend to the holders of the redeemable
convertible preferred stock and increases are recorded against additional
paid-in-capital, to the extent available, and then the accumulated deficit.

     j.    REVENUE RECOGNITION:  Revenue subject to time-based contracts
is recognized ratably over the duration of the contract. Deferred revenue
represents the portion of revenue that has not been recognized related to
time based contracts. For contracts based on certain performance or
delivery criteria, revenue is recognized in the month performance is
delivered to the customer.



<PAGE>


     Barter revenue includes amounts recorded for barter transactions in
which the Company exchanges promotion or direct marketing services for
advertising. Prior to January 2000, barter transactions were recorded at
the fair value of the goods or services provided, or received, whichever
were more readily determinable. Upon adoption of Emerging Issues Task Force
("EITF") No. 99-17 "Accounting for Advertising Barter Transactions", barter
transactions have been valued based upon similar cash transactions which
have occurred within six months prior to the date of the barter
transaction. In the years ended December 31, 2001, 2000 and 1999, barter
revenues and corresponding advertising costs were $1,070, $2,300 and $144,
respectively.

     k.    ADVERTISING:  Advertising costs are expensed as incurred.
Advertising expense was $8,508, $31,423 and $14,136  during the years ended
December 31, 2001, 2000, and 1999 respectively.

     l.    INCOME TAXES:  Income taxes are accounted for using an asset
and liability approach, which requires the recognition of taxes payable or
refundable for the current year and deferred tax liabilities and assets for
the future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The measurement of current
and deferred tax liabilities and assets are based on provisions of  the
enacted tax law; the effects of future changes in tax laws or rates are not
anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realized.

     m.    CAPITALIZED SOFTWARE COSTS:  The Company accounts for software
development costs in accordance with the American Institute of Certified
Public Accountants Statement of Position 98-1 ("SOP 98-1"), "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use" which
requires capitalization of certain costs including the cost of outside
consultants. These costs are amortized using the straight-line method over
three years, beginning when individual modules are placed into service. The
Company recognized $497, $497 and $112 in amortization expense for the
years ended December 31, 2001, 2000 and 1999, respectively. No software
development costs were capitalized in the years ended December 31, 2001 and
2000. In the year ended December 31, 1999, the Company capitalized $1,400
of software development costs.

     n.    CAPITALIZED WEB SITE DEVELOPMENT COSTS:  Effective July 1,
2000, the Company applied the standards of EITF No. 00-2 "Accounting for
Web Site Development Costs", which requires capitalization of certain web
site development costs. The Company capitalized costs of $1,579 and $2,668
related to web site development in the years ended December 31, 2001 and
2000, respectively.  The Company recognized $1,542 and $48 of amortization
expense for the years ended December 31, 2001 and 2000, respectively.
Additionally, the Company wrote off web site development costs during 2001
with a net book value of $781.

     o.    STOCK-BASED COMPENSATION:  Financial Accounting Standards Board
("FASB") Statement of Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" encourages, but does not require, companies to
record compensation cost for stock-based compensation at fair value. The
Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and its related
Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market value of a share of the
Company's stock at the date of the grant over the amount that must be paid
to acquire the stock. No compensation expense has been recorded in
connection with stock option grants in 1999 and 2001. See Note 10g for a
discussion of common stock compensation recorded in 2000 related to the
departure of the former president of the Company.



<PAGE>


     p.    BASIC AND DILUTED NET LOSS PER SHARE:  The Company computes net
loss per share in accordance with the provisions of SFAS 128 "Earnings per
Share" ("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS 128 and SAB 98, basic and diluted net loss per
share applicable to common shareholders is computed by dividing the net
loss applicable to common shareholders for the period by the weighted
average number of common shares outstanding for the period. The calculation
of diluted net loss per share excludes shares of common stock issuable upon
the conversion of unsecured convertible subordinated notes (see Note 6c),
exercise of employee stock options (see Note 10) and warrants (See Note
6b), and the conversion of the preferred stocks (See Note 9) as the effect
of such exercises would be anti-dilutive. Refer to Note 11 -- Earnings Per
Share for the reconciliation of the numerator and denominator of the basic
and diluted EPS calculation.

     q.    COMPREHENSIVE EARNINGS:  The Company reports comprehensive
earnings in accordance with SFAS Statement No. 130, "Reporting
Comprehensive Income," which establishes standards for the reporting and
display of comprehensive earnings and its components in general-purpose
financial statements. There were no components of other comprehensive
income during any of the periods presented.

     r.    SEGMENT INFORMATION:  SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" requires that management identify
operating segments based on the way that management desegregates the entity
for making internal operating decisions. The Company currently operates
under the definition of one segment.

     s.    RECENT PRONOUNCEMENTS:  In July 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 141 "Business Combinations"
("SFAS 141") and SFAS No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142").  SFAS 141 requires business combinations initiated after
June 30, 2001 to be accounted for using the purchase method of accounting.
It also defines the criteria for identifying intangible assets for
recognition apart from goodwill.  SFAS 142 addresses the recognition and
measurement of goodwill and other intangible assets subsequent to their
acquisition.  This statement requires that intangible assets with finite
useful lives are amortized and intangible assets with indefinite lives and
goodwill no longer be amortized, but instead tested for impairment at least
annually.  The Company does not anticipate that the adoption of SFAS
No. 141 and 142 will have a material effect on existing assets as of
December 31, 2001.

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," ("SFAS 143") which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143
is required to be adopted for fiscal years beginning after June 15, 2002.
The Company does not expect the adoption of SFAS 143 will have a material
impact on the financial position or results of operations.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets" ("SFAS 144") which is
effective for fiscal years beginning after December 15, 2001.  SFAS 144
addresses financial accounting and reporting for the impairment or disposal
of long-lived assets and supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" while retaining many of the provisions of that statement.  The Company
does not expect the adoption of SFAS 144 to have a material impact on our
financial position or results of operations.

     t.    RECLASSIFIED PRIOR-YEAR AMOUNTS:  Certain prior-year amounts
have been reclassified to conform to the current year's presentation.



<PAGE>


2.   LANDMARK TRANSACTION - RELATED PARTY

     In 2001, the Company entered into a series of transactions with
Landmark Communications, Inc. and Landmark Ventures VII, LLC (together,
"Landmark") whereby Landmark made loans to and an equity investment in
CoolSavings.  This series of transactions resulted in a change in voting
control of the Company.  Landmark's principal business interests are in the
media industry, and it owns and operates entities engaged in newspaper and
other print publishing, television broadcasting and cable television
programming services.

     SENIOR SECURED NOTE

     Landmark loaned CoolSavings $5.0 million pursuant to a senior secured
note (the "Senior Secured Note"), which loan is due on June 30, 2006 (the
"Senior Secured Loan"). The Senior Secured Note and Senior Secured Loan are
governed by the terms of an amended and restated senior secured loan and
security agreement dated July 30, 2001 (the "Amended and Restated Loan
Agreement").  In connection with the Senior Secured Loan, CoolSavings
issued Landmark a warrant to purchase shares of our common stock. The
warrant was exercisable for 10.0 million shares of common stock at an
exercise price of $0.50 per share at November 12, 2001. The exercise price
of the warrant will increase to $0.75 per share on July 30, 2005 if not
previously exercised. The loan bears interest at 8% per annum, which
interest accrues quarterly and is payable "in-kind". The in-kind interest
payment is effected by adding the accrued interest to the principal of the
Senior Secured Note and increasing the number of shares of common stock
that may be purchased under the warrant by two shares for each dollar of
interest accrued under the Senior Secured Note. As of December 31, 2001,
the principal and interest owed under the Senior Secured Loan was $5.2
million and the related warrant was exercisable for approximately 10.1
million shares. The Senior Secured Note is secured by a second lien on all
of the Company's assets.

     The Amended and Restated Loan Agreement contains financial covenants
and affirmative and negative covenants that, among other things, restrict
our ability to incur additional indebtedness and take other actions without
the consent of the note holder.

     GRID NOTE

     Landmark has also funded additional amounts to CoolSavings pursuant
to a grid note, as amended (the "Grid Note"). The Grid Note is also
governed by the terms of the Amended and Restated Loan Agreement.  The Grid
Note bears interest at 8% per annum, is payable on demand, and may evidence
up to $20,000 in advances.

     In connection with funding the advances under the Grid Note, Landmark
has reserved its rights with respect to defaults by CoolSavings of certain
provisions of the Purchase Agreement (defined below) and Amended and
Restated Loan Agreement.  These defaults, the "Existing Defaults", include
CoolSavings' failure to initially comply with the collateral base covenant
in the forbearance agreement with American National Bank and the following
defaults that have not been and cannot be cured (and will result in
continuing defaults):

     .     the failure of at least 1.4 million members to access the
           CoolSavings web site in the period between July 19 and
           August 17, 2001 (a requirement of the Purchase Agreement);

     .     CoolSavings' failure to achieve a prescribed amount of
           billings in the month of July, 2001 (a requirement of the
           Amended and Restated Loan Agreement); and

     .     CoolSavings' failure to maintain a minimum level of working
           capital and a ratio of cash, cash equivalents and certain
           receivables over current liabilities, in each case as of
           July 31, 2001 (requirements of the Amended and Restated Loan
           Agreement).


<PAGE>


     Although its occurrence makes it an Existing Default, CoolSavings has
cured the default under the forbearance agreement with American National
Bank. Because Landmark has reserved its rights with respect to the Existing
Defaults, and because CoolSavings cannot cure certain of the Existing
Defaults (because of the nature of such Existing Defaults), Landmark may at
any time terminate the Amended and Restated Loan Agreement and require
CoolSavings to repay to Landmark all outstanding debt incurred under the
Amended and Restated Loan Agreement (plus accrued and unpaid interest).
Before CoolSavings can make any such payments to Landmark, the Company must
pay all amounts owing to American National Bank under its credit facilities
with it or obtain American National Bank's consent to or waiver of the
required payments to Landmark.  In addition, if Landmark terminates the
Purchase Agreement (defined below) and the Amended and Restated Loan
Agreement, CoolSavings' banks can terminate the forbearance agreements and
immediately accelerate the debt the Company owes them.

     During the third and fourth quarter of 2001, Landmark loaned to the
Company an aggregate of $16,500 under the Grid Note.  On November 12, 2001,
Landmark, pursuant to the Securities Purchase Agreement between Landmark
and the Company, dated November 12, 2001 (the "Purchase Agreement"),
exercised their right to apply $10,000 of principal and $108 of accrued
interest to the purchase of 65,057,936 shares of the Company's $0.001 par
value Cumulative Convertible Series B Preferred Stock (the "Series B
Preferred Stock").  Principal outstanding under the Grid Note at December
31, 2001 was $7,249.  Under the terms of the Purchase Agreement, Landmark
may require that any amount funded under the Grid Note be applied to
purchase additional shares of Series B Preferred Stock at $0.1554 per
share.

     CoolSavings has obtained all of its most recent financing from
Landmark under the Grid Note to support its operations.  Landmark was not
obligated to fund those additional advances and did so at its discretion.
Landmark may demand payment in full under the Grid Note at any time as well
as accelerate and demand payment under the Senior Secured Note as a result
of the Existing Defaults.  Additionally, Landmark, at any time, may redeem
their shares of Series B Preferred Stock in whole or in part at their
stated value of $0.1554 per share plus accrued but unpaid dividends.

SALE OF SERIES B PREFERRED STOCK

     On November 12, 2001, the Company issued to Landmark 65,057,936
shares of Series B Preferred Stock pursuant to the terms of the Purchase
Agreement.  Landmark purchased the Series B Preferred Stock, at a purchase
price of $0.1554 per share, by applying $10,000 of principal and $108 of
interest under the Grid Note to offset the complete purchase price of the
shares of Series B Preferred Stock.  As of December 31, 2001, Landmark
holds 65,057,936 shares of Series B Preferred Stock (and has rights with
respect to accrued dividends thereon), holds a warrant to purchase
10,106,667 shares of our common stock and has the right to apply amounts
funded under the Grid Note and accrued interest to purchase 46,876,274
shares of Series B Preferred Stock.  Landmark's ownership will continue to
grow through the issuance of additional shares of Series B Preferred Stock
and warrants as "in-kind" payments for dividends and interest accruing on
the Series B Preferred Stock and Senior Secured Note, respectively, and
through their ability to purchase additional shares of Series B Preferred
Stock by funding additional advances under the Grid Note.



<PAGE>


TERMS OF THE SERIES B PREFERRED STOCK.

     The terms of the Series B Preferred Stock are set forth in their
entirety in the Company's Certificate of Incorporation.  The Series B
Preferred Stock ranks senior (with respect to, among other things,
dividends, redemption and liquidation payments) to the Series C Preferred
Stock (defined below), the common stock and any future preferred stock of
CoolSavings.  The following discussion briefly summarizes the preferential
rights of the Series B Preferred Stock.

     DIVIDENDS AND LIQUIDATION PREFERENCE

     Dividends accrue on the shares of Series B Preferred Stock at the
rate of 8% per annum, payable quarterly in additional shares of Series B
Preferred Stock. Dividends are cumulative and will continue to accrue
whether or not declared.  As of December 31, 2001, 722,866 shares of Series
B Preferred Stock are issuable with respect to accrued, but not declared,
dividends.

     On liquidation, holders of Series B Preferred Stock are entitled to
be paid the greater of the amount per share that would have been payable if
each share of Series B Preferred Stock had been converted to common stock
or the stated value ($0.1554 at the time of issuance, subject to anti-
dilution adjustments) for each share of Series B Preferred Stock plus the
amount of any accrued but unpaid dividends thereon before holders of the
Series C Preferred Stock and common stock receive a distribution.  At the
election of the holders of the Series B Preferred Stock, a merger or
consolidation that effects a change of control of CoolSavings, or a sale of
all or substantially all of the assets of CoolSavings may be deemed to be a
liquidation.

     CONVERSION RIGHTS

     Each share of Series B Preferred Stock, plus any shares issuable as
accrued but unpaid dividends thereon, is convertible at the holder's option
into the number of shares of common stock obtained by dividing the stated
value of a share of Series B Preferred Stock ($0.1554) by the conversion
price ($0.1554 at the time of issuance, subject to anti-dilution
adjustments).

