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

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

               For the fiscal year ended December 31, 2003

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

                      Commission File No. 000-30199



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


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


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


           ---------------------------------------------------
           Former name, former address and former fiscal year,
                      if changed since last report


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


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

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

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

      Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).  Yes  [  ]  No [ X ]



<PAGE>


      As of June 30, 2003 (the end of the Registrant's most recently
completed second fiscal quarter), the aggregate market value of the
Registrant's voting stock held by non-affiliates of the Registrant
(assuming for this purpose that executive officers, directors and 10%
stockholders are affiliates) was approximately $10,840,255, based on the
closing sales price of $0.82 on such date.  As of March 1, 2004, there were
39,225,044 shares of the Registrant's common stock issued and outstanding.
(This number represents the number of shares that are required to be
reported here.  This report describes additional shares of common stock
that are issuable upon conversion of outstanding shares of preferred stock
and the exercise of outstanding warrants and outstanding stock options.)


                   DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant's definitive proxy statement to be filed
pursuant to Regulation 14A under the Securities and Exchange Act of 1934,
in connection with the Registrant's 2004 Annual Meeting of Stockholders,
are incorporated by reference into Part III of this report.



<PAGE>


                            COOLSAVINGS, INC.
                         Form 10-K Annual Report
                   Fiscal Year Ended December 31, 2003

                            TABLE OF CONTENTS


                                                               Page
                                                               ----

PART I

Item 1.   Business. . . . . . . . . . . . . . . . . . . . . .     5

Item 2.   Properties. . . . . . . . . . . . . . . . . . . . .    23

Item 3.   Legal Proceedings . . . . . . . . . . . . . . . . .    23

Item 4.   Submission of Matters to a Vote of
          Security Holders. . . . . . . . . . . . . . . . . .    25


PART II

Item 5.   Market for the Company's Common Equity and
          Related Stockholder Matters . . . . . . . . . . . .    25

Item 6.   Selected Financial Data . . . . . . . . . . . . . .    26

Item 7.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations . . .    29

Item 7A.  Quantitative and Qualitative Disclosures
          About Market Risk . . . . . . . . . . . . . . . . .    47

Item 8.   Financial Statements and Supplementary Data . . . .    48

Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure. . . . . . .    86

Item 9A.  Controls and Procedures . . . . . . . . . . . . . .    86


PART III

Item 10.  Directors and Executive Officers
          of the Registrant . . . . . . . . . . . . . . . . .    86

Item 11.  Executive Compensation. . . . . . . . . . . . . . .    86

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management and Related Stockholder Matters. . .    86

Item 13.  Certain Relationships and Related Transactions. . .    86

Item 14.  Principal Accountant Fees and Expenses. . . . . . .    87


PART IV

Item 15.  Exhibits, Financial Statement Schedule and
          Reports on Form 8-K . . . . . . . . . . . . . . . .    87


SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . .    88






<PAGE>


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This annual report contains statements, including statements that are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, regarding our expectations, beliefs, hopes,
intentions or strategies. Where possible, these forward-looking statements
have been identified by use of words such as "project," "target,"
"forecast," "anticipate," "believe," "will," "expect," and similar
expressions. These forward-looking statements include, without limitation,
statements regarding our expectations of revenue growth, expense growth,
and capital spending.  Known and unknown risks, uncertainties and other
factors, both general and specific to the matters discussed in this annual
report, may cause our actual results and performance to differ materially
from the future results and performance expressed in, or implied by, these
forward-looking statements.  These risks, uncertainties and other factors
include, without limitation, our ability to secure financing to meet our
long-term capital needs, our ability to protect our patents, trademarks and
proprietary rights, our successful introduction of new services and
features, our ability to add new members, our ability to continue to
attract, assimilate and retain highly skilled personnel,  our ability to
secure long-term contracts with existing advertisers and attract new
advertisers, and our ability to compete successfully against current and
future competitors.  For a discussion of these and other risks,
uncertainties and factors which could cause actual results to differ
materially from those expressed in, or implied by, the forward-looking
statements, see "Item 1. Business - Risk Factors".

      We undertake no obligation to update any of the forward-looking
statements after the date of this report to conform these statements to
actual results or otherwise to reflect new developments or changed
circumstances, unless expressly required by applicable federal securities
laws.  You should not place undue reliance on such forward-looking
statements.


                                *   *   *


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


                                *   *   *


      ALL DOLLAR AMOUNTS INCLUDED IN THIS REPORT ARE EXPRESSED IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE INDICATED.





<PAGE>


                                 PART I

ITEM 1.  BUSINESS

OVERVIEW

      CoolSavings is an online direct marketing and media company with a
database of 11.5 million active consumers who have taken an action on our
web site in the last twelve months.  We help marketers reach their target
consumers by leveraging our broad marketing network, sophisticated
analytics and proprietary technology.  Our mission is to be the leading
provider of promotional offers to consumers while most effectively
connecting marketers to their best customers.  Using CoolSavings, marketers
drive sales and customer traffic to their stores, web sites, catalogues or
call centers by taking advantage of a wide variety of highly targeted
marketing services, including lead generation, couponing, targeted e-mail,
category newsletters, direct mail, product sampling and banner
advertisements. In addition, our proprietary database technology and
analytical tools track consumer response, shopping preferences and site
behavior at the household and shopper level to provide our clients with a
wide range of sophisticated consumer data which they may use to make
smarter marketing decisions.

      Our web site, coolsavings.com, and our marketing network offer
consumers convenient and personalized incentives for goods and services
from a broad range of advertisers, including national retailers, consumer
packaged goods manufacturers, media and publishing companies, and travel
and financial service providers.

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

      Beginning in 2001, we entered into a series of transactions with
Landmark Communications, Inc. and Landmark Ventures VII, LLC (together,
"Landmark") whereby Landmark made loans to and equity investments in our
Company.  This series of transactions, (collectively, the "Landmark
Transaction") resulted in Landmark having control over our Company.  For a
more detailed discussion of Landmark's investment, please see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Investment by Landmark in CoolSavings, Inc." and Note 2 of our
Financial Statements contained in "Item 8. Financial Statements and
Supplementary Data."  Landmark's principal business interests are in the
media industry, and it owns and operates entities engaged in newspaper and
other print publishing, television broadcasting and cable television
programming services. Landmark has experience in building value and
improving operating, marketing and financial performance in companies that
it owns or controls.


THE COOLSAVINGS SOLUTION

      Our web site and marketing network offer convenient and personalized
incentives for goods and services from a broad range of advertisers,
including national retailers, consumer packaged goods manufacturers, media
and publishing companies, and travel and financial service providers.  We
offer a wide array of highly targeted promotional services for advertisers
including lead generation, couponing, targeted e-mail, category
newsletters, direct mail, product sampling and banner advertisements.




<PAGE>


BENEFITS TO COOLSAVINGS ADVERTISERS

      The benefits to advertisers of using CoolSavings include:

      .     Access to 11.5 million active members who are qualified,
            receptive shoppers. Advertisers are able to reach millions of
            active shoppers who visit our web site or the web sites of our
            marketing network partners looking for shopping values.  These
            shoppers are willing to provide demographic data about
            themselves and others in their households.  Advertisers
            reach our database of consumers through our web site, email,
            and through traditional direct mail programs.

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

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

      .     Single source online direct marketing solution.  We offer
            advertisers a full range of promotional incentives that can be
            targeted to significant life events a customer may experience,
            such as getting married, having a child, buying a first home,
            etc.  Redeemable both online and in-store, these services
            include printable coupons for brick-and-mortar stores,
            electronic codes for online purchases, targeted e-mails, lead
            generation for trial subscriptions and samples, notices of
            ongoing sales where no certificate is necessary, and banner
            advertisements.

      .     Ability to track purchases by the consumer.  We can track,
            through the use of unique bar codes, the redemption of grocery
            coupons by our members.  We can also target prospective
            customers for our advertisers and track their individual online
            purchases.  With the cooperation of advertisers and retailers,
            we can also track certain offline purchases of our members.
            These capabilities result in highly accountable campaigns that
            can be improved over time.



<PAGE>


      .     Lower set-up costs and improved time to market.  Our
            investments in infrastructure, technology and production
            systems allow our advertisers to deploy their promotional
            campaigns without the upfront expense in production and
            technical development associated with any other media,
            therefore providing significant cost savings.  We enable
            our advertisers to deploy their online marketing campaigns
            quickly and with a high degree of reliability, thus improving
            our advertisers' return on investment.

      .     Multiple distribution vehicles.  Advertisers can reach
            millions of consumers via promotions on our web site,
            through our marketing network, by direct mail, or directly with
            their own consumers by licensing our proprietary technology for
            use at their own web sites.


THE COOLSAVINGS STRATEGY AND SERVICES

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

      .     Continue investment in the coolsavings.com web site, its
            features, its brand, and its member base.  We believe the
            service continues to generate high incremental returns.
            Maintenance and improvement in the service have a high return
            on investment given their low cost.  We intend to continue to
            promote our brand online, with advertising campaigns on high
            traffic web sites designed to drive new and returning consumers
            to interact with the service. As this traffic grows, we expect
            that our services will be attractive to additional advertisers.
            We will therefore continue our investment in features and
            services that improve the way our advertisers communicate to
            our consumers.

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

      .     Develop third party network marketing relationships.  We intend
            to continue to pursue relationships to distribute our brand and
            offer content to consumers through partnerships with high
            quality web-centric partners.

      .     Rollout new incentive types that take advantage of the growing
            infrastructure for electronic transactions to meet advertiser
            demands and consumer desires.  We intend to make these
            investments with a view toward long-term sustainability and
            leadership.



<PAGE>


      DELIVERY OF INCENTIVES

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

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

      The promotional services that we provide our advertisers include:

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

      .     Lead Generation.  We provide advertisers a method of generating
            permission-based leads by providing free sample or trial
            offers of their products or services to our members.  These
            offers are targeted to our members by demographic profile and
            shopping preferences.  Members voluntarily provide the
            advertiser with contact information such as name, e-mail and
            mailing address, as well as other data about their households
            in order to participate in the client's offer.

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

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

      .     Coupon Technology.  Clients with a need to offer secure,
            trackable print-at-home coupons may do so by licensing the use
            of our Coupon Technology ASP Solution.  This allows clients
            to offer electronic coupons on their web sites, through their
            e-mails, or through their electronic advertisements.  We
            provide the technology, reporting, tracking and production
            services to the clients.

      .     Direct Mail.  We provide advertisers an additional communi-
            cation channel by combining postal and e-mail communications
            in convergent campaigns.  Refreshed monthly with new names,
            our postal list currently includes more than 10 million
            consumers that have opted in to receive special offers.



<PAGE>


      ANALYTIC AND RESEARCH SERVICES

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


SALES AND MARKETING

      We have built a sales organization dedicated to developing and
maintaining close relationships with advertisers and advertising agencies.
Our sales force is organized into three groups to effectively manage the
breadth and diversity of our key strategic advertisers and advertising
agencies.  We intend to continue to build these relationships and expand
our reach into five vertical industry segments:  retail, consumer packaged
goods, personal and professional services, media and entertainment, and
financial services.

      Our marketing department is dedicated to promoting the CoolSavings
brand, acquiring members for our service, and initiating product and
service improvements that meet the needs of our members and advertisers.
Currently and historically, we have made heavy use of online advertising
consisting of online banner advertisements on high-traffic web sites such
as portals and search engines.  We also have developed network affiliate
programs in which other companies send consumers to the CoolSavings web
site and receive a fee per each resulting member registration.  Some of our
advertisers provide links from their own web sites that click through to
offers on CoolSavings.


OPERATIONS AND TECHNOLOGY

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

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

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

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

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

      .     our campaign manager software, SavingsCenter, which we and our
            advertisers use to create, target and report on the
            effectiveness of our clients' offers; and

      .     our email system that allows us to deliver Solo Targeted
            E-mail, Direct E-mail, Select Response surveys and Category
            Newsletters on a highly targeted basis to our consumers who
            have specifically requested the contact from our advertisers.



<PAGE>


      Our system has been designed around industry-standard architecture
and is designed to provide availability 24 hours-a-day, seven days-a-week.
Occasionally in the past, we have disconnected our servers to make upgrades
or maintenance checks on our system.  Our system has been available to the
public approximately 99.7% of the time since our launch in 1997.

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


INTELLECTUAL PROPERTY

      We currently hold all rights, title and interest to two United States
Patents, No. 5,761,648, entitled "Interactive Marketing Network and Process
Using Electronic Certificates" (the "'648 Patent"), and No. 5,855,007,
entitled "Electronic Coupon Communication System" (the "'007 Patent").
Currently, we are a defendant in two lawsuits filed by a competitor, each
of which alleges that our technology or business methods infringe on the
competitor's patent.  In connection with one of the lawsuits, our '648
Patent is currently in re-examination with the United States Patent and
Trademark Office.  The lawsuits seek, among other things, to prevent us
from using methods that allegedly violate the competitor's patents.  See
"Item 3. Legal Proceedings" for further discussion.

      In addition, we hold all rights, title and interest to two United
States Patent Applications, including Series Nos. 60/416,981 (filed October
8, 2002) and 10/677,555 (filed October 2, 2003) entitled "Secure
Promotions", and Serial No. 10/760,701 (filed January 20, 2004) entitled
"System and Method of Presenting Offers by Way of a Computer Network."

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

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


COMPETITION

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

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

      .     advertiser identification and retention;

      .     brand recognition and credibility;



<PAGE>


      .     pricing of our services;

      .     breadth of our service offerings for advertisers and consumers;

      .     reliability of service and quality of advertiser support;

      .     advertiser and member acquisition costs;

      .     membership size and demographics;

      .     ability to source and activate members;

      .     frequency of use and consumer response rates;

      .     technological expertise; and

      .     general demand for online marketing services.

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

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

      We also encounter competition from a number of other sources,
including other online direct marketers, online publishers, companies
engaged in advertising sales networks, advertising agencies and other
companies that facilitate Internet advertising.


EMPLOYEES

      As of March 1, 2004, we had 138 full-time employees.  We have never
had a work stoppage and our employees are not covered by any collective
bargaining agreement.  We consider our relations with our employees to be
good.


AVAILABLE INFORMATION

      We maintain an Internet web site at http://www.coolsavings.com that
includes a hypertext link to the Securities and Exchange Commission's (SEC)
web site (http://www.sec.gov), where our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all
amendments to those reports are available without charge, as soon as
reasonably practicable following the time that they are filed with or
furnished to the SEC.  Alternatively, all materials that we file with the
SEC may be read and copied at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549.  Information related to the operation
of the Public Reference Room can be obtained by calling the SEC at 1-800-
SEC-0330.




<PAGE>


RISK FACTORS

      You should carefully consider the risks, uncertainties and other
factors described below because they could materially and adversely affect
our business, financial condition, operating results, cash flow and
prospects, and/or the market price of our common stock.

      WE HAVE A HISTORY OF NET LOSSES

      We incurred net losses and negative cash flows in all years prior to
2003.  We may not be able to sustain profitability in the future.  As of
December 31, 2003, our accumulated deficit was $97,211.

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

      At December 31, 2003, we had $7,347 in cash and cash equivalents.  We
are in default under the terms of an Amended and Restated Senior Secured
Loan and Security Agreement dated July 30, 2001 (the "Amended and Restated
Loan Agreement") with Landmark.  The entire loan plus accrued interest,
totaling $6,141 at December 31, 2003, is immediately due and payable at the
option of Landmark.  Furthermore, Landmark could at any time require us to
redeem any or all of the shares of Series B Preferred Stock held by
Landmark, which had an aggregate redemption value of $24,805 as of
December 31, 2003.  Landmark has reserved its rights with respect to all
breaches and defaults, and Landmark is under no obligation to advance us
any additional funds.  If we are unable to generate sufficient cash flows
from operations or obtain continuing financing to meet our long-term
capital needs, we may be unable to operate our business.

      We have received a report from our independent auditors for our
fiscal year ended December 31, 2003 containing an explanatory paragraph
that describes the uncertainty as to our ability to continue as a going
concern because, as of the date they issued their report, we did not have
access to sufficient committed capital or cash flow from operations to meet
our needs in the event Landmark exercised some or all of its rights to
accelerate payment under our obligations to Landmark.  See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

      WE DERIVE MOST OF OUR REVENUES FROM CONTRACTS WITH OUR ADVERTISERS
THAT MAY BE CANCELLED ON 30-DAYS NOTICE

      A majority of our current advertising contracts permit either party
to terminate the contract upon 30-days advance written notice.  We may be
unsuccessful in securing longer commitments. Some advertisers prefer short-
term contracts because they use our service to promote limited-time
promotional events or seasonal products and services.  The possibility that
our advertising contracts can be terminated on 30-days' advance written
notice makes it difficult for us to forecast our revenues.  We may not be
able to renew our existing contracts or attract new advertisers.

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

      We expect that, as the number of services and competitors in Internet
advertising and direct marketing grows, we will be increasingly subject to
intellectual property infringement, unfair competition and related claims
against us. Third parties may also seek to invalidate our '648 Patent,
which is currently in re-examination with the United States Patent and
Trademark Office, and our '007 Patent.  Currently, we are a defendant in
two lawsuits filed by a competitor, each of which alleges that our
technology or business methods infringe on the competitor's patent.  The
lawsuits seek, among other things, to prevent us from using methods that
allegedly violate the competitor's patents.  In addition, competitors have


<PAGE>


in the past, and may in the future, name our customers as defendants in
these suits, which may cause these customers to terminate their
relationships with us.  Our efforts to defend these actions may not be
successful.  Our failure to prevail in this litigation could result in:

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

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

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

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

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

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

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

      WE MAY BE HARMED IF RETAILERS REFUSE TO ACCEPT ELECTRONIC PRINT-AT-
HOME COUPONS OR IF OUR ADVERTISERS FAIL TO HONOR THEIR PROMOTIONS ON OUR
WEB SITE OR TO COMPLY WITH APPLICABLE LAWS

      Our success depends largely upon retailers honoring electronic and
printed coupons, including ours, and upon advertisers reliably delivering
and accurately representing the listed goods and services.  Some
traditional retailers may not readily accept computer-generated coupons as
valid, in part because of their cashiers' lack of familiarity with them and
the risk that coupons can be counterfeited.  We have occasionally received,
and expect to continue to receive, complaints from our members about
retailers' failure to honor coupons, including ours.  If such complaints
become more common and/or costly to our members, these complaints may be
accompanied by requests for reimbursement or threats of legal action
against us. Any resulting reimbursements or related litigation could be
costly for us, divert management attention, or increase our costs of doing


<PAGE>


business.  In addition, our advertisers' promotion of their goods and
services may not comply with federal, state and local laws. Our role in
facilitating advertisers' sales activities may expose us to liability under
these laws. If we are exposed to this kind of liability, we could be
required to pay substantial fines or penalties, redesign our web site or
business processes, discontinue some of our services or otherwise spend
resources to limit our liability.

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

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

      During the second half of 2003, we experienced an increase in
advertising rates that have resulted in lower advertising activity.  While
this has been offset by subsequent increases in our own rates and by
temporary seasonal fluctuations, we do face a potential long-term risk of
diminished economic opportunity should advertising rates continue to
increase over the long term.

      WE DEPEND ON INTERNET SERVICE PROVIDERS TO DELIVER OUR E-MAIL
TRANSMISSIONS

      We send e-mail messages on behalf of advertisers to our members who
have requested to receive e-mail from us; we also assemble and transmit e-
mail newsletters to our members which contain promotions from multiple
advertisers.  In order for our members to receive our e-mails, we depend on
Internet Service Providers (ISPs) to accept and deliver those messages to
our members.

      Due to the proliferation of unsolicited e-mail, many ISPs are
developing technologies to limit or eliminate the delivery of unsolicited
e-mail to their members.  Although we send e-mail only to those members who
specifically have requested we do so, the technologies currently in use or
those being developed, such as e-mail surcharges (electronic stamps, ISP-
approved white lists, or e-mail sender password verifications), may not
respect the choices made by our members.  We, along with others in the
industry that send e-mail, have at various times during 2003 experienced
the failure of an ISP to deliver e-mails to their customers who also are
our members.

      Many of our members use e-mail services provided by one of the
relatively small number of large ISPs.  If one or more of those ISPs fail
to deliver our e-mail transmissions, our inability to communicate with
those members could harm our business.  In addition, if one or more of
those ISP's adopt electronic stamp technology or a white list, our costs
related to e-mail delivery may increase substantially.  In any of the prior
examples, we may not be able to send the volume of e-mail requested by an
advertiser.  Additionally, our inability to communicate with those members
may cause them to stop visiting our web site.  If our database of e-mail
addresses shrinks materially as a result of the failure of one or more ISPs
to deliver our e-mail, advertisers may be less willing to purchase our e-
mail products and services.



<PAGE>


      WE DEPEND ON THE SUCCESSFUL INTRODUCTION OF NEW SERVICES AND FEATURES

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

      WE DEPEND ON COMPELLING PROMOTIONAL OFFERS BY OUR ADVERTISERS

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

      OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL FLUCTUATIONS

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

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

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

      Some of our competitors may be able to devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing policies
and devote substantially more resources to web site and systems
development.  Increased competition may cause us to lose brand recognition
and market share and could otherwise harm our business.



<PAGE>


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

      The information in our database is an integral part of our business.
We do not sell member identifying information to third parties without the
specific and affirmative consent of the member.  Furthermore, we send our
e-mail notices and newsletters to members who have elected to receive them.

Nevertheless, some people who receive promotions from us may be unhappy
that we contacted them.  In addition, we provide advertisers with aggregate
information regarding member demographics, shopping preferences and past
behavior. There has been substantial publicity, governmental investigations
and litigation regarding privacy issues involving the Internet and
Internet-based advertising. To the extent that our data mining and/or other
activities conflict with any privacy protection initiatives or if any
private or personally identifiable information is inadvertently made
public, we may become a defendant in lawsuits or the subject of regulatory
investigations relating to our practices in the collection, maintenance and
use of information about, and our disclosure of these information practices
to, our members. Litigation and regulatory inquiries of these types are
often expensive and time consuming, and their outcome is uncertain. We may
need to spend significant amounts on our legal defense, and senior
management may be required to divert its attention from other aspects of
our business.  Furthermore, a judgment or decree may be entered against us,
which could require us to pay damages or to make changes to our present and
planned products or services.

