**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D. C. 20549**





**FORM
      10-K**





**x ANNUAL
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE**


**ACT
      OF 1934**





**For
      The Fiscal Year Ended December 31, 2005**




**o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





**Commission
      File No. 0-25681**








**(exact
      name of registrant specified in its charter)**





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





**11760
      U.S. Highway One, Suite 500**


**North
      Palm Beach, Florida 33408**


**(Address
      of principal executive offices) (zip code)**





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





**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**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes
o
      No x


Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x


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


Indicate
      by check mark 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. o


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large
      accelerated filer o Accelerated
      filer x Non-accelerated filer o


Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No
x





The
      aggregate market value of the voting common equity held by non-affiliates of
      the
      registrant on June 30, 2005 was approximately $175,827,000 based on the closing
      price reported for such date on the Nasdaq National Market. As of February
      28,
      2006, the registrant had outstanding 15,879,092 shares of Common Stock.















**PART
      I**





**ITEM
      1. BUSINESS**





**INTRODUCTORY
      NOTE**





This
      Annual Report on Form 10-K contains “forward-looking statements” within the
      meaning of the Private Securities Litigation Reform Act of 1995. These
      forward-looking statements include, among others, statements about our beliefs,
      plans, objectives, goals, expectations, estimates and intentions that are
      subject to significant risks and uncertainties and are subject to change based
      on various factors, many of which are beyond our control. The words “may,”
“could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,”
“intend,” “plan,” “target,” “goal,” and similar expressions are intended to
      identify forward-looking statements.





All
      forward-looking statements, by their nature, are subject to risks and
      uncertainties. Our actual future results may differ materially from those set
      forth in our forward-looking statements.





In
      addition to those risks discussed in this Annual Report under Item 1A Risk
      Factors, factors that could cause our actual results to differ materially from
      those in the forward-looking statements, include, without
      limitation:





·
            the
                willingness of our advertisers to advertise on our Web
                sites;


·
            interest
                rate volatility;


·
            our
                ability to establish and maintain distribution
                arrangements;


·
            our
                ability to integrate the business and operations of companies that
                we have
                acquired, and those we may acquire in the
                future;


·
            our
                need and our ability to incur additional debt or equity
                financing;


·
            the
                effect of unexpected liabilities we assume from our
                acquisitions;


·
            the
                impact of resolution of lawsuits to which we are a
                party;


·
            the
                willingness of consumers to accept the Internet as a medium for obtaining
                financial product information;


·
            increased
                competition and its effect on our Web site traffic, advertising rates,
                margins, and market share;


·
            our
                ability to manage traffic on our Web sites and service
                interruptions;


·
            our
                ability to protect our intellectual
                property;


·
            the
                effects of facing liability for content on our Web
                sites;


·
            legislative
                or regulatory changes;


·
            the
                concentration of ownership of our common
                stock;


·
            the
                fluctuations of our results of operations from period to period;


·
            the
                strength of the United States economy in general;


·
            the
                accuracy of our financial statement estimates and assumptions;


·
            the
                effect of changes in the stock market and other capital markets;


·
            technological
                changes;


·
            changes
                in monetary and fiscal policies of the U.S.
                Government;


·
            changes
                in consumer spending and saving habits;


·
            changes
                in accounting principles, policies, practices or
                guidelines;


·
            other
                risks described from time to time in our filings with the Securities
                and
                Exchange Commission; and


·
            our
                ability to manage the risks involved in the foregoing.





However,
      other factors besides those listed in Item 1A Risk Factors or discussed in
      this
      Annual Report also could adversely affect our results, and you should not
      consider any such list of factors to be a complete set of all potential risks
      or
      uncertainties. Any forward-looking statements made by us or on our behalf speak
      only as of the date they are made. We do not undertake to update any
      forward-looking statement, except as required by applicable law.





**Overview**





Bankrate,
      Inc. owns and operates an Internet-based consumer banking marketplace,
      Bankrate.com, a smaller, yet similar site, Interest.com, an Internet-based
      lead
      aggregation firm, FastFind.com, and finally, Bankrate Print which produces
      newspaper-based advertising and editorial products. Our flagship Web site,
      Bankrate.com, is one of the Internet’s leading aggregator of information on more
      than 300 financial products, including mortgages, credit cards, 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. 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. Over 550 print
      and
      online partner publications depend on Bankrate.com as their source for financial
      rates and information.





2





Thirty
      years 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.





In
      addition to traditional banking and loan products, our offerings include
      channels on investing, taxes, college finances, financial advice and insurance.
      Each channel offers a unique look at its particular topic. For example,
      Bankrate.com users can read advice and tips in the Tax channel, find a new
      529
      plan in the College Finance area or ask a financial expert a question in the
      Personal Finance 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 *Mortgage
      Guide.* The *Mortgage
      Guide* is a
      weekly newspaper-advertising table consisting of product and rate information
      from local mortgage companies and financial institutions. The *Mortgage
      Guide* appears
      weekly in over 500 U.S. metropolitan newspapers with combined single day
      circulation in excess of 40 million copies.





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 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 personal finance authority. We are seeking to build
      greater brand awareness of our Web site and to reach a greater number of online
      users.





In
      the
      fourth quarter of 2005, we acquired two companies, Wescoco, LLC d/b/a FastFind
      (“ FastFind”)
      and Mortgage Market Information Services, Inc. and Interest.com (collectively,
      “MMIS/Interest.com”). We purchased FastFind, an Internet lead aggregator based
      in San Francisco, California to complement our online publishing business.
      We
      purchased MMIS/Interest.com, which publishes mortgage guides in over 300
      newspapers and operates Interest.com, a Web site that publishes financial rates
      and information connecting consumers with lenders to expand our print and online
      publishing business, respectively.





In
      2006,
      we are focusing on:





·
            Optimizing
                our cost per thousand impressions (“CPMs”) and cost per clicks (“CPCs”) on
                Bankrate.com and Interest.com;


·
            Integrating
                FastFind ad placements opportunistically on Bankrate.com and
                Interest.com;


·
            Placing
                our CPC rate tables and FastFind’s lead generating capabilities on our
                co-brand partners’ Web pages;


·
            Expanding
                our co-branded and affiliate relationships with other Web
                sites;


·
            Selling
                Certificates of Deposits (“CDs”) and Deposit tables into our 450+
                newspaper network.





See
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations - Results of Operations and Critical Accounting Policies, and Note
      8
      to the Financial Statements below for a discussion of our two reportable
      business segments: online publishing and print publishing and
      licensing.








3





**Our
      Opportunity**





We
      believe that 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,
      we believe consumers seek new 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
      about
      financial products and services that was previously not readily available to
      consumers.





According
      to a 2004 survey conducted by the Board of Governors of the U.S. Federal
      Reserve, the percentage of U.S. families that own certain financial instruments
      was as follows:




Transaction
                  Accounts
              
              
              CDs
              
              
              Stocks
              
              
              Loans
                  secured
                by
                  primary
                residence
              
              
              Installment
                  loans
              
              
              Credit
                  card balances
              
              
              Any
                  debt91.3
              
              
              12.7
              
              
              20.7
              
              
              47.9
              
              
              46.0
              
              
              46.2
              
              
              76.4







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 information, advice
      and
      interest rate data. Our efforts are targeted to fulfill the slightly less
      competitive, but equally important niches of consumer banking and personal
      finance information. As a result, we believe we can maintain a loyal base of
      users comprised of targeted audiences that are attractive to advertisers.





We
      have
      seen steady interest in our primary niches - mortgages, automobile loans, home
      equity loans and CD/savings products and information. The ability of Bankrate
      to
      provide a platform for frictionless communication between consumers and
      businesses has not changed. We believe Bankrate is well-positioned to benefit
      from growth in the Internet personal finance advertising market.





**Strategy**




We
      believe that the consumer banking and personal finance sectors hold significant
      opportunities for growth and expansion. As we grow, we are seeking to
      consolidate our position as one of the industry leaders 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
                or
                hyperlinks, banks, brokers and other advertisers are tapping into
                our
                strongest resource - consumers on the verge of engaging in a high-value
                transaction. By allowing advertisers to efficiently access these
                “in-market” consumers, we are helping advertisers acquire new customers,
                and ultimately creating a transaction that is beneficial for the
                advertiser, the consumer and us.





·
            Remaining a
                dominant brand in consumer personal finance data and
                content:
                We believe we are a leading company in our market based on a number
                of
                metrics, including revenue, the number of banks surveyed, the number
                of
                pages viewed by consumers and the number of unique visitors. We are
                continuing our strong push to remain a dominant player in our
                market.





·
            Continued
                growth through partnering with top Web sites:
                Our partner network provides Bankrate.com with a steady stream of
                visitors, with little to no up-front payment risk to us. Over 90%
                of these
                agreements are revenue-sharing, under which we only pay out a percentage
                of what we actually bring in. We also plan to explore initiatives
                to
                expand the breadth and depth of our product offerings and services
                by
                partnering in the real estate, auto finance, sub-prime lending and
                college
                lending areas.





4





**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, and (2) licensing, in which we provide content
      to the other operator's Web site together with a hyperlink to our own site.
      We
      have historically 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 display advertising, and collect
      advertising revenues, which are shared with the third party Web site.





Under
      licensing arrangements, we provide limited 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,
      2005
      included America Online, Netscape, Yahoo!, Internet Broadcasting System, USA
      Today, and Dollar Stretcher. During 2005, approximately 14% of the traffic
      to
      Bankrate.com was attributable to the over 75 distribution partners compared
      to
      20% in 2004 and 21% in 2003. The decline results from the heightened consumer
      awareness of our site, resulting in more traffic coming directly to
      Bankrate.com. We expect traffic from distribution partners to continue to be
      approximately 10% to 15% of total site traffic in 2006.





**Financial
      Product Research**





As
      of
      December 31, 2005, our research staff was made up of 44 employees who track
      comparative information on more than 300 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 estimate that over 3,000,000 items of data are gathered
      each week for more than 577 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 largest U.S. markets, as defined by the
      U.S. Census Bureau's Metropolitan Statistical Area categories and Financial
      Deposit Insurance Company (“FDIC”) Market Report. Along with the largest
      markets, the surveys include subsequent markets and other selected communities
      that we believe represent areas of growth.





In
      most
      instances, 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. The quality control process
      then includes several visual checks and proofing by different staff members
      to
      insure that the data inputs are accurate. Our quality control staff reviews
      each
      listing in relation to regional and national trends and for overall accuracy
      and
      consistency of 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 daily 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. 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.





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.





5





**Editorial
      Content**





In
      addition to our research department, as of December 31, 2005, we maintained
      an
      editorial staff of 20 editors, writers and researchers, and graphic designers
      who create original stories and content for our Web site. We also have
      relationships with more than 30 freelance writers. Most of our editorial staff
      members are experienced journalists with lengthy newspaper, magazine, new media
      and broadcast experience. The reporters and editors of Bankrate.com have
      professional journalistic work experience ranging from one to 37 years,
      with an average of 18 years' 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, a
      comprehensive provider of foreign exchange and currency trading information
      services.





**Print
      Publications**





We
      continue to produce and sell advertisements in 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 Web site.
      Our
      print publications activities include the following:





·
            *Mortgage
                Guide*:
                We generate revenue through the sale of mortgage rate and product
                listings
                in over 500 metropolitan newspapers across the United States
                with combined Sunday circulation of 40 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 98 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**





Our
      primary marketing expenditures are for key word CPC advertising campaigns
      on Internet search engines. Through the end of 2005, we also entered into barter
      transactions (the exchange by us of advertising space on our Web site for
      reciprocal advertising space on other Web sites) to promote our brand and
      generate traffic to our Web site.  We also used sweepstakes and promotions
      efforts to drive site traffic and grow our e-mail newsletter subscriber base.
      We
      actively conduct earned media public relations campaigns to promote our
      editorial content and personnel to the consumer and trade media. Our
      spokespersons are routinely featured in newspapers, magazines and in broadcast
      media, and are promoted to and are featured as expert commentators on,
      major broadcast and cable news programs and talk radio. In 2005, our experts
      were quoted or we were referenced in over 990 media exposures. Our spokespersons
      were featured in 191 television interviews, including *The
      Today Show* , *ABC
      World News Tonight* ,
      The Fox
      Cable Network, MSNBC, CNBC, and CNN; 638 print articles, including *The
      New York Times* , *The
      Wall Street Journal* and *USA
      Today* ;
      and 162
      interviews on numerous talk radio broadcasts. Finally, we produce “The
      Bankrate.com Personal Finance Minute” which is distributed to XM radio and
      selected terrestrial radio stations throughout the United States.





Bankrate.com’s
      home page and other key pages routinely rank at or near the top of major search
      engines' natural (unpaid) listings for highly coveted key words and phrases
      related to banking products, and we believe we generate significant traffic
      and
      revenue from such placements. The high rankings are largely a result of our
      success at creating highly relevant, widely read content, and because our
      personnel stay abreast of and use various search optimization techniques.





6





**Advertising
      Sales**





Our
      advertising sales staff consisted of 20 online salespeople and 12 print
      salespeople plus support staff as of December 31, 2005. The sales team focuses
      on selling online and offline advertising to national, regional and local
      advertisers. The sales staff focuses on three segments of the financial
      industry: lending (mortgage, home equity and auto loans), banking (CDs, money
      market accounts and credit cards) and general personal finance (college loans,
      taxes and IRAs). We have four sales regions with offices in each region: East
      (New York City), Midwest (Chicago), Southeast (North Palm Beach) and West (San
      Francisco and Orange County). Each salesperson is responsible for a designated
      geographic region of the United States. They are paid based on the performance
      of the territory.





The
      sales
      team is responsible for selling the Bankrate Network of products. The Bankrate
      Network includes: graphic advertising on Bankrate.com and Interest.com,
      hyperlink listings on the Bankrate rate tables (CPC), Bankrate Print (i.e.,
      the
*Mortgage Guides*) , and mortgage leads from FastFind. We believe the
      "Network" approach enhances value for advertisers and direct marketers by (1)
      alleviating the need to purchase advertising from numerous vendors, (2)
      providing advertisers and direct marketers the opportunity to optimize their
      marketing dollars among four different products, (3) offering integrated
      marketing packages that meet the strategic needs of our customers, and (4)
      providing access to in-market consumers who are ready to act. We believe
      advertisers and direct marketers enhance the effectiveness of their campaigns
      by
      customizing advertising delivery on our Network within a particular content
      channel or across our entire network.





**Advertising
      Alternatives**





Our
      advertisers can target prospective customers using several different approaches:





·
            Focusing
                on consumers in specific situations, such as those who are first-time
                home
                buyers, or those actively shopping for home equity
                loans.


·
            Targeting
                specific geographic and product areas; for example, CD shoppers in
                Georgia; or just one of these - all consumers interested in CDs,
                or all
                consumers from Georgia.


·
            General
                rotation throughout our site.





Our
      most
      common Web site graphic advertisement sizes are leader boards (728 x 90 pixels)
      and banners (486 x 60 pixels), which are prominently displayed at the top or
      bottom of a Web page, skyscrapers (160 x 600 pixels or 120 x 600 pixels),
      posters (330 x 275 pixels) and islands (250 x 250 pixels). These advertisements
      can be targeted to specific areas of our site or placed 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.





Posters
      are oversized advertisements that contain more information than traditional
      banner advertisements. We position posters on certain Web pages so that they
      dominate the page. 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.





We
      believe that 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 allow third-parties, such as
      DoubleClick, to serve our customers’ advertisements.




**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. Prior to October 1, 2005, hyperlinks were sold under
      flat dollar fee per month contracts that ranged primarily between three and
      twelve months.





Our
      hyperlinks were converted to a CPC pricing model as of October 1, 2005. Under
      this arrangement, advertisers pay us a specific, pre-determined cost each time
      a
      consumer clicks on that advertiser’s hyperlink or phone icon (usually found
      under the advertiser’s name in the rate table listings). All clicks are screened
      for fraudulent characteristics by an independent third-party vendor and then
      charged to the advertiser’s account.





7





We
      also
      sell text links on our rate pages to advertisers on a 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.





**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, 2005,
      we had 48 graphic advertisers and 355 hyperlink advertisers, some of which
      are
      both graphic and hyperlink advertisers. Among our largest advertisers are
      LowerMyBills.com, iHomeowners, Inc., Emigrant Savings Bank, ING Direct,
      E-Loan, Inc., Bank of America and Equifax. No sales to any one customer exceeded
      10% of total revenue for the years ended December 31, 2005, 2004 and 2003.
      No
      material revenues were generated outside of the United
      States.





**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 and print competition includes the following:





·
            Personal
                finance sections of general interest Web sites such as Yahoo! Finance,
                AOL
                Personal Finance and MSN Money;





·
            Personal
                finance destination sites such as The Motley Fool, CBS MarketWatch,
                SmartMoney.com, Kiplinger.com and
                CNNMoney.com;





·
            E-commerce
                oriented sites that include banking and credit products such as
                LendingTree;





·
            Lead
                aggregators such as LowerMyBills, iHomeowners/LoanWeb and
                NexTag;





·
            Print
                mortgage table sellers like Infotrack and National Financial News
                Service;





·
            Rate
                listing sites, such as MonsterMoving, Move.com, Informa Research
                Services
                and Checkinterestrates.com/CarsDirect; and





·
            Key
                word CPC sites/networks such as Google, Yahoo! Search Marketing and
                MIVA.





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 operate our Web site and supporting systems on servers
      at a secure third-party co-location facility in Atlanta, Georgia.
      Our infrastructure and network connectivity at this third-party
      facility are monitored continuously, on a 24 hours a day, 365 days a
      year basis. In March 2006, we also added a presence at a similar data
      center in Denver, Colorado. The additional data center will initially operate
      systems related to recently acquired Web properties. The dual data centers
      are
      also key to our business continuity strategy, providing additional recovery
      options if either data center should suffer a major outage. These
      facilities are powered continuously from multiple sources, including
      uninterruptible power supplies and emergency power generators. The
      facilities are connected to the Internet with redundant high-speed data
      lines. The systems at each data center are protected by a
      multi-layered security system including dual inspection state firewalls at
      each
      data center. To provide maximum scalability, many of our high-traffic Web
      pages are served from an independent content distribution network. Multi-node
      clusters or multiple load shared systems are used for most key functions,
      including web serving, ad serving, and SQL databases. The vast majority of
      the information presented on our Web sites, including back-end databases that
      provide the raw information, is stored and delivered via such
      multi-node or multi-system configurations from one of the co-location
      facilities.





8





All
      of
      our systems are controlled and updated remotely via encrypted virtual
      private network (“VPN”) links to various Bankrate locations. The technical
      services team, based primarily in North Palm Beach, Florida and Chicago,
      Illinois, has established extensive monitoring of all key systems to provide
      continuous real-time response capability should key systems or network
      connections fail. Much of the content on our various Web sites
      is prepared on systems located in the secure server room in our North
      Palm Beach location, then transferred at scheduled intervals via the VPN to
      the
      systems at the co-location facilities. The North Palm Beach facility systems
      are
      also powered redundantly by uninterruptible power supply units. In the event
      that North Palm Beach or any other location is temporarily unavailable,
      temporary VPN access is established from alternative locations to provide
      continuity for key operations and content updates.





**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, 2005, we had 159 full-time employees, of which 21 were in Web
      site
      and content operations, 36 in sales and business development, 44 in content
      and
      data research, 7 in advertising revenue operations, 21 in product development
      and information technology, 11 in finance and accounting, 10 in corporate
      communications and marketing and 9 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.





**Available
      Information**





For
      further discussion concerning our business, see the information included in
      Items 7 (Management’s Discussion and Analysis of Financial Condition and Results
      of Operations) and 8 (Financial Statements and Supplementary Data) 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, pursuant to
      Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended,
      as
      soon as reasonably practicable after the material is electronically filed with
      or furnished to the Securities and Exchange Commission (“SEC”).





**ITEM
      1A. RISK FACTORS**





*You
      should consider carefully the following risk factors before deciding whether
      to
      invest in our common stock. Our business, including our operating results and
      financial condition, could be harmed by any of these risks. Additional risks
      and
      uncertainties not currently known to us or that we currently deem to be
      immaterial also may materially and adversely affect our business. The trading
      price of our common stock could decline due to any of these risks, and you
      may
      lose all or part of your investment. In assessing these risks you should also
      refer to the other information contained in our filings with the SEC, including
      our financial statements and related notes.*





**Risks
      Related to Our Business**





***Our
      Success Depends on Internet Advertising Revenue***




We
      expect
      to derive approximately 80% 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
      sites 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;





9





·
            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 sites 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 use
      the
      CPM-based model, which is based upon the number of advertisement impressions,
      and the performance-based, or CPC, model, which generates revenue based on
      each
      individual click on a particular advertisement. 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. If we do not attract
      advertisers from other industries, revenue growth could be adversely
      affected.





