<PAGE>   1


================================================================================

                       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 and nine month periods ended September 30, 2000

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

            For the transition period from to _________ to _________


                        Commission File Number 000-29215

                                LENDINGTREE, 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)



        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          Common Stock, $.01 par value
                                (Title of class)



         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 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 [ ].

         As of October 31, 2000 there were 18,704,985 shares of Common Stock,
$.01 par value, outstanding, excluding 948,971 shares of treasury stock.




================================================================================



<PAGE>   2


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



                                LENDINGTREE, INC.
                                TABLE OF CONTENTS

                                                                          PAGE
                                                                         NUMBER
                                                                         ------
PART I   FINANCIAL INFORMATION:


Item 1.  Financial Statements

          Statements of Operations -
              Three months and nine months ended September 30, 1999
              and September 30, 2000 (unaudited)                           3
          Balance Sheets -
              December 31, 1999 and September 30, 2000 (unaudited)         4
          Statements of Cash Flows -
              Nine months ended September 30, 1999 and
              September 30, 2000 (unaudited)                               5
         Notes to Financial Statements                                     6

Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations               12



PART II  OTHER INFORMATION:

Item 1.  Legal Proceedings                                                23

Item 2.  Changes in Securities and Use of Proceeds                        23

Item 3.  Quantitative and Qualitative Disclosures about Market Risk       24

Item 6.  Exhibits and Reports on Form 8-K                                 24

SIGNATURE                                                                 25







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

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

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



                                       2




<PAGE>   3


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

                                LENDINGTREE, INC.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>
                                             FOR THE THREE MONTHS ENDED SEPTEMBER 30,   FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                             ----------------------------------------   ---------------------------------------

                                                     1999                 2000                 1999                  2000
                                             ------------------    ------------------   ------------------    -----------------
<S>                                              <C>               <C>                  <C>                   <C>
Revenue
  LendingTree.com network                        $ 1,535,000          $  7,451,000         $  2,666,000          $ 17,616,000
  Lend-X
    Lend-X network                                   338,000               380,000              732,000             1,890,000
    Lend-X technology                                445,000             1,199,000              630,000             1,706,000
                                                 -----------          ------------         ------------          ------------
        Total revenue                              2,318,000             9,030,000            4,028,000            21,212,000
                                                 -----------          ------------         ------------          ------------
Cost of revenue
  LendingTree.com network                            450,000             1,517,000              906,000             4,158,000
  Lend-X
    Lend-X network                                   192,000               349,000              401,000             1,232,000
    Lend-X technology                                 55,000               731,000              246,000               937,000
                                                 -----------          ------------         ------------          ------------
        Total cost of revenue                        697,000             2,597,000            1,553,000             6,327,000
Gross profit:
  LendingTree.com network                          1,085,000             5,934,000            1,760,000            13,458,000
  Lend-X
    Lend-X network                                   146,000                31,000              331,000               658,000
    Lend-X technology                                390,000               468,000              384,000               769,000
                                                 -----------          ------------         ------------          ------------
        Total gross profit                         1,621,000             6,433,000            2,475,000            14,885,000
Operating expenses:
  Product development                                272,000               532,000              808,000             2,096,000
  Marketing and advertising                        6,186,000            12,493,000           12,025,000            46,113,000
  Sales, general and administrative                2,596,000             8,762,000            5,703,000            19,461,000
                                                 -----------          ------------         ------------          ------------
        Total operating expenses                   9,054,000            21,787,000           18,536,000            67,670,000
                                                 -----------          ------------         ------------          ------------
Loss from operations                              (7,433,000)          (15,354,000)         (16,061,000)          (52,785,000)
Miscellaneous expense, net                                --              (102,000)                  --              (102,000)
Interest income, net                                  55,000               425,000               80,000             1,830,000
                                                 -----------          ------------         ------------          ------------
Net loss                                          (7,378,000)          (15,031,000)         (15,981,000)          (51,057,000)
                                                 -----------          ------------         ------------          ------------
Accretion of mandatorily redeemable
  preferred stock                                    (43,000)                   --             (131,000)                   --
Accumulated, undeclared dividends on
  convertible preferred stock                       (319,000)                   --             (616,000)                   --
Dividends on convertible preferred stock            (525,000)                   --             (525,000)           (2,461,000)
                                                 -----------          ------------         ------------          ------------
Net loss attributable to common shareholders     $(8,265,000)         $(15,031,000)        $(17,253,000)         $(53,518,000)
                                                 ===========          ============         ============          ============

Net loss per common share - basic and diluted    $     (2.24)         $      (0.81)        $      (4.60)         $      (3.49)
                                                 ===========          ============         ============          ============

Weighted average shares used in basic and
  diluted net loss per common share calculations   3,685,956            18,479,424            3,747,888            15,354,108
                                                 ===========          ============         ============          ============
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       3


<PAGE>   4


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



                                LENDINGTREE, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                         DECEMBER 31,       SEPTEMBER 30,
                                                                             1999                2000
                                                                        -------------      --------------
                                                                                            (unaudited)
<S>                                                                     <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents                                             $  2,419,000       $   2,453,000
  Short-term investments                                                  27,053,000          13,527,000
  Restricted short-term investments                                               --           8,521,000
                                                                        ------------       -------------
    Total cash and cash equivalents, short-term investments
      restricted short-term investments                                   29,472,000          24,501,000
  Accounts receivable, net of allowance for
    doubtful accounts of $118,000 and $469,000, respectively               2,027,000           6,618,000
  Prepaid expenses and other current assets                                1,005,000           1,235,000
                                                                        ------------       -------------
    Total current assets                                                  32,504,000          32,354,000
Property, equipment and software, net                                      1,086,000           4,515,000
Excess purchase price, HomeSpace, net                                             --          11,498,000
Other assets                                                                 177,000             550,000
Investments in other businesses                                                   --           2,500,000
                                                                        ------------       -------------
    Total assets                                                        $ 33,767,000       $  51,417,000
                                                                        ============       =============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                         3,579,000           6,517,000
  Accrued expenses                                                         2,451,000           5,266,000
  Current portion capital lease obligations                                       --             668,000
                                                                        ------------       -------------
    Total current liabilities                                              6,030,000          12,451,000
Deposits                                                                          --              92,000
Capital lease obligations                                                         --             899,000
Commitments and contingencies                                                     --                  --
Shareholders' equity:
Series A Convertible Preferred stock, $.01 par value,
  8% cumulative, 3,049,031 shares authorized, 1,754,484
  and 0 shares issued and outstanding at December 31, 1999
  and September 30, 2000, respectively                                     9,884,000                  --
Series B and C Convertible Preferred stock, $.01 par value,
  911,450 and 268,074 shares authorized, none issued, respectively                --                  --
Series D Convertible Preferred stock, $.01 par value, 8%
  cumulative, 6,238,639 shares authorized, 6,238,172 and
  0 shares issued and outstanding at December 31, 1999 and
  September 30, 2000, respectively                                        49,234,000                  --
Common stock, $.01 par value, 100,000,000 shares authorized,
  4,070,655 and 19,653,956 shares issued at December 31,
  1999 and September 30, 2000, respectively                                   41,000             197,000
Deferred compensation                                                     (2,767,000)         (3,721,000)
Treasury stock (948,971 shares at cost)                                   (5,978,000)         (5,978,000)
Notes receivable from officers for option exercises                               --          (1,603,000)
Unrealized gain on available-for-sale securities                              46,000                  --
Additional paid-in-capital                                                 9,423,000         132,283,000
Accumulated deficit                                                      (32,146,000)        (83,203,000)
                                                                        ------------       -------------
    Total shareholders' equity                                            27,737,000          37,975,000
                                                                        ------------       -------------
    Total liabilities and shareholders' equity                          $ 33,767,000       $  51,417,000
                                                                        ============       =============
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       4


<PAGE>   5
]

LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



                                LENDINGTREE, INC.
                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                                                ---------------------------------------

                                                                       1999                 2000
                                                                ------------------   ------------------
<S>                                                             <C>                  <C>
Cash flows used in operating activities:
  Net loss                                                         $(15,981,000)       $(51,057,000)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Loss on disposal of fixed assets                                         --             104,000
    Depreciation and amortization                                       126,000           1,486,000
    Provision for doubtful accounts                                      87,000             720,000
    Common stock or stock options issued in lieu of
      compensation for services rendered                                549,000                  --
    Amortization of deferred compensation                                    --           1,629,000
    Issuance of stock options and warrants                               13,000                  --
    Issuance of Series D Convertible Preferred
      stock in lieu of interest                                          27,000                  --
    Changes in assets and liabilities, net of effects from
     acquisitions:
      Accounts receivable                                            (1,667,000)         (5,295,000)
      Prepaid expenses and other current assets                        (189,000)           (170,000)
      Other assets                                                      (15,000)           (373,000)
      Accounts payable                                                1,804,000           2,939,000
      Accrued expenses                                                1,631,000           1,150,000
      Deposits                                                               --              92,000
                                                                   ------------        ------------
        Net cash used in operating activities                       (13,615,000)        (48,775,000)
                                                                   ------------        ------------