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

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

      Additionally, acts of sabotage, known as denial of service attacks,
on prominent, high traffic web sites have caused extended interruptions of
service on those web sites. Like other operators of web sites, we could
also face system interruptions or shutdowns as a result of denial of
service attacks.

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



<PAGE>


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

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

      We rely on a third-party service provider to provide access to our
web site and support its operation.  Our web site infrastructure is co-
located at the suburban Chicago facility of Exodus, a Savvis Communications
Corporation data center.  Our support arrangement with this provider is for
a term of two years and may be canceled on 30 days' notice in certain
limited circumstances. In the event this arrangement is terminated, we may
not be able to find alternative service providers on a timely basis, on
terms acceptable to us or at all.

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

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

      OUR BUSINESS WILL BE HARMED IF OUR ONLINE SECURITY MEASURES FAIL

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



<PAGE>


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

      We regard the protection of our patent rights, copyrights, service
marks, trademarks, trade dress and trade secrets as important to our future
success.  However, the steps we take to protect these and other proprietary
rights can be costly, may require significant management resources and may
be inadequate.  If the steps we take are not adequate, potential
competitors may be more inclined to offer similar products and services.

      PATENTS

      Although we have two issued United States patents and have two
pending United States patent applications directed to different aspects of
our technology and business processes:

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

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

      .     our pending patent application for a "System and Method of
            Generating Sales Leads by Way of a Computer Network" may not
            result in the issuance of a patent;

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

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

      We cannot predict how United States laws and court decisions may
impact our proprietary rights.  Any such impact would need to be assessed
in the context of a particular situation.  We are also uncertain whether
countries other than the United States will grant patents for inventions
pertaining to Internet-related businesses, or as to the extent of
protection those foreign patents would afford if issued. As in the United
States, the legal standards applied abroad for intellectual property in
Internet-related businesses are evolving and unproven.  Any ruling or
legislation that reduces the validity or enforceability of our patents may
seriously harm our business.

      We may not prevent others from infringing on our patents and using
our proprietary rights.  Furthermore, one company we sued and an affiliate
of that company have filed lawsuits against us that are still pending, and
those lawsuits seek damages against us and further seek to prevent us from
using features of our system or business.  The plaintiffs in those lawsuits
and another company we sued in the past are taking steps in the United
States Patent and Trademark Office to contest our patent rights.  On May 2,
2000, the United States Patent and Trademark Office granted the request for
re-examination of our patent.  Therefore, our '648 Patent will be re-
examined.  The re-examination may result in the '648 Patent being narrowed
in scope or declared invalid.



<PAGE>


      TRADEMARKS, COPYRIGHTS, TRADE SECRETS AND DOMAIN NAMES

      We rely on a combination of laws and contractual restrictions to
establish and protect our proprietary rights.  The contractual arrangements
and other steps we have taken to protect our intellectual property may not
prevent misappropriation of our proprietary rights or deter independent
third-party development or use of similar intellectual property.

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

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

      WE MAY NOT BE ABLE TO CONTINUE TO ATTRACT, ASSIMILATE AND RETAIN
HIGHLY SKILLED PERSONNEL

      Our future success depends on the continued services of our senior
management and other key sales and technical personnel.  Our future success
also depends on our ability to identify, attract, retain and motivate
highly skilled employees. Competition for the best employees in our
industry remains intense.  We have occasionally encountered and may
continue to encounter difficulties in hiring and retaining highly skilled
employees, particularly qualified software developers for our web site and
database systems.  We may be unable to retain our key employees or
identify, attract, assimilate or retain other highly qualified employees in
the future.

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

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

      Laws and regulations that apply to Internet advertising and
communications and Internet users' privacy are becoming more prevalent. For
example, the United States Congress and Federal Trade Commission have
adopted laws and regulations regarding the online collection and use of
information from children and the content of Internet communications, and
the United States' Congress as well as various states regulate e-mail
marketing and online privacy.  However, even in areas where there has been
some legislative action, the laws governing the Internet remain largely
unsettled. There is no single government body overseeing our industry, and
some existing state laws have different and sometimes inconsistent
application to our business. It may take years to determine whether and how
existing laws, such as those governing intellectual property, privacy,
libel, taxation, determination of proper state jurisdiction taxation and
the need to qualify to do business in a particular state, apply to the
Internet, Internet advertising and online activities in general.  Also, we


<PAGE>


have conducted trivia quizzes and other contests and sweepstakes on our web
site, which may be subject to gaming and sweepstakes laws. Our attempts to
comply with these laws may be inadequate, in part because the effect of
these laws on our activities is often unclear.  In addition, since our web
site can be accessed from foreign countries, our business may be subject to
foreign laws and regulations.  Activities that may be acceptable in the
United States may not be acceptable in foreign jurisdictions.

      We expect that regulation of the Internet and Internet advertising
will intensify. New laws could slow the growth in Internet use and
otherwise adversely affect the Internet as a commercial medium, which would
harm our business. Due to the proliferation of unsolicited e-mail, the
United States' Congress passed the Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003 ("CAN-SPAM").  Additionally, a number
of proposals to restrict the collection of information about Internet users
and to tax Internet-based transactions are under consideration by federal,
state, local and foreign governmental organizations. A three-year federal
moratorium on new taxes on Internet access expired in October 2001, and was
extended in November 2001 for two years. This moratorium expired
November 1, 2003, and the future status of taxes on Internet transactions
is uncertain.  There is no federal law preempting state tax laws or the
levy of state sales taxes to online e-commerce activities. The taxation of
online transactions or other new regulations could increase our costs of
doing business or otherwise harm us by making the Internet less attractive
for consumers and businesses.  The application of existing laws such as
those governing intellectual property and privacy to the Internet and
Internet advertising lends additional uncertainty to our business.

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

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

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

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

      .     increase the cost of delivering our services to advertisers;

      .     reduce the effectiveness of our targeted promotional
            services; or

      .     in some other manner harm our business.






<PAGE>


      OUR SERIES B PREFERRED STOCKHOLDER HAS THE ABILITY TO EXERCISE
SIGNIFICANT CONTROL OVER US

      The holder of our Series B Preferred Stock has the ability to control
all matters requiring approval by our stockholders, including the election
and removal of directors and the approval of any merger, consolidation or
sale of all or substantially all of our assets. In addition, pursuant to
the terms of our Certificate of Incorporation, the Series B Preferred
stockholder is entitled to designate not less than a majority of the Board
of Directors of the Company. Among other limitations, without the approval
of the holders of at least a majority of the outstanding shares of Series B
Preferred Stock, we may not:

      .     amend our charter document or our bylaws;

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

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

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

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

      These restrictions provide the holder of the Series B Preferred Stock
with significant control over us and may discourage others from initiating
potential merger or other change of control transactions.

      OUR STOCKHOLDERS COULD SUFFER SUBSTANTIAL DILUTION AS A RESULT OF
OUTSTANDING PREFERRED STOCK, WARRANTS AND STOCK OPTIONS AND NEW ISSUANCES
OF PREFERRED STOCK AND WARRANTS, AND OUR STOCK PRICE MAY DECLINE IF A LARGE
NUMBER OF SHARES ARE SOLD OR THERE IS A PERCEPTION THAT SUCH SALES COULD
OCCUR.

      As of March 1, 2004, we had a total of 175,822,331 shares of Series B
and Series C Preferred Stock issued and outstanding. Under the terms and
conditions of the Series B and Series C Preferred Stock, these shares are
convertible into an equal number of shares of our common stock at the
holder's option. In addition, as of March 1, 2004, we had outstanding
warrants exercisable for 11,950,890 shares of our common stock and
outstanding stock options exercisable for 7,806,481 shares of our common
stock.  As described under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," we continue to issue additional shares of Series B Preferred
Stock and warrants as "in-kind" payments for dividends and interest
accruing on the Series B Preferred Stock and Senior Secured Note (as
defined in this Form 10-K).  Our stockholders may suffer substantial
additional dilution as a result of the issuance of additional shares of
preferred stock and warrants.  Furthermore, our stock price may decline as
a result of sales of a large number of the shares of common stock issuable
upon conversion or exercise of the preferred stock, warrants and/or stock
options or the perception that such sales could occur.



<PAGE>


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

      Our common stock currently trades on the OTC Bulletin Board (OTCBB).
Stockholders may have difficulty buying and selling our stock on the OTCBB.
Since the OTCBB is a broker driven marketplace, we are dependent on
professional market makers to facilitate trading of our stock on the OTCBB.
If market makers do not register to trade our stock on the OTCBB,
stockholders may not have a public market for the purchase and sale of our
securities.

      The market price of our common stock has been volatile and may be
subject to wide fluctuations.  Since our public offering in May 2000, the
per share price of our common stock has fluctuated from a high of $7.13 per
share to a low of $0.03 per share.  Factors that might cause the market
price of our common stock to fluctuate include, without limitation:

      .     quarterly variations in our operating results;

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

      .     the expiration, on November 12, 2003, of the covenant
            restriction by which Landmark had agreed it would not take
            action to cause us to become a privately-held company (such
            covenant was contained in an agreement among certain of our
            stockholders and Landmark;

      .     interpretation of the effect of our outstanding stock options
            and warrants on our overall capital structure;

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

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

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

      .     changes in our liquidity position;

      .     changes in key personnel;

      .     future sales of our common stock, including sales of common
            stock acquired upon conversion of our Series B Preferred Stock;

      .     announcements of material events related to outstanding loans
            to us; and

      .     volatility in the equity markets.

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





<PAGE>


ITEM 2.  PROPERTIES

      Our executive and operating offices are currently located in Chicago,
Illinois, in a 48,373 square foot leased facility. We occupy 32,226 square
feet, have sublet 12,173 square feet, and are attempting to sublet the
remaining unoccupied space.  The lease expires in 2010.  We also lease
3,251 square feet of office space in San Francisco, California, pursuant to
a lease that expires on July 31, 2005.  In 2003, due to low utilization, we
terminated our lease agreement for 3,078 square feet of office space in New
York City, New York.


ITEM 3.  LEGAL PROCEEDINGS

      On October 21, 1998, we instituted a lawsuit in the U.S. District
Court for the Northern District of Illinois (the "Northern District")
against Catalina Marketing International, Inc. ("Catalina Marketing"), and
its affiliate Supermarkets Online, Inc., for infringement of our '648
Patent, seeking unspecified damages and a permanent injunction against
further infringement.  The defendants filed counterclaims alleging
invalidity of our '648 Patent and sought unspecified damages and injunctive
relief. In addition, on February 18, 2000, Catalina Marketing filed a
request for re-examination of our '648 Patent with the United States Patent
and Trademark Office, which request was granted on May 2, 2000.  On
February 21, 2003, we settled this lawsuit and agreed to pay Catalina
Marketing $350.  The settlement dismissed all claims and counterclaims of
the parties, including claims for attorneys' fees and expenses, with
prejudice.  Our payment obligations under this settlement were shared with
a third party, resulting in a net expense to us of $150.  We recorded this
net expense as a charge to general and administrative expense in 2002.

      On November 15, 1999, Catalina Marketing filed a separate lawsuit
against us in the United States District Court for the Middle District of
Florida. The complaint alleged that our systems and methods infringed
Catalina Marketing's United States Patent No. 4,674,041 (the "'041
Patent"), and sought to enjoin us from further infringing its '041 patent.
The case was transferred to the Northern District which ruled that we did
not infringe the '041 patent.  On May 8, 2002, the United States Court of
Appeals for the Federal Circuit (the "Federal Circuit") affirmed-in-part,
reversed-in-part, and vacated-in-part the non-infringement ruling of the
Northern District.  The case was remanded to the Northern District for
further proceedings to determine whether we have any liability for
infringement of the '041 Patent.  On June 25, 2003, the Northern District
issued a claim construction ruling construing claim terms in dispute
between the parties.  Because Catalina agreed with us that, based on the
Northern District's construction of several claim terms of the '041 Patent,
Catalina Marketing could not establish infringement of the '041 Patent by
us, on July 10, 2003 the parties asked the Northern District to enter a
final judgment of non-infringement in favor of us.  On September 4, 2003,
Catalina Marketing appealed the final judgment of the Northern District's
Circuit; that appeal is currently pending. An unfavorable outcome for us is
considered neither probable nor remote by management at this time, and an
estimate of possible loss or range of possible losses cannot currently be
made.

      On February 12, 2000, Supermarkets Online, Inc. ("Supermarkets
Online"), an affiliate of Catalina Marketing, filed a lawsuit against us in
the United States District Court for the Central District of California.
The complaint alleges that our systems and methods infringe Supermarket
Online's United States Patent No. 6,014,634 (the "'634 Patent"), and seeks
unspecified damages and injunctive relief. We have filed with the Patent
and Trademark Office a request for re-examination of the '634 Patent, which
request for re-examination was granted in March 2001.  The lawsuit is
currently stayed, except that fact discovery is permitted.  This stay may
be lifted at any time, before or after the Patent and Trademark Office
issues its opinion.  An unfavorable outcome for us in regards to the
litigation is considered neither probable nor remote by management at this
time, and an estimate of possible loss or range of possible losses
currently cannot be made.


<PAGE>


      The two foregoing pending lawsuits, with Catalina Marketing and
Supermarkets Online, while pending for at least three years, are
nevertheless in the pre-trial discovery stage and may not be resolved
favorably to us. For example, we may be required to alter or stop selling
our services, or to pay costs and legal fees or other damages in connection
with these cases and the various counterclaims that have been asserted
against us, and our patents or future patents may be found invalid or
unenforceable. Furthermore, additional counterclaims, separate lawsuits or
other proceedings may be brought against us to invalidate our patents or
force us to change our services or business methods.

      In October 2002, we received a demand for arbitration from Coupco,
Inc. ("Coupco") relating to a dispute over our obligation to pay royalties
under a Patent License Agreement with Coupco which was executed on
April 16, 2000 (the "Patent License Agreement").  On July 29, 2003, we
entered into a Restated Patent License Agreement with Coupco which resolved
the dispute under similar terms as the Patent License Agreement.

      On August 23, 1999, we instituted a lawsuit in the Northern District
against Brightstreet.com, Inc. ("Brightstreet") for infringement of our
'648 Patent, seeking unspecified damages and a permanent injunction against
further infringement. Brightstreet filed counterclaims alleging invalidity
and unenforceability of our patent and seeking unspecified damages and
injunctive relief.  The parties agreed to a settlement of the lawsuit in
open court on October 29, 2001.  Subsequently, Brightstreet objected to the
report and recommendation of the court that the written settlement
agreement we presented most accurately reflected the agreement reached by
the parties.  On July 8, 2002, the Northern District fully adopted the
report and recommendation of the Magistrate Judge, concurring with our
belief that the litigation had been settled, denied Brightstreet's
objections to the report and recommendation, adopted the written settlement
agreement we presented, and dismissed the case with prejudice.  On
August 9, 2002, Brightstreet appealed the ruling of the Northern District.
On May 15, 2003, the Federal Circuit affirmed the Northern District's
decision that the litigation had been settled and dismissed the case with
prejudice.

      In March 2003, a customer claimed that we failed to deliver certain
services pursuant to the terms of a 2002 agreement with the customer.  We
believe the services were delivered in accordance with the terms of the
agreement.  In January 2004, we reached final agreement with the customer
to resolve this matter.  The agreement involves our delivery of certain
additional services at no charge, and our receipt from the customer of a
complete release from any future actions related to this matter.  We
recorded an expense of $184 and $70 in 2003 and 2002, respectively, in
general and administrative expenses to reflect the cost of these services.
Revenue will be recorded in the period the services are delivered.

      In February 2003, we received notice of entry of an order by the
United States Bankruptcy Court of the Northern District of California,
Division 3 approving a Settlement Agreement and Mutual Release with
Netcentives, Inc. (the "Settlement").  Pursuant to the Settlement, we
recorded a gain of $256, which was recorded in our financial statements as
a reduction of cost of revenues in 2002.  In addition, the Settlement
released us from any past or future obligation of payments to Netcentives,
Inc.  We had recorded a charge of $321 for unpaid service fees to
Netcentives, Inc. in 2001.  This charge was reversed against cost of
revenues in 2002.

      Currently, we are also involved in other legal proceedings arising in
the ordinary course of business, none of which is expected to have a
material adverse effect on our financial position or results of operations.

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


<PAGE>


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

      No matters were submitted to a vote of our security holders during
the fourth quarter of 2003.



                                 PART II


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

MARKET INFORMATION.

      Our common stock is traded on the OTC Bulletin Board under the symbol
"CSAV.OB."  The following table presents the per share high and low bid
prices of our common stock for the periods indicated as reported by the OTC
Bulletin Board.

                                                      High       Low
                                                      -----     -----

Fiscal Year Ended December 31, 2003
  First Quarter 2003. . . . . . . . . . . . . . .     $0.25     $0.09
  Second Quarter 2003 . . . . . . . . . . . . . .      1.15      0.21
  Third Quarter 2003. . . . . . . . . . . . . . .      0.90      0.56
  Fourth Quarter 2003 . . . . . . . . . . . . . .      0.90      0.51

Fiscal Year Ended December 31, 2002
  First Quarter 2002. . . . . . . . . . . . . . .     $0.17     $0.08
  Second Quarter 2002 . . . . . . . . . . . . . .      0.14      0.05
  Third Quarter 2002. . . . . . . . . . . . . . .      0.12      0.03
  Fourth Quarter 2002 . . . . . . . . . . . . . .      0.14      0.06

      On March 1, 2004, the closing sales price of our common stock was
$0.65, and our common stock was held by approximately 1,800 holders of
record.

      We have never declared nor paid any cash dividends on our common
stock. We currently anticipate that we will retain any future earnings for
the development and operation of our business. Accordingly, we do not
anticipate paying cash dividends on our common stock in the foreseeable
future.

      The holders of the Series B Preferred Stock are entitled to receive
8% per annum "in-kind" stock dividends.  As of December 31, 2003, 3,192,594
shares of Series B Preferred Stock were issuable with respect to accrued,
but not declared, dividends. Dividends are declared quarterly on January 1,
April 1, July 1, and October 1.


RECENT SALES OF UNREGISTERED SECURITIES

      In April 2003, we issued 7,976 shares of common stock to one former
employee who exercised his stock options, at an exercise price of $0.20 per
share, prior to our filing of a registration statement on Form S-8 covering
shares issuable under our stock option plan.  We issued these shares in
reliance upon the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as a transaction not involving a public
offering.


RECENT PURCHASES OF OUR EQUITY SECURITIES

      We did not purchase any of our equity securities during the fourth
quarter of 2003.



<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

      The statement of operations data set forth below for the years ended
December 31, 2003, 2002 and 2001 and the balance sheet data as of
December 31, 2003 and 2002 have been derived from audited financial
statements included elsewhere within this annual report. The statement of
operations data for the years ended December 31, 2000 and 1999 and the
balance sheet data as of December 31, 2001, 2000 and 1999 are derived from
audited financial statements that do not appear in this report.

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




<PAGE>


<table>


<caption>
                                                                  Year Ended December 31,
                                    ----------------------------------------------------------------------
                                          2003          2002           2001          2000          1999
                                       ----------    ----------     ----------    ----------    ----------
                                                (in thousands, except share and per share data)

                                     <c>           <c>           <c>           <c>           <c>
Statement of Operations Data:
  Net revenues. . . . . . . . . . .     $  32,392     $  26,360     $   22,173    $   39,866    $   12,916
  Cost of revenues. . . . . . . . .         2,654         3,030          5,739         7,172         1,851
                                       ----------    ----------     ----------    ----------    ----------
  Gross profit. . . . . . . . . . .        29,738        23,330         16,434        32,694        11,065
                                       ----------    ----------     ----------    ----------    ----------
  Operating expenses:
    Sales and marketing . . . . . .        17,054        14,281         17,814        42,335        17,933
    Product development . . . . . .         3,033         4,002          6,092         8,353         4,574
    General and administrative. . .         7,962         8,846         18,184        21,384         5,691
    Lease exit costs. . . . . . . .           519         2,148          --            --            --
    Loss on asset impairment. . . .            81         1,233          --            --            --
                                       ----------    ----------     ----------    ----------    ----------
        Total operating expenses. .        28,649        30,510         42,090        72,072        28,198
                                       ----------    ----------     ----------    ----------    ----------

    Income (loss) from operations .         1,089        (7,180)       (25,656)      (39,378)      (17,133)
      Interest (expense) income,
        net . . . . . . . . . . . .          (434)       (1,107)          (583)          138           265
      Amortization of debt discount         --            --            (3,096)        --            --
      Other settlement expense. . .         --            --              (219)        --            --
      Extraordinary gain. . . . . .         --            --               327         --            --
                                       ----------    ----------     ----------    ----------    ----------
    Net income (loss) . . . . . . .     $     655     $  (8,287)    $  (29,227)   $  (39,240)   $  (16,868)

    Deemed dividend representing
      the beneficial conversion
      feature of Series A Preferred
      Stock . . . . . . . . . . . .         --            --             --          (19,868)        --

    Accretion of convertible
      redeemable Series B
      Preferred Stock to
      redemption value. . . . . . .         --            --            (1,318)        --            --

    Cumulative dividend on
      Series B Preferred Stock. . .        (1,926)         (909)          (113)        --            --
                                       ----------    ----------     ----------    ----------    ----------



<PAGE>


                                                                  Year Ended December 31,
                                    ----------------------------------------------------------------------
                                          2003          2002           2001          2000          1999
                                       ----------    ----------     ----------    ----------    ----------
                                                                 (in thousands)
    Loss applicable to common
      stockholders. . . . . . . . .     $  (1,271)    $  (9,196)    $  (30,658)   $  (59,108)   $  (16,868)

    Loss per common share,
      basic and diluted . . . . . .     $   (0.03)    $   (0.24)    $    (0.78)   $    (1.63)   $    (0.57)

    Weighted average shares used
      to compute basic and diluted
      loss per common share . . . .     39,107,203    39,093,660     39,093,660    36,313,759   29,804,681

Balance Sheet Data:

  Cash and cash equivalents . . . .     $   7,347     $   4,867     $    5,144    $    7,041    $   17,489

  Working capital (deficit) . . . .           112        (1,299)       (10,761)       (1,623)       15,703

  Total assets. . . . . . . . . . .        15,061        14,005         17,964        29,510        29,590

  Long-term debt, including
    current portion . . . . . . . .         6,059         5,592         14,281         4,389           878

  Total convertible redeemable
    preferred stock . . . . . . . .        26,755        25,041         12,058         --            --

  Total stockholders' (deficit)
    equity. . . . . . . . . . . . .       (25,317)      (24,219)       (15,023)        9,743        19,120


</table>


<PAGE>


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

      You should read the following discussion of our financial condition
and results of operations along with the financial statements and the
related notes included elsewhere in this report. This discussion contains
statements that are not historical facts but may be forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995 regarding our expectations, beliefs, hopes, intentions or
strategies.  Where possible, these forward-looking statements have been
identified by use of words such as "project," "target," "forecast,"
"believe," "will", "expect", "anticipate," and similar expressions.  These
forward-looking statements include, without limitation, statements
regarding our expectations of revenue growth, expense growth, and capital
spending.  Known and unknown risks, uncertainties and other factors, both
general and specific to the matters discussed in this annual report, may
cause our actual results and performance to differ materially from the
future results and performance expressed in, or implied by, these forward-
looking statements. These risks, uncertainties, and other factors include,
without limitation, our ability to secure financing to meet our long-term
capital needs, our ability to protect our patents, trademarks and
proprietary rights, our successful introduction of new services and
features, our ability to add new members, our ability to continue to
attract, assimilate and retain highly skilled personnel, our ability to
secure long-term contracts with our existing advertisers and attract new
advertisers and our ability to compete successfully against current and
future competitors.  For a discussion of these and other risks,
uncertainties and factors which could cause actual results to differ
materially from those expressed in, or implied by, the forward-looking
statements, see "Item 1. Business - Risk Factors".