     The conversion price and conversion ratio are subject to "full
ratchet" adjustment upon certain events.  This means, for example (and
excluding exceptions), that if CoolSavings issues any shares of common
stock for less than the conversion price or issues convertible or
derivative securities with an exercise or conversion price less than the
conversion price of the Series B Preferred Stock, the conversion price and
conversion ratio are reduced to the price at which such new securities were
issued.

     REDEMPTION.

     CoolSavings' Election.  Shares of Series B Preferred Stock are
redeemable in whole, at CoolSavings' election, after the seventh
anniversary of the issuance of the Series B Preferred Stock, at their
stated value of $0.1554 per share plus accrued but unpaid dividends through
the redemption date. CoolSavings' ability to redeem the shares of Series B
Preferred Stock is subject to the following:

     .     the common stock must have traded at or above $3.00 per share
           for 20 consecutive trading days (and during at least 60 of the
           80 trading days immediately prior to the redemption date);

     .     CoolSavings must have on file, or agree to file and make
           effective within 30 days of redemption a registration statement
           with the SEC registering for resale the shares of common stock
           underlying the Series B Preferred Stock;

     .     CoolSavings shall have paid any outstanding debt to Landmark
           in full; and


<PAGE>


     .     there are no securities outstanding that are junior in ranking
           to the Series B Preferred Stock (except common stock).

     Holders' Election. Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2001, the Series B Preferred
Stock was redeemable in whole or in part at the holder's election at the
stated value of $0.1554 per share plus accrued but unpaid dividends.


     VOTING RIGHTS AND BOARD OF DIRECTORS

     Each share of Series B Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series B Preferred Stock and accrued dividends thereon is convertible,
from time to time. The holders of the Series B Preferred Stock are entitled
to vote together with holders of common stock at any meeting of the
stockholders on any and all matters presented to the stockholders for
consideration.  In addition to their right to vote in the general election
of members of our Board on an as-converted basis, the holders of Series B
Preferred Stock are entitled to designate, and vote separately as a single
class for the election of, a majority of our Board (and the number of seats
elected exclusively by the Series B Preferred Stock shall be automatically
increased to such greater number as may be proportionate to the Series B
Preferred Stock's percentage ownership interest in the Company, calculated
on an as-converted basis).  The holders of Series B Preferred Stock also
have special voting rights where we are prohibited from taking certain
actions without their consent, including but not limited to, amending our
charter documents, entering into business transactions, authorizing or
issuing securities (except in limited circumstances), entering into related
party transactions, hiring or terminating key executive officers and
amending the terms of our forbearance agreements with our banks.

SALE OF SERIES C PREFERRED STOCK

     As a condition to the consummation of the Landmark Transaction on
November 12, 2001, we issued to three individuals, two of whom are
directors of the Company, 13.0 million shares of the Company's Series C
Convertible Preferred Stock ("Series C Preferred Stock") in exchange for
$2,100 of the Company's 8% Senior Subordinated Convertible Notes ("Director
Notes"), due March 1, 2006, accrued interest, and warrants to purchase
1,050,000 shares of common stock which were previously issued to such
individuals with the Director Notes.

TERMS OF THE SERIES C PREFERRED STOCK

     The terms of the Series C Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series C Preferred Stock
ranks junior (with respect to dividends and liquidation payments) to the
Series B Preferred Stock but senior to the common stock.

     DIVIDENDS

     The Series C Preferred Stock will not accrue dividends. Dividends may
be declared and paid on the Series C Preferred Stock from funds lawfully
available as and when determined by the Board of Directors and subject to
any preferential dividend rights of any then outstanding preferred stock,
including the Series B Preferred Stock.

     CONVERSION RIGHTS

     Each share of Series C Preferred Stock is convertible, at the
holder's option, into the number of shares of common stock obtained by
dividing the stated value of a share of Series C Preferred Stock ($0.1665)
by the conversion price ($0.1665 at the time of issuance, subject to anti-
dilution adjustments).



<PAGE>


     The conversion price and conversion ratio are subject to "weighted
average" adjustment upon certain events. This means, for example (and
excluding exceptions), that if CoolSavings issues common stock for less
than the conversion price or issues convertible or derivative securities
with an exercise or conversion price less than the conversion price of the
Series C Preferred Stock, the conversion price and conversion ratio are
reduced to the price derived from the weighted average of the price at
which all such new securities were issued.

     REDEMPTION

     Shares of Series C Preferred Stock are redeemable in whole, at
CoolSavings' election, at any time after the shares of Series B Preferred
Stock have been redeemed or after the third anniversary of the date of
issuance, if the holders of a majority of the shares of Series B Preferred
Stock consent, at the stated value ($0.1665 at the time of issuance,
subject to anti-dilution adjustments) for each share of Series C Preferred
Stock plus a cash amount per share equal to eight percent (8%) per annum of
the Series C Preferred Stock stated value.

     VOTING RIGHTS

     Each share of Series C Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series C Preferred Stock is convertible. The holders of Series C
Preferred Stock are entitled to vote together with holders of common stock
at any meeting of the shareholders of CoolSavings on any and all matters
presented to the shareholders for consideration.

     LIQUIDATION PREFERENCE

     On liquidation, after the payment of the preferred distribution to
the holders of the Series B Preferred Stock, holders of Series C Preferred
Stock are entitled to be paid the greater of: (1) the amount per share that
would have been payable if each share of Series C Preferred had been
converted to common stock, or (2) the stated value ($0.1665 at the time of
issuance, subject to anti- dilution adjustments) for each share of Series C
Preferred Stock plus a cash amount per share equal to eight percent (8%)
per annum of the Series C Preferred Stock stated value before holders of
common stock receive a distribution. At the election of the holders of the
Series C Preferred Stock, a change of control of CoolSavings, or a sale of
all or substantially all of the assets of CoolSavings may be deemed to be a
liquidation, provided the holders of the Series B Preferred Stock have
elected to have such event constitute a liquidation.

3.   OTHER RELATED PARTY TRANSACTIONS:

     a.    LEGAL SERVICES:  Certain attorneys with a law firm that provide
services to the Company were members of the Company's Board of Directors
during 1998 and one such attorney has been a Company director since
September 2001.  Several attorneys with this law firm also are holders of
the Company's stock. Total fees for services were $1,142, $571,and $955,
during the years ended December 31, 2001, 2000 and 1999, respectively.
These fees are included in general and administrative expenses and debt
discount amortization in 2001.  These fees are included in general and
administrative expenses in the Company's statements of operations in 2000
and 1999.  Total fees payable were $128 and $215, at December 31, 2001 and
2000, respectively.  An attorney related to our former Chairman of the
Board and Chief Executive Officer provided services to the Company.  Total
fees for services were $162, $430, and $0 during the years ended
December 31, 2001, 2000 and 1999, respectively.  These fees are included in
general and administrative expenses in the Company's statements of
operations.  No fees were payable at December 31, 2001 or 2000.



<PAGE>


     b.    NOTES RECEIVABLE:  In March, April, and July 1999 and April,
2000, shareholders provided a total of $3,517 notes receivable upon
exercise of stock options and warrants by current and former officers and
directors of the Company ("Related Party Notes"). These Related Party Notes
accrued interest at rates ranging from 4.83% to 6.71% due annually. These
Related Party Notes were collateralized by the shares of common stock
issued upon exercise of the related options and warrants and the makers of
each note were personally liable for up to 20% of the face value of the
note, plus accrued interest. Accrued but unpaid interest on these notes was
$274 as of December 31, 2000.  During 2001, the Company forgave these
Related Party Notes which had an aggregate principal and accrued interest
of $3,747 and recorded the forgiveness as compensation expense and $139
recorded as uncollectible bad debt expense.  Each related party was
permitted to keep the common stock purchased by delivery of the Related
Party Notes.

     c.    CONVERTIBLE SUBORDINATED NOTES:  On May 28, 1999, the Company
issued $1,496 of unsecured convertible subordinated notes (See Note 6c).
One note with a principal amount of $65 was held by a member of the Board
of Directors. In October 1999, the Company borrowed approximately $3,500
from a major shareholder under an unsecured convertible subordinated note
(See Note 6c). The principal aggregating $4,996 on the unsecured
convertible promissory notes, were converted into 793,068 shares of the
Company's common stock upon the closing of the initial public offering.

     In March 2001, the Company sold $2,100 of 8% Senior Subordinated
Convertible Notes due March 1, 2006 ("Director Notes") to three accredited
investors.  Two of those investors are members of the Company's Board of
Directors, each of whom purchased $1,000 of these Director Notes.  These
Director Notes carried warrants to purchase one share of the Company's
common stock for every $2.00 of principal indebtedness under each Director
Note for a total of one million shares subject to warrants issued to
related parties.  The warrants had an exercise price of $1.25 per share.
The proportional fair value of the warrants was $387, of which $369 was to
related parties.  Such value represented a discount from the fair value of
the Director Notes and the relative fair value of the warrants was recorded
in the financial statements as stipulated by APB 14 and was being amortized
to interest expense over the term of the Director Notes.  The Director
Notes were convertible at any time into common stock at a conversion rate
equal to one share for each outstanding dollar of principal and accrued
interest, at the election of the note holder.  Interest was payable
quarterly, and for periods prior to April 1, 2003, the Company had the
option to pay interest on the outstanding principal balance of the notes in
cash or by delivery of additional notes in an amount equal to the amount of
the interest.  In November 2001, in conjunction with, and as a condition
to, the closing of the investment in the Company by Landmark described in
Note 2 above, the Company issued 13.0 million shares of its Series C
Preferred Stock (See Note 9b) in exchange for the Director Notes, the
accumulated accrued interest on the Director Notes and the accompanying
warrants.  This transaction resulted in an extraordinary gain of $327 due
to the early extinguishment of the Director Notes.

     d.    NOTE PAYABLE:  In June 2001, Tomay Charitable Remainder
Unitrust u/t/a dated April 12, 1994, as amended, of which one of our
Directors, Richard H. Rogel, is the trustee, loaned the Company a total of
$279.  These loans consisted of an interest free loan of $60 and a loan for
$219 evidenced by a promissory note dated June 27, 2001, which accrued
interest at a rate equal to 8.5% per annum.  All principal and accrued
interest under these loans has been repaid.

     e.    PARTNERSHIP:  The Company formed a partnership with DIMAC
Marketing Partners.  Mr. Robert Kamerschen, a former director of the
Company, is an officer, director and owner of DIMAC Corporation.  DIMAC
Corporation and the Company entered into an agreement whereby the parties
market services and products to designated customers.  The Company did not
earn any revenue with respect to this contract in 2001.



<PAGE>


     f.    SEVERANCE AGREEMENT:  On April 1, 2001, the Company entered
into an employment agreement with Steven M. Golden, who was serving as the
Company's Chairman and Chief Executive Officer.  The employment agreement
had a term of three years and provided for an annual base salary of $345
and the grant of an option to purchase 150,000 additional shares of the
Company's common stock.  At the time of the execution of the employment
agreement, all of Mr. Golden's stock options previously issued and not
vested were made immediately vested and exercisable.  On July 30, 2001, the
Company entered into a severance agreement with Mr. Golden which terminated
Mr. Golden's employment agreement.  The severance agreement provided for
three years of severance pay in the amount of $345 per year and the
continuation of certain benefits.  The severance agreement further provided
that all options held by Mr. Golden:  (a) became immediately vested and
fully exercisable; (b) were adjusted to have an exercise price of $0.50;
and (c) were exercisable through the tenth anniversary of the grant of each
such options.  These options are subject to variable accounting under FASB
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation."  No compensation expense was recorded in  2001 as the
modified options had no intrinsic value.

     g.    EMPLOYMENT AGREEMENT:  On July 30, 2001, the Company entered
into an employment agreement with Matthew Moog, the Company's President and
Chief Executive Officer.  The employment agreement has a term of three
years, provides for an annual base salary of $345, and provides for the
grant of an option to purchase 750,000 shares of the Company's common
stock.  The employment agreement further provides that Mr. Moog would be
granted 200,000 additional options on the first and second anniversary of
the agreement if he is still employed by the Company.  Additionally, the
agreement provides for the immediate and full vesting on January 1, 2002 of
the stock options for 250,000 shares of common stock that were originally
issued on March 23, 2001.

4.   PROPERTY AND EQUIPMENT:  Property and equipment at December 31, 2001
and 2000, respectively, was comprised of the following:

                                                   December 31,
                                               -------------------
                                                 2001        2000
                                                -------     ------
     Computer hardware/software . . . . . . .    $6,464     $6,545
     Furniture and fixtures . . . . . . . . .     2,902      2,296
     Leasehold improvements . . . . . . . . .     1,227        480
     Construction in process. . . . . . . . .      --          124
                                                -------     ------
               Total. . . . . . . . . . . . .   $10,593     $9,445
                                                =======     ======


5.   INTANGIBLE ASSETS. Intangible assets are comprised of various license
agreements and patents that are recorded at cost. Intangible assets at
December 31, 2001 and 2000, were comprised of the following:

                                                   December 31,
                                               -------------------
                                                 2001        2000
                                                -------     ------
     License agreements . . . . . . . . . . .   $   176     $  325
     Patents. . . . . . . . . . . . . . . . .       500        500
                                                -------     ------
               Total. . . . . . . . . . . . .       676        825
     Less amortization. . . . . . . . . . . .      (245)      (148)
                                                -------     ------
     Net intangible assets. . . . . . . . . .   $   431     $  677
                                                =======     ======




<PAGE>


6.   LONG AND SHORT TERM DEBT:

     a.    BANK LINES OF CREDIT:

     The Company has two separate credit facilities under which the
Company had borrowed an aggregate of $1,879, and had $1,978 in letters of
credit outstanding, at December 31, 2001.

