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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

|                                              |  |                                                                                         
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(Mark one)                                    |  |                                                                                         
|x                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2003
|OR                                           
|o                                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to _____________________.

Commission File Number 000-29215LENDINGTREE, INC.
(Exact name of registrant as specified in its charter)

|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 25-1795344         
|                                         |  |                    
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                         |  |                    
|11115 Rushmore Drive                     |  |                    
|Charlotte, North Carolina                |  | 28277              
|                                         |  |                    
|(Address of principal executive offices) |  | (Zip code)         
|                                         |  |                    

(704) 541-5351





(Registrants telephone number, including area code)


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 o.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act). Yes x  No o.

As of April 30, 2003 there were 22,910,267 shares of Common Stock, $0.01 par
value, outstanding. Additionally, there are 230,866 shares of treasury stock
issued but not outstanding.



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LendingTree, Inc.
Table of Contents

|          |  |                                                                                                 |  |       
|--------- |  | ----------------------------------------------------------------------------------------------- |  | ------
|          |  |                                                                                                 |  | Page  
|          |  |                                                                                                 |  | Number
|          |  |                                                                                                 |  |       
|Part I    |  | Financial Information:                                                                          |  |       
|Item 1.   |  | Consolidated Financial Statements (Unaudited)                                                   |  |       
|          |  | Consolidated Balance Sheets  March 31, 2003 and December 31, 2002                              |  | 3     
|          |  | Consolidated Statements of Operations -
Three months ended March 31, 2003 and March 31, 2002    |  | 4     
|          |  | Consolidated Statements of Cash Flows -
Three months ended March 31, 2003 and March 31, 2002    |  | 5     
|          |  | Consolidated Statement of Changes in Shareholders Equity-
March 31, 2003 and December 31, 2002 |  | 6     
|          |  | Notes to Consolidated Financial Statements                                                      |  | 7     
|Item 2.   |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations           |  | 17    
|Item 3.   |  | Quantitative and Qualitative Disclosures about Market Risk                                      |  | 30    
|Item 4.   |  | Controls and Procedures                                                                         |  | 30    
|Part II   |  | Other Information:                                                                              |  |       
|Item 1.   |  | Legal Proceedings                                                                               |  | 31    
|Item 2.   |  | Changes in Securities and Use of Proceeds                                                       |  | 31    
|Item 6.   |  | Exhibits and Reports on Form 8-K                                                                |  | 31    
|Signature |  |                                                                                                 |  | 33    



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PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND
MAY BE TRADE NAMES OR TRADEMARKS OF LENDINGTREE, INC. OR THIRD PARTIES.



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2



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PART I  Financial Information

Item 1. Consolidated Financial Statements.


LendingTree, Inc.
Consolidated Balance Sheets

|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |        |        |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | ------------------------- | ------ | --------------------------------------- | ------ | ------------ | ------ | ------ | ------ | 
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        | March 31,                               |        | December 31,
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        | 2003                                    |        | 2002        
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        | (unaudited)                             |        |              |        |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        | ($ in thousands, except per share data)
|Assets                                                                                                                                                                                                                                            |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|Current assets:                                                                                                                                                                                                                                   |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|                                                                                                                                                                                                                                                  | Cash and cash equivalents                                                                                                                                  |                                                     | $                                          | 20,645                    |        |                                         | $      | 22,708       |       
|                                                                                                                                                                                                                                                  | Restricted cash                                                                                                                                            |                                                     |                                            | 6,232                     |        |                                         |        | 4,479        |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            | Total cash and cash equivalents and restricted cash |                                            |                           | 26,877 |                                         |        |              | 27,187 |       
|                                                                                                                                                                                                                                                  | Accounts receivable, net of allowance for doubtful accounts                                                                                                |                                                     |                                            | 21,998                    |        |                                         |        | 16,892       |       
|                                                                                                                                                                                                                                                  | Prepaid expenses and other current assets                                                                                                                  |                                                     |                                            | 1,581                     |        |                                         |        | 1,010        |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     | Total current assets                       |                           |        | 50,456                                  |        |              |        | 45,089 |       
|Equipment, furniture and leasehold improvements, net                                                                                                                                                                                              |                                                                                                                                                            |                                                     | 3,240                                      |                           |        |                                         | 1,717  |             
|Projects in process                                                                                                                                                                                                                               |                                                                                                                                                            |                                                     | 774                                        |                           |        |                                         | 1,468  |             
|Software, net                                                                                                                                                                                                                                     |                                                                                                                                                            |                                                     | 871                                        |                           |        |                                         | 965    |             
|Intangible assets, net                                                                                                                                                                                                                            |                                                                                                                                                            |                                                     | 743                                        |                           |        |                                         | 1,330  |             
|Other assets                                                                                                                                                                                                                                      |                                                                                                                                                            |                                                     | 174                                        |                           |        |                                         | 118    |             
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     | Total assets                               |                           | $      | 56,258                                  |        |              | $      | 50,687 |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|Liabilities and Shareholders Equity                                                                                                                                                                                                              |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|Current liabilities:                                                                                                                                                                                                                              |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|                                                                                                                                                                                                                                                  | Accounts payable                                                                                                                                           |                                                     | $                                          | 7,133                     |        |                                         | $      | 6,952        |       
|                                                                                                                                                                                                                                                  | Deferred revenue                                                                                                                                           |                                                     |                                            | 365                       |        |                                         |        | 417          |       
|                                                                                                                                                                                                                                                  | Accrued incentive and other compensation                                                                                                                   |                                                     |                                            | 2,465                     |        |                                         |        | 5,095        |       
|                                                                                                                                                                                                                                                  | Accrued professional services and other fees                                                                                                               |                                                     |                                            | 2,395                     |        |                                         |        | 284          |       
|                                                                                                                                                                                                                                                  | Accrued consumer promotional costs                                                                                                                         |                                                     |                                            | 987                       |        |                                         |        | 1,324        |       
|                                                                                                                                                                                                                                                  | Accrued other expenses                                                                                                                                     |                                                     |                                            | 1,123                     |        |                                         |        | 1,422        |       
|                                                                                                                                                                                                                                                  | Current portion capital lease obligations                                                                                                                  |                                                     |                                            | 754                       |        |                                         |        | 619          |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            | Total current liabilities |        |                                         | 15,222 |              |        |        | 16,113 | 
|Long-term deferred revenue and other non-current liabilities                                                                                                                                                                                      |                                                                                                                                                            |                                                     | 1,078                                      |                           |        |                                         | 927    |             
|Capital lease obligations                                                                                                                                                                                                                         |                                                                                                                                                            |                                                     | 427                                        |                           |        |                                         | 311    |             
|Commitments and contingencies
Mandatorily redeemable securities
Series A convertible preferred stock, $.01 par value, 8%
cumulative, 6,885,715 shares authorized, 5,996,676 shares
issued and outstanding at March 31, 2003 and December 31, 2002 |                                                                                                                                                            |                                                     | 21,861                                     |                           |        |                                         | 21,691 |             
|Shareholders equity:                                                                                                                                                                                                                             |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |             
|                                                                                                                                                                                                                                                  | Common stock, $.01 par value, 100,000,000 shares authorized,
23,018,037 and 22,823,920 shares issued at March 31, 2003
and December 31, 2002, respectively |                                                     |                                            | 230                       |        |                                         |        | 228          |       
|                                                                                                                                                                                                                                                  | Treasury stock (230,449 shares at March 31, 2003 and
237,673 shares at December 31, 2002, at cost)                                                         |                                                     |                                            | (1,472                    | )      |                                         |        | (1,518       | )     
|                                                                                                                                                                                                                                                  | Additional paid-in-capital                                                                                                                                 |                                                     |                                            | 131,475                   |        |                                         |        | 131,357      |       
|                                                                                                                                                                                                                                                  | Accumulated deficit                                                                                                                                        |                                                     |                                            | (112,406                  | )      |                                         |        | (118,163     | )     
|                                                                                                                                                                                                                                                  | Deferred compensation                                                                                                                                      |                                                     |                                            | (157                      | )      |                                         |        | (214         | )     
|                                                                                                                                                                                                                                                  | Notes receivable from officers                                                                                                                             |                                                     |                                            |                          |        |                                         |        | (45          | )     
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     | Total shareholders equity                 |                           |        | 17,670                                  |        |              |        | 11,645 |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     | Total liabilities and shareholders equity |                           | $      | 56,258                                  |        |              | $      | 50,687 |       
|                                                                                                                                                                                                                                                  |                                                                                                                                                            |                                                     |                                            |                           |        |                                         |        |              |       

The accompanying notes are an integral part of these consolidated financial statements

3



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LendingTree, Inc.
Consolidated Statements of Operations
(unaudited)

|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |        | 
|-------------------------------------------------------------------------------------- | --------------------------------- | -------- | ------------------------ | ------ | ------------------------------------- | ------ | ------ | ------ | ------ | ------ | 
|                                                                                       |                                   |          |                          |        | For the Three Months Ended March 31, 
|                                                                                       |                                   |          |                          |        |                                      
|                                                                                       |                                   |          |                          |        | 2003                                  |        | 2002  
|                                                                                       |                                   |          |                          |        |                                       |        |       
|                                                                                       |                                   |          |                          |        | (in thousands, except per share data)
|Revenue:                                                                               |                                   |          |                          |        |                                       |        |        |       
|                                                                                       |                                   | Exchange |                          | $      | 38,412                                |        |        | $      | 19,628 |       
|                                                                                       |                                   | Other    |                          |        | 745                                   |        |        |        | 1,640  |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|                                                                                       |                                   |          | Total revenue            |        |                                       | 39,157 |        |        |        | 21,268 | 
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Cost of revenue:                                                                       |                                   |          |                          |        |                                       |        |        |       
|                                                                                       |                                   | Exchange |                          |        | 6,181                                 |        |        |        | 3,249  |       
|                                                                                       |                                   | Other    |                          |        | 385                                   |        |        |        | 320    |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|                                                                                       |                                   |          | Total cost of revenue    |        |                                       | 6,566  |        |        |        | 3,569  | 
|Gross profit:                                                                          |                                   |          |                          |        |                                       |        |        |       
|                                                                                       |                                   | Exchange |                          |        | 32,231                                |        |        |        | 16,379 |       
|                                                                                       |                                   | Other    |                          |        | 360                                   |        |        |        | 1,320  |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|                                                                                       |                                   |          | Total gross profit       |        |                                       | 32,591 |        |        |        | 17,699 | 
|Operating expenses:                                                                    |                                   |          |                          |        |                                       |        |        |       
|                                                                                       | Product development               |          |                          | 1,018  |                                       |        |        | 878    |       
|                                                                                       | Marketing and advertising         |          |                          | 18,071 |                                       |        |        | 10,681 |       
|                                                                                       | Sales, general and administrative |          |                          | 7,802  |                                       |        |        | 6,859  |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|                                                                                       |                                   |          | Total operating expenses |        |                                       | 26,891 |        |        |        | 18,418 | 
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Income (loss) from operations                                                          |                                   |          | 5,700                    |        |                                       |        | (719   | )     
|Interest income                                                                        |                                   |          | 123                      |        |                                       |        | 122    |       
|Interest expense, financing and other charges                                          |                                   |          | (66                      | )      |                                       |        | (115   | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Income (loss) from operations before income taxes                                      |                                   |          | 5,757                    |        |                                       |        | (712   | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Provision (benefit) for income taxes                                                   |                                   |          |                         |        |                                       |        |       |       
|Net income (loss) from operations                                                      |                                   |          | 5,757                    |        |                                       |        | (712   | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Accretion of mandatorily redeemable preferred stock                                    |                                   |          | (170                     | )      |                                       |        | (169   | )     
|Dividends on preferred stock                                                           |                                   |          | (455                     | )      |                                       |        | (1,960 | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Net income (loss) available to common shareholders                                     |                                   | $        | 5,132                    |        |                                       | $      | (2,841 | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Net income (loss) per common share  basic                                             |                                   | $        | 0.23                     |        |                                       | $      | (0.15  | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Net income (loss) per common share  diluted                                           |                                   | $        | 0.18                     |        |                                       | $      | (0.15  | )     
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Weighted average shares used in basic net
income (loss) per common share calculation   |                                   |          | 22,662                   |        |                                       |        | 19,372 |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       
|Weighted average shares used in diluted net
income (loss) per common share calculation |                                   |          | 32,292                   |        |                                       |        | 19,372 |       
|                                                                                       |                                   |          |                          |        |                                       |        |        |        |        |       

The accompanying notes are an integral part of these consolidated financial statements