      We undertake no obligation to update any of the forward-looking
statements after the date of this report to conform these statements to
actual results or otherwise to reflect new developments or changed
circumstances, unless expressly required by applicable federal securities
laws.  You should not place undue reliance on such forward-looking
statements.

OVERVIEW

      For the year ended December 31, 2003, and for the first time in our
history, we recorded positive net income.  In addition, the fourth quarter
of 2003 represented our sixth consecutive quarter of positive cash flows
from operations.  We expect to generate sufficient cash flow from
operations to meet our ongoing operating obligations for the foreseeable
future, excluding any potential acquisitions that may require large cash
outlays, or any accelerated payments under our obligations to Landmark that
Landmark has the right to demand.

      We made important transitions during 2003.  We moved from a cash flow
driven approach of cost containment to a longer-term planning and
developing approach whereby we are making investments in additional staff
and product capabilities in our effort to continue the growth of the
business.  Although revenue grew 23% for the year, fourth quarter revenue
was down 3% compared to the same quarter of 2002.  Despite slower revenue
growth in the fourth quarter, we believe that the positive cash flow over
the last five quarters has given us the resources to address the pressing
issues that currently challenge the growth and profitability of the
business.

      During the fourth quarter of 2003, we added 10 new employees to
develop new technology and business relationships to enable us to build a
distribution network of other web properties for lead generation offers.
We expect to have this network operational at the beginning of the second
quarter in 2004.  This and future efforts to network-enable our other
products should help to substantially increase our consumer reach.



<PAGE>


HOW WE GENERATE REVENUE

      ONLINE DIRECT MARKETING SERVICES REVENUE

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

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

      .     the number of offers delivered to members, commonly sold on a
            cost per response basis (coupon prints, samples or trial
            offers requested);

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

      .     the number of emails delivered;

      .     cost per sale or revenue share; and

      .     promotion set-up fees.

      Our pricing depends upon a variety of factors including, without
limitation, the degree of targeting, the duration of the advertising
contract, and the number of offers delivered. The degree of targeting
refers to the number of identified household or member attributes, such as
gender, age, or product or service preferences used to select the audience
for an offer.  Generally, the rates we charge our advertisers increase as
the degree of targeting and customization increases.  Revenues subject to
time-based contracts are recognized ratably over the duration of the
contract.  For contracts based on certain performance or delivery criteria,
revenues are recognized in the month performance is delivered to the
customer.  Most of our advertising contracts have stated terms of less than
one year and permit either party to terminate the contract upon 30 days'
advance written notice.  In 2003, our largest advertiser accounted for
approximately 3.3% of our revenues and our top five advertisers together
accounted for approximately 14.4% of our revenues.

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

      LICENSING REVENUE

      We have licensed portions of our intellectual property, including our
issued patents, to third parties.  Approximately 1% of our revenues were
generated from royalties and license fees and other miscellaneous sources
during the year ended December 31, 2003.  We expect to generate
substantially lower licensing revenue in 2004 (see Note 14 "Subsequent
Events" in the Notes to the Financial Statements).




<PAGE>


EXPENSES

      COST OF REVENUES

      Our cost of revenues consists primarily of Internet connection
charges, web site equipment depreciation, salaries and related benefits of
operations personnel, fulfillment costs related to member loyalty
incentives, salaries and related benefits of personnel providing consulting
services to customers, and other operations costs directly related to
revenue generation.

      SALES AND MARKETING

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

      PRODUCT DEVELOPMENT

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

      GENERAL AND ADMINISTRATIVE

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

      LEASE EXIT COSTS AND LOSS ON ASSET IMPAIRMENT

      Lease exit costs and loss on asset impairment charges reflect costs
associated with our determination that a significant portion of our leased
office space was unnecessary for our future operations.  During 2002 and
2003, we recorded lease exit costs representing the present value of
estimated future lease obligations related to the unnecessary leased office
space, and estimated costs associated with subleasing the space, net of
estimated cash flows from future sublease arrangements.  These estimates
are revised as market conditions and future outlooks change, and as lease
obligations are terminated.

      We also determined that the estimated undiscounted cash flows
expected to be generated by the assets in the unnecessary, unoccupied
office space were less than the net book value of the assets. Therefore, we
recorded losses on asset impairment to write down the assets to their
estimated fair value.

      Significant assumptions about the timing of a sale or inclusion of
these assets in a future sublease were required in making the estimate of
fair value for these assets.  As provided under Financial Accounting
Standards Board ("FASB") Statement of Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
we used discounted cash flow analysis to estimate fair values.



<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our significant accounting policies are more fully described in
Note 1 of our Notes to Financial Statements.  The financial statements have
been prepared in accordance with generally accepted accounting principles.
However, certain of our accounting policies, which we refer to as our
"critical accounting policies", are particularly important to the portrayal
of our financial position and results of operations and require application
of management's most difficult, subjective or complex judgments often as a
result of the need to make estimates about matters that are inherently
uncertain and may change in future periods.  Management bases its estimates
and judgments on historical experience and various other factors that it
believes to be reasonable under the circumstances.  Management considers
the following to be our critical accounting policies:

      .     revenue recognition

      .     estimation of sales credits and the allowance for doubtful
            accounts

      .     capitalization of web site development costs

      .     valuation of long-lived and intangible assets

      .     measurement of lease exit liability

      .     valuation of deferred tax assets

      .     valuation of stock-based compensation


REVENUE RECOGNITION

      We recognize revenue from the sale of products and services when a
contract has been signed, the product or service has been provided, the fee
is fixed and determinable and the collection of the resulting receivable is
reasonably assured.  We assess whether the fee is fixed and determinable
based on contract terms for particular products and services.  If the
product or service being provided is derived from activity recorded on our
web site, we are able to determine the quantity and value based on contract
terms.  If the product or service is exclusively dependent on tracking from
a customer's web site, the revenue is recognized upon confirmation of the
product or service delivered from the customer.  Revenue subject to time-
based contracts is recognized ratably over the duration of the contract.
Deferred revenue represents amounts which have been prepaid under time
based contracts.  For contracts based on certain performance or delivery
criteria, revenue is recognized in the month performance is delivered to
the customer.


ESTIMATION OF SALES CREDITS AND THE ALLOWANCE FOR DOUBTFUL ACCOUNTS

      Sales credits arise in the ordinary course of business.  Adjustments
to the actual billing may arise due to variances in the systems tracking
devices between us and our customers.  During 2003, we estimated this
difference to be approximately 2.1% of sales and therefore have established
a credit memo reserve as a reduction to the recorded revenue and
receivables.  The adequacy of this reserve is monitored and adjusted as
customer trends and economic trends develop.  The allowance for doubtful
accounts is based on several factors including overall customer credit
quality, historical write-off experience and specific account analysis that
project the ultimate collectibility of the account.  As such, these factors
may change over time causing the reserve level to adjust accordingly.



<PAGE>


      When it is determined that a customer is unlikely to pay, a charge is
recorded to bad debt expense in the income statement and the allowance for
doubtful accounts is increased.  When it becomes certain the customer
cannot pay, the receivable is written off by removing the accounts
receivable amount and reducing the allowance for doubtful accounts
accordingly.


CAPITALIZATION OF WEB SITE DEVELOPMENT COSTS

      The costs of developing and enhancing the functionality of our web
site are capitalized and amortized over 24 months.  Management performs
periodic reviews of the expected continued use of web site functionality in
future periods and the related development costs that are being or have
been capitalized.  Write-offs of current and previously capitalized costs
and the related amortization are recognized in the period management
decides there is no future need for the functionality.  Any such write-off
would have a negative impact on our earnings.


VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS

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

      The estimates of future cash flows involve considerable management
judgment and are based upon assumptions about future operating performance.

The actual cash flows could differ from management's estimates due to
changes in business conditions, operating performance, and economic
conditions.


MEASUREMENT OF LEASE EXIT LIABILITY

      We continually assess our future leased office space requirements to
determine whether currently leased office space is necessary for our future
operations. We have recorded a liability representing the present value of
the estimated future lease obligations related to the unnecessary leased
office space, and estimated costs associated with subleasing the space, net
of estimated cash flows from future sublease arrangements on this space.
Changes in our estimates of future leased office space requirements, the
cost of subleasing the unnecessary space, or the future cash flows from
subleasing the space result in an adjustment to the liability and an impact
to our earnings.

      The estimates of future cash flows involve considerable management
judgment and are based upon assumptions about future events.  The actual
cash flows could differ from management's estimates due to changes in
business conditions and economic conditions.


VALUATION OF DEFERRED TAX ASSETS

      We assess the probability that we will realize the value of our
deferred tax assets, which result from differences between the carrying
amount of assets and liabilities and their respective tax bases and for tax
carryforward items. Based on our history of net losses through 2002, we
have offset the entire amount of net deferred tax assets with a valuation
allowance due to the uncertainty regarding the realization of the assets.




<PAGE>


VALUATION OF STOCK-BASED COMPENSATION

      The Company accounts for its stock option plan using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," which results in no charge to earnings when options are issued
at fair market value.  SFAS No. 123, "Accounting for Stock-Based
Compensation," which was issued subsequent to APB No. 25 and amended by
SFAS NO. 148 "Accounting for Stock Based Compensation - Transition and
Disclosure," defines a fair value based method of accounting for employee
stock options but allows companies to continue to measure compensation cost
for employee stock options using the intrinsic value based method described
in APB No. 25.

      The Company has no immediate plans at this time to voluntarily change
its accounting policy to the fair value based method; however, the Company
continues to evaluate this alternative.  In accordance with SFAS No. 148,
the Company has been disclosing in the notes to its consolidated financial
statements the impact on net income and earnings per share had the fair
value based method been adopted.  We used the Black-Scholes option pricing
model to measure stock-based compensation expense under the fair value
based method.  The assumptions used in the Black-Scholes option pricing
model include dividend yield, risk free rate of return, expected option
term and expected volatility. If the fair value method had been adopted,
net income (loss) for 2003, 2002, and 2001 would have been $1,397, $2,439,
and $2,249 lower than reported and loss/earnings per share would have been
approximately $.04, $.06 and $.06 per diluted share lower, respectively.


RECENT DEVELOPMENTS

BUSINESS ACQUISITION

      On February 6,  2004, the Company acquired certain assets related to
the Targeted Marketing Services ("TMS") business line of Alliance Data
Systems, Inc. ("ADS"). In addition, the Company contracted for certain data
center services, and assumed a short term lease obligation and certain
existing customer contracts and service obligations related to the
operations of the TMS business line. Among the assets acquired were certain
intangible property related to consumer package goods (CPG) contracts,
retail relationships, patent rights, copyrights, trademarks and domain
names and an information technology capability necessary to meet existing
service obligations.  The Company made a cash payment of $100 for the
purchase of these assets and a cash payment of $93 for the data center
services to be provided.  The funds used for the purchase price were
provided by the Company's existing working capital.  In addition, in
connection with the acquisition, the Company released ADS from its
obligations under a license agreement with the Company under which the
Company recorded revenue of $273 in 2003.


INVESTMENT BY LANDMARK IN COOLSAVINGS, INC.

      The holders of the Series B Preferred Stock are entitled to receive
8% per annum "in-kind" stock dividends, pursuant to the Securities Purchase
Agreement.  In 2003, dividends in the amount of 11,029,635 shares of Series
B Preferred Stock were declared "in-kind" on the outstanding shares of
Series B Preferred Stock.  In addition, 3,192,594 shares of Series B
Preferred Stock were accrued as "in-kind" dividends as of December 31,
2003.  The Series B Preferred Stock is redeemable at its stated value of
$0.1554 per share plus accrued but unpaid dividends at Landmark's option at
any time.  The Series B Preferred Stock also is convertible into common
stock at Landmark's option at any time.  As of December 31, 2003, Landmark
held 159,629,737 shares of Series B Preferred Stock (and rights with
respect to accrued dividends thereon) convertible into 159,629,737 shares
of our common stock.  Warrants to purchase 11,711,456 shares of our common
stock were held by Landmark as of December 31, 2003.


<PAGE>


LEGAL PROCEEDINGS

      See "Item 3.  Legal Proceedings."

      RESULTS OF OPERATIONS

      The following table presents statements of operations data as a
percentage of net revenue.

                                     For the Year Ended December 31,
                                   ----------------------------------
                                      2003         2002        2001
                                    --------     --------    --------
Net revenues. . . . . . . . . . .     100.0%       100.0%      100.0%
Cost of revenues. . . . . . . . .       8.2%        11.5%       25.9%
                                    --------     --------    --------
Gross profit. . . . . . . . . . .      91.8%        88.5%       74.1%
                                    --------     --------    --------

Operating expenses:
  Sales and marketing . . . . . .      52.6%        54.2%       80.3%
  Product development . . . . . .       9.4%        15.2%       27.5%
  General and administrative. . .      24.6%        33.5%       82.0%
  Lease exit costs. . . . . . .         1.6%         8.1%       --
  Loss on asset impairment. . . .       0.2%         4.7%       --
                                    --------     --------    --------
Total operating expenses. . . . .      88.4%       115.7%      189.8%
                                    --------     --------    --------

Income (loss) from operations . .       3.4%       (27.2%)    (115.7%)

Other income (expense):
  Interest and other income . .         0.1%         0.1%        1.2%
  Interest expense. . . . . . . .      (1.5%)       (4.3%)      (3.8%)
  Other settlement expense. . . .       0.0%         0.0%       (1.0%)
  Amortization of debt discount .       0.0%         0.0%      (14.0%)
                                    --------     --------    --------
Total other income (expense). . .      (1.4%)       (4.2%)     (17.6%)
                                    --------     --------    --------
Income (loss) before income
  taxes and extraordinary gain. .       2.0%       (31.4%)    (133.3%)

Income taxes. . . . . . . . . . .      --           --          --
                                    --------    ---------    --------

Income (loss) before
  extraordinary gain. . . . . . .       2.0%       (31.4%)    (133.3%)

Extraordinary gain. . . . . . . .       0.0%         0.0%        1.5%
                                    --------    ---------    --------

Net income (loss) . . . . . . . .       2.0%       (31.4%)    (131.8%)

Accretion of convertible
  redeemable Series B
  Preferred Stock to
  redemption value. . . . . . . .      --           --          (6.0%)
Cumulative dividends on
  Series B Preferred Stock. . . .      (5.9%)       (3.5%)      (0.5%)
                                    --------    ---------   ---------

Loss applicable to common
  stockholders. . . . . . . . . .      (3.9%)      (34.9%)    (138.3%)
                                    ========    =========   =========




<PAGE>


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

      NET REVENUES

      Net revenues increased 23% to $32,392 in 2003 from $26,360 in 2002.
The increase was attributable to an increase in our spending on online
advertising, along with the addition of more well-known brands making
compelling offers as advertisers, and our ability to better apply our data
analytics to more effectively target these offers. These factors drove an
increase in the number of new member registrations and an increase in the
number of revenue producing actions initiated by our members.  We currently
expect that our revenues will grow by approximately 20% in 2004, reflecting
anticipated growth associated with the launch of our distribution network
for lead generation offers, scheduled for late first quarter of 2004.

      COST OF REVENUES AND GROSS PROFIT

      Cost of revenues decreased by 12% to $2,654 in 2003 from $3,030 in
2002.  Gross profit increased as a percentage of net revenues to 92% in
2003 from 89% in 2002.  The increase in gross profit reflects a $952
decrease in amortization and depreciation expense in 2003 as compared to
2002 caused by a decrease in capital spending since mid-2001 and certain
computer hardware and software assets being fully amortized as of December
31, 2002.  Also, we experienced a $337 decrease in the costs of gift
certificates used as member incentives. Partially offsetting these
decreases was a gain of $581 in 2002 associated with a discontinued member
incentive and loyalty program.  Also, expenses associated with our direct
mail advertising campaigns increased $191 from 2002 to 2003.  We expect
cost of revenues, as a percentage of net revenues, to increase during 2004,
reflecting the costs associated with the development and launch of our
distribution network for lead generation offers.

      OPERATING EXPENSES

      Sales and Marketing.  Sales and marketing expenses increased to
$17,054 in 2003, or 53% of net revenues, from $14,281, or 54% of net
revenues, in 2002. The $2,773 increase was primarily due to a $1,301
increase in personnel and personnel-related costs, a $1,071 increase in
online advertising, a $352 offline advertising credit received in 2002 as
compared to no such credit in 2003, and an increase of $242 in expenditures
for promotions and public relations.  Partially offsetting these increases
was a $193 decrease in expenses associated with a decrease in barter
revenue.  In addition, we received bonus online advertising at no expense
to us in 2003.  We estimate the fair value of this bonus media to be
approximately $443.  We may or may not receive bonus online advertising in
the future.  We expect sales and marketing costs, as a percentage of net
revenues, to increase during 2004, reflecting higher marketing costs
associated with acquiring new members.

      Product Development.  Product development expenses decreased to
$3,033 in 2003, or 9% of net revenues, from $4,002 in 2002, or 15% of net
revenues.  The $969 decrease was primarily due to a $857 decrease in the
amortization of capitalized web site costs as compared to 2002.  A
significant portion of our capitalized web site costs are fully amortized.
Also contributing to this decrease were $11 in write-offs of previously
capitalized web site in 2003 as compared to $177 in 2002.  We expect
product development costs in 2004, as a percentage of net revenues, to be
comparable with 2003.

      General and Administrative.  General and administrative expenses
decreased to $7,962 in 2003, or 25% of net revenues, from $8,846 in 2002,
or 34% of net revenues.  In 2003, we incurred $779 in depreciation and
amortization expense as compared to $1,604 in 2002.  Also in 2003, office
rent decreased by $709, and we had no legal settlement costs in 2003
compared to $150 in such costs in 2002.  We expect general and
administrative expenses, as a percentage of net revenues, to decline
substantially during 2004 due to lower legal fees associated with
intellectual property matters, depreciation and amortization.


<PAGE>


      Partially offsetting these decreases was $267 in settlement gains
made with vendors in 2002 compared to no such gains in 2003, a $240
increase in personnel and personnel-related expenses, a $242 increase in
legal fees, a $114 increase in expenses related to the resolution of a
customer matter, and a $159 stock option expense in 2003 compared to no
such expense in 2002.

      Lease Exit Costs.  In accordance with SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," we recorded an
operating expense of $519 in 2003 and $2,148 in 2002, representing an
adjustment to the estimated future lease obligations related to unnecessary
office space and estimated costs associated with subleasing and disposing
of the space, net of estimated cash flows from future sublease
arrangements.  The adjustment in 2003 was recorded to reflect changes in
estimates in current and projected sublease market conditions.

      Loss on Asset Impairment.  Following ongoing assessments of  our
future space requirements, we determined that a significant portion of our
unoccupied leased office space and the assets associated with that office
space were unnecessary for our future operations.  In accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
we determined that the estimated undiscounted cash flows expected to be
generated by the assets were less than their net book value.  Therefore, we
recorded an operating expense of $81 in 2003 and $1,233 in 2002 to write
down the assets to their estimated fair value.

OTHER INCOME (EXPENSES), NET

      Net Interest Expense.  During 2003, we incurred net interest expense
of $434 as compared to $1,107 in 2002.  In 2002, we incurred interest
expense of $668 on amounts funded to us by Landmark under an Amended and
Restated Commercial Demand Note (the "Grid Note") in connection with a
transaction with Landmark in 2001 (the "Landmark Transaction").  In
December 2002, Landmark applied the principal and interest owed to it to
the purchase price payable in connection with Landmark's exercise of a
"Shortfall Purchase Option" to acquire 60,967,777 additional shares of
Series B Preferred Stock.  Accordingly, there was no interest expense
related to the Grid Note in 2003.

      INCOME TAXES

      On November 12, 2001, our issuance of Series B Preferred Stock to
Landmark triggered tax rules under Section 382 of the Internal Revenue
Code, which limit our ability to offset taxable income earned subsequent to
this date with our pre-November 12, 2001 net operating losses.  As of the
period ended December 31, 2003, we had cumulative tax net operating losses
of $6,295.  For financial reporting purposes, the entire amount of deferred
tax assets has been offset by a valuation allowance due to uncertainty
regarding realization of the asset.  Accordingly, there was no net
provision for income taxes for the years ended December 31, 2003 and 2002.