***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 our Web sites 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 our Web sites 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 sites 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
      our Web sites, we are working with our syndication partners to program more
      intensively, and we are aggressively promoting products not related to mortgage
      activity. If our non-mortgage related products are not successful, or if we
      are
      otherwise unable to increase or maintain traffic to areas of our Web sites
      other
      than mortgage information, we will remain dependent on interest rate levels
      and
      mortgage refinancing activity.





***We
      May Expand our Operations Through Acquisitions, Which Could Divert Management’s
      Attention and Expose Us to Unanticipated Costs and Liabilities and we May
      Experience Difficulties Integrating the Acquired Operations, and we May Incur
      Costs Relating to Potential Acquisitions that are Never
      Consummated***





Our
      business plan could include growth through future acquisitions. For example,
      in
      late 2005, we acquired FastFind and MMIS/Interest.com. However, our ability
      to
      consummate any future acquisitions on terms that are favorable to us may be
      limited by the number of attractive acquisition targets, internal demands on
      our
      resources and our ability to obtain financing. Our success in integrating newly
      acquired businesses will depend upon our ability to retain key personnel, avoid
      diversion of management’s attention from operational matters, and integrate the
      technical operations and personnel of the acquired company. In addition, future
      acquisitions could result in the incurrence of additional debt, costs and
      contingent liabilities or the dilution of our stockholders’ ownership through
      issuance of additional stock. Integration of acquired operations may take
      longer, or be more costly or disruptive to our business, than originally
      anticipated. It is also possible that expected synergies from future
      acquisitions may not materialize. We may also incur costs and divert management
      attention as regards potential acquisitions that are never consummated.





Although
      we undertake a due diligence investigation of each business that we acquire,
      there may be liabilities of the acquired companies that we fail to or are unable
      to discover during the due diligence investigation and for which we, as a
      successor owner, may be responsible. In connection with acquisitions, we
      generally seek to minimize the impact of these types of potential liabilities
      through indemnities and warranties from the seller, which may in some instances
      be supported by deferring payment of a portion of the purchase price. However,
      these indemnities and warranties, if obtained, may not fully cover the
      liabilities due to limitations in scope, amount or duration, financial
      limitations of the indemnitor or warrantor or other reasons.





10





***If
      we Fail to Detect Click-through Fraud, we Could Lose the Confidence of our
      Advertisers, Thereby Causing our Business to Suffer***





We
      are
      exposed to the risk of fraudulent clicks on our ads by persons seeking to
      increase the advertising fees paid to us. Click-through fraud occurs when a
      person clicks on an ad displayed on our Web site in order to generate revenue
      to
      us and to increase the cost for the advertiser.  If we were unable to
      detect this fraudulent activity and find new evidence of past fraudulent clicks,
      we may have to issue refunds retroactively of amounts previously paid to us.
      This would negatively affect our profitability, and these types of fraudulent
      activities could hurt our reputation and our brand. If fraudulent clicks are
      not
      detected, the affected advertisers may experience a reduced return on their
      investment in our advertising programs because the fraudulent clicks would
      not
      lead to potential revenue for the advertisers. This could lead the advertisers
      to become dissatisfied with our advertising programs, which could lead to loss
      of advertisers and revenue.




***Adverse
      Resolution of Litigation may Harm our Operating Results or Financial
      Condition***




We
      are
      party to lawsuits in the normal course of business. Litigation can be expensive,
      lengthy and disruptive to normal business operations. Moreover, the results
      of
      complex legal proceedings are difficult to predict. An unfavorable resolution
      of
      a particular lawsuit could have a material adverse effect on our business,
      operating results, or financial condition. For additional information regarding
      certain of the lawsuits in which we are involved, See Item 3, "Legal
      Proceedings."





***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. If
      our
      distribution arrangements do no attract a sufficient number of users to support
      our current advertising model, or if we do not establish and maintain
      distribution arrangements on favorable economic terms, our business could be
      adversely affected.





**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 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, we may not be able to compete effectively with
      traditional methods of obtaining such rate information and our business, results
      of operations and financial condition will be adversely affected.





***Our
      Markets Are Highly Competitive***




We
      compete for Internet advertising revenues with the personal finance sections
      of
      general interest sites such as Yahoo! Finance, AOL Personal Finance and MSN
      Money; personal finance destination sites such as The Motley Fool, CBS
      MarketWatch, SmartMoney.com, Kiplinger.com and CNNMoney.com; e-commerce oriented
      sites that include banking and credit products such as LendingTree; lead
      aggregators such as LowerMyBills, iHomeowners and NexTag; print mortgage table
      sellers like National Financial News Service; rate listing sites such as
      MonsterMoving, Move.com, Informa Research Services and
      Checkinterestrates.com/CarsDirect; and key word CPC advertising
      sites/networks such as Google. In addition, new competitors may 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.





11





***Our
      Web Sites May Encounter Technical Problems and Service Interruptions***




In
      the
      past, our Web sites have 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
      sites have 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 located at our corporate
      headquarters in North Palm Beach, Florida and at secure third-party co-location
      facilities in Atlanta, Georgia and Denver, Colorado (beginning in March 2006).
      Multiple system failures involving these locations could lead to
      interruptions or delays in service for our Web sites, 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.





***We
      Rely on the Protection of Our Intellectual Property***




Our
      intellectual property consists of the content of our Web sites 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 Sites***




Much
      of
      the information published on our Web sites 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 providers of online
      services as well as print publications. Our insurance may not adequately protect
      us against these types of claims.





12





***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 sites 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 sites. 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, 2005, approximately 38% 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 32%
      of
      our outstanding common stock. As a result, our officers and directors will
      be
      able to exercise significant 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
      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 sites, which can fluctuate
                significantly;


·
            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;


·
            changes
                in interest rates;


·
            general
                economic conditions; and


·
            changes
                in banking or other laws that could limit or eliminate content on
                our Web
                sites.




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.





13





***Our
      Stock Price May Continue to be Volatile***





Our
      common stock has experienced substantial price volatility, particularly as
      a
      result of variations between our actual financial results and the published
      expectations of analysts. Furthermore, speculation in the press or investment
      community about our strategic position, financial condition, results of
      operations, business, or significant transactions can cause changes in our
      stock
      price. These factors, as well as general economic and political conditions,
      may
      materially adversely affect the market price of our common stock in the future.





**ITEM
      1B.**  **UNRESOLVED STAFF COMMENTS**





We
      have
      received no written comments regarding our periodic or current reports from
      the
      staff of the SEC that were issued 180 days or more preceding the end of our
      2005
      fiscal year and that remain unresolved.





**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
      lease is for approximately 12,388 square feet of office and expires on December
      31, 2007. On November 3, 2005, we entered into a lease for approximately 21,000
      square feet of office space in the same building to replace our current lease.
      The initial lease term is for 10 years with an option to renew for one
      additional 5-year term and is contingent on us terminating our lease for our
      existing office space.





We
      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 on September 30, 2006. We also lease approximately 6,000 square feet
      in
      San Francisco, California, that is also used for administration, sales and
      business development. The San Francisco lease expires on February 28, 2009.
      We
      also leased an office facility in Villa Park, Illinois that was used for
      sales and business development and approximately 120 square feet in Pennington,
      New Jersey that is used for sales. The Villa Park lease expires on March 31,
      2006 and the Pennington lease expires on June 30, 2006. We entered into an
      agreement to lease approximately 4,872 square feet in Chicago, Illinois to
      replace the Villa Park lease. The Chicago lease expires on November 30,
      2008.





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**





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.
      On
      October 8, 2004, we were notified that the buyer settled the litigation matter,
      effective October 1, 2004, and we reimbursed the buyer $390,000 under the
      indemnity. The $390,000 was recorded in the quarter ended September 30, 2004
      as
      a legal settlement charge.





In
      March
      2002, American Interbanc Mortgage, LLC (“AI”), a mortgage lender that advertised
      on Bankrate.com (the “Web site”), filed suit in the Superior Court of California
      against several of AI's competitors (not including us) who also advertised
      on
      the Web site for:





(i)
            false
                advertising under the federal Lanham Act;


(ii)
            common
                law unfair competition; and


(iii)
            violations
                of certain sections of the California Business and Professions
                Code.





In
      August
      2002, we declined to renew AI's advertising contract. In December 2002, AI
      filed
      a First Amended Complaint (the “Amended Complaint”), adding us as a defendant,
      and asserting an additional claim for an alleged violation of the Cartwright
      Act, California's antitrust law, alleging that we conspired with all of the
      co-defendants (various mortgage lenders and mortgage brokers) to allow them
      to
      engage in allegedly false advertising on the Web site while also precluding
      AI
      from advertising on the Website. The Amended Complaint sought an undisclosed
      sum
      of monetary damages, restitution of profits, compensation acquired as a result
      of the allegedly wrongful conduct, attorney's fees, costs, and injunctive
      relief. We filed a special motion to strike the Amended Complaint under
      California's anti-SLAPP (Strategic Lawsuits Against Public Participation)
      statute, contending that:





14





(i)
            AI's
                claims against us were all based on publishing decisions protected
                by the
                First Amendment of the United States Constitution and its counterpart
                in
                the California Constitution; and


(ii)
            AI
                could not establish a probability of success on the merits of its
                claims.





We
      also
      filed a demurrer to the Amended Complaint, contending that it failed to state
      facts constituting a valid cause of action against the Company. AI filed
      motions





(i)
            for
                a preliminary injunction against us, seeking an order requiring the
                Company to publish AI's advertisements and to cease publishing the
                alleged
                false advertisements of AI's competitors, and


(ii)
            seeking
                sanctions against us for having filed an allegedly “frivolous” anti-SLAPP
                motion.





By
      Orders
      dated April 24, and May 22, 2003, the trial court:





(i)
            denied
                our anti-SLAPP motion,


(ii)
            granted
                our demurrer as to AI's common law unfair competition claim, but
                otherwise
                overruled the demurrer,


(iii)
            denied
                AI's motion for a preliminary injunction, and


(iv)
            denied
                AI's motion for sanctions.





On
      May
      22, 2003, we appealed the order denying its anti-SLAPP claim, and AI, among
      other things, appealed the order denying its motion for preliminary injunction.
      The Court of Appeal of the State of California, Fourth Appellate District,
      affirmed the various appeals and denied all relief requested. On January 15,
      2004, AI filed its Second Amended Complaint asserting five counts, including
      claims for:





(i)
            false
                advertising under the Lanham Act, against all defendants,


(ii)
            restraint
                of trade under the Cartwright Act, against all defendants,


(iii)
            intentional
                interference with economic relations, against defendants other than
                us,


(iv)
            intentional
                interference with prospective economic advantage, against some defendants
                but no longer against us, and


(v)
            false
                advertising and unfair trade practices, against all defendants.





The
      Second Amended Complaint seeks unspecified damages, including treble damages,
      interest, attorney's fees, and costs, disgorgement of property and profits
      allegedly wrongfully acquired, restitution, an accounting, and injunctive
      relief.





On
      December 20, 2004, we received a Statement of Damages (the “Statement”) by which
      AI, for the first time, indicated the amount of damages it allegedly seeks.
      In
      the Statement AI states, without factual explanation, that it “is informed and
      believes that its damages are not less than $16.5 million,” allegedly “incurred
      as a proximate result of [all] defendants' wrongful conduct.” AI seeks to have
      those damages trebled and also seeks “reasonable attorney's fees pursuant to 15
      U.S.C. Section 1117(b) and California Business and Professions Code Section
      16750(a),” and costs. In connection with the causes of action for intentional
      interference with economic relations and prospective economic advantage, AI
      in
      its Statement “reserves the right to seek not less than $33 million in punitive
      damages when it seeks a judgment” in the action. We believe that all of AI's
      claims against it are factually and legally without merit.





We
      will
      continue to vigorously defend itself against all of AI's claims. We have filed
      two motions for summary adjudication. The first seeks summary adjudication
      of
      AI’s false advertising causes of action. The second seeks summary adjudication
      of AI’s conspiracy in restraint of trade causes of action. The motions are
      scheduled for hearing by the Court on April 4, 2006, and April 25, 2006,
      respectively. Trial of the matter is currently scheduled to begin on May 30,
      2006. Currently, the outcome of this matter is uncertain. We cannot estimate
      at
      this time, the amount of loss, if any, which could result from an adverse
      resolution of this litigation.





In
      February 2005, we settled a contractual dispute with a former Internet and
      co-location facility provider for $120,000. This amount is included in legal
      settlements in the accompanying statement of operations for the year ended
      December 31, 2004.




**ITEM
        4.**  **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None.





15





**PART
      II**





**ITEM
                5.**
            **MARKET
                FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER****MATTERS****AND
                ISSUER PURCHASES OF EQUITY
                SECURITIES**





Our
      common stock is traded on the Nasdaq National Market under the stock symbol
      “RATE.”





The
      prices per share reflected in the table below represent, for the periods
      indicated, the range of highest and lowest closing prices for our common stock
      on the Nasdaq National Market.





HIGH
            
            LOWYear
                ended December 31, 2004First
                quarter
            
            $
            19.92
            
            $
            12.12Second
                quarter
            
            
            20.30
            
            
            8.46Third
                quarter
            
            
            11.80
            
            
            7.01Fourth
                quarter
            
            
            16.00
            
            
            9.25Year
                ended December 31, 2005First
                quarter
            
            $
            20.16
            
            $
            13.10Second
                quarter
            
            
            20.14
            
            
            12.41Third
                quarter
            
            
            28.56
            
            
            20.17Fourth
                quarter
            
            
            34.01
            
            
            23.95





The
      closing sale price of our common stock on the Nasdaq National Market on February
      28, 2006 was $36.15 per share.





The
      number of shareholders of record of our common stock as of February 28, 2006,
      was 3,439.





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 in Item
      7 in
      this report. The statement of operations data for the years ended December
      31,
      2005, 2004 and 2003, and the balance sheet data as of December 31, 2005 and
      2004, are derived from, and are qualified by reference to, the financial
      statements of Bankrate, Inc. included in Item 8 in this report, which financial
      statements have been audited by KPMG LLP, independent registered public
      accounting firm. The audit report is included elsewhere in this Form 10-K.
      The
      statement of operations data for years ended December 31, 2002 and 2001, and
      the
      balance sheet data as of December 31, 2003, 2002 and 2001, have been derived
      from audited financial statements not included in this report. Historical
      results are not necessarily indicative of results to be expected in the future.




16





**Year
                Ended December 31,****2005
                 (A)**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001**Statement
                of Operations Data:(In
                thousands, except share and per share data)Revenue:Online
                publishing
            
            $
            43,296
            
            $
            33,942
            
            $
            31,368
            
            $
            22,651
            
            $
            14,986Print
                publishing and licensing
            
            
            5,753
            
            
            5,262
            
            
            5,253
            
            
            3,920
            
            
            3,271Total
                revenue
            
            
            49,049
            
            
            39,204
            
            
            36,621
            
            
            26,571
            
            
            18,257Cost
                of revenue:Online
                publishing
            
            
            7,389
            
            
            5,535
            
            
            4,514
            
            
            3,813
            
            
            3,161Print
                publishing and licensing
            
            
            5,346
            
            
            4,359
            
            
            4,044
            
            
            2,862
            
            
            2,174Total
                cost of revenue
            
            
            12,735
            
            
            9,894
            
            
            8,558
            
            
            6,675
            
            
            5,335Gross
                margin
            
            
            36,314
            
            
            29,310
            
            
            28,063
            
            
            19,896
            
            
            12,922Operating
                expenses:Sales
            
            
            3,683
            
            
            4,187
            
            
            5,040
            
            
            4,276
            
            
            3,203Marketing
            
            
            5,923
            
            
            6,357
            
            
            5,496
            
            
            3,477
            
            
            2,923Product
                development
            
            
            2,457
            
            
            2,406
            
            
            2,271
            
            
            1,422
            
            
            1,386General
                and administrative
            
            
            9,035
            
            
            6,667
            
            
            5,813
            
            
            5,537
            
            
            5,512Legal
                settlements
            
            
            —
            
            
            510
            
            
            —
            
            
            —
            
            
            —Severance
                charge
            
            
            —
            
            
            260
            
            
            —
            
            
            —
            
            
            —Depreciation
                and amortization
            
            
            895
            
            
            743
            
            
            681
            
            
            622
            
            
            70021,993
            
            
            21,130
            
            
            19,301
            
            
            15,334
            
            
            13,724Income
                (loss) from operations
            
            
            14,321
            
            
            8,180
            
            
            8,762
            
            
            4,562
            
            
            (802
            )Other
                income (expense), net
            
            
            933
            
            
            410
            
            
            243
            
            
            83
            
            
            (134
            )Gain
              on insurance proceeds
            
            
            220
            
            
            —
            
            
            —
            
            
            —
            
            
            —Gain
                on early extinguishment of debt
            
            
            —
            
            
            —
            
            
            —
            
            
            2,022
            
            
            —Income
                (loss) before income taxes
            
            
            15,474
            
            
            8,590
            
            
            9,005
            
            
            6,667
            
            
            (936
            )Income
                tax (provision) benefit
            
            
            (5,800
            )
            
            4,766
            
            
            3,100
            
            
            —
            
            
            —Net
                income (loss)
            
            $
            9,674
            
            $
            13,356
            
            $
            12,105
            
            $
            6,667
            
            $
            (936
            )Basic
                and diluted net income (loss) per share:Basic
            
            $
            0.61
            
            $
            0.87
            
            $
            0.84
            
            $
            0.48
            
            $
            (0.07
            )Diluted
            
            $
            0.57
            
            $
            0.84
            
            $
            0.79
            
            $
            0.46
            
            $
            (0.07
            )Weighted
                average common shares outstanding:Basic
            
            
            15,809,259
            
            
            15,438,097
            
            
            14,473,151
            
            
            13,997,168
            
            
            13,996,950Diluted
            
            
            16,922,218
            
            
            15,975,382
            
            
            15,299,734
            
            
            14,609,359
            
            
            13,996,950**December
                31,****2005
                (A)**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001**Balance
                Sheet Data:(In
                thousands)Cash
                and cash equivalents
            
            $
            3,480
            
            $
            27,735
            
            $
            20,874
            
            $
            11,001
            
            $
            9,755Working
                capital
            
            
            9,809
            
            
            33,628
            
            
            23,898
            
            
            9,369
            
            
            7,865Intangible
                assets, net
            
            
            11,652
            
            
            206
            
            
            —
            
            
            —
            
            
            —Goodwill
            
            
            30,035
            
            
            —
            
            
            —
            
            
            —
            
            
            —Total
                assets
            
            
            62,553
            
            
            46,007
            
            
            28,983
            
            
            15,173
            
            
            12,526Subordinated
                note payable
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,350Total
                stockholders' equity
            
            
            52,853
            
            
            42,334
            
            
            24,925
            
            
            10,650
            
            
            3,982





(A)
      Includes the acquired operations of FastFind and MMIS/Interest.com as of and
      for
      the period from December 1, 2005 to December
      31, 2005.





17





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





**Introduction**





Management’s
      discussion and analysis (“MD&A”) provides supplemental information, which
      sets forth the major factors that have affected our financial condition and
      results of operation and should be read in conjunction with our consolidated
      financial statements and notes thereto included in this Annual
      Report.





This
      Annual Report, including this MD&A section, contains “forward-looking
      statements” within the meaning of the Private Securities Litigation Reform Act
      of 1995. These forward-looking statements include, among others, statements
      about our beliefs, plans, objectives, goals, expectations, estimates and
      intentions that are subject to significant risks and uncertainties and are
      subject to change based on various factors, many of which are beyond our
      control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,”
“estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar
      expressions are intended to identify forward-looking statements.





All
      forward-looking statements, by their nature, are subject to risks and
      uncertainties. Our actual future results may differ materially from those set
      forth in our forward-looking statements. Please see the Introductory Note and Item
      1A
      Risk Factors of
      this
      Annual Report for a discussion of factors that could cause our actual results
      to
      differ materially from those in the forward-looking statements. However, other
      factors besides those listed in Item 1A Risk Factors or discussed in this Annual
      Report also could adversely affect our results, and you should not consider
      any
      such list of factors to be a complete set of all potential risks or
      uncertainties. Any forward-looking statements made by us or on our behalf speak
      only as of the date they are made. We do not undertake to update any
      forward-looking statement, except as required by applicable law.





**Overview**





Bankrate,
      Inc. (the "Company" or “Bankrate”) 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 300 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 more than 575 markets in all 50 states in order
      to provide the most current objective, unbiased information. Hundreds of print
      and online partner publications depend on Bankrate.com as the trusted source
      for
      financial rates and information.





