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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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FORM 10-K



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|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



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



Commission File No. 0-25681



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LOGO

(exact name of registrant specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 65-0423422                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



11811 U.S. Highway
One, Suite 101

North Palm Beach, Florida 33408

(Address of principal executive offices) (zip code)



Registrants telephone number, including area code: (561) 630-2400



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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 $0.01 per share



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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 Rule 12b-2 of the
Act).    Yes  x    No ̈



The aggregate market value of the voting common equity held by non-affiliates
of the Registrant, based on the average of the closing bid and ask quotations for the Common Stock on June 30, 2003 as reported by the Nasdaq SmallCap Market was approximately $80,873,000. As of February 27, 2004, the Registrant had outstanding
15,232,065 shares of Common Stock.



DOCUMENTS INCORPORATED BY
REFERENCE



Portions of the Registrants Proxy
Statement for the 2004 Annual Meeting of Stockholders are incorporated by reference into Parts I and III of this report.



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ITEM 1. BUSINESS



This Report and our other communications and statements may contain forward-looking statements, including statements about our beliefs, plans,
objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. For information
concerning these factors and related matters, see Risk Factors below and Forward-Looking Statements in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.



Overview



Bankrate, Inc. owns and operates an Internet-based consumer banking marketplace. Our flagship site, Bankrate.com, is the
Internets leading aggregator of information on more than 250 financial products, including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees and home equity loans.
Additionally, we provide financial applications and information to a network of distribution partners and also through national and state publications.



Bankrate.com provides the tools and information that can help consumers make better financial decisions. We regularly survey more than 4,800 financial
institutions in all 50 states in order to provide the most current objective, unbiased rates. Hundreds of print and online partner publications depend on Bankrate.com as the trusted source for financial rates and information.



Over two decades ago, we began as a print publisher of the newsletter Bank
Rate Monitor. Our rate tables provide, at no cost to the consumer, a detailed list of lenders by market and include relevant details to help consumers compare loan products.



We continue to enhance our offerings in order to provide Bankrate.com users with the most complete experience. Features such
as financial calculators and e-mail newsletters allow users to interact with our site. Our Rate Trend Index is a weekly poll of industry insiders designed to help consumers forecast interest rate trends.



We also broadened our offerings to include channels on investing, taxes,
small business, financial advice and insurance. Each channel offers a unique look at its particular topic. Bankrate.com users can find advice and tips from the Tax channel, obtain business ideas from the Small Business channel and ask a financial
expert a question in the Advice channel.



Prior to 1996, and
dating back to 1976, our principal business was the publication of print newsletters, the syndication of unbiased editorial bank and credit product research to newspapers and magazines, and advertising sales of the Consumer Mortgage Guide. We
currently syndicate editorial research to 101 newspapers that have combined single day circulation in excess of 28 million copies, and to two national magazines with combined monthly circulation in excess of 4.6 million copies. The Consumer
Mortgage Guide is a weekly newspaper-advertising table consisting of product and rate information from local mortgage companies and financial institutions. The Consumer Mortgage Guide appears weekly in approximately 28 U.S. metropolitan
newspapers with combined single day circulation in excess of 9 million copies, including our first TV Consumer Mortgage Guide with a reach of 2.8 million. Together, these Bankrate.com branded print activities have the potential of reaching
41.5 million readers according to Editor & Publisher International 2003 Year Book.



In 1996, we began our online operations by placing our editorially unbiased research on our Web site, Bankrate.com. By offering our information online, we created new revenue opportunities through the sale of
graphical and hyperlink advertising associated with our rate and yield tables. In fiscal 1997, we implemented a strategy to concentrate on building these online operations.



We believe that the recognition of our research as a leading source of independent, objective information on banking and
credit products is essential to our success. As a result, we have sought to maximize distribution of our research to gain brand recognition as a research authority. We are seeking to build greater brand awareness of our Web site and to reach a
greater number of online users.



See Managements
Discussion and Analysis of Financial Condition and Results of Operations  Results of Operations and Critical Accounting Policies, and Note 9 to the Financial Statements below for a discussion of our two reportable business segments: online
publishing, and print publishing and licensing.



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Our Opportunity



Many financial services customers are relatively uninformed with respect to financial products and services and often rely upon personal relationships
when choosing such products and services. Many of these products and services are not well explained, and viable, equivalent alternatives typically are not presented when marketed to consumers through traditional media. As the sale of many of these
products and services moves to the Internet, where there is little personal contact, we believe that consumers will seek sources of independent objective information such as Bankrate.com to facilitate and support their buying decisions. The
interactive nature of the Internet allows us to display extensive research on financial products and services that was previously unavailable to consumers.



We believe the majority of financial information available on the Web is oriented toward investment advice and providing business news and stock market
information, rather than personal and consumer finance data. Our publications are targeted to fulfill the less competitive, but equally important niches of consumer banking and finance information. As a result, we believe we can maintain a loyal
base of users comprised of targeted audiences that are attractive to advertisers.



Despite weakness in advertising spending on the Internet, we have seen steady interest in our primary niches  mortgages, automobile loans, home equity loans and CD/savings products. In addition, we believe our
faith in the long-term benefits of the Internet is well founded. The ability of the Internet to provide a platform for frictionless communication between consumers and businesses has not changed. We believe Bankrate, Inc. is positioned to benefit
from any growth in Internet usage and the return of the Internet advertising market.



Restructuring



We spent much of 2000 and 2001
refocusing the Companys business efforts into our primary Web site, Bankrate.com, while actively controlling expenses and pursuing additional sources of revenue. In addition, we sold or curtailed development of under-performing Web sites and
business units. The following steps were taken as a direct result of our strategic reorganization initiatives.



| |  | We substantially reduced marketing expenditures beginning in January 2000.
| | - | --------------------------------------------------------------------------



| |  | In May 2000, we sold CPNet.com, our online advertising network that provided content and advertising management to college newspaper Web sites.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  | In June 2000, we reduced employment levels of continuing operations by 10% and began consolidating our physical locations.
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | In June 2000, we shut down our Broadcast Operations that produced Cost of Life personal finance video segments distributed to television stations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In June 2000, we shut down ilife.com, our vertical personal finance portal, and incorporated IntelligentTaxes.com, our personal income tax information Web site, as a channel of
Bankrate.com.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In July 2000, we sold Pivot.com, our virtual insurance agency and fulfillment/call center.
| | - | ------------------------------------------------------------------------------------------



| |  | In August 2000, we shut down and sold certain assets of Consejero.com, our Spanish-language personal finance Web site, and Garzarelli.com, a subscription Web site for investment
advisor Elaine Garzarelli.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In December 2000, we shut down GreenMagazine.com, our alternative personal finance Web site, and the print publication Green Magazine.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| |  | In 2001, we terminated unprofitable distribution and advertising agreements, formed a telemarketing group in our advertising sales staff to focus primarily on hyperlink sales, and
focused our marketing efforts on non-cash intensive marketing programs such as sweepstakes, promotions and barter transactions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Strategy



We believe that the consumer banking sector holds significant opportunities for growth and expansion. As we grow, we are seeking to consolidate our
position as the industry leader in the gathering of rate data and to expand our brand recognition with consumers and partners. Elements of our strategy include:



| |  | Continuing to provide advertisers with high-quality, ready-to-transact consumers: By advertising on our site, either through purchasing graphic ads, hyperlinks, or
sponsorships, banks, brokers and other advertisers are tapping into our strongest resource, consumers on the verge of engaging in a transaction. By allowing advertisers to efficiently access these in-market consumers, we are helping
advertisers lower their own costs of acquiring new customers, and ultimately creating a transaction that is beneficial for the advertiser, the consumer and us.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Remaining the dominant brand in consumer bank rate data and content: We are continuing our strong push to remain the dominant player in our market. We believe we are the
number one competitor in our market on a number of levels, including revenue, the number of banks surveyed, the number of pages viewed by consumers and the number of unique visitors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Continued, low-risk growth through partnering with top Web sites: Our partner network provides Bankrate.com with a steady stream of visitors, with little to no advertising
risk to the Company. As the bulk of these agreements are revenue- sharing, we only pay out a percentage of what we actually bring in.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Zealously guarding our limited resources: Our greatest assets are our people, our partners and our brand. We carefully weigh every decision for the potential impact on these
three resources.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Distribution Arrangements



Our distribution (or syndication) arrangements with other Web site operators
fall into two categories: (1) co-branding, in which we establish a co-branded site with another Web site operator, (2) licensing, in which we provide content to the other operators Web site together with a hyperlink to our own
site. We have found co-branding to be more effective in driving traffic to our site.



Co-branded sites are created pursuant to agreements with other Web site operators. Generally, agreements relating to co-branded sites provide for us to host the co-branded Web pages, sell and serve the graphical
advertising, and collect advertising revenues, which are shared with the third party Web site.



Under licensing arrangements, we provide content to other Web sites in exchange for a fee. The content identifies Bankrate.com as its source and typically includes a hyperlink to the Bankrate.com Web site.



Our largest partners in terms of driving traffic to our site as of
December 31, 2003 included America Online, USA Today, Dollar Stretcher, Netscape, and Yahoo! During 2003, approximately 21% of the traffic to Bankrate.com was attributable to the distribution partners compared to 32% in 2002. The decline results
from the heightened consumer demand for mortgage products data during 2003 driving more traffic directly to Bankrate.com. We expect traffic from distribution partners to be between 25% and 30% of total site traffic in 2004.



Financial Product Research



Our research staff is made up of 39 employees who track comparative
information on more than 250 financial products and services, including checking accounts, consumer loans, lines of credit, mortgages, certificates of deposit, savings accounts, credit cards, money market accounts and online accounts. We cover both
personal and small business accounts offered through branch offices and on the Internet by banks, thrifts, credit unions, credit card issuers, mortgage bankers and mortgage brokers. We estimate that over 3,000,000 items of data are gathered each
week for more than 300 markets across the United States from over 4,800 financial institutions. The information obtained includes not only interest rates and yields, but also related data such as lock periods, fees, points, and loan sizes for
mortgages and grace periods, late penalties, cash advance fees, cash advance annual percentage rates, annual percentage yields, minimum payments, and terms and conditions of credit cards.



We adhere to a strict methodology in developing our markets and our institutional survey group. The market survey includes
the 100 largest U.S. markets, as defined by the U.S. Census Bureaus Metropolitan Statistical Area categories, along with the largest market in each state that does not include one of the largest 100 markets and other selected communities that
represent areas of growth. We provide a comparative analysis of data by market and state as well as on a national basis.



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Institutions in the survey group include the largest banks and thrifts within each market area based on
total deposits. The number of institutions tracked within a given market is based on the types of financial products available and number of institutions in the market area. In each of the largest 25 markets, we track at least 10 institutions. In
each of the smaller markets, we track three or more institutions. We verify and adjust, if necessary, the institutions included in the survey group on an annual basis using FDIC deposit data from year-end call reports. We do not include credit
unions in the market survey group because product availability is based upon membership. However, we track the 50 largest U.S. credit unions as a separate survey group for comparison purposes.



All products included in our database have narrowly defined criteria so that
information provided by institutions is comparable. Collected data undergoes four levels of quality control prior to being accepted for inclusion in the database. The first level is automatically performed by our editing software, which identifies
unusual changes. The second level is visual proofing, which is performed by a researcher who gathers rates from institutions, reviews the surveys to determine whether there have been any changes in the data on a weekly basis, and verifies unusual
changes or other questionable data by contacting the institution. The third level is a second visual check by a senior researcher. The fourth level is performed by a dedicated quality control staff consisting of senior researchers who verify that
the information has been correctly updated and entered into our databank. Our quality control staff reviews each listing in relation to regional and national trends and for overall accuracy and consistency fees and related information prior to
disclosure of the information to consumers. The staff also reviews the comparability of products, institutional accuracy and survey accuracy. In addition, the quality control team performs anonymous shopping on a weekly basis, whereby we place calls
to institutions in order to validate the data in a consumer setting. Institutions providing invalid data are contacted by our quality control staff to ensure that future information will be accurate.



The criteria for product listings consist of specific attributes, such as
loan size and term that are used to define each type of financial instrument in order to ensure uniformity in the products that are compared. With the exception of the Internet Banking Deals table, no special offers are listed on our
site. Institutions listed in our Bankrate.com online tables that purchase hyperlinks to their own sites or purchase other advertising must comply with the same criteria for product listings that apply to other institutions or they will be removed.



All of our new research employees are provided with a
four-week program of on-the-job training to ensure consistency of data-gathering and validation techniques. Follow-up refresher training is provided to our research employees on an ongoing basis to ensure that skill levels are maintained.



At the end of each weekly survey, data are archived as part of
our 20-year old cumulative historical data file. This file provides a unique resource for our financial analysts and editorial team in developing trend graphs, charts and narrative analysis that is used by national and local media.



We are aware of the potential conflict of interest resulting from the sale of
advertising to financial institutions while providing independent and objective research. However, we believe that no potential conflicts of interest have ever compromised our ability to provide independent and objective research, and we are
committed to continue to provide such research in the future.



Editorial
Content



In addition to our research department, as of
December 31, 2003, we maintained an editorial staff of 18 editors, writers and researchers, and graphic designers who create original stories and content for our Web site. We also have relationships with more than 20 free-lance writers. Most of our
editorial staff members are experienced journalists with newspaper or broadcast experience. For example, the reporters and editors of Bankrate.com have professional journalistic work experience ranging from three to 33 years, with an average of 12
years of experience. We believe the quality of our original content plays a critical role in attracting visitors to our Web site and to our co-branded partners Web sites.



Most of the content within our Web site is original and produced internally. There is a very limited amount of third-party
content, acquired under advertising revenue-sharing agreements or licenses, which allows us to incorporate relevant information on our Web site that would otherwise require additional resources to produce. An example of this type of arrangement is
the incorporation in Bankrate.com of currency conversion functionality from OANDA.com.



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Print Publications



We continue to produce traditional print publications to absorb part of the cost of producing research and original editorial content. Additionally, we
believe that print publishing activities contribute to greater exposure and branding opportunities for our Internet Web site. Our print publications activities include the following:



| |  | Consumer Mortgage Guide: We generate revenue through the sale of mortgage rate and product listings in 28 metropolitan newspapers across the United States with
combined Sunday circulation of 9 million copies. We enter into agreements with the newspapers for blocks of print space, which is in turn sold to local mortgage lenders and we share the revenue with the newspapers on a percentage basis.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Syndication of Editorial Content and Research: We syndicate editorial research to 101 newspapers, which have a combined Sunday circulation of more than 28 million copies, and
two national magazines with combined monthly circulation in excess of 4.6 million copies.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Newsletters: We publish three newsletters: 100 Highest Yields and Jumbo Flash Report, which target individual consumers, and Bank Rate Monitor, which
targets an institutional audience. These newsletters provide bank deposit, loan and mortgage interest rate information with minimal editorial content.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Consumer Marketing



We have determined that our resources are best leveraged by emphasizing non-cash intensive marketing programs. This gives us the opportunity to reach
consumers using multiple advertising vehicles with a minimal depletion of our marketing budget. We continued this successful strategy in 2003 by expanding our barter effort, purchasing a series of strategic, highly targeted online and print
campaigns, and pay per performance campaigns on search engines. In addition, we have used sweepstakes and promotions efforts to drive site traffic and grow our e-mail newsletter subscriber base. All consumer marketing efforts are designed,
implemented, and tracked by our employees.



Advertising Sales



Our advertising sales staff consisted of 22 salespeople
and support staff as of December 31, 2003. It is divided into two groups: the Graphic Ad Team (GAT) and the Telemarketing Group (Telemarketing). The GAT focuses on selling graphic ads to national advertisers, while
Telemarketing primarily sells hyperlinks to regional and local advertisers. Most of our salespersons are located in our North Palm Beach corporate headquarters. We also maintain two satellite offices in New York, New York and in Irvine, California.
Each salesperson is responsible for a designated geographic region of the United States.



Our GAT salespeople present advertising solutions to potential advertisers using inventory created by our Web site as well as co-branded Web sites. We believe this combined network of sites enhances value for
advertisers and direct marketers by (1) alleviating the need to purchase a series of advertising campaigns from numerous Web sites, (2) providing advertisers and direct marketers with advertising opportunities on a wide variety of Web pages
containing business and personal finance content, and (3) providing targeted access to Internet users with desirable demographics. Advertisers and direct marketers can enhance the effectiveness of their campaigns by customizing advertising delivery
on our networks within a particular content channel or across an entire network.



Advertising Alternatives



Our advertisers can
target prospective customers using several different approaches:



| |  | Targeting specific geographic and product areas; for example, mortgage shoppers in Atlanta, Georgia; or just one of these  all consumers interested in mortgages, or all
consumers from Atlanta.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Focusing on consumers in specific situations, such as those who are first-time home buyers, or those actively shopping for CDs.
| | - | -------------------------------------------------------------------------------------------------------------------------------



| |  | General rotation throughout our site.
| | - | -------------------------------------



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Our most common graphic advertisement sizes are banners, which are prominently displayed at the top or
bottom of a page (486 x 60 pixels) and badges, which are smaller than banners (125 x 125 pixels). We offer banners and badges which can be targeted to specific areas of our site, or on a general rotation basis. Advertising rates may vary depending
upon the quantity of advertisements purchased by an advertiser and the length of time an advertiser runs an advertisement on our site. Discounts are available based upon the volume of advertisements purchased.



We also sell posters, which are oversized advertisements that contain more
information than traditional advertisements. We position posters on certain pages so that they dominate the page. Advertisers may also purchase sponsorship positions on the Bankrate.com home page and the main page for each product channel. In
addition, we offer product special issues that are available for single sponsorships. Rates for product special issues are based on expected impression levels and additional content requirements.



Providing effective tools for managing advertising campaigns is essential to
maintaining advertising relationships. We use a state-of-the-art program under license from a third party that allows our advertisers to monitor their spending on our Web sites in real-time for impressions received and click-through ratios
generated. We also accept impression counts from other third party servers.



Hyperlinks



Financial institutions that are
listed in our rate tables have the opportunity to hyperlink their listings. By clicking on the hyperlink, users are taken to the institutions Web site. A substantial benefit to advertisers with the hyperlink rate listing is that the hyperlinks
are in fixed placement on the rate pages and are shown every time a user accesses a page. In contrast, banner advertisements are rotated based on the number of impressions purchased. Hyperlinks are sold under contracts that range primarily between
three and twelve months. The number of hyperlinked rate listings that can be added to a rate page is limited only by the number of institutions listed, while banner positions are limited by available space.



We also sell text links on our rate pages to advertisers on a cost-per-click
(CPC) basis. Advertisers enter an auction bidding process on a third party Web site for placement of their text link based on the amount they are willing to pay for each click through to their Web site. We recognize revenue monthly for
each text link based on the number of clicks at the CPC contracted for during the auction bidding process.



E-Mail Sponsorships



We
publish more than a dozen e-mail newsletters ranging from specific topics such as CDs, credit cards, and mortgages, to broader topics such as frugal living, monthly checkups and weekly news to alert newsletters (e-mails alerting
subscribers every time a rate changes in mortgages or CDs, or when stories are published on a particular topic). These newsletters offer another marketing and sales outlet for us. With over 1.2 million e-mail subscriptions, we believe our e-mail
newsletters represent attractive advertising space for our customers. Advertisers can sponsor e-mails with both text and graphic ads.



Advertisers



We market to local advertisers targeting a specific audience in a city or state and also to national advertisers targeting the entire country. As of
December 31, 2003, we had 69 graphic advertisers and 533 hyperlink advertisers, some of which are both graphic and hyperlink advertisers. Among our larger advertisers are GetSmart (recently acquired by Lending Tree, Inc.)/Providian Financial
Corporation, Mortgage Expo/Cyber Financial Network, iHomeowners, Inc., E-Loan, Inc., PeopleFirst Finance, LLC, Lending Tree, Inc., E*Trade Bank, A-1 at Homebound Mortgage, WeRLoans.com, ING Direct, Washington Mutual and Bank of America. We had one
online customer, GetSmart/Providian Financial Corporation, who accounted for approximately 9%, 11% and 4%, respectively, of total revenue for the years ended December 31, 2003, 2002 and 2001. Sales to no other customer exceeded 10% of total revenue
for the periods presented. No revenues were generated outside of the United States.



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Competition



We compete for advertising revenues across the broad category of personal finance information, both in traditional media such as newspapers, magazines,
radio, and television, and in the developing market for online financial information. There are many competitors that have substantially greater resources than we do. Our online competition includes the following:



| |  | Personal finance sections of general interest sites such as MSN Money and Excite;
| | - | ---------------------------------------------------------------------------------



| |  | Personal finance destination sites such as Forbes.com, The Motley Fool, SmartMoney.com, Kiplinger.com and CNNMoney.com;
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| |  | E-commerce sites that provide banking and credit products and information such as E-LOAN and LendingTree;
| | - | ---------------------------------------------------------------------------------------------------------



| |  | Rate listing sites, such as MonsterMoving; and
| | - | ----------------------------------------------



| |  | Key word search engine sites such as Ask Jeeves and FindWhat.
| | - | -------------------------------------------------------------



Competition in the online segment is generally directed at growing users and revenue using marketing and promotion to increase traffic to Web sites. We
believe that our original content, focus and objective product information differentiate us from our competitors.



Operations



We currently host our Web site on proprietary servers at a secure third party co-location facility in Atlanta, Georgia. This facility is manned, and our
equipment is monitored continuously, 24 hours daily. The facility is powered continuously with multiple sources, including uninterruptible power supplies and internal power generators. The facility is connected to the Internet with redundant
high-speed digital data lines that are diversely routed. Our Web site pages are served from an independent content distribution network for performance and redundancy. Much of the information presented on our Web site is stored on a dual-node
database server cluster also housed in the co-location facility. Our systems are protected by a multi-layered security system including dual high-speed inspection state firewalls.



All of our systems are controlled remotely via an encrypted virtual private network (VPN) from our network
operations center (NOC) in our principal office in North Palm Beach, Florida. Content on our Web site is created and initially stored on systems located at the NOC, then transferred at scheduled intervals during the day via the VPN to
the systems at the Georgia co-location facility. The North Palm Beach facility systems are also powered redundantly by uninterruptible power supply units and an LP gas-powered electric generator.



Proprietary Rights



Our proprietary intellectual property consists of our unique research and editorial content. We rely primarily on a
combination of copyrights, trademarks, trade secret laws, our user policy and restrictions on disclosure to protect this content. In addition, we license some of our data and content from other parties. Our copyrights, trademarks and licenses expire
at various dates, and none is individually significant.