      On July 1, 2003, Landmark's ownership percentage of our company
exceeded 80%, creating an Affiliated Group as defined in Section 1504(a) of
the Internal Revenue Code.  As such, effective July 1, 2003, we entered
into a Tax Allocation Agreement with Landmark whereby we will join with the
affiliated group of corporations controlled by Landmark in filing a
consolidated federal income tax return, and possibly combined returns for
state tax purposes.  Generally, the Tax Allocation Agreement provides that
Landmark will pay all consolidated federal income taxes on behalf of the
consolidated group that includes our company, and we will make payments to
Landmark in an amount equal to the tax liability, if any, that we would
have had if we were to file as a consolidated group separate and apart from
Landmark.



<PAGE>


      NON-CASH CHARGES - IMPACTING LOSS APPLICABLE TO COMMON STOCKHOLDERS

      During 2003, we incurred $1,926 in charges related to the accrual of
in-kind dividends on the Series B Preferred Stock.  During 2002, we
incurred $909 in charges related to the accrual of in-kind dividends on the
Series B Preferred Stock. The increase is due to dividends accruing during
2003 on the additional shares of Series B Preferred Stock that were issued
to Landmark when Landmark exercised its "Shortfall Purchase Option" in
December 2002 as further described below.


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

      NET REVENUES

      Net revenues increased 19% to $26,360 in 2002 from $22,173 in 2001.
The revenue increase was primarily due to an increase in the number of new
member registrations and an increase in the number of revenue producing
actions initiated by our members.  We believe the increase in new member
registrations was driven primarily by a $944 increase in online advertising
and media purchases.  Partially offsetting this increase was a reduction in
revenue recognized from barter transactions from $1,070 in 2001 to $193 in
2002.

      COST OF REVENUES AND GROSS PROFIT

      Cost of revenues decreased by 47% to $3,030 in 2002 from $5,739 in
2001. Gross profit increased as a percentage of net revenues to 89% in 2002
from 74% in 2001.  The increase in gross profit was partially due to the
costs eliminated when we discontinued a member incentive and loyalty
program, CoolSavings Rewards, in 2001 and a gain of $257 and the reversal
of a $321 expense accrual as a result of the Settlement.  Additionally, the
increase in gross profit reflected the realization of personnel and
personnel-related cost reductions that occurred during fiscal year 2001,
and a reduction in the costs of gift certificates used as member
incentives.

      OPERATING EXPENSES

      Sales and Marketing.  Sales and marketing expenses decreased to
$14,281 in 2002, or 54% of net revenues, from $17,814, or 80% of net
revenues, in 2001. The $3,533 decrease was primarily due to the realization
of $3,690 in personnel and personnel-related cost reductions that occurred
during fiscal year 2001.  The decrease was also due to lower expenses
associated with a decrease in barter transactions of $877.  These decreases
were partially offset by a $944 increase in spending on advertising to
attract new members and a $90 increase in other operating expenses.

      Product Development.  Product development expenses decreased to
$4,002 in 2002, or 15% of net revenues, from $6,092 in 2001, or 27% of net
revenues.  The $2,090 decrease was primarily due to reduced spending on
outside consulting for our web site development efforts of $1,160 and the
realization of $1,120 in 2002 in personnel and personnel-related cost
reductions that occurred during fiscal year 2001, partially offset by a
$190 increase in other product development costs.

      General and Administrative.  General and administrative expenses
decreased to $8,846 in 2002, or 34% of net revenues, from $18,184 in 2001,
or 82% of net revenues.  The $9,338 decrease was primarily due to a $3,747
charge recorded in 2001 related to the forgiveness of certain loans and
interest owed by related parties, a reduction in bad debt expense by
$2,105, a $990 severance charge recorded in 2001 related to the termination


<PAGE>


of an executive, and a $1,097 decrease in office lease, maintenance, and
supplies expense.  In addition, there were decreases of $749 related to
Landmark Transaction costs incurred in 2001, the realization in 2002 of
$625 in personnel and personnel-related cost reductions that occurred
during fiscal year 2001, a reduction of $463 in legal fees, a charge of
$541 related to the loss on fixed assets in 2001, lower depreciation on
furniture and equipment of $354 and lower other general and administrative
expenses.  Partially offsetting these decreases was a $1,480 decrease in
gains recorded from accounts payable settlements in 2002 compared to 2001.

      Lease Exit Costs.  In accordance with SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," we recorded a lease
exit cost expense of $2,148 in 2002, compared to $0 in 2001, representing
the estimated future lease obligations related to unnecessary office space
and estimated costs associated with subleasing and disposing of the space,
net of estimated cash flows from future sublease arrangements.

      Loss on Asset Impairment.  In August 2002, following an ongoing
assessment of our future space requirements, we determined that a
significant portion of our unoccupied leased office space and the assets
associated with that office space were unnecessary for our future
operations.  In accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", we determined that the
estimated undiscounted cash flows expected to be generated by the assets
were less than their net book value.  Therefore, we recorded an operating
expense of $1,233 in 2002 to write down the assets to their estimated fair
value.  There was no similar expense in 2001.

      OTHER INCOME (EXPENSES), NET

      Net Interest Expense.  During 2002, we incurred net interest expense
of $1,107 as compared to $583 in 2001.  The $524 increase was due to
additional interest expense of $725 in 2002 related to proceeds of loans to
us by Landmark in June and July of 2001 (the "Senior Secured Loan") and the
Grid Note.  Additionally, interest income decreased by $209 due to a lower
average cash balance in 2002 as compared to 2001.  Partially offsetting
these increases was a reduction by $379 of interest expense incurred in
2002 on short-term debt.

      Amortization of Debt Discount.  During 2001, we were in default of
the debt covenants related to the Senior Secured Loan.  Therefore, the debt
discount of $3,017 was immediately amortized to reflect the debt at its
callable value.  Additionally, we recorded $79 in amortization expense
related to the debt discount on our convertible subordinated promissory
notes which were exchanged for 13,000,000 shares of Series C Preferred
Stock in conjunction with, and as a condition to, the closing of the
Landmark Transaction.

      Other Expense Settlement.  In 2001, we accepted a mediation award in
connection with a non-operating business related lawsuit pursuant to which
we paid the plaintiff the sum of $219.

      INCOME TAXES

      On November 12, 2001, our issuance of Series B Preferred Stock to
Landmark triggered tax rules under Section 382 of the Internal Revenue
Code, which limit our ability to offset taxable income earned subsequent to
this date with our pre-November 12, 2001 net operating losses.  As of the
period ended December 31, 2002, we had cumulative tax net operating losses
of $8,035.  For financial reporting purposes, the entire amount of deferred
tax assets has been offset by a valuation allowance due to uncertainty
regarding realization of the asset.  Accordingly, there was no provision
for income taxes for the years ended December 31, 2002 and 2001.



<PAGE>


      EXTRAORDINARY GAIN

      In March 2001, we received proceeds from the sale of the Director
Notes and warrants in the amount of $2,100.  Contemporaneously with the
Landmark Transaction, Director Notes and warrants of $2,100 of face value
plus accrued interest of $177 were converted to Series C Preferred Stock.
The fair market value of the Series C Preferred Stock was determined to be
$1,950 resulting in an extraordinary gain of $327 to the Company for early
extinguishment of debt.

      NON-CASH CHARGES - IMPACTING LOSS APPLICABLE TO COMMON STOCKHOLDERS

      During 2002, we incurred $909 in charges related to the accrual of
in-kind dividends on the Series B Preferred Stock.  During 2001, we
incurred $1,318 in charges related to the accretion of Series B Preferred
Stock to its redemption value, and $113 related to the accrual of the in-
kind dividends on the Series B Preferred Stock.


LIQUIDITY AND CAPITAL RESOURCES

      LIQUIDITY AND CAPITAL RESOURCES

      At December 31, 2003, we had approximately $7,347 in cash and cash
equivalents.

      Our independent auditors have issued their report on our financial
statements for 2003 with an explanatory paragraph. The explanatory
paragraph describes the uncertainty as to our ability to continue as a
going concern. If Landmark elects to exercise some or all of its rights to
accelerate payment under our obligations to Landmark, our ability to
operate our business would be jeopardized.

      We expect our current liquidity position to meet our anticipated cash
needs for working capital and capital expenditures, excluding potential
acquisitions that may acquire large cash outlays, or any accelerated
payments that Landmark may require, for the foreseeable future.  However,
if cash generated from our operations is insufficient to satisfy our cash
needs, we may be required to raise additional capital or issue additional
debt. If we raise additional funds through the issuance of equity or
equity-linked securities, our stockholders may experience significant
dilution.  Furthermore, additional financing may not be available when we
need it, or if available, may not be on terms favorable to us or to our
stockholders.  If financing is not available when needed or is not
available on acceptable terms, we may be unable to take advantage of
business opportunities or respond to competitive pressures.  Any of these
events could have a material adverse effect on our business, results of
operations and financial condition.

      Net cash provided by operating activities was $3,440 in 2003 and net
cash used in operating activities was $1,813 in 2002.  The increase in net
cash provided by operating activities in 2003 resulted mainly from
increased revenues, improved cash collections, ongoing control of cash
outlays, and the return of restricted certificates of deposit of $231
associated with the collateral on our Letters of Credit.  The restrictions
on these certificates of deposit were lifted on January 1, 2003.  In 2002,
net cash used in operating activities resulted primarily from our net loss,
together with the increase in accounts receivable and the decrease in
accounts payable.

      Net cash used in investing activities was $974 in 2003 and $772 in
2002.  In both periods, net cash used in investing activities resulted from
purchases of property and equipment and amounts used in developing our web
site.  We expect to invest approximately $1,700 during 2004 in development
of our web site and computer hardware and software to maintain our
operations.



<PAGE>


      Net cash provided from financing activities was $14 in 2003 and
$2,308 in 2002.  Net cash provided from financing activities in 2003 was
attributable to the exercise of employee stock options.  Net cash provided
from financing activities in 2002 was attributable to the net proceeds from

the issuance to Landmark of 17,825,212 shares of our Series B Preferred
Stock for an aggregate purchase price of $2,770, and $1,500 of loans
advanced by Landmark under the Grid Note, offset by debt repayments in the
amount of $1,962.  We invested these proceeds in cash equivalents with
maturities not exceeding 90 days.  We intend to continue investing our
excess cash in various short-term securities until used.

      Since our inception, we have financed our operations primarily
through the sale of equity and debt securities (and other borrowings from
Landmark).  In May 2000, we completed an initial public offering of 3.3
million shares of our common stock, resulting in net proceeds to us of
approximately $19,625.  In March 2001, we received proceeds from the
issuance of our convertible subordinated promissory notes and warrants in
the amount of $2,100.  In June and July 2001, we received proceeds of
$5,000 under the Senior Secured Loan. The Senior Secured Loan is payable on
June 30, 2006 and bore interest at 12.0% per annum until November 12, 2001,
at which time the interest rate was reduced to 8.0% per annum.  The
interest is paid quarterly in arrears in the form of additional notes and
warrants (described below).  We have the right to prepay the Senior Secured
Loan on or after the third anniversary thereof if certain conditions are
met.  The Senior Secured Loan also contains financial covenants and
negative and affirmative covenants that, among other things, restrict our
ability to incur additional indebtedness, merge or consolidate with any
other company, make acquisitions of substantially all the assets of any
other company, and take other actions without the consent of Landmark. At
December 31, 2003, we were not in compliance with certain financial
covenants of the Senior Secured Loan.  This failure to comply constitutes
an event of default.  Consequently, the loan including accrued interest is
immediately due and payable at the option of Landmark.  Accordingly, we
have classified the Senior Secured Loan, including the paid-in-kind
interest which has been compounded on the principal balance, totaling
$6,141, as currently payable as of December 31, 2003.

      In connection with the Senior Secured Loan, we issued a warrant to
Landmark (the "Landmark Warrant").  The Landmark Warrant has a term of
eight years and may be exercised in whole or in part immediately.  The
warrant contains a net exercise feature and was exercisable for 10.0
million shares of our common stock at an exercise price of $0.50 per share
at December 31, 2003 (the exercise price automatically increases to $0.75
per share on July 30, 2005 if the Landmark Warrant has not previously been
exercised).  The number of shares exercisable under the Landmark Warrant
automatically increases by two shares of common stock for each dollar of
interest accrued on the Senior Secured Loan as paid-in-kind interest. As of
March 1, 2004, Landmark held a warrant to purchase 11,950,890 shares of our
common stock.  Under APB 14 "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants," we assigned a $2,400 value to the
Landmark Warrant and recorded it as additional paid-in-capital.  The entire
discount of $3,017 (including loan issuance costs of $617) from the Senior
Secured Loan was amortized immediately to interest expense in 2001.  This
was due to our covenant violations, including our failure to achieve a
prescribed amount of billings during 2001, our failure to maintain a
minimum level of working capital and a ratio of cash, cash equivalents and
certain receivables over current liabilities, and our failure to maintain a
minimum ratio of total indebtedness over tangible net worth.  These
covenant violations caused the entire loan to be immediately due and
payable at the option of Landmark.



<PAGE>


       In addition, through October 31, 2001, Landmark funded an additional
$10,000 to us under the Grid Note, which amount plus accumulated interest
was applied to the purchase price for 65,057,936 shares of Series B
Preferred Stock on November 12, 2001.  This stock purchase resulted in
Landmark having voting control of our company.  As a result of various
events that occurred prior to December 31, 2002 ("Shortfall Events")
Landmark made additional loans of $4,000 and $2,500 under the Grid Note on
November 30, 2001 and December 24, 2001, respectively, in lieu of
exercising its options that arose in connection with such Shortfall Events
(each, a "Shortfall Purchase Option") to acquire additional shares of
Series B Preferred Stock at a price of $0.1554 per share.  In addition, the
Grid Note reflected in 2001 a loan related to our obligation to reimburse
Landmark's legal expenses incurred in connection with the Landmark
Transaction.

       On February 28, 2002, Landmark loaned us an additional $1,500 under
the Grid Note in connection with another Shortfall Event, bringing the
outstanding principal balance under the Grid Note to $8,770.  On
October 24, 2002, we received proceeds of $2,770 from the issuance to
Landmark of 17,825,212 shares Series B Preferred Stock in connection with
Landmark's exercise of an existing Shortfall Purchase Option.  On
December 20, 2002, at our request, Landmark applied the $8,770 of principal
and $704 of accrued interest then outstanding under the Grid Note (as
described above) toward the purchase of 60,967,777 shares of Series B
Preferred Stock (at the purchase price of $0.1554 per share) in connection
with the exercise of additional existing Shortfall Purchase Options.  The
Series B Preferred Stock issued to Landmark is redeemable at Landmark's
option at any time. As of March 1, 2004, Landmark held 162,822,331 shares
of Series B Preferred Stock (and rights with respect to accrued dividends
thereon).  Landmark's ownership will continue to grow through the issuance
of additional shares of Series B Preferred Stock and warrants as "in-kind"
payments for dividends and interest accruing on the Series B Preferred
Stock and Senior Secured Note, respectively.  Our business plans have not
been modified to prepare for any exercise by Landmark of its rights to
accelerate payment of obligations due to Landmark under the Senior Secured
Note or to redeem the Series B Preferred Stock.

      Effective August 31, 2002, we entered into a Reimbursement and
Security Agreement (the "Reimbursement Agreement") with Landmark.  On our
behalf, Landmark has applied for and received letters of credit (the
"Landmark Letters of Credit") in the aggregate amount of $1,599 from
Wachovia Bank to collateralize lease deposits on our office facilities.
Under the Reimbursement Agreement, we have agreed, among other things, to
reimburse Landmark for all amounts that Landmark is required to pay
Wachovia under the bank agreement related to the Landmark Letters of
Credit, including all fees, penalties, interest and amounts in connection
with draws on such Letters of Credit; our obligations to Landmark under the
Reimbursement Agreement are secured by a lien on all of our assets.  If we
fail to pay Landmark any amount when due, interest will accrue and compound
on all such amounts at the rate of 7% per annum until such time as Landmark
demands payment.  Upon Landmark's demand for payment, interest will accrue
and compound on all such amounts at the rate of 10% per annum from the date
of the demand, increasing monthly at a rate of 1%.  The aggregate amount of
letters of credit required to collateralize lease deposits on our office
facilities declined to $1,194 as of December 31, 2003, due to the
termination of our lease in New York City, and scheduled reductions
contained in our lease agreement for our Chicago, Illinois facility.  We
reimbursed Landmark $6 and $4 for fees related to the Landmark Letters of
Credit in 2003 and 2002, respectively.  The Landmark Letters of Credit
expire in March and April of 2004.  Landmark has applied to Wachovia for a
renewal of such Letters of Credit and may, at its sole discretion, cancel
such Letters of Credit on 90 days written notice to us.  If the Landmark
Letters of Credit so expire or are cancelled, we will need to enter into an
alternate credit arrangement.




<PAGE>


CONTRACTUAL OBLIGATIONS

      The following summarizes our contractual obligations at December 31,
2003, and the effect such obligations are expected to have on our liquidity
and cash flows in future periods.
                                   Payment Due by Period
                         -------------------------------------------
                                     Less                     More
Contractual                         than 1     1-3     3-5    than 5
Obligations                 Total    year     years   years   years
-----------                -------  ------   ------  ------   ------
Long-Term Debt
 Obligations (1). . . . .    6,059   6,059     --      --       --
Capital Lease
 Obligations. . . . . . .     --      --       --      --       --
Operating Lease
 Obligations. . . . . . .    8,863   1,470    2,758   2,750    1,885
Purchase Obligations. . .     --      --       --      --       --
Other Long-Term
 Liabilities Reflected
 on the Registrant's
 Balance Sheet under
 GAAP . . . . . . . . . .       98      98     --      --       --
Other Long-Term
 Liabilities Not
 Reflected on the
 Registrant's Balance
 Sheet. . . . . . . . . .      979     394      585    --       --
                            ------  ------   ------  ------   ------
      Total . . . . . . .   15,999   8,021    3,343   2,750    1,885
                            ======  ======   ======  ======   ======

   (1)  This obligation relates to the Landmark Transaction.  It is
        categorized as currently due as a result of our defaults under
        the Senior Secured Loan and the Amended and Restated Loan and
        Security agreement as described above.


RECENT ACCOUNTING PRONOUNCEMENTS

      In January 2003, we adopted SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"), which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.  The adoption
of SFAS 143 did not have a material impact on our financial position or
results of operations.

       In January 2003, we adopted Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others," which expands previously issued
accounting guidance and disclosure requirements for certain guarantees. The
Interpretation requires an entity to recognize an initial liability for the
fair value of an obligation assumed by issuing a guarantee. The provision
for initial recognition and measurement of the liability will be applied on
a prospective basis to guarantees issued or modified after December 31,
2002. This Interpretation did not have a material impact on our financial
position or results of operations.



<PAGE>


      During 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46).  This new interpretation requires that companies consolidate a
variable interest equity if the company is subject to a majority of the
risk of loss from the variable interest entity's activities, or is entitled
to receive a majority of the entity's residual returns, or both.  In
December 2003, the FASB issued Interpretation 46R (FIN 46R), a revision to
FIN 46.  FIN 46R clarifies some of the provisions of FIN 46 and exempts
certain entities from its requirements.  FIN 46R is effective at the end of
the first interim period ending after March 15, 2004.  Entities that have
adopted FIN 46 prior to this effective date can continue to apply the
provisions of FIN 46 until the effective date of FIN 46R.  The Company
adopted FIN 46 in January 2003, and it did not have an impact on the
Company's financial statements.

      In July 2003, we adopted EITF No. 00-21, "Revenue Arrangements with
Multiple Deliverables" ("EITF 00-21").  EITF 00-21 provides guidance on how
to determine whether an arrangement involving multiple deliverables
contains more than one unit of accounting and how arrangement consideration
should be measured and allocated to the separate units of accounting in the
arrangement.  The adoption of EITF 00-21 did not have a material impact on
our financial position or results of operations.

      In July 2003, we adopted SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS 150").  SFAS 150 establishes standards for how entities classify and
measure in their statement of financial position certain financial
instruments with characteristics of both liabilities and equity.  The
adoption of SFAS 150 did not have a material effect on our financial
position or results of operations.


FACTORS AFFECTING OPERATING RESULTS

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

      During 2004, much of our efforts will be focused on improving
consumer reach and member retention.  We expect to successfully launch a
distribution network for lead generation offers to improve consumer reach.
We also plan to launch a new rewards program, which we expect will improve
member retention and create network partnership opportunities with grocery
stores and credit card issuers.  We have also recently added sales
resources to focus on key consumer package goods and pharmaceutical market
consumers which we believe will improve member retention.




<PAGE>


QUARTERLY FINANCIAL DATA

      The following are our unaudited quarterly results, for the years
ended December 31, 2003 and December 31, 2002:

                                For the three months ended
                   ----------------------------------------------------
                     March 31,    June 30,  September 30,  December 31,
                       2003         2003         2003          2003
                    -----------  ----------- ------------- ------------
                    (in thousands, except share and per share data)

Net revenues. . . .  $    7,624   $    8,646   $    8,043   $     8,079
Gross profit. . . .       6,836        8,045        7,271         7,586
Operating
 expenses (a) . . .       7,692        7,861        7,161         5,935
Loss (income)
 from opera-
 tions (a). . . . .        (856)         184          110         1,651
Net (loss)
 income . . . . . .        (950)          73           21         1,511
(Loss) income
 applicable to
 common stock-
 holders (b). . . .      (1,418)        (403)        (465)        1,015
Weighted average
 shares outstand-
 ing (basic). . . .  39,093,660   39,101,022   39,101,636    39,132,073
Weighted average
 shares outstand-
 ing (diluted). . .  39,093,660   39,101,022   39,101,636   227,687,202
Basic earnings
 per share. . . . .  $    (0.04)  $    (0.01)  $    (0.01)  $      0.03
Diluted earnings
 per share (c). . .  $    (0.04)  $    (0.01)  $    (0.01)  $      0.01


                                For the three months ended
                   ----------------------------------------------------
                     March 31,    June 30,   September 30, December 31,
                       2002         2002         2002          2002
                    -----------  ----------- ------------- ------------
                    (in thousands, except share and per share data)

Net revenues. . . .  $    5,763   $    5,126   $    7,123   $     8,348
Gross profit. . . .       4,779        4,212        6,241         8,098
Operating
 expenses (d) . . .       7,053        5,620        9,999         7,838
(Loss) income
 from opera-
 tions (d). . . . .      (2,274)      (1,408)      (3,758)          260
Net loss. . . . . .      (2,545)      (1,696)      (4,044)           (2)
Loss applicable
 to common stock-
 holders (e). . . .      (2,749)      (1,905)      (4,257)         (285)
Weighted average
 shares out-
 standing . . . . .  39,093,660   39,093,660   39,093,660    39,093,660
Basic and
 diluted
 earnings
 per share. . . . .  $    (0.07)  $    (0.05)  $    (0.11)  $     (0.01)

      (a)   Lease exit accretion expense of $26, $25, and $26 in the first,
            second, and third quarters, respectively, of 2003 is shown in
            Operating expenses, but was previously reported in Interest
            Expense.