Thirty
      years 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 have 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.
      Bankrate.com had over 46 million unique visitors in 2005, according to
      Omniture.





We
      operate a traditional media business on the Internet. 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.





18





We
      believe 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 Internet advertising revenues with the personal finance sections
      of
      general interest sites such as Yahoo! Finance, AOL Personal Finance and MSN
      Money; personal finance destination sites such as The Motley Fool, CBS
      MarketWatch, SmartMoney.com, Kiplinger.com and CNNMoney.com; e-commerce oriented
      sites that include banking and credit products such as LendingTree and
      Pricegrabber; lead aggregators such as LowerMyBills, iHomeowners and NexTag;
      Print mortgage table sellers like National Financial News Service; rate listing
      sites such as MonsterMoving, realtor.com, Informa Research Services and
      Checkinterestrates.com/CarsDirect; and key word cost-per-click advertising
      sites/networks such as Google, Yahoo! Search Marketing, Ask Jeeves and MIVA.
      Our
      traffic has grown from 700,000 unique visitors per month in early 2000 to 4
      million unique visitors per month in 2005 according to Omniture.




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 60 new
      graphic advertisers and over 180 new hyperlink advertisers in 2005. The number
      of advertisers has grown from approximately 320 in 2001 to over 390 in 2005.
      Page views have grown from 237 million in 2001 to 426 million in 2005.




We
      have
      improved our gross margin from 71% in 2001 to 74% in 2005, and have reduced
      other operating expenses (excluding barter expense, legal settlement charges
      and
      severance charges) as a percentage of total revenue (excluding barter revenue)
      from 71% in 2001 to 40% in 2005. Our income before income taxes (excluding
      legal
      settlement charges and severance charges) as a percentage of total revenue
      (excluding barter revenue) has grown to 32% in 2005.





**Critical
      Accounting Estimates**





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make judgments, 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 period.
      We base our judgments, estimates and assumptions on historical experience and
      various other factors that we believe to be reasonable under the circumstances.
      Actual results could differ materially from these estimates under different
      assumptions or conditions. We evaluate our judgments, estimates and assumptions
      on a regular basis and make changes accordingly. We believe that the judgments,
      estimates and assumptions involved in the accounting for income taxes, the
      allowance for doubtful accounts receivable and legal contingencies have the
      greatest potential impact on our financial statements, so we consider these
      to
      be our critical accounting policies. Below we discuss the critical accounting
      estimates associated with these policies. Historically, our judgments, estimates
      and assumptions relative to our critical accounting policies have not differed
      materially from actual results. For further information on our critical
      accounting policies, see the discussion in the section titled “Results of
      Operations and Critical Accounting Policies” below, and Note 2 of our Notes to
      Consolidated Financial Statements.





**Income
      Taxes**





As
      required by Statement of Financial Accounting Standards (“SFAS”) No. 109,
*Accounting for Income Taxes*, we recognize tax assets on the balance
      sheet if it is more likely than not that they will be realized on future tax
      returns. Until 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
      management reassessed the valuation allowance previously established against
      deferred tax assets. Factors considered included: 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 was more likely than not that a portion of the deferred tax
      assets would be realized and, accordingly, released $3,400,000 of the valuation
      allowance, which resulted in an income tax benefit of approximately $3,100,000.





During
      the quarters ended March 31, June 30, and Sept 30, 2004, we continued to
      evaluate the need for a valuation allowance against the deferred tax asset.
      We
      completed our business planning process during the fourth quarter of 2004,
      which
      included the following strategic initiatives for 2005: the enhancement of our
      quality control process and procedures; the re-design of our Web site; the
      execution of exclusive advertising contracts with two mortgage lead aggregators;
      broadening the breadth and depth of our products and services; a reorganization
      of our advertising sales force; and the migration to a cost-per-click revenue
      model on our rate tables. Considering these strategic initiatives and their
      impact on future earnings potential, we concluded that it is more likely than
      not that we will generate sufficient taxable income in future periods to realize
      the entire deferred tax asset. At December 31, 2004, we reversed the remaining
      $9,400,000 valuation allowance resulting in an income tax benefit of $4,800,000
      and a net deferred tax asset of $11,400,000. The realization of the deferred
      tax
      asset depends on our ability to continue to generate taxable income in the
      future. If we determine that we will not be able to realize all or a portion
      of
      the deferred tax asset in the future, an adjustment to the deferred tax asset
      will be charged against earnings in the period such determination is made.
      The
      income tax benefit relating to stock options exercised in 2005 and 2004 was
      approximately $446,000 and $3,170,000, respectively, which was allocated to
      stockholders’ equity.





19





**Allowance
      for Doubtful Accounts Receivable**





We
      maintain an allowance for doubtful accounts for estimated losses resulting
      from
      the inability or unwillingness of our customers to make required payments.
      We
      look at historical write-offs and sales growth when determining the adequacy
      of
      the allowance. As of December 31, 2005, our allowance increased as the customer
      base associated with the acquisitions made during 2005 are different than our
      traditional customers. Should the financial condition of our customers
      deteriorate, resulting in an impairment of their ability to make payments,
      or if
      the level of accounts receivable increases, the need for possible additional
      allowances may be necessary. Any additions to the allowance for doubtful
      accounts are recorded as bad debt expense and included in general and
      administrative expenses.




**Legal
        Proceedings**
 
 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.
        On
        October 8, 2004, we were notified that the buyer settled the litigation matter,
        effective October 1, 2004, and we reimbursed the buyer $390,000 under the
        indemnity. The $390,000 was recorded in the quarter ended September 30, 2004
        as
        a legal settlement charge.
 
 In
        February 2005, we settled a contractual dispute with a former Internet and
        co-location facility provider for $120,000. This amount is included in legal
        settlements in the accompanying statement of operations for the year ended
        December 31, 2004.
 
 In
        March
        2002, American Interbanc Mortgage, LLC (“AI”), a mortgage lender that advertised
        on Bankrate.com (the “Web site”), filed suit in the Superior Court of California
        against several of AI's competitors (not including us) who also advertised
        on
        the Web site for:
 
 (i)
              false
                  advertising under the federal Lanham Act:
 (ii)
              common
                  law unfair competition: and
 (iii)
              violations
                  of certain sections of the California Business and Professions
                  Code.
 
 In
        August
        2002, we declined to renew AI's advertising contract. In December 2002, AI
        filed
        a First Amended Complaint (the “Amended Complaint”), adding us as a defendant,
        and asserting an additional claim for an alleged violation of the Cartwright
        Act, California's antitrust law, alleging that we conspired with all of the
        co-defendants (various mortgage lenders and mortgage brokers) to allow them
        to
        engage in allegedly false advertising on the Web site while also precluding
        AI
        from advertising on the Website. The Amended Complaint sought an undisclosed
        sum
        of monetary damages, restitution of profits, compensation acquired as a result
        of the allegedly wrongful conduct, attorney's fees, costs, and injunctive
        relief. We filed a special motion to strike the Amended Complaint under
        California's anti-SLAPP (Strategic Lawsuits Against Public Participation)
        statute, contending that:
 
 20
 
 (i)
              AI's
                  claims against us were all based on publishing decisions protected
                  by the
                  First Amendment of the United States Constitution and its counterpart
                  in
                  the California Constitution; and
 (ii)
              AI
                  could not establish a probability of success on the merits of its
                  claims.
 
 We
        also
        filed a demurrer to the Amended Complaint, contending that it failed to state
        facts constituting a valid cause of action against the Company. AI filed
        motions:
 
 (i)
              for
                  a preliminary injunction against us, seeking an order requiring
                  us to
                  publish AI's advertisements and to cease publishing the alleged
                  false
                  advertisements of AI's competitors, and
 (ii)
              seeking
                  sanctions against us for having filed an allegedly “frivolous” anti-SLAPP
                  motion.
 
 By
        Orders
        dated April 24, and May 22, 2003, the trial court:
 
 (i)
              denied
                  our anti-SLAPP motion,
 (ii)
              granted
                  our demurrer as to AI's common law unfair competition claim, but
                  otherwise
                  overruled the demurrer,
 (iii)
              denied
                  AI's motion for a preliminary injunction, and
 (iv)
              denied
                  AI's motion for sanctions.
 
 On
        May
        22, 2003, we appealed the order denying its anti-SLAPP claim, and AI, among
        other things, appealed the order denying its motion for preliminary injunction.
        The Court of Appeal of the State of California, Fourth Appellate District,
        affirmed the various appeals and denied all relief requested. On January
        15,
        2004, AI filed its Second Amended Complaint asserting five counts, including
        claims for:
 
 (i)
              false
                  advertising under the Lanham Act, against all defendants,
 (ii)
              restraint
                  of trade under the Cartwright Act, against all defendants,
 (iii)
              intentional
                  interference with economic relations, against defendants other
                  than us,
 (iv)
              intentional
                  interference with prospective economic advantage, against some
                  defendants
                  but no longer against us, and
 (v)
              false
                  advertising and unfair trade practices, against all defendants.
 
 The
        Second Amended Complaint seeks unspecified damages, including treble damages,
        interest, attorney's fees, and costs, disgorgement of property and profits
        allegedly wrongfully acquired, restitution, an accounting, and injunctive
        relief.
 
 On
        December 20, 2004, we received a Statement of Damages (the “Statement”) by which
        AI, for the first time, indicated the amount of damages it allegedly seeks.
        In
        the Statement AI states, without factual explanation, that it “is informed and
        believes that its damages are not less than $16.5 million,” allegedly “incurred
        as a proximate result of [all] defendants' wrongful conduct.” AI seeks to have
        those damages trebled and also seeks “reasonable attorney's fees pursuant to 15
        U.S.C. Section 1117(b) and California Business and Professions Code Section
        16750(a),” and costs. In connection with the causes of action for intentional
        interference with economic relations and prospective economic advantage,
        AI in
        its Statement “reserves the right to seek not less than $33 million in punitive
        damages when it seeks a judgment” in the action. We believe that all of AI's
        claims against it are factually and legally without merit.
 
 We
        will
        continue to vigorously defend itself against all of AI's claims. We have
        filed
        two motions for summary adjudication. The first seeks summary adjudication
        of
        AI’s false advertising causes of action. The second seeks summary adjudication
        of AI’s conspiracy in restraint of trade causes of action. The motions are
        scheduled for hearing by the Court on April 4, 2006, and April 25, 2006,
        respectively. Trial of the matter is currently scheduled to begin on May
        30,
        2006. Currently, the outcome of this matter was uncertain. We cannot estimate
        at
        this time, the amount of loss, if any, which could result from an adverse
        resolution of this litigation.
 21


**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
      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.





On
      June
      21, 2004, Thomas R. Evans, was appointed President and Chief Executive Officer
      and entered into an employment agreement with the Company. Under the terms
      of
      the employment agreement, Mr. Evans is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria, and a guaranteed bonus of at least
      $50,000 for 2004. Under the terms of the employment agreement, Mr. Evans 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. Evans agrees not to
      compete with the Company and not to recruit any of the Company’s employees. Upon
      Mr. Evans’ 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. Mr. Evans was also granted options to purchase
      600,000 shares of the Company’s common stock at $8.46, the fair market value on
      the date of grant. The options have a seven year term and vest as follows:
      200,000 shares on July 1, 2005; and 16,666.667 shares on the first day of each
      month beginning August 1, 2005 and ending July 1, 2007. On October 26, 2004,
      Mr.
      Evans was granted options to purchase 500,000 shares of the Company’s common
      stock at $10.01, the fair market value on the date of grant. The options have
      a
      seven year term and vest as to all 500,000 shares five years from the date
      of
      grant. Vesting accelerates if, at any point during the term of the option,
      the
      fair market value of the Company’s common stock is at or above the following
      incremental thresholds for ninety consecutive trading days; $20.00 - 100,000
      shares; $22.50 - 50,000 shares; $25.00 - 75,000 shares; $27.50 - 50,000 shares;
      $30.00 - 75,000 shares; $32.50 - 75,000 shares; $35.00 - 75,000
      shares.





22





On
      July
      15, 2004, Bruce J. Zanca, was appointed Senior Vice President and Chief
      Communications/Marketing Officer and entered into an employment agreement with
      the Company. Under the terms of the employment agreement, Mr. Zanca is entitled
      to receive an annual base salary as stipulated in the employment agreement,
      an
      annual bonus contingent on achieving certain performance criteria, and a
      guaranteed bonus of $30,000 for 2004. Under the terms of the employment
      agreement, Mr. Zanca 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. Zanca agrees not to compete with the Company and not to recruit
      any of the Company’s employees. Upon Mr. Zanca’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.
      Mr.
      Zanca was also granted options to purchase 150,000 shares of the Company’s
      common stock at $8.11, the fair market value on the date of grant. The options
      have a seven year term and vest as follows: 37,500 shares on July 15, 2005;
      and
      3,125 shares on the first day of each month beginning August 1, 2005 and ending
      July 15, 2008.





On
      August
      10, 2004, the Company and its former President and CEO (“former CEO”) entered
      into a Separation and General Release Agreement (the “Separation Agreement”)
      pursuant to the terms of an Executive Employment Agreement dated April 27,
      2002
      (the “Executive Employment Agreement”). The Separation Agreement provided, among
      other things, that the former CEO (i) resign as a director of the Company as
      of
      August 10, 2004; (ii) release and forever discharge the Company from any and
      all
      claims the former CEO had or may have against the Company; (iii) the former
      CEO’s last day as an employee of the Company was extended until October 21,
      2004; (iv) on August 19, 2004, the Company paid the former CEO $125,000, subject
      to standard withholdings and deductions for the payment of certain of the former
      CEO’s legal fees; (v) on August 19, 2004, the Company paid $54,207, subject to
      standard withholdings, for accrued vacation pay; (vi) on August 19, 2004, the
      Company paid $10,000 to a third party for outplacement and transitional
      counseling services; (vii) on August 19, 2004, the Company paid for the former
      CEO’s unpaid and reasonably approved business expenses; (viii) the Company will
      provide the former CEO with certain health insurance benefits through June
      21,
      2005 in accordance with the terms of the Executive Employment Agreement, and
      (ix) on October 21, 2004, the Company paid the former CEO $125,000, subject
      to
      standard withholdings.





In
      September 2004, two major hurricanes made landfall within 30 miles north of
      the
      Company’s North Palm Beach, Florida office facility, resulting in periods of
      power outages and significant property damage throughout the region. The
      Company’s contingency and disaster recovery plans were activated which allowed
      for the continued, uninterrupted operation of Bankrate.com during the recovery
      periods. Significant damage to the roof of the office building resulted in
      the
      loss of certain furniture, fixtures, equipment and leasehold improvements.
      The
      majority of the losses were covered by insurance for which the Company filed
      a
      claim. As a result, a $241,000 insurance claim receivable was recorded as of
      December 31, 2004.





On
      October 4, 2004, Steve Horowitz, was appointed Vice President and Publisher
      and
      entered into an employment agreement with the Company. Under the terms of the
      employment agreement, Mr. Horowitz is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria, and a guaranteed bonus of $50,000 for
      2004 and of at least $30,000 for the first quarter of 2005. Under the terms
      of
      the employment agreement, Mr. Horowitz 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. Horowitz agrees not to compete with the Company and
      not
      to recruit any of the Company’s employees. Upon Mr. Horowitz’ 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 six month'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 three
      months after the termination date; and one-third payable six months from the
      termination date. Mr. Horowitz was also granted options to purchase 100,000
      shares of the Company’s common stock at $10.30, the fair market value on the
      date of grant. The options have a seven year term and vest as follows: 25,000
      shares on October 25, 2005; and 2,083.333 shares on the first day of each month
      beginning November 1, 2005 and ending October 25, 2008.





23





On
      January 22, 2005 and January 25, 2005, we entered into exclusive agreements
      with
      LowerMyBills, Inc. and iHomeowners, Inc., respectively. Under the terms of
      the
      agreements, we ran graphic advertisements from these companies on our home
      page,
      mortgage and refinance channels, calculators, and other areas of the Bankrate
      Web site on a category exclusive basis, at agreed-upon CPM’s. We also
      participated in a performance-based revenue sharing opportunity with each of
      the
      companies. The agreements with these companies terminated December 31, 2005.
      On
      January 1, 2006, the Company entered into a new agreement with LowerMyBills,
      Inc. under similar terms and that continues until March 31, 2006.





On
      April
      1, 2005, we previewed a redesigned Web site and added two channels. The new
      Web
      site included a new user interface and navigation architecture intended to
      provide a better experience for consumers and advertisers and an enhanced rate
      search process with the ability to sort and compare mortgage lenders and rates.
      The redesigned Web site also increased the number of Internet Advertising Bureau
      (IAB) compliant ad formats, which allowed us greater flexibility and opportunity
      of advertisers. In connection with the redesigned Web site, we added two new
      channels: a College Finance editorial channel and a Debt Management
      (sub-prime/problem credit). On May 2, 2005, we fully launched the redesigned
      Web
      site.





On
      April
      20, 2005, we added 174 new local markets. The expanded research offerings
      increased our market position in terms of the number of local markets covered
      and financial products researched for the benefit of consumers.





On
      May
      23, 2005, Lynn Varsell, was appointed Vice President-Publisher and entered
      into
      an employment agreement with the Company. Under the terms of the employment
      agreement, Ms. Varsell is entitled to receive an annual base salary as
      stipulated in the employment agreement, an annual bonus contingent on achieving
      certain performance criteria. Under the terms of the employment agreement,
      Ms.
      Varsell 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 six months thereafter, Ms.
      Varsell agrees not to compete with the Company and not to recruit any of the
      Company’s employees. Upon Ms. Varsell’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 six months’ base salary at the then-current
      rate payable in three equal installments; one-third payable 15 days after the
      termination date; one-third payable three months after the termination date;
      and
      one-third payable six months from the termination date. Ms. Varsell was also
      granted options to purchase 50,000 shares of the Company’s common stock at
      $17.13, the fair market value on the date of grant. The options have a
      seven-year term and vest as follows: 12,500 shares on May 23, 2006; and
      1,041.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 23, 2009.





On
      May
      31, 2005, Daniel P. Hoogterp, was appointed Senior Vice President-Chief
      Technology Officer and entered into an employment agreement with the Company.
      Under the terms of the employment agreement, Mr. Hoogterp is entitled to receive
      an annual base salary as stipulated in the employment agreement, an annual
      bonus
      contingent on achieving certain performance criteria, and a guaranteed bonus
      of
      $50,000 for 2005 that was paid in the first quarter of 2006. Under the terms
      of
      the employment agreement, Mr. Hoogterp 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
      six months thereafter, Mr. Hoogterp agrees not to compete with the Company
      and
      not to recruit any of the Company’s employees. Upon Mr. Hoogterp’ 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.
      Mr. Hoogterp was also granted options to purchase 80,000 shares of the Company’s
      common stock at $18.26, the fair market value on the date of grant. The options
      have a seven-year term and vest as follows: 20,000 shares on May 31, 2006;
      and
      1,666.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 31, 2009.





On
      October 1, 2005, we launched a new pay-for-performance pricing structure for
      our
      interest rate table (hyperlink) advertising business. The new pricing structure
      is a cost-per-click (“CPC”) model whereby advertisers will now pay us each time
      a visitor to our Web site clicks on a rate table listing. Prior to this launch,
      advertisers paid a flat monthly fee for their hyperlink. Beginning in the
      quarter ending December 31, 2005, we saw an increase in hyperlink revenue of
      35%
      from the same quarter in 2004.




On
      October 24, 2005, a major hurricane passed through the North Palm Beach, Florida
      area resulting in a power outage and minor damage to our office facility. Our
      contingency and disaster recovers plans were activated which allowed for the
      continued, uninterrupted operation of Bankrate.com during the recovery period.
      The majority of the losses and additional expenses incurred are covered by
      insurance for which we have filed a claim.




On
      November 3, 2005, we entered into a Lease (the “lease”) with Gardens Plaza
      Investors, LLC, for approximately 21,000 square feet of office space on the
      first and second floors of Golden Bear Plaza, West Tower, 11760 US Highway
      One,
      North Palm Beach, Florida. The initial lease term is for 10 years with an option
      to renew for one additional 5-year term. The lease calls for initial total
      annual rent of approximately $452,000, includes a 3.5% annual escalation clause,
      and is contingent on us terminating the existing sublease dated November 18,
      2004 on our existing office space. This space will replace our existing office
      space on the fifth floor of Golden Bear Plaza of approximately 12,400 square
      feet with total annual rent of approximately $303,000. We paid approximately
      $67,000 to be held as a refundable security deposit.