     Under the credit facility with American National Bank (the "ANB
Facility") the Company has one term loan and one $3,000 revolving credit
line.  The term loan, which had an outstanding balance of $446 at December
31, 2001, is payable in installments.  The revolving credit line, which had
an outstanding balance of $1,186 at December 31, 2001, is also payable in
installments.  The outstanding balance under the term loan bears interest
at the bank's prime rate plus 1.25% or 6.00% at December 31, 2001.  The
borrowings outstanding under the revolving line of credit bear interest at
the bank's prime rate plus 1.00% or 5.75% at December 31, 2001.
Additionally, the Company had $1,978 of letters of credit outstanding under
the line to collateralize lease deposits on its office facilities.  The
Company had restricted certificates of deposit relating to the letters of
credit in the amount of $231 at December 31, 2001.  These letters of
credit, net of restricted certificates of deposit, reduce the amount of
borrowings available to the Company under the line dollar for dollar.  The
Company has $67 available under the revolving credit line as of December
31, 2001.  Borrowings are collateralized by substantially all the assets of
the Company.

     On June 15, 2001, the Company entered into a Forbearance and
Reaffirmation Agreement with American National Bank, which was amended by a
letter agreement dated July 27, 2001 ("ANB Forbearance Agreement"), wherein
American National Bank agreed to forbear from accelerating borrowings under
the ANB Facility for certain stated defaults.  Among others, the Company
was in default primarily because of a $10 million tangible capital
requirement (defined as total assets less intangible assets plus
subordinated debt), a debt to tangible capital ratio requirement and a
current asset to current liability ratio requirement.  The forbearance is
based on the continued compliance with the terms of the ANB Forbearance
Agreement.  The terms included an accelerated principal payment schedule
with respect to the ANB Facility.  This accelerated payment schedule
provides an additional principal payment of $150 per month and for the
payment of the entire indebtedness on or before December 31, 2002.

     Under the credit facility with Midwest Guaranty Bank (the "Midwest
Facility"), the Company has a $1,000 equipment line of credit.  At December
31, 2001, there was $247 outstanding under this line.  The weighted average
interest rate on the outstanding borrowings under this line at December 31,
2001 was 9.0%.  Borrowings are collateralized by the specific equipment
purchased and are payable in installments.

     On June 12, 2001, the Company entered into a Forbearance Letter
Agreement with Midwest Guaranty Bank, and on July 27, 2001, the Company
entered into a Loan Forbearance and Reaffirmation Agreement with Midwest
Guaranty Bank (collectively, the "Midwest Forbearance Agreement").  Midwest
Guaranty Bank agreed to forbear from accelerating the Midwest Facility for
certain stated defaults.  Among others, the Company was in default of the
Midwest Facility primarily because it was in default of the ANB Facility.
The forbearance is based on the continued compliance with the terms of the
Midwest Forbearance Agreement, which include an accelerated principal
payment schedule of $5 per month.  The entire indebtedness under the
Midwest facility is due by October 31, 2002.



<PAGE>


b.   LANDMARK LOANS:

     In June 2001, Landmark loaned the Company a total of $650.  Such loan
was evidenced by a Loan and Security Agreement, as amended, dated June 14,
2001 (the "Landmark Bridge Loan").  The Landmark Bridge Loan provided for
repayment on demand and the accrual of interest at a rate of 12% per annum
and granted a second lien on principally all of the Company's assets.  The
Landmark Bridge Loan was ultimately funded up to $5,000 before it was
cancelled on July 30, 2001 and replaced with a $5,000 Amended and Restated
Senior Secured Loan and Security Agreement (the "Senior Secured Loan"),
also dated July 30, 2001.  The Senior Secured Loan continues to carry a
second lien on principally all of the Company's assets.  Offering costs of
$643 assigned to the debt were recorded in the transaction.

     The Senior Secured Loan is payable on June 30, 2006 and bore interest
at 12.0% per annum until November 12, 2001 at which time the interest rate
was reduced to 8.0% per annum.  The interest is paid quarterly in arrears
in the form of additional notes and warrants (described below).  The
Company has the right to prepay the Senior Secured Loan on or after the
third anniversary if certain conditions are met.  The agreement also
contains financial covenants and negative and affirmative covenants that,
among other things, restrict the Company's ability to incur additional
indebtedness and take other actions without the consent of Landmark.

     At December 31, 2001, the Company was not in compliance with certain
financial covenants of the Senior Secured Loan.  The following is a list of
the material defaults under the Senior Secured Loan, and therefore under
the Grid Note and the Amended and Restated Loan and Security Agreement, as
these notes are cross-collateralized:

     .     CoolSavings' failure to achieve a prescribed amount of billings
           during 2001 (a requirement of the Amended and Restated Loan
           Agreement); and

     .     CoolSavings' failure to maintain a minimum level of working
           capital and a ratio of cash, cash equivalents and certain
           receivable over current liabilities (requirements of the
           Amended and Restated Loan Agreement); and

     .     The Company's failure to maintain a minimum ratio of total
           indebtedness over tangible net worth (a requirement of the
           Amended and Restated Loan Agreement).

     This failure to comply constitutes an event of default.
Consequently, the loan is immediately due and payable at the option of
Landmark, including accrued interest.  Accordingly, the Company has
reclassified the Senior Secured Loan as currently payable as of
December 31, 2001, including the paid-in-kind interest which has been
compounded on the principal balance totaling $5,153.

     In connection with the Senior Secured Loan, the Company issued
warrants to Landmark (the "Landmark Warrants").  The Landmark Warrants have
a term of eight years (expiring July 30, 2009) and may be exercised in
whole or in part immediately.  The warrants contain a net exercise feature
and were exercisable for 10.0 million shares of the Company's common stock
at an exercise price of $0.50 per share on November 12, 2001 (increasing to
$0.75 per share on July 30, 2005 if not previously exercised).  The Company
will issue to Landmark additional warrants to purchase two shares of common
stock for each dollar of interest accrued on the Senior Secured Loan as
paid-in-kind interest.  Under APB 14, the Company assigned a $2.4 million
value to the Landmark Warrants and recorded it as additional paid-in-
capital and debt discount.

     The debt discount of $3,017 from the Senior Secured Loan was
amortized immediately to expense in 2001.  This was due to the covenant
violations by the Company causing the entire loan to be immediately due and
payable at the option of Landmark.


<PAGE>


     During the second half of 2001, Landmark loaned to the Company under
a restated commercial demand grid note (the "Grid Note") an aggregate of
$17,249, of which $16,500 related to cash advances (in several separate
drawdowns) and $749 related to transaction costs reimbursable to Landmark.
The principal balance outstanding under the Grid Note bears interest at
8.0% per annum.  The Grid Note is immediately due and payable at the option
of Landmark, including accrued interest.  This agreement is cross-
collateralized with the Senior Secured Loan and maintains the exact same
covenants as the Senior Secured Loan. The entire $749 of offering costs
reimbursable to Landmark was expensed in 2001 and is included as general
and administrative expense.

     On November 12, 2001, Landmark, pursuant to the Securities Purchase
Agreement, exercised their right to apply $10,000 of principal and $108 of
accrued interest under the Grid Note to the purchase of Series B Preferred
Stock (Note 9).  Consequently, the remaining outstanding payable balance in
Grid Notes due to Landmark at December 31, 2001 is $7,249.

     c.    CONVERTIBLE SUBORDINATED NOTES PAYABLE:  On May 28, 1999, the
Company issued $1,496 of unsecured convertible subordinated notes. These
notes had a maturity date of June 30, 2000 and accrued interest at a rate
of 10.0% per annum. Upon the closing of the Company's initial public
offering, the notes automatically converted into 238,087 shares of common
stock.

     On April 9, 1999, the Company received a commitment from a major
shareholder to advance the Company up to $3,500 by December 31, 1999, at
the Company's discretion. On October 18, 1999, the Company borrowed $3,496
under the commitment through an unsecured convertible subordinated note.
This note accrued interest at an annual rate of 10.0% and had a maturity
date of June 30, 2000. Upon the closing of the Company's initial public
offering, the notes automatically converted into 554,981 shares of common
stock.

     Based on the conversion ratio into common stock of the convertible
subordinated notes, management determined that the discount received by the
note holders constituted a beneficial conversion feature under the EITF
Issue 98-5. The value of the beneficial conversion feature was computed at
$555 and was recorded by the Company as additional paid in capital and
interest expense.

7.   COMMITMENTS AND CONTINGENCIES:

     a.    LETTERS OF CREDIT:  At December 31, 2000, the Company
maintained a $28 certificate of deposit to secure a line of credit. At
December 31, 2000, the Company maintained four letters of credit totaling
$1,611 which collateralize the lease deposits for the office facilities in
Chicago, New York and San Francisco.

     At December 31, 2001, the Company maintained five letters of credit
totaling $1,747, net of a $231 restricted certificate of deposit.  These
letters of credit continue to collateralize the lease deposits for the
office facilities in Chicago, New York and San Francisco.  Pursuant to the
ANB Forbearance Agreement, these letters of credit expire on December 31,
2002.



<PAGE>


     b.    LITIGATION:  During 2000, the Company settled several patent
infringement suits. As a result of these settlements, the Company will
receive certain royalty payments.  These payments are contingent upon
certain business transactions occurring and other transactions not
occurring over the next three years.  There can be no assurance that the
agreements will result in additional royalty revenue.  One of these
settlements contained certain change in control provisions which may result
in the acquired party paying to the other party $1,500 as additional
royalties.  During 2001, the Company accepted a mediation award with a non-
operating business related lawsuit pursuant to which the Company paid the
plaintiff the sum of $219.  The Company is currently a defendant in two
patent infringement lawsuits and one business related lawsuit. While the
Company believes that these actions are without merit and intends to defend
them vigorously, the Company's efforts may not be successful. An
unfavorable outcome for the Company is considered neither probable nor
remote by management at this time, and an estimate of possible loss or
range of possible losses cannot currently be made.

     c.    MEMBER INCENTIVE PROGRAM:  In March 2000, the Company entered
into a two year agreement with a developer of web-based loyalty incentives
programs. Under this agreement, the Company co-developed a custom loyalty
program for its members using software that it licensed from the developer.

On June 14, 2001 the Company entered into an amendment to this agreement
which reduced the remaining commitment to purchase incentive awards during
the remaining term of the Agreement to $580.  The developer filed for
bankruptcy protection under the Federal Bankruptcy Code on or about
October 5, 2001.  In December 2001, the Company made the decision to cease
the loyalty program effective March 21, 2002, and informed all its
participating members of such action.  Certain qualifying members were
provided the option to receive cash for their current balance.  As of
December 31, 2001, the Company has recorded approximately $165 for the cash
payments that may result from the loyalty program wind down.

     d.    LEASES:  The Company leases equipment and its office premises
under operating lease agreements. Rental expense under these agreements was
$2,230, $1,795 and $439 during 2001, 2000 and 1999, respectively.

     At December 31, 2001, future minimum payments under noncancelable
operating leases were as follows:

     For the years ended December 31:

           2002 . . . . . . . . . . . . . . .   $ 2,098
           2003 . . . . . . . . . . . . . . .     2,071
           2004 . . . . . . . . . . . . . . .     2,076
           2005 . . . . . . . . . . . . . . .     1,922
           2006 . . . . . . . . . . . . . .       1,730
           and thereafter . . . . . . . . . .     5,981
                                                -------

           Total. . . . . . . . . . . . . . .   $15,878
                                                =======



<PAGE>


8.   INCOME TAXES:  Under SFAS No. 109, "Accounting for Income Taxes",
deferred tax assets and liabilities are recognized for the future tax
consequences of differences between the carrying amounts of assets and
liabilities and their respective tax bases and for tax carryforward items
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets consist of the following:

                                                  December 31,
                                           ------------------------
                                             2001            2000
                                           --------        --------
Deferred tax assets:
  Net operating loss carryforward . .      $  1,276          24,021
Amounts to adjust from accrual
 method to the cash method of
 accounting used for tax purposes . .          (553)           (860)
Allowance for doubtful accounts . . .           335             501
Deferred royalty income . . . . . . .           192             178
Deferred compensation . . . . . . . .         1,505           1,540
Property and equipment. . . . . . . .           205             (48)
Capitalized software. . . . . . . . .          (576)           (996)
Debt discount . . . . . . . . . . . .         1,032           --
Other . . . . . . . . . . . . . . . .           132             (35)
Valuation allowances. . . . . . . . .        (3,548)        (24,301)
                                           --------        --------
                                           $  --               --
                                           ========        ========

     The difference between the amount of income tax benefit recorded and
the amount of income tax benefit calculated using the U.S. federal
statutory rate of 38% is due to net operating losses not being benefitted.
For financial reporting purposes, the entire amount of deferred tax assets
has been offset by a valuation allowance due to uncertainty regarding
realization of the asset. Accordingly, there is no provision for income
taxes for the years ended December 31, 2001, 2000 and 1999, respectively.

     The Company has net operating loss carryforwards of approximately
$3,357, $63,213 and $23,496 at December 31, 2001, 2000 and 1999,
respectively.  On November 12, 2001, as result of the issuance of Series B
Preferred Stock to Landmark, the Company triggered tax rules at Section 382
of the Code, which limits the ability of the Company to offset taxable
income earned subsequent to this date with the Company's pre-November 12,
2001 net operating losses.

9.   REDEEMABLE PREFERRED STOCK

     a.    SERIES B PREFERRED STOCK:  On November 12, 2001, under the
Securities Purchase Agreement, the Company issued to Landmark 65,057,936
shares of $0.001 par value Series B Preferred Stock for $10,108.  This
transaction was approved at the annual shareholders meeting on September
20, 2001.  The Series B Preferred Stock has certain conversion rights and
has an 8% quarterly dividend payable in additional shares of Series B
Preferred Stock.  Under Section 382 of the Internal Revenue Code, this
transaction with Landmark will result in a limitation on the amount of net
operating loss carryforwards that can be utilized in future years.  See
note 8 for a further discussion of income taxes related to the Company.
The Series B Preferred Stock is subject to certain redemption requirements
outside the control of the Company.  Landmark has the right to elect not
less than a majority of the Company's board of directors.  Landmark also
has an option to purchase additional shares of Series B Preferred Stock at
the same price per share ($0.1554 per share) upon the occurrence of certain


<PAGE>


events and may elect to apply any draws under the Grid Note as effective
payment of any portion of the purchase price of additional shares of
Series B Preferred Stock.   As of December 31, 2001, the Company has
reserved approximately 133 million shares of common stock for the
conversion of all the outstanding shares of Series B Preferred Stock, the
option to convert the loans outstanding under the Grid Note into Series B
Preferred Stock and the exercise of all outstanding Landmark Warrants.  See
Note 2 for further description of the terms of the Series B Preferred
Stock.

     b.    SERIES C PREFERRED STOCK:  As a condition to the consummation
of the Landmark Transaction on November 12, 2001, the Company issued to
three individuals (two of whom are directors of the Company) 13.0 million
shares of $0.001 par value Series C preferred stock.  The Series C
Preferred Stock was given in exchange for the Director Notes (see Note 3c),
the related accrued interest and the accompanying warrants to purchase
1,050,000 shares of common stock previously issued to such individuals.  As
a result of the exchange, the Company recorded a gain of $327.  As of
December 31, 2001, the Company has reserved 13 million shares of common
stock for the conversion of all the outstanding shares of Series C
Preferred Stock.  See Note 2 for further description of the terms of the
Series C Preferred Stock.