<PAGE>


      (b)   Loss applicable to common stockholders includes $1,926 related
            to accrued cumulative dividend on the Series B Preferred Stock.

      (c)   In the three months ended December 31, 2003, the calculation of
            diluted net loss per share includes shares of common stock
            issuable upon the exercise of employee stock options, Landmark
            warrants, and the conversion of preferred stocks, as the effect
            of such exercises would be dilutive.  The following is a
            reconciliation of the diluted EPS calculation.

                                                          For the
                                                        Three Months
                                                           Ended
                                                        December 31,
                                                            2003
                                                        ------------
               Diluted numerator:
                 Net income . . . . . . . . . . . . .    $     1,511
               Less:  stock option compensation
                 (credit) . . . . . . . . . . . . . .           (202)
                                                        ------------
               Numerator for diluted earnings
                 per share. . . . . . . . . . . . . .    $     1,309
                                                        ============

               Diluted denominator:
                 Weighted average shares used in
                   the calculation of diluted
                   earnings per share . . . . . . . .    227,687,202

               Diluted earnings per share . . . . . .    $      0.01

      (d)   Lease exit accretion expense of $11 and $24 in the third and
            fourth quarters, respectively, of 2002 is shown in Operating
            expenses, but was previously reported in Interest Expense.
            Income of $13 in the third quarter of 2002 is shown as a
            reduction to Operating expense, but was previously reported in
            Interest and Other Income.

      (e)   Loss applicable to common stockholders includes $909 related to
            accrued cumulative dividend on the Series B Preferred Stock.





<PAGE>


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We had no holdings of derivative financial or commodity instruments
at December 31, 2003.  However, we are exposed to financial market risks
associated with fluctuations in interest rates. Because all of the amounts
in our investment portfolio are cash or cash equivalents, the related
income would not be significantly impacted by increases or decreases in
interest rates due to the short-term nature of our investment portfolio and
we believe our portfolio is at fair value. If market rates were to increase
immediately by 10 percent from levels on December 31, 2003, the fair value
of our investment portfolio would not change by a material amount. A sharp
decline in interest rates could reduce future interest earnings of our
investment portfolio. If market rates were to decrease immediately by 10
percent from levels on December 31, 2003, the resultant decrease in
interest earnings of our investment portfolio would not have a material
impact on our earnings as a whole.  As of December 31, 2003, we had only
fixed rate debt.

      On April 5, 2002, Landmark acquired 10,889,636 shares of our common
stock from Lend Lease International Pty. Limited of Australia.
Contemporaneously with the purchase, we entered into a call option
agreement with Landmark, whereby we have the right to call, subject to
certain terms and conditions, all 10,889,636 shares of common stock from
Landmark.  The call price is $0.08 per share plus seven percent interest
thereon, compounded annually.  We do not have any right to call any other
shares of our capital stock held by Landmark. We accounted for this call
option as permanent equity and a contribution from Landmark under EITF 00-
19 Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock.  We ascribed a value of
$1,200 to the option at issuance.




<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                      INDEX TO FINANCIAL STATEMENTS






                                                                 Page
                                                                 ----


Report of Independent Auditors. . . . . . . . . . . . . . .        49


Financial Statements:

  Balance Sheets. . . . . . . . . . . . . . . . . . . . . .        50

  Statements of Operations. . . . . . . . . . . . . . . . .        53

  Statements of Changes in Convertible Redeemable
  Preferred Stock and Stockholders' (Deficit) Equity. . . .        55

  Statements of Cash Flows. . . . . . . . . . . . . . . . .        58

  Notes to Financial Statements . . . . . . . . . . . . . .        60




The supplementary financial data is provided under "Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Quarterly Financial Data."





<PAGE>








                     REPORT OF INDEPENDENT AUDITORS




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

      In our opinion, the accompanying balance sheets and the related
statements of operations, changes in convertible redeemable preferred stock
and stockholders' (deficit) equity and of cash flows present fairly, in all
material respects, the financial position of CoolSavings, Inc. (the
"Company") at December 31, 2003 and 2002, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 2003 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

      The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has not been in compliance with
certain terms and covenants of its debt agreements, which raises
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 1. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




PricewaterhouseCoopers LLP



Chicago, Illinois
February 20, 2004, except for
  paragraphs 3 and 4 of Note 14
  which are as of March 24, 2004





<PAGE>


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



                                            December 31,  December 31,
                                                2003         2002
                                            ------------  ------------
ASSETS
Current assets:
  Cash and cash equivalents . . . . . . .    $     7,347   $     4,867
  Restricted certificates of deposit. . .          --              231
  Accounts receivable, net of allowance
    of $676 and $753 at December 31,
    2003 and December 31, 2002,
    respectively. . . . . . . . . . . . .          4,786         4,900
  Prepaid assets. . . . . . . . . . . . .            392           244
  Other assets, including amounts
    due from related parties of $0
    and $13 at December 31, 2003 and
    December 31, 2002, respectively . . .             27           360
                                             -----------   -----------
          Total current assets. . . . . .         12,552        10,602
                                             -----------   -----------

Property and equipment. . . . . . . . . .          9,112         9,051
Capitalized software costs. . . . . . . .          1,490         1,490
Capitalized web site costs. . . . . . . .          3,599         3,152
                                             -----------   -----------

          Total . . . . . . . . . . . . .         14,201        13,693

Less accumulated depreciation and
  amortization. . . . . . . . . . . . . .        (11,692)      (10,391)
                                             -----------   -----------

                                                   2,509         3,302
Intangible assets, patents and licenses,
  net of accumulated amortization
  of $500 and $399 at December 31, 2003
  and December 31, 2002, respectively . .          --              101
                                             -----------   -----------

Total assets. . . . . . . . . . . . . . .    $    15,061   $    14,005
                                             ===========   ===========


<PAGE>


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



                                            December 31,  December 31,
                                                2003         2002
                                            ------------  ------------
LIABILITIES
Current liabilities:
  Accounts payable, including amounts
    due to related parties of $0 and
    $55 at December 31, 2003 and
    December 31, 2002, respectively . . .    $     1,033   $     1,091
  Accrued marketing expense, including
    amounts due to related parties of
    $68 and $77 at December 31, 2003 and
    December 31, 2002, respectively . . .          1,402           989
  Accrued compensation. . . . . . . . . .          1,368         1,147
  Accrued interest due to related party .             82            76
  Accrued expenses, including amounts
    due to related parties of $962 and
    $1,066 at December 31, 2003 and
    December 31, 2002, respectively . . .          1,806         2,179
  Lease exit cost liability . . . . . . .            206           311
  Deferred revenue. . . . . . . . . . . .            484           516
  Senior secured note payable due to
    related party . . . . . . . . . . . .          6,059         5,592
                                             -----------   -----------
          Total current liabilities . . .         12,440        11,901
                                             -----------   -----------

Long-term liabilities:
  Deferred revenue. . . . . . . . . . . .            114           177
  Lease exit cost liability . . . . . . .          1,069         1,014
  Accrued expenses due to related parties          --               91
                                             -----------   -----------
          Total long-term liabilities . .          1,183         1,282
                                             -----------   -----------

Commitments and contingencies (Note 8)

Convertible redeemable cumulative
  Series B Preferred Stock, $0.001
  par value, 258,000,000 shares
  authorized,  and 159,629,737 and
  148,600,102 issued and outstanding at
  December 31, 2003 and December 31,
  2002, respectively (liquidation
  preference of $0.1554 per share at
  December 31, 2003 and December 31,
  2002) . . . . . . . . . . . . . . . . .         24,805        23,091

Convertible redeemable Series C
  Preferred Stock, $0.001 par value,
  13,000,000 shares authorized and
  13,000,000 shares issued and
  outstanding at December 31, 2003
  and December 31, 2002 (liquidation
  preference of $0.1665 per share at
  December 31, 2003 and December 31,
  2002) . . . . . . . . . . . . . . . . .          1,950         1,950



<PAGE>


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



                                            December 31,  December 31,
                                                2003         2002
                                            ------------  ------------
STOCKHOLDERS' DEFICIT
  Common stock, $0.001 par value per
    share, 379,000,000 shares authorized,
    39,169,270 and 39,093,660 shares
    issued and outstanding at December 31,
    2003 and December 31, 2002. . . . . .             39            39
Additional paid-in capital. . . . . . . .         71,855        73,608
Accumulated deficit . . . . . . . . . . .        (97,211)      (97,866)
                                             -----------   -----------
          Total stockholders' deficit . .        (25,317)      (24,219)
                                             -----------   -----------
          Total liabilities, convertible
            redeemable preferred stock
            and stockholders' deficit . .    $    15,061   $    14,005
                                             ===========   ===========












































 The accompanying notes are an integral part of the financial statements


<PAGE>


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



                                  For the Year Ended December 31,
                               -------------------------------------
                                  2003          2002         2001
                                ----------   ----------   ----------
Revenue:
  e-marketing services. . . .   $  32,119    $   26,088   $   21,874
  License royalties . . . . .         273           272          299
                                ----------   ----------   ----------

Net revenues. . . . . . . . .      32,392        26,360       22,173
Cost of revenues. . . . . . .       2,654         3,030        5,739
                                ----------   ----------   ----------

Gross profit. . . . . . . . .      29,738        23,330       16,434
                                ----------   ----------   ----------

Operating expenses:
  Sales and marketing . . . .      17,054        14,281       17,814
  Product development . . . .       3,033         4,002        6,092
  General and administrative,
    inclusive of $3.7 million
    of expense related to
    forgiveness of notes
    receivable, including
    interest, for 2001. . . .       7,962         8,846       18,184
  Lease exit costs. . . . . .         519         2,148        --
  Loss on asset impairment. .          81         1,233        --
                                ----------   ----------   ----------
        Total operating
          expenses. . . . . .      28,649        30,510       42,090
                                ----------   ----------   ----------
Income (loss) from
  operations. . . . . . . . .       1,089        (7,180)     (25,656)

Other income (expense):
  Interest and other income .          40            38          258
  Interest expense. . . . . .        (474)       (1,145)        (841)
  Other settlement expense. .       --            --            (219)
  Amortization of debt
    discount. . . . . . . . .       --            --          (3,096)
                                ----------   ----------   ----------
        Total other
          income (expense). .        (434)       (1,107)      (3,898)
                                ----------   ----------   ----------
Income (loss) before income
  taxes and extraordinary
  gain. . . . . . . . . . . .         655        (8,287)     (29,554)

Income taxes. . . . . . . . .       --            --           --
                                ----------   ----------   ----------

Income (loss) before
  extraordinary gain. . . . .         655        (8,287)     (29,554)

Extraordinary gain
  (Note 3). . . . . . . . . .       --            --             327
                                ----------   ----------   ----------
        Net income (loss) . .         655        (8,287)     (29,227)






<PAGE>


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



                                  For the Year Ended December 31,
                               -------------------------------------
                                  2003          2002         2001
                                ----------   ----------   ----------

Accretion of convertible
  redeemable Series B
  Preferred Stock to
  redemption value. . . . . .       --            --          (1,318)
Cumulative dividends on
  Series B  Preferred Stock .      (1,926)         (909)        (113)
                                ----------   ----------   ----------
Loss applicable to common
  stockholders. . . . . . . .   $  (1,271)   $   (9,196)  $  (30,658)
                               ==========    ==========   ==========

Basic and diluted loss per
  share before extraordinary
  gain. . . . . . . . . . . .   $   (0.03)   $    (0.24)  $    (0.79)
Extraordinary gain. . . . . .       --            --            0.01
                                ----------   ----------   ----------

Basic and diluted net
  loss per share. . . . . . .   $   (0.03)   $    (0.24)  $    (0.78)
                               ==========    ==========   ==========

Weighted average shares
  used in the calculation
  of basic and diluted net
  loss per share. . . . . . .  39,107,203    39,093,660   39,093,660
                               ==========    ==========   ==========































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


<PAGE>


<table>
                                               COOLSAVINGS, INC.
      STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
                             For the Years Ended December 31, 2003, 2002 and 2001
                                (in thousands, except share and per share data)

<caption>
                                                                                      Stockholders'
                                                                                    (Deficit) Equity
                                                                           ---------------------------------
                                    Series B               Series C
                                    Redeemable             Redeemable
                                  Preferred Stock        Preferred Stock        Common Stock      Additional
                              ---------------------  ------------------------------------------    Paid-in
                                Shares      Amount    Shares       Amount    Shares      Amount    Capital
                              ----------- ---------  ----------  ---------  ---------- --------   ----------

                           <c>          <c>        <c>        <c>         <c>       <c>
Balances, December 31,
  2000. . . . . . . . . . . .      --      $   --        --      $   --     39,093,660  $73,659   $     (47)

Issuances of detachable
  warrants. . . . . . . . . .                                                                         2,762
Forgiveness of notes
  receivable. . . . . . . . .
Conversion from no par to
  $0.001 par common stock . .                                                           (73,620)     73,620
Issuance of Series B
  Preferred Stock, net
  of issuance costs of
  $1.3 million. . . . . . . . 65,057,936      8,790
Accretion of Series B
  Preferred to redemption
  value . . . . . . . . . . .                 1,318                                                  (1,318)
Cumulative dividend
  accrued on Series B
  Preferred Stock . . . . . .                                                                          (113)
Exchange of notes payable,
  accrued interest and
  warrants for Series C
  Preferred Stock . . . . . .                         13,000,000      1,950                            (387)
Net loss. . . . . . . . . . .
                              ----------- ---------  ----------   --------- ---------- --------   ---------

Balances, December 31,
  2001. . . . . . . . . . . .  65,057,936    10,108  13,000,000       1,950 39,093,660       39      74,517




<PAGE>


                                               COOLSAVINGS, INC.
STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
                             For the Years Ended December 31, 2003, 2002 and 2001
                                (in thousands, except share and per share data)


                                                                                      Stockholders'
                                                                                    (Deficit) Equity
                                                                          ----------------------------------
                                    Series B               Series C
                                    Redeemable             Redeemable
                                  Preferred Stock        Preferred Stock        Common Stock      Additional
                              ---------------------  ------------------------------------------    Paid-in
                                Shares      Amount    Shares       Amount    Shares      Amount    Capital
                              -----------  --------  ----------   --------  ----------  -------   ----------
Issuance of Series B
  Preferred Stock . . . . . .  17,825,212     2,770
Conversion of Grid Note
  to Series B Preferred
  Stock . . . . . . . . . . .  60,967,777     9,475
Cumulative dividend
  declared on Series B
  Preferred Stock . . . . . .   4,749,177       738
Cumulative dividend
  accrued on Series B
  Preferred Stock . . . . . .                                                                          (626)
Net loss. . . . . . . . . . .                                                                          (283)
                              ----------- ---------  ----------  ---------- -------------------   ---------
Balances, December 31,
  2002. . . . . . . . . . . . 148,600,102    23,091   13,000,000      1,950 39,093,660       39      73,608

Cumulative dividend
  declared on Series B
  Preferred Stock . . . . . .  11,029,635     1,714                                                  (1,430)
Cumulative dividend
  accrued on Series B
  Preferred Stock . . . . . .                                                                          (496)
Stock option expense. . . . .                                                                           159
Stock options exercised . . .                                                   75,610                   14
Net income. . . . . . . . . .
                              ----------- ---------  ----------  ---------- -------------------   ---------
Balances, December 31,
  2003. . . . . . . . . . . . 159,629,737  $ 24,805  13,000,000  $    1,950 39,169,270  $    39   $  71,855
                              =========== =========  ==========  ========== ===================   =========




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


<PAGE>


<table>

                                               COOLSAVINGS, INC.
      STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
                             For the Years Ended December 31, 2002, 2001 and 2000
                                (in thousands, except share and per share data)
<caption>
                                                                      Stockholders' (Deficit) Equity
                                                              ----------------------------------------------
                                                                                  Notes           Total
                                                                                Receivable     Stockholders'
                                                                Accumulated    From Related      (Deficit)
                                                                  Deficit        Parties          Equity
                                                                -----------    ------------    -------------

                                                             <c>            <c>             <c>
Balances, December 31, 2000 . . . . . . . . . . . . . . . . . .     (60,352)         (3,517)           9,743

Issuances of detachable warrants. . . . . . . . . . . . . . . .                                        2,762
Forgiveness of notes receivable . . . . . . . . . . . . . . . .                       3,517            3,517
Conversion from no par to $0.001 par common stock . . . . . . .                                        --
Issuance of Series B Preferred Stock, net of issuance
  costs of $1.3 million . . . . . . . . . . . . . . . . . . . .                                        --
Accretion of Series B Preferred to redemption value . . . . . .                                       (1,318)
Cumulative dividend accrued on Series B Preferred Stock . . . .                                         (113)
Exchange of notes payable, accrued interest and
  warrants for Series C Preferred Stock . . . . . . . . . . . .                                         (387)
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . .     (29,227)                         (29,227)
                                                                -----------    ------------    -------------
Balances, December 31, 2001 . . . . . . . . . . . . . . . . . .     (89,579)          --             (15,023)

Issuance of Series B Preferred Stock. . . . . . . . . . . . . .                                        --
Conversion of Grid Note to Series B Preferred Stock . . . . . .                                        --
Cumulative dividend declared on Series B Preferred Stock. . . .                                         (626)
Cumulative dividend accrued on Series B Preferred Stock . . . .                                         (283)
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . .      (8,287)                          (8,287)
                                                                ------------   ------------    -------------
Balances, December 31, 2002 . . . . . . . . . . . . . . . . . .     (97,866)          --             (24,219)

Cumulative dividend declared on Series B
  Preferred Stock . . . . . . . . . . . . . . . . . . . . . . .                                       (1,430)
Cumulative dividend accrued on Series B
  Preferred Stock . . . . . . . . . . . . . . . . . . . . . . .                                         (496)
Stock option expense. . . . . . . . . . . . . . . . . . . . . .                                          159
Stock options exercised . . . . . . . . . . . . . . . . . . . .                                           14
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . .         655                              655
                                                                ------------   ------------    -------------
Balances, December 31, 2003 . . . . . . . . . . . . . . . . . . $   (97,211)   $      --       $     (25,317)
                                                                ===========    ============    =============
<fn>
                   The accompanying notes are an integral part of the financial statements.
</table>


<PAGE>


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


                                     For the Year Ended December 31,
                                    --------------------------------
                                       2003        2002       2001
                                      --------   --------   --------
Cash flows used in operating
 activities:
  Net income (loss) . . . . . . . .   $   655    $ (8,287)  $(29,227)
  Adjustments to reconcile net
   loss to net cash used in
   operating activities:
    Depreciation and amortization .     1,757       4,392      5,064
    Loss (gain) on disposal of
      property and equipment. . . .        16          (8)       120
    Write-off related to website
      project costs . . . . . . . .        11         177        781
    Write-off related to
      PeopleSoft asset. . . . . . .     --          --           150
    Write-off related to intangi-
      ble asset . . . . . . . . . .         4          38      --
    Forgiveness of notes
      receivable and interest
      from directors. . . . . . . .     --          --         3,666
    Provision for doubtful
      accounts. . . . . . . . . . .       965         623      2,432
    Amortization of debt discount .     --          --         3,096
    Interest payment in kind. . . .       474       1,143        379
    Extraordinary gain on
      exchange of debt for
      preferred stock . . . . . . .     --          --          (327)
    Landmark reimbursed trans-
      action costs (Note 7) . . . .     --             21        749
    Loss on asset impairment. . . .        81       1,233      --
    Stock option expense. . . . . .       159       --         --

Changes in assets and liabilities:
  Decrease (increase) in
   restricted certificates
   of deposit . . . . . . . . . . .       231       --          (204)
  (Increase) decrease in
   accounts receivable. . . . . . .      (851)     (1,913)     3,413
  Decrease (increase) in
   prepaid and other current
   assets . . . . . . . . . . . . .       185        (140)       645
  (Decrease) increase in
   accounts payable . . . . . . . .       (58)     (1,811)    (3,828)
  (Decrease) increase in
   deferred revenue . . . . . . . .       (95)        101       (560)
  (Decrease) increase in
   lease exit cost liability. . . .       (50)      1,325      --
  (Decrease) increase in
   accrued and other liabilities. .       (44)      1,293     (2,863)
                                   ----------  ---------- ----------
Net cash flows provided by
  (used in) operating activities. .     3,440      (1,813)   (16,514)
                                   ----------  ---------- ----------



<PAGE>


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


                                     For the Year Ended December 31,
                                    --------------------------------
                                       2003        2002       2001
                                      --------   --------   --------
Cash flows used in investing
 activities:
  Purchases of property and
   equipment. . . . . . . . . . . .      (419)       (388)    (1,691)
  Sale of property and
   equipment. . . . . . . . . . . .         3          54         29
  Capitalized web site
   development costs. . . . . . . .      (558)       (438)    (1,579)
                                      --------   --------   --------
Net cash used in
  investing activities. . . . . . .      (974)       (772)    (3,241)
                                      --------   --------   --------

Cash flows from financing
 activities:
  Proceeds from short-term debt . .     --          --         1,552
  Repayment of debt obligations . .     --         (1,962)    (4,258)
  Advances on notes payable . . . .     --          1,500     23,879
  Proceeds from exercise of
    stock options . . . . . . . . .        14       --         --
  Proceeds from issuance of
    preferred stock . . . . . . . .     --          2,770      --
  Cash overdraft. . . . . . . . . .     --          --        (1,335)
  Financing costs . . . . . . . . .     --          --        (1,980)
                                      --------   --------   --------
Net cash provided by
 financing activities . . . . . . .        14       2,308     17,858
                                      --------   --------   --------

Net increase (decrease) in cash . .     2,480        (277)    (1,897)
Cash and cash equivalents,
  beginning of period . . . . . . .     4,867       5,144      7,041
                                      --------   --------   --------

Cash and cash equivalents,
  end of period . . . . . . . . . .   $ 7,347    $  4,867   $  5,144
                                     ========    ========   ========

Supplemental schedule of cash
 flow information:
   Cash paid for interest . . . . .     --             52        355

Noncash Investing and
 Financing Activity:
   Conversion of Grid Note to
    Series B Preferred Stock. . . .     --          9,475      8,790
   Conversion of notes and
    warrants to Series C
    Preferred Stock . . . . . . . .     --          --         1,950
   Accretion of Series B
    Preferred Stock . . . . . . . .     --          --         1,318








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


<PAGE>


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


1.    DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES:

      a.    THE COMPANY:  CoolSavings, Inc. ("CoolSavings" or the
"Company") is an online direct marketing and media company that provides
smarter solutions to connect marketers to their target consumers by
leveraging the Company's marketing network, analytic services and
proprietary technology.  Under the Company's established brand, advertisers
can deliver, target and track a wide array of promotional programs,
including printed and electronic coupons, personalized e-mails, rebates,
samples, trial offers, sales notices, and gift certificates to promote
sales of products or services in stores or online.