Employees



As of December 31, 2003, we had 122 full-time employees,
of which 18 were in Web site and content operations, 30 in sales, business development and marketing, 39 in content and data research, 6 in advertising revenue operations, 16 in product development and information technology, 7 in finance and
accounting, and 6 in administration. We have never had a work stoppage and none of our employees are represented under collective bargaining agreements. We consider our employee relations to be favorable.



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Risk Factors



Risks Related to Our Business



Our Success Depends on Internet Advertising Revenue



We expect to derive approximately 85% of our revenue in the foreseeable future through the sale of advertising space and
hyperlinks on our Internet Web pages. Any factors that limit the amount advertisers are willing to spend on advertising on our Web site could have a material adverse effect on our business. These factors may include:



| |  | a lack of standards for measuring Web site traffic or effectiveness of Web site advertising;
| | - | --------------------------------------------------------------------------------------------



| |  | a lack of established pricing models for Internet advertising;
| | - | --------------------------------------------------------------



| |  | the failure of traditional media advertisers to adopt Internet advertising;
| | - | ---------------------------------------------------------------------------



| |  | the introduction of alternative advertising sources; and
| | - | --------------------------------------------------------



| |  | a lack of significant growth in Web site traffic.
| | - | -------------------------------------------------



Continuing to demonstrate the effectiveness of advertising on our Web site is critical to our ability to generate advertising revenue. Currently, there
are no widely accepted standards to measure the effectiveness of Internet advertising, and we cannot be certain that such standards will develop sufficiently to support our growth through Internet advertising.



A number of different pricing models are used to sell advertising on the
Internet. Pricing models are typically either CPM-based or performance-based. We predominantly utilize the CPM-based model, which is based upon the number of advertisement impressions. The performance-based, or per click, model generates payments on
each individual click even though it may take multiple advertisement impressions to generate one click-through. We cannot predict which pricing model, if any, will emerge as the industry standard. Therefore, it is difficult for us to project our
future advertising rates and revenues. For instance, banner advertising, which is one of our primary sources of online revenue, may not be an effective advertising method in the future. If we are unable to adapt to new forms of Internet advertising
and pricing models, our business could be adversely affected.



Financial services companies account for a majority of our advertising revenues. We will need to sell advertising to customers outside of the financial services industry in order to significantly increase our revenues. To date, relatively
few advertisers from industries other than the technology and financial services industries have devoted a significant portion of their advertising budgets to Internet advertising. If we do not attract advertisers from other industries, revenue
growth could be adversely affected.



We Have a History of
Losses



We have incurred net losses in six of our last
eight fiscal years, resulting in an accumulated deficit of approximately $41 million as of December 31, 2003.



We have succeeded in managing our cash by actively controlling expenses and pursuing additional sources of revenue. For instance, since early 2000, we
have substantially reduced marketing expenditures and sold or shut down under-performing, non-core business units. We sold CPNet.com and Professional Direct Insurance Agency, Inc. in May 2000 and July 2000, respectively, shut down and sold certain
assets of Consejero.com in August 2000, and shut down Greenmagazine.com in December 2000. These transactions yielded approximately $4,392,000 in cash and reduced operating expenses. We have also reduced employment levels of continuing operations and
consolidated our physical locations. In February 2002, we completed the early repayment of our $4,350,000 convertible subordinated note payable, including accrued interest, for $3,400,000. We have generated cash from operations for 11 consecutive
quarters and have been profitable for 9 consecutive quarters through December 31, 2003. Based on these actions and our current plan, we believe our existing capital resources will be sufficient to satisfy our cash requirements through at least the
next 12 months.



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We Use Barter Transactions, Which Do Not Generate Cash



We enter into barter transactions to promote our brand and generate traffic
to our Web site without spending any of our cash resources. Barter transactions represent the exchange by the Company of advertising space on the Companys Web site for reciprocal advertising space on other Web sites. Revenue from barter
transactions is recognized as income when advertisements are delivered on the Companys Web site. Barter expenses are recognized when the Companys advertisements are run on the other companies Web sites, which typically are in the
same period in which barter revenues are recognized. Barter transactions, however, do not generate cash. Limited cash flow may adversely affect our ability to expand our operations and satisfy liabilities. Revenue from barter transactions
represented approximately 9%, 11%, and 14% of total revenue for the years ended December 31, 2003, 2002 and 2001, respectively. We expect barter revenue to represent approximately 10% of our total revenue in 2004.



Our Success Depends on Interest Rate Volatility



We provide interest rate information for mortgages and other loans, credit
cards and savings accounts. Visitor traffic to Bankrate.com tends to increase with interest rate movements and decrease with interest rate stability. Factors that have caused significant visitor fluctuations in the past have been Federal Reserve
Board actions and general market conditions affecting home mortgage interest rates. Additionally, the level of traffic to Bankrate.com can be dependent on interest rate levels as well as mortgage re-financing activity. Accordingly, a slowdown in
mortgage production volumes could have a material adverse effect on our business.



We believe that as we continue to develop our Web site with broader personal finance topics, the percentage of overall traffic seeking mortgage information will remain stabilized at current levels. To accelerate the
growth of traffic to Bankrate.com, we are working with our syndication partners to program more intensively, and we are aggressively promoting Bankrate.com products not related to mortgage activity. We cannot be certain that we will be successful in
these efforts.



Our Success Depends on Establishing and Maintaining
Distribution Arrangements



Our business strategy
includes the distribution of our content through the establishment of co-branded Web pages with high-traffic business and personal finance sections of online services and Web sites. A co-branded site is typically a custom version of our Web site
with the graphical look, feel, and navigation, of the co-branded partners Web site. Providing access to these co-branded Web pages is a significant part of the value we offer to our advertisers. We compete with other Internet content providers
to maintain our current relationships with other Web site operators and establish new relationships. In addition, as we expand our personal finance content, some of these Web site operators may perceive us as a competitor. As a result, they may be
unwilling to promote distribution of our banking and credit content. We cannot guarantee that our distribution arrangements will attract a sufficient number of users to support our current advertising model. In addition, our business could be
adversely affected if we do not establish and maintain distribution arrangements on favorable economic terms.



Risks Related to Our Industry, the Internet and Our Technology Infrastructure



Our Future Success is Dependent Upon Increased Acceptance of the Internet by Consumers as a Medium for Obtaining Financial Product Information



Our success will depend in large part on continued and expanded
widespread consumer acceptance of obtaining rate information regarding financial products such as mortgages, credit cards, money market accounts, certificates of deposit, checking and ATM fees, home equity loans, online banking fees and new and used
auto loans online. Increased consumer use of the Internet to provide for their lending needs is subject to uncertainty. The development of an online market for obtaining rate information regarding the above listed financial products has only
recently begun, is rapidly evolving and likely will be characterized by an increasing number of market entrants. If consumer acceptance of the Internet as a source for such information does not increase, our business, results of operations and
financial condition will be adversely affected. As a result, we cannot be sure that we will be able to compete effectively with traditional methods of obtaining such rate information.



Our Markets Are Highly Competitive



We compete for Internet advertising revenues with the personal finance sections of general interest sites such as Yahoo! and America Online; personal
finance destination sites such as Forbes.com, The Motley Fool, SmartMoney.com, Kiplinger.com and CNNMoney.com; e-commerce sites that provide banking and credit products and information such as



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E-LOAN and LendingTree; and rate listing sites such as MonsterMoving. In addition, new competitors may easily enter this
market as there are few barriers to entry. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than us. Many competitors have complementary products or services that drive traffic to their Web sites. Increased competition could result in lower Web site traffic, advertising rate reductions, reduced margins or
loss of market share, any of which would adversely affect our business. We cannot be certain that we will be able to compete successfully against current or future competitors.



Our Web Site May Encounter Technical Problems and Service Interruptions



In the past, our Web site has experienced significant increases in traffic
in response to interest rate movements and other business or financial news events. The number of our users has continued to increase over time, and we are seeking to further increase our user base. As a result, our Internet servers must accommodate
spikes in demand for our Web pages in addition to potential significant growth in traffic.



Our Web site has in the past, and may in the future, experience slower response times or interruptions as a result of increased traffic or other reasons. These delays and interruptions resulting from failure to
maintain Internet service connections to our site could frustrate users and reduce our future Web site traffic, which could have a material adverse effect on our business.



All of our communications and network equipment is co-located at our corporate headquarters in North Palm Beach, Florida and
at a secure third party co-location facility in Atlanta, Georgia. Multiple system failures at these locations could lead to interruptions or delays in service for our Web site, which could have a material adverse effect on our business. Our
operations are dependent upon our ability to protect our systems against damage from fires, hurricanes, earthquakes, power losses, telecommunications failures, break-ins, computer viruses, hacker attacks and other events beyond our control. Although
we maintain business interruption insurance, it may not adequately compensate us for losses that may occur due to failures of our systems.



We Rely on the Protection of Our Intellectual Property



Our intellectual property consists of the content of our Web site and print publications. We rely on a combination of copyrights, trademarks, trade secret
laws and our user policy and restrictions on disclosure to protect our intellectual property. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary
information. Despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our Web sites or print publications without authorization. A failure to protect our intellectual property in a meaningful
manner could have a material adverse effect on our business.



Because we license some of our data and content from other parties, we may be exposed to infringement actions if such parties do not possess the necessary proprietary rights. Generally, we obtain representations as to the origin and
ownership of licensed content and obtain indemnification to cover any breach of any these representations. However, these representations may not be accurate and the indemnification may not be sufficient to provide adequate compensation for any
breach of these representations.



Any future infringement or
other claims or prosecutions related to our intellectual property could have a material adverse effect on our business. Defending against any of these claims, with or without merit, could be time-consuming, result in costly litigation and diversion
of technical and management personnel or require us to introduce new content or trademarks, develop new technology or enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available on acceptable
terms, if at all.



We May Face Liability for Information on Our Web Site



Much of the information published on our Web site
relates to the competitiveness of financial institutions rates, products and services. We may be subjected to claims for defamation, negligence, copyright or trademark infringement or other theories relating to the information we publish on
our Web sites. These types of claims have been brought, sometimes successfully, against online services as well as print publications. Our insurance may not adequately protect us against these types of claims.



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Future Government Regulation of the Internet is Uncertain and Subject to Change



As Internet commerce continues to evolve, increasing regulation by federal
or state agencies or foreign governments may occur. Such regulation is likely in the areas of user privacy, pricing, content and quality of products and services. Additionally, taxation of Internet use or electronic commerce transactions may be
imposed. Any regulation imposing fees for Internet use or electronic commerce transactions could result in a decline in the use of the Internet and the viability of Internet commerce, which could have a material adverse effect on our business.



We May Be Limited Or Restricted In The Way We Establish And Maintain Our
Online Relationships By Laws Generally Applicable To Our Business



State and Federal lending laws and regulations generally require the accurate disclosure of the critical components of credit costs so that consumers can readily compare credit terms from various lenders. In addition,
these laws and regulations impose certain restrictions on the advertisement of these credit terms. Because we are an aggregator of rate and other information regarding many financial products online, we may be subject to some of these laws and
regulations. We believe that we have structured our Web site to comply with these laws and regulations. However, if these laws and regulations are changed, or if new laws or regulations are enacted, these events could prohibit or substantially alter
the content we provide on our Web site. Moreover, such events could materially and adversely affect our business, results of operations and financial condition.



Risks Related to Corporate Control and our Stock Price



Our Ownership is Heavily Concentrated



At December 31, 2003, approximately 42% of our outstanding common stock was beneficially owned by our officers and directors, including Peter C. Morse, a
director and our largest shareholder, who beneficially owns approximately 33% of our outstanding common stock. As a result, our officers and directors will be able to exercise control over all matters requiring shareholder approval. In particular,
these controlling shareholders will have the ability to elect all of our directors and approve or disapprove significant corporate transactions. This control could be used to prevent or significantly delay another company or person from acquiring or
merging with us and could inhibit our liquidity and affect trading in our common stock.



Our Success May Depend on Management and Key Employees



Our success may depend largely upon retaining the continued services of our executive officers and other key management, developing personnel as well as hiring and training additional employees. We have a number of
key employees on whom we depend and who may be difficult to replace. A failure to retain our current key employees or to hire enough qualified employees to sustain our growth could have a material adverse effect on our business.



We May Encounter Difficulties With Future Acquisitions



We may acquire complementary Web sites and other content providers as a part
of our business strategy. Any acquisitions may present a number of potential risks that could have a material adverse effect on our business. These risks include the following: failure to integrate the technical operations and personnel in a timely
and cost-effective manner; failure to retain key personnel of the acquired company; and assumption of unexpected material liabilities. In addition, we cannot assure you that we will be able to identify suitable acquisition candidates that are
available for sale at reasonable prices.



We may finance future
acquisitions with debt financing, which would increase our debt service requirements, or through the issuance of additional common or preferred stock, which could result in dilution to our shareholders. We cannot be certain that we will be able to
arrange adequate financing on acceptable terms.



Our Results of
Operations May Fluctuate Significantly



Our results of
operations are difficult to predict and may fluctuate significantly in the future as a result of several factors, many of which are beyond our control. These factors include:



| |  | changes in fees paid by advertisers;
| | - | ------------------------------------



| |  | traffic levels on our Web site, which can fluctuate significantly;
| | - | ------------------------------------------------------------------



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| |  | changes in the demand for Internet products and services;
| | - | ---------------------------------------------------------



| |  | changes in fee or revenue-sharing arrangements with our distribution partners;
| | - | ------------------------------------------------------------------------------



| |  | our ability to enter into or renew key distribution agreements;
| | - | ---------------------------------------------------------------



| |  | the introduction of new Internet advertising services by us or our competitors;
| | - | -------------------------------------------------------------------------------



| |  | changes in our capital or operating expenses;
| | - | ---------------------------------------------



| |  | general economic conditions; and
| | - | --------------------------------



| |  | changes in banking or other laws that could limit or eliminate content on our Web site.
| | - | ---------------------------------------------------------------------------------------



Our future revenue and results of operations are difficult to forecast due to these factors. As a result, we believe that
period-to-period comparisons of our results of operations may not be meaningful, and you should not rely on past periods as indicators of future performance.



In future periods, our results of operations may fall below the expectations of securities analysts and investors, which could adversely affect the
trading price of our common stock.



Our Stock Price May Be Particularly
Volatile Because of the Industry We Are In



The stock
prices and trading volume of Internet-related companies have been extremely volatile. Accordingly, our stock price can be volatile as well. In January 2001, we announced that our common stock had been removed from the Nasdaq National Market and had
become eligible for trading on the OTC Bulletin Board. On January 9, 2003, we announced that our common stock had begun trading on the Nasdaq SmallCap Market and on August 18, 2003, we announced that our common stock had again begun trading on the
Nasdaq National Market under our existing stock symbol RATE.



If Our Common Stock Price Drops Significantly, We May Be Delisted From the Nasdaq National Market, Which Could Eliminate The Trading Market For Our Common Stock



Our common stock is listed on the Nasdaq National Market. In order to continue to be included on the Nasdaq National Market,
a company must meet certain maintenance criteria. As of December 31, 2003, we were in compliance with all such criteria. However, we cannot assure you that we will continue to meet these listing criteria. If our common stock were to be delisted, we
would be required to meet the criteria for initial listing if we wanted to be listed on the Nasdaq National Market again. The initial listing standards are more stringent than the maintenance standards. Accordingly, we cannot provide assurances that
if we were delisted we would be able to have our common stock relisted on the Nasdaq National Market. Further, if our common stock were to be delisted, it may become more difficult for us to raise funds through the sale of our common stock or
securities convertible into our common stock.



Available Information



For further discussion concerning our business, see the
information included in Items 7 and 8 of this report.



We make
available free of charge through our Web site at www.bankrate.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, if applicable, as soon as reasonably
practicable after the material is electronically filed with or furnished to the Securities and Exchange Commission.



In addition, we expect to post our Corporate Governance Guidelines and the charters for our Audit Committee, Compensation Committee and Nominating
Committee on our Web site at www.bankrate.com prior to our 2004 Annual Meeting of Shareholders.



ITEM 2. PROPERTIES



Our
principal administrative, sales, Web operations, marketing and research functions are located in one leased facility in North Palm Beach, Florida. The facility is leased from Bombay Holdings, Inc., which is wholly-owned by Peter C. Morse, a director
and 33% stockholder. The lease is for approximately 14,300 square feet and expires on December 31, 2006. We also lease approximately 4,500 square feet in New York, New York, that is principally used for administration, sales and business
development. The New York office lease expires in September 2006. We also lease approximately 500 square feet on a month-to-month basis in Irvine, California that is used principally as a sales office.



We believe that all of our facilities are adequate and suitable for
operations in the foreseeable future. However, we may undertake the expansion of certain facilities from time to time in the ordinary course of business.



See Notes 6 and 7 to the financial statements in Item 8 below for more information about our leased facilities.



ITEM 3. LEGAL PROCEEDINGS



On March 28, 2000, a purported class-action lawsuit was filed against us and
others in the United States District Court for the Southern District of New York. The suit alleged that we violated federal securities laws by, among other things, selling securities pursuant to a defective registration statement, and
misrepresenting and/or omitting material information concerning our financial results for the quarter ended March 31, 1999, and other financial information, in our registration statement filed with the Securities and Exchange Commission in
connection with our initial public offering. The action, seeking an



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unspecified amount of money damages, was filed purportedly on behalf of all stockholders who purchased shares of our
common stock during the period from May 13, 1999, through March 27, 2000. We filed a motion to dismiss this complaint and, on March 28, 2001, the suit was dismissed with prejudice. On April 25, 2001, plaintiffs appealed the decision to dismiss the
suit to the United States Court of Appeals for the Second Circuit. On January 28, 2003, the United States Court of Appeals for the Second Circuit affirmed the dismissal of this action in its entirety.



In July 2000, we sold our former wholly-owned subsidiary, Professional Direct
Agency, Inc. (Pivot), for $4,350,000 in cash. In connection with the sale, we agreed to indemnify the buyer for liability of up to $1,000,000 in connection with a litigation matter between Pivot and its co-founders and former owner. In
March 2001, the case was dismissed based on a technical deficiency. In August 2001, the plaintiff re-filed the complaint. At December 31, 2003, the outcome of this matter was uncertain. We cannot estimate at this time the amount of loss, if any,
that could result from an adverse resolution of this litigation.



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



None.



ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT



The names, ages, and current positions of our executive officers as of March
15, 2004 are listed in the table below. There are no family relationships among the executive officers nor is there any agreement or understanding between any officer and any other person pursuant to which the officer was elected.



Executive Officers



|                     |  |     |  |                                                  
|-------------------- |  | --- |  | -------------------------------------------------
|Name                 |  | Age |  | Position                                         
|Elisabeth DeMarse    |  | 49  |  | President, Chief Executive Officer and Director  
|                     |  |    
|G. Cotter Cunningham |  | 41  |  | Senior Vice President and Chief Operating Officer
|                     |  |    
|Robert J. DeFranco   |  | 47  |  | Senior Vice President and Chief Financial Officer
|                     |  |    
|Richard G. Stalzer   |  | 40  |  | Senior Vice President and Chief Revenue Officer  



Elisabeth DeMarse.Ms. DeMarse has served as President and Chief Executive Officer of the Company since April 2000. Prior to that time, Ms. DeMarse served as Executive Vice President of International Operations at Hoovers, Inc., which operates Hoovers
Online, from February 1999. Previously, she was an Executive Vice President at Bloomberg L.P. Ms. DeMarse spent ten years at Bloomberg L.P. in various leadership positions, where she led the start-up of eight businesses including Bloomberg.com,
Bloombergs e-commerce and i-commerce divisions and Bloombergs print divisions. Prior to Bloomberg, she served four years at Citibanks Information Business, and over four years at Western Union marketing telecommunications services.
Ms. DeMarse holds an A.B. cum laude from Wellesley College where she majored in history, and an M.B.A. from Harvard with an emphasis on marketing.



G. Cotter Cunningham.Mr. Cunningham has served as Senior Vice President and Chief Operating Officer of the Company since September 2000. Prior to
that, he served as interim President and Chief Executive Officer of the Company from February 2000 and as Senior Vice President-Marketing and Sales of the Company from February 1999. From 1997 to 1999, Mr. Cunningham was Vice President and General
Manager of Valentine McCormick Ligibel, Inc., an advertising agency specializing in new media. From 1992 to 1997, Mr. Cunningham was Vice President of Block Financial Corporation, where he created, launched and directed the CompuServe Visa and
WebCard Visa credit card programs. Mr. Cunningham holds a B.S. in Economics from the University of Memphis and an M.B.A. from Vanderbilt Universitys Owen Graduate School of Management.



Robert J. DeFranco. Mr. DeFranco has served as Senior Vice President
and Chief Financial Officer of the Company since September 2000. Prior to that he served as Vice President and Finance and Chief Accounting Officer from March 1999. From 1986 to 1999, he held various positions in corporate accounting and finance for
companies including Ocwen Financial Corporation (as Director of Finance from January 1998 through March 1999), SunTrust Banks, Inc. (as Vice President-Financial Reporting from February 1995 through December 1997), Ryder System, Inc. and Southeast
Banking Corporation.



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From 1978 to 1986 he was a member of the commercial audit division of Arthur Andersen & Co., Miami, Florida, where he
last served as senior audit manager for a variety of publicly-held and privately-held companies in industries including banking and other financial institutions, manufacturing, distribution and real estate development. Mr. DeFranco is a Certified
Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. DeFranco received a Bachelor of Science degree with a major in accounting from Florida State University in 1978.



Richard G. Stalzer. Mr. Stalzer has served as Senior Vice
President and Chief Revenue Officer since February 23, 2004. Prior to that, he was with MSN-Microsoft Corporation as East Coast Financial Service Director since March 2003, and as Director of Agency Relations since September 2002. From March 2002 to
June 2002 he was Advertising Director at Advertising Age  Crain Communication. From March 1999 to February 2002 he was Vice President of Sales of E*Trade Financial Group where he was responsible for developing E*Trades media business and
the creation of the E*Trade Financial Network. From October 1990 to March 1999 he held various positions with MONEY Magazine  Time Warner, most recently as Western Regional Advertising Director from December 1995 to March 1999. Mr. Stalzer
received a Bachelor of Science degree with a major in Business Administration from the University of Denver in 1986.



PART II



ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS



Our common stock traded on the Nasdaq National Market from May 1999 until January 26, 2001. Prior to May 1999, there was no established market for the shares.



Effective January 29, 2001, our common stock was removed from the Nasdaq
National Market and immediately became eligible for trading on the OTC Bulletin Board. Nasdaqs decision to delist our common stock from the Nasdaq National Market was based on our net tangible assets, as defined by Nasdaq, falling below the
required $4,000,000 minimum amount.



Effective January 9, 2003,
our common stock began trading on the Nasdaq SmallCap Market, and on August 18, 2003 we again began trading on the Nasdaq National Market under its existing stock symbol RATE.