Cash flows used in investing activities:
  Purchase of short-term investments                                         --         (58,401,000)
  Liquidation of short-term investments                                      --          71,878,000
  Purchase of restricted investments                                         --         (43,657,000)
  Liquidation of restricted investments                                      --          35,138,000
  Investment in other businesses                                             --          (8,700,000)
  Investment in equipment, furniture and software                      (535,000)         (2,509,000)
                                                                   ------------        ------------
        Net cash used in investing activities                          (535,000)         (6,251,000)
                                                                   ------------        ------------

Cash flows provided by financing activities:
  Proceeds from sales of common stock and warrants
     and exercise of stock options                                      308,000             249,000
  Proceeds from issuance of convertible notes                         1,750,000                  --
  Repurchase of common stock                                         (5,978,000)                 --
  Proceeds from sale of equity rights certificate                            --          10,000,000
  Proceeds from initial public offering of common stock, net                 --          44,811,000
  Proceeds from sale of mandatorily redeemable
    Series A Convertible Preferred stock and warrants,
    net of offering costs                                             4,935,000                  --
  Proceeds from sale of Series D Convertible
    Preferred stock, net of offering costs                           47,542,000                  --
                                                                   ------------        ------------
        Net cash provided by financing activities                    48,557,000          55,060,000
                                                                   ------------        ------------
Net decrease in cash and cash equivalents                            34,407,000              34,000
Cash and cash equivalents, beginning of period                        3,085,000           2,419,000
                                                                   ============        ============
Cash and cash equivalents, end of period                           $ 37,492,000        $  2,453,000
                                                                   ============        ============

Supplemental disclosure of cash flow information:
  Common stock issued in connection with business acquisition      $         --        $  4,739,000
  Notes receivable issued to officers for option exercises         $         --        $  1,603,000
  Acquisition of assets through capital leases                     $         --        $  1,682,000
  Accrued liabilities established in connection with a
    business acquisition                                           $         --        $  1,384,000
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       5

<PAGE>   6


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - THE COMPANY

LendingTree, Inc. (the "Company") was incorporated in the State of Delaware on
June 7, 1996.

The Company's primary offerings are an Internet-based loan marketplace for
consumers and lenders, licenses of its technology and hosting Internet-based
systems to enable other businesses to create their own on-line lending
exchanges. In addition, through its website the Company provides access to other
services related to owning, maintaining or buying and selling a home, including
a network of real estate brokers.

Through its website, www.lendingtree.com, the Company collects consumer credit
requests and compares these requests and related credit information to the
underwriting criteria of more than 100 participating lenders in its network.
Consumers may 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 can generate new business that meets their specific underwriting
criteria at a cost that is lower than the cost associated with offline loan
originations. The Company's marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards and personal loans and also provides access to small business loans.

The Company is not a lender; rather, its Internet-based marketplace and
technology offerings facilitate the lending process. The Company's revenue model
depends on revenue generated from lenders participating in its network who pay
fees ("transmission fees") based upon their receipt of loan requests (known as
"qualification forms") and fees based upon loan closings ("closed-loan fees").
The Company's website is powered by its loan marketplace technology platform,
Lend-X(sm).

The Company also licenses or hosts its Lend-X technology for use by other
businesses, enabling them to create their own customized co-branded or
private-label versions of online lending exchanges. Through these Lend-X
partnerships, the Company can earn revenue both from technology fees related to
customization, licensing and hosting the network, as well as network sources
(transmission fees and closed-loan fees)


NOTE 2 - BASIS OF PRESENTATION:

         Interim Financial Information

The financial statements of the Company include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary for a fair
presentation of its financial position as of September 30, 2000 and results of
operations and cash flows for the interim periods presented. The results of
operations for the three months and nine months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the entire year.

The accompanying unaudited 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 required by generally accepted
accounting principles are not included herein. These interim financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 1999 as reported by the Company in its
final Prospectus dated February 15, 2000 filed with the Securities and Exchange
Commission in conjunction with the Company's initial public offering of its
common stock.

         Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions 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.
Significant estimates include percentage complete calculations under long-term
contracts, useful lives of long-term assets and the valuation of the Company's
common stock, options and warrants. Actual results could differ from those
estimates.


                                       6

<PAGE>   7


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



         Reclassifications

Certain comparative period amounts have been reclassified to conform to current
period presentation.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Restricted Investments

As of September 30, 2000, the Company had $8.5 million of investments held in an
escrow account. This account was established by the Company and its advertising
agency to maintain funds set aside by the Company for non-cancelable and
approved expenditures and services of the advertising agency. Disbursements from
the escrow account can only be made with signatures from both the Company and
the advertising agency. The fund is used only for advertising costs the Company
has approved in advance. Disbursements from the escrow account are made no
sooner than one month following the invoice date for the expenditures. The
Company receives all income earned on funds held in this investment account.

         Segment Reporting

The Company has determined that its reportable segments are its lendingtree.com
and Lend-X businesses (as described above). Management regularly reviews the
revenue, cost of revenue and gross margins, (which are presented on the
statement of operations) for these two lines of business. No other operating
expenses or assets or liabilities of the Company are segregated or allocated
into these segments for review by management. There are no inter-segment
revenues.


         Revenue Recognition

The Company's lendingtree.com network revenue represents transmission fees and
closed-loan fees paid by lenders for credit requests that are received through
the Company's website, www.lendingtree.com. This revenue also includes fees to
set up lenders on the network. Transmission fees are recognized at the time
qualification forms are transmitted, while closed-loan fees are recognized at
the time the lender reports the activity to the Company, which may be up to four
months after the qualification form is transmitted. Revenue from lender set-up
fees is recognized upon completion of the lender's integration into the
lendingtree.com network. Revenue earned through the Company's network of real
estate brokers is recognized upon notification by the broker that a real estate
transaction has closed.

Lend-X network revenue is derived from qualification forms that are received
through private-label or co-branded websites of other businesses ("Lend-X
partners") that are enabled by the Company's Lend-X technology. If these
qualification forms are successfully transmitted to or fulfilled by one of the
Company's network lenders, the Company earns transmission fees and/or
closed-loan fees, if applicable, from that lender, which are recognized as
described above.

Lend-X technology revenue is related primarily to hosting, licensing and
modifying the Company's proprietary software for use by lenders and other third
parties. Initial fees, set-up fees or licensing fees under such contracts are
recognized as revenue over the term of the related contract. If the contract
requires significant modification or customization of the software, the revenue
related to the contract is recognized as work is performed under the percentage
of completion method with progress generally measured using costs incurred to
date compared to total estimated costs to be incurred. Maintenance and support
revenue is recognized ratably over the period the services are provided. Losses,
if any, are recognized when the liability is identified.

Included in accounts receivable, net, as of September 30, 2000 were unbilled
receivables of $.3 million related to percentage of completion contracts. At
December 31, 1999 unbilled receivables were $10,000. Deferred revenue as of
September 30, 2000 and December 30, 1999 was $.5 million and $.2 million,
respectively.

For the three months ended September 30, 2000, the Company recorded revenue of
approximately $1.0 million (or approximately 11% of total revenue) under a
software license, customization and services agreement with Federal Home Loan
Mortgage Corporation. No other sources of revenue exceeded 10% of the Company's
total revenue.


                                       7

<PAGE>   8


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



         Cost of Revenue

The Company's lendingtree.com and Lend-X network cost of revenue includes salary
and benefit costs of the borrower relations and implementation groups, credit
agency scoring fees, consumer promotion costs, and the costs of website hosting
hardware. Lend-X network cost of revenue includes these items and additional
amounts the Company pays its Lend-X partners.

Cost of revenue related to Lend-X technology includes direct costs of modifying
the Company's proprietary software for licensing to lenders, as well as the cost
of servers related to hosting the systems for these licensees.


         Stock Split

 In January 2000, the Board of Directors approved a 1.27-for-1 common stock
split that was effective February 22, 2000 upon the closing of the Company's
initial public offering. The financial statements for all periods presented have
been restated to reflect the effect of this stock split. In addition, the Board
approved an amendment to the Company's certificate of incorporation, effective
in conjunction with the Company's Form S-1 Registration Statement, increasing
the authorized capital stock to 100,000,000 shares of common stock and
10,000,000 shares of preferred stock, each with a par value of $0.01 per share.

         Software Development Costs

Software development costs primarily include expenses incurred by the Company to
develop its proprietary software and to enhance and upgrade its website. The
Company accounts for the software development costs component of product
development costs associated with software to be sold or marketed in accordance
with Statement of Financial Accounting Standards No. 86 "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," which
requires software development costs to be capitalized beginning when a product's
technological feasibility is established and ending when a product is available
for general release. For the three months and nine months ended September 30,
2000, the Company capitalized development costs related to software to be sold
or marketed of approximately $.1 million.

The Company accounts for the software development component of product
development costs associated with internal use software in accordance with
Statement of Position No. 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which 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.

For the three months and nine months ended September 30, 2000, the Company
capitalized internal use software development costs of approximately $.5 million
and $1.8 million, respectively, (including compensation costs, purchased
software and consulting costs related to internal use software projects). No
software development costs were capitalized in the periods ending September 30,
1999. Capitalized software development costs are included on the balance sheet
under the caption "Property, equipment and software, net".

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


         Advertising Expenses

Advertising expenses consist primarily of television, radio and outdoor
advertising campaign costs as well as trade shows and other indirect costs. The
Company expenses advertising costs as incurred or the first time the advertising
takes place. For the three months ending September 30, 1999 and 2000,
advertising expenses were $5.4 million and $9.4 million, respectively. For the
nine months ending September 30, 1999 and 2000, advertising expenses were $9.9
million and $39.4 million, respectively.