10.  SHAREHOLDERS' (DEFICIT) EQUITY:

     a.    SERIES A PREFERRED STOCK:  In December 1999, the Company issued
2,197.650 shares of no par value Series A convertible preferred stock
("Series A Preferred Stock") at a price of $9,100.63 per share and received
proceeds of $20,000. The Company incurred $132 of issuance costs. The
holders of Series A Preferred had various rights and preferences as
follows:

     VOTING:  Each share of Series A Preferred had the same voting rights
as a share of common stock and voted together as one class with the common
stock.

     CONVERSION:  Each share of Series A Preferred converted to the
Company's common stock at the closing of the initial public offering
("IPO").  Such shares were not required to be registered as part of the
IPO.

     The EITF Issue 98-5 requires that beneficial conversion features
present in the terms of the convertible securities should be recognized and
measured by allocating a portion of the proceeds equal to the value of that
feature to additional paid-in capital. The value of the beneficial
conversion feature related to the Series A Preferred stock offering was in
excess of the $19,900 net proceeds. Accordingly, the Company allocated the
full amount of net proceeds to the beneficial conversion feature and
recorded $19,900 as additional paid-in capital as of December 31, 1999. The
beneficial conversion feature was recognized as a deemed dividend of
$19,900 during 2000. Upon the closing of the Company's IPO, the Series A
Preferred converted into 2,822,096 shares of the Company's common stock.

     b.    MERGER:  The Company consummated a merger on September 25, 2001
that resulted in a name change from coolsavings.com inc. to CoolSavings,
Inc. and a change in the state of incorporation from Michigan to Delaware.
As a result of the merger, the common and preferred stock changed from no
par to $0.001 par stock.  Also, the number of authorized shares of common
stock increased from 100,000,000 to 379,000,000, and the number of
authorized shares of preferred stock increased from 10,000,000 to
271,000,000.  The Company has designated 258,000,000 shares of preferred
stock as Series B and 13,000,000 shares of preferred stock as Series C.
Pursuant to the merger agreement, each share of coolsavings.com inc. common
stock issued and outstanding immediately prior to the merger was converted
into one share of common stock of CoolSavings, Inc.



<PAGE>


     c.    STOCK SPLIT:  On April 7, 2000 the Board of Directors approved
a 1,150 for 1 common stock split. All share and per share amounts have been
retroactively restated to reflect the split.

     d.    INITIAL PUBLIC OFFERING:  On May 19, 2000, the Company
completed its IPO in which the Company sold 3,300,000 shares of its common
stock, resulting in proceeds to the Company of $19,625, after deducting
underwriters discounts and commissions and other related offering expenses.

     e.    ADVERTISING AGREEMENT:  On May 28, 1999, the Company entered
into an agreement with a major television network under which the Company
purchased television advertising valued at $3,000 in exchange for 686,766
shares of its common stock. The advertisements stipulated in the agreement
were aired during the twelve-month period beginning on October 1, 1999.

     In accordance with EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services," the Company recorded the
value of spots to be received based on the fair value of the spots, as it
was more reliably measured than the fair value of the stock issued at the
time that the performance commitment by the network was reached. Amounts
recorded prior to the running of the advertising spots were classified on
the balance sheet as deferred advertising at December 31, 1999. As the
advertising spots were run, the Company recognized advertising expense.

     f.    COMMON STOCK OPTIONS:  The Company had two stock-based
compensation plans, the 1997 Stock Option Plan (the "1997 Employee Plan")
and the 1997 Non-Employee Director Stock Option Plan (the "1997 Non-
Employee Plan"). The 1997 Employee Plan and the 1997 Non-Employee Plan were
established by action of the Company's Board of Directors on December 4,
1997.  In April 1999, the Board of Directors terminated the Company's 1997
Non-Employee Plan.  In July 1999, the Board of Directors approved the
establishment of the 1999 Non-Employee Director Stock Option Plan (the
"1999 Non-Employee Plan").  In March 2000, the 1997 Employee Plan was
amended and restated.

     On September 20, 2001, the Company's shareholders, in conjunction
with the annual meeting, ratified the adoption of the 2001 Stock Option
Plan (the "2001 Employee Plan") to replace the 1997 Employee Plan.
Additionally, in conjunction with the Landmark financing, the 1999 Non-
Employee Plan was terminated.

     Vesting under the 2001 Employee Plan is determined by the Board of
Directors on an individual grant basis and is typically incremental vesting
over a period of approximately four years.  Options that were granted under
the 1997 Employee Plan vest over a period of approximately four years.
Options that were granted under the 1999 Non-Employee Plan became fully
vested one year from the date of the grant. The term of the grants made
under each plan is established by the Board of Directors and may not exceed
ten years.  The Company is authorized to issue stock options under the 2001
Employee Plan up to 7,953,954 plus an additional 1,800,000 related to
cancellations of certain stock options as defined in the plan.

     The Company has reserved 5,620,131 shares of common stock under the
1997 Employee Plan and 63,250 shares under the 1999 Non-Employee Plan for
the exercise of stock options.  Additionally, the Company has reserved
7,953,954 shares of common stock under the 2001 Employee Plan, plus up to
1,800,000 shares issued in connection with the cancellation of options
under our 1997 option plan for the exercise of stock options issued or to
be potentially issued.

     In addition to the above plans, the Company has granted options to a
certain employee in conjunction with the execution of a Board-approved
employment contract consistent with the 1997 Employee Plan. These options
are included in the disclosures that follow.



<PAGE>


     The following information relates to stock options whose exercise
price equals the fair value of the underlying stock on the date of grant:

                             Year Ended December 31,
            ---------------------------------------------------------
                      2001              2000              1999
               ------------------------------------------------------
                         Weighted          Weighted          Weighted
                         Average           Average           Average
                         Exercise          Exercise          Exercise
                 Share    Price    Shares   Price   Shares    Price
               --------- -------- -------------------------- --------
Outstanding
 at beginning
 of period     4,729,032  $ 4.59  4,252,217 $ 3.51 1,852,627  $ 1.84
Granted        3,600,445    0.45  1,496,583   7.25 2,538,050    4.76
Exercised          --              (379,730)  2.17  (127,190)   4.16
Forfeited/
 expired      (2,349,096)   4.38   (640,038)  5.03   (11,270)   2.85
              ----------          ---------        ---------
Outstanding
 at end of
 period        5,980,381  $ 1.75  4,729,032 $ 4.59 4,252,217  $ 3.51
              ==========          =========        =========

Exercisable
 at end of
 period        3,337,588  $ 1.38  1,151,357 $ 1.78 1,175,047  $ 1.65
              ==========          =========        =========
Weighted
 average
 fair value
 of options
 granted
 during the
 period                   $ 0.44            $ 4.57            $ 1.45

     The following information relates to stock options whose exercise
price exceeds the fair value of the underlying stock on the date of grant:

                             Year Ended December 31,
            ---------------------------------------------------------
                      2001              2000              1999
               ------------------------------------------------------
                         Weighted          Weighted          Weighted
                         Average           Average           Average
                         Exercise          Exercise          Exercise
                 Share    Price    Shares   Price   Shares    Price
               --------- -------- -------------------------- --------

Outstanding at
 beginning of
 period             --    $  --        --   $  --    287,500  $ 2.29
Granted             --       --        --      --       --      --
Exercised           --       --        --      --   (287,500)   2.29
Forfeited/
 expired            --       --        --      --       --       --
                  ------             ------         --------
Outstanding at
 end of period      --    $  --        --   $  --       --    $  --
                  ======             ======         ========
Exercisable at
 end of period      --    $  --        --   $  --       --    $  --
                  ======             ======         ========
Weighted average
 fair value of
 options granted
 during the period        $  --             $  --             $  --



<PAGE>


     The following information relates to stock options whose exercise
price is less than the fair value of the underlying stock on the date of
grant:

                             Year Ended December 31,
            ---------------------------------------------------------
                      2001              2000              1999
               ------------------------------------------------------
                         Weighted          Weighted          Weighted
                         Average           Average           Average
                         Exercise          Exercise          Exercise
                 Share    Price    Shares   Price   Shares    Price
               --------- -------- -------------------------- --------

Outstanding at
 beginning of
 period             --    $  --        --   $  --    230,000  $ 2.10
Granted             --       --        --      --       --      --
Exercised           --       --        --      --   (230,000)   2.10
Forfeited/
 expired            --       --        --      --       --       --
                  ------             ------         --------
Outstanding at
 end of period      --    $  --        --   $  --       --    $  --
                  ======             ======         ========
Exercisable at
 end of period      --    $  --        --   $  --       --    $  --
                  ======             ======         ========
Weighted average
 fair value of
 options granted
 during the period        $  --             $  --             $  --


     The following table summarizes information about fixed stock options
outstanding at December 31, 2001:



                                   December 31, 2001
                 ----------------------------------------------------
                             Outstanding              Exercisable
                  ------------------------------- -------------------
                                         Weighted
                               Average    Average            Weighted
Exercise Price                   Life    Exercise             Average
Range                Options  (in years)   Price    Options    Price
--------------      --------- ---------- --------  --------- --------

$0.07 - $1.75       4,008,156      8.60   $ 0.44   2,238,747  $ 0.46
$2.17 - $3.69       1,214,324      6.66     2.20     842,262    2.18
$4.14 - $6.25         116,700      7.76     4.58      72,713    4.37
$7.00 - $11.00        641,201      8.08     8.58     183,866    7.72
                    ---------     -----   ------   ---------  ------
Totals              5,980,381      8.13   $ 1.75   3,337,588  $ 1.38
                    =========     =====   ======   =========  ======



<PAGE>


     The Company adopted the disclosure requirements of SFAS 123,
"Accounting for Stock Based Compensation," upon establishing the Employee
Plans and the Non-Employee Plans.  As permitted by SFAS 123, the Company
continues to apply the accounting provisions of APB Opinion Number 25,
"Accounting for Stock Issued to Employees" with regard to the measurement
of compensation cost for options granted.  The Company recognized $0,
$3,960 and $0 of compensation expense during 2001, 2000 and 1999, in
conjunction with grants made under its fixed stock option plans. Had
expense been recognized using the fair value method described in SFAS 123,
the Company would have reported the following results of operations using
the Black-Scholes option pricing model:
                                      Years Ended December 31,
                                ----------------------------------
                                     2001       2000       1999
                                  ---------- ---------- ----------
Pro forma net loss applicable
  to common shareholders          $  (32,907)$  (61,822)$  (17,609)

Weighted average shares
  outstanding                     39,093,660 36,313,759 29,804,681

Pro forma net loss per basic
  and diluted share               $    (0.84)$    (1.70)$    (0.59)


     These costs may not be representative of the total effects on pro
forma reported income for future years. Factors that may also impact
disclosures in future years include the attribution of the awards to the
service period, the vesting period of stock options, timing of additional
grants of stock option awards and number of shares granted for future
awards.

     The assumptions used for valuations of option grants calculated in
accordance with SFAS 123 are as follows:

                                     2001       2000       1999
                                  ---------- ---------- ----------

Annualized dividend yield              0.00%      0.00%      0.00%
Risk-free rate of return               4.49%      6.28%      5.60%
Expected option term (in years)        5.00       5.00       6.66
Expected volatility                  231.37%     74.80%      0.00%

     g.    COMMON STOCK COMPENSATION:  On December 30, 1999, the Company
entered into a termination and consulting agreement with its former
President.  In conjunction with the termination and consulting agreement,
the Company agreed, effective January 6, 2000, to extend the expiration
date of the former President's options to purchase an aggregate of 661,250
shares of the Company's common stock at a price of $2.17 per share until
the first anniversary of the termination of the consulting agreement. The
extension of the stock option agreements resulted in a remeasurement of the
compensation cost associated with the stock options.  Accordingly, a total
non-cash compensation charge of $3,960 was recognized on a straight-line
basis during 2000.

     The Company granted options to purchase 150,000 shares of common
stock pursuant to the employment agreement with Steven Golden, the then
current President and Chief Executive Officer of the Company, in April
2001.  Additionally, the Company granted options to purchase 750,000 shares
of common stock to Matthew Moog, the current President and Chief Executive
Officer, pursuant to his July 30, 2001 employment agreement.  The agreement
also provides for the immediate and full vesting on January 1, 2002 of the
stock options for 250,000 shares of common stock that were originally
issued on March 23, 2001.



<PAGE>


     Pursuant to the July 30, 2001 severance agreement between the Company
and Steven Golden, all his options granted by the Company as of the date
thereof became immediately vested and fully exercisable.  The options were
also repriced at a strike price of $0.50 per share.  These options are
subject to variable accounting under FASB Interpretation No. 44 "Accounting
for Certain Transactions Involving Stock Compensation."  The company did
not recognize any expense in 2001 related to these options.

     During 2001, the Company forgave Related Party Notes which had an
aggregate principal and accrued interest of $3,747 and recorded the
forgiveness as compensation expense.  Each related party was permitted to
keep the common stock purchased by delivery of the Related Party Notes
(Note 3b).

     h. STOCK-BASED COMPENSATION: On April 6, 2000, the Company granted
an option to purchase up to $500 of our common stock at the per share
public offering price established in the Company's initial public offering.
This option was granted for consulting services related to intellectual
property licensed by the Company. The options were valued at $102 using the
Black-Scholes option pricing model. The options expired unexercised during
2000.