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

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

      b.  PROFITABILITY UNCERTAIN AND LIQUIDITY CONSTRAINTS.  The Company
has achieved positive net income for the year ended December 31, 2003.  In
addition, the Company has achieved positive cash flow from operations and
has funded the capital requirements of the current operations for the six
most recent consecutive quarters.  However, the Company is not in
compliance with certain covenants of its loan agreement with Landmark.  As
a result, Landmark has the right to accelerate payment of obligations due
to Landmark and require redemption of the Convertible Redeemable Cumulative
Series B Preferred Stock at any time.  The Company's ability to meet these
obligations in the ordinary course of business is dependent upon
management's ability to maintain profitable operations and obtain
continuing financing from sources with acceptable terms and conditions.
Business plans have not been modified to prepare for any exercise by
Landmark of its rights.

      c.    CASH AND CASH EQUIVALENTS:  The Company considers all highly
liquid investments with an original maturity of three months or less to be
cash equivalents. Cash equivalents consist primarily of deposits in money
market funds and certificates of deposit.



<PAGE>


      d.  CONCENTRATION OF CREDIT RISK:  Financial instruments that
potentially subject the Company to a concentration of credit risk consist
of cash and cash equivalents and accounts receivable. Cash and cash
equivalents are deposited with high credit quality financial institutions.
The Company's accounts receivable are derived from revenue earned from
customers located primarily in the U.S. and are denominated in U.S.
dollars.  The Company had no customers that represented more than 10% of
net revenues for the years ended December 31, 2003 and 2002.  One customer
represented 12.7% of net revenues for the year ended December 31, 2001.
The Company had five customers that together represented 14.4%, 16.0% and
26.2% of net revenues for the years ended December 31, 2003, 2002 and 2001,
respectively.  The Company had no individual customers that represented
more than 10% of outstanding receivables at December 31, 2003 or 2002.  The
Company had five customers that together represented 15.5% and 18.2% of the
outstanding receivables at December 31, 2003 and 2002, respectively.

      e.    FAIR VALUE OF FINANCIAL INSTRUMENTS:  The Company's financial
instruments, including cash and cash equivalents, accounts receivable,
accounts payable and notes payable are carried at cost, which approximates
their fair value because of the short-term maturity of these instruments.

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

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

      h.    LONG-LIVED ASSETS:  The Company assesses the recoverability of
long-lived assets at the asset group level, whenever adverse events or
changes in circumstances or business climate indicate that an impairment
may have occurred. If the future cash flows (undiscounted and without
interest) expected to result from the use of the related assets are less
than the carrying value of such assets, an impairment has incurred and a
loss is recognized to reduce the carrying value of the long-lived assets to
fair value, which is determined by discounting estimated future cash flows.

      i.    REDEEMABLE PREFERRED STOCK:  Preferred stock whose redemption
is not within the control of the Company is classified outside of permanent
equity within the financial statements.  The Company's Series B Redeemable
Convertible Preferred Stock is carried at its redemption value because
Landmark may require the Company to redeem it at any time at Landmark's
option. The accretion to redemption value is recorded as a dividend to the
holders of the Series B Redeemable Convertible Preferred Stock and is
charged against additional paid-in-capital, to the extent available, and
then the accumulated deficit.



<PAGE>


      The Company's Series C Preferred Stock is carried at its fair value
at the time of issuance and is redeemable at CoolSavings' election at any
time after the shares of Series B Preferred Stock have been redeemed or
after the third anniversary of the date of issuance, if the holders of a
majority of the shares of Series B Preferred Stock consent. The holders of
the Series C Preferred Stock can deem certain change in control events to
be liquidating events if the holders of the Series B Preferred Stock have
deemed these events to be liquidating events.  The Series C Preferred Stock
is classified outside of permanent equity because these events are not
considered to be within the Company's control. Because the Company does not
deem the occurrence of a change in control to be probable as of
December 31, 2003, the Series C Preferred Stock is not accreted to its
liquidation value.

      j.    REVENUE RECOGNITION:  Revenue subject to time-based contracts
is recognized ratably over the duration of the contract. Deferred revenue
represents amounts which have been prepaid under time based contracts. For
contracts based on certain performance or delivery criteria, revenue is
recognized in the month performance is delivered to the customer.

      Barter revenue includes amounts recorded for barter transactions in
which the Company exchanges promotion or direct marketing services for
advertising.  Pursuant to Emerging Issues Task Force ("EITF") Issue No. 99-
17 "Accounting for Advertising Barter Transactions," barter transactions
have been valued based upon similar cash transactions which have occurred
within six months prior to the date of the barter transaction. In the years
ended December 31, 2003, 2002 and 2001, barter revenues and corresponding
advertising costs were $0, $193 and $1,070, respectively.

      k.    ADVERTISING:  Advertising costs are expensed as incurred.
Advertising expense was $9,944, $8,488 and $8,508 during the years ended
December 31, 2003, 2002 and 2001, respectively.

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

      m.    CAPITALIZED SOFTWARE COSTS:  The Company accounts for
capitalized software development costs in accordance with the American
Institute of Certified Public Accountants Statement of Position 98-1
("SOP 98-1"), "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use," which requires capitalization of certain costs
including the cost of outside consultants. These costs are amortized using
the straight-line method over three years, beginning when individual
modules are placed into service. These costs were fully amortized as of
December 31, 2002.  The Company recognized $0, $406 and $497 in
amortization expense for the years ended December 31, 2003, 2002 and 2001,
respectively. No software development costs were capitalized in the years
ended December 31, 2003, 2002 and 2001.



<PAGE>


      n.    CAPITALIZED WEB SITE DEVELOPMENT COSTS:  Effective July 1,
2000, the Company adopted the standards of EITF Issue No. 00-2 "Accounting
for Web Site Development Costs," which requires capitalization of certain
web site development costs. The Company capitalized costs of $558, $438 and
$1,579 related to web site development in the years ended December 31,
2003, 2002 and 2001, respectively.  The Company recognized $577, $1,433 and
$1,542 of amortization expense for the years ended December 31, 2003, 2002
and 2001, respectively.  Additionally, the Company wrote off web site
development costs with net book values of $11, $177 and $781 during 2003,
2002 and 2001, respectively.

      o.    STOCK-BASED COMPENSATION:  The Company accounts for its stock
option plan using Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," whereby compensation cost for stock options
is measured as the excess, if any, of the fair market value of a share of
the Company's stock at the date of the grant over the amount that must be
paid to acquire the stock.  SFAS No. 123, "Accounting for Stock-Based
Compensation" issued subsequent to APB No. 25 and amended by SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure"
defines a fair value based method of accounting for employees stock options
but allows companies to continue to measure compensation cost for employee
stock options using the intrinsic value based method described in APB No.
25.  See also Note 11 "Stockholders' (Deficit) Equity" for more information
on the Company's stock-based compensation.

      The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions
of FASB Statement No. 123, "Accounting for Stock-Based Compensation," as
amended by FASB Statement No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure," to stock-based employee compensation.

                                       Years Ended December 31,
                                  ------------------------------------
                                      2003        2002         2001
                                   ----------  ----------   ----------
Net loss applicable to common
  stockholders, as reported . . .   $  (1,271)  $  (9,196)  $  (30,658)
Add:  Stock Option Compensation
  expense . . . . . . . . . . . .         159       --           --
Deduct: Stock-based employee
  compensation expense determined
  under fair value based method
  for all awards, net of related
  tax effects . . . . . . . . . .      (1,556)     (2,439)      (2,249)
                                   ----------  ----------   ----------
Pro forma net loss applicable to
  common stockholders . . . . . .   $  (2,668)  $ (11,635)  $  (32,907)
                                   ==========  ==========   ==========
Weighted average shares
  outstanding . . . . . . . . . .  39,107,203  39,093,660   39,093,660

Loss per share:
  Basic and diluted
    - as reported . . . . . . . .   $   (0.03)  $   (0.24)  $    (0.78)
  Basic and diluted
    - pro forma . . . . . . . . .   $   (0.07)  $   (0.30)  $    (0.84)


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



<PAGE>


      The assumptions used for valuations of option grants calculated in
accordance with SFAS 148 are as follows:

                                      2003        2002         2001
                                   ----------  ----------   ----------

Annualized dividend yield . . . .       0.00%        0.00%       0.00%
Risk-free rate of return. . . . .       3.10%        4.21%       4.49%
Expected option term (in years) .        5.00         5.00       5.00
Expected volatility . . . . . . .     261.10%      247.63%     231.37%


      p.    BASIC AND DILUTED NET LOSS PER SHARE:  The Company computes net
loss per share in accordance with the provisions of SFAS 128 "Earnings per
Share" ("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS 128 and SAB 98, basic and diluted net loss per
share applicable to common stockholders is computed by dividing the net
loss applicable to common stockholders for the period by the weighted
average number of common shares outstanding for the period. The calculation
of diluted net loss per share excludes shares of common stock issuable upon
the exercise of employee stock options (see Note 11) and warrants (See
Note 7b), and the conversion of shares of preferred stock (See Note 10),
because the effect of such exercises would be anti-dilutive. Refer to
Note 12 -- Earnings Per Share for the reconciliation of the numerator and
denominator of the basic and diluted EPS calculation.

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

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

      s.    RECENT PRONOUNCEMENTS:  In 2003, the Company adopted SFAS
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs.  The adoption of SFAS 143 did not have a material impact
on the Company's financial position or results of operations.

       In January 2003, the Company adopted Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantees of Indebtedness of Others," which expands
previously issued accounting guidance and disclosure requirements for
certain guarantees. The Interpretation requires an entity to recognize an
initial liability for the fair value of an obligation assumed by issuing a
guarantee. The provision for initial recognition and measurement of the
liability will be applied on a prospective basis to guarantees issued or
modified after December 31, 2002.  This Interpretation did not have a
material impact on the Company's financial position or results of
operations.



<PAGE>


      During 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46).  This new interpretation requires that companies consolidate a
variable interest equity if the company is subject to a majority of the
risk of loss from the variable interest entity's activities, or is entitled
to receive a majority of the entity's residual returns, or both.  In
December 2003, the FASB issued Interpretation 46R (FIN 46R), a revision to
FIN 46.  FIN 46R clarifies some of the provisions of FIN 46 and exempts
certain entities from its requirements.  FIN 46R is effective at the end of
the first interim period ending after March 15, 2004.  Entities that have
adopted FIN 46 prior to this effective date can continue to apply the
provisions of FIN 46 until the effective date of FIN 46R.  The Company
adopted FIN 46 in January 2003 and it did not have an impact on the
Company's financial statements.

      In July 2003, the Company adopted EITF No. 00-21, "Revenue
Arrangements with Multiple Deliverables" ("EITF 00-21").  EITF 00-21
provides guidance on how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting and how
arrangement consideration should be measured and allocated to the separate
units of accounting in the arrangement.  The adoption of EITF 00-21 did not
have a material impact on the Company's financial position or results of
operations.

      In July 2003, the Company adopted SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity" ("SFAS 150").  SFAS 150 establishes standards for how entities
classify and measure in their statement of financial position certain
financial instruments with characteristics of both liabilities and equity.
The adoption of SFAS 150 did not have a material effect on the Company's
financial position or results of operations.

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


2.    LANDMARK TRANSACTION - RELATED PARTY

      Beginning in 2001, the Company entered into a series of transactions
with Landmark (collectively, the "Landmark Transaction") whereby Landmark
made loans to and an equity investment in the Company.

      SENIOR SECURED NOTE

      During 2001, Landmark loaned the Company $5,000 pursuant to a senior
secured note (the "Senior Secured Note"), which loan is due on June 30,
2006 (the "Senior Secured Loan"). The Senior Secured Note and Senior
Secured Loan are governed by the terms of an amended and restated senior
secured loan and security agreement dated July 30, 2001 (the "Amended and
Restated Loan Agreement").  In connection with the Senior Secured Loan, the
Company issued Landmark a warrant (the "Landmark Warrant") to purchase
shares of its common stock. The warrant was exercisable for 10.0 million
shares of common stock at an exercise price of $0.50 per share at
November 12, 2001. The exercise price of the warrant will automatically
increase to $0.75 per share on July 30, 2005 if not previously exercised.
The Senior Secured Loan bears interest at 8% per annum, which accrues
quarterly and is payable "in-kind."  The Company automatically issues to
Landmark additional warrants to purchase two shares of common stock for
each dollar of interest accrued and paid-in-kind on a quarterly basis
(January 31, April 30, July 31 and October 31) on the Senior Secured Loan.
As of December 31, 2003, the principal and interest owed under the Senior
Secured Loan was $6,141.  As of December 31, 2003, the Landmark Warrants
were exercisable for 11,711,456 shares of the Company's common stock.  The
Senior Secured Note is secured by a lien on all of the Company's assets.
Due to defaults under the Securities Purchase Agreement (defined below),
Landmark may demand payment under the Senior Secured Loan at any time.



<PAGE>


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

      GRID NOTE

      Under the terms of that certain Securities Purchase Agreement dated
July 30, 2001 (the "Securities Purchase Agreement"), the Company agreed
that if certain events occurred prior to December 31, 2002, defined therein
as "Shortfall Events", Landmark would have the right to acquire additional
shares of Series B Preferred Stock (defined below) at a price of $0.1554
per share (a "Shortfall Purchase Option").  Among other things, Shortfall
Events would occur if the Company failed to maintain an excess of current
assets over current liabilities at or above prescribed amounts.  The number
of shares Landmark could acquire upon the occurrence of a Shortfall Event
was the quotient determined by dividing the "Shortfall Amount" (generally
the cash needed by the Company in connection with a Shortfall Event) by
$0.1554.  Under a letter agreement dated November 12, 2001, the Company
agreed that when Shortfall Events occurred, Landmark could elect to loan
the Company the Shortfall Amount under the Amended and Restated Commercial
Demand Grid Note dated September 25, 2001, as amended (the "Grid Note"),
and Landmark could later elect to apply to the purchase price of the
Shortfall Purchase Option that arose in connection with the Shortfall
Events.

      As Shortfall Events occurred during 2001, Landmark loaned the Company
an aggregate of $17,249 under the Grid Note.  On November 12, 2001,
pursuant to the Securities Purchase Agreement, Landmark exercised its
rights to apply $10,000 of principal and $108 of accrued interest then
outstanding under the Grid Note to the purchase of 65,057,936 shares of the
Company's $0.001 par value Cumulative Preferred B Stock (the "Series B
Preferred Stock") at a price per share of $0.1554.  On January 29, 2002,
Landmark loaned to the Company, under the Grid Note, an additional $21
related to transaction costs reimbursable to Landmark.  On February 28,
2002, Landmark loaned the Company an additional $1,500 under the Grid Note,
bringing the outstanding principal balance (including advances made in
2001) to $8,770.  This balance included $8,000 related to Shortfall Events
and $770 related to the Company's obligation to reimburse Landmark for
legal fees related to the Landmark Transaction.

      On December 20, 2002, Landmark, at the Company's request, applied the
$8,770 of principal and $705 of accrued interest then outstanding under the
Grid Note against the purchase of 60,967,777 shares of Series B Preferred
Stock ($0.1554 per share).  As of December 31, 2003, the Grid Note had no
outstanding principal or accrued interest.  The Grid Note bears interest at
eight percent (8%) per annum and may evidence up to $20,000 in advances.

      SALE OF SERIES B PREFERRED STOCK

      On November 12, 2001, pursuant to the Securities Purchase Agreement,
Landmark exercised its rights to apply $10,000 of principal and $108 of
accrued interest then outstanding under the Grid Note to the purchase of
65,057,936 shares of the Company's Series B Preferred Stock at a price per
share of $0.1554.

      On October 24, 2002, in connection with one Shortfall Event which
occurred on June 30, 2002 (related to the amount of current assets over
current liabilities at such date), Landmark exercised its related Shortfall
Purchase Option to purchase 17,825,212 shares of Series B Preferred Stock
and paid the Company $2,770 ($0.1554 per share) in connection with its
exercise of additional existing Shortfall Purchase Options.

      On December 20, 2002, Landmark, at the Company's request, applied the
$8,770 of the principal and $705 of accrued interest then outstanding under
the Grid Note against the purchase of 60,967,777 shares of Series B
Preferred Stock ($0.1554 per share) in connection with its exercise of
additional existing Shortfall Purchase Options.



<PAGE>


      The Series B Preferred Stock has certain conversion rights and has an
8% annual dividend, payable quarterly in additional shares of Series B
Preferred Stock.  As a result of the defaults under the Amended and
Restated Loan Agreement, Landmark may at its option require the Company to
redeem for cash all of the issued and outstanding Series B Preferred Stock
at any time.

      As of December 31, 2003, Landmark holds 159,629,737 shares of
Series B Preferred Stock (and has rights with respect to accrued dividends
thereon) and holds a warrant to purchase 11,711,456 shares of the Company's
common stock.  Landmark's ownership in the Company will continue to grow
through the issuance of additional shares of Series B Preferred Stock and
warrants as "in-kind" payments for dividends and interest accruing on the
Series B Preferred Stock and interest accruing on the Senior Secured Note,
respectively.


TERMS OF THE SERIES B PREFERRED STOCK

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

      DIVIDENDS AND LIQUIDATION PREFERENCE

      Dividends accrue on the shares of Series B Preferred Stock at the
rate of 8% per annum, payable quarterly in additional shares of Series B
Preferred Stock. Dividends are cumulative and will continue to accrue
whether or not declared.  As of December 31, 2003, 3,192,594 shares of
Series B Preferred Stock are issuable with respect to accrued, but not
declared, dividends.

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

      CONVERSION RIGHTS

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

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



<PAGE>


      REDEMPTION

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

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

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

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

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

      Holders' Election. Due to default events under the Amended and
Restated Loan Agreement, as of December 31, 2003 and 2002, the Series B
Preferred Stock was redeemable in whole or in part at the holder's election
at the stated value of $0.1554 per share plus accrued but unpaid dividends.

See Note 7 of these financial statements for a discussion of the default
events.

      VOTING RIGHTS AND BOARD OF DIRECTORS

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


SALE OF SERIES C PREFERRED STOCK

      As a condition to the consummation of the Landmark Transaction, on
November 12, 2001 the Company issued to three individuals, two of whom are
directors of the Company, 13,000,000 shares of the Company's Series C
Convertible Preferred Stock ("Series C Preferred Stock") in exchange for
$2,100 of the Company's 8% Senior Subordinated Convertible Notes ("Director
Notes"), due March 1, 2006, accrued interest, and warrants to purchase
1,050,000 shares of common stock which were previously issued to such
individuals with the Director Notes.




<PAGE>


TERMS OF THE SERIES C PREFERRED STOCK

      The Series C Preferred Stock ranks junior (with respect to dividends
and liquidation payments) to the Series B Preferred Stock but senior to the
common stock. The following discussion summarizes the rights of the
Series C Preferred Stock.

      DIVIDENDS

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

      CONVERSION RIGHTS

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

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

      REDEMPTION

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

      VOTING RIGHTS

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

      LIQUIDATION PREFERENCE

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




<PAGE>


3.    OTHER RELATED PARTY TRANSACTIONS:

      a.    LEGAL SERVICES:  One attorney with a law firm that provided
services to the Company was a member of the Company's Board of Directors
from September 2001 through July 2002.  Several attorneys with this law
firm also are holders of the Company's stock. Total fees for services were
$0, $82 and $1,142, during the years ended December 31, 2003, 2002 and
2001, respectively. These fees are included in general and administrative
expenses in 2003, 2002 and 2001, respectively, except a portion that had
been capitalized as Landmark Transaction costs and later amortized to
interest expense as a debt discount in 2001.  Total fees payable were $0
and $8 at December 31, 2003 and 2002, respectively.  An attorney related to
our former Chairman of the Board and Chief Executive Officer provided
services to the Company.  Total fees for such services were $0, $0 and $162
during the years ended December 31, 2003, 2002 and 2001, respectively.
These fees are included in general and administrative expenses in the
Company's statements of operations.  No fees were payable at December 31,
2003 or 2002.

      b.    NOTES RECEIVABLE:  In March, April, and July 1999 and April,
2000, stockholders provided a total of $3,517 notes receivable upon
exercise of stock options and warrants by current and former officers and
directors of the Company ("Related Party Notes"). These Related Party Notes
accrued interest at rates ranging from 4.83% to 6.71% due annually. These
Related Party Notes were collateralized by the shares of common stock
issued upon exercise of the related options and warrants and the makers of
each note were personally liable for up to 20% of the face value of the
note, plus accrued interest. Accrued but unpaid interest on these notes was
$274 as of December 31, 2000.  During 2001, the Company forgave these
Related Party Notes which had an aggregate principal and accrued interest
of $3,747 and recorded the forgiveness as compensation expense and recorded
a charge of $139 as uncollectible bad debt expense.  Each related party was
permitted to keep the common stock (approximately 1.7 million shares)
purchased by delivery of the Related Party Notes.

      c.    DIRECTORS NOTES PAYABLE:  In March 2001, the Company sold
$2,100 of 8% Senior Subordinated Convertible Notes due March 1, 2006
("Director Notes") to three accredited investors.  Two of those investors
are members of the Company's Board of Directors, each of whom purchased
$1,000 of these Director Notes.  These Director Notes carried warrants to
purchase one share of the Company's common stock for every $2.00 of
principal indebtedness under each Director Note for a total of one million
shares subject to warrants issued to related parties.  The warrants had an
exercise price of $1.25 per share.  The proportional fair value of the
warrants was $387, of which $369 was to related parties.  Such value
represented a discount from the fair value of the Director Notes, and the
relative fair value of the warrants was recorded in the financial
statements as stipulated by APB 14, "Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants," and was being amortized to
interest expense over the term of the Director Notes.  The Director Notes
were convertible at any time into common stock at a conversion rate equal
to one share for each outstanding dollar of principal and accrued interest,
at the election of the note holder.  Interest was payable quarterly, and
for periods prior to April 1, 2003, the Company had the option to pay
interest on the outstanding principal balance of the notes in cash or by
delivery of additional notes in an amount equal to the amount of the
interest.  In November 2001, in conjunction with, and as a condition to,
the closing of the investment in the Company by Landmark described in
Note 2 above, the Company issued 13,000,000 shares of its Series C
Preferred Stock (See Note 10b) in exchange for the Director Notes, the
accumulated accrued interest on the Director Notes and the accompanying
warrants.  This transaction resulted in an extraordinary gain of $327 due
to the early extinguishment of the Director Notes.