                                       8


<PAGE>   9

LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



NOTE 4 - SIGNIFICANT TRANSACTIONS

         Capital Z Investment

On September 29, 2000, Capital Z Partners ("Capital Z"), the Company's largest
shareholder, purchased an Equity Rights Certificate from the Company for $10
million. This Certificate is initially exercisable for 1,253,918 shares of the
Company's common stock (equivalent to $7.975 per share), and warrants to
purchase 225,000 shares of the Company's common stock with an initial exercise
price of $7.975. Capital Z also received a commitment fee warrant to purchase
135,000 shares of the Company's common stock with an initial exercise price of
$7.975.

The Equity Rights Certificate may be exercised at the election of Capital Z
anytime up to and including the fifth business day following June 30, 2001. The
Equity Rights Certificate contains anti-dilution provisions, including
provisions that allow Capital Z to receive additional shares of the Company's
common stock if certain events occur prior to the expiration of the Certificate.
Such events include, among others, a subsequent financing in which the Company
receives consideration of at least $15 million, a Sale Transaction or a Going
Private Transaction (as those terms are defined in the Equity Rights
Certificate). If the Equity Rights Certificate has not been exercised by June
30, 2001 and the price of the Company's stock is less than $7.975, Capital Z
will receive additional shares of the Company's common stock upon exercise of
the Certificate. Upon exercise of the Equity Rights Certificate, the warrants
issued therewith will have an exercise period that starts September 29, 2001 and
ends September 29, 2005. The anti-dilution provisions described above also apply
to the warrants and therefore the actual exercise price of the warrants will be
determined at the time of issuance.

The commitment fee warrant is exercisable at any time on or after September 29,
2001 and until September 29, 2005 at an exercise price of $7.975 per share. This
exercise price is subject to adjustment upon the occurrence of the events
described above.


         Acquisition

On August 2, 2000, the Company, acquired certain assets and assumed certain
liabilities of HomeSpace Services, Inc. The consideration paid by LendingTree
(approximately $11.2 million) for the acquired assets consisted of $6.2 million
in cash, 639,077 shares of the Company's restricted common stock, valued at $4.7
million (using the average closing stock price 3 days before and after the
closing date) and $.3 million of assumed liabilities. At closing, 169,851 shares
of the common stock were placed in escrow in the event of any post-closing
indemnification claims and $4.2 million in cash was placed in escrow to be paid
to trade creditors of HomeSpace. The Company agreed to file a registration
statement relating to the shares of restricted common stock issued in connection
with the acquisition by March 31, 2001 and agreed to use its reasonable best
efforts to cause such registration statement to be declared effective by the
Securities and Exchange Commission. The cash portion of the purchase price was
funded from the Company's short-term investments, the source of which was its
February 2000 initial public offering of common stock.

Prior to the acquisition, there was no material relationship between HomeSpace,
its shareholders or affiliates, directors or officers and the Company, its
shareholders or any of its affiliates, directors or officers.

The following unaudited pro forma consolidated financial information reflects
the results of operations of the Company for the nine-month periods ended
September 30, 1999 and 2000 as if the acquisition of the HomeSpace assets had
occurred on January 1, 1999 and 2000, respectively, and after giving effect to
certain purchase accounting adjustments. These pro forma results are not
necessarily indicative of what the Company's operating results would have been
had the acquisition actually taken place on January 1, 1999 or 2000, and may not
be indicative of future operating results.


                                                    Nine Months     Nine Months
                                                       Ended           Ended
                                                   September 30,   September 30,
       Pro Forma (unaudited)                           1999            2000
                                                   -------------   -------------

       Revenue                                      $ 7,696,000     $23,486,000
       Net loss available to common shareholders    $45,080,650     $78,947,000
       Net loss per common share                    $     (8.03)    $     (4.58)


                                       9


<PAGE>   10


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



         Initial Public Offering and Conversion of Preferred Stock to Common
         Stock

On February 15, 2000, the Company completed the sale of 4,197,500 shares of its
common stock at an initial public offering ("IPO") price of $12.00 per share,
raising approximately $44.9 million, net of offering expenses, underwriting
discounts and commissions. Simultaneous with the closing of the initial public
offering, all previously outstanding shares of convertible preferred stock and
accumulated, unpaid in-kind dividends thereon were automatically converted into
an aggregate of 10.5 million shares of common stock.


         Officer Loans

In February 2000, the Company entered into promissory notes and pledge
agreements with certain executive officers of the Company to provide a total of
approximately $1.9 million to these officers for the purpose of exercising
non-qualified stock options and for paying the related withholding taxes on such
exercises. The loans are to be repaid to the Company, plus interest at the
federal rate (as defined) in equal annual installments beginning on January 31,
2002, and through January 31, 2005. The officers have pledged to the Company a
security interest in the stock issued as a result of these options being
exercised. The pledged stock may not be sold by the officers without prior
written consent by the Company.

On November 7, 2000, the Company extended a short-term loan in the amount of
$25,000 to an executive officer of the Company for personal or household
purposes and the loan is repayable together with interest upon demand by the
Company on or after February 15, 2001. The obligation is secured by a pledge of
the officer's stock options and restricted common stock of the Company.


         Investment

In February 2000, the Company made a $2.5 million equity investment in a
wholesale lending service LoanTrader.com. The Company's minority investment
represents approximately 8.5% of the outstanding equity of LoanTrader.com.
Accordingly, the Company is accounting for this investment using the cost method
of accounting.


         Warrant Agreements

In January 2000, Prudential Securities Incorporated, an underwriter for the
Company's initial public offering and a holder of a warrant to purchase the
Company's common stock agreed to exchange its existing warrant to purchase
127,000 shares of the Company's common stock at an exercise price of $7.52 per
share for a new warrant to purchase 127,000 shares of common stock at an
exercise price equal to the initial public offering price of common stock. The
new warrant is exercisable for a five year period from the date of the first
warrant or through September 21, 2004. Upon the exchange of these warrants, the
Company recorded an offset to the IPO proceeds of approximately $.1 million
based upon the fair value of the new warrant issued in excess of the existing
warrant based upon an option valuation model.


Also during January 2000, the Company entered into an agreement for an initial
one-year period with CNBC to co-brand a web site. In February 2000, the Company
granted two warrants to CNBC in connection with this agreement. Each warrant is
for the purchase of 95,250 shares of the Company's common stock at $7.87 per
share. The first warrant, granted February 2, 2000, with an underlying fair
value of $11.00, was immediately vested and exercisable at the date of grant.
The second warrant was granted February 15, 2000 with an underlying fair value
of $12.00 and was also immediately vested and exercisable. An expense of
approximately $1.3 million, calculated using an option-pricing model, will be
recognized ratably for services provided by the third party over the initial
one-year period of the agreement. For the three months and nine months ended
September 30, 2000, the Company recognized a charge for these warrants of
approximately $0.3 million and $0.8 million, respectively.


                                       10

<PAGE>   11


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



In connection with this agreement, the Company has also committed to
approximately $4.4 million of advertising and promotional costs during the
initial one-year period of the agreement. On October 13, 2000, the Company
notified CNBC of its intention to terminate the Co-Branded Site Agreement
between the parties dated January 14, 2000. Pursuant to the terms of that
agreement, the termination will become effective no later than January 13, 2001.

         Option Grants

In January 2000, the Company granted stock options to purchase 769,225 shares of
common stock to employees at an exercise price of $9.28 per share. Based on the
difference between the strike price of these options and the fair market value
at the date of grant ($11.00), the Company recorded a deferred compensation
charge of approximately $1.3 million and is amortizing it to expense over the
options' four year vesting period. For the three months and nine months ended
September 30, 2000, the Company recorded compensation expenses of $0.2 million
and $0.7 million, respectively, related to these options.

         Lease Termination Reserve

In December 1999, the Company established a $.5 million reserve for the
estimated loss in connection with the sublease of certain excess office space.
Through September 30, 2000 the Company has charged payments of approximately $.3
million against this reserve and the balance at September 30, 2000 is
approximately $.2 million. .


NOTE 5 - NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share is calculated by dividing net loss
available to common shareholders by the weighted average number of common shares
outstanding. For purposes of determining the Company's basic and diluted loss
per common share, 1.3 million shares issuable in connection with the equity
rights certificate described above in Note 4 have been treated as outstanding
from September 29, 2000. Other common stock equivalents, including stock options
and warrants, are excluded from the calculation, as their effect would be
anti-dilutive. The calculation of diluted loss per share for the three months
and nine months ended September 30, 2000 excludes options and warrants to
purchase approximately one million shares of common stock as their impact would
be anti-dilutive.


                                       11


<PAGE>   12


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



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


OVERVIEW

This Quarterly Report on Form 10-Q may contain certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended,
that represent the Company's expectations or beliefs concerning future events or
projected financial results. Such forward-looking statements are about matters
that are inherently subject to risks and uncertainties. Factors that could
influence the matters discussed in certain forward-looking statements include
the timing and amount of revenue that may be recognized by the Company,
continuation of current expense trends, absence of unforeseen changes in the
Company's markets, continued acceptance of the Company's services and products
and general changes in the economy, as well as matters discussed in "Risks and
Uncertainties" in the Company's final Prospectus with an effective date of
February 15, 2000. There can be no assurance that such future events or
projected results will be achieved and actual results could differ materially.