11.  EARNINGS PER SHARE:  SFAS 128 requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
EPS computations. The calculation below provides net loss, weighted average
common shares outstanding and the resultant net loss per share for both
basic and diluted EPS for the years ended December 31, 2001, 2000 and 1999.

                                      Years Ended December 31,
                                ----------------------------------
                                     2001       2000       1999
                                  ---------- ---------- ----------
Numerator:
  Loss before extraordinary gain  $  (29,554)$  (39,240)$  (16,868)

Extraordinary gain                       327      --         --
                                  ---------- ---------- ----------
Net loss                             (29,227)   (39,240)   (16,868)

Deemed dividend representing the
  beneficial conversion feature of
  Series A Preferred Stock             --       (19,868)     --
Accretion of convertible redeemable
  Series B Preferred Stock to
  redemption value                    (1,318)     --         --
Cumulative dividend on Series B
  Preferred Stock                        (63)     --         --
Accretion of PIK dividend on
  Series B Preferred Stock               (50)
                                  ---------- ---------- ----------
Loss applicable to common
  shareholders                    $  (30,658)$  (59,108)$  (16,868)
                                  ========== ========== ==========
Denominator:
  Basic and diluted loss per
    share before extraordinary
    gain                          $    (0.79)$    (1.63)$    (0.57)
Extraordinary gain                      0.01      --         --
                                  ---------- ---------- ----------
Basic and diluted net loss
  per share                       $    (0.78)$    (1.63)$    (0.57)
                                  ========== ========== ==========
Weighted average shares used
  in the calculation of basic
  and diluted net loss per share  39,093,660 36,313,759 29,804,681
                                  ========== ========== ==========



<PAGE>


     The calculation of diluted net loss per share excludes shares of
common stock issuable upon the conversion of unsecured convertible
subordinated notes, exercise of employee stock options and warrants, and
the conversion of convertible preferred stock as the effect of such
exercises would be anti-dilutive.

12.  401(k) PLAN:  On February 11, 1997, the Company adopted a 401(k) plan
for employees. All employees who meet certain age requirements are eligible
to participate.  Matching contributions are made at the discretion of the
Company. The Company made no matching contributions during 2001, 2000, or
1999.






<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.



                               PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Directors and Executive Officers

     The names, ages and positions held by our directors and executive
officers as of March 1, 2002 are as follows:

Name                    Age   Position
----                    ---   --------

Richard H. Rogel         53   Director and Chairman of the Board
R. Bruce Bradley         52   Director
Gary S. Briggs           39   Director
Guy R. Friddell, III     50   Director
Steven M. Golden         49   Director
Hugh R. Lamle            56   Director
Matthew Moog             32   Director, President
                              and Chief Executive Officer
Karl B. Quist            30   Director
Arthur A. Weiss          52   Director
John J. Adams            31   Chief Operating Officer
David B. Arney           39   Chief Financial Officer
David B. Desser          33   Vice President of Business Affairs
                              and General Counsel

     Richard H. Rogel has served as Chairman of the Board since July 2001
and as a director of CoolSavings since May 1996. In 1982, Mr. Rogel founded
Preferred Provider Organization of Michigan, Inc., a preferred provider
organization, and served as its Chairman from its inception until it was
sold in 1997.  Mr. Rogel is the President of the University of Michigan
Alumni Association and chairs the University of Michigan's Business School
Development Advisory Board, as well as serving on other boards of the
University.  Mr. Rogel holds a B.B.A. from the University of Michigan.

     R. Bruce Bradley has served as President of Landmark Publishing Group
since January 1999.  In 1995 he was named President and Publisher of The
Virginian-Pilot, Landmark's flagship newspaper in Norfolk, Virginia.  He
previously held numerous positions throughout The Virginian-Pilot, in
addition to positions at Landmark's two other metro papers, the News &
Record in Greensboro, North Carolina and The Roanoke Times in Roanoke,
Virginia.  Mr. Bradley served three years as a ship navigator in the U.S.
Navy.  He is the past chairman of the Hampton Roads Chamber of Commerce and
past Chairman of the Hampton Roads YMCA.  Mr. Bradley holds a B.S. in
Business Administration from Villanova University, and a M.B.A. from Old
Dominion University in Norfolk, VA.

     Gary S. Briggs is Chief Marketing Officer and one of the founders of
OurHouse.com, an internet retailer focused on home related products and
services. Prior to founding OurHouse.com in 1999, he was Director of Brand
Strategy for IBM Corporation. Before joining IBM in 1997, he worked for six
years at Pepsi-Cola, most recently as Marketing Director for Brand Pepsi.
Prior to Pepsi, Mr. Briggs worked for four years at McKinsey and Company as
an associate and engagement manager. Mr. Briggs holds a B.A. from Brown
University and an M.B.A. from J.L. Kellogg Graduate School of Management,
Northwestern University.



<PAGE>


     Guy R. Friddell, III is Executive Vice President and General Counsel
of Landmark Communications, Inc. Prior to 1999, he was a partner in the
Norfolk, Virginia law firm of Willcox & Savage, P.C. where he headed the
corporate department and practiced in the mergers and acquisitions area. He
is currently Vice Chairman of the Norfolk Convention and Visitors Bureau,
and has previously served as chairman of the Norfolk Board of Zoning
Appeals and in various other civic capacities. Mr. Friddell holds an A.B.
in Economics and Political Science from Princeton University and a J.D.
from the University of Virginia School of Law.

     Steven M. Golden founded CoolSavings in December 1994. He has served
as a director since June 1996 and as our President, Chairman of the Board
and Chief Executive Officer from January 2000 through July 2001. Prior to
founding CoolSavings, Mr. Golden was a financial consultant with Smith
Barney from May 1993 to May 1996. From January 1989 to April 1993, Mr.
Golden served as President of Land Data Network, which was founded by Mr.
Golden and was one of the nation's first online property information
systems, providing tax roll and assessment information for various counties
in the State of Michigan. Mr. Golden holds a B.B.A. from Michigan State
University.

     Hugh R. Lamle has served as a director of CoolSavings since June
1998. Since April 1974, Mr. Lamle has served as Executive Vice President
and a principal of M.D. Sass Investors Services Inc., a registered
investment advisory firm.  Since June 1995, Mr. Lamle has also served as
President and Chief Investment Officer of Chase & M.D. Sass Partners, a
joint venture between Chase Manhattan Bank and M.D. Sass Investors Services
which manages portfolios for corporate and institutional investors.  Mr.
Lamle also serves as President of Resurgence Asset Management and on the
advisory board of Real Estate Capital Partners, both affiliates of M.D.
Sass, as Executive Vice President and a director of Corporate Renaissance
Group, Inc., a closed-end business development company, and as a public
director of the Finex division of the New York Cotton Exchange.  Mr. Lamle
holds a B.A. from Queens College and an M.B.A. from Baruch College at the
City University of New York.

     Matthew Moog has served as our President and Chief Executive Officer
since July 2001, from January 2001 to July 2001 as our President and Chief
Operating Officer and from August 1998 to January 2001 was our Executive
Vice President, Sales and Marketing. From October 1996 to July 1998, Mr.
Moog served as our Vice President, Sales. Prior to joining CoolSavings, Mr.
Moog worked for Microsoft Corporation in various capacities from June 1992
to September 1996, including Strategic Integrator Account Executive, MSN
Business Development Executive and Internet Business Development Manager.
Mr. Moog holds a B.A. from The George Washington University.

     Karl B. Quist has served as a director of CoolSavings since December,
2001.  Mr. Quist serves as a Director, New Ventures at Landmark
Communications, Inc.  Prior to joining Landmark in 2001, Mr. Quist spent
two years as a consultant with McKinsey & Company, Inc.  Mr. Quist holds a
B.S. in Commerce from the University of Virginia and an M.B.A. from the
Darden Graduate School of Business Administration.

     Arthur A. Weiss has served as a director of CoolSavings since
September 2001. He also previously served as a director of CoolSavings from
March 1998 to June 1998.  Since 1976 Mr. Weiss has practiced law with, and
is currently a stockholder of, the law firm of Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, which represents CoolSavings in various matters.
Mr. Weiss is also a director of Sun Communities, Inc. and Bingham Financial
Services Corporation.



<PAGE>


     John J. Adams has served as our Chief Operating Officer from July
2001 and, our Executive Vice President, Operations and Technology since
October 1999 until July 2001. From January 1999 to October 1999, Mr. Adams
served as our Executive Vice President, Engineering and Chief Technology
Officer. Prior to joining CoolSavings, Mr. Adams worked in several
capacities for Arthur Andersen Business Consulting from July 1993 to
January 1999, including Manager--Architecture and Methodology, Manager of
Client Server and Internet Development and Senior Systems Consultant. Mr.
Adams holds a B.S. from Florida State University.

     David B. Arney has served as our Chief Financial Officer since
October 2001.  Mr. Arney joined CoolSavings from eLoyalty Corporation where
he was Director of Worldwide Finance from September 1999 to September 2001.

From July 1990 through September 1999, Mr. Arney held positions of
increasing responsibility at Trans Union Corporation where he was most
recently Division Controller of the Credit Reporting Division.  Earlier in
his career, Mr. Arney spent two years with Federated Foods, Inc. and its
Affiliates as  an Accounting and Financial Reporting Manager and four years
at Deloitte and Touche in the Audit Practice.  Mr. Arney is currently a
Masters of Business Administration Candidate at Kellogg Graduate School of
Management at Northwestern University.  He received his Bachelor of
Business Administration in Accountancy from Western Michigan University.
Mr. Arney is a Certified Public Accountant.

     David B. Desser has served as our Vice President of Business Affairs
and General Counsel since November 2001, and was appointed Secretary of the
Company in December 2001.  From July 1999 to September 2000, Mr. Desser
served as our Vice President and General Counsel.  Mr. Desser has been
engaged in the private practice of law during the periods when he has not
been at CoolSavings.  From December 1994 through July 1999, Mr. Desser was
an associate with the law firm of Katten Muchin Zavis focusing on mergers
and acquisitions.  Mr. Desser holds a B.A. in Politics from Brandeis
University and a J.D. from the Georgetown University Law Center.

     Each director is elected for a one-year term at our annual meeting of
stockholders and serves until the next annual meeting of stockholders or
until his or her successor is duly elected and qualified.




SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     CoolSavings is required to identify each person who was an officer,
director or beneficial owner of more than 10% of its registered equity
securities during its most recent fiscal year and who failed to file on a
timely basis reports required by Section 16(a) of the Securities Exchange
Act of 1934. Based solely on our review of the copies of such reports
received by us, and written representations from certain reporting persons,
we believe, that during the year ended December 31, 2001, our directors,
executive officers and beneficial owners of more than 10% of our capital
stock have complied with all filing requirements applicable to them, except
that: (a) Peter Sugar, our former secretary filed a late Form 3 reporting
his beneficial ownership; (b) Richard Rogel, a Director of the Company,
filed one late Form 4 reporting one transaction; and (c) Matthew Moog, our
President, Chief Executive Officer and a Director of the Company, filed one
late Form 4 reporting transactions.




<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth all compensation paid to our Chief
Executive Officer and our four highest paid other executives who were
serving as executive officers at December 31, 2001 (the "Named Executive
Officers").  In addition, the table includes our former Chief Executive
Officer and two additional individuals for whom disclosure would have been
made had they been serving as executive officers as of December 31, 2001.
See explanations (2), (3) and (4).

                      SUMMARY COMPENSATION TABLE



                                                            Long-term
                                                             Compen-
                                   Annual Compensation       sation
                             ------------------------------ ----------
                                                   Other    Securities
                                                   Annual   Underlying
                               Salary             Compensa-   Options/
                        Year    ($)    Bonus ($)  tion ($)      SAR's
                       ------ -------- ---------  --------- ----------

Matthew Moog (1)         2001 $277,269  $  --          -     1,000,000
  President and          2000  254,011   100,000       -          -
  Chief Executive        1999  137,000   130,000       -       258,750
  Officer

Steven M. Golden (2)     2001 $232,968  $  --      $132,690    500,000
  Former Chairman        2000  299,999   200,000       -          -
  of the Board and       1999  245,000    75,000       -       460,000
  Chief Executive
  Officer

John J. Adams            2001 $165,000  $  --          -       175,000
  Chief Operating        2000  149,999   100,000       -          -
  Officer                1999  125,000    20,000       -       312,000

Robert Gorman (3)        2001 $132,952  $   -      $ 38,077     85,000
  Executive Vice         2000   82,269      -          -          -
  President, General     1999     -         -          -          -
  Counsel, Secretary and
  Chief Privacy Officer

Jonathan J. Smith (4)    2001 $121,529  $  --      $ 38,077    175,000
  Executive Vice         2000  149,999   100,000       -          -
  President, Strategic   1999  119,000    30,000       -       312,000
  Business Development

----------

(1)  On July 30, 2001, the Company entered into an employment agreement
with Matthew Moog, who became the Company's President and Chief Executive
Officer.  The employment agreement has a term of three years, provides for
an annual base salary of $345,000, and provides for the grant of an option
to purchase 750,000 shares of the Company's common stock.  The employment
agreement further provides that Mr. Moog would be granted 200,000
additional options on the first and second anniversary of the agreement if
he is still employed by the Company.



<PAGE>


(2)  On July 30, 2001, the Company entered into a severance agreement with
Mr. Golden which terminated Mr. Golden's employment agreement.  The
severance agreement provided for three years of severance pay in the amount
of $345,000 per year and the continuation of certain benefits.  The
severance agreement further provided that all options held by Mr. Golden:
(a) became immediately vested and fully exercisable; (b) were adjusted to
have an exercise price of $0.50; and (c) were exercisable through the tenth
anniversary of the grant of each such options.  These options are subject
to variable accounting under FASB Interpretation No. 44 "Accounting for
Certain Transactions Involving Stock compensation."  No compensation
expense was recorded in 2001 as the modified options had no intrinsic
value.