On
      November 30, 2005, we completed the acquisition of Wescoco LLC, a Delaware
      limited liability company d/b/a “FastFind” (“FastFind”) for $10 million in cash,
      subject to final Closing Date Net Working Capital adjustments under section
      3.03
      of the Agreement and Plan of Merger dated November 20, 2005. We paid $7 million
      in cash to the FastFind members and $3 million was placed in escrow to satisfy
      certain indemnification obligations of the FastFind members. Results of
      operations from December 1, 2005 to December 31, 2005 are included in our
      consolidated financial statements.




On
      December 1, 2005, we completed the acquisition of Mortgage Market Information
      Services, Inc., an Illinois corporation, and Interest.com, Inc., an Illinois
      corporation (“Interest.com” and collectively with Mortgage Market Information
      Services, Inc., “MMIS”), for $30 million in cash ***,*** subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005. ****** We paid
      $26 million on December 8, 2005, $1 million on January 5, 2006, and $3 million
      was placed in escrow to satisfy certain indemnification obligations of MMIS's
      shareholder. Results of operations from December 1, 2005 to December 31, 2005
      are included in our consolidated financial statements.




**Results
        of Operations and Critical Accounting Policies**
 
 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. This analysis should be read
        in
        conjunction with our financial statements, including the related notes to
        the
        financial statements. Other accounting policies are contained in Note 2 to
        the
        financial statements in Item 8. A detailed discussion of our accounting policies
        and procedures is set forth in the applicable sections of this
        analysis.




24





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





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Statement
                of Operations DataRevenue:Online
                publishing
            
            
            88
            %
            
            87
            %
            
            86
            %Print
                publishing and licensing
            
            
            12
            
            
            13
            
            
            14Total
                revenue
            
            
            100
            
            
            100
            
            
            100Cost
                of revenue:Online
                publishing
            
            
            15
            
            
            14
            
            
            12Print
                publishing and licensing
            
            
            11
            
            
            11
            
            
            11Total
                cost of revenue
            
            
            26
            
            
            25
            
            
            23Gross
                margin
            
            
            74
            
            
            75
            
            
            77Operating
                expenses:Sales
            
            
            8
            
            
            11
            
            
            14Marketing
            
            
            12
            
            
            16
            
            
            15Product
                development
            
            
            5
            
            
            6
            
            
            6General
                and administrative
            
            
            18
            
            
            17
            
            
            16Legal
                settlements
            
            
            —
            
            
            1
            
            
            —Severance
                charge
            
            
            —
            
            
            1
            
            
            —Depreciation
                and amortization
            
            
            2
            
            
            2
            
            
            245
            
            
            54
            
            
            53Income
                from operations
            
            
            29
            
            
            21
            
            
            24Other
                income, net
            
            
            2
            
            
            1
            
            
            1Gain
                on insurance proceeds
            
            
            1
            
            
            —
            
            
            —Income
                before income taxes
            
            
            32
            
            
            22
            
            
            25Income
                tax (expense) benefit
            
            
            (12
            )
            
            12
            
            
            8Net
                income
            
            
            20
            %
            
            34
            %
            
            33
            %





**Revenue**





**Total
                Revenue****Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Online
                publishing
            
            $
            43,296,384
            
            $
            33,942,241
            
            $
            31,368,392Print
                publishing and licensing
            
            
            5,752,647
            
            
            5,262,020
            
            
            5,253,099$
            49,049,031
            
            $
            39,204,261
            
            $
            36,621,491





***Online
      Publishing Revenue***





We
      sell
      graphical advertisements on our 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 we
      sell
      is a function of (1) the number of visitors to our Web site, (2) the number
      of
      ad pages we serve to those visitors, (3) the number of advertisements per page,
      and (4) the capacity of our sales force. Advertising sales are invoiced monthly
      at amounts based on specific contract terms. When the number of impressions
      over
      the contract term is guaranteed, the monthly invoiced amount is based on the
      monthly contractual number of impressions to be delivered at the contractual
      price, or CPM. Revenue is recognized monthly based on the actual number of
      impressions delivered, and the revenue corresponding to any under-delivery
      is
      deferred as unearned income on the balance sheet and is recognized later when
      the under-delivery is served. When the number of impressions over the contract
      term is not guaranteed, the monthly invoiced amount is determined and revenue
      is
      recognized based on the actual number of impressions delivered at the
      contractual price or CPM. 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, subject to our verification. 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 revenue is shared
      according to distribution agreements. Revenue is recorded at gross amounts
      and
      partnership payments are recorded in cost of revenue, pursuant to the provisions
      of Emerging Issues Task Force (“EITF”) 99-19, *Reporting
      Revenue Gross as a Principal versus Net as an Agent.* We also
      sell 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 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 though 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. On October 1, 2005, we launched a new pay-for-performance
      pricing structure for our interest rate table (hyperlink) advertising business.
      The new pricing structure is a CPC model whereby advertisers will now pay us
      each time a visitor to our Web site clicks on a rate table listing. Prior to
      this launch, advertisers paid a flat monthly fee for their
      hyperlink.





25




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 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
      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, 2005 and 2004. Barter revenue was approximately
      $2,254,000, $3,088,000 and $3,164,000 and represented approximately 5%, 8%
      and
      9% of total revenue, respectively, for the years ended December 31, 2005, 2004
      and 2003. Barter revenue was intentionally reduced as was down $834,000, or
      27% from 2004, as we focus more on monetizing our available views through paid
      advertising. Beginning January 1, 2006, we will no longer have barter
      advertising on our Web site.




**Online
                  Publishing Revenue****Year
                  Ended December 31,****2005**
              
              
              
              **2004**
              
              
              
              **2003****YTY**
              
              
              
              **YTY****Change**
              
              
              
              **Change**Graphic
                  advertisements
              
              $
              25,177,728
              
              
              54%
              
              $
              16,368,024
              
              
              13%
              
              $
              14,436,287Hyperlinks
              
              
              15,864,968
              
              
              10%
              
              
              14,486,226
              
              
              5%
              
              
              13,768,359Online
                  publishing revenue, excluding barter
              
              
              41,042,696
              
              
              33%
              
              
              30,854,250
              
              
              9%
              
              
              28,204,646Barter
              
              
              2,253,688
              
              
              -27%
              
              
              3,087,991
              
              
              -2%
              
              
              3,163,746$
              43,296,384
              
              
              28%
              
              $
              33,942,241
              
              
              8%
              
              $
              31,368,392




Online
      publishing revenue was $43,296,000, $33,942,000 and $31,368,000 in 2005, 2004
      and 2003, respectively, representing annual growth rates of 28% and 8% for
      2005
      and 2004, respectively. Excluding barter revenue, online publishing revenue
      was
      $41,043,000, $30,854,000 and $28,205,000 in 2005, 2004 and 2003, respectively,
      representing annual growth rates of 33% and 9% for 2005 and 2004,
      respectively.




Graphic
      advertisement sales were $8,810,000, or 54%, higher in 2005 due to higher CPMs
      and an increase in page views of 37.1 million, or 9%, compared to 2004. We
      also
      sold 48.3 million, or 3%, more ads during 2005 compared to 2004. During 2005,
      graphic advertisements were purchased by an average of 48 monthly graphic
      advertisers compared to 73 in 2004.





Graphic
      advertisement sales were $1,932,000, or 13%, higher in 2004 due to higher CPMs,
      offsetting an 11.6 million, or 3%, decline in page views compared to 2003.
      We
      also sold 130.1 million, or 10%, more ads during 2004 compared to 2003. During
      2004, graphic advertisements were purchased by an average of 73 graphic
      advertisers monthly compared to 63 in 2003.





During
      2004, we sold graphic advertisements to seven mortgage lead aggregators that
      generated approximately 50% of our graphic advertising revenue while using
      approximately 60% of our available inventory. In January 2005, we entered into
      exclusive agreements with LowerMyBills, Inc. and iHomeowners, Inc, respectively.
      Under the terms of the agreements, we ran graphic advertisements from these
      companies on our home page, mortgage and refinance channels, calculators, and
      other areas of our Web site on a category exclusive basis, at agreed-upon CPMs.
      We also participated in a performance-based revenue sharing opportunity with
      each of these companies. The agreements with these companies terminated on
      December 31, 2005. On January 1, 2006, we entered into a new agreement with
      LowerMyBills, Inc. under similar terms and continues until March 31,
      2006.





Hyperlink
      sales were $1,379,000, or 10%, higher in 2005 than in 2004 due to higher pricing
      during the first nine months 2005 and a conversion to a new pay-for-performance
      pricing structure during the last three months of 2005 even though the average
      number of monthly advertisers dropped by approximately 130 during 2005. During
      2005, there were an average of approximately 355 advertisers each month compared
      to 485 during 2004. The new CPC pricing structure does not rely on the quantity
      of advertisers as it did with the flat-fee based model but rather on page view
      traffic.





26





Hyperlink
      sales were $718,000, or 5%, higher in 2004 than in 2003 due to higher pricing
      even though the average number of monthly advertisers dropped by approximately
      100 during 2004. During 2004, there were approximately 485 advertisers on
      average each month compared to 585 during 2003.





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 CPMs.





Historically,
      in terms of page views, we have typically experienced a slowdown in traffic
      during our fourth quarter. 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 third quarter of 2004. As brand awareness continues to
      strengthen for Bankrate.com, we believe our quarterly page views will become
      more consistent with a possible decline in the fourth quarter due to the holiday
      season.





**Page
                Views****(Millions)****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001****Q1**
            
            
            111.0
            
            
            117.2
            
            
            106.7
            
            
            58.4
            
            
            70.5**Q2**
            
            
            113.8
            
            
            92.6
            
            
            121.8
            
            
            48.0
            
            
            52.2**Q3**
            
            
            107.8
            
            
            92.0
            
            
            100.3
            
            
            82.1
            
            
            47.3**Q4**
            
            
            97.6
            
            
            91.3
            
            
            75.8
            
            
            79.3
            
            
            66.5**Year**
            
            
            430.2
            
            
            393.1
            
            
            404.6
            
            
            267.8
            
            
            236.5





***Print
      Publishing and Licensing Revenue***





Print
      publishing and licensing revenue represents advertising revenue from the sale
      of
      advertising in the *Mortgage*  *Guide* (formerly called *Consumer
      Mortgage Guide* )
      rate
      tables, newsletter subscriptions, and licensing of research information. We
      charge a commission for placement of the *Mortgage
      Guide* in a
      print publication. Advertising revenue and commission income is recognized
      when
      the *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,****2005**
            
            
            
            **2004**
            
            
            
            **2003****YTY**
            
            
            
            **YTY****Change**
            
            
            
            **Change**Mortgage
                Guide
            
            $
            4,882,574
            
            
            11
            %
            $
            4,405,629
            
            
            0
            %
            $
            4,402,741Editorial
            
            
            870,073
            
            
            2
            %
            
            856,391
            
            
            1
            %
            
            850,358$
            5,752,647
            
            
            9
            %
            $
            5,262,020
            
            
            0
            %
            $
            5,253,099





Print
      publishing and licensing revenue for the year ended December 31, 2005 increased
      $491,000, or 9%, from 2004. We ended 2005 with 163 *Mortgage
      Guide* contracts, an increase of 135 from 2004, 107 of the contracts were the direct
      result of the acquisition of MMIS. Editorial sales were up 2% over 2004
      reflecting the newspapers’ continuing efforts to cut costs and reduce their
      editorial advertising content spending.





Print
      publishing and licensing revenue for the year ended December 31, 2004 was
      essentially unchanged from the prior year. We ended 2004 with 28 *Mortgage
      Guide* contracts, the same as in 2003, continuing the lower post-refinance consumer
      demand. Editorial sales were up 1% over 2003 reflecting the newspapers
      continuing efforts to cut costs and reduce their editorial advertising content
      spending.





27





**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.





**Online
                Publishing Gross Margin****Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Online
                publishing revenue, excluding barter
            
            $
            41,042,696
            
            $
            30,854,250
            
            $
            28,204,646Cost
                of online publishing revenue
            
            
            7,389,089
            
            
            5,534,456
            
            
            4,514,023Gross
                margin
            
            $
            33,653,607
            
            $
            25,319,794
            
            $
            23,690,62382
            %
            
            82
            %
            
            84
            %





Online
      publishing costs increased $1,855,000, or 34%, over 2004. The increase in direct
      costs was due primarily to higher revenue sharing payments ($988,000, or 43%)
      to
      our distribution partners reflecting higher associated revenue and traffic;
      and
      higher human resource costs ($637,000, or 48%) due to the addition of seven
      full-time equivalent employees during 2005 and merit increases.





Online
      publishing costs increased $1,020,000, or 23%, over 2003. The increase in direct
      costs was due primarily to higher revenue sharing payments ($880,000, or 62%)
      to
      our distribution partners reflecting higher associated revenue and traffic;
      and
      higher human resource costs ($255,000, or 12%) due to the addition of four
      full-time equivalent employees during 2004 and merit increases.





***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 *Mortgage
      Guide* ,
      compensation and benefits, printing and allocated overhead. These costs vary
      proportionately with the related revenue and increased $987,000, or 23%, in
      2005
      compared to 2004 and $315,000, or 8%, in 2004 compared to 2003. Revenue sharing
      payments were $578,000, or 16%, higher and $154,000, or 4% higher, in 2005
      and
      2004, respectively.





**Print
                Publishing & Licensing Gross Margin****Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Print
                publishing & licensing revenue
            
            $
            5,752,647
            
            $
            5,262,020
            
            $
            5,253,099Cost
                of print publishing & licensing revenue
            
            
            5,346,017
            
            
            4,359,444
            
            
            4,043,970Gross
                margin
            
            $
            406,630
            
            $
            902,576
            
            $
            1,209,1297
            %
            
            17
            %
            
            23
            %





**Other
      Expenses**





***Sales***





Sales
      expenses represent direct selling expenses of the advertising sales team,
      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, 2005 decreased $503,000, or 12%, from 2004 due
      to
      $258,000, or 19%, as a result of lower sales commissions following our
      restructuring of the online sales compensation plans and $185,000, or 9%, as
      a
      result of lower human resource costs due to the restructuring of the advertising
      sales team. Sales expenses for the year ended December 31, 2004 decreased
      $853,000, or 17%, from 2003 due to lower sales commissions ($1,013,000, or
      42%)
      resulting from lower online revenue growth in 2004, and modifications to the
      sales compensation plans offset by higher salaries and recruiting costs.





28





***Marketing***




**Marketing
                  Expenses****Year
                  Ended December 31,****2005**
              
              
              
              **2004**
              
              
              
              **2003****YTY**
              
              
              
              **YTY****Change**
              
              
              
              **Change**Keyword
                  and other marketing costs
              
              $
              3,669,276
              
              
              12%
              
              $
              3,269,433
              
              
              40%
              
              $
              2,332,064Barter
              
              
              2,253,688
              
              
              -27%
              
              
              3,087,991
              
              
              -2%
              
              
              3,163,746$
              5,922,964
              
              
              -7%
              
              $
              6,357,424
              
              
              16%
              
              $
              5,495,810




Marketing
      expenses represent expenses associated with expanding brand awareness of our
      products and services to consumers and include key word (pay-per-performance)
      campaigns on Internet search engines, 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 $2,254,000, $3,088,000
      and
      $3,164,000 for the years ended December 31, 2005, 2004 and 2003, respectively.
      Excluding barter expense, marketing expenses would have been $3,669,000,
      $3,269,000 and $2,332,000 for the years ended December 31, 2005, 2004 and 2003,
      respectively. For all years presented, marketing expenses increased due
      primarily to key word (pay-per-performance) campaigns on Internet search engines
      as traffic acquisition becomes more competitive. We anticipate having to spend
      at comparable levels in the foreseeable future except for barter expenses,
      which
      we have eliminated beginning January 1, 2006.




***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 expense for 2005
      of
      $2,457,000 were $51,000, or 2%, higher than the $2,406,000 in 2004. Product
      development expenses for 2004 were $135,000, or 6%, higher than the $2,271,000
      in 2003 primarily due to the expenses associated with the design and development
      of new products and higher human resources costs.





***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 19%, 18% and 17% in 2005,
      2004
      and 2003, respectively.





For
      the
      year ended December 31, 2005, general and administrative expenses were
      $2,368,000, or 36%, higher than the same period in 2004 due primarily to the
      following: $809,000 higher consulting and outside professional service fees,
      $105,000 higher rent costs and $1,704,000 higher incentive plan accruals based
      on measurements to plan. These increases were offset by a decrease of $208,000
      in consulting fees.





For
      the
      year ended December 31, 2004, general and administrative expenses were $854,000,
      or 15%, higher than the same period in 2003 due to the following: $437,000
      higher human resource costs and recruiting fees related to merit increases
      and
      new hire searches; $82,000 higher Internet hosting services fees due to
      increased bandwidth utilization; $168,000 higher consulting and outside
      professional service fees; and $555,000 in bad debt expense to increase the
      allowance for doubtful accounts supporting higher sales levels and receivable
      balances. These higher costs were offset by $282,000 lower incentive plan
      accruals based on measurements to plan, and $125,000 lower Nasdaq filing fees
      as
      both national market and SmallCap Market initial listing fees were paid in
      2003.





We
      maintain an allowance for doubtful accounts for estimated losses resulting
      from
      the inability or unwillingness of our customers to make required payments.
      We
      look at historical write-offs and sales growth when determining the adequacy
      of
      the allowance. As of December 31, 2005, our allowance increased as the customer
      base associated with the acquisitions made during 2005 are different than our
      traditional customers. Should the financial condition of our customers
      deteriorate, resulting in an impairment of their ability to make payments,
      or if
      the level of accounts receivable increases, the need for possible additional
      allowances may be necessary. Any additions to the allowance for doubtful
      accounts are recorded as bad debt expense and included in general and
      administrative expenses.





29





***Severance
      and Legal Settlement Charges***





On
      August
      10, 2004, we entered into a Separation and General Release Agreement (the
“Agreement”) with our former President and CEO (“former CEO”) pursuant to the
      terms of an Executive Employment Agreement dated April 27, 2002 (the “Executive
      Employment Agreement”). The Agreement provided, among other things, that the
      former CEO (i) resign as a director of the Company as of August 10, 2004; (ii)
      release and forever discharge the Company from any and all claims the former
      CEO
      had or may have against the Company; (iii) the former CEO’s last day as an
      employee of the Company was extended until October 21, 2004; (iv) on August
      19,
      2004, the Company paid the former CEO $125,000, subject to standard withholdings
      and deductions for the payment of certain of the former CEO’s legal fees; (v) on
      August 19, 2004, the Company paid $54,207, subject to standard withholdings,
      for
      accrued vacation pay; (vi) on August 19, 2004, the Company paid $10,000 to
      a
      third party for outplacement and transitional counseling services; (vii) on
      August 19, 2004, the Company paid for the former CEO’s unpaid and reasonably
      approved business expenses; (viii) the Company will provide the former CEO
      with
      certain health insurance benefits through June 21, 2005 in accordance with
      the
      terms of the Executive Employment Agreement, and (ix) on October 21, 2004,
      the
      Company paid the former CEO $125,000, subject to standard withholdings. The
      Company recorded $260,000 as a severance charge in the quarter ended June 30,
      2004.





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.
      On
      October 8, 2004, we were notified that the buyer settled the litigation matter,
      effective October 1, 2004, and we reimbursed the buyer $390,000 under the
      indemnity. The $390,000 was recorded in the quarter ended September 30, 2004
      as
      a legal settlement charge.





In
      February 2005, we settled a contractual dispute with a former Internet and
      co-location facility provider for $120,000. This amount is included in legal
      settlements in the accompanying statement of operations for the year ended
      December 31, 2004.





***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 2005, we purchased
      approximately $244,000 of depreciable assets and depreciation and amortization
      increased $153,000, or 21%, over 2004, of which, $122,000 relatd to the
      amortization expense incurred from the acquisitions. During 2004, we purchased
      approximately $1,065,000 of depreciable assets, primarily in the third and
      fourth quarters, and depreciation and amortization increased $62,000, or 9%,
      over 2003.





***Other
      Income (Expense), Net***





Other
      income (expense), net consists primarily of interest income on invested cash
      and
      cash equivalents and a gain from insurance proceeds. Other income (expense),
      net
      for the year ended December 31, 2005 was $743,000, or 181%, higher than the
      comparable amount in 2004, due to higher cash balances and a gain on insurance
      proceeds. Other income (expense), net for the year December 31, 2004 was
      $167,000, or 69%, higher than the comparable amount in 2003 due to higher cash
      balances and a non-refundable cash advance, net of commissions, of $42,000
      from
      a book authored by the Company’s Chief Operating Officer.





***Income
      Taxes***





Our
      effective rate differs from the statutory federal income tax rate, in 2005
      primarily due to state income taxes and in 2004 and 2003, primarily as a result
      of the changes in the valuation allowance on deferred tax assets.