The Company's primary offerings are an Internet-based loan marketplace for
consumers and lenders, licenses to its technology and hosting Internet-based
systems to enable other businesses to create their own on-line lending
offerings. In addition, through its website the Company provides access to other
services related to owning, maintaining or buying and selling a home, including
a network of real estate brokers.

Through its own website, www.lendingtree.com, the Company collects consumer
credit requests and using its proprietary technology, Lend-X, compares these
requests and related credit information to the underwriting criteria of more
than 100 participating lenders in its network. Consumers may receive multiple
offers in response to a single credit request and then compare, review and
accept the on-line loan offer that best suits their needs. Lenders can generate
new business that meets their specific underwriting criteria at a cost that is
lower than the cost associated with offline loan originations. The Company's
marketplace encompasses most consumer credit categories, including mortgages,
home equity loans, automobile loans, credit cards and personal loans and
provides access to small business loans.

The Company is not a lender; rather, its Internet-based marketplace facilitates
the lending process without the assumption of risks typically bourne by lenders
and certain brokers that fund loans. The Company's revenue model depends on
revenue generated from lenders participating in its network who pay fees based
upon their receipt of qualification forms ("transmission fees"), and fees based
upon loan closings ("closed-loan fees"). All of the Company's network revenue is
derived from lenders; the Company does not charge or collect fees from
consumers. The Company's website is powered by its loan marketplace technology
platform, Lend-X(sm).

The Company also licenses or hosts its Lend-X technology for use by other
businesses, enabling them to create their own customized co-branded or
private-label versions of online lending offerings. In many of these Lend-X
partnerships, the Company earns fees paid for technology related to
customization, licensing and hosting the network. In some of these partnerships,
the Company can also earn revenue from network sources (transmission fees and
closed-loan fees).

For the three months ended September 30, 2000, the Company recorded revenue of
approximately $1.0 million (or approximately 11% of total revenue) under a
software license, customization and services agreement with Federal Home Loan
Mortgage Corporation. No other sources of revenue exceeded 10% of the Company's
total revenue for the three months or nine months ended September 30, 2000.

The Company's lendingtree.com and Lend-X network cost of revenue includes salary
and benefit costs of the borrower relations and implementation groups, credit
agency scoring expenses, consumer promotion costs and the costs of website
hosting hardware. Lend-X network cost of revenue includes the above expenses, as
well as additional expenses related to the amounts the Company pays its Lend-X
partners for the services they provide.

The Company's Lend-X technology cost of revenue includes direct costs of
modifying the Company's proprietary software for license to Lend-X users, as
well as the related costs of hardware used to host the systems for these
customers. All of these expenses are recognized in the period that they are
incurred.


                                       12


<PAGE>   13


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
         THREE MONTHS ENDED SEPTEMBER 30, 1999

         REVENUE

Total revenue was approximately $9.0 million in the three months ended September
30, 2000, an increase of $6.7 million from $2.3 million in the same period in
1999.

The Company's lendingtree.com network revenue was approximately $7.5 million, or
82.5% of total revenue for the three months ended September 30, 2000, compared
with 66% for the same period in 1999. This growth reflects a substantial
increase in volume of qualification forms the Company transmitted to its lenders
and a significant increase in the amount of revenue earned from closed-loan
fees. The Company attributes the increase in transmission volume (from
approximately 62,000 discrete transmitted qualification forms in the three
months ended September 30, 1999 to approximately 212,000 in the same period of
2000) primarily to its extensive advertising campaign run during the first and
second quarters of 2000 . Although advertising expense was reduced in the third
quarter of 2000 (compared to the first and second quarter), the Company
attributes increased brand awareness and a significant increase in website
traffic to the advertising spending earlier in 2000. The increase in closed-loan
fees reflects not only the increased transmission volume, but also to an
increase in the number and variety of lenders on the Company's network.

Lend-X technology revenue totaled $1.2 million or 13.3% of the Company's revenue
for the three months ended September 30, 2000. This is an increase of $.8
million over the same period in 1999. The growth in Lend-X technology revenue in
the three months ended September 30, 2000 is principally the result of a
significant new customization, implementation and licensing contract that was
entered into in the second quarter. Lend-X technology revenue recognized during
the third quarter under this contract reflects the Company's progress towards
completion. Customization and implementation efforts under this contract are
expected to conclude in the fourth quarter of 2000, after which on-going revenue
will be transaction based.


         GROSS PROFIT

Gross profit of $6.4 million (71% of total revenue) for the three months ended
September 30, 2000 was $4.8 million higher than the same period of 1999 which
had gross profit of $1.6 million (70% of total revenue). The improvement in
gross margin is due to the substantial increase in revenue, as noted above,
without similar, proportionate increases in costs of revenue.

 Total cost of revenue increased $1.9 million from the third quarter of 1999
when compared to the same period in 2000. Portions of the Company's costs of
revenue are volume-based. Costs such as credit scoring fees, network hosting
expenses and direct costs to Lend-X partners tend to increase as volume and
revenue increase. In the third quarter of 2000, these costs were $.9 million
higher than the same period in 1999. In addition, the third quarter of 2000
included $.4 million for direct consumer promotion costs associated with
borrowers that requested and qualified for a credit card and also closed a loan
through the Company's network. These promotional costs were less than $.1
million during the third quarter of 1999. Costs of revenue that are not directly
volume based, principally personnel costs, increased approximately $.7 million
reflecting increased staffing in the Company's implementation and borrower
relationship departments.


         OPERATING EXPENSES

Product development expense was approximately $.5 million for the three months
ended September 30, 2000 and $.3 for the same period in 1999. Product
development costs consist of expenses incurred related to the ongoing efforts to
enhance and maintain the functionality of the Company's Website and Lend-X
technology.

Marketing and advertising expenses increased $6.3 million to approximately $12.5
million for the three months ended September 30, 2000 compared to $6.2 million
for the same period in 1999. This increase is primarily due to substantially
higher advertising expenses in 2000 incurred in an effort to maintain its brand
awareness built earlier in the year and to attract customers to the Company's
Internet-based loan marketplace. During the third quarter of 2000, the Company
continued its


                                       13

<PAGE>   14


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



television (principally cable) advertising campaign (which began in the first
quarter of 2000) and added expanded radio and outdoor advertising campaigns in
significantly more markets than during the same period in 1999. The Company
currently anticipates that marketing and advertising will continue to be its
most significant expense, as it will continue to run these promotional campaigns
for both its LendingTree and Lend-X brands.

Sales, general and administrative expenses increased to $8.8 million for the
three months ended September 30, 2000 from $2.6 million for the same period in
1999. Approximately $3.0 million of this increase is due to higher
employee-compensation related costs due to the significant growth in the
business. Another $.9 million of the increase relates to employee related costs
such as travel, relocation and recruiting fees. The Company also incurred $.3
million higher rent expense for a larger facility. The amortization of the
excess purchase price related to the HomeSpace acquisition contributed $.8
million of the increase and transitional expenses incurred related to
temporarily operating the HomeSpace business while shifting the operations to
the Company's headquarters in Charlotte, NC added another $.7 million.

Included in the Company's operating expenses for the three months ended
September 30, 2000 is amortization of deferred non-cash compensation charges of
$0.6 million. As of September 30, 2000, the Company's balance sheet reflected
deferred non-cash compensation charges of $3.7 million related to certain stock
option and warrant grants that were considered compensatory. The deferred charge
related to stock options ($3.2 million) is being amortized over the four-year
vesting period associated with the related options, ending principally in the
third quarter of 2003 and the first quarter of 2004. The deferred charge related
to warrants ($.5 million) is being amortized through February 2001,
corresponding to the initial term of the underlying service agreement.

         INTEREST INCOME

Interest income consists primarily of interest earned on cash and cash
equivalents and short-term investments. Interest income increased to $.4 million
in the three months ended September 30, 2000 from less than $0.1 million in the
same period in 1999. This increase was primarily due to higher average cash
balances in 2000 as a result of the net proceeds from the Company's initial
public offering in February 2000.

         Other Information

For the three months ended September 30, 1999 and 2000, the Company had losses
before taxes, interest, depreciation and amortization ("EBITDA") of $7.4 million
and $14.2 million, respectively. Additionally, non-cash compensation charges of
$.5 million and $.6 million are in included in EBITDA for the three periods
ended September 30, 1999 and 2000, respectively.


NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
         NINE MONTHS ENDED SEPTEMBER 30, 1999

         REVENUE

Total revenue was approximately $21.2 million in the nine months ended September
30, 2000, an increase of $17.2 million from $4.0 million in the same period in
1999.

The Company's lendingtree.com network revenue was approximately $17.6 million,
or 83% of total revenue for the nine months ended September 30, 2000, compared
with 66 % for the same period in 1999. This growth reflects a substantial
increase in volume of qualification forms the Company transmitted to its lenders
and a significant increase in the amount of revenue earned from closed-loan
fees. The Company attributes the increase in transmission volume (from
approximately 164,000 discrete transmitted qualification forms in the nine
months ended September 30, 1999 to approximately 524,000 in the same period of
2000) primarily to its extensive advertising campaign run during 2000. Although
advertising expense was reduced in the third quarter of 2000 (compared to the
first and second quarter), the Company attributes increased brand awareness and
a significant increase in Website traffic to the increased advertising spending.
The increase in closed-loan fees reflects not only the increased transmission
volume, but also to an increase in the number and variety of lenders on the
Company's network.