(3)  On October 1, 2001, the Company entered into a severance agreement
with Mr. Gorman which terminated Mr. Gorman's employment.  The severance
agreement provided for a one time payment to Mr. Gorman and the continued
payment of the entire premium for continued coverage under CoolSavings'
health plan covering medical, dental and vision through April 30, 2002.
The severance agreement further provided that all options held by Mr.
Gorman would continue vesting until October 1, 2002.

(4)  On September 7, 2001, the Company entered into a severance agreement
with Mr. Smith which terminated Mr. Smith's employment.  The severance
agreement provided for a one time payment to Mr. Smith and the continued
payment of the entire premium for continued coverage under CoolSavings's
health plan covering medical, dental and vision through May 7, 2002.  The
severance agreement further provided that all options held by Mr. Smith
would continue vesting until September 7, 2002.






<PAGE>


STOCK OPTIONS

     The following table sets forth summary information concerning
individual grants of stock options made during 2001 to each of the Named
Executive Officers:

                         OPTION GRANTS IN 2001

                            Percent of
                              Total
                No. of       Options                          Grant
              Securities    Granted to                        Date
              Underlying    Employees  Exercise              Present
               Options      in Fiscal   Price     Expiration  Value
Name           Granted      Year (7)   ($/Share)    Date       (8)
------        ----------    ---------- ---------  ---------- --------

Matthew Moog     750,000 (1)     20.8%     $0.40   7/30/2011 $296,879
                 250,000 (2)      6.9%     $0.50   3/23/2011  123,412

Steven M. Golden 350,000 (3)      9.7%     $0.50   3/23/2011  172,777
                 150,000 (3)      4.2%     $0.50   5/30/2011   47,333

John J. Adams    175,000 (4)      4.9%     $0.50   3/23/2011   86,388

Robert Gorman     85,000 (5)      2.4%     $0.50  10/01/2002   40,288

Jonathan J.
  Smith          175,000 (6)      4.9%     $0.50   9/18/2002   82,970

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

(1)  Options granted with an exercise price equal to the market price of
     CoolSavings shares on the date of grant; vesting in equal increments
     over the five years from the date of grant; and having a term of ten
     years from the date of grant.

(2)  Options granted with an exercise price equal to the market price of
     CoolSavings shares on the date of grant; vesting on January 1, 2002;
     and having a term of ten years from the date of grant.

(3)  Options granted with an exercised price equal to the market price of
     CoolSavings shares on the date of grant; vesting on July 30, 2001;
     and having a term of ten years from the date of grant.

(4)  Options granted with an exercise price equal to the market price of
     CoolSavings shares on the date of grant; vesting in equal increments
     on December 31, 2001 and December 31, 2002; and having a term of ten
     years from the date of grant.

(5)  Options granted with an exercise price equal to the market price of
     CoolSavings shares on the date of grant; vesting in equal increments
     on December 31, 2001 and December 31, 2002 but with an expiration
     date of October 1, 2002.

(6)  Options granted with an exercise price equal to the market price of
     CoolSavings shares on the date of grant; vesting in equal increments
     on December 31, 2001 and December 31, 2002 but with an expiration
     date of September 18, 2002.

(7)  Based on a total of 3,600,445 option shares granted to our employees
     under the 1997 Stock Option Plan and the 2001 Stock Option Plan
     during 2001.



<PAGE>


(8)  All options were granted at an exercise price equal to the market
     price of CoolSavings common shares on the date of grant.
     CoolSavings, like all public companies, is required to indicate a
     grant date present value of the option using one of the methods
     prescribed by the United States Securities and Exchange Commission.
     CoolSavings chose to use the Black-Scholes present value option
     pricing model, which is a method of calculating a theoretical present
     value of the options based upon a mathematical formula using certain
     assumptions.

The following assumptions were used in calculating the Black-Scholes values
shown on the table: an assumed option life of five years; interest rates of
3.69%-5.07%, which represent the yield of a bond equivalent with a maturity
date similar to the assumed exercise period; assumed annual volatility of
underlying shares of 219.22%-316.45%, calculated based on historical, daily
share price movement since inception; zero dividend yield; and the vesting
schedule indicated for the respective option grant.

     The following table sets forth the number of shares of common stock
acquired upon the exercise of stock options by each Named Executive Officer
during 2001 and the number and value of securities underlying unexercised
options held by each Named Executive Officer as of December 31, 2001:

    AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES

                                    Number of            Value of
                                    Securities          Unexercised
                                    Underlying         In-The-Money
                                    Unexercised         Options at
                                    Options at          December 31,
             Shares              December 31, 2001        2001 (1)
            Acquired           --------------------  ----------------
               on      Value     Exer-     Unexer-    Exer-   Unexer-
Name        Exercise  Realized   cisable   cisable    cisable cisable
---------   --------  --------  --------- ---------   ------- -------

Matthew
 Moog          --        --       603,537 1,008,700     N/A     N/A

Steven M.
 Golden        --        --     1,213,000     --        N/A     N/A

John J.
 Adams         --        --       207,100   269,200     N/A     N/A

Robert
 Gorman        --        --        50,714    42,500     N/A     N/A

Jonathan J.
 Smith         --        --        87,500    87,500     N/A     N/A

----------

     (1)   None of the options included in this table were in-the-money as
of December 31, 2001.




<PAGE>


     The following table sets forth summary information concerning grants
of stock options that have been repriced for each of the Named Executive
Officers:

                     OPTION REPRICINGS DURING 2001

                                                           Length of
                                                           original
                                                            option
                    Securities  Market                       term
                    underlying price of  Exercise           remain-
                     number    stock at  price at    New    ing at
                    of options time of    time of  exercise date of
Name          Date   repriced  repricing repricing  price  repricing
------       ----------------- --------- --------- ------------------

Steven M.
 Golden (1)
Former Chairman
 of the Board and
 Chief Executive
 Officer
             7/30/01  150,000     $0.40     $0.32    $0.50 4.83 years

             7/30/01  230,000     $0.40     $7.91    $0.50 8.33 years

             7/30/01  230,000     $0.40     $2.17    $0.50 7.58 years

             7/30/01   69,000     $0.40     $2.17    $0.50 7.42 years

             7/30/01  184,000     $0.40     $2.17    $0.50 6.33 years

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

     (1)   On July 30, 2001, the Company entered into a severance
           agreement with Mr. Golden which provided that all options held
           by Mr. Golden: (a) became immediately vested and fully
           exercisable; (b) were adjusted to have an exercise price of
           $0.50; and (c) were exercisable through the tenth anniversary
           of the grant of each such option.



<PAGE>






   REPORT OF THE BOARD OF DIRECTORS ON OPTIONS REPRICING DURING 2001


     We entered into an employment agreement with Steven Golden for a term
of three years beginning April 2001, which provided for a salary of
$345,000 per year subject to periodic increases at the discretion of the
Board. Mr. Golden was also eligible to receive a bonus each year as
determined by our Board. In addition, we also granted Mr. Golden stock
options to purchase 150,000 shares of common stock at $0.50 per share and
accelerated the vesting of all other stock options held by Mr. Golden.

     Effective July 30, 2001, in connection with the Landmark Transaction,
Mr. Golden resigned as Chief Executive Officer and Chairman of the Board
and we entered into a severance agreement with him. The severance agreement
provides that he will receive a monthly severance payment equal to the
compensation otherwise payable under his employment agreement during the
remainder of the term of his employment agreement. The severance agreement
also provides that all of Mr. Golden's stock options to purchase shares of
our common stock become immediately vested and exercisable at an exercise
price of $0.50 per share. The non-competition agreement in Mr. Golden's
employment agreement will be binding on Mr. Golden for a period of two
years following his resignation. Mr. Golden will continue to be bound by
the confidentiality, non-disclosure and assignment of inventions covenants
contained in his employment agreement.

     The Board of Directors of the Company as of the effective date of Mr.
Golden's Severance Agreement believed that the repricing of Mr. Golden's
options was justified as an element of such severance agreement in light of
Mr. Golden's contributions to the Company.  Mr. Golden did not participate
in this decision.


     Respectfully Submitted,


     Richard H. Rogel
     Matthew Moog
     R. Bruce Bradley
     Gary S. Briggs
     Guy R. Friddell, III
     Steven M. Golden
     Hugh R. Lamle
     Karl B. Quist
     Arthur A. Weiss



DIRECTOR COMPENSATION

     Directors who are also employees of CoolSavings receive no
compensation for serving on the board of directors. Directors who are not
employees of CoolSavings do not currently receive any cash compensation
from us for their service as members of the Board of Directors, although
they are reimbursed for all travel and other expenses incurred in
connection with attending Board and committee meetings. Under our 1999 Non-
Employee Director Stock Option Plan, non-employee directors are also
eligible to receive automatic stock option grants upon their initial
appointment to the Board of Directors and at each of our annual stockholder
meetings.  In 2001, no director received options under the 1999 Non-
Employee Director Stock Option Plan.



<PAGE>


EMPLOYMENT AGREEMENTS

     Matthew Moog Employment Agreement

     We entered into an employment agreement with Matthew Moog for a term
of three years beginning July 30, 2001, which appoints Mr. Moog chief
executive officer and provides for a salary of $345,000 per year subject to
periodic increases by our board of directors at its discretion. Mr. Moog is
eligible to receive a bonus each year as determined by our board. We also
granted Mr. Moog stock options to purchase 750,000 shares of common stock
vesting over five years at an exercise price equal to the greater of market
price on the day of execution of his employment agreement or the twenty day
closing average of our common stock following execution of his employment
agreement. On each of the first two anniversaries of the employment
agreement (subject to Mr. Moog's continued employment with us), we will
grant Mr. Moog additional stock options to purchase not less than 200,000
shares of our common stock, which options shall vest over a four year
period. In addition, we also accelerated the vesting of 250,000 other stock
options held by Mr. Moog. If Mr. Moog's employment is terminated without
cause, he is entitled to receive a severance payment equal to the greater
of the present value of the compensation owed for the remainder of his
employment agreement or the present value of the base annual salary then in
effect.

     Each of our executive officers has signed our standard terms of
employment detailing, among other things, his non-competition and
confidentiality obligations and his at-will employment status. All of our
executive officers (other than Mr. Moog) are employees at-will and may be
terminated at any time at the discretion of our Board of Directors.

     Golden Employment Agreement and Severance Agreement.

     Please see "Option Repricings During 2001" above.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     None of the members of our compensation committee is an officer or
employee of CoolSavings. No executive officer of CoolSavings serves as a
member of the Board of Directors or compensation committee of any entity
that has one or more executive officers serving on our board of directors
or compensation committee.  One member of the compensation committee has
entered into loan transactions with us. Please see "Item 13 - Certain
Relationships and Related Transactions".


<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following table sets forth information with respect to the
beneficial ownership of our common stock as of March 1, 2002, by:

     .     each person known by us to beneficially own more than 5% of our
           common stock;

     .     each Named Executive Officer;

     .     each of our directors; and

     .     all executive officers and directors as a group.

   Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options or warrants that are
currently exercisable or exercisable within 60 days after March 1, 2002,
are deemed to be outstanding and to be beneficially owned by the person
holding the options or warrants for the purpose of computing the percentage
ownership of that person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares indicated, subject to
applicable community property laws. Beneficial ownership percentage is
based on 39,093,660 shares of common stock outstanding as of March 1, 2002.

   Unless indicated otherwise, the address of the beneficial owners is: c/o
CoolSavings, Inc., 360 N. Michigan Avenue, Suite 1900, Chicago, Illinois
60601.
                                                          Percentage
                                            Shares         of Shares
Name and Address                          Beneficially    Beneficially
of Beneficial Owner                          Owned           Owned
-------------------                       ------------    ------------

Landmark Ventures VII, LLC
150 W. Brambleton Ave.
Norfolk, Virginia 23510                   123,061,393 (1)       75.89%

Lend Lease International Pty. Limited
Level 44, Australia Square
Sydney, Australia 2000                      10,889,636          27.86%

Landmark Communications, Inc.
150 W. Brambleton Ave.
Norfolk, Virginia 23510                    10,175,556 (2)       20.32%

Richard H. Rogel
56 Rose Crown
Avon, Colorado 81620                       13,573,089 (3)       29.97%

Hugh R. Lamle
c/o M.D. Sass
1185 Avenue of the Americas
New York, New York 10036                    7,271,199 (4)       16.05%

Steven M. Golden                            6,101,815 (5)       15.14%

Matthew Moog                                1,464,899 (6)        3.66%

John J. Adams                                 272,650 (7)          *


<PAGE>


                                                          Percentage
                                            Shares         of Shares
Name and Address                          Beneficially    Beneficially
of Beneficial Owner                          Owned           Owned
-------------------                       ------------    ------------

Arthur A. Weiss
One Woodward
Suite 2400
Detroit, Michigan 48226                       155,677 (8)            *

R. Bruce Bradley
c/o Landmark Communications, Inc.
150 W. Brambleton Ave.
Norfolk, Virginia 23510                             0 (9)            *

Gary S. Briggs
c/o Ebay, Inc.
2145 Hamilton Ave.
San Jose, California  95125                         0                *

Guy R. Friddell, III
c/o Landmark Communications, Inc.
150 W. Brambleton Ave.
Norfolk, Virginia 23510                             0 (9)            *

Karl B. Quist
c/o Landmark Communications, Inc.
150 W. Brambleton Ave.
Norfolk, Virginia 23510                             0 (9)            *

Robert Gorman                                 147,237(10)            *

Jonathan J. Smith                              91,500(11)            *

All directors and executive
  officers as a group
  (12 persons)(12)                         173,204,651          99.05%


     *     Less than 1%.


     (1)   Includes 65,780,822 shares of Series B Preferred Stock that are
           immediately convertible into 65,780,822 shares of common stock
           and options that are immediately exercisable for the purchase
           of 57,280,571 shares of Series B Preferred Stock which is
           immediately convertible into 57,280,571 shares of common stock.

     (2)   Includes 10,175,556 shares of common stock subject to purchase
           pursuant to an immediately exercisable warrant.