<PAGE>


      d.    SEVERANCE AGREEMENT:  On April 1, 2001, the Company entered
into an employment agreement with Steven M. Golden, who was serving as the
Company's Chairman and Chief Executive Officer.  The employment agreement
had a term of three years and provided for an annual base salary of $345
and the grant of an option to purchase 150,000 shares of the Company's
common stock.  At the time of the execution of the employment agreement,
all of Mr. Golden's stock options previously issued and not vested were
made immediately vested and exercisable.  On July 30, 2001, the Company
entered into a severance agreement with Mr. Golden which terminated Mr.
Golden's employment agreement.  The severance agreement provided for three
years of severance pay in the amount of $345 per year and the continuation
of certain benefits.  The severance agreement further provided that all
options held by Mr. Golden:  (a) became immediately vested and fully
exercisable; (b) were adjusted to have an exercise price of $0.50; and (c)
were exercisable through the tenth anniversary of the grant of each such
options.  These options are subject to variable accounting under FASB
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation."  Compensation expense of $159 and $0 was recorded in 2003
and 2002 to reflect the intrinsic value of the modified options.

      e.    EMPLOYMENT AGREEMENT:  On July 30, 2001, the Company entered
into an employment agreement with Matthew Moog, the Company's President and
Chief Executive Officer.  The employment agreement has a term of three
years, provides for an annual base salary of $345, and provides for the
grant of an option to purchase 750,000 shares of the Company's common
stock.  The employment agreement further provides that Mr. Moog would be
granted options to purchase at least an additional 200,000 shares on each
of the first and second anniversary of the agreement if he is still
employed by the Company.  In January of 2002, Mr. Moog was granted 328,571
stock options.  These stock options were granted in lieu of the stock
option grant for not less than 200,000 shares that was due to Mr. Moog on
July 30, 2002, pursuant to terms of his employment agreement.
Additionally, the agreement provided for the immediate and full vesting on
January 1, 2002 of the stock options for 250,000 shares of common stock
that were originally issued on March 23, 2001.  See Note 14 for a
discussion of an amendment to this employment agreement in 2004.

      f.    CONSULTING CONTRACT:  From November 1, 2002 through April 30,
2003, the Company had engaged John Giuliani, a member of the Company's
Board of Directors, in a marketing services consulting agreement.  These
fees are included in general and administrative expenses in the Company's
statement of operations, and totaled $20 and $10 in 2003 and 2002,
respectively.  Total fees payable were $0 and $0 at December 31, 2003 and
2002, respectively.

      g.    SERVICES PROVIDED:  Landmark provides financial and payroll
system support to the Company for a fixed monthly fee.  The Company
recorded general and administrative expenses for these services of $42, $41
and $0 in 2003, 2002 and 2001, respectively.  In addition, the Company
purchased online advertising services from weather.com, a division of The
Weather Channel, Inc., a wholly owned subsidiary of Landmark, and recorded
marketing expense of $626, $280 and $145 in 2003, 2002 and 2001,
respectively, for these services.

      h.    CALL OPTION AGREEMENT:  In April 2002, Landmark acquired
10,889,636 shares of the Company's common stock from Lend Lease
International Pty. Limited of Australia. Contemporaneously with the
purchase, the Company entered into a call option agreement with Landmark,
whereby the Company has the right to call, subject to certain terms and
conditions, all 10,889,636 shares of common stock from Landmark.  The call
price is $0.08 per share plus seven percent interest thereon, compounded
annually.  The option can be exercised at any time after April 5, 2003 and
prior to March 31, 2008.  The Company accounted for this call option as
permanent equity and a contribution from Landmark under EITF No. 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock."  The Company ascribed a
value of $1,200 to the option at issuance.



<PAGE>


      i.    TAX ALLOCATION AGREEMENT:  See Note 14 for a discussion of a
Tax Allocation Agreement between Landmark and the Company, entered into in
2004.


4.    PROPERTY AND EQUIPMENT:  Property and equipment at December 31, 2003
and 2002, respectively, were comprised of the following:

                                                December 31,
                                           ----------------------
                                              2003        2002
                                            ---------   ---------
     Computer hardware/software . . . . .   $   6,823    $  6,646
     Furniture and fixtures . . . . . . .       1,589       1,637
     Leasehold improvements . . . . . . .         700         768
                                            ---------   ---------
     Total. . . . . . . . . . . . . . . .       9,112       9,051
     Less depreciation. . . . . . . . . .      (7,277)     (6,455)
                                            ---------   ---------
     Net property and equipment . . . . .   $   1,835    $  2,596
                                            =========   =========

      Depreciation expense recorded on property and equipment was $1,079,
$2,303 and $2,820 in 2003, 2002 and 2001, respectively.


5.    INTANGIBLE ASSETS. Intangible assets are comprised of various license
agreements and patents that are recorded at cost. Intangible assets at
December 31, 2003 and 2002, were comprised of the following:

                                                December 31,
                                           ----------------------
                                              2003        2002
                                            ---------   ---------
     Patents. . . . . . . . . . . . . . .   $     500    $    500
                                            ---------   ---------
     Total. . . . . . . . . . . . . . . .         500         500
     Less amortization. . . . . . . . . .        (500)       (399)
                                            ---------   ---------
     Net intangible assets. . . . . . . .   $   --       $    101
                                            =========   =========

      Amortization expense recorded on intangible assets was $101, $251 and
$226 in 2003, 2002 and 2001, respectively.  In 2002, the Company wrote off
$176 in license agreements for licenses it no longer uses.  The write off
resulted in a loss on intangible assets of $38.



<PAGE>


6.    IMPAIRMENT OF LONG-LIVED ASSETS AND COSTS ASSOCIATED WITH EXIT
ACTIVITIES

      During 2002, following an ongoing assessment of its future expected
space requirements, the Company determined that a significant portion of
its unoccupied leased office space and the assets associated with that
office space were unnecessary for its future operations.  In accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", the Company determined that the estimated undiscounted cash flows
expected to be generated by the assets were less than their net book value.

Therefore, the Company recorded an operating expense of $1,233 in 2002 to
write down the assets to their estimated fair value. In addition, in
accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities", the Company recorded an operating expense of $2,148
in 2002, representing the estimated future lease obligations related to the
unoccupied office space, and estimated costs associated with subleasing the
space, net of estimated cash flows from future sublease arrangements.

      In 2003, the Company re-evaluated its future expected space
requirements and determined that an additional portion of its leased office
space and the assets associated with that space were unnecessary for its
future operations.  As a result of this re-evaluation, the Company recorded
an additional operating expense of $81 in 2003 to write down the assets
related to this office space to their estimated fair value.  In addition,
the Company recorded an operating expense of $519 in 2003, representing an
adjustment to the estimated future lease obligations related to the office
space and estimated costs associated with subleasing and disposing of the
space, net of estimated cash flows from future sublease arrangements.

      For the year ended December 31, 2003 and 2002, the lease exit costs
were as follows:
                                                Twelve Month
                                                Period Ended
                                                December 31,
                                           ----------------------
                                              2003        2002
                                            ---------   ---------
     Lease obligation, net of estimated
       sub-lease income . . . . . . . . .   $     536    $  1,344
     Adjustment to accrued rent expense .       --           (132)
     Broker commissions and other
       miscellaneous costs. . . . . . . .         (17)        936
                                            ---------   ---------
     Lease exit costs . . . . . . . . . .   $     519    $  2,148
                                            =========   =========


      At December 31, 2003, the liability associated with lease exit costs
consisted of the following:

                 Balance at   Subsequent                 Balance at
                December 31,   Accruals,                December 31,
                   2002          Net         Payments      2003
                ------------  -----------   ----------  ------------
Lease obliga-
 tions, net of
 estimated
 sub-lease
 income . . . .   $    1,090   $      536   $     (444)  $     1,182
Broker commis-
 sions and
 other trans-
 action costs .          235          (17)        (125)           93
                 -----------                            ------------

Subtotal. . . .        1,325                                   1,275



<PAGE>


                 Balance at   Subsequent                 Balance at
                December 31,   Accruals,                December 31,
                   2002          Net         Payments      2003
                ------------  -----------   ----------  ------------

Less portion
 of liability
 classified
 as current . .         (311)                                   (206)
                 -----------                            ------------
Long-term
 lease exit
 liability. . .   $    1,014                             $     1,069
                 ===========                            ============

      Significant assumptions were required concerning the estimated fair
value of the assets and estimates of sublease income.  As provided under
SFAS No. 144, the Company primarily used discounted cash flow analysis,
together with other available information, to estimate fair values.


7.    LONG AND SHORT TERM DEBT:

      a.    BANK LINES OF CREDIT:

      During 2002, the Company had two separate credit facilities, both of
which expired as of December 31, 2002.  As of December 31, 2003, the
Company had no credit facilities.

      Under a credit facility with American National Bank (the "ANB
Facility") the Company had one term loan and one $3,000 revolving credit
line.  Both the term loan and the revolving credit line were payable in
installments.  At December 31, 2002, the Company had restricted
certificates of deposit of $231 which related to letters of credit which
were issued under the credit line, and which expired on December 31, 2002.
The restrictions on the certificates of deposit were removed on January 1,
2003. Borrowings were collateralized by substantially all the assets of the
Company.

      On June 15, 2001, the Company entered into a Forbearance and
Reaffirmation Agreement with American National Bank, which was amended by a
letter agreement dated July 27, 2001 ("ANB Forbearance Agreement"), wherein
American National Bank agreed to forbear from accelerating borrowings under
the ANB Facility for certain stated defaults.  Among others, the Company
was in default primarily because of failure to satisfy a $10,000 tangible
capital requirement (defined as total assets less intangible assets plus
subordinated debt), a debt to tangible capital ratio requirement and a
current asset to current liability ratio requirement with which the Company
was not in compliance.  The forbearance was based on the continued
compliance with the terms of the ANB Forbearance Agreement.  The terms
included an accelerated principal payment schedule with respect to the ANB
Facility.  This accelerated payment schedule provided an additional
principal payment of $150 per month and for the payment of the entire
indebtedness on or before December 31, 2002. The entire indebtedness was
paid before December 31, 2002.

      Under a credit facility with Midwest Guaranty Bank (the "Midwest
Facility"), the Company had a $1,000 equipment line of credit, which
expired on December 31, 2002.  Borrowings were collateralized by the
specific equipment purchased and were payable in installments.



<PAGE>


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

      b.    LANDMARK LOANS:

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

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

      At December 31, 2003, the Company was not in compliance with certain
financial covenants of the Senior Secured Loan.  The following is a list of
the significant defaults under the Senior Secured Loan, and therefore under
the Grid Note and the Amended and Restated Loan and Security Agreement, as
these notes are cross-collateralized:

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

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

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

      The Company's failures to comply with such covenants constitute
events of default.  Consequently, the Senior Secured Loan, including
accrued interest, is immediately due and payable at the option of Landmark.

Accordingly, the Company has reclassified the Senior Secured Loan,
including the in-kind interest which has been compounded on the principal
balance totaling $6,141, as currently payable as of December 31, 2003.



<PAGE>


      In connection with the Senior Secured Loan, the Company issued the
Landmark Warrants.  The Landmark Warrants have a term of eight years
(expiring July 30, 2009) and may be exercised in whole or in part
immediately.  The Landmark Warrants contain a net exercise feature and were
exercisable for 10,000,000 million shares of the Company's common stock at
an exercise price of $0.50 per share on November 12, 2001 (the exercise
price automatically increases to $0.75 per share on July 30, 2005 if the
Landmark Warrants have not previously been exercised).  The Company
automatically issues to Landmark additional warrants to purchase two shares
of common stock for each dollar of interest accrued on the Senior Secured
Loan as paid-in-kind interest.  Under APB 14, the Company assigned a $2,400
value to the Landmark Warrants and recorded it as additional paid-in-
capital and debt discount.  The debt discount of $3,017 resulting from the
offering costs and warrant allocation from the Senior Secured Loan was
amortized immediately to interest expense in 2001.  This was due to
covenant violations by the Company causing the entire loan to be
immediately due and payable at the option of Landmark.

      During the second half of 2001, Landmark loaned to the Company under
the Grid Note an aggregate of $17,249, of which $16,500 related to cash
advances (in separate drawdowns, several of which were related to Shortfall
Events that occurred under the Securities Purchase Agreement) and $749
related to transaction costs reimbursable to Landmark.  The principal
balance outstanding under the Grid Note bore interest at 8.0% per annum.
The Grid Note including accrued interest was immediately due and payable at
the option of Landmark.  The Grid Note was cross-collateralized with the
Senior Secured Loan and maintained the exact same covenants as the Senior
Secured Loan. The entire $749 of offering costs reimbursable to Landmark
was expensed in 2001 and was included as general and administrative
expense.

      On November 12, 2001, pursuant to the Securities Purchase Agreement,
Landmark exercised its right to apply $10,000 of principal and $108 of
accrued interest then outstanding under the Grid Note to the purchase of
65,057,936 shares of Series B Preferred Stock (Note 10).

      On January 29, 2002, Landmark loaned to the Company, under the Grid
Note, an additional $21 related to transaction costs reimbursable to
Landmark.  On February 28, 2002, Landmark loaned the Company an additional
$1,500 under the Grid Note, in connection with another Shortfall Event,
bringing the outstanding principal balance to $8,770.  On December 20,
2002, Landmark, at the Company's request, applied the $8,770 of principal
and $705 of accrued interest then outstanding under the Grid Note to the
purchase of 60,967,777 shares of Series B Preferred Stock ($0.1554 per
share). Consequently, there was no balance due under the Grid Note at the
end of 2003 or 2002.  The Grid Note bears interest at eight percent (8%)
per annum and may evidence up to $20,000 in advances.


8.    COMMITMENTS AND CONTINGENCIES:

      a.    LETTERS OF CREDIT:  At December 31, 2001, the Company
maintained five letters of credit totaling $1,747, net of a $231 restricted
certificate of deposit to secure a line of credit. These letters of credit
were required under the ANB Facility and collateralized the lease deposits
for the Company's office facilities in Chicago, New York and San Francisco.
All letters of credit expired as of December 31, 2002.



<PAGE>


      On August 31, 2002, the Company entered into an Amended and Restated
Reimbursement and Security Agreement (the "Reimbursement Agreement") with
Landmark.  On behalf of the Company, Landmark applied for and received
letters of credit in the aggregate amount of $1,599 from Wachovia Bank to
collateralize lease deposits on the Company's office facilities (the
"Landmark Letters of Credit").  The Company has replaced the letters of
credit outstanding under the ANB Facility with the Landmark Letters of
Credit.  Under the Reimbursement Agreement, the Company has agreed, among
other things, to reimburse Landmark for all amounts that Landmark is
required to pay Wachovia under the bank agreement related to the Landmark
Letters of Credit, including all fees, penalties, interest and amounts in
connection with draws on the Landmark Letters of Credit.  The Landmark
Letters of Credit expire in March and April of 2003.  Landmark has applied
to Wachovia for a renewal of such Letters of Credit and may, in its sole
discretion, cancel such Letters of Credit on ninety (90) days written
notice to the Company.  If the Landmark Letters of Credit so expire or are
cancelled, the Company will need to enter into an alternate credit
arrangement.  The aggregate amount of letters of credit required to
collateralize lease deposits on our office facilities declined to $1,194 as
of December 31, 2003, due to the termination of our lease in New York City,
and scheduled reductions contained in our lease agreement for our Chicago,
Illinois facility.

      Effective January 1, 2003, the Company established the CoolSavings,
Inc. Long Term Incentive Plan ("LTIP").  Employee participation in the LTIP
is at the sole discretion of the Company's Board of Directors.  LTIP
participants are eligible to receive units which may increase in value if
the Company achieves certain long term profitability objectives.  After
vesting, units which have increased in value since the date of grant can be
redeemed with the Company for cash payments equal to their increase in
value.  The Company will record an expense during periods in which the
value of the outstanding units increases.  No expense was recorded during
2003 related to the LTIP.

      b.    LITIGATION:  During 2000, the Company settled several patent
infringement suits. As a result of these settlements, the Company received
certain royalty payments through 2003.  On February 6, 2004, the Company
acquired certain assets of the business with whom this settlement was
reached (the "Seller").  In connection with the acquisition, the Company
released the seller from its future obligations to pay the Company
royalties.  (See Note 14.)

      During 2001, the Company accepted a mediation award with a non-
operating business related lawsuit pursuant to which the Company paid the
plaintiff the sum of $219.

      The Company is currently a defendant in two patent infringement
lawsuits.  While the Company believes that these actions are without merit
and intends to defend them vigorously, the Company's efforts may not be
successful and may have an adverse impact on the Company's business.  An
unfavorable outcome for the Company is considered neither probable nor
remote by management at this time, and an estimate of possible loss or
range of possible losses cannot currently be made.

      In 2002, the Company received a demand for arbitration from Coupco,
Inc. ("Coupco") relating to a dispute over the Company's obligation to pay
royalties under its Patent License Agreement with Coupco which was executed
on April 6, 2000 ("the Patent License Agreement").  On July 29, 2003, the
Company entered into a Restated Patent License Agreement with Coupco which
resolved the dispute under similar terms as the Patent License Agreement.



<PAGE>


      On October 21, 1998, the Company instituted a lawsuit in the Northern
District of Illinois against Catalina Marketing International, Inc. and its
affiliate Supermarkets Online, Inc. (together with Catalina Marketing
International, Inc., "Catalina") for infringement of the Company's United
States Patent No. 5,761,648 (the " '648 Patent"), seeking unspecified
damages and a permanent injunction against further infringement.  Catalina
filed counterclaims alleging the invalidity of the Company's patent and
sought unspecified damages, attorneys' fees and injunctive relief. On
February 21, 2003, the Company settled this lawsuit and agreed to pay
Catalina $350.  The settlement dismissed all claims and counterclaims of
the parties, including claims for attorneys' fees and expenses, with
prejudice.  The payment of this settlement was shared with a third party,
resulting in a net expense to the Company of $150.  The Company recorded
this net expense as a charge to general and administrative expense in 2002.

      In February of 2003, the Company received notice of entry of an order
by the United States Bankruptcy Court of the Northern District of
California, Division 3 approving a Settlement Agreement and Mutual Release
with Netcentives, Inc. (the "Settlement").  Pursuant to the Settlement, the
Company recorded a gain of $256, which was recorded in the Company's
financial statements as a reduction of cost of revenues in 2002.  In
addition, the Settlement released the Company from any past or future
obligation of payments to Netcentives, Inc.  The Company recorded a charge
of $321 for unpaid service fees to Netcentives, Inc. in 2001.  This charge
was reversed against cost of revenues in 2002.

      In 2003, the Company reached agreement (which was finalized in
January 2004) with a customer to resolve a disagreement regarding the
delivery of services.  The agreement involves the delivery of additional
services at no charge.  The Company recorded an expense of $184 and $70 in
2003 and 2002, respectively, in general and administrative expenses to
reflect the cost of these services.  Revenue will be recorded in the period
the services are delivered.  The Company received a complete release from
the customer against any future actions.

      c.    LEASES:  The Company leases equipment and its office premises
under operating lease agreements. Rental expense under these agreements was
$1,221, $1,961 and $2,405 during 2003, 2002 and 2001, respectively.

      At December 31, 2003, future minimum payments under noncancelable
operating leases were as follows:

      For the years ended December 31:

                 2004 . . . . . . . . . . .     $ 1,470
                 2005 . . . . . . . . . . .       1,419
                 2006 . . . . . . . . . . .       1,339
                 2007 . . . . . . . . . . .       1,363
                 2008 . . . . . . . . . . .       1,387
                 and thereafter . . . . . .       1,885
                                                -------
                 Total. . . . . . . . . . .     $ 8,863
                                                =======


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


<PAGE>


                                                     December 31,
                                                    2003       2002
                                                  --------   --------
Deferred tax assets:
  Net operating loss carryforward . . . . . . .   $  2,392   $  2,826
Amounts to adjust from accrual method to
  the cash method of accounting used for
  tax purposes. . . . . . . . . . . . . . . . .      --          (779)
Allowance for doubtful accounts . . . . . . . .        257        286
Deferred revenue. . . . . . . . . . . . . . . .        184        196
Deferred compensation . . . . . . . . . . . . .      --         --
Property and equipment. . . . . . . . . . . . .        386        255
Capitalized software. . . . . . . . . . . . . .       (256)      (267)
Debt discount . . . . . . . . . . . . . . . . .        573        803
Lease exit liability. . . . . . . . . . . . . .        484        504
Asset impairment. . . . . . . . . . . . . . . .        263        468
Landmark transaction fees . . . . . . . . . . .        148        207
Other . . . . . . . . . . . . . . . . . . . . .        255         33
Valuation allowances. . . . . . . . . . . . . .     (4,686)    (4,532)
                                                  --------   --------
                                                  $  --      $  --
                                                  ========   ========

      The difference between the amount of income tax provision/(benefit)
recorded and the amount of income tax provision/(benefit) calculated using
the U.S. federal statutory rate of 35% is due to net operating losses not
being benefitted for 2002 and due to the use of nonbenefitted net operating
losses in 2003.  For financial reporting purposes, the entire amount of
deferred tax assets has been offset by a valuation allowance due to
uncertainty regarding realization of the asset.  Accordingly, there is no
provision for income taxes for the years ended December 31, 2003, 2002 and
2001, respectively.