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LendingTree, Inc.
Consolidated Statements of Cash Flows
(unaudited)

|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |       |        |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------ | ----------------------------------------- | ------------------------------------- | ----- | ------------------------------------ | ------ | ----- | ----- | ------ | ------ | -
|                                                     |                                                                                      |                                            |                                           |                                       |       | For the Three Months Ended March 31,
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                     
|                                                     |                                                                                      |                                            |                                           |                                       |       | 2003                                 |        | 2002 
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |      
|                                                     |                                                                                      |                                            |                                           |                                       |       | ($ in thousands)                    
|Cash flows used in operating activities:             |                                                                                      |                                            |                                           |                                       |       |                                      |        |      
|                                                     | Net income (loss)                                                                    |                                            | $                                         | 5,757                                 |       |                                      | $      | (712  | )    
|                                                     | Adjustments to reconcile net income (loss) to net cash
used in operating activities: |                                            |                                           |                                       |       |                                      |        |       |      
|                                                     |                                                                                      | Depreciation and amortization              |                                           |                                       | 1,187 |                                      |        |       | 1,915 |       
|                                                     |                                                                                      | Provision for doubtful accounts            |                                           |                                       | 80    |                                      |        |       | 30    |       
|                                                     |                                                                                      | Non-cash equity based compensation charges |                                           |                                       | 66    |                                      |        |       | 237   |       
|                                                     |                                                                                      | Changes in assets and liabilities:         |                                           |                                       |       |                                      |        |       |       |       
|                                                     |                                                                                      |                                            | Advertising escrow                        |                                       |       | (1,832                               | )      |       |       | (3,671 | )     
|                                                     |                                                                                      |                                            | Accounts receivable                       |                                       |       | (5,186                               | )      |       |       | (649   | )     
|                                                     |                                                                                      |                                            | Prepaid expenses and other assets         |                                       |       | (634                                 | )      |       |       | (246   | )     
|                                                     |                                                                                      |                                            | Accounts payable                          |                                       |       | 181                                  |        |       |       | (526   | )     
|                                                     |                                                                                      |                                            | Deferred revenue                          |                                       |       | 130                                  |        |       |       | (716   | )     
|                                                     |                                                                                      |                                            | Accrued expenses and other liabilities    |                                       |       | (1,187                               | )      |       |       | 419    |       
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|                                                     |                                                                                      |                                            |                                           | Net cash used in operating activities |       |                                      | (1,438 | )     |       |        | (3,919 | )
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|Cash flows used in investing activities:             |                                                                                      |                                            |                                           |                                       |       |                                      |        |      
|                                                     | Deposits to restricted cash                                                          |                                            |                                           | (6                                    | )     |                                      |        | (100  | )    
|                                                     | Release of restricted cash                                                           |                                            |                                           | 85                                    |       |                                      |        | 298   |      
|                                                     | Investments in software                                                              |                                            |                                           | (301                                  | )     |                                      |        | (427  | )    
|                                                     | Purchases of equipment, furniture, leasehold improvements                            |                                            |                                           | (556                                  | )     |                                      |        | (204  | )    
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|                                                     |                                                                                      |                                            | Net cash used in investing activities     |                                       |       | (778                                 | )      |       |       | (433   | )     
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|Cash flows provided by financing activities:         |                                                                                      |                                            |                                           |                                       |       |                                      |        |      
|                                                     | Proceeds from sales of common stock and exercise of
warrants and stock options       |                                            |                                           | 726                                   |       |                                      |        | 742   |      
|                                                     | Sale of treasury stock for employee stock purchase plan                              |                                            |                                           | 65                                    |       |                                      |        |      |      
|                                                     | Payment of capital lease obligations                                                 |                                            |                                           | (228                                  | )     |                                      |        | (230  | )    
|                                                     | Payment of dividends  Series A convertible preferred stock                          |                                            |                                           | (455                                  | )     |                                      |        |      |      
|                                                     | Net short-term borrowings                                                            |                                            |                                           |                                      |       |                                      |        | 4,742 |      
|                                                     | Proceeds from repayment of officer note                                              |                                            |                                           | 45                                    |       |                                      |        | 23    |      
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|                                                     |                                                                                      |                                            | Net cash provided by financing activities |                                       |       | 153                                  |        |       |       | 5,277  |       
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|Net increase (decrease) in cash and cash equivalents |                                                                                      |                                            | (2,063                                    | )                                     |       |                                      | 925    |      
|Cash and cash equivalents, beginning of period       |                                                                                      |                                            | 22,708                                    |                                       |       |                                      | 3,400  |      
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      
|Cash and cash equivalents, end of period             |                                                                                      | $                                          | 20,645                                    |                                       |       | $                                    | 4,325  |      
|                                                     |                                                                                      |                                            |                                           |                                       |       |                                      |        |       |      

The accompanying notes are an integral part of these consolidated financial statements

5



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LendingTree, Inc.
Consolidated Statements of Changes in Shareholders Equity
(in thousands, except share data)
(unaudited)

|                                                                            |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   |        |   | 
|--------------------------------------------------------------------------- | ---------- |  | ------------ |  | ------ | - | ----- |  | ---------- | - | ------- | - | -------- | - | ---------- | - | ------------ | - | -------- | ----- | ----- | - | ---- | - |  | - | --- | - |  | - | ------ | - | 
|                                                                            |            |  | Common Stock |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       | Notes |   |      |   | 
|                                                                            |            |  |              |  |        |   |       |  | Additional |   | Accum-  |   | Deferred |   | Receivable |   | Total Share-
|                                                                            |            |  | Number of    |  |        |   |       |  | Treasury   |   | Paid-In |   | ulated   |   | Comp-      |   | to Acquire   |   | holders'
|                                                                            |            |  | Shares       |  | Amount |   | Stock |  | Capital    |   | Deficit |   | ensation |   | Stock      |   | Equity      
|                                                                            |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |             
|Balance at December 31, 2002                                                |            |  | 22,823,920   |  |        | $ | 228   |  |            | $ | (1,518  | ) |          | $ | 131,357    |   |              | $ | (118,163 | )     |       | $ | (214 | ) |  | $ | (45 | ) |  | $ | 11,645 |  
|Amortization of deferred compensation                                       |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   | 57   |   |  |   |     |   |  |   | 57     |  
|Payment of dividends on Series A convertible preferred stock                |            |  |              |  |        |   |       |  |            |   |         |   |          |   | (455       | ) |              |   |          |       |       |   |      |   |  |   |     |   |  |   | (455   | )
|Accretion of Series A convertible preferred stock                           |            |  |              |  |        |   |       |  |            |   |         |   |          |   | (170       | ) |              |   |          |       |       |   |      |   |  |   |     |   |  |   | (170   | )
|Repayment of an officer note                                                |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   | 45  |   |  |   | 45     |  
|Exercise of common stock warrants                                           |            |  | 2,666        |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   |        |  
|Reissuance of treasury shares for employee stock purchase
plan participants |            |  |              |  |        |   |       |  |            |   | 46      |   |          |   | 19         |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   | 65     |  
|Exercise of common stock options                                            |            |  | 191,451      |  |        |   | 2     |  |            |   |         |   |          |   | 724        |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   | 726    |  
|Other comprehensive income:                                                 |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   |        |  
|                                                                            | Net Income |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          | 5,757 |       |   |      |   |  |   |     |   |  |   |        |   | 
|Total comprehensive income                                                  |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   | 5,757  |  
|                                                                            |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   |        |  
|Balance at March 31, 2003                                                   |            |  | 23,018,037   |  |        | $ | 230   |  |            | $ | (1,472  | ) |          | $ | 131,475    |   |              | $ | (112,406 | )     |       | $ | (157 | ) |  | $ |    |   |  | $ | 17,670 |  
|                                                                            |            |  |              |  |        |   |       |  |            |   |         |   |          |   |            |   |              |   |          |       |       |   |      |   |  |   |     |   |  |   |        |  

The accompanying notes are an integral part of these consolidated financial statements

6



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LendingTree, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1  The Company

LendingTree, Inc. was incorporated in the state of Delaware on June 7,
1996 and commenced nationwide operations on July 1, 1998.

We are an online exchange empowering consumers, Lenders, REALTORS® and
related service providers with convenience, choice and value. Through our
exchange, which can be accessed online at www.lendingtree.com or by calling us
directly at 1-800-555-TREE, consumers can access a nationwide network of over
200 banks, lenders and loan brokers (collectively, Lenders) and approximately
650 real estate brokerages representing more than 9,000 agents to obtain loan
offers or the services of a real estate agent. We attract consumers to our
exchange through various forms of advertising and through arrangements with
both online and offline partners.

Consumers seeking loan products begin the LendingTree process by
completing a simple online credit request (which we refer to as a
qualification form). Consumers can also call us directly at 1-800-555-TREE
and we will complete the qualification form based on their instructions and
answers to questions. After the qualification form is complete, our Lend-X
technology automatically retrieves the credit score for the particular
consumer. The consumers data and credit scores are then automatically
compared to the underwriting criteria of the Lenders participating on our
exchange. Qualified consumers can receive multiple loan offers in response to
a single credit request and then compare, review, and accept the offer that
best suits their needs.

Lenders on our exchange can generate new business that meets their
specific underwriting criteria at a lower cost of acquisition than traditional
marketing channels. Our lending exchange encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We earn revenue from the Lenders on our exchange
that pay us fees for qualification forms that meet their underwriting criteria
and are transmitted to them (transmission fees). Since a qualification form
can be transmitted to more than one Lender, we may generate multiple
transmission fees for the same form. We also earn revenue for loans that the
Lenders on our exchange close with consumers that we transmitted to them
(closed-loan fees).

Consumers interested in working with a real estate agent to buy or sell a
home can access an online form through our exchange at www.lendingtree.com or
through one of the websites of participating membership programs, such as
Costco, Delta Skymiles, Continental, United Airlines, USAirways, Northwest
Airlines and American Express and Priority Club. Based on the information
entered by the consumer, our system automatically provides the consumer with a
choice of references to REALTORS® from our nationwide network and also forwards
the consumers information to the chosen real estate agents desktop via our
proprietary web-based technology. If the two parties agree to work together,
the transaction is completed locally. Consumers closing a transaction with a
REALTOR® on our exchange are eligible for rebates and promotional incentives.
REALTORS® are able to efficiently access new, highly qualified potential
customers.

We earn fees from real estate brokers that pay us when consumers requests
that we transmit to them result in a purchase or sale of a home (realty
services fees).

Our
technology platform, Lend-XSM, is the technology that powers our
internet-based exchange. In the past, we have also licensed the use of our
Lend-X technology to other businesses and have enabled them to create either
private-labeled or co-branded exchanges on their websites. However, in 2002,
we shifted the primary strategy for Lend-X to support the growth of our
exchange by using our technology in arrangements with our Lenders and other
online businesses that transmit consumers to our exchange and Lenders who
respond to loan requests from our exchange.

7



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NOTE 2  Basis of Presentation:

Consolidation

The consolidated financial statements include the accounts of LendingTree,
Inc. and our wholly owned subsidiary (Homespace Acquisition Company). All
intercompany balances and transactions have been eliminated in consolidation.

Interim Financial Information

Our consolidated financial statements include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary for a fair
presentation of our financial position as of March 31, 2003 and results of
operations and cash flows for the interim periods presented. The results of
operations for the quarter ended March 31, 2003 are not necessarily indicative
of the results to be expected for the entire year.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, certain information and footnotes
that are required by generally accepted accounting principles are not included
herein. These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for
the year ended December 31, 2002 as reported by us in our Annual Report on Form
10-K, which was filed with the Securities and Exchange Commission on March 12,
2003.

Use of Estimates and Judgments

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
judgments that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. We base our estimates and judgments on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. On an ongoing basis we evaluate our estimates and refine our
judgments as actual results and experiences develop. Significant estimates and
judgments are involved in the process of determining our incentive compensation
accruals, the value and lives of acquired intangible assets, the term of
arrangements for recognition of Lender set-up fees and costs and the valuation
allowance on our deferred tax asset. Significant estimates affecting our
disclosures include the valuation of our common stock options and warrants used
in computing proforma stock compensation charges. Actual results could differ
from those estimates. The significant accounting policies discussed below as
well as in our Consolidated Financial Statements in our Annual Report on Form
10-K affect our estimates and judgments in preparing the consolidated financial
statements.

Reclassifications

In the three months ended March 31, 2002, approximately $0.3 million of
operating expenses have been reclassified to cost of revenue to conform to our
current period presentation which reflects the hosting of our website
internally. In addition, in the three months ended March 31, 2002
approximately $0.1 million of sales, general and administrative
expenses have been reclassified to product development expense to
conform to our current period presentation which reflects our current
business structure.

NOTE 3  Summary of Significant Accounting Policies

Restricted Cash

As of March 31, 2003 and December 31, 2002, we had $6.2 million and $4.5
million, respectively, of cash classified as restricted. Of these balances at
March 31, 2003 and December 31, 2002, $4.2 million and $2.4 million,
respectively, relate to funds deposited into an escrow account that was
established by us and our advertising agency to maintain funds set aside by us
for approved future expenditures and services of the advertising agency.
Disbursements from the escrow account can only be made with signatures from
both parties. The fund is used only for advertising costs we have approved in
advance. Disbursements from the escrow account are made no sooner than one
month following the invoice date for the expenditures. We receive all income
earned on funds held in this escrow account.

In addition, at March 31, 2003 and December 31, 2002, $1.6 million of the
restricted cash balance represents funds set aside as collateral for a letter
of credit issued by our bank to a bonding company that provides surety bonds in
the various states where we are licensed to do business. The various states
require surety bonds in amounts ranging from $5,000 to $150,000 as a part of
their mortgage broker or loan originator regulations.

8



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Accounts Receivable

Our accounts receivable are presented net of an allowance for doubtful
accounts. Management estimates the amount of the necessary allowance using its
judgment about current factors, such as customers financial condition, and
based on historical trends of receivable write-offs. Receivables are
written-off against this allowance when management determines the amount is
uncollectible.

Trade accounts receivable consists of the following:

|                                      |  |           |        |              |  |   |        |  
|------------------------------------- |  | --------- | ------ | ------------ |  | - | ------ | -
|                                      |  | March 31, |        | December 31,
|                                      |  | 2003      |        | 2002        
|                                      |  |           |        |             
|Accounts receivable                   |  | $         | 22,445 |              |  | $ | 17,261 |  
|Less: allowance for doubtful accounts |  |           | (447   | )            |  |   | (369   | )
|                                      |  |           |        |              |  |   |        |  
|                                      |  | $         | 21,998 |              |  | $ | 16,892 |  
|                                      |  |           |        |              |  |   |        |  

In both the three months ended March 31, 2003 and March 31, 2002, we
recorded bad debt expense of $0.1 million and wrote-off less than $0.1 million
of receivables against the allowance for doubtful accounts.