The prices per share reflected in the table below represent, for the periods indicated, the range of high and low bid
information for our common stock as reported by the OTC Bulletin Board from Tuesday, January 1, 2002 through Wednesday, January 8, 2003; the range of high and low closing sale prices for our common stock as reported by the Nasdaq SmallCap Market
from Thursday, January 9, 2003 through Friday, August 15, 2003; and the range of high and low closing sale prices for our common stock as reported by the Nasdaq National Market from Monday, August 18, 2003 through Wednesday, December 31, 2003. The
OTC Bulletin Board quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions, and may not reflect actual transactions.



|                             |  |      |       |     |   |      
|---------------------------- |  | ---- | ----- | --- | - | -----
|                             |  | HIGH |       | LOW
|Year ended December 31, 2002 |  |      |       |     |   |      
|First quarter                |  | $    | 1.29  |     | $ | 0.65 
|Second quarter               |  |      | 1.50  |     |   | 1.10 
|Third quarter                |  |      | 2.09  |     |   | 1.02 
|Fourth quarter               |  |      | 3.91  |     |   | 2.05 
|                             |  |     
|Year ended December 31, 2003 |  |      |       |     |   |      
|First quarter                |  | $    | 5.84  |     | $ | 3.40 
|Second quarter               |  |      | 12.10 |     |   | 4.77 
|Third quarter                |  |      | 15.45 |     |   | 10.94
|Fourth quarter               |  |      | 19.82 |     |   | 11.01



The closing sale price
of our common stock as reported by the Nasdaq National Market on February 27, 2004 was $15.95 per share.



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The number of shareholders of record of our common stock as of February 27, 2004, was 4,280.



We have never paid cash dividends on our capital stock. We currently
intend to retain any earnings for use in our business and do not anticipate paying any cash dividends in the foreseeable future.



ITEM 6. SELECTED FINANCIAL DATA



The selected financial data set forth below should be read in conjunction with the financial statements and notes thereto, and Managements
Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. The statement of operations data for the years ended December 31, 2003, 2002 and 2001, and the balance sheet data as of December 31,
2003 and 2002, are derived from, and are qualified by reference to, the financial statements of Bankrate, Inc. included elsewhere in this Form 10-K, which financial statements have been audited by KPMG LLP, independent auditors. The audit report is
included elsewhere in this Form 10-K. The statement of operations data for years ended December 31, 2000 and 1999, and the balance sheet data as of December 31, 2000 and 1999, have been derived from audited financial statements not included in this
Form 10-K. Historical results are not necessarily indicative of results to be expected in the future.



Statement of Operations Data



(In thousands, except share and per share data)



|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ---------- | - |  | -------- | ---------- | - |  | - | ---------- | -
|                                                                                    |  | Year Ended December 31, |           
|                                                                                    |  | 2003                    |            | 2002 |   | 2001       |  |   | 2000 (A)   |   |  | 1999 (B) |           
|Revenue:                                                                            |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Online publishing                                                                   |  | $                       | 31,368     |      | $ | 22,651     |  | $ | 14,986     |   |  | $        | 12,283     |   |  | $ | 8,497      |  
|Print publishing and licensing                                                      |  |                         | 5,253      |      |   | 3,920      |  |   | 3,271      |   |  |          | 2,922      |   |  |   | 3,473      |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Total revenue                                                                       |  |                         | 36,621     |      |   | 26,571     |  |   | 18,257     |   |  |          | 15,205     |   |  |   | 11,970     |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Cost of revenue:                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Online publishing                                                                   |  |                         | 4,514      |      |   | 3,813      |  |   | 3,161      |   |  |          | 7,114      |   |  |   | 5,627      |  
|Print publishing and licensing                                                      |  |                         | 4,044      |      |   | 2,862      |  |   | 2,174      |   |  |          | 1,983      |   |  |   | 2,387      |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Total cost of revenue                                                               |  |                         | 8,558      |      |   | 6,675      |  |   | 5,335      |   |  |          | 9,097      |   |  |   | 8,014      |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Gross margin                                                                        |  |                         | 28,063     |      |   | 19,896     |  |   | 12,922     |   |  |          | 6,108      |   |  |   | 3,956      |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Operating expenses:                                                                 |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Sales                                                                               |  |                         | 5,040      |      |   | 4,276      |  |   | 3,203      |   |  |          | 3,234      |   |  |   | 3,018      |  
|Marketing                                                                           |  |                         | 5,496      |      |   | 3,477      |  |   | 2,923      |   |  |          | 3,874      |   |  |   | 16,459     |  
|Product development                                                                 |  |                         | 2,271      |      |   | 1,422      |  |   | 1,386      |   |  |          | 1,950      |   |  |   | 2,025      |  
|General and administrative                                                          |  |                         | 5,813      |      |   | 5,537      |  |   | 5,512      |   |  |          | 8,467      |   |  |   | 9,415      |  
|Restructuring and impairment charges                                                |  |                         |           |      |   |           |  |   |           |   |  |          | 2,285      |   |  |   |           |  
|Depreciation and amortization                                                       |  |                         | 681        |      |   | 622        |  |   | 700        |   |  |          | 874        |   |  |   | 422        |  
|Goodwill amortization                                                               |  |                         |           |      |   |           |  |   |           |   |  |          | 231        |   |  |   | 186        |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|                                                                                    |  |                         | 19,301     |      |   | 15,334     |  |   | 13,724     |   |  |          | 20,915     |   |  |   | 31,525     |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Income (loss) from operations                                                       |  |                         | 8,762      |      |   | 4,562      |  |   | (802       | ) |  |          | (14,807    | ) |  |   | (27,569    | )
|Other income (expense), net                                                         |  |                         | 243        |      |   | 83         |  |   | (134       | ) |  |          | 230        |   |  |   | 873        |  
|Gain on early extinguishment of debt                                                |  |                         |           |      |   | 2,022      |  |   |           |   |  |          |           |   |  |   |           |  
|Noncash financing charge                                                            |  |                         |           |      |   |           |  |   |           |   |  |          |           |   |  |   | (2,656     | )
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Income (loss) before income taxes and discontinued operations                       |  |                         | 9,005      |      |   | 6,667      |  |   | (936       | ) |  |          | (14,577    | ) |  |   | (29,352    | )
|Income tax benefit                                                                  |  |                         | 3,100      |      |   |           |  |   |           |   |  |          |           |   |  |   |           |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Income (loss) before discontinued operations                                        |  |                         | 12,105     |      |   | 6,667      |  |   | (936       | ) |  |          | (14,577    | ) |  |   | (29,352    | )
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Discontinued operations:                                                            |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Loss from discontinued operations                                                   |  |                         |           |      |   |           |  |   |           |   |  |          | (3,215     | ) |  |   | (2,136     | )
|Gain on disposal of discontinued operations                                         |  |                         |           |      |   |           |  |   |           |   |  |          | 871        |   |  |   |           |  
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|                                                                                    |  |                         |           |      |   |           |  |   |           |   |  |          | (2,344     | ) |  |   | (2,136     | )
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Net income (loss)                                                                   |  |                         | 12,105     |      |   | 6,667      |  |   | (936       | ) |  |          | (16,921    | ) |  |   | (31,488    | )
|Accretion of Convertible Series A and Series B preferred stock to redemption value  |  |                         |           |      |   |           |  |   |           |   |  |          |           |   |  |   | (2,281     | )
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Net income (loss) applicable to common stock                                        |  | $                       | 12,105     |      | $ | 6,667      |  | $ | (936       | ) |  | $        | (16,921    | ) |  | $ | (33,769    | )
|                                                                                    |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic and diluted net income (loss) per share:                                      |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Income (loss) before discontinued operations-                                       |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  | $                       | 0.84       |      | $ | 0.48       |  | $ | (0.07      | ) |  | $        | (1.05      | ) |  | $ | (2.90      | )
|Diluted                                                                             |  | $                       | 0.79       |      | $ | 0.46       |  | $ | (0.07      | ) |  | $        | (1.05      | ) |  | $ | (2.90      | )
|Discontinued operations-                                                            |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  | $                       |           |      | $ |           |  | $ |           |   |  | $        | (0.17      | ) |  | $ | (0.21      | )
|Diluted                                                                             |  | $                       |           |      | $ |           |  | $ |           |   |  | $        | (0.17      | ) |  | $ | (0.21      | )
|Net income (loss)-                                                                  |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  | $                       | 0.84       |      | $ | 0.48       |  | $ | (0.07      | ) |  | $        | (1.22      | ) |  | $ | (3.11      | )
|Diluted                                                                             |  | $                       | 0.79       |      | $ | 0.46       |  | $ | (0.07      | ) |  | $        | (1.22      | ) |  | $ | (3.11      | )
|Accretion of Convertible Series A and Series B preferred stock to redemption value- |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  | $                       |           |      | $ |           |  | $ |           |   |  | $        |           |   |  | $ | (0.23      | )
|Diluted                                                                             |  | $                       |           |      | $ |           |  | $ |           |   |  | $        |           |   |  | $ | (0.23      | )
|Net income (loss) applicable to common stock-                                       |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  | $                       | 0.84       |      | $ | 0.48       |  | $ | (0.07      | ) |  | $        | (1.22      | ) |  | $ | (3.34      | )
|Diluted                                                                             |  | $                       | 0.79       |      | $ | 0.46       |  | $ | (0.07      | ) |  | $        | (1.22      | ) |  | $ | (3.34      | )
|Weighted average common shares outstanding:                                         |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|Basic                                                                               |  |                         | 14,473,151 |      |   | 13,997,168 |  |   | 13,996,950 |   |  |          | 13,872,788 |   |  |   | 10,113,928 |  
|Diluted                                                                             |  |                         | 15,299,734 |      |   | 14,609,359 |  |   | 13,996,950 |   |  |          | 13,872,788 |   |  |   | 10,113,928 |  
|                                                                                    |  |                         |            |      |  
|Balance Sheet Data                                                                  |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|                                                                                    |  |                         |            |      |  
|(In thousands)                                                                      |  |                         |            |      |   |            |  |   |            |   |  |          |            |   |  |   |            |  
|                                                                                    | 
|                                                                                    |  | As of December 31,      |           
|                                                                                    |  | 2003                    |            | 2002 |   | 2001       |  |   | 2000       |   |  | 1999     |           
|Cash and cash equivalents                                                           |  | $                       | 20,874     |      | $ | 11,001     |  | $ | 9,755      |   |  | $        | 8,891      |   |  | $ | 22,492     |  
|Working capital                                                                     |  |                         | 23,898     |      |   | 9,369      |  |   | 7,865      |   |  |          | 7,057      |   |  |   | 18,973     |  
|Total assets                                                                        |  |                         | 28,983     |      |   | 15,173     |  |   | 12,526     |   |  |          | 12,634     |   |  |   | 32,600     |  
|Subordinated note payable                                                           |  |                         |           |      |   |           |  |   | 4,350      |   |  |          | 4,350      |   |  |   | 4,350      |  
|Total stockholders equity                                                          |  |                         | 24,925     |      |   | 10,650     |  |   | 3,982      |   |  |          | 1,573      |   |  |   | 17,445     |  

---

|Note: | The statements of operations data for the years ended December 31, 2002 and 2001 have been reclassified to present certain sales expenses that were previously included in cost of
online publishing revenue.
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(A) | Excludes the operations of CPNet.com after May 2000, Pivot after July 2000, Consejero.com after September 2000, and includes GreenMagazine.com through December 2000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Includes the operations of CPNet.com from January 1999, and Pivot and GreenMagazine.com from August 1999, their respective acquisition dates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



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



Introduction



The following discussion should be read in conjunction with the financial
statements and related notes contained in this Form 10-K. In addition, this discussion contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as
may, will, should, expect, plan, anticipate, believe, estimate, predict, potential, or continue, or the negative of
these terms or other similar terminology. The forward-looking statements contained in this Form 10-K involve known and unknown risks, uncertainties and other factors that may cause our results or our industrys actual results, levels of
activity, performance or achievements of our industry, our Company, or both to be materially different from any future results, level of activity, performance or achievements expressed or implied by these statements. These factors include those
listed under Risk Factors in Item 1. above and elsewhere in this Form 10-K. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. You should not place undue reliance on these forward-looking statements. We make no commitment to update these statements in the future.



Overview



Bankrate, Inc. (the Company) owns and operates an Internet-based consumer banking marketplace. Our flagship site, Bankrate.com, is the
Webs leading aggregator of information on more than 250 financial products including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online
banking fees. Additionally, we provide financial applications and information to a network of distribution partners and also through national and state publications. Bankrate.com provides the tools and information that can help consumers make better
financial decisions. We regularly survey approximately 4,800 financial institutions in all 50 states in order to provide the most current objective, unbiased rates. Hundreds of print and online partner publications depend on Bankrate.com as the
trusted source for financial rates and information.



Over two
decades ago, we began as a print publisher of the newsletter Bank Rate Monitor. Our rate tables provide, at no cost to the consumer, a detailed list of institutions by market and include relevant details to help consumers compare products.



We continue to enhance our offerings in order to provide
Bankrate.com users with the most complete experience. Features such as financial calculators and email newsletters allow users to interact with our site. Our Rate Trend Index is a weekly poll of industry insiders designed to help consumers
forecast interest rate trends. We also broadened our offerings to include channels on investing, taxes, small business and financial advice. Each channel offers a unique look at its particular topic. Bankrate.com users can find advice and tips from
the Tax channel, obtain business ideas from the Small Business channel and ask a financial expert a question in the Advice channel.



We believe that the recognition of our research as a leading source of independent, objective information on banking and credit products is essential to
our success. As a result, we have sought to maximize distribution of our research to gain brand recognition as a research authority. We are seeking to build greater brand awareness of our Web site and to reach a greater number of online users.



We operate a traditional media business on the Internet. We
are the central marketplace for financial institutions to acquire customers. We have a high quality, poised-to-transact audience that has been educated by us and is ready to do business with our advertisers. We are the number one site for financial
information and advice according to comScore Media Metrix. We sell graphic advertisements and hyperlinks on our Web site, we publish rates and sell advertisements in metropolitan newspapers, and we license our rates and editorial content.



Our potential market is enormous and is still in the early
growth stages of consumer awareness of the Internet as a personal finance tool. Financial institutions are still in the early stages of adopting the Internet for advertising products and customer acquisition. Their online advertising spending is
still a very small percentage of their overall advertising budgets.



We compete for advertising dollars with the large portals like AOL and Yahoo! and with some of the print brand franchises like Forbes.com and SmartMoney.com. We also compete for traffic with brands like these. Our traffic has grown from
700,000 unique visitors per month in early 2000 to 5 million unique visitors a month according to comScore Media Metrix.



The key drivers to our business are the number of advertisers on our Web site and the number of consumers visiting our Web site or page views. We added
over 100 new advertisers in 2003 and served over 137 million more pages in 2003 than in 2002. The number of advertisers has grown from approximately 200 in 2000 to over 600 in 2003. Page views have grown from 134 million in 2000 to over 400 million
in 2003.



We have improved our gross margin from 37% in 2000 to
77% in 2003, and have reduced other operating expenses (excluding barter expense) as a percentage of total revenue (excluding barter revenue) from 140% in 2000 to 48% in 2003. Our net income as a percentage of total revenue has grown to 33% in 2003
and we have increased cash and cash equivalents by approximately $12 million since December 31, 2000.



Significant Developments



The following significant developments and transactions have affected our results of operations and our financial condition during the periods covered by
the financial statements in Item 8 of this Report.



On April
27, 2000, Elisabeth DeMarse was elected to our Board of Directors and was elected President and Chief Executive Officer. On that date, Ms. DeMarse entered into an employment agreement with us that expired on April 27, 2002. Ms. DeMarse entered into
a new agreement on April 27, 2002. Pursuant to the terms of her employment agreement, Ms. DeMarse is entitled to receive an annual base salary of $300,000 and a bonus of $100,000 payable in quarterly installments. We have agreed to provide other
benefits, including $500,000 in term life insurance and participation in our benefit plans available to other executive officers. Under the terms of the employment agreement, Ms. DeMarse agrees to assign to us all of her copyrights, trade secrets
and patent rights that relate to our business. Additionally, during the term of her employment and for a period of one year thereafter, Ms. DeMarse agrees not to compete with us and not to recruit any of our employees,



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unless we terminate her without cause or she resigns for good reason (as defined in the agreement). Upon Ms.
DeMarses termination of employment for certain reasons (i.e., without cause, disability, resignation for good reason, or a change of control), we agree to pay her a severance amount of $250,000, as well as reimburse her for health, dental and
life insurance coverage premiums for one year after such termination. The agreement terminates on April 27, 2005. Ms. DeMarse was previously granted options to purchase 541,936 shares of our common stock under our 1999 Equity Compensation Plan at
$2.69 per share, the fair market value on the date of grant. The options vested over a 24-month period. Ms. DeMarse surrendered all of these options and was granted options to purchase 541,936 shares at $0.85, the fair market value of our common
stock on February 4, 2002, the date of grant, in connection with our stock option exchange program.



In January 2001, our common stock was removed from the Nasdaq National Market and immediately became eligible for trading on the OTC Bulletin Board under
the symbol RATE. Nasdaqs decision to delist our common stock from the Nasdaq National Market was based on our net tangible assets, as defined by Nasdaq, falling below the required $4,000,000 minimum amount. On January 9, 2003, our
common stock began trading on the Nasdaq SmallCap Market, and on August 18, 2003, our common stock began trading on the Nasdaq national Market, under its existing stock symbol RATE.



On July 3, 2001, we implemented a stock option exchange program in which
employees were offered the opportunity to surrender stock options previously granted to them in exchange for new options to purchase an equal number of shares. Options to purchase 1,180,002 shares were surrendered under this program. The new options
were granted on February 4, 2002, six months and one day after the date of cancellation. The exercise price of the new options was the closing market price of our common stock on the date of grant. The exchange program was designed to comply with
FIN No. 44 and did not result in any additional compensation charges or variable plan accounting. As a result of this program, we recorded a non-cash compensation charge of approximately $481,000 for the unrecognized compensation expense of certain
options surrendered under the option exchange program, and reclassified approximately $2,452,000 from accrued stock compensation expense to additional paid in capital in the quarter ended September 30, 2001.



On August 20, 1999, the Company acquired Professional Direct Agency, Inc.
(Pivot) pursuant to a Stock Purchase Agreement, dated August 20, 1999, by and between the Company, the shareholders of Pivot and The Midland Life Insurance Company (Midland), a note and warrant holder of Pivot (the
Agreement), for approximately $4,744,000 including acquisition costs. Pursuant to the Agreement, the Company acquired a 100% interest in Pivot and, as a result of the acquisition, Pivot became a wholly-owned subsidiary. The transaction
was accounted for using the purchase method of accounting. On July 14, 2000, the Company sold Pivot for $4,350,000 in cash. The Company recorded a gain on the sale of $871,212 in the quarter ended September 30, 2000. The Company remained liable on
the convertible subordinated note issued in connection with the Pivot acquisition.



On February 6, 2002 we entered into an agreement with Reassure America Life Insurance Company (REALIC), successor by merger to Pivots former owner. Pursuant to the terms of this agreement, REALIC
agreed to full repayment of the $4,350,000 convertible subordinated note payable, including accrued interest, on February 22, 2002 for $3,400,000 in cash. Accordingly, we recorded a gain on early extinguishment of debt of approximately $2,022,000 in
the quarter ending March 31, 2002.



On January 1, 2004, G.
Cotter Cunningham, the Companys Senior Vice President and Chief Operating Officer, entered into an employment agreement with the Company. Under the terms of the employment agreement, Mr. Cunningham is entitled to receive an annual base salary
as stipulated in the employment agreement and an annual bonus contingent on achieving certain performance criteria. Under the terms of the employment agreement, Mr. Cunningham agrees to assign to the Company all of his copyrights, trade secrets and
patent rights that relate to the business of the Company. Additionally, during the term of his employment and for a period of one year thereafter, Mr. Cunningham agrees not to compete with the Company and not to recruit any of the Companys
employees. Upon Mr. Cunninghams termination of employment for certain reasons (i.e., without cause or resignation for good reason), the Company agrees to pay a separation payment equal to one years base salary at the then-current rate
payable in three equal installments; one-third payable 15 days after the termination date; one-third payable six months after the termination date; and one-third payable 12 months from the termination date.



On January 1, 2004, Robert J. DeFranco, the Companys Senior Vice
President and Chief Financial Officer, entered into an employment agreement with the Company. Under the terms of the employment agreement, Mr. DeFranco is entitled to receive an annual base salary as stipulated in the employment agreement and an
annual bonus contingent on achieving certain performance criteria. Under the terms of the employment agreement, Mr. DeFranco agrees to assign to the Company all of his copyrights, trade secrets and patent rights that relate to the business of the
Company. Additionally, during the term of his employment and for a period of one year thereafter, Mr. DeFranco agrees not to compete with the Company and not to recruit any of the Companys employees. Upon Mr. DeFrancos termination of
employment for certain reasons (i.e., without cause or resignation for good reason), the Company agrees to pay a separation payment equal to one years base salary at the then-current rate payable in three equal installments; one-third payable
15 days after the termination date; one-third payable six months after the termination date; and one-third payable 12 months from the termination date.



Legal Proceedings



On March 28, 2000, a purported class-action lawsuit was filed against us and others in the United States District Court for the Southern District of New
York. The suit alleged that we violated federal securities laws by, among other things,



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selling securities pursuant to a defective registration statement, and misrepresenting and/or omitting material
information concerning our financial results for the quarter ended March 31, 1999, and other financial information, in our registration statement filed with the Securities and Exchange Commission in connection with our initial public offering. The
action, seeking an unspecified amount of money damages, was filed purportedly on behalf of all stockholders who purchased shares of our common stock during the period from May 13, 1999, through March 27, 2000. We filed a motion to dismiss this
complaint and, on March 28, 2001, the suit was dismissed with prejudice. On April 25, 2001, plaintiffs appealed the decision to dismiss the suit to the United States Court of Appeals for the Second Circuit. On January 28, 2003, the United States
Court of Appeals for the Second Circuit affirmed the dismissal of the action in its entirety.



In July 2000, we sold our former wholly-owned subsidiary, Pivot, for $4,350,000 in cash. In connection with the sale, we agreed to indemnify the buyer for liability of up to $1,000,000 in connection with a litigation
matter between Pivot and its co-founders and former owner. In March 2001, the case was dismissed based on a technical deficiency. In August 2001, the plaintiff re-filed the complaint. At December 31, 2003, the outcome of this matter was uncertain.
We cannot estimate at this time, the amount of loss, if any, that could result from an adverse resolution of this litigation.