      The Company has net operating loss carryforwards of approximately
$6,295, $7,436 and $3,627 at December 31, 2003, 2002 and 2001,
respectively.  As a result of the issuance of Series B Preferred Stock to
Landmark, the Company triggered tax rules under Section 382 of the Internal
Revenue Code, which limits the ability of the Company to offset taxable
income earned subsequent to the initial issuance of the Series B Preferred
Stock on November 12, 2001 with the Company's net operating losses.

      See Note 14 for a discussion of a Tax Allocation Agreement between
Landmark and the Company, entered into in 2004.


10.   REDEEMABLE PREFERRED STOCK

      a.    SERIES B PREFERRED STOCK:  On November 12, 2001, under the
Securities Purchase Agreement, the Company issued to Landmark 65,057,936
shares of $0.001 par value Series B Preferred Stock for $10,108.  This
transaction was approved at the annual stockholders meeting on
September 20, 2001.  The Series B Preferred Stock has certain conversion
rights and has an 8% quarterly dividend payable in additional shares of
Series B Preferred Stock.  On October 24, 2002, in connection with one
Shortfall Event which occurred on June 30, 2002 (related to the amount of
current assets over current liabilities at such date), Landmark exercised
its right to purchase 17,825,212 shares of Series B Preferred Stock and
paid the Company $2,770 ($0.1554 per share).  On December 20, 2002,
Landmark, at the Company's request, applied the $8,770 of principal and
$705 of accrued interest then outstanding under the Grid Note toward the
purchase of 60,967,777 shares of Series B Preferred Stock.  As of
December 31, 2003, Landmark holds 159,629,737 shares of Series B Preferred
Stock (and has rights with respect to accrued dividends thereon) and holds


<PAGE>


a warrant to purchase 11,711,456 shares of the Company's common stock.
Under Section 382 of the Internal Revenue Code, this transaction with
Landmark resulted in a limitation on the amount of net operating loss
carryforwards that can be utilized in future years.  See Note 9 for a
further discussion of income taxes related to the Company.  The Series B
Preferred Stock is subject to certain redemption requirements outside the
control of the Company.  Landmark has the right to elect not less than a
majority of the Company's board of directors.

      b.    SERIES C PREFERRED STOCK:  As a condition to the consummation
of the Landmark Transactions on November 12, 2001 the Company issued to
three individuals (two of whom are directors of the Company) 13,000,000
shares of $0.001 par value Series C Preferred Stock.  The Series C
Preferred Stock was given in exchange for the Director Notes (see Note 3c),
the related accrued interest and the accompanying warrants to purchase
1,050,000 shares of common stock previously issued to such individuals.  As
a result of the exchange, the Company recorded a gain of $327.  As of
December 31, 2003, the Company has reserved 13,000,000 shares of common
stock for the conversion of all the outstanding shares of Series C
Preferred Stock.  See Note 2 for further description of the terms of the
Series C Preferred Stock.

      c.    RESERVED COMMON SHARES:  The Company has reserved 305 million
shares of common stock for the conversion of shares of Series B and Series
C Preferred Stock, the exercise of Landmark Warrants, and the exercise of
options under the Company's stock option plans.  See Note 2 for further
description of the terms of the Series B and Series C Preferred Stock.


11.   STOCKHOLDERS' (DEFICIT) EQUITY:

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

      b.    COMMON STOCK OPTIONS:  On September 20, 2001, the Company's
stockholders, in conjunction with the annual meeting, ratified the adoption
of the 2001 Stock Option Plan (the "2001 Employee Plan") to replace the
1997 Employee Plan.  Additionally, in conjunction with the Landmark
Transaction, the 1999 Non-Employee Plan was terminated.

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



<PAGE>


      The Company has reserved 4,318,200 and 23,000 shares of common stock
for option exercises under the 1997 Employee Plan and the 1999 Non-Employee
Plan, respectively.  Additionally, the Company has reserved 7,953,954
shares of common stock under the 2001 Employee Plan, plus up to 1,800,000
shares issued in connection with the cancellation of options under the 1997
Employee Plan for the exercise of stock options issued or to be potentially
issued.

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

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


                              Year Ended December 31,
        ---------------------------------------------------------------
                 2003                 2002                2001
         --------------------  -------------------   --------------------
                     Weighted             Weighted             Weighted
                     Average              Average              Average
                     Exercise             Exercise             Exercise
            Shares    Price      Shares    Price     Shares     Price
          ---------  --------   --------- --------  ---------  --------

Outstanding
 at beginn-
 ing of
 period    4,929,440   $1.55    5,718,180  $ 1.68   4,429,817   $ 4.42

Granted      100,000    0.90      101,000    0.11   3,450,445     0.45

Exercised      --       --          --       --         --        --

Forfeited/
 expired    (513,841)   1.49     (889,740)   2.26  (2,162,082)    4.17
          ----------           ----------           ----------

Outstanding
 at end of
 period    4,515,599   $1.54    4,929,440  $ 1.55   5,718,180   $ 1.68
          ==========           ==========          ==========

Exercisable
 at end of
 period    3,912,417   $1.58    3,800,462  $ 1.37   3,149,311   $ 1.36
          ==========           ==========          ==========

Weighted
 average
 fair value
 of options
 granted
 during the
 period                $0.90               $ 0.10               $ 0.44



<PAGE>


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


                              Year Ended December 31,
        ---------------------------------------------------------------
                 2003                 2002                2001
         --------------------  -------------------   --------------------
                     Weighted             Weighted             Weighted
                     Average              Average              Average
                     Exercise             Exercise             Exercise
            Shares    Price      Shares    Price     Shares     Price
          ---------  --------   --------- --------  ---------  --------

Outstanding
 at beginn-
 ing of
 period    4,336,753   $0.36      262,201  $ 3.28      299,215  $ 7.00

Granted        --       --      4,465,241    0.20      150,000    0.50

Exercised    (75,610)   0.20        --       --         --        --

Forfeited/
 expired    (427,374)   0.38     (390,689)   0.53    (187,014)    6.78
          ----------           ----------           ----------

Outstanding
 at end of
 period    3,833,769   $0.36    4,336,753  $ 0.36      262,201  $ 3.28
          ==========           ==========          ==========

Exercisable
 at end of
 period    1,152,342   $0.60      225,598  $ 1.92      188,276  $ 1.82
          ==========           ==========          ==========

Weighted
 average
 fair value
 of options
 granted
 during the
 period                N/A                 $ 0.09               $ 0.32



<PAGE>


      The following table summarizes information about fixed stock options
outstanding at December 31, 2003:

                                  December 31, 2003
              ---------------------------------------------------------
                           Outstanding                 Exercisable
               --------------------------------- ----------------------
                                        Weighted               Weighted
                             Average    Average                Average
Exercise Price                Life      Exercise               Exercise
Range            Options    (in years)  Price      Options      Price
--------------  ---------  -----------  --------  ----------   --------

$0.07-$0.20     3,903,668         8.09   $  0.20   1,120,737   $   0.19
$0.21-$0.50     3,212,834         6.39      0.45   2,893,609       0.46
$0.51-$2.88       619,675         5.82      1.94     510,088       2.15
$3.13-$6.00        91,800         5.99      4.41      82,085       4.39
$6.06-$11.00      521,391         6.07      8.62     458,240       8.47
                ---------        -----  --------   ---------   --------
Totals          8,349,368         7.12   $  1.00   5,064,759   $   1.36
                =========        =====  ========   =========   ========

      The Company adopted the disclosure requirements of SFAS 148,
"Accounting for Stock Based Compensation - Transition and Disclosure - An
Amendment of FASB Statement No. 123."  See Note 1 "Description of the
Company and Summary of Significant Accounting Policies: Stock-Based
Compensation."

      c.    COMMON STOCK COMPENSATION:  Pursuant to the July 30, 2001
severance agreement between the Company and Steven Golden, all of the
options granted to Mr. Golden by the Company as of the date thereof became
immediately vested and fully exercisable.  The options were also repriced
at a strike price of $0.50 per share.  These options are subject to
variable accounting under FASB Interpretation No. 44 "Accounting for
Certain Transactions Involving Stock Compensation."  The Company recognized
$159 and $0 in 2003 and 2002, respectively, related to these options, which
represents their intrinsic value.

      Additionally, the Company granted options to purchase 750,000 shares
of common stock to Matthew Moog, the current President and Chief Executive
Officer, pursuant to his July 30, 2001 employment agreement.  In January of
2002, Mr. Moog was granted 328,571 options to purchase 328,571 shares of
the Company's common stock.  These stock options were granted in lieu of
the stock option grant for not less than 200,000 shares that was due to Mr.
Moog on July 30, 2002, pursuant to terms of his employment agreement.  The
agreement also provides for the immediate and full vesting on January 1,
2002 of the stock options for 250,000 shares of common stock that were
originally issued on March 23, 2001.  See Note 14 for a discussion of an
amendment to this employment agreement in 2004.

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




<PAGE>


12.   EARNINGS PER SHARE:  SFAS 128 requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
EPS computations.  The calculation below provides net loss, weighted
average common shares outstanding and the resultant net loss per share for
both basic and diluted EPS for the years ended December 31, 2003, 2002 and
2001.
                                       Years Ended December 31,
                                  ------------------------------------
                                      2003        2002         2001
                                   ----------  ----------   ----------
Numerator:
  Income (loss) before extra-
    ordinary gain . . . . . . . .   $     655   $  (8,287)  $  (29,554)

Extraordinary gain. . . . . . . .       --          --             327
                                   ----------  ----------   ----------
Net income (loss) . . . . . . . .         655      (8,287)     (29,227)

Accretion of convertible
  redeemable Series B Preferred
  Stock to redemption value . . .       --          --          (1,318)
Cumulative dividends on Series B
  Preferred Stock . . . . . . . .      (1,926)       (909)        (113)
                                   ----------  ----------   ----------
Loss applicable to common
  stockholders. . . . . . . . . .   $  (1,271)  $  (9,196)  $  (30,658)
                                   ==========  ==========   ==========

Basic and diluted loss per share
  before extraordinary gain         $   (0.03)  $   (0.24)  $    (0.79)
Extraordinary gain. . . . . . . .       --          --            0.01
                                   ----------  ----------   ----------
Basic and diluted net loss
  per share . . . . . . . . . . .   $   (0.03)  $   (0.24)  $    (0.78)
                                   ==========  ==========   ==========

Denominator:
Weighted average shares used in
  the calculation of basic and
  diluted net loss per share. . .  39,107,203  39,093,660   39,093,660
                                   ==========  ==========   ==========

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


13.   401(k) PLAN:  On February 11, 1997, the Company adopted a 401(k) plan
for employees.  All employees who meet certain age requirements are
eligible to participate.  Matching contributions are made at the discretion
of the Company.  The Company made no matching contributions during 2003,
2002, or 2001.




<PAGE>


14.   SUBSEQUENT EVENTS

      On February 6,  2004, the Company acquired certain assets related to
the Targeted Marketing Services ("TMS") business line of Alliance Data
Systems, Inc. ("ADS"). In addition, the Company contracted for certain data
center services, and assumed a short term lease obligation and certain
existing customer contracts and service obligations related to the
operations of the TMS business line. Among the assets acquired were certain
intangible property related to consumer package goods (CPG) contracts,
retail relationships, patent rights, copyrights, trademarks and domain
names and an information technology capability necessary to meet existing
service obligations.  The Company made a cash payment of $100 for the
purchase of these assets and a cash payment of $93 for the data center
services to be provided.  The funds used for the purchase price were
provided by the Company's existing working capital.  In addition, in
connection with the acquisition, the Company released ADS from its
obligations under a license agreement with the Company under which the
Company recorded revenue of $273 in 2003.

      Dividends in the amount of 3,192,594 shares of Series B Preferred
Stock accrued "in-kind" on the existing shares of Series B Preferred Stock
as of December 31, 2003, and the Company declared and paid the dividends on
January 1, 2004.

      Mr. Moog's employment agreement with the Company provided that Mr.
Moog be granted options to purchase at least an additional 200,000 shares
of the Company's common stock on the second anniversary of the agreement,
which was July 30, 2003.  In March 2004, the employment agreement was
amended to provide that the 51,000 units in the CoolSavings, Inc. Long Term
Incentive Plan, which were granted to Mr. Moog in November 2003 and
effective January 1, 2003, were granted in lieu of the stock option grant
for not less than 200,000 shares that was due to Mr. Moog on July 30, 2003.

      On July 1, 2003, Landmark's ownership percentage in the company
exceeded 80%, creating an Affiliated Group as defined in Section 1504(a) of
the Internal Revenue Code.  As such, in March 2004, and effective July 1,
2003, the Company entered into a Tax Allocation Agreement with Landmark
whereby the Company will join with the affiliated group of corporations
controlled by Landmark in filing a consolidated federal income tax return,
and possibly combined returns for state tax purposes.  The Tax Allocation
Agreement establishes the methodology for the calculation and payment of
income taxes in connection with the consolidation of the Company with
Landmark for income tax purposes.  Generally, the Tax Allocation Agreement
provides that Landmark will pay all consolidated federal income taxes on
behalf of the consolidated group that includes the Company, and the Company
will make payments to Landmark in an amount equal to the tax liability, if
any, that the Company would have had if it were to file as a consolidated
group separate and apart from Landmark.








<PAGE>


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

      None.


ITEM 9A. CONTROLS AND PROCEDURES

      Based upon an evaluation of our disclosure controls and procedures
performed by management, with the participation of our chief executive
officer and chief financial officer, our chief executive officer and chief
financial officer have concluded that, as of December 31, 2003, our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the reports that we
issue or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.

      A control system, no matter how well designed and operated, can
provide only reasonable (not absolute) assurance that its objectives will
be met.  Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.

      There was not any change in our internal control over financial
reporting during the quarter ended December 31, 2003 that has materially
affected, or is reasonably likely to materially effect, our internal
control over financial reporting.



                                PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information to be contained under the captions "Election of Directors
- Nominees," "Executive Officers and Compensation," Board Meetings and
Committees," "Section 16(a) Beneficial Ownership Reporting Compliance,"
"Report of the Audit Committee" and "Corporate Governance Practices and
Policies" in the Proxy Statement to be filed by us for our 2004 Annual
Meeting of Stockholders (the "2004 Proxy Statement") is incorporated herein
by reference in response to this item.


ITEM 11.  EXECUTIVE COMPENSATION

      Information to be contained under the captions "Report of the
Compensation Committee on Executive Compensation" and "Executive Officers
and Compensation" in the 2004 Proxy Statement is incorporated herein by
reference in response to this item.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS

      The information to be contained under the captions "Security
Ownership of Certain Beneficial Owners and Management" and "Equity
Compensation Plan Information" in the 2004 Proxy Statement is incorporated
herein by reference in response to this item.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information to be contained under the captions "Certain
Relationships and Related Transactions" in the 2004 Proxy Statement is
incorporated herein by reference in response to this item.




<PAGE>


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information to be contained under the caption "Independent
Auditor Fees" in the 2004 Proxy Statement is incorporated by reference in
response to this item.



                                 PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

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

      (1)   Financial statements:  See "Item 8.  Financial Statements and
            Supplementary Data"

      (2)   Financial statement schedule:  The following financial
            statement schedule is filed as a part of this Form 10-K,
            --Schedule II--Valuation and Qualifying Accounts on
            pages S-1 and S-2.

      (3)   Exhibits: See "Exhibit Index" beginning on page E-1.


   (b)      Reports on Form 8-K

      On October 24, 2003, we filed a Current Report on Form 8-K with the
SEC in which we furnished under Item 12 information regarding our results
of operations and financial position as of and for the nine months ended
September 30, 2003.




<PAGE>


                               SIGNATURES
                               ----------

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


Date: March 29, 2004               CoolSavings, Inc.

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


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


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


/s/ Matthew Moog             President,                 March 29, 2004
-------------------------    Chief Executive Officer
Matthew Moog                 (principal executive
                             officer) and Director


/s/ David B. Arney           Senior Vice President
-------------------------    of Operations,
David B. Arney               Chief Financial Officer
                             and Corporate Secretary    March 29, 2004
                             (principal financial and
                             accounting officer)


/s/ Richard H. Rogel         Chairman of the Board      March 29, 2004
-------------------------    of Directors
Richard H. Rogel



                             Director                   March 29, 2004
-------------------------
R. Bruce Bradley



/s/ Gary S. Briggs           Director                   March 29, 2004
-------------------------
Gary S. Briggs


                             Director                   March 29, 2004
-------------------------
James S. Correll



/s/ Guy R. Friddell, III     Director                   March 29, 2004
-------------------------
Guy R. Friddell, III



<PAGE>


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


/s/ John Giuliani            Director                   March 29, 2004
-------------------------
John Giuliani


/s/ Hugh R. Lamle            Director                   March 29, 2004
-------------------------
Hugh R. Lamle


/s/ Karl B. Quist            Director                   March 29, 2004
-------------------------
Karl B. Quist


                             Director                   March 29, 2004
-------------------------
Bradley Schram


/s/ Daniel Sherr             Director                   March 29, 2004
-------------------------
Daniel Sherr


/s/ Debora J. Wilson         Director                   March 29, 2004
-------------------------
Debora J. Wilson














<PAGE>










                    Report of Independent Auditors on
                      Financial Statement Schedule



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


Our audits of the financial statements referred to in our report dated
February 20, 2004, except for paragraphs 3 and 4 of note 14 which are as of
March 24, 2004, appearing in this Form 10-K also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In
our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related financial statements.





PricewaterhouseCoopers LLP


Chicago, Illinois
February 20, 2004



<PAGE>


                            CoolSavings, Inc.

            Schedule II -- Valuation and Qualifying Accounts



                                 Additions (Reductions)
                          ----------------------------------
                              (1)
               Balance at  Charged to   Charged              Balance at
              Beginning of  Costs and   to Other    (2)        End of
                Period      Expenses    Accounts  Deduction    Period
              ------------ ----------  ---------- ---------- ----------

YEAR ENDED
DECEMBER 31,
2003
------------

Allowance for
 doubtful
 receivables      $   753    $   965    $   --     $ (1,042)    $  676


YEAR ENDED
DECEMBER 31,
2002
------------

Allowance for
 doubtful
 receivables      $   881    $   623    $   --     $   (751)     $  753


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

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



     (1)  Includes $725, $385, and $125 charged against revenues in the
          years ended December 31, 2003, 2002 and 2001, respectively.

     (2)  Uncollectible accounts written off.



<PAGE>


                              EXHIBIT INDEX

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

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

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

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

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

3.2        Bylaws (incorporated by reference to Appendix F to CoolSavings'
           Definitive Proxy Statement filed with the Commission on
           July 30, 2001.

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

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

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

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

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

4.6        Warrant between CoolSavings, Inc. and Landmark Communications,
           Inc. dated November 12, 2001 (incorporated by reference to
           Exhibit 4.6 to CoolSavings' Annual Report on Form 10-K filed
           with the Securities and Exchange Commission on April 1, 2002).

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


<PAGE>


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

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

10.2*      1997 Stock Option Plan (incorporated by reference to
           Exhibit 10.3 to CoolSavings' Registration Statement on
           Form S-1, file no. 333-94677)

10.3*      1999 Director Option Plan (incorporated by reference to
           Exhibit  10.4 to CoolSavings' Registration Statement on
           Form S-1, file no. 333-94677)

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

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

10.6       Letter Agreement dated July 27, 2001 between coolsavings.com,
           inc. and American National Bank and Trust Company of Chicago
           (incorporated by reference to Exhibit 10.6 to CoolSavings'
           Quarterly Report on Form 10-Q for the period ended June 30,
           2001)

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

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

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

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

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

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


<PAGE>


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

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

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

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

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

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

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

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

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

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

10.22*     2001 Stock Option Plan (incorporated by reference to
           Exhibit 10.3 to the August 8-K)

10.23      Form of Stockholders Agreement between CoolSavings, Inc.,
           Landmark Ventures VII, LLC and certain Stockholders of
           coolsavings.com, inc. (incorporated by reference to
           Exhibit 10.4 to the August 8-K)

10.24*     Severance Agreement dated July 29, 2001 between
           coolsavings.com, inc. and Steven M. Golden (incorporated by
           reference to Exhibit 10.12 to the CoolSavings' Quarterly Report
           on Form 10-Q for the period ended June 30, 2001)


<PAGE>


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

10.25*     Employment Agreement dated July 29, 2001 between
           coolsavings.com, inc. and Matthew M. Moog (incorporated by
           reference to Exhibit 10.13 to the CoolSavings' Quarterly Report
           on Form 10-Q for the period ended June 30, 2001)

10.26      Senior Secured Note dated July 30, 2001 between
           coolsavings.com, inc. and Landmark Communications, Inc.
           (incorporated by reference to Exhibit 10.36 to the CoolSavings'
           Annual Report on Form 10-K for the period ended December 31,
           2001)

10.27      Letter Agreement by and among Landmark Communications, Inc.,
           Landmark Ventures VII, LLC and CoolSavings, Inc. dated
           November 12, 2001 (incorporated by reference to Exhibit 10.27
           to the CoolSavings' Annual Report on Form 10-K for the period
           ended December 31, 2002)

10.28*     CoolSavings, Inc. Long Term Incentive Plan

23.1       Consent of Independent Accountants

31.1       Certification of Chief Executive Officer Pursuant to
           Rule 13a-14(a) (Section 302 of the Sarbanes - Oxley Act
           of 2002.)

31.2       Certification of Chief Financial Officer Pursuant to
           Rule 13a-14(a) (Section 302 of the Sarbanes - Oxley Act
           of 2002.)

32.1       Certifications of Chief Executive Officer and Chief Financial
           Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
           of 2002 (furnished herewith).

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

   *       Management contract or compensatory plan or arrangement
           required to be filed as an exhibit to the Annual Report on
           Form 10-K.