Software Development Costs

Software development costs primarily include expenses incurred by us to
develop our proprietary software, which powers our website. Statement of
Position No. 98-1 Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use (SOP 98-1) provides guidance regarding when
software developed or obtained for internal use should be capitalized. SOP
98-1 requires that certain costs incurred during the application development
stage be capitalized, while costs incurred during the preliminary project stage
and post-implementation/operation stage should be expensed as incurred. We
account for our website development costs and other internal use software in
accordance with SOP 98-1.

During the three months ended March 31, 2003 and 2002, we capitalized
internal use software development costs (including compensation costs) of
approximately $0.2 million and $0.3 million, respectively.

Capitalized internal use software development costs are amortized over the
estimated life of the related application, which range from 1 to 3 years.

Intangible Assets

Our intangible assets consisted of the following as of March 31, 2003 and
December 31, 2002:

Amortization expense of our intangible assets was $0.6 million for both
the quarters ended March 31, 2003 and March 31, 2002. Estimated amortization
expense for the years ending December 31, 2003, 2004, 2005, 2006 and 2007 is
$1.3 million, less than $0.1 million, $0 and $0 and $0, respectively.

|                            |                                    |       |                |                     |   |        |  |                      |       |                         |  |                |       |             |  |   |       |       |  |   |       | 
|--------------------------- | ---------------------------------- | ----- | -------------- | ------------------- | - | ------ |  | -------------------- | ----- | ----------------------- |  | -------------- | ----- | ----------- |  | - | ----- | ----- |  | - | ----- | 
|                            |                                    |       |                |                     |   |        |  | As of March 31, 2003 |       | As of December 31, 2002
|                            |                                    |       |                |                     |   |        |  |                      |       |                        
|                            |                                    |       |                |                     |   |        |  | (in 000s)           |       | (in 000s)             
|                           
|                            |                                    |       |                |                     |   |        |  | Gross Carrying       |       | Accumulated             |  | Gross Carrying |       | Accumulated
|                            |                                    |       |                | Amortization Period |   | Amount |  | Amortization         |       | Amount                  |  | Amortization  
|                            |                                    |       |                |                     |   |        |  |                      |       |                         |  |               
|Amortized Intangible Assets |                                    |       |                |                     |   |        |  |                      |       |                         |  |                |       |             |  |   |       |       |  |  
|                            | Realtor Network                    |       | 3 years        |                     | $ | 6,472  |  |                      | $     | 5,755                   |  |                | $     | 6,472       |  |   | $     | 5,220 | 
|                            | Affinity program partner contracts |       | 2 - 3.75 years |                     |   | 544    |  |                      |       | 518                     |  |                |       | 544         |  |   |       | 466   | 
|                            |                                    |       |                |                     |   |        |  |                      |       |                         |  |                |       |             |  |   |       |       |  |  
|                            |                                    | Total |                |                     |   |        |  | $                    | 7,016 |                         |  | $              | 6,273 |             |  | $ | 7,016 |       |  | $ | 5,686 | 
|                            |                                    |       |                |                     |   |        |  |                      |       |                         |  |                |       |             |  |   |       |       |  |  

Revenue Recognition

Exchange:

Our Lending Exchange revenue principally represents transmission fees and
closed-loan fees paid by Lenders that received a transmitted loan request or
closed a loan for a consumer that originated through our website,
www.lendingtree.com. Transmission fees are recognized at the time
qualification forms are transmitted, while closed-loan

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fees are recognized at the time the Lender reports the closed loan to us, which may be several months
after the qualification form is transmitted.

Additionally, we earn revenue through a network of real estate brokers who
compensate us for real estate transactions that close with consumers that were
referred to them through our Exchange or our clients website. Revenue earned
through our network of real estate brokers is recognized upon notification by
the broker that a real estate transaction has closed.

We also derive Lending and Realty Exchange revenue from loan requests and
realty referrals that are received through private-label or co-branded websites
of other businesses that are enabled by our Lend-X technology. If these
requests are successfully transmitted to or closed by one of the Lenders or
realtors on our exchange, we earn fees as described above.

Other:

Our Other revenue consists primarily of revenue generated from our Lend-X
technology. This revenue is related primarily to hosting, licensing access to
and modifying our proprietary software for use by Lenders and other third
parties.

Our typical Lend-X technology arrangement involves licensing access to and
hosting our software for use by third parties. These arrangements typically
include implementation, consulting and/or other services bundled together with
the access and hosting fees. In accordance with SAB No. 101, the revenue for
the entire arrangement is deferred and recognized over the longer of the term
of the related contract or the expected service period. Our hosting
arrangements typically do not permit customers to take possession of our
software.

Revenue from arrangements involving only consulting or other services
(that is, those services that are not bundled with access or hosting services)
is recognized as the services are performed. Maintenance is recognized ratably
over the longer of the term of the underlying agreement or the expected service
period. Maintenance includes technical support and updates and upgrades to our
software.

When a contractual arrangement requires us to provide services for
significant implementation, customization or modification of the software or
when the customer considers these services essential to the functionality of
the software product, both the software fees and consulting services revenue
are recognized in accordance with the provisions of Statement of Position
(SOP) 81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts. We recognize revenue from these arrangements using
the percentage-of-completion method primarily based on labor hour inputs.
Therefore, during the implementation period, both the software fee and the
consulting service revenue are recognized as work progresses.

Losses, if any, are recognized when identified.

Advertising Expenses

Advertising expenses consist of certain direct expenses, including
television, radio and affiliate and partner marketing fees, as well as certain
indirect expenses, such as agency fees and production costs. We expense
advertising costs as incurred. For the quarters ended March 31, 2003 and 2002,
advertising expenses were $16.4 million and $9.5 million, respectively.

Incentive Compensation

Under our incentive compensation plan, employees can earn a bonus in
addition to their salary based on achievement of various financial and
operational performance factors or other specific goals. The actual bonus
formula may vary by individual and the goals are not the same from year to
year. During the year, we make monthly estimates of the amount of the bonus
each eligible employee has earned based on actual and forecasted levels of
Company achievement relative to pre-established goals and historical averages
of personal performance. These monthly estimates are accrued with a charge to
operating income for that period. The awards are typically paid to the
employee following the completion of a year.

Stock-Based Compensation

We account for the effect of our stock-based compensation plans for
employees under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, (SFAS No. 123) using the optional
intrinsic value method. The intrinsic value method results in compensation cost
equal to the excess of the fair value of the stock over

10



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##### 



the exercise or purchase price at the date of award. Such compensation costs (if any) are
recorded over the vesting period of the respective option and presented in the
consolidated statement of operations as a cost of revenue or operating expense,
consistent with where the optionees compensation is recorded. In contrast,
the fair value approach results in compensation cost using an option-pricing
model that takes into account the fair value at the grant date, the volatility
of our stock price, the exercise price, the expected life of the award, the
expected dividends, and the risk-free interest rate expected over the life of
the award. We account for the effect of stock-based compensation for
non-employees under SFAS No. 123, using the fair value approach. The pro forma
income statement effect of our stock-based compensation plans as if we had
adopted the fair value approach is as follows:

|                                                                |  |                       |        |      |  |   |        |  
|--------------------------------------------------------------- |  | --------------------- | ------ | ---- |  | - | ------ | -
|                                                                |  | For the Quarter Ended
|                                                                |  | March 31,            
|                                                                |  | 2003                  |        | 2002
|                                                                |  |                       |        |     
|Net income (loss)                                               |  | $                     | 5,757  |      |  | $ | (712   | )
|Dividends and accretion on preferred stock                      |  |                       | (625   | )    |  |   | (2,129 | )
|                                                                |  |                       |        |      |  |   |        |  
|Net income (loss) attributable to common shareholders           |  |                       | 5,132  |      |  |   | (2,841 | )
|                                                                |  |                       |        |      |  |   |        |  
|Pro forma adjustment for stock compensation expense             |  |                       | (2,404 | )    |  |   | (1,606 | )
|                                                                |  |                       |        |      |  |   |        |  
|Pro forma net income (loss) attributable to common
shareholders |  | $                     | 2,728  |      |  | $ | (4,447 | )
|                                                                |  |                       |        |      |  |   |        |  
|Net income (loss) per common share  basic                      |  | $                     | 0.23   |      |  | $ | (0.15  | )
|Pro forma adjustment for stock compensation expense             |  |                       | (0.11  | )    |  |   | (0.08  | )
|                                                                |  |                       |        |      |  |   |        |  
|Pro forma net income (loss) per common share  basic            |  | $                     | 0.12   |      |  | $ | (0.23  | )
|                                                                |  |                       |        |      |  |   |        |  
|Net income (loss) per common share  diluted                    |  | $                     | 0.18   |      |  | $ | (0.15  | )
|Pro forma adjustment for stock compensation expense             |  | $                     | (0.07  | )    |  |   | (0.08  | )
|                                                                |  |                       |        |      |  |   |        |  
|Pro forma net income (loss) per common share  diluted          |  | $                     | 0.10   |      |  | $ | (0.23  | )
|                                                                |  |                       |        |      |  |   |        |  

Supplemental Cash Flow Information

In both the quarters ended March 31, 2003 and 2002, we paid interest of
less than $0.1 million and paid no income taxes during those periods due to
carryforward tax losses applicable for those periods.

A supplemental schedule of non-cash financing and investing activities
follows (in thousands):

|                                                                          |  |                       |     |      |  |   |       | 
|------------------------------------------------------------------------- |  | --------------------- | --- | ---- |  | - | ----- | 
|                                                                          |  | For the Quarter Ended
|                                                                          |  | March 31,            
|                                                                          |  | 2003                  |     | 2002
|                                                                          |  |                       |     |     
|Conversion of preferred stock and accumulated
dividends into common stock |  | $                     |    |      |  | $ | 163   | 
|Accretion of mandatorily
redeemable preferred stock                       |  |                       | 170 |      |  |   | 169   | 
|Dividends on convertible preferred
stock                                  |  |                       |    |      |  |   | 1,960 | 
|Receivable from stock option exercises                                    |  |                       |    |      |  |   | 410   | 
|Acquisition of assets through capital leases                              |  |                       | 478 |      |  |   |      | 

11



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Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued FASB Statement No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities (FAS 149). FAS 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under FAS 133. The new guidance amends
FAS 133 for decisions made: (a) as part of the Derivatives Implementation
Group process that effectively required amendments to FAS 133, (b) in
connection with other Board projects dealing with financial instruments, and
(c) regarding implementation issues raised in relation to the application of
the definition of a derivative, particularly regarding the meaning of an
underlying and the characteristics of a derivative that contains financing
components. The amendments set forth in FAS 149 improve financial reporting by
requiring that contracts with comparable characteristics be accounted for
similarly. FAS 149 is generally effective for contracts entered into or
modified after June 30, 2003 (with a few exceptions) and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. We do not expect the impact of adopting this statement will
have a material impact on our results of operations, financial condition or
cash flows.

NOTE 4  Segment Data

Based on the nature of our products and services, the types of customers
and the regulatory environment, management has organized our business into
three operating segments: our lending exchange, real estate services and Lend-X
Technology.

Lending Exchange: primarily focused on enabling consumers to receive
multiple loan offers in response to a single, credit request and then compare,
review and accept the offer that best suits their needs. The exchange is also
focused on providing Lenders the ability to generate new business that meets
their specific underwriting criteria. Consumers can reach the exchange through
our website, www.lendingtree.com, by calling 1-800-555-TREE or through a
variety of private-label or co-branded websites enabled by Lend-X. Once the
consumer contacts us, he or she can request a variety of loan products.

Realty Services:through our real estate services exchange we provide
access to a network of real estate professionals that can assist a consumer in
buying or selling a home. In most states, real estate brokers participating in
our network pay us a fee when consumers requests that we transmit to them
result in a purchase or sale of a home.

Lend-X
Technology:our technology platform, Lend-XSM, is the technology
that powers our internet-based exchange. In the past, we had focused on
licensing the use of our Lend-X technology to other businesses, enabling them
to create either private-labeled or co-branded exchanges on their websites.
However, in 2002, we shifted the primary strategy for Lend-X to support the
growth of our Exchange by using our technology in arrangements with other
online businesses that transmit consumers to our exchange and Lenders who
respond to loan requests from our exchange.

Management regularly reviews the revenue, cost of revenue and gross
margins for these segments. No other operating expenses, measure of
profitability or assets or liabilities are consistently segregated or allocated
into these segments for regular review by management or in determining
allocations of resources. There are no inter-segment revenues.

The following tables present the revenue and gross margin for each of our
three segments for the quarters ended March 31, 2003 and 2002, as well as a
reconciliation to consolidated net income (loss).