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Results of Operations and Critical Accounting Policies



The following table displays our results for the respective periods
expressed as a percentage of total revenues.



Statement of Operations Data



|                                     |  |                        |   |  |      |   |  |      |   
|------------------------------------ |  | ---------------------- | - |  | ---- | - |  | ---- | --
|                                     |  | Year EndedDecember 31, |  
|                                     |  | 2003                   |   |  | 2002 |   |  | 2001 |   
|Revenue:                             |  |                        |   |  |      |   |  |      |   
|Online publishing                    |  | 86                     | % |  | 85   | % |  | 82   | % 
|Print publishing and licensing       |  | 14                     |   |  | 15   |   |  | 18   |   
|                                     |  |                        |   |  |      |   |  |      |   
|Total revenue                        |  | 100                    |   |  | 100  |   |  | 100  |   
|                                     |  |                        |   |  |      |   |  |      |   
|Cost of revenue:                     |  |                        |   |  |      |   |  |      |   
|Online publishing                    |  | 12                     |   |  | 14   |   |  | 17   |   
|Print publishing and licensing       |  | 11                     |   |  | 11   |   |  | 12   |   
|                                     |  |                        |   |  |      |   |  |      |   
|Total cost of revenue                |  | 23                     |   |  | 25   |   |  | 29   |   
|                                     |  |                        |   |  |      |   |  |      |   
|Gross margin                         |  | 77                     |   |  | 75   |   |  | 71   |   
|                                     |  |                        |   |  |      |   |  |      |   
|Operating expenses:                  |  |                        |   |  |      |   |  |      |   
|Sales                                |  | 14                     |   |  | 16   |   |  | 18   |   
|Marketing                            |  | 15                     |   |  | 13   |   |  | 16   |   
|Product development                  |  | 6                      |   |  | 5    |   |  | 8    |   
|General and administrative           |  | 16                     |   |  | 21   |   |  | 30   |   
|Depreciation and amortization        |  | 2                      |   |  | 2    |   |  | 4    |   
|                                     |  |                        |   |  |      |   |  |      |   
|                                     |  | 53                     |   |  | 58   |   |  | 75   |   
|                                     |  |                        |   |  |      |   |  |      |   
|Income (loss) from operations        |  | 24                     |   |  | 17   |   |  | (4   | ) 
|Other income (expense), net          |  | 1                      |   |  |     |   |  | (1   | ) 
|Gain on early extinguishment of debt |  |                       |   |  | 8    |   |  |     |   
|                                     |  |                        |   |  |      |   |  |      |   
|Income (loss) before income taxes    |  | 25                     |   |  | 25   |   |  | (5   | ) 
|Income taxes                         |  | 8                      |   |  |     |   |  |     |   
|                                     |  |                        |   |  |      |   |  |      |   
|Net income (loss)                    |  | 33                     | % |  | 25   | % |  | (5   | )%
|                                     |  |                        |   |  |      |   |  |      |   



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The following is our analysis of the results of operations for the periods covered by our financial
statements, including a discussion of the accounting policies and practices (revenue recognition, allowance for doubtful accounts and valuation of deferred tax assets) that we believe are critical to an understanding of our results of operations and
to making the estimates and judgments underlying our financial statements. Other accounting policies are contained in Note 2 to the financial statements in Item 8. A detailed discussion of our significant accounting policies and procedures is set
forth in the applicable sections of this analysis. This analysis should be read in conjunction with our financial statements, including the related notes to the financial statements.



Revenue



Total Revenue



|                               |  |                         |            |      |   |            |  |   |           
|------------------------------ |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ----------
|                               |  | Year Ended December 31,
|                               |  | 2003                    |            | 2002 |   | 2001      
|Revenue:                       |  |                         |            |      |   |            |  |   |           
|Online publishing              |  | $                       | 31,368,392 |      | $ | 22,651,216 |  | $ | 14,985,903
|Print publishing and licensing |  |                         | 5,253,099  |      |   | 3,919,815  |  |   | 3,271,223 
|                               |  |                         |            |      |   |            |  |   |           
|Total revenue                  |  | $                       | 36,621,491 |      | $ | 26,571,031 |  | $ | 18,257,126
|                               |  |                         |            |      |   |            |  |   |           



Online Publishing Revenue



We sell graphic advertisements on our Web site (including
co-branded sites) consisting of banner, badge, billboard, poster and island advertisements. These advertisements are sold to advertisers according to the cost per thousand impressions, or CPM, the advertiser receives. The amount of advertising we
sell is a function of (1) the number of advertisements per Web page, (2) the number of visitors viewing our Web pages, and (3) the capacity of our sales force. Advertising sales are invoiced monthly based on the number of advertisement impressions
or the number of times the advertisement is viewed by users of our Web site. Revenue is recognized monthly based on the percentage of actual impressions to the total number of impressions contracted. Revenue for impressions invoiced but not
delivered is deferred. Additionally, we generate revenue on a per action basis (i.e., a purchase or completion of an application) when a visitor to our Web site transacts with one of our advertisers after viewing an advertisement.
Revenue is recognized monthly based on the number of actions reported by the advertiser. We are also involved in revenue sharing arrangements with our online partners where the consumer uses co-branded sites hosted by us. Revenue is effectively
allocated to each partner based on the percentage of advertisement views at each site. The allocated revenues are shared according to distribution agreements. Revenue is recorded at gross amounts and revenue payments are recorded in cost of revenue.
We also sell hyperlinks to various third-party Internet sites that generate a fixed monthly fee, which is recognized in the month earned.



Online publishing revenue also includes barter revenue, which represents the exchange of advertising space on our Web site for reciprocal advertising
space or traffic on other Web sites. Barter revenues and expenses are recorded at the fair market value of the advertisements delivered or received, whichever is more determinable in the circumstances. We follow the accounting literature provided by
the Emerging Issues Task Force (EITF) 99-17, Accounting for Advertising Barter Transactions. In accordance with EITF 99-17, barter transactions have been valued based on similar cash transactions which have occurred within six
months prior to the date of the barter transaction. Revenue from barter transactions is recognized as income when advertisements are delivered on our Web site. Barter expense is recognized when our advertisements are run on the other companies
Web sites, which is typically in the same period barter revenue is recognized. If the advertising impressions are received from the customer prior to our delivering the advertising impressions, a liability is recorded. If we deliver advertising



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impressions to the other companies Web sites prior to receiving the advertising impressions, a prepaid expense is
recorded. No prepaid expense or liability was recorded at December 31, 2003 and 2002. At December 31, 2001, we recorded a prepaid expense of approximately $8,000 for barter advertising to be received. Barter revenue was approximately $3,164,000,
$2,912,000, and $2,558,000, and represented approximately, 9%, 11%, and 14% of total revenue, respectively, for the years ended December 31, 2003, 2002 and 2001.





|            |  |                         |                           |         |      |   |  |      |            |  |    |   |  |   |           
|----------- |  | ----------------------- | ------------------------- | ------- | ---- | - |  | ---- | ---------- |  | -- | - |  | - | ----------
|            |  |                         | Online Publishing Revenue
|            | 
|            |  | Year Ended December 31,
|            |  | 2003                    |                           |         | 2002 |   |  | 2001
|            |  |                         |                           | YTY Inc |      |   |  |      | YTY Inc    |  |    |  
|Graphic ads |  | $                       | 14,436,287                |         | 32   | % |  | $    | 10,936,034 |  | 42 | % |  | $ | 7,693,370 
|Hyperlinks  |  |                         | 13,768,359                |         | 56   | % |  |      | 8,803,208  |  | 86 | % |  |   | 4,734,224 
|Barter      |  |                         | 3,163,746                 |         | 9    | % |  |      | 2,911,974  |  | 14 | % |  |   | 2,558,309 
|            |  |                         |                           |         |      |   |  |      |            |  |    |   |  |   |           
|            |  | $                       | 31,368,392                |         | 38   | % |  | $    | 22,651,216 |  | 51 | % |  | $ | 14,985,903
|            |  |                         |                           |         |      |   |  |      |            |  |    |   |  |   |           



Online publishing
revenue was $31,368,000, $22,651,000, and $14,986,000 in 2003, 2002 and 2001, respectively, representing annual growth rates of 38% and 51% for 2003 and 2002, respectively. Excluding barter revenue, online publishing revenue was $28,205,000,
$19,739,000, and $12,428,000 in 2003, 2002 and 2001, respectively, representing annual growth rates of 43% and 59% for 2003 and 2002, respectively. The increase in 2003 over 2002 was due to higher graphic advertisement and hyperlink sales.



Graphic advertisement sales were $3,500,000, or 32%, higher in
2003 as approximately 601 million, or 87%, more advertisements were sold in 2003 compared to 2002. This increase is a direct result of serving approximately 137 million, or 51%, more page views in 2003 compared to 2002. However, graphic
advertisements were sold at approximately 29% lower CPM as we monetized the increase in page views albeit at lower rates. Graphic advertisement pricing is sensitive to market supply and demand, the interest rate environment and consumer spending
patterns. During 2003, graphic advertisements were purchased by an average of 63 graphic advertisers monthly compared to 59 in 2002, an increase of 7%. Graphic advertisement sales were $3,243,000, or 42%, higher in 2002 as approximately 284 million,
or 30%, more advertisements were sold in 2002 compared to 2001. Additionally, graphic advertisements were sold at approximately 27% higher rates per thousand page views than in 2001, and were purchased by approximately 59 graphic advertisers in 2002
compared to 55 in 2001, an increase of 7%.



Hyperlink sales
were $4,965,000, or 56%, higher in 2003 due to a 22% increase in the number of average monthly hyperlink advertisers over 2002. During 2003, there were approximately 107 more hyperlink advertisers on average each month than in 2002. We also
implemented price increases ranging from 10% to 20% that impacted 2003 contract renewals. Hyperlink sales were $4,069,000, or 86%, higher in 2002 due to a 60% increase in the number of average monthly hyperlink advertisers over 2001. During 2002,
there were approximately 179 more hyperlink advertisers on average each month than in 2001.



Consumer demand for our mortgage-related services heightened during 2002 and continued into late 2003 due to the declining interest rate environment. Our advertisers increased their spending in efforts to capitalize
on this demand and we expect this demand to continue in 2004.



A majority of our advertising customers purchase advertising under short-term contracts. Customers have the ability to stop, and have on occasion stopped, advertising on relatively short notice. Online publishing revenue would be adversely
impacted if we experienced contract terminations, or if we were not able to renew contracts with existing customers or obtain new customers. The market for Internet advertising is intensely competitive and has, in the past, experienced significant
downturns in demand that could impact advertising rates. Future revenue could be adversely affected if we were forced to reduce our advertising rates or if we were to experience lower CPMs.



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##### Table of Contents

Historically, our first calendar quarter has been our highest in terms of page views, and we have
typically experienced a slowdown in traffic during our third and fourth quarters. During 2002, certain traffic initiatives and expanded commitments from our distribution partners as well as the activity in mortgage lending caused increases in
traffic inconsistent with our historical trends that continued through the second quarter of 2003. Based on historical trends and current economic conditions, we believe we will experience an increase in traffic and online publishing revenue during
the first quarter of 2004 and a relative slowdown during our third and fourth quarters.



Page Views



|     |  |            |  |       |  |       |  |      
|---- |  | ---------- |  | ----- |  | ----- |  | -----
|     |  | (Millions)
|     |  | 2003       |  | 2002  |  | 2001  |  | 2000 
|Q1   |  | 106.7      |  | 58.4  |  | 70.5  |  | 37.0 
|Q2   |  | 121.8      |  | 48.0  |  | 52.2  |  | 34.1 
|Q3   |  | 100.3      |  | 82.1  |  | 47.3  |  | 30.5 
|Q4   |  | 75.8       |  | 79.3  |  | 66.5  |  | 32.8 
|     |  |            |  |      
|Year |  | 404.6      |  | 267.8 |  | 236.5 |  | 134.4



Print Publishing and Licensing
Revenue



Print publishing and licensing revenue represents
advertising revenue from the sale of advertising in Consumer Mortgage Guide rate tables, newsletter subscriptions, and licensing of research information. We charge a commission for placement of the Consumer Mortgage Guide in a print
publication. Advertising revenue and commission income is recognized when the Consumer Mortgage Guide runs in the publication. Revenue from our newsletters is recognized ratably over the period of the subscription, which is generally up to
one year. Revenue from the sale of research information is recognized ratably over the contract period.



We also earn fees from distributing editorial rate tables that are published in newspapers and magazines across the United States, from paid subscriptions
to three newsletters, and from providing rate surveys to institutions and government agencies. In addition, we license research data under agreements that permit the use of rate information we develop to advertise the licensees products in
print, radio, television and web site promotions. Revenue for these products is recognized ratably over the contract/subscription periods.



Print Publishing & Licensing Revenue



|                        |  |                         |           |              |      |   |  |      |              |  |    |   |  |   |          
|----------------------- |  | ----------------------- | --------- | ------------ | ---- | - |  | ---- | ------------ |  | -- | - |  | - | ---------
|                        |  | Year Ended December 31,
|                        |  | 2003                    |           |              | 2002 |   |  | 2001
|                        |  |                         |           | YTY Inc -Dec |      |   |  |      | YTY Inc -Dec |  |    |  
|Consumer Mortgage Guide |  | $                       | 4,402,741 |              | 46   | % |  | $    | 3,008,621    |  | 32 | % |  | $ | 2,270,986
|Editorial               |  |                         | 850,358   |              | -7   | % |  |      | 911,194      |  | -9 | % |  |   | 1,000,237
|                        |  |                         |           |              |      |   |  |      |              |  |    |   |  |   |          
|                        |  | $                       | 5,253,099 |              | 34   | % |  | $    | 3,919,815    |  | 20 | % |  | $ | 3,271,223
|                        |  |                         |           |              |      |   |  |      |              |  |    |   |  |   |          



Print publishing and
licensing revenue increased $1,333,000, or 34%, in 2003 over 2002, and $649,000, or 20%, in 2002 over 2001, due primarily to increases in Consumer Mortgage Guide revenue. These increases resulted from declining interest rates beginning in
2001 and continuing through 2003 that bolstered the mortgage and refinance markets resulting in more advertisers publishing their rates. During 2003, we generated revenue from the sale of mortgage rate and product listings in 28 metropolitan
newspapers compared to 24 in 2002 and 13 in 2001.



Our
syndicated editorial content and research revenue declined 9% from 2001 to 2002 and 7% from 2002 to 2003. We believe that newspapers are continuously forced to reduce expenses as the Internet and other non-print media make it easier for consumers to
obtain information. During 2003 and 2002, we saw our newspaper customers reduce their spends with us as they become more unwilling to pay for content. While we are constantly looking for new business, we believe that the branding, marketing and
public relations exposure benefits received in serving our existing customer base of major metropolitan newspapers outweigh the loss in revenue.



Cost of Revenue



Online Publishing Costs



Online publishing costs represent expenses directly associated with the creation of online publishing revenue. These costs include contractual revenue
sharing obligations resulting from our distribution arrangements (distribution payments), editorial costs, research costs and allocated overhead. Distribution payments are made to Web site operators for visitors directed to our Web site; these costs
increase proportionately with gains in traffic to our site. Editorial costs relate to writers and editors who create original content for our online publications and associates who build Web pages; these costs have increased as we have added online
publications and co-branded versions of our site under distribution arrangements. These sites must be maintained on a daily basis. Research costs include expenses related to gathering data on banking and credit products and consist primarily of
compensation and benefits and allocated overhead.



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##### Table of Contents

Online publishing costs increased 18% in 2003 over 2002, and 21% in 2002 over 2001. The increase in
direct costs was due primarily to higher human resources costs ($248,000, or 13%) reflecting four additional full-time equivalent employees in 2003 and merit increases; higher revenue sharing payments ($165,000, or 13%) to our distribution partners
due to higher associated revenue and traffic; approximately $69,000 higher consulting expenses related to branding studies and market research; approximately $73,000 in radio production costs to launch the Bankrate Personal Finance Minute
syndicated on over 400 radio stations through the Associated Press; and approximately $144,000 higher software licensing costs supporting our financial calculators.



Online publishing costs increased $651,000, or 21%, in 2002 compared to 2001. This increase was due primarily to higher
revenue sharing payments ($400,000, or 45%) to our distribution partners due to higher associated revenue; higher e-mail distribution costs ($100,000 or 45%) supporting the 149% increase in e-mail related revenue; and approximately $100,000 higher
consulting and software licensing expense supporting the higher revenue levels in 2002.



Online Publishing Gross Margin



|                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                            |  | Year Ended December 31, |           
|                                            |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Online publishing revenue, excluding barter |  | $                       | 28,204,646 |   |      | $ | 19,739,242 |      |  | $ | 12,427,594 |  
|Cost of online publishing revenue           |  |                         | 4,514,023  |   |      |   | 3,812,765  |      |  |   | 3,161,273  |  
|                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|Gross margin                                |  | $                       | 23,690,623 |   |      | $ | 15,926,477 |      |  | $ | 9,266,321  |  
|                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|                                            |  |                         | 84         | % |      |   | 81         | %    |  |   | 75         | %



For the year ended
December 31, 2003 compared to 2002, total online publishing revenue excluding barter increased $8,465,000, or 43%, while direct costs increased $701,000, or 18%, resulting in an increase in gross margin excluding barter of $7,764,000, or 49%. This
improvement is a result of selling more graphic advertisements and a higher volume of hyperlink sales. Hyperlink revenue as a percentage of online revenue excluding barter increased from 45% to 49% in 2003 over 2002, contributing to the gross margin
improvement. For the year ended December 31, 2002 compared to 2001, total online publishing revenue excluding barter increased $7,312,000, or 59%, while direct costs increased $651,000, or 21%, resulting in an increase in gross margin excluding
barter of $6,660,000, or 72%. This improvement was a result of selling more graphic advertisements at higher prices and a higher volume of hyperlink sales on a stabilized, fixed expense base.



Print Publishing and Licensing Costs



Print publishing and licensing costs represent expenses directly associated
with print publishing revenue. These costs include contractual revenue sharing obligations with newspapers related to the Consumer Mortgage Guide, compensation and benefits, printing and allocated overhead. These costs vary proportionately
with the related revenue and increased $1,182,000, or 41%, in 2003 compared to 2002, and $689,000, or 32%, in 2002 compared to 2001. Revenue sharing payments were $1,103,000, or 48%, and $596,000, or 36%, higher in 2003 and 2002, respectively. The
decline in our syndicated editorial content and research revenue has contributed to a 4% and 7% decline in the print publishing & licensing gross margin in 2003 and 2002, respectively.



Print Publishing & Licensing Gross Margin



|                                             |  |                         |           |   |      |   |           |      |  |   |           |  
|-------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                             |  | Year Ended December 31, |          
|                                             |  | 2003                    |           |   | 2002 |   |           | 2001 | 
|Print publishing & licensing revenue         |  | $                       | 5,253,099 |   |      | $ | 3,919,815 |      |  | $ | 3,271,223 |  
|Cost of print publishing & licensing revenue |  |                         | 4,043,970 |   |      |   | 2,862,338 |      |  |   | 2,173,529 |  
|                                             |  |                         |           |   |      |   |           |      |  |   |           |  
|Gross margin                                 |  | $                       | 1,209,129 |   |      | $ | 1,057,477 |      |  | $ | 1,097,694 |  
|                                             |  |                         |           |   |      |   |           |      |  |   |           |  
|                                             |  |                         | 23        | % |      |   | 27        | %    |  |   | 34        | %



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##### Table of Contents

Other Expenses



Sales



Sales expenses represent direct selling expenses of the Graphic Ad Team and the Telesales Group, principally for online advertising, and include
compensation and benefits for sales personnel, sales commissions, and allocated overhead. Sales expenses for the year ended December 31, 2003 increased $764,000, or 18%, compared to 2002 due to higher sales commissions ($612,000 or 34%) resulting
from an $8.5 million increase in online sales; and $357,000 higher human resources costs from adding 5 full-time equivalent sales employees during 2003. Those increases were offset by approximately $165,000 lower consulting and market research
costs. For the year ended December 31, 2002, sales expenses increased $1,072,000, or 33%, compared to 2001 due to higher sales commissions ($723,000) resulting from higher online sales; higher spending on market research and sales consulting
($219,000); and approximately $132,000 more Telesales operating expenses in 2002 as the department began operating in May of 2001.



Marketing



Marketing expenses represent expenses associated with expanding brand awareness of our products and services to consumers and include print and Internet
advertising, marketing and promotion costs. Marketing expenses also include barter expense, which represents the cost of our advertisements that are run on other companies Web sites in our barter transactions. Barter expense was $3,164,000,
$2,920,000, and $2,750,000 for the years ended December 31, 2003, 2002 and 2001, respectively. Excluding barter expense, marketing expenses would have been $2,332,000, $557,000, and $173,000 for the years ended December 31, 2003, 2002 and 2001,
respectively. During 2003 and 2002, marketing expenses increased due primarily to key word (pay per performance) campaigns on search engines as traffic acquisition becomes more competitive. We anticipate having to spend at comparable levels in the
foreseeable future.



Product Development



Product development expenses represent compensation and benefits related to
site development, network systems and telecommunications infrastructure support, programming and other technology costs. Product development expenses for 2003 were $849,000, or 60%, higher than 2002 due to approximately $576,000 of expenses
associated with the design and development of new products; and approximately $153,000 of higher human resources and training costs. For the year ended December 31, 2002, product development expenses were $37,000, or 3%, higher than the comparable
amount in 2001 resulting from the stabilization of our fixed expense base after the restructuring efforts in 2000.



General and Administrative



General and administrative expenses represent compensation and benefits for executive, finance and administrative personnel, professional fees,
non-allocated overhead and other general corporate expenses. As a percentage of total revenue excluding barter, general and administrative expenses were 17%, 23%, and 35% in 2003, 2002 and 2001, respectively. For the year ended December 31, 2003,
general and administrative expenses were $277,000, or 5%, higher than the comparable period in 2002 due to $111,000 of Nasdaq National and SmallCap Market initial listing and annual fees as we attained listing on both exchanges during 2003; $165,000
higher investor and public relations expenses commensurate with our launch of specific campaigns in 2003; and approximately $240,000 higher legal expenses related to currently outstanding legal matters. Those higher costs were offset by reductions
in numerous other general and administrative expenses totaling approximately $239,000. General and administrative expenses for the year ended December 31, 2002 were essentially flat ($25,000 higher than 2001) due to the stabilization of our fixed
expense base in 2002.



We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Any additions to the allowance for doubtful accounts are recorded as bad debt expense and included in general and administrative expenses.