     (3)   Includes 75,000 shares held by a  trust of which Mr. Rogel is
           the trustee; 139,700 shares held by a limited partnership, of
           which Mr. Rogel is a partner; 11,500 shares of common stock
           subject to options exercisable within 60 days after March 1,
           2002; and 6,190,476 shares of Series C Preferred Stock that are
           immediately convertible into 6,190,476 shares of common stock.

     (4)   Includes 289,970 shares of common stock held by HLBL Family
           Partners, LP, which is controlled by Mr. Lamle; 1,500 shares
           held by a foundation controlled by Mr. Lamle; 11,500 shares of
           common stock subject to options exercisable within 60 days
           after March 1, 2002; and 6,190,476 shares of Series C Preferred
           Stock that are immediately convertible into 6,190,476 shares of
           common stock.



<PAGE>


     (5)   Includes 4,382,315 shares of common stock held by a revocable
           trust, of which Mr. Golden is the trustee; 172,500 shares of
           common stock held by Steven M. Golden LLC, which is controlled
           by Mr. Golden; and 1,213,000 shares of common stock subject to
           options exercisable within 60 days after March 1, 2002.

     (6)   Includes 238,269 shares of common stock held by Moog Investment
           Partners, LP, which is controlled by Mr. Moog; and 896,662
           shares of common stock subject to options exercisable within 60
           days after March 1, 2002.

     (7)   Includes 263,450 shares of common stock subject to options
           exercisable within 60 days after March 1, 2002.

     (8)   Includes 149,257 shares of common stock held by ARL Investors,
           LLC which is controlled by Mr. Weiss.

     (9)   Does not include the 133,236,949 shares of common stock
           beneficially owned by Landmark VII, LLC and Landmark
           Communications, Inc. which shares such individual may be deemed
           to beneficially own as a result of his relationship as a
           stockholder, director, officer or employee of such
           entities.  Such individual expressly disclaims beneficial
           ownership of all such shares of common stock.

     (10)  Includes 50,714 shares of common stock subject to options
           exercisable within 60 days after March 1, 2002.

     (11)  Includes 87,500 shares of common stock subject to options
           exercisable within 60 days after March 1, 2002.

     (12)  Includes 135,771,275 shares of common stock subject to options
           and warrants and convertible preferred stock exercisable or
           convertible within 60 days after March 1, 2002.








<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     LANDMARK

     As a result of a series of transactions between Landmark and the
Company, Landmark has the right to designate not less than a majority of
our Board of Directors at all times while the Company's Series B Preferred
Stock is outstanding.  R. Bruce Bradley, Guy R. Friddell, III and Karl B.
Quist are currently the directors designated by Landmark.  As a result of
an agreement between certain stockholders and Landmark, those stockholders
agreed to vote their shares of CoolSavings common stock in favor of the
election of directors nominated by the holders of a majority of the then
outstanding shares of Series B Preferred Stock. Landmark has also agreed
that until May 31, 2005, subject to certain conditions, it will vote its
shares of Series B Preferred Stock on an as converted basis to elect as a
director one person nominated by each of Messrs. Golden, Lamle and Rogel.
Pursuant to that same agreement, Landmark has agreed that it will not take
any action to cause CoolSavings to become a privately-held company until
the earlier of two years after Landmark and any of its affiliates own 51%
of our common stock (on an as-converted basis) or July 30, 2005 unless such
transaction is approved by the holders of a majority of the shares of our
common stock not owned by Landmark; provided, such restriction does not
apply to purchases made from Messrs. Golden, Lamle, Moog or Rogel (or their
affiliates), purchases made from Lend Lease or any of the transactions
contemplated under the Company's stock purchase and loan agreements with
Landmark (including "in-kind" payment due Landmark from the Company).
CoolSavings is not a party to this agreement and, as such, it may be
amended or terminated without CoolSavings' involvement.

     LEND LEASE

     In connection with an Investment Agreement between Lend Lease and
CoolSavings dated June 1, 1998, CoolSavings, Lend Lease and certain of our
stockholders entered into a stockholders agreement under which, among other
things, Lend Lease designated three persons to serve on our Board of
Directors. Albert Aiello, Robert J. Kamerschen and Lynette H. Mayne were
the directors designated by Lend Lease and served on the Board of Directors
until our annual meeting of shareholders on September 20, 2001. The
provisions in the shareholders agreement addressing the composition of our
Board of Directors terminated upon the completion of our initial public
offering in May 2000.  No Lend Lease designated directors serve on our
Board of Directors.

     In October 1999, pursuant to an April 1999 agreement with Lend Lease,
we borrowed nearly $3.5 million under convertible subordinated notes issued
to Lend Lease. The principal on these notes automatically converted into
554,982 shares of our common stock upon completion of our initial public
offering.

     LOANS TO DIRECTORS

     On February 4, 1999, our Board of Directors authorized the payment of
the exercise prices of outstanding options and warrants held by our
directors and other warrant holders by delivery of promissory notes to
CoolSavings with the following terms: (a) all principal and accrued and
unpaid interest is due on the fourth anniversary of the issuance of the
note; (b) the notes bear interest at rates between 4.83% and 6.71% per
annum (the then applicable federal rate); (c) accrued interest is payable
annually; (d) the note is secured by the shares of common stock issued upon
exercise of such option or warrant; and (e) the maker is personally liable
on the note only to the extent of all accrued interest on the note plus 20%
of the total principal amount of the note.  Pursuant to this Plan, current
and former directors exercised warrants and options to acquire a total of
approximately 1.7 million shares of common stock for notes in the aggregate
principal amount of approximately $3.4 million.


<PAGE>


     Prior to the date of our initial public offering, the following
directors of CoolSavings exercised their outstanding options and warrants
in exchange for the delivery of a promissory note with the terms described
above:

                                    Shares Issued        Principal
Name                                Upon Exercise     Amount of Note
----                                -------------     --------------

Richard H. Rogel, Trustee                862,500       $1,181,250(1)
Albert Aiello                             57,500          120,922
Hugh R. Lamle                             57,500          120,922
Lynette Mayne                             57,500          120,922
Arthur A. Weiss (2)                       57,500          131,250

     (1)   Mr. Rogel delivered 13 notes in the aggregate principal amount
of $1,050,000 upon the exercise of warrants to purchase 805,000 shares of
common stock and delivered an additional note in the principal amount of
$131,250 upon the exercise of an option to purchase 57,500 shares of common
stock.  All of these notes have identical terms and conditions as described
above.

     (2)   Mr. Weiss is a director of Cool Savings.

     On April 3, 2000, Steven M. Golden, our Chairman and Chief Executive
Officer, exercised his vested options to purchase 322,000 shares of our
common stock in exchange for the delivery of a promissory note in the
principal amount of $700,000 with the terms as described above, except that
the interest rate is 6.71% per annum (the applicable federal rate).  Each
of the loans described above has been forgiven by CoolSavings, see
"Indebtedness of Directors, Officers and Management".

     OPTIONS TO DIRECTOR

     On July 13, 1999, we granted to Richard H. Rogel, one of our
directors, an option to purchase 115,000 shares of our common stock at a
price of $4.37 per share. Mr. Rogel exercised this option by delivering to
CoolSavings a full recourse promissory note in the original principal
amount of $502,354. This note bears interest at the rate of 5.86% per annum
(the then applicable federal rate), provides for annual payments of accrued
interest and is due in full on the fourth anniversary of the note.  This
note was forgiven by CoolSavings.

     INDEBTEDNESS OF DIRECTORS AND MANAGEMENT

     The following table presents the aggregate amount of indebtedness
owing to CoolSavings by a former executive officer and current and former
directors to whom CoolSavings has made a loan as described in this Item 13
as of June 30, 2001:

                                     Aggregate
                                      Amount
                                    Outstanding
                                       as of
Name                               June 30, 2001
----                               --------------

Steven M. Golden                    $  805,136
Richard H. Rogel,                    1,869,408
Albert Aiello                          134,138
Hugh R. Lamle                          134,138
Lynette Mayne                          133,658
Arthur A. Weiss                        145,589



<PAGE>


     At a meeting held in 2001, the directors present (director Kamerschen
could not attend) engaged in a discussion of the facts surrounding these
notes.  There followed a deliberation of the potential benefits and
detriments of several alternatives concerning the notes including possible
forgiveness of the amounts owing under the notes.  After due consideration,
the directors by a vote of four in favor (director Aiello abstaining)
authorized CoolSavings to forgive the principal and accrued interest owing
under these notes.

     PRIVATE PLACEMENT

     In March 2001, an unrelated third party purchased $0.1 million and
Richard H. Rogel and Hugh R. Lamle each purchased $1.0 million of our 8%
Senior Subordinated Convertible Notes due March 1, 2006. These notes
carried warrants to purchase one share of our common stock for every $2.00
of principal indebtedness under each note for a total of one million shares
subject to warrants held by directors. The warrants have an exercise price
of $1.25 per share. The notes were convertible at any time into the our
common stock at a conversion rate equal to one share for each outstanding
dollar of principal and accrued interest, at the election of the note
holder. Interest was payable quarterly, and for periods prior to April 1,
2003, we had the option to pay interest on the outstanding principal
balance of the notes in cash or by delivery of additional notes in an
amount equal to the amount of the interest.

     In connection with the Landmark Transaction, the holders of the notes
elected to exchange their notes and warrants for 13.0 million shares of the
Company's Series C Convertible Preferred Stock.

     The terms of the Series C Preferred Stock are set forth in their
entirety in our Certificate of Incorporation.  The Series C Preferred Stock
ranks junior (with respect to dividends and liquidation payments) to the
Series B Preferred Stock but senior to the common stock.

     The Series C Preferred Stock will not accrue dividends. Dividends may
be declared and paid on the Series C Preferred Stock from funds lawfully
available as and when determined by the Board of Directors and subject to
any preferential dividend rights of any then outstanding preferred stock,
including the Series B Preferred Stock.

     Each share of Series C Preferred Stock is convertible, at the
holder's option, into the number of shares of common stock obtained by
dividing the stated value of a share of Series C Preferred Stock ($0.1665)
by the conversion price ($0.1665 at the time of issuance, subject to anti-
dilution adjustments).

     The conversion price and conversion ratio are subject to "weighted
average" adjustment upon certain events. This means, for example (and
excluding exceptions), that if we issue common stock for less than the
conversion price or issue convertible or derivative securities with an
exercise or conversion price less than the conversion price of the Series C
Preferred Stock, the conversion price and conversion ratio are reduced to
the price derived from the weighted average of the price at which all such
new securities were issued.

     Shares of Series C Preferred Stock are redeemable in whole, at our
election, at any time after the shares of Series B Preferred Stock have
been redeemed or after the third anniversary of the date of issuance, if
the holders of a majority of the shares of Series B Preferred Stock
consent, at the stated value ($0.1665 at the time of issuance, subject to
anti-dilution adjustments) for each share of Series C Preferred Stock plus
a cash amount per share equal to eight percent (8%) per annum of the
Series C Preferred Stock stated value.



<PAGE>


     Each share of Series C Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which such share
of Series C Preferred Stock is convertible. The holders of Series C
Preferred Stock are entitled to vote together with holders of common stock
at any meeting of our shareholders on any and all matters presented to our
shareholders for consideration.

     On liquidation, after the payment of the preferred distribution to
the holders of the Series B Preferred Stock, holders of Series C Preferred
Stock are entitled to be paid the greater of: (1) the amount per share that
would have been payable if each share of Series C Preferred had been
converted to common stock, or (2) the stated value ($0.1665 at the time of
issuance, subject to anti- dilution adjustments) for each share of Series C
Preferred Stock plus a cash amount per share equal to eight percent (8%)
per annum of the Series C Preferred Stock stated value before holders of
our common stock receive a distribution. At the election of the holders of
the Series C Preferred Stock, a change of control of CoolSavings or a sale
of all or substantially all of the assets of CoolSavings may be deemed to
be a liquidation, provided the holders of the Series B Preferred Stock have
elected to have such event constitute a liquidation.

     LOANS FROM DIRECTOR

     In June 2001, a trust of which one of our directors, Richard H.
Rogel, is the trustee, loaned us a total of $279,000.  These loans
consisted of an interest free loan of $60,000 and a loan for $219,000
evidenced by a promissory note dated June 27, 2001, which accrued interest
at a rate equal to 8.5% per annum.  All principal and accrued interest
under these loans has been repaid.

     RELATIONSHIP WITH LEGAL COUNSEL

     During the fiscal year ended December 31, 2001, the law firm of
Jaffee, Raitt, Heuer & Weiss, Professional Corporation, acted as outside
counsel and represented us in various matters.  Arthur A. Weiss, one of our
directors, is a stockholder of Jaffe Raitt.

     RELATIONSHIP WITH DIRECTOR

     M. Gary S. Briggs, one of our directors, was the chief marketing
officer and one of the founders of OurHouse.com, an internet retailer
focused on home related products and services.  OurHouse.com has been one
of our customers.




<PAGE>


                                PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)   The following documents are filed herewith as part of this
     Form 10-K:

     (1)   A list of the financial statements required to be filed as a
           part of this Form 10-K is shown in the "Index to the Financial
           Statements" filed herewith.

     (2)   The following financial statement schedule is filed as a part
           of this Form 10-K,--Schedule II--Valuation and Qualifying
           Accounts.


     (3)   A list of the exhibits required by Item 601 of Regulation S-K
           to be filed as a part of this Form 10-K is shown on the
           "Exhibit Index" filed herewith.

     (b)   Reports on Form 8-K

           No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.


<PAGE>


                              SIGNATURES
                              ----------

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


Date: April 1, 2002               CoolSavings, Inc.

                                  By:  /s/ Matthew Moog
                                       -------------------------
                                       Matthew Moog
                                       Chief Executive Officer,
                                       President and Director



                                  By:  /s/ David B. Arney
                                       -------------------------
                                       David B. Arney
                                       Chief Financial Officer


                           POWER OF ATTORNEY

     Each person whose signature appears below hereby constitutes and
appoints Matthew Moog and David B. Arney, and each of them, his or her
attorneys-in-fact, each with the power of substitution, for him or her in
any and all capacities, to sign any amendments to this Report on Form 10-K,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
to said attorneys-in-fact, or his substitute or substitutes, the power and
authority to perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may
do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and on the dates indicated.