12



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|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |        |   | 
|----------------------- | ---------------------- | - | ------ | ------------------------------------ |  | -------- | ----- | --------- |  | ---------- | ------ | ------------ |  | - | --- |  |  | - | ------ | ------ | - | 
|                        |                        |   |        | For the Quarter Ended March 31, 2003
|                        |                        |   |        |                                     
|                        |                        |   |        | Exchanges                            |  |          |       |           |  |            |        |              |  |   |     | 
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     | 
|                        |                        |   |        | Lending                              |  | Realty   |       | Total     |  | Lend-X     |        | Consolidated
|                        |                        |   |        | Exchange                             |  | Services |       | Exchanges |  | Technology |        |             
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |             
|Revenue                 |                        | $ | 36,011 |                                      |  | $        | 2,401 |           |  | $          | 38,412 |              |  | $ | 745 |  |  | $ | 39,157 |       
|Cost of revenue         |                        |   | 4,767  |                                      |  |          | 1,414 |           |  |            | 6,181  |              |  |   | 385 |  |  |   | 6,566  |       
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|Gross margin            |                        | $ | 31,244 |                                      |  | $        | 987   |           |  | $          | 32,231 |              |  | $ | 360 |  |  | $ | 32,591 |       
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|Reconciling items:      |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|                        | Operating expenses     |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   | $      | 26,891 |  
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|                        | Income from operations |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        | 5,700  |  
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|                        | Non-operating income   |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        | 123    |  
|                        | Non-operating expense  |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        | (66    | )
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       
|Consolidated net income |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  | $ | 5,757  |       
|                        |                        |   |        |                                      |  |          |       |           |  |            |        |              |  |   |     |  |  |   |        |       

|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |        |   | 
|--------------------- | --------------------- | - | ------ | ------------------------------------ |  | -------- | ----- | --------- |  | ---------- | ------ | ------------ |  | - | ----- |  |  | - | ------ | ------ | - | 
|                      |                       |   |        | For the Quarter Ended March 31, 2002
|                      |                       |   |        |                                     
|                      |                       |   |        | Exchanges                            |  |          |       |           |  |            |        |              |  |   |       | 
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       | 
|                      |                       |   |        | Lending                              |  | Realty   |       | Total     |  | Lend-X     |        | Consolidated
|                      |                       |   |        | Exchange                             |  | Services |       | Exchanges |  | Technology |        |             
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |             
|Revenue               |                       | $ | 18,319 |                                      |  | $        | 1,309 |           |  | $          | 19,628 |              |  | $ | 1,640 |  |  | $ | 21,268 |       
|Cost of Revenue       |                       |   | 2,380  |                                      |  |          | 869   |           |  |            | 3,249  |              |  |   | 320   |  |  |   | 3,569  |       
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|Gross margin          |                       | $ | 15,939 |                                      |  | $        | 440   |           |  | $          | 16,379 |              |  | $ | 1,320 |  |  | $ | 17,699 |       
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|Reconciling items:    |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|                      | Operating expenses    |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        | 18,418 |  
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|                      | Loss from operations  |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   | $      | (719   | )
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|                      | Non-operating income  |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        | 122    |  
|                      | Non-operating expense |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        | (115   | )
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       
|Consolidated net loss |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  | $ | (712   | )     
|                      |                       |   |        |                                      |  |          |       |           |  |            |        |              |  |   |       |  |  |   |        |       

NOTE 5-Financing Sources

Revolving Line of Credit

On July 13, 2001, we entered into a loan and security agreement and
revolving credit note with GE Capital Commercial Services, Inc. (GE). Under
these arrangements, GE has provided a two-year senior revolving credit facility
with a maximum availability of up to $15.0 million. Under this facility we
have pledged our trade accounts receivable and borrowings are limited to 90% of
our eligible accounts receivable and bear interest at the prime rate. We also
pay GE a fee equal to 0.115% of the eligible accounts receivable arising during
the term of the facility. As of March 31, 2003, we had eligible receivables of
approximately $7.4 million. Our eligible receivables at March 31, 2003
excluded approximately $12.8 million of invoices related to March receivables
that in the normal course of business were not transmitted to and approved by
GE until April 2003.

As of March 31, 2003, we had no borrowings outstanding under the GE credit
facility and we were in compliance with all covenants of the facility. Also as
of March 31, 2003, we had approximately $2.0 million of a receivable due from
GE representing funds collected on our accounts receivable through a lockbox
service managed by GE and not yet available for our use.

On April 30, 2003, we provided notice to GE of our election not to extend
the current term of this agreement beyond its stated expiration date of July
14, 2003.

Equity Line

In March 2001, we entered into a common stock purchase agreement with Paul
Revere Capital Partners, Ltd. for the potential future issuance and sale of our
common stock. This equity line agreement terminated in March 2003 and we never
made any drawdown requests under this arrangement.

13



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##### 



NOTE 6 -Equity-Based Compensation

As of March 31, 2003, we have approximately $0.2 million of deferred
equity-based compensation remaining on our consolidated balance sheet primarily
related to common stock options granted in late 1999 and early 2000 before our
initial public offering with exercise prices below fair market value. In both
the quarters ended March 31, 2003 and March 31, 2002, as a result of employees
leaving the company, we adjusted the balance of deferred compensation by less
than $0.1 million to reflect forfeited and expired options. We are amortizing
the deferred compensation to expense over the options four-year vesting
periods. For the quarter ended March 31, 2002, this amortization resulted in
compensation expense of approximately $0.2 million. In December 2002 we
accelerated the vesting period of some of these stock options that were granted
below fair market value. As a result, for the quarter ended March 31, 2003,
this amortization resulted in compensation expense of less than $0.1 million.

NOTE 7-Commitments and Contingencies

A covenant in one of our capital lease agreements requires that we
maintain a total cash balance of not less than $3.0 million throughout the term
of the lease. If our total cash balance falls below $3.0 million at the end of
a period, we will be required to collateralize the balance of the lease with
cash. As of March 31, 2003, we were in compliance with this covenant and the
balance of this lease was approximately $0.1 million.

On September 10, 2001, Block Financial Corporation, or Block, filed a complaint
in the United States District Court for the Western District of Missouri [Block
Financial Corporation v. LendingTree, Inc., Case Number 01-1007-CV-W-3],
against us, alleging that our financial card (credit card) qualification form
processing system infringes its U.S. Patent No. 6,014,645 entitled, Real-Time
Financial Card Application System. The complaint seeks both monetary damages
in the form of a reasonable royalty and injunctive relief. On November 19,
2001, we filed an answer to the complaint denying infringement of the Block
patent. We also filed a counterclaim against Block seeking a declaratory
judgment of non-infringement and invalidity of the Block patent. In addition,
we have filed a request with the United States Patent Office (USPTO) seeking
a reexamination of Blocks patent. Contemporaneous with that filing, we filed
a motion for a stay of all proceedings in the United States District Court for
the Western District of Missouri pending the reexamination of the Block patent
by the USPTO. On August 23, 2002, the USPTO issued an Order granting our
request for reexamination of the Block patent, finding that a substantial new
question of patentability affecting the claims of the Block patent has been
raised by the request. On or about April 30, 2003, the USPTO issued an initial
Office Action in which all claims of the Block patent were rejected as being
unpatentable view of the prior art cited in the reexamination request.
Additionally, pursuant to an order from the District Court, the action against
us is stayed until the reexamination proceeding is complete. We believe that
we have meritorious defenses to Blocks claim and we do not believe that this
action will have a material impact on our financial condition, cash flows or
results of operations.

We are involved in other litigation from time to time that is routine in
nature and incidental to the conduct of our business. We believe that the
outcome of any such litigation would not have a material adverse effect on our
financial condition, cash flows or results of operations.

NOTE 8-Net Income (Loss) per Common Share

We compute net income (loss) per common share in accordance with Statement
of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS No.
128).

As of March 31, 2003 we had outstanding stock options to acquire 6,322,725
shares of common stock and warrants to acquire 184,397 shares of common stock.
Additionally there were 5,996,676 shares of Series A Preferred Stock that were
convertible into 6,506,549 shares of common stock. At March 31, 2003,
participants in our Employee Stock Purchase Plan had contributed amounts that
entitled them to purchase approximately 25,000 shares of common stock.

As shown in the table below, basic net income (loss) per common share is
computed by dividing net income (loss) available to common shareholders by the
weighted average number of common shares outstanding.

Diluted net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares plus, to the
extent they are not anti-dilutive, the effect of outstanding preferred shares
using the if-converted method and outstanding stock options, shares issuable
pursuant to our employee stock purchase plan and warrants using the treasury
stock method.

The following are the components of the numerators and denominators used
to compute the basic and diluted net income (loss) per share amounts for the
periods presented.

14



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##### 



|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |        |        |        |        |  
|------------------------------------------ | ------------------------------------------ | -------------------------------- | -------------------------------------------------- | -------------------------------------------------- | ------ | ----------------------- | ------ | ------ | ------ | ------ | ------ | -
|                                           |                                            |                                  |                                                    |                                                    |        | Quarter Ended March 31,
|                                           |                                            |                                  |                                                    |                                                    |        |                        
|                                           |                                            |                                  |                                                    |                                                    |        | 2003                    |        | 2002  
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  |                                                    |                                                    |        | (in thousands)         
|Numerator  Earnings Per Share  Basic:    |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  |                                                    | Net income (loss) available to common shareholders |        | $                       | 5,132  |        |        | $      | (2,841 | )
|Denominator  Earnings Per Share  Basic:  |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  |                                                    | Weighted average common shares outstanding         |        |                         | 22,662 |        |        |        | 19,372 |  
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|Earnings (loss) per share  Basic          |                                            | $                                | 0.23                                               |                                                    |        | $                       | (0.15  | )     
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|Numerator  Earnings Per Share  Diluted   |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  | Net income                                         |                                                    | $      | 5,757                   |        |        |        |        |       
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  | Net loss available to common shareholders          |                                                    |        |                         |        |        | $      | (2,841 | )     
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|Denominator  Earnings Per Share  Diluted |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           | Weighted average common shares outstanding |                                  |                                                    | 22,662                                             |        |                         |        | 19,372 |       
|                                           | Effect of dilutive securities:             |                                  |                                                    |                                                    |        |                         |        |        |       
|                                           |                                            |                                  | Options                                            |                                                    |        | 3,011                   |        |        |        |       |       
|                                           |                                            |                                  | Warrants                                           |                                                    |        | 88                      |        |        |        |       |       
|                                           |                                            |                                  | Employee stock purchase plan                       |                                                    |        | 25                      |        |        |        |       |       
|                                           |                                            |                                  | Mandatorily redeemable convertible preferred stock |                                                    |        | 6,507                   |        |        |        |       |       
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            | Adjusted weighted average shares |                                                    |                                                    | 32,293 |                         |        |        | 19,372 |       
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       
|Earnings (loss) per share  Diluted        |                                            | $                                | 0.18                                               |                                                    |        | $                       | (0.15  | )     
|                                           |                                            |                                  |                                                    |                                                    |        |                         |        |       

For the periods presented in the following table, the options and warrants
listed are excluded from the calculations of diluted earnings per share because
the exercise price of such options and warrants exceeded the average market
price of our common stock for the related period.

|                                         |  |                        |     |      |  |  |     | 
|---------------------------------------- |  | ---------------------- | --- | ---- |  |  | --- | 
|                                         |  | Quarter
EndedMarch 31,
|Out-of-the-money potential common shares |  | 2003                   |     | 2002
|                                         |  |                        |     |     
|                                         |  | (in thousands)        
|Out-of-the-money stock options           |  |                        | 872 |      |  |  | 724 | 
|Out-of-the-money warrants                |  |                        |    |      |  |  | 127 | 

For the periods presented in the following table, the antidilutive
potential common shares listed are excluded from the calculations of diluted
earnings per share because their inclusion would be antidilutive.

15



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##### 



|                                                                 |                                      |  |                |  |      |  |       |  | 
|---------------------------------------------------------------- | ------------------------------------ |  | -------------- |  | ---- |  | ----- |  | 
|                                                                 |                                      |  | Quarter Ended 
|                                                                 |                                      |  | March 31,     
|                                                                 |                                      |  | 2003           |  | 2002
|                                                                 |                                      |  |                |  |     
|                                                                 |                                      |  | (in thousands)
|                                                                 | Antidilutive potential common shares |  |                |  |      |  |       |  | 
|Options, treasury stock method                                   |                                      |  |               |  |      |  | 2,380 | 
|Warrants, treasury stock method                                  |                                      |  |               |  |      |  | 356   | 
|Employee stock purchase plan, treasury stock method              |                                      |  |               |  |      |  | 42    | 
|Mandatorily redeemable convertible preferred stock,
if converted |                                      |  |               |  |      |  | 7,271 | 

NOTE 9  Subsequent Event

On May 5, 2003 we announced that we had entered into an Agreement and Plan
of Merger (the Merger Agreement) with USA Interactive, a Delaware corporation
(USA), and Forest Merger Corporation, a Delaware corporation and wholly-owned
subsidiary of USA (Merger Sub). Pursuant to the terms and conditions of the
Merger Agreement, Merger Sub will be merged with and into LendingTree, with
LendingTree being the surviving corporation and becoming a wholly-owned
subsidiary of USA (the Merger).

Upon consummation of the Merger, our outstanding securities will be
converted into USA securities as follows:



| |  |  | Each outstanding share of our common stock will be converted into
0.6199 of a share of USA common stock.                                                                                                                                                                                      
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Each outstanding share of our Series A Preferred Stock will be
converted into the number of shares of USA common stock into which
such share of Series A Preferred Stock would have been converted into
share of LendingTree common stock immediately before the effective
time of the Merger.
|
| |  |  | Outstanding options and warrants to purchase our common stock
will be converted into options and warrants to purchase USA common
stock.                                                                                                                                                       

Based on the closing price of USAs common stock on May 5, 2003, the
Merger consideration per share of our common stock is valued at approximately
$21.14.

In connection with the execution of the Merger Agreement, certain
stockholders holding shares of our stock representing 31.5% of the votes
entitled to be cast on approval of the Merger have agreed to vote all shares of
common stock and Series A Preferred Stock they own in favor of the Merger.

16



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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

Overview

LendingTree, Inc. was incorporated in the state of Delaware on June 7,
1996 and commenced nationwide operations on July 1, 1998.

We are an online exchange empowering consumers, Lenders, REALTORS® and
related service providers with convenience, choice and value. Through our
exchange, which can be accessed online at www.lendingtree.com or by calling us
directly at 1-800-555-TREE, consumers can access a nationwide network of over
200 banks, lenders and loan brokers (collectively, Lenders) and approximately
650 real estate brokerages representing more than 9,000 agents to obtain loan
offers or the services of a real estate agent. We attract consumers to our
exchange through various forms of advertising and through arrangements with
both online and offline partners.