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##### Table of Contents

Depreciation and Amortization



Depreciation and amortization represents the cost of capital asset acquisitions spread over their expected useful lives.
These expenses are spread over three to seven years and are calculated on a straight-line basis. During 2003, we purchased approximately $400,000 of depreciable assets and depreciation and amortization increased $59,000, or 10%, over 2002. For the
year ended December 31, 2002, depreciation and amortization was $79,000, or 11%, lower than in 2001 due to the expiration of lease terms on certain capital lease assets.



Interest Income (Expense), Net



Interest income (expense), net consists primarily of interest income on invested cash and cash equivalents, and interest expense on capital lease
obligations and the 10% convertible subordinated note payable associated with the Pivot acquisition. Net interest income for the year ended December 31, 2003 was $160,000, or 193% higher than in 2002 due to a $9.9 million increase in cash balances
during the year. Net interest income was $217,000, or 162%, higher for the year ended December 31, 2002 as interest expense was eliminated due to the expiration of lease terms on certain capital lease assets and the repayment of the 10% convertible
subordinated note payable in the quarter ended March 31, 2002.



Income Taxes



Our effective rate differs from the statutory federal
income tax rate, primarily as a result of the uncertainties regarding our ability to utilize our net operating loss carryforward and the changes in the valuation allowance on deferred tax assets.



As required by Statement of Financial Accounting Standards (SFAS)
No. 109, we recognize tax assets on the balance sheet if it is more likely than not that they will be realized on future tax returns. Up to the third quarter of 2003, we had provided a full valuation allowance against accumulated deferred tax
assets, reflecting the uncertainty associated with our future profitability. In the fourth quarter of 2003 we reassessed the valuation allowance previously established against deferred tax assets. Factors considered by us included: our historical
results of operations, volatility of the economic and interest rate environment and projected earnings based on current operations. Based on this evidence, we concluded that it is more likely than not that a portion of the deferred tax assets would
be realized. Accordingly, we released $3,400,000 of the valuation allowance, which resulted in an income tax benefit of approximately $3,100,000. However, should we determine that we will not be able to realize all or part of our deferred tax assets
in the future, an adjustment to the deferred tax assets would be charged against income in the period such determination is made. As of December 31, 2003, we had $3,400,000 in deferred tax assets. The realization of deferred tax assets will depend
on our ability to continue to generate taxable income in the future.



At December 31, 2003, we had approximately $31,000,000 of net operating loss carryforwards for tax reporting purposes available to offset future taxable income. Our net operating loss carryforwards expire from 2012 through 2021. The Tax
Reform Act of 1986 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an ownership change of a corporation. Due to the change in our ownership interests in the third quarter of
1997 and the acquisition and subsequent disposition of Pivot in August 1999 and July 2000, respectively, future utilization of our net operating loss carryforwards will be subject to certain limitations or annual restrictions.



Related Party Transactions



The Company leases office space in North Palm Beach, Florida from Bombay
Holdings, Inc., which is wholly-owned by Peter C. Morse, a director and 33% stockholder. Total rent paid to Bombay for the years ended December 31, 2003, 2002 and 2001 was approximately $305,000, $296,000, and $298,000, respectively. During 2003,
2002 and 2001, the Company paid an outside director consulting fees of approximately $50,000, $53,000, and $40,000, respectively.



26



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##### Table of Contents

Quarterly Results of Operations



The following table presents certain unaudited quarterly statement of operations data for each of the last 8 quarters
through the year ended December 31, 2003. The information has been derived from our unaudited condensed consolidated financial statements. In the opinion of our management, the unaudited condensed financial statements have been prepared on a basis
consistent with the financial statements which appear elsewhere in this Form 10-K and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and results of operations for
such unaudited periods. Historical results are not necessarily indicative of results to be expected in the future.



|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|---------------------------------------------- | -------- | ---------------------------- | ---------- | ---------------------------- | ----------- | ---------- | ----------- | - | ---------- |  | - | ---------- |  | ------------ | ---------- | ---------- |  | - | ---------- |  | - | ---------- |  | - | ----------
|(In thousands, except share andper share data) |          | Year Ended December 31, 2003 |            | Year Ended December 31, 2002
|                                               | March 31 |                              | June 30    |                              | September30 |            | December 31 |   | March 31   |  |   | June 30    |  | September 30 |            | December31
|Revenue:                                       |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Online publishing                              |          | $                            | 7,334      |                              | $           | 8,197      |             | $ | 8,114      |  | $ | 7,723      |  | $            | 4,713      |            |  | $ | 5,268      |  | $ | 6,265      |  | $ | 6,406     
|Print publishing and licensing                 |          |                              | 1,212      |                              |             | 1,355      |             |   | 1,347      |  |   | 1,339      |  |              | 924        |            |  |   | 934        |  |   | 978        |  |   | 1,083     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Total revenue                                  |          |                              | 8,546      |                              |             | 9,552      |             |   | 9,461      |  |   | 9,062      |  |              | 5,637      |            |  |   | 6,202      |  |   | 7,243      |  |   | 7,489     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Cost of revenue:                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Online publishing                              |          |                              | 1,240      |                              |             | 1,342      |             |   | 1,303      |  |   | 1,433      |  |              | 882        |            |  |   | 935        |  |   | 1,148      |  |   | 1,262     
|Print publishing and licensing                 |          |                              | 1,008      |                              |             | 1,057      |             |   | 1,032      |  |   | 1,041      |  |              | 672        |            |  |   | 667        |  |   | 746        |  |   | 777       
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Total cost of revenue                          |          |                              | 2,248      |                              |             | 2,399      |             |   | 2,335      |  |   | 2,474      |  |              | 1,554      |            |  |   | 1,602      |  |   | 1,894      |  |   | 2,039     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Gross margin                                   |          |                              | 6,298      |                              |             | 7,153      |             |   | 7,126      |  |   | 6,588      |  |              | 4,083      |            |  |   | 4,600      |  |   | 5,349      |  |   | 5,450     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Operating expenses:                            |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Sales                                          |          |                              | 1,026      |                              |             | 1,139      |             |   | 1,111      |  |   | 985        |  |              | 851        |            |  |   | 944        |  |   | 1,027      |  |   | 1,040     
|Marketing                                      |          |                              | 1,198      |                              |             | 1,372      |             |   | 1,412      |  |   | 1,489      |  |              | 923        |            |  |   | 967        |  |   | 840        |  |   | 747       
|Product development                            |          |                              | 432        |                              |             | 563        |             |   | 620        |  |   | 561        |  |              | 330        |            |  |   | 351        |  |   | 365        |  |   | 376       
|General and administrative expenses            |          |                              | 1,470      |                              |             | 1,458      |             |   | 1,438      |  |   | 1,446      |  |              | 1,134      |            |  |   | 1,243      |  |   | 1,346      |  |   | 1,814     
|Depreciation and amortization                  |          |                              | 191        |                              |             | 163        |             |   | 162        |  |   | 165        |  |              | 144        |            |  |   | 123        |  |   | 174        |  |   | 180       
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|                                               |          |                              | 4,317      |                              |             | 4,695      |             |   | 4,743      |  |   | 4,646      |  |              | 3,382      |            |  |   | 3,628      |  |   | 3,752      |  |   | 4,157     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Income from operations                         |          |                              | 1,981      |                              |             | 2,458      |             |   | 2,383      |  |   | 1,942      |  |              | 701        |            |  |   | 972        |  |   | 1,597      |  |   | 1,293     
|Other income (expense), net                    |          |                              | 38         |                              |             | 63         |             |   | 65         |  |   | 76         |  |              | (11        | )          |  |   | 30         |  |   | 31         |  |   | 32        
|Gain on early extinguishment of debt           |          |                              |           |                              |             |           |             |   |           |  |   |           |  |              | 2,022      |            |  |   |           |  |   |           |  |   |          
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Income before income taxes                     |          |                              | 2,019      |                              |             | 2,521      |             |   | 2,448      |  |   | 2,018      |  |              | 2,712      |            |  |   | 1,002      |  |   | 1,628      |  |   | 1,325     
|Income tax benefit                             |          |                              |           |                              |             |           |             |   |           |  |   | 3,100      |  |              |           |            |  |   |           |  |   |           |  |   |          
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Net income                                     |          | $                            | 2,019      |                              | $           | 2,521      |             | $ | 2,448      |  | $ | 5,118      |  | $            | 2,712      |            |  | $ | 1,002      |  | $ | 1,628      |  | $ | 1,325     
|                                               |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Basic and diluted net income per share:        |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Net income-                                    |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Basic                                          |          | $                            | 0.14       |                              | $           | 0.17       |             | $ | 0.16       |  | $ | 0.14       |  | $            | 0.19       |            |  | $ | 0.07       |  | $ | 0.12       |  | $ | 0.10      
|Diluted                                        |          |                              | 0.13       |                              |             | 0.16       |             |   | 0.16       |  |   | 0.14       |  |              | 0.19       |            |  |   | 0.07       |  |   | 0.11       |  |   | 0.09      
|Weighted average common shares outstanding:    |          |                              |            |                              |             |            |             |   |            |  |   |            |  |              |            |            |  |   |            |  |   |            |  |   |           
|Basic                                          |          |                              | 14,162,059 |                              |             | 14,472,485 |             |   | 14,941,600 |  |   | 15,090,378 |  |              | 13,996,950 |            |  |   | 13,996,950 |  |   | 13,996,950 |  |   | 13,997,815
|Diluted                                        |          |                              | 15,423,056 |                              |             | 15,478,477 |             |   | 15,787,803 |  |   | 15,857,834 |  |              | 14,066,486 |            |  |   | 14,375,393 |  |   | 14,566,248 |  |   | 14,960,019



Liquidity and Capital Resources



Our principal source of liquidity is the cash generated
by our operations. As of December 31, 2003, we had working capital of $23,898,000, and our primary commitments were approximately $1,828,000 in operating lease payments over the next five years, and capital expenditures and recurring payables and
accruals arising during the course of operating our business, estimated at approximately $4,260,000 through December 31, 2004. We generally establish payment terms with our vendors that extend beyond the amount of time required to collect from our
customers. There are no other significant commitments or off-balance sheet arrangements. On February 22, 2002, we completed the early repayment of our $4,350,000 10% convertible subordinated note, including accrued interest, for $3,400,000 in cash.
This transaction will save us approximately $3,125,000 in principal and interest through August 20, 2004, the original maturity date.



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Contractual Obligations



The following table represents the amounts of payments due under the specified types of contractual obligations.



|                                |  |                             |         |                    |   |                   |  |                     |        |  |   |  
|------------------------------- |  | --------------------------- | ------- | ------------------ | - | ----------------- |  | ------------------- | ------ |  | - | -
|                                |  | Payments Due (In thousands)
|                                |  | Less thanone year           |         | One to three years |   | Three tofiveyears |  | More thanfive years
|Contractual obligations         |  |                             |         |                    |   |                   |  |                     |        |  |   |  
|Long-term debt obligations      |  | $                           |        |                    | $ |                  |  | $                   |       |  | $ | 
|Capital lease obligations (1)   |  |                             |        |                    |   |                  |  |                     |       |  |   | 
|Operating lease obligations (1) |  |                             |        |                    |   | 1,800,871         |  |                     | 27,463 |  |   | 
|Purchase obligations (2)        |  |                             | 204,286 |                    |   | 2,365             |  |                     |       |  |   | 
|Other long-term obligations     |  |                             |        |                    |   |                  |  |                     |       |  |   | 

---

|(1) | Includes our obligations under existing operating leases. See Note 7 to our financial statements in Item 8. for further details related to our lease obligations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents base contract amounts for Internet hosting, co-location content distribution and other infrastructure costs.
|--- | -----------------------------------------------------------------------------------------------------------------------



During the year ended December 31, 2003, we generated $8,114,000 of net cash
from operating activities. Net income was adjusted for non-cash charges of $792,000 and the $3,400,000 non-cash reversal of deferred tax asset reserves (see Note 6 to the financial statements); and a net negative change in the components of working
capital of $1,383,000. During 2003, our average collections on accounts were $2,761,000, or 81%, of average monthly account balances, up from $1,892,000, or 78%, of average monthly account balances in 2002. Our accounts receivable turnover and days
sales outstanding have remained strong at 9.82 and 37, respectively, in 2003, and 9.75 and 37, respectively, in 2002. Investing cash activities in 2003 consisted of $408,000 of equipment purchases and licenses. We expect to spend approximately
$800,000 in 2004 for capital expenditures and upgrading licenses and software maintenance contracts. Cash from financing activities consisted primarily of the proceeds from 1,116,181 stock options exercised at strike prices between $0.85 and $8.13.



During the year ended December 31, 2002, we generated
$5,343,000 of net cash from operating activities. Our net income of $6,667,000 was adjusted for non-cash charges of $743,000, a net positive change in the components of working capital of $45,000, and the $2,021,000 gain on early extinguishment of
debt recorded in the first quarter of 2002 (see Note 9 to the financial statements in Item 8.). Net cash used in investing activities consisted of capital expenditures and upgrading licenses and software maintenance contracts of approximately
$661,000, while cash used in financing activities consisted primarily of the $3,400,000 repayment of the 10% convertible subordinated note payable (see Note 9 to the financial statements in Item 8.).



We have incurred net losses in six of our last eight fiscal years, resulting
in an accumulated deficit of approximately $41 million as of December 31, 2003.



We have succeeded in managing our cash by actively controlling expenses and pursuing additional sources of revenue. For instance, since early 2000, we have substantially reduced marketing expenditures and sold or shut
down under-performing, non-core business units. We sold CPNet.com and Professional Direct Insurance Agency, Inc. in May 2000 and July 2000, respectively, shut down and sold certain assets of Consejero.com in August 2000, and shut down
Greenmagazine.com in December 2000. These transactions yielded approximately $4,392,000 in cash and reduced operating expenses. We have also reduced employment levels of continuing operations and consolidated our physical locations. In February
2002, we completed the early repayment of our $4,350,000 convertible subordinated note payable, including accrued interest, for $3,400,000. We have generated cash from operations for 11 consecutive quarters and have been profitable for 9 consecutive
quarters through December 31, 2003. Based on these actions and our current plan, we believe our existing capital resources will be sufficient to satisfy our cash requirements through at least the next 12 months.



Recent Accounting Pronouncements



In May 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The interpretation requires a company to record as a liability the fair value of
certain guarantees initiated by the company. In addition, the interpretation requires additional



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disclosure of these and other guarantees in the notes to the financial statements. The recognition provisions of this
interpretation are applied to guarantees entered into after December 31, 2002. This interpretation did not have a material impact on the Companys financial statements.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(Statement 146) which requires, among other things, recording a liability for costs associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. Commitment to an exit plan or a plan of
disposal expresses only managements future actions and, therefore, does not meet the requirement for recognizing a liability and the related expense. The provisions of Statement 146 are effective prospectively for exit and disposal activities
initiated after December 31, 2002, with early application encouraged. This statement did not have a material impact on the Companys financial statements.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement
No. 123 (Statement 148) to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The provisions
of Statement 148 are effective for interim periods beginning after December 15, 2002, with early application encouraged. This statement did not have a material impact on the Companys financial statements. The Company currently intends to
continue to account for stock options issued under Accounting Principles Board Opinion No. 25 and present the pro forma disclosures in the footnotes to the financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (Statement 150). Statement No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Statement 150 requires that
an issuer classify a financial instrument that is within the scope of Statement 150 as a liability. Statement 150 is effective for financial instruments entered into or modified after May 31, 2003, is otherwise effective for the Company beginning
September 1, 2003, and did not have a material impact on the Companys financial statements.



In December 2003, the FASB issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51, (FIN 46R). FIN 46R requires the consolidation of entities in which an enterprise absorbs a majority of the entitys expected losses, receives a majority of the entitys expected residual
returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting
interest in the entity. The provisions of FIN 46R are generally effective for existing (prior to February 1, 2003) variable interest relationships of a public entity no later than the end of the first reporting period that ends after March 15, 2004.
However, prior to the required application of this interpretation a public entity that is not a small business issuer shall apply FIN 46R to those entities that are considered to be special-purpose entities no later than the end of the first
reporting period that ends after December 15, 2003. The Company applied the portion of FIN 46R that is applicable to special purpose entities effective December 31, 2003, with no material effect, and will apply the remainder of FIN 46R to its first
quarter 2004 financial statements with no material effect anticipated.



ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Interest Rate Risk



The primary objective of
our investment strategy is to preserve principal while maximizing the income we receive from investments without significantly increasing risk. To minimize this risk, to date we have maintained our portfolio of cash equivalents in short-term and
overnight investments that are not subject to market risk, as the interest paid on such investments fluctuates with the prevailing interest rates. As of December 31, 2003, all of our cash equivalents mature in less than three months.



Exchange Rate Sensitivity



Our exposure to foreign currency exchange rate fluctuations is minimal to
none as we do not have any revenues denominated in foreign currencies. Additionally, we have not engaged in any derivative or hedging transactions to date.



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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



INDEX TO FINANCIAL STATEMENTS



|                                                                                        |  |     
|--------------------------------------------------------------------------------------- |  | ----
|                                                                                        |  | PAGE
|Independent Auditors Report                                                            |  | 31  
|                                                                                        | 
|Balance Sheets as of December 31, 2003 and 2002                                         |  | 32  
|                                                                                        | 
|Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001           |  | 33  
|                                                                                        | 
|Statements of Stockholders Equity for the Years Ended December 31, 2003, 2002 and 2001 |  | 34  
|                                                                                        | 
|Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001           |  | 35  
|                                                                                        | 
|Notes to Financial Statements                                                           |  | 36  



30



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INDEPENDENT AUDITORS REPORT



The Board of Directors

Bankrate, Inc.:



We have audited the accompanying balance sheets of Bankrate, Inc. as of December 31, 2003 and
2002, and the related statements of operations, stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2003. 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 in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bankrate,
Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of
America.



KPMG LLP



West Palm Beach, Florida

January 30, 2004



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Bankrate, Inc.



Balance Sheets



|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                           |  | December 31, 2003 |             |   | December 31, 2002 |  
|Assets                                                                                                                                                                     |  |                   |             |   |                   |   |             |  
|Cash and cash equivalents                                                                                                                                                  |  | $                 | 20,874,482  |   |                   | $ | 11,000,561  |  
|Accounts receivable, net of allowance for doubtful accounts of $230,000 and $200,000 at December 31, 2003 and 2002,
respectively                                           |  |                   | 3,031,882   |   |                   |   | 2,378,535   |  
|Deferred tax asset, net                                                                                                                                                    |  |                   | 3,400,000   |   |                   |   |            |  
|Other current assets                                                                                                                                                       |  |                   | 343,311     |   |                   |   | 370,886     |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total current assets                                                                                                                                                       |  |                   | 27,649,675  |   |                   |   | 13,749,982  |  
|                                                                                                                                                                           |  |                  
|Fixed assets, net                                                                                                                                                          |  |                   | 796,928     |   |                   |   | 912,651     |  
|Intangible assets, net                                                                                                                                                     |  |                   | 73,201      |   |                   |   | 206,915     |  
|Other assets                                                                                                                                                               |  |                   | 463,463     |   |                   |   | 303,547     |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total assets                                                                                                                                                               |  | $                 | 28,983,267  |   |                   | $ | 15,173,095  |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Liabilities and Stockholders Equity                                                                                                                                       |  |                   |             |   |                   |   |             |  
|Liabilities:                                                                                                                                                               |  |                   |             |   |                   |   |             |  
|Accounts payable                                                                                                                                                           |  | $                 | 1,227,463   |   |                   | $ | 809,068     |  
|Accrued expenses                                                                                                                                                           |  |                   | 2,226,905   |   |                   |   | 3,072,771   |  
|Deferred revenue                                                                                                                                                           |  |                   | 181,110     |   |                   |   | 255,081     |  
|Other current liabilities                                                                                                                                                  |  |                   | 116,551     |   |                   |   | 243,891     |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total current liabilities                                                                                                                                                  |  |                   | 3,752,029   |   |                   |   | 4,380,811   |  
|                                                                                                                                                                           |  |                  
|Other liabilities                                                                                                                                                          |  |                   | 306,274     |   |                   |   | 142,226     |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total liabilities                                                                                                                                                          |  |                   | 4,058,303   |   |                   |   | 4,523,037   |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Stockholders equity:                                                                                                                                                      |  |                   |             |   |                   |   |             |  
|Preferred stock, 10,000,000 shares authorized and undesignated                                                                                                             |  |                   |            |   |                   |   |            |  
|Common stock, par value $.01 per share 100,000,000 shares authorized; 15,114,371 and 13,998,168 shares issued and outstanding at
December 31, 2003 and 2002, respectively |  |                   | 151,144     |   |                   |   | 139,982     |  
|Additional paid in capital                                                                                                                                                 |  |                   | 66,091,014  |   |                   |   | 63,932,578  |  
|Accumulated deficit                                                                                                                                                        |  |                   | (41,317,194 | ) |                   |   | (53,422,502 | )
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total stockholders equity                                                                                                                                                 |  |                   | 24,924,964  |   |                   |   | 10,650,058  |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                                                                                 |  | $                 | 28,983,267  |   |                   | $ | 15,173,095  |  
|                                                                                                                                                                           |  |                   |             |   |                   |   |             |  



See
accompanying notes to financial statements.



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Bankrate, Inc.