As
      required by 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 management reassessed the
      valuation allowance previously established against deferred tax assets. Factors
      considered included: 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 was more likely than
      not that a portion of the deferred tax assets would be realized and,
      accordingly, released $3,400,000 of the valuation allowance, which resulted
      in
      an income tax benefit of approximately $3,100,000.





30





During
      the quarters ended March 31, June 30, and Sept 30, 2004, we continued to
      evaluate the need for a valuation allowance against the deferred tax asset.
      We
      completed our business planning process during the fourth quarter of 2004,
      which
      included the following strategic initiatives for 2005: the enhancement of our
      quality control process and procedures; the re-design of our Web site; the
      execution of exclusive advertising contracts with two mortgage lead aggregators;
      broadening the breadth and depth of our products and services; a reorganization
      of our advertising sales force; and the migration to a cost-per-click revenue
      model on our rate tables. Considering these strategic initiatives and their
      impact on future earnings potential, we concluded that it is more likely than
      not that we will generate sufficient taxable income in future periods to realize
      the entire deferred tax asset. At December 31, 2004, we reversed the remaining
      $9,400,000 valuation allowance, resulting in an income tax benefit of $4,800,000
      and a net deferred tax asset of $11,400,000. The realization of the $11,400,000
      deferred tax asset depends on our ability to continue to generate taxable income
      in the future. If we determine that we will not be able to realize all or a
      portion of the deferred tax asset in the future, an adjustment to the deferred
      tax asset will be charged against earnings in the period such determination
      is
      made. Approximately $1,200,000 million of the valuation allowance was
      attributable to the tax benefit of stock options exercised in a prior year.
      The
      income tax benefit relating to stock options exercised during 2004 was
      approximately $2,000,000, for a total 2004 benefit of approximately $3,200,000
      which was allocated to stockholders’ equity.





At
      December 31, 2005, we had net operating loss carryforwards for Federal income
      tax purposes of approximately $13,997,000, 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.





***Related
      Party Transactions***





We
      formerly leased office space in North Palm Beach, Florida from Bombay Holdings,
      Inc., which is wholly-owned by Peter C. Morse, a director and 32% stockholder.
      Total rent paid to Bombay for the years ended December 31, 2004 and 2003 was
      approximately $244,000 and $305,000, respectively. That lease was terminated
      effective December 31, 2004.





During
      2004 and 2003, we paid an outside director consulting fees of approximately
      $17,000 and $50,000, respectively. There were no such fees in 2005 as the
      consulting arrangement was terminated in 2004.





*Goodwill
      and Other
      Intangibles*




In
      accordance with SFAS No. 142,*Goodwill
      and Other Intangible Assets*,
      we test
      goodwill for impairment at least annually at the reporting unit level in lieu
      of
      being amortized. We have determined that we have two reporting units, online
      publishing and print publishing and licensing, under SFAS No. 142 as these
      are
      the components of the business for which discrete financial information is
      available and for which segment management regularly reviews the operating
      results.




The
      goodwill impairment test is a two-step test. Under the first step, the fair
      value of the reporting unit is compared with its carrying value (including
      goodwill). If the fair value of the reporting unit is less than its carrying
      value, an indication of goodwill impairment exists for the reporting unit,
      accordingly, the enterprise must perform step two of the impairment test
      (measurement).




We
      will
      perform an annual impairment review of goodwill for both reporting units on
      during the fourth quarter of each year.




SFAS
      No.
      142 also requires that intangible assets with definite lives be amortized over
      their estimated useful life and reviewed for impairment in accordance with
      SFAS
      No. 144,*Accounting
      for the Impairment or Disposal of Long-Lived Assets*.




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, 2005.
      The information has been derived from our unaudited condensed consolidated
      financial statements. In the opinion of our management, the unaudited condensed
      consolidated 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.





31





(In
                thousands, except share and per share data)
            
            (A)
            
            Year
                Ended December 31, 2005
            
            Year
                Ended December 31, 2004Revenue:
            
            December
                31
            
            September
                30
            
            June
                30
            
            March
                31
            
            December
                31
            
            September
                30
            
            June
                30
            
            March
                31Online
                publishing
            
            $
            11,611
            
            $
            11,214
            
            $
            11,204
            
            $
            9,267
            
            $
            8,107
            
            $
            8,158
            
            $
            8,694
            
            $
            8,982Print
                publishing and licensing
            
            
            2,279
            
            
            1,158
            
            
            1,161
            
            
            1,155
            
            
            1,243
            
            
            1,311
            
            
            1,417
            
            
            1,292Total
                revenue
            
            
            13,890
            
            
            12,372
            
            
            12,365
            
            
            10,422
            
            
            9,350
            
            
            9,469
            
            
            10,111
            
            
            10,274Cost
                of revenue:Online
                publishing
            
            
            2,024
            
            
            1,902
            
            
            1,823
            
            
            1,640
            
            
            1,353
            
            
            1,337
            
            
            1,424
            
            
            1,420Print
                publishing and licensing
            
            
            2,051
            
            
            1,117
            
            
            1,075
            
            
            1,103
            
            
            1,051
            
            
            1,089
            
            
            1,177
            
            
            1,042Total
                cost of revenue
            
            
            4,075
            
            
            3,019
            
            
            2,898
            
            
            2,743
            
            
            2,404
            
            
            2,426
            
            
            2,601
            
            
            2,462Gross
                margin
            
            
            9,815
            
            
            9,353
            
            
            9,467
            
            
            7,679
            
            
            6,946
            
            
            7,043
            
            
            7,510
            
            
            7,812Operating
                expenses:Sales
            
            
            926
            
            
            944
            
            
            971
            
            
            842
            
            
            897
            
            
            915
            
            
            1,071
            
            
            1,303Marketing
            
            
            1,313
            
            
            1,377
            
            
            1,713
            
            
            1,520
            
            
            1,445
            
            
            1,358
            
            
            1,805
            
            
            1,750Product
                development
            
            
            745
            
            
            697
            
            
            511
            
            
            504
            
            
            582
            
            
            600
            
            
            618
            
            
            606General
                and administrative
            
            
            2,738
            
            
            2,161
            
            
            2,222
            
            
            1,914
            
            
            1,773
            
            
            1,678
            
            
            1,530
            
            
            1,687Legal
                settlements
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            120
            
            
            390
            
            
            —
            
            
            —Severance
                charge
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            260
            
            
            —Depreciation
                and amortization
            
            
            317
            
            
            181
            
            
            208
            
            
            189
            
            
            190
            
            
            187
            
            
            193
            
            
            1726,039
            
            
            5,360
            
            
            5,625
            
            
            4,969
            
            
            5,007
            
            
            5,128
            
            
            5,477
            
            
            5,518Income
                from operations
            
            
            3,776
            
            
            3,993
            
            
            3,842
            
            
            2,710
            
            
            1,939
            
            
            1,915
            
            
            2,033
            
            
            2,294Other
                income, net
            
            
            277
            
            
            302
            
            
            212
            
            
            362
            
            
            118
            
            
            138
            
            
            77
            
            
            77Income
                before income taxes
            
            
            4,053
            
            
            4,295
            
            
            4,054
            
            
            3,072
            
            
            2,057
            
            
            2,053
            
            
            2,110
            
            
            2,371Income
                tax (expense) benefit
            
            
            (1,461
            )
            
            (1,632
            )
            
            (1,540
            )
            
            (1,167
            )
            
            4,766
            
            
            —
            
            
            —
            
            
            —Net
                income
            
            $
            2,592
            
            $
            2,663
            
            $
            2,514
            
            $
            1,905
            
            $
            6,823
            
            $
            2,053
            
            $
            2,110
            
            $
            2,371Basic
                and diluted net income per share:Net
                income-Basic
            
            $
            0.16
            
            $
            0.17
            
            $
            0.16
            
            $
            0.12
            
            $
            0.43
            
            $
            0.13
            
            $
            0.14
            
            $
            0.16Diluted
            
            $
            0.15
            
            $
            0.16
            
            $
            0.15
            
            $
            0.12
            
            $
            0.42
            
            $
            0.13
            
            $
            0.13
            
            $
            0.15Weighted
                average common shares outstanding:Basic
            
            
            15,829,601
            
            
            15,815,057
            
            
            15,804,045
            
            
            15,787,264
            
            
            15,732,686
            
            
            15,506,719
            
            
            15,310,318
            
            
            15,198,675Diluted
            
            
            17,262,632
            
            
            17,109,385
            
            
            16,590,763
            
            
            16,561,802
            
            
            16,288,812
            
            
            15,869,708
            
            
            16,084,565
            
            
            15,958,487





(A)
      Includes the acquired operations of Wescoco LLC, and Mortgage Market Information
      Services, Inc. and Interest.com as of and for the period from December 1,
      2005 to December 31, 2005.





32





**Liquidity
      and Capital Resources**





Our
      principal source of liquidity is the cash generated by our operations. As of
      December 31, 2005, we had working capital of $9,809,000, and our primary
      commitments were approximately $3,028,000 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
      $9,136,000 through December 31, 2006. 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.





***Contractual
      Obligations***





The
      following table represents the amounts of payments due under the specified
      types
      of contractual obligations, as of December 31, 2005:


**Payments
                  Due****Less
                than**
            
            **One
                to**
            
            **Three
                to**
            
            **More
                than****Total**
            
            **one
                year**
            
            **three
                years**
            
            **five
                years**
            
            **five
                years**Long-term
                debt obligations
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Capital
                lease obligations (1)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Operating
                lease obligations (1)
            
            
            6,084,488
            
            
            793,364
            
            
            1,220,923
            
            
            1,013,929
            
            
            3,056,272Purchase
                obligations (2)
            
            
            681,942
            
            
            523,142
            
            
            158,800
            
            
            —
            
            
            —Other
                long-term obligations
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —$
            6,766,430
            
            $
            1,316,506
            
            $
            1,379,723
            
            $
            1,013,929
            
            $
            3,056,272





(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, 2005, we generated $14,549,000 of net cash from
      operating activities. Our net income of $9,674,000 was adjusted for depreciation
      and amortization of $895,000; and bad debt expense of $200,000; the tax benefit
      of incentive stock options exercised during 2005 of $446,000, and a deferred
      tax
      benefit of $4,932,000, and a net negative change in the components of operating
      assets and liabilities of $1,599,000. Of this negative change, $3,337,000
      resulted from an increase in accounts receivable and $1,822,000 resulted from
      an
      increase in accrued expenses. Exclusive of the acquisitions of FastFind and
      MMIS/Interest.com, accounts receivable balances were higher at December 31,
      2005
      as a result of higher sales levels. Our average monthly collections on accounts
      were $3,604,000, or 57%, of the average monthly account balances, down on a
      percentage basis from 63% in 2004. Our accounts receivable turnover declined
      and
      days sales outstanding increased to 7.13 and 51, respectively, compared to
      7.86
      and 46, respectively, in 2004. Exclusive of the acquisitions, the decrease
      in
      other assets was primarily due to a decrease in our insurance claim receivable
      from damages sustained during Hurricane Wilma in October 2005 compared to the
      two hurricanes in September 2004. During 2005, net cash of $39,203,000 was
      used
      for investing activities, of which $38,970,000 was related to our two
      acquisitions and related costs and $244,000 was to purchase equipment and other
      fixed assets. Net cash provided by financing activities consisted of the
      proceeds from 77,066 stock options exercised at strike prices between $0.85
      and
      $13.00.





During
      the year ended December 31, 2004, we generated $7,044,000 of net cash from
      operating activities. Our net income of $13,356,000 was adjusted for
      depreciation and amortization of $743,000 and bad debt expense of $555,000;
      the
      tax benefit of incentive stock options exercised during 2004 of $3,170,000,
      and
      a deferred tax benefit of $8,007,000, both resulting from reversing the
      remaining allowance against deferred tax assets as of December 31, 2004 (see
      Note 5 to the financial statements in Item 8.); and a net negative change in
      the
      components of operating assets and liabilities of $2,774,000. Of this negative
      change, $1,867,000 resulted from an increase in accounts receivable and $521,000
      resulted from an increase in other assets. Accounts receivable balances were
      higher at December 31, 2004 supporting higher sales levels, and the slow-down
      of
      refinance activity during 2004 that negatively impacted certain customers.
      We
      also had more sales to larger customers purchasing advertising through agencies
      during 2004. These accounts tend to run higher balances and take somewhat longer
      to collect. Our average collections on accounts were $2,889,000, or 63%, of
      the
      average monthly account balances, down on a percentage basis from 81% in 2003.
      Our accounts receivable turnover declined slightly and days sales outstanding
      increased slightly to 7.86 and 46, respectively, compared to 9.82 and 37,
      respectively, in 2003. The increase in other assets was primarily due to an
      increase in prepaid expenses related to the purchase of software licenses and
      maintenance agreements, and an insurance claim receivable from damages sustained
      during the two hurricanes in September 2004. During 2004, net cash of $1,066,000
      was used to purchase equipment and other fixed assets. Net cash provided by
      financing activities consisted primarily of the proceeds from 666,440 stock
      options exercised at strike prices between $0.85 and $13.00.





33





**Off
      Balance Sheet Arrangements and Contractual Obligations**





We
      have
      not entered into any transactions, agreements or other contractual arrangements
      to which an entity unconsolidated with us is a party.





**Recent
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued 
SFAS No. 123R, *Share-Based
      Payment,* which
      replaces SFAS No. 123, *Accounting
      for Stock-Based Compensation* and
      supercedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      No. 123R requires the measurement of all share-based payments to directors
      and
      employees, including stock option grants, using a fair value-based method and
      the recording of such expense in our consolidated statements of operations.
      In
      April 2005, The SEC announced that the accounting provisions of SFAS No. 123R
      are to be applied in the first quarter of the fiscal year beginning after June
      15, 2005. As a result, we are now required to adopt SFAS No. 123R in the first
      quarter of 2006 and will recognize stock-based compensation expense using the
      modified prospective method. The pro forma disclosures previously permitted
      under SFAS No. 123 will no longer be an alternative to financial statement
      recognition. See Note 2 in our Notes to Consolidated Financial Statements for
      the pro forma net income and net income per share amounts as if we had used
      a
      fair value-based method similar to the methods required under SFAS No. 123R
      to
      measure compensation expense for employee stock incentive awards. We expect
      the
      adoption to significantly reduce earnings per share by approximately
      $0.25-$0.30.




In
      December 2004, the FASB issued SFAS No. 153, *Exchanges
      of Nonmonetary Assets — an amendment of APB Opinion
      No. 29.* This
      Statement amends APB No. 29 to eliminate the exception for nonmonetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. SFAS
      No. 153 is effective for nonmonetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005. Therefore, the Company adopted this
      Statement effective January 1, 2006. The adoption of SFAS No. 153 did
      not have an impact on the Company’s consolidated results of operations or
      financial position.





**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, 2005, 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.





34





**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





**INDEX
      TO FINANCIAL STATEMENTS**





PAGEReports
                of Independent Registered Public Accounting Firm
            36-38Consolidated
                Balance Sheets as of December 31, 2005 and 2004
            39Consolidated
                Statements of Operations for the Years Ended December 31, 2005, 2004
                and
                2003
            40Consolidated
                Statements of Stockholders' Equity for the Years Ended December 31,
                2005,
                2004 and 2003
            41Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2005, 2004
                and
                2003
            42Notes
                to Consolidated Financial Statements
            43








35





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


Bankrate,
      Inc.:




We
      have
      audited management’s assessment, included in the accompanying *Management’s
      Report on Internal Control Over Financial Reporting* appearing
      under Item 9A *,* that
      Bankrate, Inc. maintained effective internal control over financial reporting
      as
      of December 31, 2005, based on criteria established in *Internal
      Control—Integrated Framework* ,
      issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO) *.* Bankrate,
      Inc.’s management is responsible for maintaining effective internal control over
      financial reporting and for its assessment of the effectiveness of internal
      control over financial reporting. Our responsibility is to express an opinion
      on
      management’s assessment and an opinion on the effectiveness of the Company’s
      internal control over financial reporting based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      opinion, management’s assessment that Bankrate, Inc. maintained effective
      internal control over financial reporting as of December 31, 2005, is fairly
      stated, in all material respects, based on criteria established in *Internal
      Control—Integrated Framework* ,
      issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO) *.* Also,
      in
      our opinion, Bankrate, Inc. maintained, in all material respects, effective
      internal control over financial reporting as of December 31, 2005, based on criteria
      established in *Internal
      Control—Integrated Framework* issued
      by the Committee of
      Sponsoring Organizations of the Treadway Commission (COSO) .





Bankrate,
      Inc. acquired Wescoco LLC, d/b/a FastFind and Mortgage Market Information
      Services, Inc. and Interest.com on November 30, 2005 and December 1, 2005,
      respectively, and management excluded from its assessment of the effectiveness
      of Bankrate, Inc.’s internal control over financial reporting as of December 31,
      2005, Wescoco LLC’s and Mortgage Market Information Services, Inc. and
      Interest.com’s internal control over financial reporting associated with total
      assets of $10,577,000 and $32,696,000 and total revenues of $166,000 and
      $1,271,000, respectively, included in the consolidated financial statements
      of
      Bankrate, Inc. and subsidiaries as of and for the year ended December 31, 2005.
      Our audit of internal control over financial reporting of Bankrate, Inc. also
      excluded an evaluation of the internal control over financial reporting of
      Wescoco LLC, d/b/a FastFind and Mortgage Market Information Services, Inc.
      and
      Interest.com.





36





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Bankrate,
      Inc. and subsidiaries as of December 31, 2005 and 2004, and the related
      consolidated statements of operations, stockholders’ equity, and cash flows for
      each of the years in the three-year period ended December 31, 2005, and our
      report dated March 15, 2006 expressed an unqualified opinion on those
      consolidated financial statements.





/s/KPMG
      LLP





Fort
      Lauderdale, Florida


March
      15,
      2006


Certified
      Public Accountant








37





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


Bankrate,
      Inc.:




We
      have
      audited the accompanying consolidated balance sheets of Bankrate, Inc. and
      subsidiaries as of December 31, 2005 and 2004, and the related consolidated
      statements of operations, stockholders’ equity, and cash flows for each of the
      years in the three-year period ended December 31, 2005. These consolidated
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Bankrate, Inc. and
      subsidiaries as of December 31, 2005 and 2004, and the results of their
      operations and their cash flows for each of the years in the three-year period
      ended December 31, 2005, in conformity with U.S. generally accepted
      accounting principles.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Bankrate, Inc.’s internal
      control over financial reporting as of December 31, 2005, based on criteria
      established in *Internal
      Control—Integrated Framework,* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
      and
      our report dated March 15, 2006 expressed an unqualified opinion on
      management’s assessment of, and the effective operation of, internal control
      over financial reporting.





/s/KPMG
      LLP





Fort
      Lauderdale, Florida


March
      15,
      2006


Certified
      Public Accountants








38





**Bankrate,
                Inc.**Consolidated
                Balance Sheets




**December
                31,****2005**
            
            **2004**AssetsCash
                and cash equivalents
            
            $
            3,479,609
            
            $
            27,735,267Accounts
                receivable, net of allowance for doubtful accounts of approximately
                $1,630,000 and $400,000 at December 31, 2005 and 2004,
                respectively
            
            
            8,838,879
            
            
            4,343,747Deferred
                income taxes, current portion
            
            
            6,445,636
            
            
            4,359,058Insurance
                claim receivable
            
            
            85,575
            
            
            241,015Prepaid
                expenses and other current assets
            
            
            481,677
            
            
            369,572Total
                current assets
            
            
            19,331,376
            
            
            37,048,659Furniture,
                fixtures and equipment, net
            
            
            1,063,307
            
            
            1,275,605Deferred
                income taxes
            
            
            28,769
            
            
            7,047,521Intangible
                assets, net
            
            
            11,652,161
            
            
            205,656Goodwill
            
            
            30,035,399
            
            
            —Other
                assets
            
            
            442,211
            
            
            429,079Total
                assets
            
            $
            62,553,223
            
            $
            46,006,520Liabilities
                and Stockholders' EquityLiabilities:Accounts
                payable
            
            $
            3,215,645
            
            $
            1,386,164Accrued
                expenses
            
            
            5,093,187
            
            
            1,749,058Deferred
                revenue
            
            
            414,136
            
            
            192,357Other
                current liabilities
            
            
            799,170
            
            
            93,352Total
                current liabilities
            
            
            9,522,138
            
            
            3,420,931Other
                liabilities
            
            
            178,133
            
            
            251,391Total
                liabilities
            
            
            9,700,271
            
            
            3,672,322Stockholders'
                equity:Preferred
                stock, 10,000,000 shares authorized and undesignated
            
            
            —
            
            
            —Common
                stock, par value $.01 per share -- 100,000,000 shares authorized;
                15,857,877 and 15,780,811 shares issued and outstanding at December
                31,
                2005 and 2004, respectively
            
            
            158,579
            
            
            157,808Additional
                paid in capital
            
            
            70,981,544
            
            
            70,137,462Accumulated
                deficit
            
            
            (18,287,171
            )
            
            (27,961,072
            )Total
                stockholders' equity
            
            
            52,852,952
            
            
            42,334,198Total
                liabilities and stockholders' equity
            
            $
            62,553,223
            
            $
            46,006,520




See
        accompanying notes to consolidated financial statements.