Lend-X network revenue totaled $1.9 million or 9% of the Company's revenue for
the nine months ended September 30, 2000 compared to $.7 million in the same
period of 1999. This increase of $1.2 million reflects an increase in the number
of


                                       14

<PAGE>   15


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



Lend-X partners in 2000 as well as significant increases in credit request
related volume processed through partners' websites or exchanges.

Lend-X technology revenue totaled $1.7 million, or approximately 8% of total
revenue for the nine months ended September 30, 2000, compared with $0.6 million
for the same period of 1999. The increase in Lend-X technology revenue is
principally the result of a significant new customization, implementation and
licensing contract that was entered into in the second quarter. Lend-X
technology revenue recognized during the second and third quarters under this
contract reflects the Company's progress towards completion. Customization and
implementation efforts under this contract are expected to conclude in the
fourth quarter of 2000, after which on-going revenue will be transaction based.


         GROSS PROFIT

Gross profit of $14.9 million (70% of total revenue) for the nine months ended
September 30, 2000 was $12.4 million higher than the same period of 1999 that
had gross profit of $2.5 million (61% of total revenue). These improvements in
gross margin and gross margin percentage are due to the substantial increase in
lendingtree.com network revenue, as noted above, without similar, proportionate
increases in lendingtree.com network costs of revenue.


 Total cost of revenue increased $4.8 million to $6.3 million in the nine months
ended September 30, 2000 compared to the same period of 1999. Portions of the
Company's costs of revenue are volume-based. Costs such as credit scoring fees,
network hosting expenses and direct costs to Lend-X partners tend to increase as
volume and revenue increase. In the nine months ended September 30, 2000, these
costs were approximately $3.0 million higher than the same period in 1999. In
addition, the nine month period ended September 30, 2000 included $1.2 million
for direct consumer promotion costs associated with borrowers that requested and
qualified for a credit card and also closed a loan through the Company's
network. These promotional costs were $.1 million in the same period of 1999.
Costs of revenue that are not directly volume based, principally personnel
costs, increased approximately $.6 million reflecting increased staff in the
Company's implementation and borrower relationship departments.


         OPERATING EXPENSES

Product development expense was approximately $2.1 million for the nine months
ended September 30, 2000 and $.8 for the same period of 1999. Product
development costs principally represent costs incurred related to the ongoing
efforts to enhance and maintain the functionality of the Company's Lend-X
technology and its website. The increase over the prior year is principally
related to increased headcount.

Marketing and advertising expenses increased $34.1 million to approximately
$46.1 million for the nine months ended September 30, 2000 compared to $12.0
million for the same period in 1999. This increase is primarily due to
substantially higher advertising expenses in 2000 incurred in an effort to build
and maintain its brand awareness and attract users to the Company's
Internet-based loan marketplace. During 2000, the Company ran a national network
and cable television advertising campaign and expanded its radio and outdoor
advertising campaigns to significantly more markets than during the same period
in 1999. The Company currently anticipates that marketing and advertising will
continue to be its most significant expense, as it will continue to run
promotional campaigns for both its LendingTree and Lend-X brands.

Sales, general and administrative expenses increased to $19.5 million for the
nine months ended September 30, 2000 from $5.7 million for the same period in
1999. Approximately $6.6 million of this increase is due to higher
employee-compensation related costs due to the significant growth in the
business. Another $1.8 million of the increase relates to employee related costs
such as travel, relocation and recruiting fees. Professional and consulting fees
increased $1.4 million from 1999 to 2000 reflecting increased professional
development; technology consulting costs; public relations and increased
professional fees related to regulatory and intellectual property matters. The
Company also incurred $.5 million higher rent expense for a larger facility in
2000. The amortization of the excess purchase price related to the HomeSpace
acquisition contributed $.8 million of the increase and transitional expenses
incurred related to temporarily operating the HomeSpace business while shifting
the operations to the Company's headquarters in Charlotte, NC added another $.7
million. Depreciation expenses increased $.5 million from 1999 to 2000
reflecting new equipment and software purchased in 2000.


                                       15

<PAGE>   16


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



Included in the Company's operating expenses for the nine-months ended September
30, 2000 is amortization of deferred non-cash compensation charges of $1.6
million. As of September 30, 2000, the Company's balance sheet reflected
deferred non-cash compensation charges of $3.7 million related to certain stock
option and warrant grants that were considered compensatory. The deferred charge
related to stock options ($3.2 million) is being amortized over the four-year
vesting period associated with the related options, ending principally in the
third quarter of 2003 and the first quarter of 2004. The deferred charge related
to warrants ($.5 million) is being amortized through February 2001,
corresponding to the initial term of the underlying service agreement.


         INTEREST INCOME

Interest income consists primarily of interest earned on cash and cash
equivalents and short-term investments. Interest income increased to $1.8
million in the nine months ended September 30, 2000 from less than $.1 million
in the same period in 1999. This increase was primarily due to higher average
cash, short-term investment and restricted investment balances in 2000 as a
result of the net proceeds from the Company's initial public offering in
February 2000 and the net proceeds from a private offering of preferred stock in
September 1999.

         Other Information

For the nine months ended September 30, 1999 and 2000, the Company had losses
before taxes, interest, depreciation and amortization ("EBITDA") of $15.9
million and $51.3 million, respectively. Additionally, non-cash compensation
charges of $.5 million and $1.6 million are in included in EBITDA for the nine
month periods ended September 30, 1999 and 2000, respectively.

         LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2000, the Company had approximately $24.5 million in cash,
cash equivalents, restricted investments and short-term investments. The Company
anticipates that working capital and capital expenditures will need to be funded
from additional debt or equity financing sources before March 31, 2001. Without
the proceeds from additional financing sources, management would have to
significantly reduce spending in all areas of the business, including reductions
of the Company's plans for marketing and advertising during 2001. Such
reductions, if necessary, could significantly impact the Company's ability to
generate revenue and could cause the Company to cease operations. Additional
financing may not be available when needed or, if available, such financing may
not be on terms favorable to the Company. If additional funds are raised through
the issuance of equity securities, the Company's shareholders may experience
significant dilution.

On September 29, 2000 the Company received $10 million from Capital Z, its
largest investor in exchange for an Equity Rights Certificate, initially
exercisable for 1,253,918 million shares of the Company's common stock. This
transaction is more fully described above in Item 1, Note 4.

Additionally, on February 15, 2000, the Company completed the sale of 4,197,500
shares of its common stock at an initial public offering price of $12.00 per
share, raising approximately $44.9 million net of offering costs, underwriting
discounts and commissions.

Prior to its initial public offering, the Company had financed its operations
primarily through private placements of securities, raising over $74 million,
net of offering costs.

Net cash used in operating activities was $48.8 million and $13.6 million in the
nine months ended September 30, 2000 and 1999, respectively.

In the nine months ended September 30, 2000 the cash used in investing
activities included $43.7 million that was deposited into an escrow investment
account. This account was established by the Company and its advertising agency
to maintain funds set aside by the Company for non-cancelable and approved
expenditures and services of the advertising agency. Disbursements from the
escrow account can only be made for advertising expenditures the Company has
approved in advance.

On August 2, 2000, the Company acquired certain assets and assumed certain
liabilities of HomeSpace. The consideration paid for the acquired assets
consisted of $6.2 million in cash and 639,077 shares of the Company's restricted
common stock.


                                       16

<PAGE>   17


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



The cash portion of the purchase price was funded from the Company's short-term
investments that the Company had invested in with proceeds from its February
2000 initial public offering of common stock.


INCOME TAXES:

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


RISKS

         If the Company is unable to obtain additional funds from subsequent
         financings it will have to significantly curtail the scope of its
         operations and alter its business model

The Company must continue to achieve and sustain rapid growth for the Company's
business model to succeed. To accomplish this, the Company will need to raise
additional funds in the near future, from equity or debt sources. The Company's
future cash requirements will be substantial. If additional or sufficient
financing is not available when required or is not available on acceptable
terms, the Company may be unable to successfully continue operating its business
or may not be able to promote its brand name, develop or enhance its service,
take advantage of business opportunities or respond to competitive pressures,
any of which could have a material adverse effect on the Company's financial
condition and results of operations.

         The Company's Limited Operating History Makes the Company's Business
         and Prospects Difficult to Evaluate.

The Company has a limited operating history. The Company was formed in 1996 and
began serving consumers across the United States in July 1998. There is no
significant historical basis to assess how the Company will respond to
competitive, economic or technological challenges. The Company's business and
prospects must be considered in light of the risks and uncertainties frequently
encountered by companies in the early stages of development, particularly
companies like LendingTree, Inc. who operate in new and rapidly developing
online marketplaces. The Company's failure to address these risks and
uncertainties could materially impact the Company's results of operations and
financial condition.

         The Company Has A History of Losses and Expect Losses In The Future.

The Company has never been profitable. The Company incurred losses from
operations of approximately $52.8 million in the nine months ended September 30,
2000 and $16.1 million in the same period of 1999. As of September 30, 2000, the
Company had an accumulated net deficit of approximately $83.2 million.