Signature                   Title                        Date
---------                   -----                        ----


/s/ Matthew Moog            Chief Executive Officer,     April 1, 2002
-------------------------   President and Director
Matthew Moog


/s/ David B. Arney          Chief Financial Officer      April 1, 2002
-------------------------   (Principal Accounting and
David Arney                 Financial Officer)


/s/ Richard H. Rogel        Chairman of the Board        April 1, 2002
-------------------------   of Directors
Richard H. Rogel


/s/ R. Bruce Bradley        Director                     April 1, 2002
-------------------------
R. Bruce Bradley





<PAGE>


Signature                   Title                        Date
---------                   -----                        ----


/s/ Gary S. Briggs          Director                     April 1, 2002
-------------------------
Gary S. Briggs


/s/ Guy R. Friddell, III    Director                     April 1, 2002
-------------------------
Guy R. Friddell, III


/s/ Steven M. Golden        Director                     April 1, 2002
-------------------------
Steven M. Golden


/s/ Hugh R. Lamle           Director                     April 1, 2002
-------------------------
Hugh R. Lamle


/s/ Karl B. Quist           Director                     April 1, 2002
-------------------------
Karl B. Quist


/s/ Arthur A. Weiss         Director                     April 1, 2002
-------------------------
Arthur A. Weiss



<PAGE>








                 Report of Independent Accountants on
                     Financial Statement Schedule



To the Board of Directors and Shareholders
of CoolSavings, Inc.:


Our audits of the financial statements referred to in our report dated
February 14, 2002 appearing in this Form 10-K also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related financial statements.





PricewaterhouseCoopers LLP


Chicago, Illinois
February 14, 2002



<PAGE>


                           CoolSavings, Inc.

           Schedule II -- Valuation and Qualifying Accounts




                                Additions (Reductions)
                         ----------------------------------
              Balance at  Charged to  Charged               Balance at
             Beginning of  Costs and  to Other     (1)        End of
               Period      Expenses   Accounts   Deduction    Period
             ------------ ---------- ----------  ---------- ----------


YEAR ENDED
DECEMBER 31,
2001
------------

Allowance for
 doubtful
 receivables     $ 1,318    $ 2,432   $   --      $ (2,869)    $  881



YEAR ENDED
DECEMBER 31,
2000
------------

Allowance for
 doubtful
 receivables     $   118    $ 1,638   $   --      $   (438)    $1,318



YEAR ENDED
DECEMBER 31,
1999
------------

Allowance for
 doubtful
 receivables     $    13    $   123   $   --      $    (18)    $  118



     (1)   Uncollectible accounts written off.





<PAGE>


                             EXHIBIT INDEX

Exhibit
No.        Description
-------    -----------

2.1        Securities Purchase Agreement dated as of July 30, 2001 between
           coolsavings.com, inc., CoolSavings, Inc., Landmark
           Communications, Inc., and Landmark Ventures VII, LLC
           (incorporated by reference to Exhibit 2.1 to CoolSavings'
           Current Report on Form 8-K filed with the Securities and
           Exchange Commission on August 3, 2001 (the"August 8-K")

2.2        Amendment No. 1 to the Securities Purchase Agreement dated as
           of August 16, 2001 between coolsavings.com, inc., CoolSavings,
           Inc., Landmark Communications, Inc., and Landmark Ventures VII,
           LLC (incorporated by reference to Exhibit 2.3 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ending
           September 30, 2001)

2.3        Agreement and Plan of Merger dated as of July 30, 2001 by and
           between coolsavings.com, inc. and CoolSavings, Inc.
           (incorporated by reference to Exhibit 2.2 to the August 8-K)

3.1        Certificate of Incorporation (incorporated by reference to
           Appendix D to CoolSavings' Definitive Proxy Statement filed
           with the Commission on August 22, 2001)

3.2        Bylaws (incorporated by reference to Appendix F to CoolSavings'
           Definitive Proxy Statement; file no. 000-30199)

4.1        Form of Common Stock Certificate (incorporate by reference to
           Exhibit 4.1 to CoolSavings' Registration Statement on Form S-1;
           file no. 333-94677)

4.2        Shareholders Agreement, dated as of June 1, 1998, among
           CoolSavings and certain of its Shareholders (incorporated by
           reference to Exhibit 4.2 to CoolSavings' Registration Statement
           on Form S-1; file no. 333-94677)

4.3        Registration Rights Agreement among CoolSavings and the holders
           of the 1999 Unsecured, Convertible Subordinated Promissory
           Notes (incorporated by reference to Exhibit 4.4 to CoolSavings'
           Registration Statement on Form S-1; file no. 333-94677)

4.4        Registration Rights Agreement among CoolSavings and the holders
           of the Series A Convertible Preferred Stock (incorporated by
           reference to Exhibit 4.5 to CoolSavings' Registration Statement
           on Form S-1; file no. 333-94677)

4.5        Warrant between coolsavings.com, inc. and Landmark
           Communications, Inc. dated July 30, 2001 (incorporated by
           reference to Exhibit 4.1 to the August 8-K)

4.6*       Warrant between CoolSavings, Inc. and Landmark Communications,
           Inc. dated November 12, 2001.

4.7        Registration Rights Agreement between coolsavings.com,inc.,
           Landmark Ventures VII, LLC and certain coolsavings.com, inc.
           shareholders dated July 30, 2001 (incorporated by reference to
           Exhibit 4.2 to the August 8-K)

9.1        Voting Agreement between Landmark Communications, Inc.,
           Landmark Ventures VII, LLC and certain coolsavings.com, inc.
           shareholders dated July 30, 2001 (incorporated by reference to
           Exhibit 9.1 to the August 8-K)



<PAGE>


Exhibit
No.        Description
-------    -----------

10.1       Investment Agreement, dated June 1, 1998, by and between
           CoolSavings and Lend Lease International Pty. Limited
           (incorporated by reference to Exhibit 10.1 to CoolSavings'
           Registration Statement on Form S-1; file no. 333-94677)

10.2       Form of Indemnification Agreement (incorporated by reference
           to Exhibit 10.2 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.3       1997 Stock Option Plan (incorporated by reference to
           Exhibit 10.3 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.4       1999 Director Option Plan (incorporated by reference to
           Exhibit  10.4 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.5       Loan and Security Agreement, dated January 18, 2000, between
           CoolSavings and American National Bank and Trust Company of
           Chicago (incorporated by reference to Exhibit 10.18 to
           CoolSavings' Registration Statement on Form S-1; file
           no. 333-94677)

10.6       Forbearance and Reaffirmation Agreement dated June 15, 2001
           between coolsavings.com, inc. and American National Bank and
           Trust Company of Chicago (incorporated by reference to
           Exhibit 10.5 to CoolSavings' Quarterly Report on Form 10-Q
           for the period ending June 30, 2001)

10.7       Letter Agreement dated July 27, 2001 between coolsavings.com,
           inc. and American National Bank and Trust Company of Chicago
           (incorporated by reference to Exhibit 10.6 to the Company's
           Quarterly Report on Form 10-Q filed with the Securities and
           Exchange Commission on August 14, 2001)

10.8       Form of Promissory Note from current and former directors of
           CoolSavings payable to CoolSavings in consideration for
           exercise of stock options and/or warrants (incorporated by
           reference to Exhibit 10.6 to CoolSavings' Registration
           Statement on Form S-1; file no. 333-94677)

10.9       Termination Agreement, dated December 30, 1999, between
           CoolSavings and Hillel Levin (incorporated by reference to
           Exhibit 10.7 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.10      Consulting Agreement, dated as of January 1, 2000, between
           CoolSavings and Hillel Levin (incorporated by reference to
           Exhibit 10.8 to CoolSavings Registration Statement on Form S-1;
           file no. 333-94677)

10.11      Lease Agreement, dated February 24, 1997, between Prentiss
           Properties Acquisition Partners, L.P. and CoolSavings
           (incorporated by reference to Exhibit 10.9 to CoolSavings'
           Registration Statement on Form S-1; file no. 333-94677)

10.12      Agreement of Sublease, dated June 30, 1998, between Insurance
           Company of North America and CoolSavings (incorporated by
           reference to Exhibit 10.10 to CoolSavings' Registration
           Statement on Form S-1; file no. 333-94677)



<PAGE>


Exhibit
No.        Description
-------    -----------

10.13      Lease Agreement, dated January 3, 2000, between 360 North
           Michigan Trust and CoolSavings (incorporated by reference to
           Exhibit 10.11 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.14      Forbearance Letter Agreement dated June 14, 2001 between
           coolsavings.com, inc. and 360 North Michigan Trust
           (incorporated by reference to Exhibit 10.9 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ending June 30,
           2001)

10.15      Market Survey Panelist Agreement, dated as of October 25, 1999,
           between CoolSavings and NFO Research, Inc. (incorporated by
           reference to Exhibit 10.12 to CoolSavings' Registration
           Statement on Form S-1; file no. 333-94677)

10.16      Bankcard Marketing Agreement, dated April 2, 1999, between
           CoolSavings and First USA Bank (incorporated by reference to
           Exhibit 10.13 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.17      Stock Purchase and Advertising Agreement, dated May 28, 1999,
           between CoolSavings and National Broadcasting Company, Inc.
           (incorporated by reference to Exhibit 10.14 to CoolSavings
           Registration Statement on Form S-1; file no. 333-94677)

10.18      Agreement, dated February 8, 2000, between CoolSavings and
           The Parenting Group, Inc.  (incorporated by reference to
           Exhibit 10.15 to CoolSavings' Registration Statement on
           Form S-1; file no. 333-94677)

10.19      Agreement, dated January 18, 2000, between CoolSavings and Mail
           Coups, Inc. (incorporated by reference to Exhibit 10.16 to
           CoolSavings' Registration Statement on Form S-1; file
           no. 333-94677)

10.20      Program Agreement, dated February 17, 2000, between CoolSavings
           and First Data Merchant Services Corporation (incorporated by
           reference to Exhibit 10.17 to CoolSavings' Registration
           Statement on Form S-1; file no. 333-94677)

10.21      Incentives Management Program Agreement, dated March 31, 2000,
           between CoolSavings and Netcentives, Inc. (incorporated by
           reference to Exhibit 10.19 to CoolSavings' Registration
           Statement on Form S-1; file no. 333-94677)

10.22      Addendum to the Netcentives, Inc. Incentive Management Program
           Agreement dated June 14, 2001 between coolsavings.com, inc. and
           Netcentives, Inc. (incorporated by reference to Exhibit 10.8 to
           CoolSavings' Quarterly Report on Form 10-Q for the period
           ending June 30, 2001)

10.23      Form of 8% Senior Subordinated Convertible Notes due March 1,
           2006 ("8% Notes") (incorporated by reference to Exhibit 10.1 to
           CoolSavings' Quarterly Report on Form 10-Q for the period
           ending March 31, 2001)

10.24      Form of Warrant issued in connection with 8% Notes ("Warrants")
           (incorporated by reference to Exhibit 10.2 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ending March 31,
           2001)



<PAGE>


Exhibit
No.        Description
-------    -----------

10.25      Form of Letter confirming terms of investment in 8% Notes and
           Warrants. (incorporated by reference to Exhibit 10.3 to
           CoolSavings' Quarterly Report on Form 10-Q for the period
           ending March 31, 2001)

10.26      Amended and Restated Senior Secured Loan and Security
           Agreement, dated July 30, 2001, between coolsavings.com, inc.
           and Landmark Communications, Inc. (incorporated by reference to
           Exhibit 10.1 to the August 8-K)

10.27      First Amendment to Amended and Restated Senior Secured Loan and
           Security Agreement dated September 25, 2001 between
           coolsavings.com, inc. and Landmark Communications, Inc.
           (incorporated by reference to Exhibit 10.8 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ending
           September 30, 2001)

10.28      Commercial Demand Grid Note, dated July 30, 2001, between
           coolsavings.com, inc. and Landmark Communications, Inc.
           (incorporated by reference to Exhibit 10.2 to the August 8-K)

10.29      Amended and Restated Commercial Demand Grid Note dated
           September 28, 2001 between CoolSavings, Inc. and Landmark
           Communications, Inc. (incorporated by reference to
           Exhibit 10.9 to CoolSavings' Quarterly Report on Form 10-Q
           for the period ending September 30, 2001)

10.30      2001 Stock Option Plan (incorporated by reference to
           Exhibit 10.3 to the August 8-K)

10.31      Form of Shareholders Agreement between CoolSavings, Inc.,
           Landmark Ventures VII, LLC and certain shareholders of
           coolsavings.com, inc. (incorporated by reference to
           Exhibit 10.4 to the August 8-K)

10.32      Employment Agreement dated April 1, 2001 between
           coolsavings.com, inc. and Steven M. Golden (incorporated by
           reference to Exhibit 10.10 to CoolSavings' Quarterly Report on
           Form 10-Q for the period ending June 30, 2001)

10.33      Severance Agreement dated July 29, 2001 between
           coolsavings.com, inc. and Steven M. Golden (incorporated by
           reference to Exhibit 10.12 to the Company's Quarterly Report
           on Form 10-Q filed with the Securities and Exchange Commission
           on August 14, 2001)

10.34      Employment Agreement dated July 29, 2001 between
           coolsavings.com, inc. and Matthew M. Moog (incorporated by
           reference to Exhibit 10.13 to the Company's Quarterly Report on
           Form 10-Q filed with the Securities and Exchange Commission on
           August 14, 2001)

10.35      Forbearance and Reaffirmation Agreement dated July 27, 2001
           between coolsavings.com, inc. and Midwest Guaranty Bank
           (incorporated by reference to Exhibit 10.7 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ending June 30,
           2001)



<PAGE>


Exhibit
No.        Description
-------    -----------

10.36*     Senior Secured Note dated July 30, 2001 between
           coolsavings.com, inc. and Landmark Communications, Inc.

24 *       Power of Attorney (included on signature page)

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

    *      Filed herewith.

   **      Certain information in Exhibit 10.14 has been omitted and filed
           separately with the Commission. Confidential treatment has been
           requested with respect to the omitted portion.