39





**Bankrate,
                Inc.**Consolidated
                Statements of Operations




**Year
                Ended December 31,**Revenue:
            
            **2005**
            
            **2004**
            
            **2003**Online
                publishing
            
            $
            43,296,384
            
            $
            33,942,241
            
            $
            31,368,392Print
                publishing and licensing
            
            
            5,752,647
            
            
            5,262,020
            
            
            5,253,099Total
                revenue
            
            
            49,049,031
            
            
            39,204,261
            
            
            36,621,491Cost
                of revenue:Online
                publishing
            
            
            7,389,089
            
            
            5,534,456
            
            
            4,514,023Print
                publishing and licensing
            
            
            5,346,017
            
            
            4,359,444
            
            
            4,043,970Total
                cost of revenue
            
            
            12,735,106
            
            
            9,893,900
            
            
            8,557,993Gross
                margin
            
            
            36,313,925
            
            
            29,310,361
            
            
            28,063,498Operating
                expenses:Sales
            
            
            3,683,482
            
            
            4,186,799
            
            
            5,039,892Marketing
            
            
            5,922,964
            
            
            6,357,424
            
            
            5,495,810Product
                development
            
            
            2,456,628
            
            
            2,405,676
            
            
            2,271,124General
                and administrative
            
            
            9,034,964
            
            
            6,667,448
            
            
            5,813,297Legal
                settlements
            
            
            —
            
            
            510,000
            
            
            —Severance
                charge
            
            
            —
            
            
            260,000
            
            
            —Depreciation
                and amortization
            
            
            895,369
            
            
            742,659
            
            
            680,82621,993,407
            
            
            21,130,006
            
            
            19,300,949Income
                from operations
            
            
            14,320,518
            
            
            8,180,355
            
            
            8,762,549Other
                income, net
            
            
            932,831
            
            
            410,107
            
            
            242,759Gain
                on insurance proceeds
            
            
            220,705
            
            
            —
            
            
            —Income
                before income taxes
            
            
            15,474,054
            
            
            8,590,462
            
            
            9,005,308Income
                tax (expense) benefit
            
            
            (5,800,153
            )
            
            4,765,660
            
            
            3,100,000Net
                income
            
            $
            9,673,901
            
            $
            13,356,122
            
            $
            12,105,308Basic
                and diluted earnings per share:Basic
            
            $
            0.61
            
            $
            0.87
            
            $
            0.84Diluted
            
            $
            0.57
            
            $
            0.84
            
            $
            0.79Weighted
                average common shares outstanding:Basic
            
            
            15,809,259
            
            
            15,438,097
            
            
            14,473,151Diluted
            
            
            16,922,218
            
            
            15,975,382
            
            
            15,299,734





See
      accompanying notes to consolidated financial statements.





40





**Bankrate,
                Inc.**Consolidated
                Statements of Stockholders' Equity





**Additional****Common
                Stock**
            
            **Paid-in**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Total**Balances,
                December 31, 2002
            
            
            13,998,168
            
            
            139,982
            
            
            63,932,578
            
            
            (53,422,502
            )
            
            10,650,058Stock
                options exercised
            
            
            1,116,203
            
            
            11,162
            
            
            2,158,436
            
            
            —
            
            
            2,169,598Net
                income for the period
            
            
            —
            
            
            —
            
            
            —
            
            
            12,105,308
            
            
            12,105,308Balances,
                December 31, 2003
            
            
            15,114,371
            
            
            151,144
            
            
            66,091,014
            
            
            (41,317,194
            )
            
            24,924,964Stock
                options exercised
            
            
            666,440
            
            
            6,664
            
            
            875,949
            
            
            —
            
            
            882,613Tax
                benefit-stock options
            
            
            —
            
            
            —
            
            
            3,170,499
            
            
            —
            
            
            3,170,499Net
                income for the period
            
            
            —
            
            
            —
            
            
            —
            
            
            13,356,122
            
            
            13,356,122Balances,
                December 31, 2004
            
            
            15,780,811
            
            
            157,808
            
            
            70,137,462
            
            
            (27,961,072
            )
            
            42,334,198Stock
                options exercised
            
            
            77,066
            
            
            771
            
            
            398,266
            
            
            —
            
            
            399,037Tax
                benefit-stock options
            
            
            —
            
            
            —
            
            
            445,816
            
            
            —
            
            
            445,816Net
                income for the period
            
            
            —
            
            
            —
            
            
            —
            
            
            9,673,901
            
            
            9,673,901Balances,
                December 31, 2005
            
            
            15,857,877
            
            $
            158,579
            
            $
            70,981,544
            
            $
            (18,287,171
            )
            $
            52,852,952





See
      accompanying notes to consolidated financial statements.





41





**Bankrate,
                Inc.**Consolidated
                Statements of Cash Flows





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Cash
                flows from operating activities:Net
                income
            
            $
            9,673,901
            
            $
            13,356,122
            
            $
            12,105,308Adjustments
                to reconcile net income to net cash provided byoperating
                activities:Depreciation
                and amortization
            
            
            895,369
            
            
            742,659
            
            
            680,826Provision
                for doubtful accounts receivables
            
            
            199,883
            
            
            554,935
            
            
            110,771Tax
                benefit-stock options
            
            
            445,816
            
            
            3,170,499
            
            
            —Deferred
                income taxes
            
            
            4,932,174
            
            
            (8,006,579
            )
            
            (3,400,000
            )Changes
                in operating assets and liabilities, net of effects from business
                acquisitionsIncrease
                in Accounts receivable
            
            
            (3,336,795
            )
            
            (1,866,800
            )
            
            (764,118
            )Decrease
                (increase) in Prepaid expenses and other assets
            
            
            125,498
            
            
            (521,161
            )
            
            (137,170
            )(Decrease)
                increase in Accounts payable
            
            
            (394,337
            )
            
            158,701
            
            
            418,395Increase
                (decrease) in Accrued expenses
            
            
            1,821,796
            
            
            (477,847
            )
            
            (864,112
            )(Decrease)
                increase in Other liabilities
            
            
            (37,213
            )
            
            (78,082
            )
            
            37,962Increase
                (decrease) in Deferred revenue
            
            
            221,779
            
            
            11,247
            
            
            (73,971
            )Net
                cash provided by operating activities
            
            
            14,547,871
            
            
            7,043,694
            
            
            8,113,891Cash
                flows from investing activities:Purchases
                of equipment
            
            
            (244,434
            )
            
            (1,065,522
            )
            
            (408,314
            )Cash
                used in business acquisitions, net of cash acquired
            
            
            (38,970,481
            )
            
            —
            
            
            —Proceeds
                from sale of assets
            
            
            12,349
            
            
            —
            
            
            —Net
                cash used in investing activities
            
            
            (39,202,566
            )
            
            (1,065,522
            )
            
            (408,314
            )Cash
                flows from financing activities:Principal
                payments on capital lease obligations
            
            
            —
            
            
            —
            
            
            (1,254
            )Proceeds
                from exercise of stock options
            
            
            399,037
            
            
            882,613
            
            
            2,169,598Net
                cash provided by financing activities
            
            
            399,037
            
            
            882,613
            
            
            2,168,344Net
                (decrease) increase in cash and cash equivalents
            
            
            (24,255,658
            )
            
            6,860,785
            
            
            9,873,921Cash
                and equivalents, beginning of period
            
            
            27,735,267
            
            
            20,874,482
            
            
            11,000,561Cash
                and equivalents, end of period
            
            $
            3,479,609
            
            $
            27,735,267
            
            $
            20,874,482Supplemental
                disclosures of cash flow information:Cash
                paid during the period for interest
            
            $
            —
            
            $
            —
            
            $
            323Cash
                paid during the period for income taxes
            
            $
            33,870
            
            $
            128,500
            
            $
            283,000





See
      accompanying notes to consolidated financial statements.





42





**BANKRATE,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      1 - ORGANIZATION AND BASIS OF PRESENTATION**





Bankrate,
      Inc. and subsidiaries (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 300 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
      November 30, 2005, the Company completed the acquisition of Wescoco LLC, a
      Delaware limited liability company d/b/a “FastFind” (“FastFind”) for $10 million
      in cash, subject to final Closing Date Net Working Capital adjustments under
      section 3.03 of the Agreement and Plan of Merger dated November 20, 2005. The
      Company paid $7 million in cash to the FastFind members and $3 million was
      placed in escrow to satisfy certain indemnification obligations of the FastFind
      members. Results of FastFind’s operations from December 1, 2005 to December 31,
      2005 are included in the consolidated financial statements of the
      Company.




On
      December 1, 2005, the Company completed the acquisition of Mortgage Market
      Information Services, Inc., an Illinois corporation, and Interest.com, Inc.,
      an
      Illinois corporation (“Interest.com” and collectively with Mortgage Market
      Information Services, Inc., “MMIS”), for $30 million in cash ***,*** subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005. ****** The
      Company paid $26 million on December 8, 2005, $1 million on January 5, 2006,
      and
      $3 million was placed in escrow to satisfy certain indemnification obligations
      of MMIS's shareholder. Results of MMIS’s operations from December 1, 2005 to
      December 31, 2005 are included in the consolidated financial statements of
      the
      Company.





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      consolidated financial statements include the accounts of Bankrate, Inc. and
      it's wholly-owned subsidies, Wescoco LLC, Mortgage Market Information Services,
      Inc., and Interest.com. All intercompany accounts and transactions have been
      eliminated. See Note 9.





**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.





**Allowance
      for Doubtful Accounts Receivable**





The
      Company’s allowance for doubtful accounts receivable is maintained for estimated
      losses resulting from the inability or unwillingness of its customers to make
      required payments. The Company looks at historical write-offs and revenue growth
      when determining the allowance for doubtful accounts. If the financial condition
      of those customers deteriorates, resulting in an impairment of their ability
      to
      make payments, additional allowances could be necessary.





43





**Furniture,
      Fixtures and Equipment**





Furniture,
      fixtures and equipment 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.





**Intangible
      Assets**





Intangible
      assets consist primarily of trademarks and URLs, software licenses, customer
      relationships, developed technologies and non-compete agreements. Intangible
      assets are being amortized over their estimated useful lives on a straight-line
      basis. The asset categories and their estimated useful lives are as follows:





YearsTrademarks
                and URLs
            
            
            5-20Software
                licenses
            
            
            2-3Customer
                relationships
            
            
            7-14Developed
                technologies
            
            
            5Non-compete
                agreement
            
            
            3





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.





**Goodwill**




SFAS
      No. 142, *Goodwill
      and Other Intangible Assets* ,
      requires us to test goodwill for impairment at least annually at the reporting
      unit level in lieu of being amortized. We have determined that we have two
      reporting units, online publishing and print publishing and licensing, under
      SFAS No. 142 as these are the components of the business for which discrete
      financial information is available and for which segment management regularly
      reviews the operating results.




The
      goodwill impairment test is a two-step test. Under the first step, the fair
      value of the reporting unit is compared with its carrying value (including
      goodwill). If the fair value of the reporting unit is less than its carrying
      value, an indication of goodwill impairment exists for the reporting unit,
      accordingly, the enterprise must perform step two of the impairment test
      (measurement).




We
      will
      perform an annual impairment review of goodwill for both reporting units on
      during the fourth quarter of each year.  We did not recognize any goodwill
      or intangible asset impairment charges in fiscal 2005, 2004 or 2003.




The
      Company anticipates that all of the goodwill recorded in 2005 will be deductible
      for Federal income tax purposes.




**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 Earnings Per Share**





The
      Company computes basic earnings per share by dividing net income for the year
      by
      the weighted average number of shares outstanding for the year. Diluted earnings
      per share includes the effects of common stock equivalents, consisting of
      outstanding stock options, 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,****2005**
            
            **2004**
            
            **2003**Net
                income
            
            $
            9,673,901
            
            $
            13,356,122
            
            $
            12,105,308Weighted
                average common shares outstandings
            
            
            15,809,259
            
            
            15,438,097
            
            
            14,473,151Additional
                dilutive shares related to stock options
            
            
            1,112,959
            
            
            537,284
            
            
            826,583Total
                weighted average common shares and equivalentsoutstanding
                for diluted earnings per share calculation
            
            
            16,922,218
            
            
            15,975,382
            
            
            15,299,734Basic
                and diluted earnings per share:Basic
            
            $
            0.61
            
            $
            0.87
            
            $
            0.84Diluted
            
            $
            0.57
            
            $
            0.84
            
            $
            0.79





44





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 227,500, 389,775, and
      80,775 at December 31, 2005, 2004 and 2003, respectively.





On
      January 3, 2006, the Company granted options to purchase a total of 50,000
      shares of common stock (10,000 each) to the independent outside directors of
      its
      Board of Directors. On February 7, 2006, the Company granted options to purchase
      a total of 221,000 shares of common stock to certain executive officers and
      employees.





**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, 2005 using the Black-Scholes pricing model
      together with a description of the assumptions used to calculate the fair value:





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Weighted
                average fair value
            
            $
            22.39
            
            $
            7.70
            
            $
            2.95Expected
                volatility
            
            
            116
            %
            
            100
            %
            
            100
            %Risk
                free rate
            
            
            3.5
            %
            
            3.7
            %
            
            3.0
            %Expected
                lives
            
            
            5
                years
            
            
            5
                years
            
            
            5
                yearsExpected
                dividend yield
            
            
            0
            %
            
            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
      and earnings per share would have been reported at the pro forma amounts
      indicated below.





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Net
                income:As
                reported
            
            $
            9,673,901
            
            $
            13,356,122
            
            $
            12,105,308Less
                total stock-based employee compensationdetermined
                under fair value-based method for allawards,
                net of related tax effect
            
            
            (3,336,648
            )
            
            (2,206,033
            )
            
            (420,996
            )Pro
                forma
            
            $
            6,337,253
            
            $
            11,150,090
            
            $
            11,684,312Basic
                and diluted earnings per common share as reported:Basic
            
            $
            0.61
            
            $
            0.87
            
            $
            0.84Diluted
            
            
            0.57
            
            
            0.84
            
            
            0.79Basic
                and diluted earnings per common share pro forma:Basic
            
            
            0.40
            
            
            0.72
            
            
            0.81Diluted
            
            
            0.39
            
            
            0.72
            
            
            0.81Weighted
                average common shares outstanding-reported:Basic
            
            
            15,809,259
            
            
            15,438,097
            
            
            14,473,151Diluted
            
            
            16,922,218
            
            
            15,975,382
            
            
            15,299,734Weighted
                average common shares outstanding-pro forma:Basic
            
            
            15,809,259
            
            
            15,438,097
            
            
            14,473,151Diluted
            
            
            16,399,822
            
            
            15,438,097
            
            
            14,473,151





**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 $178,133
      and
      $251,391 at December 31, 2005 and 2004, 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, 2005 and 2004 amounted to $178,133 and $251,391,
      respectively. The Rabbi Trust’s assets consist of short-term cash investments
      and a managed portfolio of equity securities. These assets are included in
      other
      assets in the accompanying balance sheets.





45





**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 and accrued liabilities approximate
      fair value due to the short-term maturities of these assets and liabilities.





**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 visitors to
      our
      Web site, (2) the number of ad pages we serve to those visitors, (3) the number
      of advertisements per page, and (4) the capacity of the Company’s sales force.
      Advertising sales are invoiced monthly at amounts based on specific contract
      terms. When the number of impressions over the contract term is guaranteed,
      the
      monthly invoiced amount is based on the monthly contractual number of
      impressions to be delivered at the contractual price, or CPM. Revenue is
      recognized monthly based on the actual number of impressions delivered, and
      the
      revenue corresponding to any under-delivery is deferred as unearned income
      on
      the balance sheet and is recognized later when the under-delivery is served.
      When the number of impressions over the contract term is not guaranteed, the
      monthly invoiced amount is determined and revenue is recognized based on the
      actual number of impressions delivered at the contractual price or CPM. The
      Company also generates revenue on a lead generation basis when a visitor
      completes an application and the application is sold to an advertiser. Revenue
      is recognized monthly based on the number of applications sold. 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 pursuant to the provisions of Emerging Issues Task Force
      (“EITF”) 99-19, *Recording
      Revenue Gross as a Principal versus Net as an Agent* .
      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. These hyperlinks were converted to a
      cost-per-click (“CPC”) pricing model on October 1, 2005. Under this arrangement,
      advertisers pay the Company a specific, pre-determined cost each time a consumer
      clicks on that advertiser’s hyperlink or phone icon. The Company also sells text
      links on its rate pages to advertisers on 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. The Company recognizes 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. The Company follows the accounting
      literature provided by the 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 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, 2005 and 2004. Barter revenue was approximately $2,254,000,
      $3,088,000 and $3,164,000 and represented approximately 5%, 8% and 9% of total
      revenue, respectively, for the years ended December 31, 2005, 2004 and 2003.





46





***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 pursuant to the provisions of EITF 99-19.





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.





**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 $3,669,000, $3,269,000 and $2,332,000, respectively, for the
      years
      ended December 31, 2005, 2004 and 2003. Barter expense of approximately
      $2,254,000, $3,088,000 and $3,164,000 was recorded for the years ended December
      31, 2005, 2004 and 2003, respectively.





**Recent
      Accounting Pronouncements**





In
      December 2004, the FASB issued SFAS No. 123R, *Share-Based
      Payments*, which requires the measurement of all employee share-based
      payments to directors and employees, including stock option grants, using a
      fair
      value-based method and the recording of such expense in the Company’s statements
      of operations. The accounting provisions of SFAS No. 123R are effective for
      the
      Company beginning January 1, 2006. The pro forma disclosures previously
      permitted under SFAS 123 will no longer be an alternative to financial statement
      recognition. See “Pro Forma Disclosures Under SFAS No. 148” in Note 1. above for
      the pro forma net income and earnings per share amounts for the years ended
      December 31, 2005, 2004 and 2003, as if the Company had used a fair value-based
      method similar to the methods required under SFAS No. 123R to measure
      compensation expense for director and employee stock option grants. The
      Company’s adoption will significantly reduce net income and earnings per
      share.





In
      December 2004, the FASB issued SFAS No. 153, *Exchanges
      of Nonmonetary Assets — an amendment of APB Opinion
      No. 29.* This
      Statement amends APB No. 29 to eliminate the exception for nonmonetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. SFAS
      No. 153 is effective for nonmonetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005. Therefore, the Company adopted this
      Statement effective January 1, 2006. The adoption of SFAS No. 153 did
      not have an impact on the Company’s consolidated results of operations or
      financial position.





**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, 2005, 62,660 shares were
      available for grant under the Plan.





47





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 ranging from 1 to 5 years
      and
      expire between 7 and 10 years after the date of grant.





Stock
      options for the purchase of 820,500 and 30,500 shares, respectively, were
      granted to directors and employees during 2004 and 2003. No stock options were
      granted under the 1997 Plan during the year ended December 31,
      2005.





**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 between 5 and 10 years after the date of grant. As
      of
      December 31, 2005, 490,340 shares were available for grant under the 1999 Plan.
      Stock options for the purchase of 690,000 and 977,500 shares, respectively,
      were
      granted under the 1999 Plan to employees during 2005 and 2004. No stock options
      were granted under the 1999 Plan during the year ended December 31,
      2003.





On
      January 3, 2006, each of the five independent outside directors were granted
      options to purchase 10,000 shares of common stock at $28.91, the fair market
      value of the common stock on the date of grant. The options vest on December
      31,
      2006 and expire 7 years from the date of grant.





On
      February 7, 2006, certain executive officers and employees were granted options
      to purchase 221,000 shares of common stock at $35.75, 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 over the remaining three
      years and the options expire 7 years from the date of grant.