The Company anticipates that its future expense levels will continue to exceed
future revenue based on the Company's operating plans for at least the next
twelve months. The Company may find it necessary to accelerate expenditures
relating to the Company's sales and marketing efforts or otherwise increase the
Company's financial commitment to creating and maintaining brand awareness among
consumers and lenders. If the Company's revenue grows at a slower rate than the
Company anticipates, or if the Company's spending levels exceed the Company's
expectations or cannot be adjusted to reflect slower revenue growth, the Company
may not achieve or sustain profitability.

         The Company's Business Model is Unproven and Could Fail.

The Company's business model and profit potential are unproven and no assurances
can be made that it will be able to become profitable. To achieve profitability
in the Company's marketplace segment the Company's revenue per consumer must
exceed the costs of attracting a consumer to the Company's Website. To date,
this has not been the case. The Company's revenue model depends heavily on
revenue generated from lenders participating in the Company's network who pay
the Company fees based upon their receipt of credit requests (referred to as
transmission fees) and fees based upon loan closings (referred to as closed-loan
fees). The Company also license its Lend-X technology to other companies who can
create single and multi-lender online marketplaces. To generate revenue the
Company must rapidly achieve broad market


                                       17

<PAGE>   18


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



acceptance of our service by both lenders and consumers who have traditionally
used other means to lend and borrow money. In addition, the Company must attract
a sufficient number of consumers with credit profiles targeted by its lenders.
It is possible that the Company's online loan marketplace model will not gain
the widespread acceptance necessary to support the Company's business, in which
case the Company may find it necessary to alter its business model. The Company
cannot accurately predict what, if any, changes it would make to its business
model in response to the uncertainties in the online lending market. These
changes might include shifting all or a portion of the Company's fees to
consumers or reducing fees currently charged to lenders to expand volume more
quickly. Shifting fees to consumers may not be feasible, as other companies may
be able to offer comparable services with no fees.

         The Company's Operating Results May Be Negatively Impacted By
         Fluctuations in Interest Rates.

During the nine months ended September 30, 2000, revenue earned from mortgages,
traditionally a market segment that is greatly impacted by changes in interest
rates, represented approximately 38% of the Company's total revenue. While
interest rates during this period were rising, the Company's business continued
to show increases in website traffic, transmitted qualifcation forms for
mortgages and revenue from closed-loan fees for mortgages over the same period
of 1999. However, during future periods of rising interest rates the Company may
experience a decline in consumer traffic to the Company's website and during
periods of robust credit demand, typically associated with falling interest
rates, lenders may have less incentive to use the Company's marketplace. Either
of these events could reduce the Company's revenue and the Company cannot assess
the effects of interest rates on the Company's business over a broad range of
interest rate environments.


         The Company's Quarterly Operating Results Are Not an Indication of the
         Company's Future Results.

The Company's quarterly operating results may fluctuate significantly in the
future due to a variety of factors that affect the Company's revenue or expenses
in any particular quarter. The Company's quarterly results will fluctuate in
part based on the demand for and supply of consumer loans which are a function
of seasonal and other fluctuations in interest rates and related economic
factors, all of which are outside of the Company's control. These temporary
fluctuations could adversely affect the Company's business. In addition, the
Company plans to continue to increase its operating expenses significantly to
expand the Company's sales and marketing, administration, maintenance and
technical support and product management groups. If revenue falls below the
Company's expectations in any quarter and the Company is unable to quickly
reduce the Company's spending in response, the Company's operating results would
be lower than expected.

In addition, the Company expects that as its business matures it will experience
seasonal fluctuations in its operating results due to fluctuations in consumer
credit markets during the year. For example, home buying behavior is seasonal.
Typically the second and third quarters of a year have a greater number of
mortgage closings as compared to the first and fourth quarters. Because of the
Company's limited operating history, it has not been possible for the Company to
assess the impact of seasonal effects on its business.


         If The Company Is Unable To Maintain The Company's Brand Recognition,
         Consumer And Lender Demand For The Company's Service Will Be Limited.

If the Company fails to promote and maintain its brand successfully or incurs
significant expenses in promoting its brand and fails to generate a
corresponding increase in revenue as a result of its branding efforts, the
Company's business could be materially adversely affected. The Company believes
it has successfully built a recognizable brand. However, continuing to build
brand awareness of the LendingTree marketplace is critical to achieving
increased demand for the Company's service. Brand recognition is a key
differentiating factor among providers of online lending services, and the
Company believes it will be increasingly important as competition intensifies.
In order to maintain the Company's brand awareness, the Company must succeed in
its marketing efforts, provide high-quality service and increase the number of
consumers using its marketplace. If visitors to the Company's website do not
perceive the Company's existing service to be of high quality or if the Company
alters or modifies its existing service, introduce new services, or enter into
new business ventures that are not favorably received, the value of the
Company's brand could be diluted, which could decrease the attractiveness of the
Company's service to consumers and lenders.


                                       18


<PAGE>   19


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



         Lenders in the Company's Network are not Precluded from Offering
         Consumer Credit Products Outside the Company's Marketplace.

If a significant number of potential consumers are able to obtain loans from the
Company's participating lenders without utilizing the Company's service, the
Company's ability to generate revenue may be limited. Because the Company does
not have exclusive relationships with the lenders whose loan products are
offered on its online marketplace, consumers may obtain offers and loans from
these lenders without using the Company's service. The Company's lenders can
offer their products directly to consumers through brokers, mass marketing
campaigns, or through other traditional methods of credit distribution. These
lenders can also offer their products over the Internet, either directly to
prospective borrowers, through one or more of the Company's online competitors,
or both.


         If The Company's Participating Lenders Do Not Provide Competitive
         Levels Of Service To Consumers, The Company's Brand Will Be Harmed And
         The Company's Ability To Attract Consumers To The Company's Website
         Will Be Limited.

The Company's ability to provide a high-quality borrowing experience depends in
part on consumers receiving competitive levels of convenience, customer service,
pricing terms and responsiveness from the Company's participating lenders. If
the Company's participating lenders do not provide consumers with competitive
levels of convenience, customer service, price, and responsiveness the value of
the Company's brand may be harmed and the number of consumers using the
Company's service may decline.

         The Company may not be able to manage its expanding operations
         effectively.

The Company has recently experienced a period of rapid expansion. In order to
execute its business plan, the Company must continue to expand significantly.
The Company's inability to expand its operations in an efficient manner could
cause its expenses to grow disproportionately to its revenue, or revenue to
decline or grow more slowly than expected, or could otherwise have a material
adverse effect on its business. . The Company's anticipated future growth,
combined with the requirements it now face as a public company, will continue to
place a significant strain on its management, systems, and resources. The
Company will need to continue to expand and maintain close coordination among
its technical, accounting, finance and sales and marketing departments. The
Company may not succeed in these efforts.


         The Company May Experience Reduced Visitor Traffic, Reduced Revenue And
         Harm to the Company's Reputation In The Event of Unexpected Network
         Interruptions Caused by System Failures.

Any significant failure to maintain the satisfactory performance, reliability,
security and availability of the Company's website, filtering systems or network
infrastructure may cause significant harm to the Company's reputation, its
ability to attract and maintain a high volume of visitors to its website, and to
attract and retain participating consumers and lenders. The Company's revenue
depends in large part on the number of credit requests submitted by consumers.
Any system interruptions that result in the inability of consumers to submit
these credit requests, or more generally the unavailability of the Company's
service offerings, could have an adverse impact on the Company's revenue. In
addition, the Company believes that consumers who have a negative experience
with the Company's website may be reluctant to return or recommend LendingTree
to other potential consumers.

In the past, the Company's website has experienced outages and decreased
performance. In the worst such instance to date, the Company experienced a
service outage for a period of approximately nine hours due to a database
software failure. If similar outages occur in the future, they may severely harm
the Company's reputation and the Company's ability to offer the Company's
service. The Company's computer hardware is located in leased facilities in
Beltsville, Maryland. A full backup system is located in Cupertino, California.
If both of these locations experienced a system failure, the performance of the
Company's website would be harmed. These systems are also vulnerable to damage
from fire, floods, power loss, telecommunications failures, break-ins, and
similar events. The Company's insurance policies may not compensate us for any
losses that may occur due to any failures or interruptions in the Company's
systems. Any extended period of disruptions could materially adversely affect
the Company's business, results of operations, and financial condition.


                                       19

<PAGE>   20

LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000


         Failure To Comply With Laws Governing The Company's Service Or Material
         Changes In The Regulatory Environment Relating To The Internet Could
         Have A Material Adverse Effect On Its Business.

The loan products available through the Company's Website and the real estate
agent referral and mortgage broker services available through the Company's
HomeSpace Service, are subject to extensive regulation by various federal and
state governmental authorities. Because of uncertainties as to the applicability
of some of these laws and regulations to the Internet and, more specifically, to
the Company's business, and considering its business has evolved and expanded in
a relatively short period of time, the Company may not always have been, and may
not always be, in compliance with applicable federal and state laws and
regulations. Failure to comply with the laws and regulatory requirements of
federal and state regulatory authorities may result in, among other things,
revocation of required licenses or registrations, loss of approved status,
termination of contracts without compensation, loss of exempt status,
indemnification liability to lenders and others doing business with us,
administrative enforcement actions and fines, class action lawsuits, cease and
desist orders, and civil and criminal liability. The occurrence of one or more
of these events could materially affect the Company's business, results of
operations and financial condition.