Statements of
Operations



|                                               |  |                         |            |      |   |            |  |   |            |  
|---------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ---------- | -
|                                               |  | Year Ended December 31, |           
|                                               |  | 2003                    |            | 2002 |   | 2001       | 
|Revenue:                                       |  |                         |            |      |   |            |  |   |            |  
|Online publishing                              |  | $                       | 31,368,392 |      | $ | 22,651,216 |  | $ | 14,985,903 |  
|Print publishing and licensing                 |  |                         | 5,253,099  |      |   | 3,919,815  |  |   | 3,271,223  |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Total revenue                                  |  |                         | 36,621,491 |      |   | 26,571,031 |  |   | 18,257,126 |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Cost of revenue:                               |  |                         |            |      |   |            |  |   |            |  
|Online publishing                              |  |                         | 4,514,023  |      |   | 3,812,765  |  |   | 3,161,273  |  
|Print publishing and licensing                 |  |                         | 4,043,970  |      |   | 2,862,338  |  |   | 2,173,529  |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Total cost of revenue                          |  |                         | 8,557,993  |      |   | 6,675,103  |  |   | 5,334,802  |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Gross margin                                   |  |                         | 28,063,498 |      |   | 19,895,928 |  |   | 12,922,324 |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Operating expenses:                            |  |                         |            |      |   |            |  |   |            |  
|Sales                                          |  |                         | 5,039,892  |      |   | 4,275,826  |  |   | 3,203,656  |  
|Marketing                                      |  |                         | 5,495,810  |      |   | 3,477,379  |  |   | 2,922,867  |  
|Product development                            |  |                         | 2,271,124  |      |   | 1,422,206  |  |   | 1,385,672  |  
|General and administrative                     |  |                         | 5,813,297  |      |   | 5,536,774  |  |   | 5,511,572  |  
|Depreciation and amortization                  |  |                         | 680,826    |      |   | 621,458    |  |   | 700,497    |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|                                               |  |                         | 19,300,949 |      |   | 15,333,643 |  |   | 13,724,264 |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Income (loss) from operations                  |  |                         | 8,762,549  |      |   | 4,562,285  |  |   | (801,941   | )
|                                               |  |                         |           
|Interest income (expense), net                 |  |                         | 242,759    |      |   | 82,833     |  |   | (133,836   | )
|Gain on early extinguishment of debt           |  |                         |           |      |   | 2,021,792  |  |   |           |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Income (loss) before income taxes              |  |                         | 9,005,308  |      |   | 6,666,910  |  |   | (935,776   | )
|                                               |  |                         |           
|Income tax benefit                             |  |                         | 3,100,000  |      |   |           |  |   |           |  
|                                               |  |                         |            |      |   |            |  |   |            |  
|Net income (loss)                              |  | $                       | 12,105,308 |      | $ | 6,666,910  |  | $ | (935,776   | )
|                                               |  |                         |            |      |   |            |  |   |            |  
|Basic and diluted net income (loss) per share: |  |                         |            |      |   |            |  |   |            |  
|Net income (loss)-                             |  |                         |            |      |   |            |  |   |            |  
|Basic                                          |  | $                       | 0.84       |      | $ | 0.48       |  | $ | (0.07      | )
|Diluted                                        |  | $                       | 0.79       |      | $ | 0.46       |  | $ | (0.07      | )
|                                               |  |                         |           
|Weighted average common shares outstanding:    |  |                         |            |      |   |            |  |   |            |  
|Basic                                          |  |                         | 14,473,151 |      |   | 13,997,168 |  |   | 13,996,950 |  
|Diluted                                        |  |                         | 15,299,734 |      |   | 14,609,359 |  |   | 13,996,950 |  



See
accompanying notes to financial statements.



33



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Bankrate, Inc.



Statements of
Stockholders Equity



|                              |        |              |        |                            |         |                     |   |            |                            |   |             |   |  |   |            |  
|----------------------------- | ------ | ------------ | ------ | -------------------------- | ------- | ------------------- | - | ---------- | -------------------------- | - | ----------- | - |  | - | ---------- | -
|                              |        | Common Stock |        | Additional Paid in Capital |         | Accumulated Deficit |   |            | Total Stockholders Equity |  
|                              | Shares |              | Amount |                            |         |                    
|Balances, December 31, 2000   |        | 13,996,950   |        | $                          | 139,969 |                     | $ | 60,586,991 |                            | $ | (59,153,636 | ) |  | $ | 1,573,324  |  
|Stock option exchange program |        |             |        |                            |        |                     |   | 2,452,425  |                            |   |            |   |  |   | 2,452,425  |  
|Stock compensation expense    |        |             |        |                            |        |                     |   | 892,139    |                            |   |            |   |  |   | 892,139    |  
|Net loss for the period       |        |             |        |                            |        |                     |   |           |                            |   | (935,776    | ) |  |   | (935,776   | )
|                              |        |              |        |                            |         |                     |   |            |                            |   |             |   |  |   |            |  
|Balances, December 31, 2001   |        | 13,996,950   |        |                            | 139,969 |                     |   | 63,931,555 |                            |   | (60,089,412 | ) |  |   | 3,982,112  |  
|Stock options exercised       |        | 1,218        |        |                            | 13      |                     |   | 1,023      |                            |   |            |   |  |   | 1,036      |  
|Net income for the period     |        |             |        |                            |        |                     |   |           |                            |   | 6,666,910   |   |  |   | 6,666,910  |  
|                              |        |              |        |                            |         |                     |   |            |                            |   |             |   |  |   |            |  
|Balances, December 31, 2002   |        | 13,998,168   |        |                            | 139,982 |                     |   | 63,932,578 |                            |   | (53,422,502 | ) |  |   | 10,650,058 |  
|Stock options exercised       |        | 1,116,203    |        |                            | 11,162  |                     |   | 2,158,436  |                            |   |            |   |  |   | 2,169,598  |  
|Net income for the period     |        |             |        |                            |        |                     |   |           |                            |   | 12,105,308  |   |  |   | 12,105,308 |  
|                              |        |              |        |                            |         |                     |   |            |                            |   |             |   |  |   |            |  
|Balances, December 31, 2003   |        | 15,114,371   |        | $                          | 151,144 |                     | $ | 66,091,014 |                            | $ | (41,317,194 | ) |  | $ | 24,924,964 |  
|                              |        |              |        |                            |         |                     |   |            |                            |   |             |   |  |   |            |  



See
accompanying notes to financial statements.



34



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Bankrate, Inc.



Statements of Cash
Flows



|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                                         |  | Year Ended December 31, |           
|                                                                                         |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Cash flows from operating activities:                                                    |  |                         |            |   |      |   |            |      |  |   |           |  
|Net income (loss)                                                                        |  | $                       | 12,105,308 |   |      | $ | 6,666,910  |      |  | $ | (935,776  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |            |   |      |   |            |      |  |   |           |  
|Gain on early extinguishment of debt                                                     |  |                         |           |   |      |   | (2,021,792 | )    |  |   |          |  
|Depreciation and amortization                                                            |  |                         | 680,826    |   |      |   | 621,458    |      |  |   | 700,497   |  
|Provision for doubtful accounts                                                          |  |                         | 110,771    |   |      |   | 121,863    |      |  |   | 48,725    |  
|Noncash stock compensation                                                               |  |                         |           |   |      |   |           |      |  |   | 892,139   |  
|Deferred tax benefit                                                                     |  |                         | (3,400,000 | ) |      |   |           |      |  |   |          |  
|Changes in operating assets and liabilities:                                             |  |                         |            |   |      |   |            |      |  |   |           |  
|Increase in accounts receivable                                                          |  |                         | (764,118   | ) |      |   | (1,241,442 | )    |  |   | (89,114   | )
|(Increase) decrease in other assets                                                      |  |                         | (137,170   | ) |      |   | (236,824   | )    |  |   | 332,601   |  
|Increase (decrease) in accounts payable                                                  |  |                         | 418,395    |   |      |   | 110,014    |      |  |   | (73,127   | )
|Increase (decrease) in accrued expenses                                                  |  |                         | (864,112   | ) |      |   | 1,195,595  |      |  |   | (137,448  | )
|Increase in other liabilities                                                            |  |                         | 37,962     |   |      |   | 220,840    |      |  |   | 484,280   |  
|Decrease in deferred revenue                                                             |  |                         | (73,971    | ) |      |   | (92,788    | )    |  |   | (115,355  | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Net cash provided by operating activities                                                |  |                         | 8,113,891  |   |      |   | 5,343,834  |      |  |   | 1,107,422 |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Cash flows from investing activities:                                                    |  |                         |            |   |      |   |            |      |  |   |           |  
|Purchases of equipment and licenses                                                      |  |                         | (408,314   | ) |      |   | (660,925   | )    |  |   | (27,243   | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Net cash used in investing activities                                                    |  |                         | (408,314   | ) |      |   | (660,925   | )    |  |   | (27,243   | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Cash flows from financing activities:                                                    |  |                         |            |   |      |   |            |      |  |   |           |  
|Principal payments on capital lease obligations                                          |  |                         | (1,254     | ) |      |   | (38,416    | )    |  |   | (215,796  | )
|Proceeds from exercise of stock options                                                  |  |                         | 2,169,598  |   |      |   | 1,036      |      |  |   |          |  
|Repayment of 10% convertible subordinated note payable                                   |  |                         |           |   |      |   | (3,400,000 | )    |  |   |          |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Net cash provided by (used in) financing activities                                      |  |                         | 2,168,344  |   |      |   | (3,437,380 | )    |  |   | (215,796  | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Net increase in cash and cash equivalents                                                |  |                         | 9,873,921  |   |      |   | 1,245,529  |      |  |   | 864,383   |  
|Cash and cash equivalents, beginning of year                                             |  |                         | 11,000,561 |   |      |   | 9,755,032  |      |  |   | 8,890,649 |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Cash and cash equivalents, end of year                                                   |  | $                       | 20,874,482 |   |      | $ | 11,000,561 |      |  | $ | 9,755,032 |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Supplemental disclosures of cash flow information:                                       |  |                         |            |   |      |   |            |      |  |   |           |  
|Cash paid during the period for interest                                                 |  | $                       | 323        |   |      | $ | 44,818     |      |  | $ | 27,341    |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  
|Cash paid during the period for income taxes                                             |  | $                       | 283,000    |   |      | $ |           |      |  | $ |          |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |           |  



See
accompanying notes to financial statements.



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##### Table of Contents

BANKRATE, INC.



NOTES TO
FINANCIAL STATEMENTS



NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION



Bankrate, Inc. (the Company) owns and
operates an Internet-based consumer banking marketplace. The Companys flagship Web site, Bankrate.com, is the Webs leading aggregator of information on more than 250 financial products including mortgages, credit cards, new and used
automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online banking fees. Additionally, the Company provides financial applications and information to a network of distribution partners and
through national and state publications. The Company is organized under the laws of the state of Florida.



On January 29, 2001, the Company announced that its common stock was removed from the Nasdaq National Market and immediately became eligible for trading
on the OTC Bulletin Board under the symbol RATE. Nasdaqs decision to de-list the Companys common stock from the Nasdaq National Market was based on the Companys net tangible assets, as defined by Nasdaq, falling below
the required $4,000,000 minimum amount.



On January 9, 2003,
the Companys common stock began trading on the Nasdaq SmallCap Market, and on August 18, 2003 again began trading on the Nasdaq National Market under its existing stock symbol RATE.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Use of Estimates



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Cash Equivalents



The Company considers all highly liquid debt investments purchased with an original maturity of less than three months to be cash equivalents. The
carrying value of these investments approximates fair value.



Fixed Assets



Fixed assets are stated at cost less
accumulated depreciation and amortization, and are depreciated on a straight-line basis over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful lives of the improvements. Equipment under capital leases are stated at the present value of the future minimum lease payments.



Intangible Assets



Intangible assets consist primarily of trademarks and software licenses. Trademarks are being amortized over their estimated useful lives, which are
approximately five years, on a straight-line basis. Software licenses relate to server and pc software and are amortized over the contractual term, usually 2 to 3 years. The Company reviews its intangible assets for impairment whenever events or
changes in circumstances indicate the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected
to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.



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##### Table of Contents

Impairment of Long-Lived Assets



The Company evaluates long-lived assets and intangible assets subject to amortization for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recorded in the amount by which the carrying amount of the asset exceeds the fair value of the asset.



Basic and Diluted Net Income (Loss) Per Share



The Company computes basic net income (loss) per share by dividing net
income (loss) for the year by the weighted average number of shares outstanding for the year. Diluted net income (loss) per share includes the effects of common stock equivalents, consisting of outstanding stock options and the 10% convertible
subordinated note payable, to the extent the effect is not antidilutive.



The following table presents the computation of basic and diluted earnings per share.



|                                                                                                            |  |                         |            |      |   |            |  |   |            |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ---------- | -
|                                                                                                            |  | Year Ended December 31, |           
|                                                                                                            |  | 2003                    |            | 2002 |   | 2001       | 
|Net income (loss)                                                                                           |  | $                       | 12,105,308 |      | $ | 6,666,910  |  | $ | (935,776   | )
|                                                                                                            |  |                         |            |      |   |            |  |   |            |  
|Weighted average common shares outstandings                                                                 |  |                         | 14,473,151 |      |   | 13,997,168 |  |   | 13,996,950 |  
|Additional dilutive shares related to stock options                                                         |  |                         | 826,583    |      |   | 612,191    |  |   |           |  
|                                                                                                            |  |                         |            |      |   |            |  |   |            |  
|Total weighted average common shares and equivalents outstanding for diluted earnings per share calculation |  |                         | 15,299,734 |      |   | 14,609,359 |  |   | 13,996,950 |  
|                                                                                                            |  |                         |            |      |   |            |  |   |            |  
|Basic and diluted net income (loss) per share:                                                              |  |                         |            |      |   |            |  |   |            |  
|Net income (loss)-                                                                                          |  |                         |            |      |   |            |  |   |            |  
|Basic                                                                                                       |  | $                       | 0.84       |      | $ | 0.48       |  | $ | (0.07      | )
|Diluted                                                                                                     |  | $                       | 0.79       |      | $ | 0.46       |  | $ | (0.07      | )



Stock options
outstanding that could potentially dilute basic earnings per share in the future (but were not included in diluted earnings per share because their effect on periods presented was antidilutive) totaled 80,775, 522,306 and 710,981 at December 31,
2003, 2002 and 2001, respectively. The antidilutive shares do not include the shares issuable on assumed conversion of the 10% convertible subordinated note payable in 2001. On January 2, 2004, the Company granted options to purchase a total of
25,000 shares of common stock (5,000 each) to the independent outside directors of its Board of Directors. On January 5, 2004, the Company granted options to purchase a total of 263,000 shares of common stock to certain executive officers and
employees.



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##### Table of Contents

Stock-Based Compensation



The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 44, Accounting for Certain
Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed plan options. Under this method, compensation is recognized over the grants vesting period only if the
current market price of the underlying stock on the date of grant exceeds the exercise price. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. The Company has elected to continue to apply the intrinsic value-based method of accounting described
above, and has adopted the disclosure requirements of SFAS No. 148.



Pro Forma Disclosures Under SFAS No. 148



The
following table provides the fair value of the options granted during the three-year period ended December 31, 2003 using the Black-Scholes pricing model together with a description of the assumptions used to calculate the fair value:





|                            |  |                         |         |      |   |         |  |  
|--------------------------- |  | ----------------------- | ------- | ---- | - | ------- |  | -
|                            |  | Year ended December 31,
|                            |  | 2003                    |         | 2002 |   | 2001   
|Weighted-average fair value |  | $                       | 2.95    |      | $ | 0.68    |  | 
|Expected volatility         |  |                         | 100%    |      |   | 100%    |  | 
|Risk free rate              |  |                         | 3%      |      |   | 4%      |  | 
|Expected lives              |  |                         | 5 years |      |   | 5 years |  | 
|Expected dividend yield     |  |                         | 0%      |      |   | 0%      |  | 



The Company applies
APB Opinion No. 25 in accounting for its stock-based compensation. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the net income (loss) and net income (loss) per share
would have been reported at the pro forma amounts indicated below.



|                                                                                                                                |  |                         |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                                |  | Year Ended December 31, |           
|                                                                                                                                |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Net income (loss):                                                                                                              |  |                         |            |   |      |   |            |      |  |   |            |  
|As reported                                                                                                                     |  | $                       | 12,105,308 |   |      | $ | 6,666,910  |      |  | $ | (935,776   | )
|Less total stock-based employee compensation determined under fair value-based method for all awards, net of related tax
effect |  |                         | (420,996   | ) |      |   | (1,135,051 | )    |  |   | (2,376,568 | )
|                                                                                                                                |  |                         |            |   |      |   |            |      |  |   |            |  
|Pro forma                                                                                                                       |  |                         | 11,684,312 |   |      |   | 5,531,859  |      |  |   | (3,312,344 | )
|Basic net income (loss) per common share as reported:                                                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic                                                                                                                           |  | $                       | 0.84       |   |      | $ | 0.48       |      |  | $ | (0.07      | )
|Diluted                                                                                                                         |  |                         | 0.79       |   |      |   | 0.46       |      |  |   | (0.07      | )
|Basic net income (loss) per common share pro forma:                                                                             |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic                                                                                                                           |  |                         | 0.81       |   |      |   | 0.40       |      |  |   | (0.24      | )
|Diluted                                                                                                                         |  |                         | 0.76       |   |      |   | 0.38       |      |  |   | (0.24      | )



Deferred Compensation
Plan



During 2002, the Company established a non-qualified
deferred compensation plan that permits eligible employees to defer a portion of their compensation. The deferred compensation liability (other non-current liabilities) was $306,274 and $142,226 at December 31, 2003 and 2002, respectively. The
Company has established a grantor trust (Rabbi Trust) to provide funding for benefits payable under its non-qualified deferred compensation plan. The assets held in the trust at December 31, 2003 and 2002 amounted to $306,274 and $142,226,
respectively, and are recorded at fair market value. The Rabbi Trusts assets consist of short-term cash investments, and a managed portfolio of equity securities that includes no Bankrate, Inc. common stock. These assets are included in other
assets in the accompanying balance sheets.



Fair Value of
Financial Instruments



The Company does not currently use
derivative financial instruments in the normal course of its business. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these assets and
liabilities.



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##### Table of Contents

Income Taxes



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recorded. The valuation allowance is based on managements judgment as to
future taxable income in light of historical results, the current environment, forecasted performance and other factors.



Revenue Recognition



The Company generates revenue from two primary sources: online publishing and print publishing and licensing.



Online publishing-



The Company sells graphical advertisements on its Web site (including
co-branded sites) consisting of banner, badge, billboard, poster and skyscraper advertisements. These advertisements are sold to advertisers according to the cost per thousand impressions, or CPM, the advertiser receives. The amount of advertising
the Company sells is a function of (1) the number of advertisements per Web page, (2) the number of visitors viewing its Web pages, and (3) the capacity of the Companys sales force. Advertising sales are invoiced monthly at amounts based on
specific contract terms. Revenue is recognized monthly based on the percentage of actual impressions to the total number of impressions contracted. Revenue for impressions invoiced but not delivered is deferred and recognized when impressions are
delivered. Additionally, the Company generates revenue on a per action basis (i.e., a purchase or completion of an application) when a visitor to its Web site transacts with one of its advertisers after viewing an advertisement. Revenue
is recognized monthly based on the number of actions reported by the advertiser. The Company is also involved in revenue sharing arrangements with its online partners where the consumer uses co-branded sites hosted by the Company. Revenue is
effectively allocated to each partner based on the percentage of advertisement views at each site. The allocated revenue is shared according to distribution agreements. Revenue is recorded at gross amounts and partnership payments are recorded in
cost of revenue. The Company also sells hyperlinks (interest rate table listings) to various third-party Internet sites that generate a fixed monthly fee, which is recognized in the month earned. We also sell text links on our rate pages to
advertisers on a cost-per-click (CPC) basis. Advertisers enter an auction bidding process on a third party Web site for placement of their text link based on the amount they are willing to pay for each click through to their Web site. We
recognize revenue monthly for each text link based on the number of clicks at the CPC contracted for during the auction bidding process.



Online publishing revenue includes barter revenue, which represents the exchange by the Company of advertising space on the Companys Web site for
reciprocal advertising space on other Web sites. Barter revenues and expenses are recorded at the fair market value of the advertisements delivered or received, whichever is more determinable in the circumstances. Barter transactions have been
valued based on similar cash transactions that have occurred within six months prior to the date of the barter transaction. Revenue from barter transactions is recognized as income when advertisements are delivered on the Companys Web site.
Barter expense is recognized when the Companys advertisements are run on the other companies Web sites, which is typically in the same period in which barter revenue is recognized. If the advertising impressions are received from the
customer prior to the Company delivering its advertising impressions, a liability is recorded. If the Company delivers its advertising impressions to the customers Web site prior to receiving the advertising impressions, a prepaid expense is
recorded. No prepaid expense or liability was recorded at December 31, 2003 and 2002. Barter revenue was approximately $3,164,000, $2,912,000, and $2,558,000, and represented approximately 9%, 11%, and 14% of total revenue, respectively, for the
years ended December 31, 2003, 2002 and 2001.



Print publishing
and licensing-



The Company sells advertisements for consumer
mortgage rate tables. The rate tables and advertising are published in various newspapers under revenue sharing arrangements. Revenue is recognized when the tables are run in the newspaper. Revenue is recorded at gross amounts and revenue sharing
payments are recorded in cost of revenue.



The Company also
earns fees from distributing editorial rate tables that are published in newspapers and magazines across the United States, from paid subscriptions to three newsletters, and from providing rate surveys to institutions and government agencies. In
addition, the Company licenses research data under agreements that permit the use of Company developed rate information to advertise the licensees products in print, radio, television and Web site promotions. Revenue for these products is
recognized ratably over the contract/subscription periods.



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##### Table of Contents

Marketing Expenses



Marketing expenses include advertising costs that are charged to expense as incurred, and barter expense that represents the
cost the Companys advertisements that are run on other companies Web sites in barter transactions. Advertising costs were approximately $2,332,000, $557,000 and $173,000, respectively, for the years ended December 31, 2003, 2002, 2001.
Barter expense of approximately $3,164,000, $2,920,000, and $2,750,000 was recorded for the years ended December 31, 2003, 2002 and 2001, respectively.



Recent Accounting Pronouncements



In May 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The interpretation requires a company to record as a liability the fair value of certain guarantees initiated by the company. In addition, the interpretation
requires additional disclosure of these and other guarantees in the notes to the financial statements. The recognition provisions of this interpretation are applied to guarantees entered into after December 31, 2002. This interpretation did not have
a material impact on the Companys financial statements.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (Statement 146) which requires, among other things, recording a liability for costs associated with an exit or
disposal activity when that liability is incurred and can be measured at fair value. Commitment to an exit plan or a plan of disposal expresses only managements future actions and, therefore, does not meet the requirement for recognizing a
liability and the related expense. The provisions of Statement 146 are effective prospectively for exit and disposal activities initiated after December 31, 2002, with early application encouraged. This statement did not have a material impact on
the Companys financial statements.



In December 2002, the
FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123 (Statement 148) to provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method
of accounting for stock-based employee compensation and the effect of the method used on reported results. The provisions of Statement 148 are effective for interim periods beginning after December 15, 2002, with early application encouraged. This
statement did not have a material impact on the Companys financial statements. The Company currently intends to continue to account for stock options issued under APB No. 25 and present the pro forma disclosures in the footnotes to the
financial statements.



In May 2003, the FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (Statement 150). Statement No. 150 establishes standards for how an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. Statement 150 requires that an issuer classify a financial instrument that is within the scope of Statement 150 as a liability. Statement 150 is effective for financial instruments entered into or
modified after May 31, 2003, is otherwise effective for the Company beginning September 1, 2003, and did not have a material impact on the Companys financial statements.