Stock
      option activity during the years ended December 31, 2005, 2004, and 2003 was
      as
      follows:





**Number
                  of Shares**
            ****
            **Price
                  Per Share**
            ****
            **Weighted
                  Average****Exercise
                Price**Balance,
                December 31, 2002
            
            
            2,058,113
            
            
            $0.85
                to $13.00
            
            $
            2.03Granted
            
            
            30,500
            
            
            $1.00
                to $3.90
            
            $
            3.40Exercised
            
            
            (1,116,203
            )
            
            $0.85
                to $8.13
            
            $
            1.94Forfeited
            
            
            (2,147
            )
            
            $0.85
                to $13.00
            
            $
            3.38Expired
            
            
            —
            
            
            —
            
            
            —Balance,
                December 31, 2003
            
            
            970,263
            
            
            $0.85
                to $13.00
            
            $
            1.20Granted
            
            
            1,798,000
            
            
            $8.11
                to $15.40
            
            $
            10.14Exercised
            
            
            (666,440
            )
            
            $0.85
                to $13.00
            
            $
            1.32Forfeited
            
            
            (63,579
            )
            
            $12.43
                to $12.63
            
            $
            12.61Expired
            
            
            —
            
            
            —
            
            
            —Balance,
                December 31, 2004
            
            
            2,038,244
            
            
            $0.85
                to $15.40
            
            $
            9.15Granted
            
            
            690,000
            
            
            $13.32
                to $32.25
            
            $
            22.39Exercised
            
            
            (77,066
            )
            
            $0.85
                to $13.00
            
            $
            5.18Forfeited
            
            
            (19,223
            )
            
            $0.85
                to $18.44
            
            $
            12.94Expired
            
            
            —
            
            
            —
            
            
            —Balance,
                December 31, 2005
            
            
            2,631,955
            
            
            $0.85
                to $32.25
            
            $
            12.69






Additional
        information with respect to outstanding options as of December 31, 2005 was
        as
        follows:
 
 **Options
                  Outstanding**
              
              **Options
                  Exercisable****Prices**
              
              **Number****of
                  Shares**
              ****
              **Weighted
                      Average****Remaining****Contractual
                  Life (Years)**
              ****
              **Number****of
                  Shares**
              ****
              **Average****Exercise****Price**$0.85
              
              
              67,608
              
              
              3.99
              
              
              67,608
              
              $
              0.85$1.19
                  to $1.75
              
              
              7,772
              
              
              6.27
              
              
              7,772
              
              
              1.21$2.39
                  to $8.46
              
              
              870,668
              
              
              5.68
              
              
              457,126
              
              
              6.89$10.01
                  to $12.63
              
              
              819,407
              
              
              5.63
              
              
              293,574
              
              
              10.88$13.00
                  to $18.44
              
              
              639,000
              
              
              5.71
              
              
              180,833
              
              
              13.95$26.98
                  to $32.25
              
              
              227,500
              
              
              6.91
              
              
              —
              
              
              —2,631,955
              
              
              6.65
              
              
              1,006,913
              
              $
              5.33





48




**NOTE
      4 - FINANCIAL STATEMENT DETAILS**




**Allowance
        for doubtful accounts-**


**For
                year ended December 31,****2005**
            
            **2004**
            
            **2003**Balance,
                beginning of year
            
            $
            400,000
            
            $
            230,000
            
            $
            200,000Provision
            
            
            199,883
            
            
            554,935
            
            
            110,771Write-offs
            
            
            (240,836
            )
            
            (395,677
            )
            
            (82,019
            )Recoveries
            
            
            19,967
            
            
            10,742
            
            
            1,248Acquisitions
            
            
            1,251,335
            
            
            —
            
            
            —Balance,
                end of year
            
            $
            1,630,349
            
            $
            400,000
            
            $
            230,000






**Fixed
        Assets-**


Fixed
                assets consisted of the following:
            
            **December
                31,****2005**
            
            **2004**Furniture
                and fixtures
            
            $
            288,494
            
            $
            311,672Computers
                and software
            
            
            3,448,690
            
            
            3,798,607Equipment
            
            
            82,158
            
            
            110,571Leasehold
                improvements
            
            
            403,837
            
            
            485,0364,223,179
            
            
            4,705,886Less
                accumulated depreciation and amortization
            
            
            (3,159,872
            )
            
            (3,430,281
            )$
            1,063,307
            
            $
            1,275,605





Depreciation
      expense was $650,163, $613,866 and $542,283 for the years ended December 31,
      2005, 2004 and 2003, respectively.






**Intangible
        Assets-**
  Intangible
        assets consisted of the following at December 31, 2005:




**Accumulated****Cost**
            
            **Amortization**
            
            **Net**Trademarks
                and URLs
            
            $
            746,367
            
            $
            (154,050
            )
            $
            592,317Software
                licenses
            
            
            533,180
            
            
            (424,090
            )
            
            109,090Customer
                relationships
            
            
            10,000,000
            
            
            (98,413
            )
            
            9,901,587Developed
                technology
            
            
            800,000
            
            
            (13,333
            )
            
            786,667Non-compete
                agreements
            
            
            270,000
            
            
            (7,500
            )
            
            262,500$
            12,349,546
            
            $
            (697,385
            )
            $
            11,652,161





49




Intangible
        assets consisted of the following at December 31, 2004


**Accumulated****Cost**
            
            **Amortization**
            
            **Net**Trademarks
                and URL's
            
            $
            146,366
            
            $
            (134,907
            )
            $
            11,459Software
                licenses
            
            
            511,470
            
            
            (317,273
            )
            
            194,197Other
            
            
            26,362
            
            
            (26,362
            )
            
            —$
            684,198
            
            $
            (478,542
            )
            $
            205,656





Amortization
      expense was $ 245,206, $128,793 and $138,543 for the years ended December 31,
      2005, 2004 and 2003, respectively. Amortization expense as of December 31,
      2005
      is expected to be:





**Amortization****Year
              Ending December 31,**
            
            
            **Expense**2006
            
            
            $
            1,555,3422007
            
            
            
            1,466,9092008
            
            
            
            1,455,5142009
            
            
            
            1,372,4522010
            
            
            
            1,357,619Thereafter
            
            
            
            4,444,325$
            11,652,161




**Other
        Assets-**




Other
                assets consisted of the following:
            
            **December
                31,****2005**
            
            **2004**Computer
                and software deposits
            
            $
            48,146
            
            $
            83,857Deferred
                compensation plan assets
            
            
            178,133
            
            
            251,391Other
                deposits
            
            
            215,932
            
            
            93,831$
            442,211
            
            $
            429,079




**Accrued
        Expenses-**




Accrued
                expenses consisted of the following:
            
            **December
                31,****2005**
            
            **2004**Accrued
                payroll and related benefits
            
            $
            1,896,997
            
            $
            141,403Vacation
            
            
            424,228
            
            
            364,160Sales
                commissions
            
            
            333,805
            
            
            464,739Marketing
            
            
            263,433
            
            
            173,000Due
                to distribution partners
            
            
            333,751
            
            
            178,040Purchase
                obligations
            
            
            1,185,616
            
            
            —Professional
                fees
            
            
            143,181
            
            
            113,755Income
                taxes
            
            
            380,754
            
            
            9,892Legal
                fees and other
            
            
            65,176
            
            
            304,069Other
            
            
            66,246
            
            
            —$
            5,093,187
            
            $
            1,749,058




50





**NOTE
      5 - INCOME TAXES**





The
      components of the income tax benefit are as follows:





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Current:Federal
            
            $
            476,307
            
            $
            2,761,525
            
            $
            200,000State
            
            
            391,672
            
            
            479,394
            
            
            100,000Total
                current
            
            
            867,979
            
            
            3,240,919
            
            
            300,000Deferred:Federal
            
            
            4,498,356
            
            
            (6,692,153
            )
            
            (2,864,365
            )State
            
            
            433,818
            
            
            (1,314,426
            )
            
            (535,635
            )Total
                deferred
            
            
            4,932,174
            
            
            (8,006,579
            )
            
            (3,400,000
            )Total
                income tax expense (benefit)
            
            $
            5,800,153
            
            $
            (4,765,660
            )
            $
            (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,****2005**
            
            **2004**
            
            **2003**Income
                taxes at statutory rate
            
            $
            5,261,178
            
            $
            2,920,757
            
            $
            3,061,805State
                income taxes, net of federal benefit
            
            
            544,823
            
            
            332,200
            
            
            365,763Nondeductible
                items and other
            
            
            17,816
            
            
            138,370
            
            
            5,491Change
                in deferred asset effective rate and other
            
            
            (23,664
            )
            
            —
            
            
            —Stock
                option benefit included in prior year valuation
                allowance
            
            
            —
            
            
            1,212,198
            
            
            —Change
                in valuation allowance
            
            
            —
            
            
            (9,369,185
            )
            
            (6,533,059
            )Total
                income tax expense (benefit)
            
            $
            5,800,153
            
            $
            (4,765,660
            )
            $
            (3,100,000
            )





The
      Company’s effective rate in 2005 differs from the statutory Federal income tax
      rate, primarily due to state income taxes. The Company’s effective rate in 2004
      and 2003 differ from the statutory Federal income tax rate, primarily as a
      result of the changes in the valuation allowance on deferred tax assets.




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,****2005**
            
            **2004**Deferred
                Tax Assets:Net
                operating loss carryforwards
            
            $
            5,631,037
            
            $
            10,873,073Tax
                credit carryforwards
            
            
            462,091
            
            
            270,878Accrued
                expenses
            
            
            157,852
            
            
            49,973Depreciation
                and amortization
            
            
            28,769
            
            
            60,129Allowance
                for doubtful accounts
            
            
            194,656
            
            
            152,526Total
                gross deferred tax assets
            
            
            6,474,405
            
            
            11,406,579Less
                valuation allowance
            
            
            —
            
            
            —Net
                deferred tax assets
            
            $
            6,474,405
            
            $
            11,406,579





As
      required by SFAS No. 109, *Accounting for Income Taxes,* the
      Company recognizes 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, the Company had provided a full valuation allowance against accumulated
      deferred tax assets, reflecting the uncertainty associated with its future
      profitability. In the fourth quarter of 2003, the Company reassessed the
      valuation allowance previously established against deferred tax assets. Factors
      considered included: historical results of operations, volatility of the
      economic and interest rate environment and projected earnings based on current
      operations. Based on this evidence, the Company concluded that it was more
      likely than not that a portion of the deferred tax assets would be realized
      and,
      accordingly, released $3,400,000 of the valuation allowance, which resulted
      in
      an income tax benefit of approximately $3,100,000.





51





During
      the quarters ended March 31, June 30, and Sept 30, 2004, the Company continued
      to evaluate the need for a valuation allowance against the deferred tax asset.
      The Company completed its business planning process during the fourth quarter
      of
      2004, which included the following strategic initiatives for 2005: the
      enhancement of its quality control process and procedures; the re-design of
      its
      Web site; the execution of exclusive advertising contracts with two mortgage
      lead aggregators; broadening the breadth and depth of its products and services;
      a reorganization of its advertising sales force; and the migration to a
      cost-per-click revenue model on its rate tables. Considering these strategic
      initiatives and their impact on future earnings potential, the Company concluded
      that it is more likely than not that it will generate sufficient taxable income
      in future periods to realize the entire deferred tax asset. At December 31,
      2004, the Company reversed the remaining $9,400,000 valuation allowance
      resulting in an income tax benefit of $4,800,000 and a net deferred tax asset
      of
      $11,400,000. The realization of the $11,400,000 deferred tax asset depends
      on
      the Company’s ability to continue to generate taxable income in the future. If
      the Company determines that it will not be able to realize all or a portion
      of
      the deferred tax asset in the future, an adjustment to the deferred tax asset
      will be charged against earnings in the period such determination is made.
      Approximately $1,200,000 million of the valuation allowance was attributable
      to
      the tax benefit of stock options exercised in a prior year. The income tax
      benefit relating to stock option exercised during 2004 was approximately
      $2,000,000, for a total 2004 benefit of approximately $3,200,000 which was
      allocated to stockholders’ equity.





At
      December 31, 2005, the Company had net operating loss carryforwards for Federal
      income tax purposes of approximately $13,997,000, 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 previously leased office space in North Palm Beach, Florida from Bombay
      Holdings, Inc. ("Bombay"), which at the time was wholly-owned by Peter C. Morse,
      a director and 32% stockholder. Total rent paid to Bombay for the years ended
      December 31, 2004 and 2003 was approximately $244,000 and $305,000,
      respectively. In November 2004, the Company entered into a sublease for new
      space and the Bombay lease was terminated effective December 31,
      2004.





During
      2004 and 2003, the Company paid an outside director consulting fees of
      approximately $17,000 and $50,000, respectively.





**NOTE
      7 - COMMITMENTS AND CONTINGENCIES**





**Leases**





On
      November 18, 2004, the Company entered into a sublease with an outside party
      for
      office space in North Palm Beach. The lease expires on December 31,
      2007.





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. In February 2005, the Company
      entered into twelve month leases for approximately 200 square feet of office
      space in Chicago, Illinois, and for approximately 300 square feet of office
      space in San Francisco, California. Both leases expired on February 28, 2006.
      The operations from these two offices were transferred to the operations of
      the
      acquisitions of MMIS/Interest.com and FastFind, respectively.





In
      connection with the acquisitions of FastFind, the Company assumed an office
      space lease in San Francisco, California, expiring February 28, 2009 and
      Pennington, New Jersey, expiring June 30, 2006. In connection with the
      acquisition of MMIS/Interest.com, the Company assumed an office space lease
      in
      Villa Park, Illinois expiring March 31, 2006. In February 2006, the Company
      entered into a lease in Chicago, Illinois for approximately 4,900 square feet
      to
      replace the Villa Park lease. This new Chicago lease expires on November 30,
      2008.





52





Total
      rent expense for the years ended December 31, 2005, 2004 and 2003 amounted
      to
      approximately $620,000, $498,000 and $513,000, respectively. During 2004 and
      2003, the Company also recorded sublease rental income of approximately $28,000
      and $54,000, respectively, under the terms of a sublease agreement that expired
      on June 21, 2004.




The
      Company recognizes rent expense for operating leases with periods of free rent
      (including construction periods), step rent provisions and escalation clauses
      on
      a straight-line basis over the applicable lease term. The Company considers
      lease renewals in the useful life of its leasehold improvements when such
      renewals are reasonably assured. The Company takes these provisions into account
      when calculating minimum aggregate rental commitments under non-cancelable
      operating leases. Future minimum lease payments under non-cancelable operating
      leases having lease terms in excess of one year as of December 31, 2005 were:




**Operating****Year
              Ending December
              31,**
            
            
            **Leases**2006
            
            
            $
            793,3642007
            
            
            
            617,5842008
            
            
            
            603,3392009
            
            
            
            509,4702010
            
            
            
            504,459Thereafter
            
            
            
            3,056,272Total
                minimum lease payments
            
            $
            6,084,488





**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**





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. On October 8, 2004, the Company was notified that the
      buyer settled the litigation matter, effective October 1, 2004, and the Company
      reimbursed the buyer $390,000 under the indemnity. The $390,000 was recorded
      in
      the quarter ended September 30, 2004 as a legal settlement charge.





In
      March
      2002, American Interbanc Mortgage, LLC (“AI”), a mortgage lender that advertised
      on Bankrate.com (the “Web site”), filed suit in the Superior Court of California
      against several of AI's competitors (not including the Company) who also
      advertised on the Web site for:


(i)
              false
                  advertising under the federal Lanham
                  Act;
 (ii)
              common
                  law unfair competition; and


(iii)
            violations
                of certain sections of the California Business and Professions
                Code.





In
      August
      2002, the Company declined to renew AI's advertising contract. In December
      2002,
      AI filed a First Amended Complaint (the “Amended Complaint”), adding the Company
      as a defendant, and asserting an additional claim for an alleged violation
      of
      the Cartwright Act, California's antitrust law, alleging that the Company
      conspired with all of the co-defendants (various mortgage lenders and mortgage
      brokers) to allow them to engage in allegedly false advertising on the Web
      site
      while also precluding AI from advertising on the Website. The Amended Complaint
      sought an undisclosed sum of monetary damages, restitution of profits,
      compensation acquired as a result of the allegedly wrongful conduct, attorney's
      fees, costs, and injunctive relief. The Company filed a special motion to strike
      the Amended Complaint under California's anti-SLAPP (Strategic Lawsuits Against
      Public Participation) statute, contending that:


(i)
                AI's
                    claims against the Company were all based on publishing decisions
                    protected by the First Amendment of the United States Constitution
                    and its
                    counterpart in the California Constitution
                    and
 (ii)
                AI
                    could not establish a probability of success on the merits of
                    its
                    claims.


53





The
      Company also filed a demurrer to the Amended Complaint, contending that it
      failed to state facts constituting a valid cause of action against the Company.
      AI filed motions:


(i)
                  for
                      a preliminary injunction against the Company, seeking an order
                      requiring
                      the Company to publish AI's advertisements and to cease publishing
                      the
                      alleged false advertisements of AI's competitors, and
 (ii)
                  seeking
                      sanctions against the Company for having filed an allegedly
“frivolous”
                      anti-SLAPP motion.





By
      Orders
      dated April 24, and May 22, 2003, the trial court:


(i)
                denied
                    the Company's anti-SLAPP motion,


(ii)
                granted
                    the Company's demurrer as to AI's common law unfair competition
                    claim, but
                    otherwise overruled the demurrer,
 (iii)
                denied
                    AI's motion for a preliminary injunction, and
 (iv)
              denied
                  AI's motion for sanctions.


On
      May
      22, 2003, the Company appealed the order denying its anti-SLAPP claim, and
      AI,
      among other things, appealed the order denying its motion for preliminary
      injunction. The Court of Appeal of the State of California, Fourth Appellate
      District, affirmed the various appeals and denied all relief requested. On
      January 15, 2004, AI filed its Second Amended Complaint asserting five counts,
      including claims for:


(i)
                    false
                        advertising under the Lanham Act, against all defendants,


(ii)
              restraint
                  of trade under the Cartwright Act, against all defendants,
 (iii)
                  intentional
                      interference with economic relations, against defendants other
                      than the
                      Company,
 (iv)
                  intentional
                      interference with prospective economic advantage, against some
                      defendants
                      but no longer against the Company, and
 (v)
                  false
                      advertising and unfair trade practices, against all defendants.


The
      Second Amended Complaint seeks unspecified damages, including treble damages,
      interest, attorney's fees, and costs, disgorgement of property and profits
      allegedly wrongfully acquired, restitution, an accounting, and injunctive
      relief.





On
      December 20, 2004, the Company received a Statement of Damages (the “Statement”)
      by which AI, for the first time, indicated the amount of damages it allegedly
      seeks. In the Statement AI states, without factual explanation, that it “is
      informed and believes that its damages are not less than $16.5 million,”
allegedly “incurred as a proximate result of [all] defendants' wrongful
      conduct.” AI seeks to have those damages trebled and also seeks “reasonable
      attorney's fees pursuant to 15 U.S.C. Section 1117(b) and California Business
      and Professions Code Section 16750(a),” and costs. In connection with the causes
      of action for intentional interference with economic relations and prospective
      economic advantage, AI in its Statement “reserves the right to seek not less
      than $33 million in punitive damages when it seeks a judgment” in the action.
      The Company believes that all of AI's claims against it are factually and
      legally without merit.





The
      Company will continue to vigorously defend itself against all of AI's claims.
      The Company has filed two motions for summary adjudication. The first seeks
      summary adjudication of AI’s false advertising causes of action. The second
      seeks summary adjudication of AI’s conspiracy in restraint of trade causes of
      action. The motions are scheduled for hearing by the Court on April 4, 2006,
      and
      April 25, 2006, respectively. Trial of the matter is currently scheduled to
      begin on May 30, 2006. Currently, the outcome of this matter is uncertain.
      The
      Company cannot estimate at this time, the amount of loss, if any, which could
      result from an adverse resolution of this litigation.





In
      February 2005, the Company settled a contractual dispute with a former Internet
      and co-location facility provider for $120,000. This amount is included in
      legal
      settlements in the accompanying statement of operations for the year ended
      December 31, 2004.





From
      time to time, in addition to those identified above, the Company is subject
      to
      legal proceedings, claims, investigations and proceedings in the ordinary course
      of business. In accordance with U.S. generally accepted accounting principles,
      the Company makes a provision for a liability when it is both probable that
      a
      liability has been incurred and the amount of the loss can be reasonably
      estimated. These provisions are reviewed at least quarterly and adjusted to
      reflect the impacts of negotiations, settlements, rulings, advice of legal
      counsel, and other information and events pertaining to a particular case.
      Litigation is inherently unpredictable. However, we believe that we have valid
      defenses with respect to the legal matters pending against the Company. It
      is
      possible, nevertheless, that our consolidated financial position, cash flows
      or
      results of operations could be affected by the resolution of one or more of
      such
      contingencies.





54





**Other
      Commitments**





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.