Many, but not all, states require licenses to solicit or broker to residents of
those states, loans secured by residential mortgages, and/or other consumer
loans, including credit card, automobile and personal loans. The Company is not
currently licensed and/or able to accept credit requests for all loan products
in every state. The Company is not currently accepting credit requests for loan
products from residents of states in which we are not licensed to provide those
products. In many of the states in which the Company is licensed, it is subject
to examination by regulators.

In addition, as a result of the HomeSpace transaction, the Company is required
to obtain real estate broker licenses, additional mortgage broker licenses and
individual call center personnel licenses in numerous states. Failure to obtain
these licenses/approvals could prevent the Company from receiving fees from the
real estate agent referral and mortgage services programs it offers and/or
subject the Company to the types of fines, forfeitures and litigation discussed
above.

As a computer loan origination system or mortgage broker conducting business
through the Internet, the Company faces an additional level of regulatory risk
given that most of the laws governing lending transactions have not been
substantially revised or updated to fully accommodate electronic commerce. Until
these laws, rules, and regulations are revised to clarify their applicability to
transactions conducted through electronic commerce, any company providing
loan-related services through the Internet or other means of electronic commerce
will face compliance uncertainty. Federal law, for example, generally prohibits
the payment or receipt of referral fees in connection with residential mortgage
loan transactions. The applicability of referral fee prohibitions to the
advertising, marketing, distribution and cyberspace rental arrangements used by
online companies like LendingTree, Inc. may have the effect of reducing the
types and amounts of fees that the Company may charge or pay in connection with
real estate-secured products.

Regulations promulgated by some states may impose compliance obligations on any
person who acquires 10% or more of the Company's common stock, including
requiring that person to periodically file financial and other personal and
business information. If any person acquires 10% or more of the Company's common
stock and refuses or fails to comply with these requirements, the Company may
not be able to obtain a license and existing licensing arrangements in
particular states may be jeopardized. The inability to obtain, or the loss of,
required licenses could have a material adverse effect on the Company's
operations or financial condition.

The parties conducting business with the Company, such as lenders and affiliated
Websites, similarly may be subject to federal and state regulation. These
parties act as independent contractors and not as our agents in their
solicitations and transactions with consumers. Consequently, the Company cannot
ensure that these entities will comply with applicable laws and regulations at
all times. Failure on the part of a lender or an affiliated Website to comply
with these laws or regulations could result in, among other things, claims of
vicarious liability or negatively impact the Company's reputation. The
occurrence of one or more of these events could materially adversely affect the
Company's business, results of operations, and financial condition.

         Legal Proceedings

The Company has been named as one of a number of defendants in a putative class
action lawsuit originally filed on September 7, 2000 in California Superior
Court in Contra Costa, California. The lawsuit was removed to federal court on
October 13, 2000, and is now captioned Thomas E. Ainsworth, et als. v. Ohio
Savings Bank, et als., Case No. C-00-3786, (N.D. Cal.). The other defendants
named in the action are Ohio Savings Bank, Costco Wholesale Corp., Costco
Financial Services Inc., First American Title Insurance Company and First
American Lenders Advantage. The complaint alleges various claims under
California law arising from a loan that plaintiffs obtained through HomeSpace
Services, Inc. ("HomeSpace") and Ohio Savings Bank in February 1999. In
particular, the complaint raises claims regarding the legality of certain

                                       20
<PAGE>   21

LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000


compensation paid to HomeSpace. The complaint seeks damages in the amount of
$10 million, plus unenumerated punitive damages. Although the Company was not a
party to plaintiffs' loan transaction, the lawsuit alleges that the Company is
liable as a result of its acquisition of certain assets of HomeSpace on August
2, 2000. The Company filed its answer to the complaint on November 8, 2000,
denying all liability. The Company believes that it has strong defenses against
both liability and class certification. It has retained counsel and intends to
defend vigorously against the claims.

The Company recently was the subject of a routine examination conducted by the
New York State Banking Department ("NYSBD"). At the close of the examination,
during the exit interview, NYSBD examiners raised an issue orally as to whether
the Company is obligated to make certain mortgage broker disclosures to
consumers under New York state law. As of this date, NYSBD has not instituted
any investigation or enforcement action. The Company could face a possible
administrative fine and/or penalty. The Company believes that the NYSBD
regulation which triggers the disclosures in question is inapplicable to it.
The Company intends to work with the NYSBD to clarify the application of its
regulations to the Company's activities, and, if necessary, to contest any fine
or penalty. Although there can be no assurances, the Company does not believe
that the outcome of any proceeding will have a material effect on its financial
condition or the results of its operations.

         As An Online Loan Marketplace The Company May Be Liable As A Result Of
         Information Retrieved From Its Website Or The Websites Of Businesses
         With Which The Company Maintains Relationships.

The Company may be subject to legal claims relating to information that is
published or made available on its website and the other websites linked to it.
The Company's service may subject us to potential liabilities or claims
resulting from:

     - lost or misdirected messages from our network lenders, consumers or
       vendors;

     - illegal or fraudulent use of e-mail; or

     - interruptions or delays in transmission of Qualification Forms or
       lenders' offers.

In addition, the Company could incur significant costs in investigating and
defending such claims, even if the Company ultimately is not found liable. If
any of these events occur, the Company's business could be materially adversely
affected.

         Failure To Protect The Company's Intellectual Property Rights Could
         Harm Its Brand-Building Efforts And Ability To Compete Effectively.

Failure to protect the Company's intellectual property could harm its brand and
our reputation, devalue our content in the eyes of our customers, and adversely
affect its ability to compete effectively. Further, enforcing or defending the
Company's intellectual property rights, including our service marks, patent
application, copyrights and trade secrets, could result in the expenditure of
significant financial and managerial resources. We regard our intellectual
property as critical to the Company's success. To protect the rights to the
Company's intellectual property, it relies on a combination of patent, trademark
and copyright law, trade secret protection, confidentiality agreements, and
other contractual arrangements with its employees, affiliates, clients, and
others. The protective steps the Company has taken may be inadequate to deter
misappropriation of its proprietary information. The Company may be unable to
detect the unauthorized use of, or take appropriate steps to enforce, its
intellectual property rights. The Company has applied for a U.S. patent and
filed a Patent Cooperation Treaty international patent application on its Lend-X
technology and its online loan market process. While the number of software and
business method patents issued by the U.S. Patent and Trademark Office has been
growing substantially in recent years, there is still a significant degree of
uncertainty associated with these patents. It is possible that the Company's
patent applications will be denied or granted in a very limited manner such that
they offer little or no basis for us to deter competitors from employing similar
technology or processes or allow the Company to defend against third party
claims of patent infringement.

         Breaches of the Company's network security could subject the Company to
         increased operating costs as well as litigation and other liabilities.

Any penetration of the Company's network security or other misappropriation of
its users' personal information could cause interruptions in its operations and
subject the Company to liability. Claims against the Company could also be based
on other misuses of personal information, such as for unauthorized marketing
purposes. These claims could result in litigation and financial liability.
Security breaches could also damage the Company's reputation. The Company relies
on licensed encryption and authentication technology to effect secure
transmission of confidential information. It is possible that advances in
computer capabilities, new discoveries, or other developments could result in a
compromise or breach of the technology that the Company uses to protect consumer
transaction data. The Company cannot guarantee that its security measures will
prevent security breaches. The Company may be required to expend significant
capital and other resources to protect against and remedy any potential or
existing security breaches and their consequences.

                                       21

<PAGE>   22


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



         Regulation Of The Internet Is Unsettled, And Future Regulations Could
         Inhibit The Growth Of The Internet, Decrease Visitors To The Company's
         Website And Otherwise Materially Adversely Affect The Company's
         Business.

Existing laws and regulations specifically regulate communications and commerce
on the Internet. Further laws and regulations that address issues such as user
privacy, pricing, online content regulation, taxation, and the characteristics
and quality of online products and services are under consideration by federal,
state, local, and foreign governments and agencies. Several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
the regulation of long distance telephone carriers and to impose access fees on
such companies. This regulation, if imposed, could increase the cost of
transmitting data over the Internet.

Moreover, it may take years to determine the extent to which existing laws
relating to issues such as intellectual property ownership and infringement and
personal privacy are applicable to the Internet. Many of these laws were adopted
prior to the advent of the Internet and related technologies and, as a result,
do not contemplate or address the unique issues of the Internet and related
technologies. The Federal Trade Commission and government agencies in certain
states have been investigating Internet companies regarding their use of
personal information. The Company could incur additional expenses if any new
regulations regarding the use of personal information are introduced or if these
agencies choose to investigate the Company's privacy practices. Any new laws or
regulations relating to the Internet, or new application or interpretation of
existing laws, could inhibit the growth of the Internet as a medium for commerce
or credit procurement which could, in turn, decrease the demand for the
Company's service or otherwise materially adversely affect the Company's
business, results of operations, and financial condition.

         The Company' Business Could Suffer If It Loses The Services Of Key
         Executives

If the Company loses the services of Douglas Lebda, its founder, Chief Executive
Officer, and a director, or any of its other executive officers or key
employees, the Company's ability to expand its business would be seriously
compromised. Mr. Lebda has been instrumental in determining the Company's
strategic direction and focus and in promoting the concept of an Internet-based
loan marketplace for consumers and lenders. The Company does not maintain key
person insurance on any of its key executives.