Consumers seeking loan products begin the LendingTree process by
completing a simple online credit request (which we refer to as a
qualification form). Consumers can also call us directly at 1-800-555-TREE
and we will complete the qualification form based on their instructions and
answers to questions. After the qualification form is complete, our Lend-X
technology automatically retrieves the credit score for the particular
consumer. The consumers data and credit scores are then automatically
compared to the underwriting criteria of the Lenders participating on our
exchange. Qualified consumers can receive multiple loan offers in response to
a single credit request and then compare, review, and accept the offer that
best suits their needs.

Lenders on our exchange can generate new business that meets their
specific underwriting criteria at a lower cost of acquisition than traditional
marketing channels. Our lending exchange encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We earn revenue from the Lenders on our exchange
that pay us fees for qualification forms that meet their underwriting criteria
and are transmitted to them (transmission fees). Since a qualification form
can be transmitted to more than one Lender, we may generate multiple
transmission fees for the same form. We also earn revenue for loans that the
Lenders on our exchange close with consumers that we transmitted to them
(closed-loan fees).

Consumers interested in working with a real estate agent to buy or sell a
home can access an online form through our exchange at www.lendingtree.com or
through one of the websites of participating membership programs, such as
Costco, Delta Skymiles, Continental, United Airlines, USAirways, Northwest
Airlines and American Express and Priority Club. Based on the information
entered by the consumer, our system automatically provides the consumer with a
choice of references to REALTORS® from our nationwide network and also forwards
the consumers information to the chosen real estate agents desktop via our
proprietary web-based technology. If the two parties agree to work together,
the transaction is completed locally. Consumers closing a transaction with a
REALTOR® on our exchange are eligible for rebates and promotional incentives.
REALTORS® are able to efficiently access new, highly qualified potential
customers.

We earn fees from real estate brokers that pay us when consumers requests
that we transmit to them result in a purchase or sale of a home (realty
services fees).

Our
technology platform, Lend-XSM, is the technology that powers our
internet-based exchange. In the past, we have also licensed the use of our
Lend-X technology to other businesses and have enabled them to create either
private-labeled or co-branded exchanges on their websites. However, in 2002,
we shifted the primary strategy for Lend-X to support the growth of our
exchange by using our technology in arrangements with our Lenders and other
online businesses that transmit consumers to our exchange and Lenders who
respond to loan requests from our exchange.

Recent Events

On May 5, 2003 we announced that we had entered into an Agreement and Plan
of Merger (the Merger Agreement) with USA Interactive, a Delaware corporation
(USA), and Forest Merger Corporation, a Delaware corporation and wholly-owned
subsidiary of USA (Merger Sub). Pursuant to the terms and conditions of the
Merger Agreement, Merger Sub will be merged with and into LendingTree, with
LendingTree being the surviving corporation and becoming a wholly-owned
subsidiary of USA (the Merger).

Upon consummation of the Merger, our outstanding securities will be
converted into USA securities as follows:



| |  |  | Each outstanding share of our common stock will be converted into
0.6199 of a share of USA common stock.
| | - |  | --------------------------------------------------------------------------------------------------------

17



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##### 





| |  |  | Each outstanding share of our Series A Preferred Stock will be
converted into the number of shares of USA common stock into which
such share of Series A Preferred Stock would have been converted into
share of LendingTree common stock immediately before the effective
time of the Merger.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Outstanding options and warrants to purchase our common stock
will be converted into options and warrants to purchase USA common
stock.                                                                                                                                                       

Based on the closing price of USAs common stock on May 5, 2003, the
Merger consideration per share of our common stock is valued at approximately
$21.14.

In connection with the execution of the Merger Agreement, stockholders
holding shares of our stock representing 31.5% of the votes entitled to be cast
on approval of the Merger have agreed to vote all shares of common stock and
Series A Preferred Stock they own in favor of the Merger.

18

Results of OperationsQuarter Ended March 31, 2003 Compared to Quarter Ended March 31, 2002

Consolidated Results

Revenue

For the quarter ended March 31, 2003, consolidated revenue was
approximately $39.2 million compared with approximately $21.3 million for the
quarter ended March 31, 2002, an increase of 84%.

Our Lending Exchange segment accounted for approximately 92% of our
consolidated revenue in the quarter ended March 31, 2003 and $17.7 million of
the overall $17.9 million increase in consolidated revenue over the quarter
ended March 31, 2002. Our Realty Services segment accounted for 6% of our
consolidated revenue in the quarter ended December 31, 2002 and $1.1 million of
the increase in consolidated revenue over the quarter ended March 31, 2002.
Our Lend-X technology segment revenue was 2% of our consolidated revenue in the
quarter ended March 31, 2003 and was $0.9 million lower than in the quarter
ended March 31, 2002. See details by segment below.

Gross Margin

For the quarter ended March 31, 2003, the consolidated gross margin was
$32.6 million, or 83.2% of consolidated revenue, compared to $17.7 million, or
83.2% of revenue, for the quarter ended March 31, 2002. This was an increase
of $14.9 million, or 84%.

Our Lending Exchange segment contributed to $15.3 million of the overall
increase in gross margin from the quarter ended March 31, 2002. We attribute
this increase in gross margin primarily to the scalability of our Lending
Exchange business model. Our Realty Services segment added approximately $0.5
million of the increase. Partially offsetting these increases in gross margin
was our Lend-X technology segment, which had a decrease in gross margin of
approximately $0.9 million due primarily to the decline in revenue noted above.

Lending Exchange Segment Results

Revenue

We earn Lending Exchange revenue primarily from Lenders on our network
that pay us fees for qualification forms that are transmitted to them (transmit
fees) and for loans they make to consumers that we transmitted to them
(closed-loan fees). A consumers discrete qualification form can be
transmitted to up to four Lenders. In this way, we generate multiple
transmission fees for the same qualification form and increase the likelihood
that the consumer will close a loan with one of the Lenders on our exchange.

For the quarter ended March 31, 2003, Lending Exchange revenue increased
approximately $17.7 million, or almost 100%, to $36.0 million from $18.3
million in the quarter ended March 31, 2002. The table below illustrates
several key components of our Lending Exchange revenue for both periods.

|                        |                        |         |                              |        |                              |        |              |              |              |         |           |        |  |        |    |              |              |   |              |        |           |  |     |     |  |  |     |     |  |  |    |    | 
|----------------------- | ---------------------- | ------- | ---------------------------- | ------ | ---------------------------- | ------ | ------------ | ------------ | ------------ | ------- | --------- | ------ |  | ------ | -- | ------------ | ------------ | - | ------------ | ------ | --------- |  | --- | --- |  |  | --- | --- |  |  | -- | -- | 
|                        |                        |         | Quarter Ended March 31, 2003 |        | Quarter Ended March 31, 2002
|                        |                        |         |                              |        |                             
|                        |                        |         | (in thousands)              
|                        |                        |         |                              |        |                              |        | Discrete     |              | Multiple     |         | Number    |        |  |        |    |              | Discrete     |   | Multiple     |        | Number   
|                        |                        |         |                              |        |                              |        | Transmission |              | Transmission |         | of Closed |        |  |        |    |              | Transmission |   | Transmission |        | of Closed
|Lending Exchange        |                        | Revenue |                              | Volume |                              | Volume |              | Transactions |              | Revenue |           | Volume |  | Volume |    | Transactions
|                        |                        |         |                              |        |                              |        |              |              |              |         |           |        |  |        |    |             
|Mortgage                |                        | $       | 25,504                       |        |                              |        | 352          |              |              |         | 1,000     |        |  |        | 33 |              |              | $ | 9,689        |        |           |  | 143 |     |  |  | 395 |     |  |  | 13 |   
|Home Equity             |                        |         | 7,470                        |        |                              |        | 100          |              |              |         | 315       |        |  |        | 16 |              |              |   | 6,485        |        |           |  | 75  |     |  |  | 216 |     |  |  | 16 |   
|Auto                    |                        |         | 1,390                        |        |                              |        | 121          |              |              |         | 282       |        |  |        | 12 |              |              |   | 924          |        |           |  | 76  |     |  |  | 180 |     |  |  | 8  |   
|Personal, Credit Card   |                        |         | 813                          |        |                              |        | 88           |              |              |         | 231       |        |  |        | 13 |              |              |   | 667          |        |           |  | 88  |     |  |  | 178 |     |  |  | 20 |   
|All Other Exchange Fees |                        |         | 834                          |        |                              |        |              |              |              |         |           |        |  |        |    |              |              |   | 554          |        |           |  |     |     |  |  |     |     |  |  |    |   
|                        |                        |         |                              |        |                              |        |              |              |              |         |           |        |  |        |    |              |              |   |              |        |           |  |     |     |  |  |     |     |  |  |    |   
|                        | Total Lending Exchange |         | $                            | 36,011 |                              |        |              | 661          |              |         |           | 1,828  |  |        |    | 74           |              |   | $            | 18,319 |           |  |     | 382 |  |  |     | 969 |  |  |    | 57 | 
|                        |                        |         |                              |        |                              |        |              |              |              |         |           |        |  |        |    |              |              |   |              |        |           |  |     |     |  |  |     |     |  |  |    |   

The growth in mortgage revenue during the quarter ended March 31, 2003 was
$15.8 million with purchase mortgage (initial mortgage on property) revenue
increasing 36% and refinance mortgage revenue increasing over 200% over the
same period in 2002.

19



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There are many factors that can influence consumer loan demand, such as
increased brand awareness, advertising spending and, as discussed more fully
below, initiatives we undertake to grow the business and increase market share.
However, we believe the historical low levels of mortgage interest rates have
also influenced consumers to apply for and close purchase mortgages or to
refinance their existing mortgages, thereby benefiting our business. We
anticipate that in periods of higher interest rates that refinance loan demand
will decrease and Lenders on our exchange will have more time and capacity
available to serve consumers and as a result we expect that we will experience
increases in our purchase mortgage transmit rates and multiple transmits of
qualification forms. In a rising interest rate environment, we also expect a
shift to more home equity loan demand from consumers and potentially continued
improvements in our closing rates.

We also believe that initiatives we undertake contribute to improve our
results. Some of our initiatives are ongoing and are aimed at improving the
number of multiple transmissions of a qualification form and at increasing the
rate at which a qualification form results in a closed loan. Other initiatives
are implemented from time to time, such as in periods of rising interest rates
or when mortgage refinance volume is expected to decline, and are aimed at
increasing consumer visits to our exchange. Some of our initiatives are
described below:



| |  |  | We increase capacity. We add to the number and variety of Lenders on
our exchange, thus increasing capacity and our ability to handle
different types of loan requests. At March 31, 2003 we had 206
participating Lenders on our exchange, compared to 163 participating
Lenders at March 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We improve Lender efficiency. We offer advisory services and several
tools to enable our Lenders to process qualification forms and close
loans more efficiently. These tools include benchmark and best practices
studies and automation tools, including our ADE feature in our Lend-X
technology offering. This ADE feature allows Lenders to provide
automated responses to pre-qualification requests. As of March 31,
2003, we had 53 Lenders utilizing our ADE compared to 21 Lenders as of
March 31, 2002. In addition to the increased utilization of our ADE
feature, we also have seen an increase in the number of Lenders
utilizing their own version of automated decisioning. We have also held
several best-practices seminars and benchmark studies for our Lenders,
both of which have the objective of coaching Lenders on the best ways to
increase their capacity and close more loans through our channel.
|
| |  |  | We enhance the opportunities for consumers and Lenders to close
transactions. We have made arrangements with several of our Lenders to
participate in our Choice Model program. Under the Choice Model, when
a consumer receives fewer than four offers, we run the consumers
request through a set of broader filters that the participating Lenders
have agreed upon and attempt to obtain the consumer up to four offers.
The Choice Model gives the Lenders the opportunity to participate in
under-served markets at a reduced transmit fee and gives the consumer a
better experience and an improved chance at closing a loan.                                                                                                                                                                                                                                                                                        
|
| |  |  | We also undertake initiatives directed to the consumer such as the
following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| | 1. |  | We improve the opportunity of our consumer to receive multiple
loan offers. In 2002 we began offering a more dynamic filtering
process. This process provides the consumer an opportunity to change
their down payment or loan value on their mortgage or home equity
qualification form in an effort to successfully pass the filters of
more Lenders in an attempt to receive up to four loan offers.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | We incent the consumer to close a transaction. From time to
time we provide consumers with incentives or rewards, such as cash,
gift certificates and airline miles, for using our services.                                                                                                                                                                                                           
|
| | 3. |  | We expand or alter our marketing efforts. From time to time we
increase or decrease our marketing spending relative to promoting
specific loan products and our realty services products or promoting
our telephone channel. We also utilize direct mail marketing and
other programs aimed at increasing consumer volume from a variety of
supply sources.                                            

Mortgage Revenue

As a result of both our initiatives and the continued low interest rate
environment, mortgage revenue increased 163% to $25.5 million in the quarter
ended March 31, 2003 from $9.7 million in the quarter ended March 31, 2002, an
increase of $15.8 million. More specifically, the increase in mortgage revenue
can be explained as follows:



| |  |  | The number of closed mortgage transactions increased 154% to
approximately 33,000 closed transactions in the quarter ended March 31,
2003 from approximately 13,000 in 2002. This increase of 20,000
additional closed-loan transactions in the first quarter of 2003 was
principally from closed refinance mortgage transactions in the period
and contributed approximately $8.5 million to the overall increase in
mortgage revenue. We have also experienced increases in our average
closing rate for mortgages. For the quarter ended March 31, 2003 the
average close rate was 10.3% and for the quarter ended March 31, 2002
the average close rate was 7.2%.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Multiple transmissions of mortgage qualification forms increased by
approximately 600,000, principally all from refinance qualification
forms, in the quarter ended March 31, 2003 from the quarter ended March
31,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