In December 2003, the FASB issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51. (FIN 46R). FIN 46R requires the consolidation of entities in which an enterprise absorbs a majority of the entitys expected losses, receives a majority of the
entitys expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through
ownership of a majority voting interest in the entity. The provisions of FIN 46R are generally effective for existing (prior to February 1, 2003) variable interest relationships of a public entity no later than the end of the first reporting period
that ends after March 15, 2004. However, prior to the required application of this interpretation a public entity that is not a small business issuer shall apply FIN 46R to those entities that are considered to be special-purpose entities no later
than the end of the first reporting period that ends after December 15, 2003. The Company applied the portion of FIN 46R that is applicable to special purpose entities effective December 31, 2003, with no material effect, and will apply the
remainder of FIN 46R to its first quarter 2004 financial statements with no material effect anticipated.



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##### Table of Contents

Reclassification



Certain prior year amounts have been reclassified to conform with the current year presentation.



NOTE 3 - STOCK OPTION PLANS



1997 Equity Compensation Plan



During 1997, the Company adopted the 1997 Equity Compensation Plan (the
Plan) to provide directors, officers, non-employee members of the Board of Directors of the Company and certain consultants and advisors with the opportunity to receive grants of incentive stock options, non-qualified stock options and
restricted stock. The Board of Directors has the sole authority to determine who receives such grants, the type, size and timing of such grants, and to specify the terms of any non-competition or other agreements relating to the grants. The
aggregate number of common shares that may be issued under the Plan was initially 900,000. In January 1999, the Company amended the Plan to increase the number of shares authorized to 1,500,000 shares. As of December 31, 2003, 799,936 shares
were available for grant under the Plan.



The exercise price of
any option grant shall be determined by the Board of Directors and may be equal to, greater than, or less than the fair market value of the stock on the grant date. An incentive stock option may not be granted to an employee who at the time of the
grant owns more than 10% of the total combined voting power of all classes of stock of the Company, unless the exercise price is not less than 110% of the fair market value of the stock on the date of the grant. Options granted vest over various
periods and expire ten years after the date of grant.



Stock
options for the purchase of 30,500 and 539,733 shares, respectively, were granted to directors and employees during 2003 and 2002. No stock options were granted under the Plan during the year ended December 31, 2001.



On January 2, 2004, each of the five independent outside directors were
granted options to purchase 5,000 shares of common stock at $12.43, the fair market value of the common stock on the date of grant. The options vest on December 31, 2004 and expire 10 years from the date of grant.



On January 5, 2004, certain executive officers and employees were granted
options to purchase 288,000 shares of common stock at $12.63, the fair market value of the common stock on the date of grant. The options vest during the four year period following the date of grant. Twenty five percent of the options vest after the
first year and the remaining vest monthly through the end of the vesting period.



On February 23, 2004, Richard G. Stalzer, the Companys Senior Vice President and Chief Revenue Officer, was granted options to purchase 100,000 shares of common stock at $15.40, the fair market value of the
common stock on the date of grant. The options vest during the four year period following the date of grant. Twenty five percent of the options vest after the first year and the remaining vest monthly through the end of the vesting period.



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##### Table of Contents

1999 Equity Compensation Plan



In March 1999, the Companys stockholders approved the 1999 Equity Compensation Plan (the 1999 Plan), to
provide designated employees of the Company, certain consultants and non-employee members of the Board of Directors with the opportunity to receive grants of incentive stock options, nonqualified stock options and restricted stock. The 1999 Plan was
originally authorized to grant options for up to 1,500,000 shares. In April 2000, the Company amended the 1999 Plan to increase the number of shares authorized to 3,500,000. This amendment was approved by the Companys stockholders. Options
granted generally vest over four years, 25% after the first year and monthly thereafter over the remaining three years, and expire ten years after the date of grant. As of December 31, 2003, 2,157,840 shares were available for grant under the 1999
Plan. Stock options for the purchase of 811,936 shares were granted under the 1999 Plan to employees during 2002. No stock options were granted under the 1999 Plan during the years ended December 31, 2003 and 2001.



Stock Option Exchange Program



On July 3, 2001, the Company implemented a stock option exchange program in
which employees were offered the opportunity to surrender stock options previously granted to them in exchange for new options, to be issued six months and one day after the date of cancellation, to purchase an equal number of shares. Options to
purchase 1,180,002 shares were surrendered under this program. The new options were granted on February 4, 2002. The exercise price of the new options was the closing market price of the Companys common stock on the date of grant. The exchange
program was designed to comply with FIN No. 44 and did not result in any additional compensation charges or variable plan accounting. As a result of this program, the Company recorded a non-cash compensation charge of approximately $481,000 for the
unrecognized compensation expense of certain options surrendered under the option exchange program, and reclassified approximately $2,452,000 from accrued stock compensation expense to additional paid in capital in the quarter ended September 30,
2001.



Stock option activity during the years ended December
31, 2003, 2002, and 2001 was as follows:



|                           |  |                 |   |  |                |                 |                               |   |     
|-------------------------- |  | --------------- | - |  | -------------- | --------------- | ----------------------------- | - | ----
|                           |  | Number ofShares |   |  | Price PerShare |                 | Weighted AverageExercisePrice
|Balance, December 31, 2000 |  | 2,091,066       |   |  |                | $1.00 to $13.00 |                               | $ | 4.03
|Granted                    |  |                |   |  |                |                |                               |   |    
|Exercised                  |  |                |   |  |                |                |                               |   |    
|Forfeited                  |  | (200,083        | ) |  |                | $1.75 to $13.00 |                               | $ | 5.03
|Cancelled                  |  | (1,180,002      | ) |  |                | $1.75 to $13.00 |                               | $ | 2.87
|Expired                    |  |                |   |  |                |                |                               |   |    
|                           |  |                 |   |  |                |                 |                               |   |     
|Balance, December 31, 2001 |  | 710,981         |   |  |                | $1.30 to $13.00 |                               | $ | 3.96
|Granted                    |  | 1,351,669       |   |  |                | $0.85 to $2.39  |                               | $ | 1.00
|Exercised                  |  | (1,218          | ) |  |                | $0.85           |                               | $ | 0.85
|Forfeited                  |  | (3,319          | ) |  |                | $0.85 to $13.00 |                               | $ | 3.84
|Expired                    |  |                |   |  |                |                |                               |   |    
|                           |  |                 |   |  |                |                 |                               |   |     
|Balance, December 31, 2002 |  | 2,058,113       |   |  | $              | 0.85 to $13.00  |                               | $ | 2.03
|Granted                    |  | 30,500          |   |  |                | $1.00 to $3.90  |                               | $ | 3.40
|Exercised                  |  | (1,116,203      | ) |  |                | $0.85 to $8.13  |                               | $ | 1.94
|Forfeited                  |  | (2,147          | ) |  |                | $0.85 to $13.00 |                               | $ | 3.38
|Expired                    |  |                |   |  |                |                |                               |   |    
|                           |  |                 |   |  |                |                 |                               |   |     
|Balance, December 31, 2003 |  | 970,263         |   |  | $              | 0.85 to $13.00  |                               | $ | 1.20
|                           |  |                 |   |  |                |                 |                               |   |     



Additional information
with respect to outstanding options as of December 31, 2003 was as follows:



|               |  |                     |  |                                                     |  |                 |  |                      |      
|-------------- |  | ------------------- |  | --------------------------------------------------- |  | --------------- |  | -------------------- | -----
|               |  | Options Outstanding |  | Options Exercisable                                
|Prices         |  | Numberof Shares     |  | Weighted Average Remaining Contractual Life (Years) |  | Numberof Shares |  | AverageExercisePrice
|$0.85          |  | 702,504             |  | 6.29                                                |  | 686,586         |  | $                    | 0.85 
|$1.13 to $1.30 |  | 24,650              |  | 7.79                                                |  | 13,088          |  | $                    | 1.22 
|$1.75          |  | 7,520               |  | 6.45                                                |  | 2,185           |  | $                    | 1.75 
|$1.84 to $2.97 |  | 128,797             |  | 8.72                                                |  | 128,777         |  | $                    | 2.41 
|$3.90          |  | 25,000              |  | 9.01                                                |  | 25,000          |  | $                    | 3.90 
|$4.50 to $7.06 |  | 1,017               |  | 5.74                                                |  | 991             |  | $                    | 6.23 
|$13.00         |  | 80,775              |  | 5.36                                                |  | 80,775          |  | $                    | 13.00
|               |  |                     |  |                                                     |  |                 |  |                      |      
|               |  | 970,263             |  | 6.65                                                |  | 937,402         |  | $                    | 1.20 
|               |  |                     |  |                                                     |  |                 |  |                      |      



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NOTE 4 - FINANCIAL STATEMENT DETAILS



Allowance for doubtful accounts-





|                           |  |      |         |   |      |   |         |      |  |   |          |  
|-------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                           |  | 2003 |         |   | 2002 |   |         | 2001 | 
|Balance, beginning of year |  | $    | 200,000 |   |      | $ | 140,000 |      |  | $ | 300,000  |  
|Provision                  |  |      | 110,771 |   |      |   | 121,863 |      |  |   | 48,725   |  
|Write-offs                 |  |      | (82,019 | ) |      |   | (67,280 | )    |  |   | (209,625 | )
|Recoveries                 |  |      | 1,248   |   |      |   | 5,417   |      |  |   | 900      |  
|                           |  |      |         |   |      |   |         |      |  |   |          |  
|Balance, end of year       |  | $    | 230,000 |   |      | $ | 200,000 |      |  | $ | 140,000  |  
|                           |  |      |         |   |      |   |         |      |  |   |          |  

Fixed Assets-



|                                               |  |              |            |   |      |   |            |  
|---------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|Fixed assets consisted of the following:       |  |              |            |   |      |   |            |  
|                                               | 
|                                               |  | December 31, |           
|                                               |  | 2003         |            |   | 2002 |  
|Furniture and fixtures                         |  | $            | 289,827    |   |      | $ | 275,271    |  
|Computers and software                         |  |              | 3,120,480  |   |      |   | 2,714,326  |  
|Equipment                                      |  |              | 115,829    |   |      |   | 125,096    |  
|Leasehold improvements                         |  |              | 157,573    |   |      |   | 160,701    |  
|                                               |  |              |            |   |      |   |            |  
|                                               |  |              | 3,683,709  |   |      |   | 3,275,394  |  
|Less accumulated depreciation and amortization |  |              | (2,886,781 | ) |      |   | (2,362,743 | )
|                                               |  |              |            |   |      |   |            |  
|                                               |  | $            | 796,928    |   |      | $ | 912,651    |  
|                                               |  |              |            |   |      |   |            |  



Depreciation expense was $542,283,
$539,372 and $673,894 for the years ended December 31, 2003, 2002 and 2001, respectively.



Intangible Assets-



|                                              |  |              |          |   |      |   |          |  
|--------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|Intangible assets consisted of the following: |  |              |          |   |      |   |          |  
|                                              | 
|                                              |  | December 31, |         
|                                              |  | 2003         |          |   | 2002 |  
|Trademarks and URLs                          |  | $            | 136,366  |   |      | $ | 136,811  |  
|Software licenses                             |  |              | 224,653  |   |      |   | 219,379  |  
|Other                                         |  |              | 26,362   |   |      |   | 151,362  |  
|                                              |  |              |          |   |      |   |          |  
|                                              |  |              | 387,381  |   |      |   | 507,552  |  
|Less accumulated amortization                 |  |              | (314,180 | ) |      |   | (300,637 | )
|                                              |  |              |          |   |      |   |          |  
|                                              |  | $            | 73,201   |   |      | $ | 206,915  |  
|                                              |  |              |          |   |      |   |          |  



Amortization expense was $138,543,
$82,086 and $26,603 for the years ended December 31, 2003, 2002 and 2001, respectively.



Other Assets-



|                                         |  |              |         |      |   |        
|---------------------------------------- |  | ------------ | ------- | ---- | - | -------
|Other assets consisted of the following: |  |              |         |      |   |        
|                                         | 
|                                         |  | December 31,
|                                         |  | 2003         |         | 2002
|Computer and software deposits           |  | $            | 87,352  |      | $ | 91,484 
|Deferred compensation plan assets        |  |              | 306,274 |      |   | 142,226
|Other deposits                           |  |              | 69,837  |      |   | 69,837 
|                                         |  |              |         |      |   |        
|                                         |  | $            | 463,463 |      | $ | 303,547
|                                         |  |              |         |      |   |        



Accrued Expenses-



|                                             |  |              |           |      |   |          
|-------------------------------------------- |  | ------------ | --------- | ---- | - | ---------
|Accrued expenses consisted of the following: |  |              |           |      |   |          
|                                             | 
|                                             |  | December 31,
|                                             |  | 2003         |           | 2002
|Accrued payroll and related benefits         |  | $            | 456,646   |      | $ | 509,147  
|Vacation                                     |  |              | 357,469   |      |   | 290,523  
|Sales commissions                            |  |              | 787,706   |      |   | 785,425  
|Marketing                                    |  |              |          |      |   | 208,611  
|Due to distribution partners                 |  |              | 221,405   |      |   | 439,280  
|Professional fees                            |  |              | 86,556    |      |   | 120,832  
|Legal and other                              |  |              | 317,123   |      |   | 718,953  
|                                             |  |              |           |      |   |          
|                                             |  | $            | 2,226,905 |      | $ | 3,072,771
|                                             |  |              |           |      |   |          



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NOTE 5 - INCOME TAXES



The components of the income tax benefit are as follows:



|                         |  |                         |            |   |      |   |      |  |   |  
|------------------------ |  | ----------------------- | ---------- | - | ---- | - | ---- |  | - | -
|                         |  | Year Ended December 31,
|                         |  | 2003                    |            |   | 2002 |   | 2001
|Current:                 |  |                         |            |   |      |   |      |  |   |  
|Federal                  |  | $                       | 200,000    |   |      |   |     |  |   | 
|State                    |  |                         | 100,000    |   |      | $ |     |  | $ | 
|                         |  |                         |            |   |      |   |      |  |   |  
|Total current            |  |                         | 300,000    |   |      |   |     |  |   | 
|                         |  |                         |            |   |      |   |      |  |   |  
|Deferred:                |  |                         |            |   |      |   |      |  |   |  
|Federal                  |  |                         | (2,864,365 | ) |      |   |     |  |   | 
|State                    |  |                         | (535,635   | ) |      |   |     |  |   | 
|                         |  |                         |            |   |      |   |      |  |   |  
|Total deferred           |  |                         | (3,400,000 | ) |      |   |     |  |   | 
|                         |  |                         |            |   |      |   |      |  |   |  
|Total income tax benefit |  | $                       | (3,100,000 | ) |      | $ |     |  | $ | 
|                         |  |                         |            |   |      |   |      |  |   |  



The difference between
income tax expense computed at the statutory rate and the reported income tax benefit is as follows:



|                                          |  |                         |            |   |      |   |            |      |  |   |          |  
|----------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | -------- | -
|                                          |  | Year Ended December 31, |           
|                                          |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Income taxes at statutory rate            |  | $                       | 3,061,805  |   |      | $ | 2,266,749  |      |  | $ | (318,164 | )
|State income taxes net of federal benefit |  |                         | 365,763    |   |      |   | 414,813    |      |  |   | 743      |  
|Nondeductible items and other             |  |                         | 5,491      |   |      |   | 17,527     |      |  |   | 5,889    |  
|Change in valuation allowance             |  |                         | (6,533,059 | ) |      |   | (2,699,089 | )    |  |   | 311,532  |  
|                                          |  |                         |            |   |      |   |            |      |  |   |          |  
|Total income tax benefit                  |  | $                       | (3,100,000 | ) |      | $ |           |      |  | $ |         |  
|                                          |  |                         |            |   |      |   |            |      |  |   |          |  



The tax effects of
temporary differences that give rise to significant portions of the deferred tax assets and liabilities consisted of the following:



|                                 |  |              |            |   |      |   |             |  
|-------------------------------- |  | ------------ | ---------- | - | ---- | - | ----------- | -
|                                 |  | December 31, |           
|                                 |  | 2003         |            |   | 2002 |  
|Deferred Tax Assets:             |  |              |            |   |      |   |             |  
|Net operating loss carryforwards |  | $            | 12,144,123 |   |      | $ | 14,384,818  |  
|Tax credit carryforwards         |  |              | 200,000    |   |      |   |            |  
|Accrued expenses                 |  |              | 206,177    |   |      |   | 136,200     |  
|Depreciation and amortization    |  |              | 130,266    |   |      |   | 92,188      |  
|Allowance for doubtful accounts  |  |              | 88,619     |   |      |   | 76,840      |  
|                                 |  |              |            |   |      |   |             |  
|Total gross deferred tax assets  |  |              | 12,769,185 |   |      |   | 14,690,046  |  
|Less valuation allowance         |  |              | (9,369,185 | ) |      |   | (14,690,046 | )
|                                 |  |              |            |   |      |   |             |  
|Net deferred tax assets          |  | $            | 3,400,000  |   |      | $ |            |  
|                                 |  |              |            |   |      |   |             |  



Our effective rate
differs from the statutory federal income tax rate, primarily as a result of the uncertainties regarding our ability to utilize our net operating loss carryforward and the changes in the valuation allowance on deferred tax assets.



As required by Statement of Financial Accounting Standard No. 109, we
recognize tax assets on the balance sheet if it is more likely than not that they will be realized on future tax returns. Up to the third quarter of 2003, we had provided a full valuation allowance against accumulated deferred tax assets, reflecting
the uncertainty associated with our future profitability. In the fourth quarter of 2003 we reassessed the valuation allowance previously established against deferred tax assets. Factors considered by us included: our historical results of
operations, volatility of the economic and interest rate environment and projected earnings based on current operations. Based on this evidence, we concluded that it is more likely than not that a portion of the deferred tax assets would be
realized. Accordingly, we released $3,400,000 of the valuation allowance, which resulted in an income tax benefit of approximately $3,100,000. However, should we determine that we would not be able to realize all or part of our deferred tax assets
in the future, an adjustment to the deferred tax assets would be charged against income in the period such determination is made. As of December 31, 2003, we had $3,400,000 in deferred tax assets. The realization of deferred tax assets will depend
on our ability to continue to generate taxable income in the future.





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Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of
December 31, 2003 resulting from the tax benefit of incentive stock options exercised will be allocated to income tax benefit that would be reported in the statements of operations totaling $8,200,000; the remaining $1,200,000 is to be allocated to
equity.



At December 31, 2003, the Company had net operating
loss carryforwards for federal income tax purposes of approximately $31,000,000, which expire beginning in 2012 through 2021. The amount of net operating loss carryforwards may also be limited if the Company has an ownership change.



NOTE 6 - RELATED PARTY TRANSACTIONS



The Company leases office space in North Palm Beach, Florida from Bombay
Holdings, Inc. (Bombay), which is wholly-owned by Peter C. Morse (Morse), a director and 33% stockholder. Total rent paid to Bombay for the years ended December 31, 2003, 2002 and 2001 was approximately $305,000, $296,000,
and $298,000, respectively.



During 2003, 2002 and 2001, the
Company paid an outside director consulting fees of approximately $50,000, $53,000, and $40,000, respectively.



NOTE 7 - COMMITMENTS AND CONTINGENCIES



Leases



Bombay is wholly-owned
by Morse. The Company leases office space in North Palm Beach, Florida from Bombay under the terms of a lease agreement dated January 1, 2004. The lease is for three years, expiring on December 31, 2006. The lease requires the Company to pay a
percentage of the common maintenance charges and lease payments are subject to an annual increase based on the consumer price index of the Fort Lauderdale/Miami region.



The Company leases office space in New York City under the terms of a lease entered into on October 7, 1999 expiring
September 30, 2006. Facilities leased in Los Angeles, California are on a month-to-month basis.



Total rent expense for the years ended December 31, 2003, 2002 and 2001 amounted to approximately $513,000, $483,000, and $481,000, respectively. During
2003 and 2002, the Company also recorded sublease rental income of approximately $54,000 and $25,000, respectively, under the terms of a sublease agreement that expires on June 21, 2004.



Future minimum lease payments under non-cancelable operating leases having lease terms in excess of one year as of December
31, 2003 were:



|                             |  |                 |          
|---------------------------- |  | --------------- | ---------
|                             |  | OperatingLeases
|Year Ending December 31,     |  |                 |          
|2004                         |  | $               | 617,806  
|2005                         |  |                 | 626,514  
|2006                         |  |                 | 556,551  
|2007                         |  |                 | 27,463   
|2008                         |  |                 |         
|                             |  |                 |          
|Total minimum lease payments |  | $               | 1,828,334
|                             |  |                 |          



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##### Table of Contents

Distribution Agreements



The Company has various agreements with advertisers, content providers and other Web sites that require it to feature such
parties exclusively in certain sections of its Web site.



Legal
Proceedings



On March 28, 2000, a purported class-action
lawsuit was filed against the Company and others in the United States District Court for the Southern District of New York. The suit alleged that the Company violated federal securities laws by, among other things, selling securities pursuant to a
defective registration statement, and misrepresenting and/or omitting material information concerning the Companys financial results for the quarter ended March 31, 1999, and other financial information, in the Companys registration
statement filed with the Securities and Exchange Commission in connection with the Companys initial public offering. The action, which seeks an unspecified amount of money damages, was filed purportedly on behalf of all stockholders who
purchased shares of the Companys common stock during the period from May 13, 1999, through March 27, 2000. The Company filed a motion to dismiss this complaint and, on March 28, 2001, the suit was dismissed with prejudice. On April 25, 2001,
plaintiffs appealed the decision to dismiss the suit to the United States Court of Appeals for the Second Circuit. On January 28, 2003, the United States Court of Appeals for the Second Circuit affirmed the dismissal of the action in its entirety.



In July 2000, the Company sold its former wholly owned
subsidiary, Pivot, for $4,350,000 in cash. In connection with the sale, the Company agreed to indemnify the buyer for liability of up to $1,000,000 in connection with a litigation matter between Pivot and its co-founders and former owner. In March
2001, the case was dismissed based on a technical deficiency. In August 2001, the plaintiff re-filed the complaint. At December 31, 2003, the outcome of this matter was uncertain. The Company cannot estimate at this time, the amount of loss, if any,
which could result from an adverse resolution of this litigation.