         The Company May Be Limited Or Restricted In The Way The Company
         Establishes And Maintains The Company's Online Relationships By Laws
         Generally Applicable To The Company's Business.

The Real Estate Settlement Procedures Act ("RESPA") and related regulations
generally prohibit the payment or receipt of fees or any other item of value for
the referral of a real estate-secured loan to a loan broker or lender. The act
and the related regulations also prohibit fee shares or splits or unearned fees
in connection with the provision of residential real estate settlement services,
including mortgage brokerage or lending services. Notwithstanding these
prohibitions, RESPA permits payments for goods or facilities furnished or for
services actually performed, so long as those payments bear a reasonable
relationship to the market value of the goods, facilities, or services provided.
Failure to comply with RESPA may result in, among other things, administrative
enforcement actions, class action lawsuits, and cease and desist orders and
civil and criminal liability.

The mortgage and home equity products offered through the Company's marketplace
are residential real estate secured loans subject to these provisions of RESPA.
Consequently, the Company's online relationships with lenders and other Internet
companies and websites that offer these products are subject to RESPA's
prohibitions on payment or receipt of fees for referrals and for unearned fees.
The Company believes that it has structured these relationships to comply with
these regulations. The applicability of RESPA's compensation provisions to these
types of Internet-based relationships, however, is unclear and the appropriate
regulatory agency has provided limited guidance to date on the subject.


                                       22

<PAGE>   23

LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

The Company has been named as one of a number of defendants in a putative class
action lawsuit originally filed on September 7, 2000 in California Superior
Court in Contra Costa, California. The lawsuit was removed to federal court on
October 13, 2000, and is now captioned Thomas E. Ainsworth, et als. v. Ohio
Savings Bank, et als., Case No. C-00-3786, (N.D. Cal.). The other defendants
named in the action are Ohio Savings Bank, Costco Wholesale Corp., Costco
Financial Services Inc., First American Title Insurance Company and First
American Lenders Advantage. The complaint alleges various claims under
California law arising from a loan that plaintiffs obtained through HomeSpace
Services, Inc. ("HomeSpace") and Ohio Savings Bank in February 1999. In
particular, the complaint raises claims regarding the legality of certain
compensation paid to HomeSpace. The complaint seeks damages in the amount of
$10 million, plus unenumerated punitive damages. Although the Company was not a
party to plaintiffs' loan transaction, the lawsuit alleges that the Company is
liable as a result of its acquisition of certain assets of HomeSpace on August
2, 2000. The Company filed its answer to the complaint on November 8, 2000,
denying all liability. The Company believes that it has strong defenses against
both liability and class certification. It has retained counsel and intends to
defend vigorously against the claims.

The Company recently was the subject of a routine examination conducted by the
New York State Banking Department ("NYSBD"). At the close of the examination,
during the exit interview, NYSBD examiners raised an issue orally as to whether
the Company is obligated to make certain mortgage broker disclosures to
consumers under New York state law. As of this date, NYSBD has not instituted
any investigation or enforcement action. The Company could face a possible
administrative fine and/or penalty. The Company believes that the NYSBD
regulation which triggers the disclosures in question is inapplicable to it.
The Company intends to work with the NYSBD to clarify the application of its
regulations to the Company's activities, and, if necessary, to contest any fine
or penalty. Although there can be no assurances, the Company does not believe
that the outcome of any proceeding will have a material effect on its financial
condition or the results of its operations.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On September 29, 2000, Capital Z Partners ("Capital Z"), the Company's largest
shareholder, purchased an Equity Rights Certificate from the Company for $10
million. This Certificate is initially exercisable for 1,253,918 shares of the
Company's common stock (equivalent to $7.975 per share), and warrants to
purchase 225,000 shares of the Company's common stock with an initial exercise
price of $7.975. Capital Z also received a commitment fee warrant to purchase
135,000 shares of the Company's common stock with an initial exercise price of
$7.975.

The Equity Rights Certificate may be exercised at the election of Capital Z
anytime up to and including the fifth business day following June 30, 2001. The
Equity Rights Certificate contains anti-dilution provisions, including
provisions that allow Capital Z to receive additional shares of the Company's
common stock if certain events occur prior to the expiration of the Certificate.
Such events include, among others, a subsequent financing in which the Company
receives consideration of at least $15 million, a Sale Transaction or a Going
Private Transaction (as those terms are defined in the Equity Rights
Certificate). If the Equity Rights Certificate has not been exercised by June
30, 2001 and the price of the Company's stock price is less than $7.975, Capital
Z will receive additional shares of the Company's common stock upon exercise of
the Certificate. Upon exercise of the Equity Rights Certificate, the warrants
issued therewith will have an exercise period that starts September 29, 2001 and
ends September 29, 2005. The anti-dilution provisions described above also apply
to the warrants and therefore the actual exercise price of the warrants will be
determined at the time of issuance.

The commitment fee warrant is exercisable at any time on or after September 29,
2001 and until September 29, 2005 at an exercise price of $7.975 per share. This
exercise price is subject to adjustment upon the occurrence of the events
described above.

The Company will use the proceeds from the Capital Z investment for general
corporate purposes.

On August 2, 2000, the Company acquired certain assets and assumed certain
liabilities of HomeSpace Services, Inc.

The consideration paid by LendingTree (approximately $11.2 million) for the
acquired assets consisted of $6.2 million in cash, 639,077 shares of the
Company's restricted common stock, valued at $4.7 million (using the average
closing stock price 3 days before and after the closing date) and $.3 million of
assumed liabilities. At closing, 169,851 shares of the common stock were placed
in escrow in the event of any post-closing indemnification claims and $4.2
million in cash was placed in escrow to be paid to trade creditors of HomeSpace.
The Company agreed to file a registration statement relating to the shares of
restricted common stock issued in connection with the acquisition by March 31,
2001 and agreed to use its reasonable best efforts to cause such registration
statement to be declared effective by the Securities and Exchange Commission.
The cash portion of the purchase price was funded from the Company's short-term
investments, the source of which was its February 2000 initial public offering
of common stock.

On February 22, 2000, the Company completed its initial public offering ("IPO")
in which it sold 4,197,500 shares of its common stock. The shares of common
stock sold in the offering were registered under the Securities Act of 1933, as
amended ("Securities Act"), on a Registration Statement on Form S-1 (the
"Registration Statement"), Registration Number


                                       23

<PAGE>   24


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



333-91839 that was declared effective by the Securities and Exchange Commission
on February 15, 2000. All 4,197,500 (including the underwriters over-allotment)
shares of the Company's common stock registered under the Registration Statement
were sold at a price of $12.00 per share, resulting in net proceeds to the
Company of $44.9 million after underwriter fees and other related expenses. The
principal underwriters for this offering were Merrill Lynch & Co., Lehman
Brothers and Prudential Volpe Technology.


The net proceeds from the IPO have been and will be used for marketing and
advertising campaigns as well as general corporate purposes, including working
capital to fund anticipated operating losses and capital expenditures.

Simultaneously with the consummation of the initial public offering, each
outstanding share of the Company's Series A and Series D Preferred Stock along
with accumulated, unpaid in-kind dividends were automatically converted into
1.27 shares of common stock without payment of additional consideration. The
conversion of Series A and Series D Preferred Stock and accumulated, unpaid
in-kind dividends resulted in an additional 10.5 million shares of outstanding
common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company currently has no floating rate indebtedness, holds no derivative
instruments, and does not earn foreign-sourced income. All of the Company's
transactions occur in U.S. dollars and the Company does not have any investments
in foreign countries. Accordingly, changes in interest rates and currency
exchange risks related to these types of transactions do not have a direct
effect on the Company's financial position or results of operations.

The Company is subject to interest rate risks on its investment portfolio. The
Company attempts to mitigate interest rate risks on such investments by
following a policy of investing only in high credit quality and marketable
securities with maturities of nine months or less and by planning for liquidity
needs to help ensure the investments can be held to maturity. The Company cannot
currently quantify the risks associated with hypothetical changes in market
rates on its future investment portfolio.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:

NUMBER                            DESCRIPTION
------                            -----------

10.1+    Promissory Note dated November 7, 2000 from David Anderson to
         LendingTree, Inc.

10.2+    Stock Pledge Agreement dated November 7, 2000 by David Anderson for the
         benefit of LendingTree, Inc.

27.1*    Financial Data Schedule.

         * Filed herewith.
         + Management contract or compensatory plan or arrangement required to
           be filed as an exhibit.


(b) REPORTS ON FORM 8-K:

On October 12, 2000, the Company filed a Current Report on Form 8-K with the
Commission to report the pro-forma condensed consolidated financial statements
of LendingTree, Inc. as of and for the six months ended June 30, 2000 and for
the year ended December 31, 1999, reflecting the acquisition of certain assets
and assumption of certain liabilities of HomeSpace Services, Inc. and reflecting
the $10 million investment in the Company by Capital Z.


                                       24



<PAGE>   25


LendingTree, Inc.
Form 10-Q for the Three Months Ended September 30, 2000



                                    SIGNATURE

         Pursuant to the requirements of Section 13 or 15(d) 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: November 11, 2000             By: /s/ Keith B. Hall
      -----------------                 -------------------------------
                                        Keith B. Hall, Senior Vice President and
                                        Chief Financial Officer



                                       25