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| |  |  | 2002 and resulted in an increase in revenue of $5.3 million. We
experienced an over 100% increase in completed qualification forms by
consumers and we were able to convert more of that volume into revenue
due to the increase in Lenders and the resulting increase in capacity
for our exchange in 2003. The percentage of our completed
qualification forms transmitted to our Lenders, increased from 71% in
the quarter ended March 31, 2002 to 79% in the quarter ended March 31,
2003. Additionally, on average, we were able to transmit each discrete
mortgage qualification form 2.84 times in the quarter ended March 31,
2003 compared to 2.76 times in the quarter ended March 31, 2002.
Assuming our close rates remain at or near current levels, we
anticipate that the increases in multiple transmissions in the first
quarter of 2003 will also benefit our closed loan revenue for mortgages
in the second quarter of 2003.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We experienced a 5% increase in our average closed-loan fee in the
quarter ended March 31, 2003. Our average closed loan fee increased
from $471 in the quarter ended March 31, 2002 to $493 in the same
period of 2003. This resulted in an increase in revenue of
approximately $0.7 million. In January 2003 we also increased our
standard transmit fee from $9.00 per transmit to $10.00 per transmit.
This increased our average revenue per transmission and contributed
approximately $0.6 million to the increase in mortgage revenue for the
quarter ended March 31, 2003.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $0.7 million of the increase is related to fees that
we earn from lending transactions involving arrangements with
third-party membership programs, such as Delta Skymiles, USAirways
Dividend Miles, Continental Airline One Pass Miles, United Airlines
Mileage Plus, Priority Club Rewards, American Express Membership
Awards, Northwest Airlines World Perks and Costco Wholesale, which
allow us to provide lending services to their members. We transmit the
qualification form completed by the third-party member to Lenders and
earn closed loan fees for our services from the Lender for each loan
that closes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Home Equity Revenue

Home equity revenue increased approximately $1.0 million, or 15%, to $7.5
million in the quarter ended March 31, 2003 from $6.5 million in the same
period of 2002. We believe this increase is attributable, in part, to higher
consumer demand for home equity loans reflecting the success of our home equity
focused marketing campaigns and the underlying low interest rates for these
types of loans. In the quarter ending March 31, 2003, we experienced a 17%
increase in the number of completed home equity qualification forms over the
same period in 2002.

Not only did we have an increase in completed qualification forms, but
because of increased Lender capacity and other initiatives, we were also able
to increase the percentage of completed home equity qualification forms that we
transmit to Lenders from about 74% to 84% and have been able to increase the
average number of Lenders to whom we transmit each discrete home equity
qualification form from approximately 2.88 in the quarter ending March 31, 2002
to 3.15 in the same period of 2003.

As a result of the higher level of completed qualification forms, the
improved transmit rate and the higher average number of transmits per
qualification form, our multiple transmissions of home equity qualification
forms increased by approximately 46%, or by approximately 99,000 transmissions,
in the quarter ended March 31, 2003 compared to the same period of 2002, and
resulted in an increase of home equity revenue of $0.9 million

The remaining $0.1 million increase in home equity revenue is due to the
January 2003 increase in our standard transmit fee from $9.00 per transmit to
$10.00 per transmit.

Auto Revenue

Fees from auto loan transactions accounted for approximately $1.4 million,
or 4% of our Lending Exchange revenue, in the quarter ended March 31, 2003 and
approximately $0.9 million, or 5%, in the quarter ended March 31, 2002. This
was an increase of approximately $0.5 million from period to period. This
increase is a result of 41% more closings in the quarter ended March 31, 2003
as compared to the quarter ended March 31, 2002. This increase in closings is
due to increased volume generated through new and expanded business
relationships with online portals and better Lender coverage of the auto loan
category resulting in a higher number of loan offers per consumer.

21



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##### 



Credit Card and Personal Revenue

Credit card and personal revenue accounted for approximately $0.8 million,
or 2% of our Lending Exchange revenue, in the quarter ended March 31, 2003 and
approximately $0.7 million, or 4%, in the quarter ended March 31, 2002. This
decrease was primarily due to lower revenue generated from our credit card
product reflecting a higher reluctance by credit card providers to accept
sub-prime qualification forms from higher risk customers. This has caused some
of our credit card providers to either tighten their filters, reducing the
volume of transmissions they receive from us, or leave our exchange altogether.

All Other Lending Exchange Revenue

All other Lending Exchange revenue, as shown in the table above, increased
to $0.8 million in the quarter ended March 31, 2003 compared to $0.6 million in
the quarter ended March 31, 2002. The increase can be attributed to new
arrangements with other online businesses that offer various complementary
products to our customers through their websites, including credit reports and
related services, as well as home security services and insurance. Due to the
overall increase in volume of consumers on our website, we have also seen more
people using these services and therefore an increase in the fees we earn from
the providers of such services.

Cost of Revenue and Gross Margin

For the quarter ended March 31, 2003 the gross margin for the Lending
Exchange segment was $31.2 million, or 86.8% of Lending Exchange revenue. This
is a $15.3 million improvement from the same period in 2002, in which we had a
gross margin of $15.9 million, or 87.0% of Lending Exchange revenue.

Lending Exchange costs of revenue increased by $2.4 million, or
approximately 100%, to $4.8 million in the quarter ended March 31, 2003 from
$2.4 million in the quarter ended March 31, 2002. These costs grew
proportionately with our revenue growth during the same time period.

Our costs of revenue primarily include salary and benefit costs of our
customer care center, Lender implementation and technology support groups,
credit scoring fees, consumer incentive costs and the website network hosting
fees.

The increase in cost of revenue includes a $1.1 million increase in our
employment expenses (employees and contractors) primarily related to increases
in our customer care department to help better manage and direct our consumer
call and e-mail volume. Late in 2002, we also began promoting and expanding
our telephone channel for consumers who may not want to use the internet to
complete a loan request. This has resulted in an increase in our overall call
volume as well.

We also experienced an increase in our promotional payments and gift
certificates to consumers who closed a loan through our Lending Exchange. This
increase is primarily due to incentives provided through arrangements with
certain third-party membership programs, such as Delta Skymiles, USAirways
Dividend Miles, Continental Airline One Pass Miles, United Airlines Mileage
Plus, Priority Club Rewards, Northwest Airlines World Perks and Costco
Wholesale. We have generated more volume through these programs in the quarter
ended March 31, 2003 and as such have had more related expense. From time to
time we have adjusted these incentives offered to consumers based on
evaluations of the responsiveness of consumers to them. Our spending on
consumer incentives and promotions increased by approximately $0.6 million to
$1.1 million in the quarter ended March 31, 2003 compared to $0.5 million in
the quarter ended March 31, 2002.

Additionally, during the first quarter of 2003, we changed the hosting of
our website from a third party to hosting of our website internally. As a
result of this change, we incurred approximately $0.4 million of non-recurring
expenses in the quarter ended March 31, 2003. These expenses were related to
terminating the agreement with our service provider, as well as expenses
incurred for a period of dual hosting and testing that will not be ongoing.

In addition, we experienced an increase in credit scoring fee expense, due
to higher overall qualification form volume in the quarter ended March 31, 2003
as compared to the same period of 2002.

Realty Services Segment Results

Revenue

We earn Realty Services revenue from real estate brokers participating in
our network. Participating brokers pay us a fee when consumers referred by us
purchase or sell a home with that broker.

22



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Realty Services revenue increased to $2.4 million in the quarter ended
March 31, 2003 from $1.3 million in the quarter ended March 31, 2002. This
$1.1 million increase is due to a higher number of closed transactions in the
year. The number of closed transactions for this segment increased 83% to
approximately 1,100 in the quarter ended March 31, 2003 from 600 in the quarter
ended March 31, 2002. This was primarily a function of a 77% increase in
Realty Services transmission volume and an improvement in the close rate, from
4.3% in the quarter ended March 31, 2002 to 7.3% in the quarter ended March 31,
2003. We have grown this business by expanding our training and best-practices
programs and by increasing our marketing efforts, including introducing a new
television advertisement for our realty services product. Further, we have
entered into arrangements with several new affinity groups or membership
programs to provide their members with benefits for using our services. We are
able to market our services directly to the members in these groups and provide
them with benefits that are affiliated with their membership such as airline
miles, store gift certificates or other incentives.

Cost of Revenue and Gross Margin

Realty Services gross margin and gross margin percentage improved in the
quarter ended March 31, 2003 from the same period of 2002. Gross margin was
$1.0 million, or 41.1% of Realty Services revenue, and $0.4 million, or 33.6%
of Realty Services revenue, in the quarters ended March 31, 2003 and 2002,
respectively.

Realty Services cost of revenue includes consumer incentive costs, salary
and benefit costs of our real estate network support staff and server costs.
Cost of revenue increased approximately $0.5 million, or approximately 63%,
during the quarter ended March 31, 2003 compared to the quarter ended March 31,
2002. This increase is due to an increase in the number of closed Realty
Services transactions that resulted in a higher number of incentives and
promotional payments made directly to consumers for using our services. During
this same period our Realty Services revenue increased by approximately 83%.

We have been able to improve our margins by decreasing the incentive
amounts offered to certain Realty Services consumers with many incentive offers
set at a fixed dollar amount. Accordingly, we anticipate that
consumer-incentive costs associated with our Realty Services segment will
continue to decrease as a percentage of revenue in the future.

Lend-X Technology Segment Results

Revenue

Lend-X technology revenue totaled $0.7 million, or 2% of our total revenue
for the quarter ended March 31, 2003, compared to $1.6 million, or 8% of total
revenue for the quarter ended March 31, 2002. In the second half of 2002, we
shifted our focus for Lend-X to facilitate the delivery of consumer demand to
our Lending and Realty Services Exchanges. We achieve this through using our
technology in arrangements with other online businesses that transmit consumers
to our exchanges.

Cost of Revenue and Gross Margin

For the quarter ended March 31, 2003, Lend-X technology gross margin was
$0.4 million, or 48.3% of Lend-X technology revenue, compared to $1.3 million,
or 80.5% of Lend-X technology revenue, for the quarter ended March 31, 2002.

Costs of revenue associated with Lend-X technology are employment costs
related to customizing and/or implementing Lend-X for third parties and ongoing
server costs related to hosting Lend-X for these companies. While we incurred
fewer employment costs related to customizing our software for our Lend-X
customers during the quarter ended March 31, 2003, we did experience an
increase in our server hosting expenses which led to a $0.1 million increase in
cost of revenue. This increase is related to the change in our server hosting
arrangement and the non-recurring server hosting expenses that were incurred
this quarter as was discussed above in the Lending Exchange Segment Results
discussion.

Consolidated Operating Expenses

Product Development

23



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Product development expense was approximately $1.0 million for the quarter
ended March 31, 2003 compared to $0.9 million for the quarter ended March 31,
2002. Product development costs consist of expenses incurred related to the
ongoing efforts to enhance and maintain the functionality of our exchange
technology and include compensation costs, server and other hardware costs.
The increase in expense is primarily due to our technology department incurring
more time on system maintenance and enhancement during the quarter ended March
31, 2003 versus customizing our software for customers in the same period in
2002.

Marketing and advertising

Marketing and advertising expenses of $18.1 million were approximately 46%
of our consolidated revenue in the quarter ended March 31, 2003 compared to
$10.7 million, or 50% of our consolidated revenue, in the quarter ended March
31, 2002. Although we had an overall increase of $7.4 million, or 69%, in
marketing and advertising expense in the quarter ending March 31, 2003 compared
to the same period of 2002, we were able to increase revenue by $17.9 million,
or 84%, during the same period.

In addition to the increases in revenue resulting from the low interest
rate environment, we attribute the decrease in marketing and advertising as a
percentage of revenue to a number of factors:



| |  |  | Improved brand awareness.We have seen continued improvements in
consumer awareness of LendingTree and we believe that this has increased
the number of consumers using our services.                                                                                                                                                                                                                                                                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Improved operating metrics. The substantial increases in revenue are
attributable to a number of factors, including improvements in our
closing rates, transmit rates and the impact of our pricing changes and
growth in average mortgage closed-loan fees as well as the overall low
interest rate environment.                                                                                                                                                                                
|
| |  |  | More product-focused advertising. We have adjusted our advertising mix
to further promote the mortgage and home equity products as well as our
realty services products. We continue to emphasize the home equity
product because it contributes the highest revenue-per-consumer and
therefore has the greatest impact on our marketing and advertising costs
as a percentage of revenue. We also expect home equity transactions to
grow at a faster rate than mortgage if interest rates rise.
|
| |  |  | New and expanded business relationships. We have also established new
and expanded business relationships with a number of online businesses
that focus on consumers that are more likely to have an interest in one
or more of our lending or realty related services.                                                                                                                                                                                                                          

The $7.4 million increase in marketing and advertising expenses in the
quarter ended March 31, 2003 as compared to the same period in 2002 is the
result of our continued investment in driving high value transactions to our
exchange. We incurred $3.1 million more marketing and advertising expense with
online strategic partners and for the costs of promoting our brand and services
within various third-party membership programs. We also spent $2.6 million
more for media costs such as cable television commercials, network radio and
internet-based advertisements. In addition, we spent $1.2 million more in
media production expenses. This was primarily related to the development of
new realty services advertisements as well as new spots for mortgage and home
equity and the promotion of our telephone channel. We also incurred $0.5
million more in direct-mail campaign spending.

Management intends to continue spending increased amounts on marketing and
advertising, using broadcast and cable television and network radio as our
primary advertising mediums. We will periodically evaluate and use mediums such
as direct mail and e-mail campaigns as a way to generate more consumer volume
to our site in a cost-effective manner. Additionally, from time to time we
will invest in new advertising production to ensure our brand messaging remains
fresh, compelling and relevant.