Other Commitments



On April 27, 2000, Elisabeth
DeMarse was elected to the Companys Board of Directors and was elected President and Chief Executive Officer of the Company. On that date, Ms. DeMarse entered into an employment agreement with the Company that expired on April 27, 2002. Ms.
DeMarse entered into a new agreement on April 27, 2002. Under the terms of her employment agreement, Ms. DeMarse is entitled to receive an annual base salary of $300,000 and a bonus of $100,000 payable in quarterly installments. The Company has
agreed to provide other benefits, including $500,000 in term life insurance and participation in the Companys benefit plans available to other executive officers. Under the terms of the employment agreement, Ms. DeMarse agrees to assign to the
Company all of her copyrights, trade secrets and patent rights that relate to the business of the Company. Additionally, during the term of her employment and for a period of one year thereafter, Ms. DeMarse agrees not to compete with the Company
and not to recruit any of the Companys employees, unless the Company terminates her without cause or she resigns for good reason (as defined in the agreement). Upon Ms. DeMarses termination of employment for certain reasons (i.e.,
without cause, disability, resignation for good reason, or a change of control), the Company agrees to pay her severance amount of $250,000, as well as reimburse her for health, dental and life insurance coverage premiums for one year after such
termination. The agreement terminates on April 27, 2005. Ms. DeMarse was previously granted options to purchase 541,936 shares of the Companys common stock under the Companys 1999 Equity Compensation Plan at $2.69 per share, the fair
market value on the date of grant. The options vested over a 24-month period. Ms. DeMarse surrendered all of these options and was granted options to purchase 541,936 shares at $0.85, the fair market value of the Companys common stock on
February 4, 2002, the date of grant, in connection with the Companys stock option exchange program (see Note 4).



On January 1, 2004, G. Cotter Cunningham, the Companys Senior Vice President and Chief Operating Officer, entered into an employment agreement with
the Company. Under the terms of the employment agreement, Mr. Cunningham is entitled to receive an annual base salary as stipulated in the employment agreement, and an annual bonus contingent on achieving certain



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##### Table of Contents

performance criteria. Under the terms of the employment agreement, Mr. Cunningham agrees to assign to the Company all of his copyrights, trade secrets and
patent rights that relate to the business of the Company. Additionally, during the term of his employment and for a period of one year thereafter, Mr. Cunningham agrees not to compete with the Company and not to recruit any of the Companys
employees. Upon Mr. Cunninghams termination of employment for certain reasons (i.e., without cause or resignation for good reason), the Company agrees to pay a separation payment equal to one years base salary at the then-current rate
payable in three equal installments; one-third payable 15 days after the termination date; one-third payable six months after the termination date; and one-third payable 12 months from the termination date.



On January 1, 2004, Robert J. DeFranco, the Companys Senior Vice
President and Chief Financial Officer, entered into an employment agreement with the Company. Under the terms of the employment agreement, Mr. DeFranco is entitled to receive an annual base salary as stipulated in the employment agreement, and an
annual bonus contingent on achieving certain performance criteria. Under the terms of the employment agreement, Mr. DeFranco agrees to assign to the Company all of his copyrights, trade secrets and patent rights that relate to the business of the
Company. Additionally, during the term of his employment and for a period of one year thereafter, Mr. DeFranco agrees not to compete with the Company and not to recruit any of the Companys employees. Upon Mr. DeFrancos termination of
employment for certain reasons (i.e., without cause or resignation for good reason), the Company agrees to pay a separation payment equal to one years base salary at the then-current rate payable in three equal installments; one-third payable
15 days after the termination date; one-third payable six months after the termination date; and one-third payable 12 months from the termination date.



NOTE 8 - LONG-TERM DEBT



On August 20, 1999, the Company acquired Professional Direct Agency, Inc. (Pivot) pursuant to a Stock Purchase Agreement, dated August 20,
1999, by and between the Company, the shareholders of Pivot and The Midland Life Insurance Company (Midland), a note and warrant holder of Pivot (the Agreement), for approximately $4,744,000 including acquisition costs.
Pursuant to the Agreement, the Company acquired a 100% interest in Pivot and, as a result of the acquisition, Pivot became a wholly-owned subsidiary. The transaction was accounted for using the purchase method of accounting. On July 14, 2000, the
Company sold Pivot for $4,350,000 in cash. The Company recorded a gain on the sale of $871,212 in the quarter ended September 30, 2000. The Company remained liable on the convertible subordinated note issued in connection with the Pivot acquisition.



On February 6, 2002, the Company entered into a Termination
Agreement and General Release (the Agreement) with Reassure America Life Insurance Company (REALIC), successor by merger to The Midland Life Insurance Company, holder of its $4,350,000 10% convertible subordinated note
payable. Pursuant to the terms of the Agreement, REALIC agreed to full repayment of the note, including accrued interest, on February 22, 2002 for $3,400,000 in cash. The Company recorded a gain on early extinguishment of debt of approximately
$2,022,000 in the quarter ended March 31, 2002.



NOTE 9 - SEGMENT
INFORMATION



The Company currently operates in two
reportable business segments: online publishing, and print publishing and licensing. The online publishing division is primarily engaged in the sale of advertising, sponsorships, and hyperlinks in connection with the Companys Internet site,
Bankrate.com. The print publishing and licensing division and segment is primarily engaged in the sale of advertising in the Consumer Mortgage Guide rate tables, newsletter subscriptions, and licensing of research information. The Company evaluates
the performance of its operating segments based on segment profit (loss).



The Company had one online customer that accounted for approximately 9%, 11% and 4%, respectively, of total revenue for the years ended December 31, 2003, 2002 and 2001. Sales to no other customer exceeded 10% of
total revenue for the periods presented. No revenues were generated outside of the United States.



47



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##### Table of Contents

Summarized segment information as of December 31, 2003, 2002 and 2001, and for the years ended December
31, 2003, 2002 and 2001, respectively, is presented below.



|                                    |  |                  |            |                              |   |           |       |  |       |            |  |   |           
|----------------------------------- |  | ---------------- | ---------- | ---------------------------- | - | --------- | ----- |  | ----- | ---------- |  | - | ----------
|                                    |  | OnlinePublishing |            | PrintPublishingand Licensing |   |           | Other |  | Total
|Year ended December 31, 2003        |  |                  |            |                              |   |           |       |  |       |            |  |   |           
|Revenue                             |  | $                | 31,368,392 |                              | $ | 5,253,099 |       |  | $     |           |  | $ | 36,621,491
|Cost of revenue                     |  |                  | 4,514,023  |                              |   | 4,043,970 |       |  |       |           |  |   | 8,557,993 
|                                    |  |                  |            |                              |   |           |       |  |       |            |  |   |           
|Gross margin                        |  |                  | 26,854,369 |                              |   | 1,209,129 |       |  |       |           |  |   | 28,063,498
|Sales                               |  |                  | 5,039,892  |                              |   |          |       |  |       |           |  |   | 5,039,892 
|Marketing                           |  |                  | 5,495,810  |                              |   |          |       |  |       |           |  |   | 5,495,810 
|Product development                 |  |                  | 1,589,787  |                              |   | 681,337   |       |  |       |           |  |   | 2,271,124 
|General and administrative expenses |  |                  | 4,955,707  |                              |   | 857,590   |       |  |       |           |  |   | 5,813,297 
|Depreciation and amortization       |  |                  | 476,578    |                              |   | 204,248   |       |  |       |           |  |   | 680,826   
|Interest income (expense), net      |  |                  |           |                              |   |          |       |  |       | 242,759    |  |   | 242,759   
|Income tax benefit                  |  |                  |           |                              |   |          |       |  |       | 3,100,000  |  |   | 3,100,000 
|                                    |  |                  |            |                              |   |           |       |  |       |            |  |   |           
|Segment profit (loss)               |  | $                | 9,296,595  |                              | $ | (534,046  | )     |  | $     | 3,342,759  |  | $ | 12,105,308
|                                    |  |                  |            |                              |   |           |       |  |       |            |  |   |           
|Total assets                        |  | $                | 3,101,810  |                              | $ | 1,606,975 |       |  | $     | 24,274,482 |  | $ | 28,983,267
|                                    |  |                  |            |                              |   |           |       |  |       |            |  |   |           



|                                     |  |                  |            |                         |   |           |       |  |       |            |  |   |           
|------------------------------------ |  | ---------------- | ---------- | ----------------------- | - | --------- | ----- |  | ----- | ---------- |  | - | ----------
|                                     |  | OnlinePublishing |            | Publishingand Licensing |   |           | Other |  | Total
|Year ended December 31, 2002         |  |                  |            |                         |   |           |       |  |       |            |  |   |           
|Revenue                              |  | $                | 22,651,216 |                         | $ | 3,919,815 |       |  | $     |           |  | $ | 26,571,031
|Cost of revenue                      |  |                  | 3,812,765  |                         |   | 2,862,338 |       |  |       |           |  |   | 6,675,103 
|                                     |  |                  |            |                         |   |           |       |  |       |            |  |   |           
|Gross margin                         |  |                  | 18,838,451 |                         |   | 1,057,477 |       |  |       |           |  |   | 19,895,928
|Sales                                |  |                  | 4,275,826  |                         |   |          |       |  |       |           |  |   | 4,275,826 
|Marketing                            |  |                  | 3,477,379  |                         |   |          |       |  |       |           |  |   | 3,477,379 
|Product development                  |  |                  | 995,544    |                         |   | 426,662   |       |  |       |           |  |   | 1,422,206 
|General and administrative expenses  |  |                  | 4,719,977  |                         |   | 816,797   |       |  |       |           |  |   | 5,536,774 
|Depreciation and amortization        |  |                  | 435,021    |                         |   | 186,437   |       |  |       |           |  |   | 621,458   
|Interest income (expense), net       |  |                  |           |                         |   |          |       |  |       | 82,833     |  |   | 82,833    
|Gain on early extinguishment of debt |  |                  |           |                         |   |          |       |  |       | 2,021,792  |  |   | 2,021,792 
|                                     |  |                  |            |                         |   |           |       |  |       |            |  |   |           
|Segment profit (loss)                |  | $                | 4,934,704  |                         | $ | (372,419  | )     |  | $     | 2,104,625  |  | $ | 6,666,910 
|                                     |  |                  |            |                         |   |           |       |  |       |            |  |   |           
|Total assets                         |  | $                | 3,394,108  |                         | $ | 778,426   |       |  | $     | 11,000,561 |  | $ | 15,173,095
|                                     |  |                  |            |                         |   |           |       |  |       |            |  |   |           



|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|----------------------------------- |  | ---------------- | ---------- | - | ----------------------------- | - | --------- | ----- |  | - | --------- | - |  | - | ---------- | -
|                                    |  | OnlinePublishing |            |   | Print Publishingand Licensing |   |           | Other |  |   | Total     |  
|Year Ended December 31, 2001        |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|Revenue                             |  | $                | 14,985,903 |   |                               | $ | 3,271,223 |       |  | $ |          |   |  | $ | 18,257,126 |  
|Cost of revenue                     |  |                  | 3,161,273  |   |                               |   | 2,173,529 |       |  |   |          |   |  |   | 5,334,802  |  
|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|Gross margin                        |  |                  | 11,824,630 |   |                               |   | 1,097,694 |       |  |   |          |   |  |   | 12,922,324 |  
|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|Sales                               |  |                  | 3,203,656  |   |                               |   |          |       |  |   |          |   |  |   | 3,203,656  |  
|Marketing                           |  |                  | 2,922,867  |   |                               |   |          |       |  |   |          |   |  |   | 2,922,867  |  
|Product development                 |  |                  | 969,970    |   |                               |   | 415,702   |       |  |   |          |   |  |   | 1,385,672  |  
|General and administrative expenses |  |                  | 4,524,035  |   |                               |   | 987,537   |       |  |   |          |   |  |   | 5,511,572  |  
|Depreciation and amortization       |  |                  | 490,348    |   |                               |   | 210,149   |       |  |   |          |   |  |   | 700,497    |  
|Interest income (expense), net      |  |                  |           |   |                               |   |          |       |  |   | (133,836  | ) |  |   | (133,836   | )
|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|Segment loss                        |  | $                | (286,247   | ) |                               | $ | (515,693  | )     |  | $ | (133,836  | ) |  | $ | (935,776   | )
|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  
|Total assets                        |  | $                | 2,004,670  |   |                               | $ | 766,310   |       |  | $ | 9,755,032 |   |  | $ | 12,526,012 |  
|                                    |  |                  |            |   |                               |   |           |       |  |   |           |   |  |   |            |  



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



None.



ITEM 9A. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities
Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that the information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any disclosure controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure
controls and procedures. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the
end of the period covered by this report. Based upon the evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to accomplish their
objectives.



Changes in Internal Controls



In addition, management, including our Chief Executive Officer and our Chief
Financial Officer, reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls during the period covered by this report.



PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



In accordance with General Instruction G(3) of the Form 10-K, the information relating to the directors of the Company,
including directors who are executive officers of the Company, is set forth in the Companys Proxy Statement for the 2004 Annual Meeting of Shareholders (the Proxy Statement) and is incorporated herein by reference. Pursuant to
Instruction 3 of Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K, information relating to the executive officers of the Company is set forth under the caption Executive Officers of the Registrant in Part I, Item
4A of this report.



The Company has adopted the Bankrate, Inc.
Finance Code of Professional Conduct (the finance code of ethics), a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Controller and other finance organization employees. The finance code of ethics is
publicly available on our website at http://www.bankrate.com/investor-relations/corpGovernance/corp-governance.asp. If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a
provision of the code to our Chief Executive Officer, Chief Financial Officer or Controller, we will disclose the nature of such amendment or waiver on that website or in a report on Form 8-K.



Compliance with Section 16(a) of the Securities Exchange Act of 1934: Section
16(a) of the Securities Exchange of 1934, as amended, and regulations of the Securities and Exchange Commission (the SEC) thereunder require the Companys directors and executive officers and any persons who own more than 10% of
Bankrate, Inc.s common stock, as well as certain affiliates of such persons, to file reports with the SEC and the National Association of Securities Dealers, Inc. with respect to their ownership of the Companys common stock. Directors,
executive officers and persons owning more than 10% of the Companys common stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such
reports received by it and written representations that no other reports were required of those persons, the Company believes that during fiscal 2003, all filing requirements applicable to its directors and executive officers were complied with in a
timely manner except that Bruns H. Grayson filed a late Form 4 in August 2003. The Company is not aware of any other persons other than directors and executive officers and their affiliates who own more than 10% of the Companys common stock.



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ITEM 11. EXECUTIVE COMPENSATION



The information relating to executive compensation is set forth under the heading Executive Compensation in the
Proxy Statement and is incorporated herein by reference.



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



Equity Compensation Plan Information



The following table summarizes information about the Companys equity compensation plans as of December 31, 2003. All outstanding awards relate to the Companys Common Stock. For additional information about
the Companys equity compensation plans, see Note 4 to the financial statements in Item 8. above.



|                                                             |  |                                                                                         |  |                                                                          |      |                                                                                                                                        |          
|------------------------------------------------------------ |  | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | -------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                                |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights |  | Weighted averageexercise price ofoutstanding options,warrants and rights |      | Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in
column (a))
|                                                             |  | (a)                                                                                     |  | (b)                                                                      |      | (c)                                                                                                                                   
|Equity compensation plans approved by securities holders (1) |  | 970,263                                                                                 |  | $                                                                        | 1.20 |                                                                                                                                        | 2,957,776
|Equity compensation plans not approved by securities holders |  |                                                                                        |  |                                                                          |     |                                                                                                                                        |         
|                                                             |  |                                                                                         |  |                                                                          |      |                                                                                                                                        |          
|Total                                                        |  | 970,263                                                                                 |  | $                                                                        | 1.20 |                                                                                                                                        | 2,957,776
|                                                             |  |                                                                                         |  |                                                                          |      |                                                                                                                                        |          

---

|(1) | All of the shares reported reflect stock options granted under the Companys 1997 Equity Compensation Plan, as amended, and the 1999 Equity Compensation Plan, as amended. See
Note 4 to the financial statements in Item 8. above for more information about these plans.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The other information required by Item 12 is incorporated by reference from the Companys Proxy Statement.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information relating to certain relationships and related transactions is set forth under the caption Related Party Transactions in the
Proxy Statement and is incorporated herein by reference.



ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES



Information concerning
principal accountant fees and services is set forth under the heading Fees Paid to KPMG LLP in the Proxy Statement and is incorporated herein by reference.



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



(A) Documents Filed as Part of This Report:



(1) Financial Statements.



See Index to Financial Statements under Item 8.



(2) Financial Statement Schedule.



All financial statement schedules have been omitted since the required
information is not material or is included in the consolidated financial statements or notes thereto.



50



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##### Table of Contents

(3) Exhibits.



The exhibits to this report are listed below. Other than exhibits that are filed herewith, all exhibits listed below are incorporated by reference.
Exhibits indicated by an asterisk (*) are the management contracts and compensatory plans, contracts or arrangements required to be filed as exhibits to this Report.



|     |  |                                                                                                                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Articles of Incorporation. (1)                                                                                                                                                        
|     | 
|3.2  |  | Articles of Amendment to Amended and Restated Articles of Incorporation. (4)                                                                                                                               
|     | 
|3.3  |  | Amended and Restated Bylaws. (1)                                                                                                                                                                           
|     | 
|4.1  |  | See exhibits 3.1 and 3.3 for provisions of the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws of the Company defining rights of the holders of common stock of
the Company.
|     | 
|4.2  |  | Specimen Stock Certificate. (7)                                                                                                                                                                            
|     | 
|10.1 |  | Lease Agreement dated January 1, 2004, between the Company and Bombay Holdings, Inc. +                                                                                                                     
|     | 
|10.2 |  | Lease Agreement dated January 1, 2003, between the Company and Bombay Holdings, Inc. (10)                                                                                                                  
|     | 
|10.3 |  | Bankrate, Inc. 1997 Equity Compensation Plan. (1) *                                                                                                                                                        
|     | 
|10.4 |  | Bankrate, Inc. 1999 Equity Compensation Plan. (1) *                                                                                                                                                        
|     | 
|10.5 |  | Form of Stock Option Agreement under the 1997 Equity Compensation Plan. (1) *                                                                                                                              
|     | 
|10.6 |  | Stock Purchase Agreement dated August 20, 1999, by and between the Company, the shareholders of Professional Direct Agency, Inc., and The Midland Life Insurance Company. (2)                              
|     | 
|10.7 |  | Asset Purchase Agreement dated August 27, 1999, by and among the Company, Green Magazine, Inc., Kenneth A. Kurson, John F. Packel, and James Michaels. (3)                                                 



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|      |  |                                                                                                                                                                                                             
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.8  |  | Executive Employment Agreement dated April 27, 2000 between Elisabeth DeMarse and the Company. (5) *                                                                                                        
|      | 
|10.9  |  | Stock Option Grant to Elisabeth DeMarse dated April 27, 2000 under the Companys 1999 Equity Compensation Plan for 541,936 shares of common stock. (5) *                                                    
|      | 
|10.10 |  | Stock Purchase Agreement dated July 14, 2000 by and between the Company and Signet Insurance Services, Inc. (6)                                                                                             
|      | 
|10.11 |  | Termination Agreement and General Release dated February 6, 2002 by and between Bankrate, Inc. and Reassure America Life Insurance Company and Gunster, Yoakley & Stewart, P.A., solely as
escrow agent. (8)
|      | 
|10.12 |  | Cancellation and Indemnification of Lost Promissory Note dated February 22, 2002 by and between Bankrate, Inc. and Reassure America Life Insurance Company. (8)                                             
|      | 
|10.13 |  | Executive Employment Agreement dated April 27, 2002 between Elisabeth DeMarse and Bankrate, Inc. (9) *                                                                                                      
|      | 
|10.14 |  | Executive Employment Agreement dated January 1, 2004 between G. Cotter Cunningham and Bankrate, Inc. * +                                                                                                    
|      | 
|10.15 |  | Executive Employment Agreement dated January 1, 2004 between Robert J. DeFranco and Bankrate, Inc. * +                                                                                                      
|      | 
|23.1  |  | Consent of KPMG LLP. +                                                                                                                                                                                      
|      | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Securities and Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+                             
|      | 
|31.2  |  | Certification of Chief Financial Officer Pursuant to Securities and Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+                             
|      | 
|32.1  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 +                                                         
|      | 
|32.2  |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 +                                                         

---

|+ | Filed herewith.
|- | ---------------

|(1) | Incorporated by reference to the exhibit filed in response to Item 16(a), Exhibits of the Companys Registration Statement on Form S-1 (File No. 333-74291) declared
effective on May 13, 1999.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 2.1 included with the Companys Current Report on Form 8-K filed on August 27, 1999.
|--- | -------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(3) | Incorporated by reference to Exhibit 2.1 included with the Companys Current Report on Form 8-K filed on September 10, 1999.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 2.2 included with the Companys Quarterly Report on Form 10-Q for the Quarterly period ended September 30, 2000 filed on November 13, 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibits filed in response to Item 6.(a), Exhibits included with the Companys Quarterly Report on Form 10-Q for the Quarterly period
ending June 30, 2000 filed on August 14, 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 2.1 included with the Companys Quarterly Report on Form 10-Q for the Quarterly period ended September 30, 2000 filed on November 13, 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibits filed in response to Item 14. (A) (3), Exhibits included with the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 filed on March 27, 2001.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibits filed in response to Item 14. (A) (3), Exhibits included with the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 filed on March 29, 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to Exhibit 10.1 included with the Companys Quarterly Report on Form 10-Q for the Quarterly period ended March 31, 2002 filed on May 13, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to Exhibits filed in response to Item 14. (A) (3), Exhibits included with the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 filed on March 28, 2003.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(B) Reports
on Form 8-K



| | (1) | The Company furnished a report on Form 8-K on October 28, 2003, reporting under Item 12. that the Company announced via press release the Companys results for its third
quarter ended September 30, 2003. (Such press release is not incorporated by reference herein or deemed filed within the meaning of Section 18 of the Securities Exchange Act of 1934.)
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 as of the 15th day of March, 2004.



LOGOBy:

/s/ Elisabeth DeMarseElisabeth DeMarsePresident and ChiefExecutive Officer(Principal Executive Officer)




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



|                                             |  |                                                                             |  |               
|-------------------------------------------- |  | --------------------------------------------------------------------------- |  | --------------
|Signature                                    |  | Title                                                                       |  | Date          
|/s/ Elisabeth DeMarseElisabeth DeMarse       |  | President and Chief Executive Officer (Principal Executive Officer)         |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Robert J. DeFrancoRobert J. DeFranco     |  | Senior Vice President Chief Financial Officer
(Principal Financial Officer) |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Joseph W. JonesJoseph W. Jones           |  | Controller (Principal Accounting
Officer)                                   |  | March 15, 2004
|                                             |  |                                                                            
|/s/ G. Cotter CunninghamG. Cotter Cunningham |  | Senior Vice President Chief Operating
Officer                               |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Bruns H. GraysonBruns H. Grayson         |  | Director                                                                    |  | March 15, 2004
|                                             |  |                                                                            
|/s/ William C. MartinWilliam C. Martin       |  | Director                                                                    |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Peter C. MorsePeter C. Morse             |  | Director                                                                    |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Robert P. OBlockRobert P. OBlock       |  | Director                                                                    |  | March 15, 2004
|                                             |  |                                                                            
|/s/ Randall E. PolinerRandall E. Poliner     |  | Director                                                                    |  | March 15, 2004



54