Sales, general and administrative

Sales, general and administrative expenses primarily include employment
expenses, facilities costs, depreciation and amortization, equity based
non-cash stock compensation charges and professional service fees.

For the quarter ended March 31, 2003 these expenses were $7.8 million, or
20% of consolidated revenue, compared to $6.9 million, or 32% of consolidated
revenue, in the quarter ended March 31, 2002. The decline in sales, general
and administrative expenses as a percentage of revenue is consistent with
managements expectations and future outlook. Sales, general and
administrative expenses are not expected to increase in proportion to our
expected future revenue growth as a result of the scalability of our business
model.

Sales, general and administrative expenses increased approximately $0.9
million in the quarter ended March 31, 2003 as compared to the same period of
2002. The primary driver of this increase was a $1.1 million increase in
incentive compensation expense from period to period. In the quarter ended
March 31, 2002, when our Board of Directors approved

24



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the 2001 bonuses, the bonus accrual. As a result of this change in estimate, we recorded a $0.6
million credit to our operating results in the first quarter of 2002.
Additionally, our estimated 2003 payout is more than we paid out in 2002 due to
an increase in the number of employees and our current forecast to
substantially exceed the new plan targets.

Facilities and related expenses increased approximately $0.2 million
primarily due to the move of our customer care group into a new facility.
Computer equipment expenses and software maintenance and support fees increased
approximately $0.2 million. In addition, professional service fees and
employee travel expenses increased approximately $0.2 million in the quarter
ended March 31, 2003 as compared to the same period of 2002.

Partially offsetting the above increases were amortization and
depreciation expenses that decreased quarter to quarter by approximately $0.7
million. This decrease was primarily due to the end of the amortization period
in July 2002 for some of the software and technology assets acquired from
another company in August 2000. In addition, in December 2002 we accelerated
the vesting period of certain of our stock options that were granted below fair
market value and as a result we recorded approximately $0.1 million less
deferred compensation amortization expense in the quarter ended March 31, 2003
as compared to the same period of 2002.

Interest and Other Non-Operating Income

Interest and other non-operating income consist of interest earned on cash
and cash equivalents and restricted cash, as well as other non-operating income
including late fees and penalties. Interest and other non-operating income was
approximately $0.1 million in both the quarters ended March 31, 2003 and 2002.

Interest Expense, Financing and Other Charges

Interest expense, financing and other charges were approximately $0.1
million for both quarters ended March 31, 2003 and 2002. This line item
consists of bank service charges, interest on capital leases and borrowings and
other expenses related to our credit facilities.

Dividends and Accretion of Series A Convertible Preferred Stock

The holders of our Series A Preferred Stock are entitled to receive
quarterly dividends on the Series A Preferred Stock equal to eight percent (8%)
per annum of the stated value per share payable at our option (i) in cash or
(ii) by increasing the stated value per share on the dividend payment date.
The stated value per share is the sum of the initial purchase price of $3.50
per share as cumulatively adjusted from time to time by accumulated dividends.
The stated value per share as of March 31, 2003 was approximately $3.80.

For the quarter ended March 31, 2003, we elected to pay the quarterly
dividends in cash. This resulted in dividend charges of $0.5 million while
incurring no additional fair value dividend charges for that period.

For the quarter ended March 31, 2002, we had elected to pay the quarterly
dividends by increasing the stated value per share of the Series A Preferred
Stock. As a result of these stated value dividends, for the quarter ended
March 31, 2002, we increased the carrying value of the Series A Preferred Stock
on our balance sheet by $0.6 million and recorded a dividend charge of the same
amount. We also recognized an additional $1.4 million of dividend charges
resulting from the excess of the fair value of the common stock that the 8%
dividends on the Series A Preferred Stock will convert into over the $3.50
conversion price that will be paid upon such conversion (or fair value dividend
charges).

We are required to redeem all Series A Preferred Stock shares remaining
outstanding on March 20, 2006 at a price of 105% of the then current value per
share. Accordingly, we are accreting the value of the Series A Preferred Stock
up to the redemption value of the shares using the effective interest method.
This is increasing the carrying value of the Series A Preferred Stock and the
charge is included in the computation of net income (loss) available to common
shareholders. In both the quarters ended March 31, 2003 and 2002, we recorded
approximately $0.2 million of accretion charges.

Beginning March 20, 2004, at our option, the shares of Series A Preferred
Stock will be redeemable for cash at a price per share equal to the applicable
percentage multiplied by the then current value per share. The applicable
percentage is initially 120% and declines to 105% on a quarterly basis over the
two-year period ending March 21, 2006. If we continue to pay quarterly cash
dividends, on March 20, 2004 the shares of Series A Preferred Stock will be
redeemable for cash at a price per share of $4.56 and will decline to a price
per share of $3.99 at March 21, 2006. Currently, and until redeemed, each
share of Series A Preferred Stock is convertible at the option of the holder at
any time into the number of shares of common stock as is determined by dividing
the current value per share by the conversion price of $3.50. The current
value

25



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##### 



per share is defined as the stated value per share (see above) plus
cumulative adjustments for dividends. At March 31, 2003, each share of Series
A Preferred Stock was convertible into 6,506,549 shares of common stock.

Factors That May Affect Our Results of Operations or Reported Results

In addition to the other information in this Form 10-Q, the following
factors should be considered in evaluating LendingTree. If any of the events
or circumstances described in the following risk factors actually occurs, our
business, financial condition or results of operations may suffer.

Estimates and Judgments Used in the Preparation of our Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
judgments that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. We base our estimates and judgments on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. On an ongoing basis we evaluate our estimates and refine our
judgments as actual results and experiences develop.

The significant accounting policies listed below, affect our estimates and
judgments in preparing the consolidated financial statements.

Specifically, these significant estimates affect our results of operations
and financial condition as follows:



| |  |  | Under our incentive compensation plan, employees can earn awards based
on achievement of various financial and operational performance factors
or other specific goals. The actual award formula may vary by individual
and the goals are not the same from year to year. During the year,
management makes monthly estimates of the amount of an award each
employee has earned based on levels of achievement relative to the goals
and performance factors. These monthly estimates are accrued with a
charge to operating income for that period. The awards are typically
paid to the employee following the completion of a year. Under our 2003
incentive compensation plan, employees can earn bonus awards based on a
combination of our achievement of certain revenue and earnings targets
for the year, managements discretion and individual achievement of
specified personal goals. As of March 31, 2003 we had $1.5 million
accrued and charged to operating income as incentive compensation expense
for the 2003 plan year estimated bonus payouts. For the first quarter of
2003, our results and forecasted results for the remainder of the year
are substantially above targeted levels. As an example of the impact
that changes in key variables relating to this estimate could have on our
financial results, we have calculated the following:
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If the companys actual results would have increased (or
decreased) 10% from the above-target revenue and earnings levels for
the year, the expected payout for the year would have increased (or
decreased) by approximately $0.2 million and our incentive
compensation charged to operating income for the three months ended
March 31, 2003 would have been less than $0.1 million higher (or
lower).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If the employees actually achieve 90% (or 70%) of their
individual performance goals instead of the 80% we have estimated,
the expected payout for the year would increase (or decrease) by
approximately $0.2 million and our incentive compensation charged to
operating income through March 31, 2003 would have been less than
$0.1 million higher (or lower).                                       



| |  |  | At March 31, 2003 we have $0.7 million of intangible assets, net of
accumulated amortization on our balance sheet related to the real
estate agent network and affinity program partner contracts we
acquired from HomeSpace, Inc. in August 2000. We have been amortizing
these assets over their estimated useful lives ranging from 2 to 3.75
years. We estimated the useful lives of these assets considering our
expected use of the assets, technological advances and the competitive
environment.                                                                                                                                                                                                                                                                                                            
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | For Lenders joining our exchange, we charge an initial set-up and
implementation fee, generally ranging from $5,000 to $25,000. For
these arrangements we estimate the expected life of that relationship
under the contract terms and recognize the applicable revenue and
costs over that period if it is longer than the stated term of the
related contract. Currently, our estimates of the expected term of
the initial Lender arrangement are 5 years. In the quarter ended
March 31, 2003, we adjusted our expected term from 2 to 5 years based
on our analysis of more historical data. At March 31, 2003 we have
approximately $1.4 million of total deferred revenue (current and
long-term) and $1.2 million of deferred cost related to such
arrangements. If the expected term of any arrangement were

26



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##### 





| |   |  | to be extended beyond our current estimates, we would defer the remaining
revenue and costs of that arrangement and recognize them over that new
term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We account for income taxes using the liability method whereby deferred
tax assets or liabilities are recognized for the temporary differences
between financial reporting and tax bases of our assets and liabilities
and for tax carryforwards. In estimating future tax consequences, we
generally consider all expected future events other than enactment of
changes in tax law or rates. If it is more likely than not that some
portion or all of a deferred tax asset will not be realized, a valuation
allowance is recorded. The valuation allowance is based on our judgment
as to future taxable income in light of historical results, the current
environment, forecasted performance and other factors. In making these
judgments we consider the evidence, giving greater weight to historical
results than forecasted improvements.

Actual results could differ from our estimates.

Business Conditions and Liquidity Considerations

At March 31, 2003 we had approximately $26.9 million in cash, cash
equivalents and restricted cash. For the quarter ended March 31, 2003, cash
flows from operations decreased $1.4 million due to the growth of our accounts
receivable, deposits made to our advertising escrow account and the payout of
our 2002 incentive compensation accrual. Cash flows from investing activities
decreased $0.8 million, primarily for investments in computer equipment and
software. Cash flows from financing activities for the quarter ended March 31,
2003 was a source of $0.2 million in cash, primarily from exercises of stock
options. As of March 31, 2003 we had a decrease in cash from December 31, 2002
of $2.1 million.

Restricted cash at March 31, 2003 ($6.2 million) and December 31, 2002
($4.5 million) primarily includes funds that are maintained in an escrow
account established by us and our advertising agency to maintain funds set
aside by us for expenditures and services of the advertising agency.
Disbursements from the escrow account can only be made for advertising
expenditures we have approved in advance. In addition, at both March
31, 2003 and December 31, 2002, $1.6 million of the restricted cash
balances represents funds set aside as collateral for a letter of credit issued
by our bank to a bonding company that provides surety bonds in the various
states where we are licensed to do business. The various states require surety
bonds in amounts ranging from $5,000 to $150,000 as a part of their mortgage
broker or loan originator regulations.

We believe that the existing cash and cash equivalents, restricted cash
and cash generated from operations will be sufficient to fund our operating and
capital needs and the payment of cash dividends to the holders of our Series A
Preferred Stock through March 31, 2004. We believe that cash from operations
will continue to be generated from revenue growth resulting from the continued
growth in online-lending, expansion of our network of Lenders and real estate
brokers and by more consumers utilizing our exchange. We expect to be able to
drive more consumers to our exchange by leveraging our existing high brand
awareness and utilizing our product-focused advertisements and by continuing to
develop business relationships with significant web-portals and
finance-oriented online businesses.

Although we have historically experienced significant revenue growth and
we achieved positive cash flows from operations for the year ended December 31,
2002, the operating results for future periods are still subject to numerous
uncertainties. While there are many factors that can influence consumer loan
demand, such as increased brand awareness, advertising spending and other
company initiatives, we believe the continued historical low levels of mortgage
interest rates have generally influenced consumers to seek and close purchase
mortgages or to refinance their existing mortgages. Significant increases in
interest rates may deter consumers from seeking loan products such as mortgage
and auto loans, which may result in lower consumer volume on our site.

Further, there can be no assurance that revenue growth will continue or
that we will be able to sustain profitability. Our liquidity could be
significantly affected if this does not happen. However, if revenue does not
grow as anticipated or if we are unable to successfully raise additional debt
or equity capital, management would reduce discretionary operating
expenditures, including advertising and marketing and certain administrative
and overhead costs. Failure to generate sufficient revenue or to reduce costs
as necessary could have a material adverse effect on our ability to continue as
a going concern and achieve our business objectives.

If needed, additional financing may not be available or, if available,
such financing may not be on terms favorable to us. If additional funds are
raised through the issuance of equity securities, our shareholders may
experience significant dilution.

27



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##### 



Significant Customers and Concentrations

No customer accounted for greater than 10% of our accounts receivable
balance as of March 31, 2003 or December 31, 2002. Additionally, no customer
accounted for more than 10% of our Lending Exchange revenue in the quarters
ended March 31, 2003 or 2002.

For the quarter ended March 31, 2003, one customer accounted for 26% of
our Other revenue. For the quarter ended March 31, 2002 two customers
accounted for 56% and 16%, respectively, of our Other revenue.

Income Taxes

LendingTree has not generated taxable income for federal or state purposes
to date and therefore has not paid any federal or state income taxes since
inception. Utilization of our net operating loss carryforwards, which begin to
expire in 2011, may be subject to certain limitations under Section 382 of the
Internal Revenue Code of 1986, as amended. We have provided a full valuation
allowance on the deferred tax asset, consisting primarily of net operating loss
carryforwards, due to the uncertainty regarding its realization.

Forward-Looking Statements and Certain Risks

This quarterly report on Form 10-Q contains certain forward-looking
statements and information based on our beliefs as well as assumptions made by,
and information currently available to us. Many statements made in the 10-Q
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
that are not based on historical facts but are based on beliefs as well as
assumptions made by us and information currently available to us. The words
expects, anticipates, estimates, intends, believes, plans and
similar expressions are intended to identify forward-looking statements. These
statements include, among others, those relating to our belief that we will
have sufficient sources of liquidity to fund our operations through 2003; our
expectation that sales, general and administrative expenses will not increase
in proportion to our expected future revenue growth; our plans to reduce
discretionary expenditures if our revenues do not grow as anticipated or if we
have a liquidity shortfall; our belief that our pending litigation will not
have an outcome that will have a material adverse effect on our financial
condition, cash flows or results of operations; our belief that improvements in
our key operating metrics and the growth in online lending will more than
offset decreases in our business caused by lower levels of consumer refinance
activity; our belief that our initiatives designed to improve the rate at which
loans close through our exchange will be effective; our expectation that if our
mortgage close rates remain at or near current levels that the higher
transmission volume in the quarter ended March 31, 2003 as compared to the same
period of 2002 will result in higher closed mortgage loan revenue for quarter
ended June 30, 2003; our expectation that advertising costs will continue to
represent a significant portion of our operating expenses; our intention to
continue to use cable television and network radio in our core advertising
strategy; our belief that we will be able to draw more customers to our
Exchange; and our belief that the costs associated with our Realty Services
Exchange segment will continue to decrease as a percentage of Realty Services
revenues. Our actual results could differ materially from the results
discussed in any of our forward-looking statements. We are not undertaking to
publicly update or revise any forward-looking statement if we obtain new
information or upon the occurrence of future events or otherwise.

The forward-looking statements reflect our current views with respect to
future events and are subject to a number of risks, including, among others,
the following: risks related to our financial condition; risks related to our
markets and strategy; risks related to the internet and our technology
infrastructure; risks related to legal and regulatory uncertainty; and risks
related to our stock price and corporate control.

Risks related to our financial condition include the following: our
limited operating history makes our business and prospects difficult to
evaluate; the long-term viability of our business model is unproven and could
fail; our operating results may be negatively impacted by fluctuations in
interest rates; our quarterly operating results are not an indication of our
future results; we may not be able to achieve our projected financial and
operating results, which could cause a decline in our stock price; we have
pledged our accounts receivable as collateral security; and if the merger with
USA is not consummated, our day-to-day operations may be disrupted due to the
substantial time and effort our management must devote to seeking to complete
the merger, which could lead to a loss of position in the market that we may be
unable to regain if the merger does not occur; if the merger agreement is
terminated under certain conditions, we may be required to pay USA a
termination fee of $25 million; and we must pay various costs related to the
merger, such as our legal and accounting fees.

Risks related to our markets and strategy include the following: our
continued success is dependent upon increased acceptance of the internet by
consumers and lenders as a medium for lending; Lenders in our network are not
precluded from offering consumer credit products outside of our exchange; if
our participating Lenders do not provide competitive levels of

28



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##### 



service to our consumers, our brand will be harmed and our ability to attract consumers to our
website will be limited; we may not be able to manage our expanding operations
effectively; if we are unable to maintain our brand recognition or high levels
of consumer satisfaction, consumer and lender demand for our service may decrease; continued terrorist
attacks, war or other civil disturbances could lead to further economic
stability and depress our stock price or adversely affect our business; and if
the merger with USA is not completed, our stock price would likely decline
since it currently reflects a market assumption that the merger will be
completed.

Risks related to the internet and our technology infrastructure include
the following: we may experience reduced visitor traffic, reduced revenue and
harm to our reputation in the event of unexpected network interruptions caused
by system failures; breaches of our network security could subject us to
increased operating costs as well as litigation and other liabilities; and
failure to protect our intellectual property rights could impair our ability to
compete effectively.

Risk related to legal and regulatory uncertainty include the following: we
may be subject to liability or legal claims relating to information that is
posted on our website or on websites linked to our website; our failure to
comply with laws governing our service or material changes in the regulatory
environment relating to the internet could have a material adverse effect on
our business; many states require us to obtain licenses to offer our products
and we may not be able to obtain or retain licenses in every state; if our
Lenders fail to produce required documents for examination by state regulators,
we may be subject to fines, forfeitures and the revocation of required
licenses; because some state regulations impose filing obligations on some of
our largest stockholders and customers, we may be unable to obtain or maintain
necessary licenses in these states for reasons beyond our control, if any of
these parties fail to comply with these filing obligations; we may not be able
to satisfy state or federal net worth or bond requirements necessary to obtain
or maintain required licenses; regulation of the internet is unsettled, and
future regulations could inhibit the growth of the internet, decrease the
number of visitors to our website or otherwise materially adversely affect our
business; and we may be limited or restricted in the way we establish and
maintain our online or offline relationships by laws generally applicable to
our business.

Risks related to our stock price and corporate control include the
following: sales of substantial amounts of our common stock in the public
market, including shares issuable upon the conversion of shares of our Series A
Preferred Stock, could have an adverse impact on the market price of our common
stock; holders of our Series A Preferred Stock have greater rights and
preferences than our common shareholders; it may be difficult for a third party
to acquire us, which could depress our stock price; and our executive
management team and directors and entities affiliated with them, whose
interests may differ from other shareholders, have the ability to exercise
significant control over us.

29



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##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk

On July 13, 2001, LendingTree and GE Capital Commercial Services, Inc.
entered into a two-year loan and security agreement and revolving credit note.
Under this arrangement, borrowings will bear interest at the prime rate
determined on the last business day of the preceding calendar month. As of
March 31, 2003 the interest rate in effect for us was 4.25% and we had no
borrowings outstanding under this facility. However, with assumed average
borrowings outstanding of $2.0 million over a 12-month period, a 1.0% increase
in the prime rate would result in additional interest expense of approximately
$20,000 during that period.

We currently hold no derivative instruments and do not earn
foreign-sourced income. All of our transactions occur in U.S. dollars and we
do not have any investments in foreign countries. Accordingly, changes in
currency exchange rates related to these types of transactions do not have a
direct effect on our financial position or results of operations.

We are subject to market risk due to the terms of our Series A Preferred
Stock. Our Series A Preferred Stock exposes us to market risk to the extent
that dividends are paid in adjustments to stated value and not in cash.
Dividends on our Series A Preferred Stock that are paid by increasing the
stated value will be recorded based on the fair value of the underlying common
stock into which the additional value is convertible. We have been paying the
quarterly dividends in cash since the quarter ended June 30, 2002 and therefore
have not recorded any fair value dividend charges since the quarter ended March
31, 2002. If, in the future, we were to settle the dividend obligations by
increasing the stated value of the preferred stock, and if the market price of
our common stock were to stay above $3.50, we would continue to incur
additional fair value charges. If we continue to pay cash dividends, we will
incur total dividend charges of approximately $1.8 million during the next
twelve-month period.

Item 4. Controls and Procedures

Within the 90-day period prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the
Exchange Act). Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective in recording, processing, summarizing and reporting information
required to be disclosed by the Company (including consolidated subsidiaries)
in our Exchange Act filings.

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the
date we carried out our evaluation.

30



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PART II  Other Information

Item 1. Legal Proceedings

On September 10, 2001, Block Financial Corporation, or Block, filed a complaint
in the United States District Court for the Western District of Missouri [Block
Financial Corporation v. LendingTree, Inc., Case Number 01-1007-CV-W-3],
against us, alleging that our financial card (credit card) qualification form
processing system infringes its U.S. Patent No. 6,014,645 entitled, Real-Time
Financial Card Application System. The complaint seeks both monetary damages
in the form of a reasonable royalty and injunctive relief. On November 19,
2001, we filed an answer to the complaint denying infringement of the Block
patent. We also filed a counterclaim against Block seeking a declaratory
judgment of non-infringement and invalidity of the Block patent. In addition,
we have filed a request with the United States Patent Office (USPTO) seeking
a reexamination of Blocks patent. Contemporaneous with that filing, we filed
a motion for a stay of all proceedings in the United States District Court for
the Western District of Missouri pending the reexamination of the Block patent
by the USPTO. On August 23, 2002, the USPTO issued an Order granting our
request for reexamination of the Block patent, finding that a substantial new
question of patentability affecting the claims of the Block patent has been
raised by the request. On or about April 30, 2003, the USPTO issued an initial
Office Action in which all claims of the Block patent were rejected as being
unpatentable view of the prior art cited in the reexamination request.
Additionally, pursuant to an order from the District Court, the action against
us is stayed until the reexamination proceeding is complete. We believe that
we have meritorious defenses to Blocks claim and we do not believe that this
action will have a material impact on our financial condition, cash flows or
results of operations.

We are involved in other litigation from time to time that is routine in
nature and incidental to the conduct of its business. We believe that the
outcome of any such litigation would not have a material adverse effect on our
financial condition, cash flows or results of operations.

Item 2. Changes in Securities and Use of Proceeds

During the three months ended March 31, 2003, we issued a total of 2,666
shares of common stock upon the exercise of outstanding warrants. Such
securities were acquired in a private placement transaction under Section 4(2)
of the Securities Act of 1933. The holders of the warrants exercised using the
net exercise method, accordingly, we received no cash proceeds from such
exercises.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits:

|       |  |                                                                                                                                                                                  
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER |  | DESCRIPTION                                                                                                                                                                      
|       |  |                                                                                                                                                                                  
|4.1    |  | Certificate of Designations, Preferences and Rights of the Series A 8%
Convertible Preferred Stock of LendingTree, Inc.                                                          
|       |  |                                                                                                                                                                                  
|99.1   |  | Certification of the Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

On February 3, 2003, we filed a report on Form 8-K to report that we
had issued a press release to report our revenue and earnings for the forth
quarter and year ended December 31, 2002 and to revise our guidance for
2003.

On March 11, 2003, we filed a report on Form 8-K to report that we had
issued a press release to revise our financial guidance for the quarter
ending March 31, 2003.

On March 12, 2003, we filed a report on Form 8-K to report that we had
issued a press release to announce that we were presenting certain
information at a conference. Among this information presented was a
business overview for our lending and real estate product, discussion of
recent operating financial results and an elaboration of our plans to
generate a large share of the consumer lending market.

On April 3, 2003, we filed a report on Form 8-K to report that our board
of directors authorized a share repurchase program of up to one million shares
of our common stock. The share purchases may be made from time to time,
depending on market conditions until September 2005. The repurchase program
does not obligate the company to acquire any specific

31



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##### 



number of shares and may be discontinued at any time. All purchases will be in accordance with the
terms, conditions, and restrictions contained in SEC Rule 10(b)-18.

On April 21, 2003, we filed a report on Form 8-K to report that we had
issued a press release to report our revenue and earnings for the quarter ended
March 31, 2003 and to revise our guidance for the remainder of 2003.

On May 6, 2003, we filed a report on Form 8-K to report that we had
entered into an Agreement and Plan of Merger with USA Interactive and Forest
Merger Corporation, pursuant to which LendingTree would become a wholly-owned
subsidiary of USA Interactive.

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                   |  |                   |  |                                      
|------------------ |  | ----------------- |  | -------------------------------------
|                   |  | LENDINGTREE, INC.
|                   |  |                   |  |                                      
|Date: May 13, 2003 |  | By:               |  | /s/ Keith B. Hall                    
|                   |  |                   |  |                                      
|                   |  |                   |  | Keith B. Hall, Senior Vice-President,
|                   |  |                   |  | Chief Financial Officer and Treasurer

33



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##### 



CERTIFICATIONS

I, Douglas R. Lebda, Chief Executive Officer, certify that



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
LendingTree, Inc.;                                                                                                                                                                                                                                                      
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of LendingTree, Inc. as of, and for, the
periods presented in this quarterly report;                
|
| | 4. |  | LendingTree, Inc.s other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
LendingTree, Inc. and we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures
to ensure that material information related to LendingTree,
Inc., including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of LendingTree,
Inc.s disclosure controls and procedures as of a date within
90 days of the filing date of this quarterly report
(Evaluation Date); and                                                                                                           
|
| | c) |  | presented in this quarterly report our
conclusions about the effectiveness of LendingTree, Inc.s
disclosure controls and procedures as of the Evaluation Date;                                                                                                                                  



| | 5. |  | LendingTrees other certifying officers and I have disclosed,
based on our most recent evaluation, to LendingTrees auditors and
the audit committee of LendingTrees board of directors:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect
our ability to record, process, summarize and report financial
data and have identified for LendingTrees auditors any
material weaknesses in internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in
LendingTrees internal controls; and                                                                                                                           



| | 6. |  | LendingTrees other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 13, 2003

| |  |                         |  | 
| |  | ----------------------- |  | 
| |  | /s/ Douglas R. Lebda    |  | 
| |  |                         |  | 
| |  | Douglas R. Lebda        |  | 
| |  | Chief Executive Officer |  | 

34



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##### 



I, Keith B. Hall, Senior Vice President and Chief Financial Officer, certify
that



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
LendingTree, Inc.;                                                                                                                                                                                                                                                      
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of LendingTree, Inc. as of, and for, the
periods presented in this quarterly report;                
|
| | 4. |  | LendingTree, Inc.s other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
LendingTree, Inc. and we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures
to ensure that material information related to LendingTree,
Inc., including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of LendingTree,
Inc.s disclosure controls and procedures as of a date within
90 days of the filing date of this quarterly report
(Evaluation Date); and                                                                                                           
|
| | c) |  | presented in this quarterly report our
conclusions about the effectiveness of LendingTree, Inc.s
disclosure controls and procedures as of the Evaluation Date;                                                                                                                                  



| | 5. |  | LendingTrees other certifying officers and I have
disclosed, based on our most recent evaluation, to LendingTrees
auditors and the audit committee of LendingTrees board of
directors:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect our ability to
record, process, summarize and report financial data and have
identified for LendingTrees auditors any material weaknesses in
internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in LendingTrees
internal controls; and                                                                                                                           



| | 6. |  | LendingTrees other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 13, 2003

| |  |                                                   |  | 
| |  | ------------------------------------------------- |  | 
| |  | /s/ Keith B. Hall                                 |  | 
| |  |                                                   |  | 
| |  | Keith B. Hall                                     |  | 
| |  | Senior Vice President and Chief Financial Officer |  | 
| |  |                                                   |  | 

35