On
      June
      21, 2004, Thomas R. Evans, was appointed President and Chief Executive Officer
      and entered into an employment agreement with the Company. Under the terms
      of
      the employment agreement, Mr. Evans is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria. Under the terms of the employment
      agreement, Mr. Evans 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. Evans agrees not to compete with the Company and not to recruit
      any of the Company’s employees. Upon Mr. Evans’ 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.
      Mr.
      Evans was also granted options to purchase 600,000 shares of the Company’s
      common stock at $8.46, the fair market value on the date of grant. The options
      have a seven year term and vest as follows: 200,000 shares on July 1, 2005;
      and
      16,666.667 shares on the first day of each month beginning August 1, 2005 and
      ending July 1, 2007. On October 26, 2004, Mr. Evans was granted options to
      purchase 500,000 shares of the Company’s common stock at $10.01, the fair market
      value on the date of grant. The options have a seven year term and vest as
      to
      all 500,000 shares five years from the date of grant. Vesting accelerates if,
      at
      any point during the term of the option, the fair market value of the Company’s
      common stock is at or above the following incremental thresholds for ninety
      consecutive trading days; $20.00 - 100,000 shares; $22.50 - 50,000 shares;
      $25.00 - 75,000 shares; $27.50 - 50,000 shares; $30.00 - 75,000 shares; $32.50
      -
      75,000 shares; $35.00 - 75,000 shares.




On
      July
      15, 2004, Bruce J. Zanca, was appointed Senior Vice President and Chief
      Communications/Marketing Officer and entered into an employment agreement with
      the Company. Under the terms of the employment agreement, Mr. Zanca is entitled
      to receive an annual base salary as stipulated in the employment agreement,
      an
      annual bonus contingent on achieving certain performance criteria. Under the
      terms of the employment agreement, Mr. Zanca 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. Zanca agrees not to compete with the Company and
      not
      to recruit any of the Company’s employees. Upon Mr. Zanca’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.
      Mr. Zanca was also granted options to purchase 150,000 shares of the Company’s
      common stock at $8.11, the fair market value on the date of grant. The options
      have a seven year term and vest as follows: 37,500 shares on July 15, 2005;
      and
      3,125 shares on the first day of each month beginning August 1, 2005 and ending
      July 15, 2008.





55





On
      October 4, 2004, Steve Horowitz, was appointed Vice President and Publisher
      and
      entered into an employment agreement with the Company. Under the terms of the
      employment agreement, Mr. Horowitz is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria. Under the terms of the employment
      agreement, Mr. Horowitz 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. Horowitz agrees not to compete with the Company and not to
      recruit any of the Company’s employees. Upon Mr. Horowitz’ 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 six month'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 three
      months after the termination date; and one-third payable six months from the
      termination date. Mr. Horowitz was also granted options to purchase 100,000
      shares of the Company’s common stock at $10.30, the fair market value on the
      date of grant. The options have a seven year term and vest as follows: 25,000
      shares on October 25, 2005; and 2,083.333 shares on the first day of each month
      beginning November 1, 2005 and ending October 25, 2008.





On
      May
      23, 2005, Lynn Varsell, was appointed Vice President-Publisher and entered
      into
      an employment agreement with the Company. Under the terms of the employment
      agreement, Ms. Varsell is entitled to receive an annual base salary as
      stipulated in the employment agreement, an annual bonus contingent on achieving
      certain performance criteria. Under the terms of the employment agreement,
      Ms.
      Varsell 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 six months thereafter, Ms.
      Varsell agrees not to compete with the Company and not to recruit any of the
      Company’s employees. Upon Ms. Varsell’ 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 six months’ base salary at the then-current
      rate payable in three equal installments; one-third payable 15 days after the
      termination date; one-third payable three months after the termination date;
      and
      one-third payable six months from the termination date. Ms. Varsell was also
      granted options to purchase 50,000 shares of the Company’s common stock at
      $17.13, the fair market value on the date of grant. The options have a
      seven-year term and vest as follows: 12,500 shares on May 23, 2006; and
      1,041.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 23, 2009.





On
      May
      31, 2005, Daniel P. Hoogterp, was appointed Senior Vice President-Chief
      Technology Officer and entered into an employment agreement with the Company.
      Under the terms of the employment agreement, Mr. Hoogterp is entitled to receive
      an annual base salary as stipulated in the employment agreement, an annual
      bonus
      contingent on achieving certain performance criteria, and a guaranteed bonus
      of
      $50,000 for 2005 that was paid in the first quarter of 2006. Under the terms
      of
      the employment agreement, Mr. Hoogterp 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
      six months thereafter, Mr. Hoogterp agrees not to compete with the Company
      and,
      for a period of one year thereafter, not to recruit any of the Company’s
      employees. Upon Mr. Hoogterp’ 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. Mr. Hoogterp was also
      granted options to purchase 80,000 shares of the Company’s common stock at
      $18.26, the fair market value on the date of grant. The options have a
      seven-year term and vest as follows: 20,000 shares on May 31, 2006; and
      1,666.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 31, 2009.





**Other
      Contingencies**





On
      October 24, 2005, a major hurricane passed through the North Palm Beach, Florida
      area resulting in a power outage and minor damage to our office facility. Our
      contingency and disaster recovers plans were activated which allowed for the
      continued, uninterrupted operation of Bankrate.com during the recovery period.
      The majority of the losses and additional expenses incurred are covered by
      insurance for which we have filed a claim. As a result, a $86,000 insurance
      claim receivable was recorded as of December 31, 2005.




In
        September 2004, two major hurricanes made landfall within 30 miles north
        of the
        Company’s North Palm Beach, Florida office facility, resulting in periods of
        power outages and significant property damage throughout the region. The
        Company’s contingency and disaster recovery plans were activated which allowed
        for the continued, uninterrupted operation of Bankrate.com during the recovery
        periods. Significant damage to the roof of the office building resulted in
        the
        loss of certain furniture, fixtures, equipment and household improvements.
        The
        majority of the losses were covered by insurance for which the Company filed
        a
        claim.
  **NOTE
      8 - 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 Mortgage Guide rate tables, newsletter subscriptions, and
      licensing of research information. The acquired operations of FastFind and
      Interest.com for the period from December 1, 2005 to December 31, 2005 are
      included in the online publishing segment. The acquired operations of Mortgage
      Market Information Services, Inc. for the period from December 1, 2005 to
      December 31, 2005 are included in the print publishing and licensing segment.
      The Company evaluates the performance of its operating segments based on segment
      profit (loss).





56





No
      sales
      to any individual customer exceeded 10% of total revenue for the periods
      presented. No material revenues were generated outside of the United
      States.





Summarized
      segment information as of December 31, 2005, 2004 and 2003, and for the years
      ended December 31, 2005, 2004 and 2003, respectively, is presented below.





**Print****Online**
            
            **Publishing****Publishing**
            
            **and
                Licensing**
            
            **Other**
            
            **Total****Year
                Ended December 31, 2005**Revenue
            
            $
            43,296,384
            
            $
            5,752,647
            
            $
            —
            
            $
            49,049,031Cost
                of revenue
            
            
            7,389,089
            
            
            5,346,017
            
            
            —
            
            
            12,735,106Gross
                margin
            
            
            35,907,295
            
            
            406,630
            
            
            —
            
            
            36,313,925Sales
            
            
            3,683,482
            
            
            —
            
            
            —
            
            
            3,683,482Marketing
            
            
            5,922,964
            
            
            —
            
            
            —
            
            
            5,922,964Product
                development
            
            
            2,168,506
            
            
            288,122
            
            
            —
            
            
            2,456,628General
                and administrative expenses
            
            
            7,975,314
            
            
            1,059,653
            
            
            —
            
            
            9,034,967Depreciation
                and amortization
            
            
            790,357
            
            
            105,012
            
            
            —
            
            
            895,369Other
                income, net
            
            
            —
            
            
            —
            
            
            1,153,536
            
            
            1,153,536Income
                tax expense
            
            
            —
            
            
            —
            
            
            (5,800,153
            )
            
            (5,800,153
            )Segment
                profit (loss)
            
            $
            15,366,675
            
            $
            (1,046,157
            )
            $
            (4,646,617
            )
            $
            9,673,901Goodwill
            
            $
            26,093,877
            
            $
            3,941,522
            
            $
            —
            
            $
            30,035,399Total
                assets
            
            $
            43,108,491
            
            $
            8,481,055
            
            $
            10,963,477
            
            $
            62,553,223





**Print****Online**
            
            **Publishing****Publishing**
            
            **and
                Licensing**
            
            **Other**
            
            **Total****Year
                Ended December 31, 2004**Revenue
            
            $
            33,942,241
            
            $
            5,262,020
            
            $
            —
            
            $
            39,204,261Cost
                of revenue
            
            
            5,534,456
            
            
            4,359,444
            
            
            —
            
            
            9,893,900Gross
                margin
            
            
            28,407,785
            
            
            902,576
            
            
            —
            
            
            29,310,361Sales
            
            
            4,186,799
            
            
            —
            
            
            —
            
            
            4,186,799Marketing
            
            
            6,357,424
            
            
            —
            
            
            —
            
            
            6,357,424Product
                development
            
            
            2,082,785
            
            
            322,891
            
            
            —
            
            
            2,405,676General
                and administrative expenses
            
            
            5,772,539
            
            
            894,909
            
            
            —
            
            
            6,667,448Legal
                settlements
            
            
            —
            
            
            —
            
            
            510,000
            
            
            510,000Severance
                charge
            
            
            —
            
            
            —
            
            
            260,000
            
            
            260,000Depreciation
                and amortization
            
            
            642,979
            
            
            99,680
            
            
            —
            
            
            742,659Other
                income, net
            
            
            —
            
            
            —
            
            
            410,107
            
            
            410,107Income
                tax benefit
            
            
            —
            
            
            —
            
            
            4,765,660
            
            
            4,765,660Segment
                profit (loss)
            
            $
            9,365,259
            
            $
            (414,904
            )
            $
            4,405,767
            
            $
            13,356,122Total
                assets
            
            $
            16,153,152
            
            $
            2,118,101
            
            $
            27,735,267
            
            $
            46,006,520





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








57





**NOTE
      9. ACQUISITIONS**





On
      November 30, 2005, the Company completed the acquisition of Wescoco LLC, a
      Delaware limited liability company d/b/a “FastFind” (“FastFind”) for $10 million
      in cash, subject to final Closing Date Net Working Capital adjustments under
      section 3.03 of the Agreement and Plan of Merger dated November 20, 2005. 
FastFind
      is an Internet lead aggregator based in San Francisco, California.The Company paid $7 million in cash to the FastFind members and $3
      million was placed in escrow to satisfy certain indemnification obligations
      of
      the FastFind members. The acquisition was made utilizing cash on hand. The
      acquisition was accounted for as a purchase and the results of operations of
      FastFind are included in the consolidated results of the Company from the
      acquisition date. As a result of the acquisition, approximately $6.7 million
      in
      goodwill was recorded by the Company, which reflects the adjustments necessary
      to allocate the purchase price to the fair value of assets acquired and
      liabilities assumed. This acquisition was made to complement the online
      publishing business.




On
      December 1, 2005, the Company completed the acquisition of Mortgage Market
      Information Services, Inc., an Illinois corporation, and Interest.com, Inc.,
      an
      Illinois corporation (“Interest.com” and collectively with Mortgage Market
      Information Services, Inc., “MMIS”), for $30 million in cash ***,*** subject
      to final Closing Date Equity adjustments under section 3.03 of the Agreement
      and
      Plan of Merger dated November 20, 2005. ****** MMIS
      publishes mortgage guides in over 300 newspapers and operates Interest.com,
      a
      Web site that publishes financial rates and information connecting consumers
      with lenders.The Company paid $26 million on December 8, 2005, $1
      million on January 5, 2006, and $3 million was placed in escrow to satisfy
      certain indemnification obligations of MMIS's shareholder. The acquisition
      was
      made utilizing cash on hand. The acquisition was accounted for as a purchase
      and
      the results of operations of MMIS are included in the consolidated results
      of
      the Company from the acquisition date. As a result of the acquisition,
      approximately $23.3 million in goodwill was recorded by the Company, which
      reflects the adjustments necessary to allocate the purchase price to the fair
      value of assets acquired, liabilities assumed and additional purchase
      liabilities recorded. This acquisition was made to expand the print and online
      publishing business.




The
      following unaudited pro forma data summarize the results of operations for
      the
      periods indicated as if these acquisitions had been completed on January 1,
      2004. The pro forma data give effect to the actual operating results prior
      to
      the acquisitions and adjustments to interest expense, goodwill amortization
      and
      income taxes. These pro forma amounts do not purport to be indicative of the
      results that would have been actually obtained if the acquisitions had occurred
      on January 1, 2004 or that may be obtained in the future.





**Year
                Ended December 31,****2005**
            
            **2004**Total
                revenue
            
            $
            69,816,030
            
            $
            58,133,515Income
                from operations
            
            $
            12,638,785
            
            $
            5,702,295Net
                income
            
            $
            8,052,959
            
            $
            11,612,982Basic
                and diluted earnings per share:Basic
            
            $
            0.51
            
            $
            0.75Diluted
            
            $
            0.48
            
            $
            0.73Weighted
                average common shares outstanding:Basic
            
            
            15,809,259
            
            
            15,438,097Diluted
            
            
            16,922,218
            
            
            15,975,382





We
      utilized independent valuations to determine the fair value of the intangibles
      and the resulting goodwill in our purchase price allocations for our
      acquisitions. These valuations principally use the discounted cash flow
      methodology and were made concurrent with the effective acquisition. Purchase
      price allocations for 2005 are tentative and subject to final adjustment due
      to
      their closing dates. Purchase price allocations for business combinations
      accounted for under the purchase method of accounting related to 2005 were
      as
      follows:





Property
                and equipment
            
            $
            227,491Goodwill
            
            
            30,035,399Working
                capital
            
            
            (1,830,178
            )Customer
                relationships
            
            
            10,000,000Developed
                technology
            
            
            800,000Internet
                domain names
            
            
            600,000Non-compete
                agreement
            
            
            270,000Other
                assets
            
            
            53,385Purchase
                obligations
            
            
            (1,185,616
            )Cash
                used in business acquisitions, net of cash acquired
            
            $
            38,970,481




58




**NOTE
      10. EMPLOYEE BENEFIT PLANS**





The
      Company sponsors a 401(k) plan for some employees over the age of 21 who have
      completed a minimum of 12 months of employment. The Company makes safe-harbour
      contributions of 3.0% of an employee’s salary. Company contributions totaled
      approximately $215,000, $227,000 and $214,000 in 2005, 2004 and 2003,
      respectively.




**NOTE
        11. SUBSEQUENT EVENTS**
 
 On
        January 29, 2006, we entered into a Lease (the “lease”) with J.A.B. Madison
        Holdings, LLC, for approximately 8,800 square feet of office space on the
        fourth
        floor of 477 Madison Avenue, New York, New York 10022. The initial lease
        term is
        for 10 years and 6 months. The lease calls for initial total annual rent
        of
        approximately $421,000 commencing six months after occupancy. This space
        will
        replace our existing 4,500 square feet of office space at 11 East 44 th Street,
        New York, New York. We delivered a letter of credit of approximately $210,000
        in
        connection with the lease.


**ITEM
      9.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND**


**FINANCIAL
      DISCLOSURE**





None.




**ITEM
      9A. CONTROLS AND PROCEDURES**





**Disclosure
      Controls and Procedures**





Based
      on
      their evaluation as of December 31, 2005, the Company’s Chief Executive Officer
      and Chief Financial Officer have concluded that the Company’s disclosure
      controls and procedures (as defined in Rule 13a-15(e) and 15-d-15(e) under
      the
      Securities Exchange Act of 1934, as amended) were sufficiently effective to
      ensure that the information required to be disclosed by the Company in this
      annual report on Form 10-K was recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and instructions for Form
      10-K.





Management,
      including the Company’s Chief Executive Officer and Chief Financial Officer,
      does not expect that the Company’s disclosure controls and procedures will
      prevent all errors and all fraud. A control system, no matter how well conceived
      and operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control system are met. Further, the design of a control
      system must reflect the fact that there are resource constraints, and the
      benefits of controls must be considered relative to their costs. Because of
      the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected.





**Management’s
      Report on Internal Control over Financial Reporting**





The
      Company’s management (“management”) is responsible for establishing and
      maintaining adequate internal control over financial reporting (as defined
      in
      Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).
      Management assessed the effectiveness of its internal control over financial
      reporting as of December 31, 2005. In making this assessment, management used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission (“COSO”) in Internal Control-Integrated
      Framework. This
      assessment excluded our acquisitions of Wescoco LLC, d/b/a FastFind (“FastFind”)
      on November 30, 2005 and Mortgage Market Information Services, Inc. and
      Interest.com (“MMIS/Interest.com”) on December 1, 2005, as described in Note 9
      of Notes to Consolidated Financial Statements. FastFind’s total assets and
      revenue as of and for the month ended December 31, 2005, were $10,557,000 and
      $166,000, respectively and represented approximately 17% and 0.3%, respectively,
      of total consolidated assets and revenue as of and for the year ended December
      31, 2005. MMIS/Interest.com’s total assets and revenue as of and for the month
      ended December 31, 2005, were $32,697,000 and $1,271,000, respectively and
      represented approximately 52% and 3%, respectively, of total consolidated assets
      and revenue as of and for the year ended December 31, 2005. Based on this
      assessment,has concluded that, as of December 31, 2005, the Company’s
      internal control over financial reporting is effective based on these criteria.
      The Company’s independent registered public accounting firm, KPMG LLP, has
      issued an audit report on the Company’s assessment of its internal control over
      financial reporting, which is included herein.




**Changes
        in Internal Control over Financial Reporting**
 
 There
        were no changes in the Company’s internal control over financial reporting
        during the quarter ended December 31, 2005 that have materially affected,
        or are
        reasonably likely to materially affect, its internal control over financial
        reporting.
 
 **ITEM
        9B. OTHER INFORMATION**
 
 None.




**PART
      III**





**ITEM
      10.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT**





**Information
      Concerning Directors**





Biographical
      information for each director appears below. The information is based entirely
      upon information provided by the respective directors.





**Peter
      C. Morse** ,
      age 59,
      has been a director of the Company since 1993, and served as our Chief Executive
      Officer from 1993 until 1997. Mr. Morse served as our Chairman from 1997 until
      1999, and since 2002. Since 1982, Mr. Morse has also served as president of
      Morse Partners, Ltd., a private equity firm that acquires operating companies
      and provides expansion capital. From 1986 to 1990, Mr. Morse was chairman of
      FAO
      Schwarz, the national chain of children's gift stores. Mr. Morse holds a
      B.S.B.A. from Georgetown University and an M.B.A. from Columbia University
      Graduate School of Business.





**Thomas
      R. Evans** ,
      age 51,
      has served as a director of the Company since April 2004, and was appointed
      President and Chief Executive Officer in June 2004. From 1999 to 2002, Mr.
      Evans
      served as Chairman and Chief Executive Officer of Official Payments Corp.,
      specializing in processing consumer credit card payments for government taxes,
      fees and fines. From 1998 to 1999, Mr. Evans was President and Chief Executive
      Officer of GeoCities Inc., a community of personal Web sites on the Internet.
      From 1991 to 1998, Mr. Evans was President and Publisher of U.S. News &
World Report. In addition to his duties at U.S. News & World Report, Mr.
      Evans served as President of The Atlantic Monthly (1996-1998) and as President
      and Publisher of Fast Company (1995-1998), a magazine launched in 1995. Mr.
      Evans received a Bachelor of Science degree in business administration from
      Arizona State University.




59




**William
      C. Martin** ,
      age 28,
      has served as a director of the Company since 2000. He is the principal of
      Indie
      Research LLC, a provider of investment and research tools, and editor and
      principal of FindProfit.com, an online investment newsletter. In 1998, Mr.
      Martin co-founded Raging Bull, an online financial media company.





**Robert
      P. O'Block** ,
      age 63,
      has served as a director of the Company since 1999. Mr. O'Block held senior
      positions with McKinsey & Company, Inc. for 30 years until his retirement in
      1998, serving as a consultant to a wide variety of business, nonprofit and
      public sector organizations in the United States, Europe and the Far East.
      As a
      director of McKinsey & Company, Mr. O'Block led studies in financial
      restructuring; corporate, business unit and product strategy; manufacturing
      operations; and organization. He started his career as a member of the faculty
      of Harvard University, where he performed research and taught courses in the
      areas of production and operations management, business economics and real
      estate. Mr. O'Block is currently a general partner of Freeport Center, a real
      estate and distribution complex in Utah. He is the current Vice Chairman of
      the
      Boston Symphony Orchestra Board of Trustees and is also a Trustee Emeritus
      of
      the U.S. Ski and Snowboard Team Foundation. Mr. O'Block received a bachelor's
      degree in mechanical engineering from Purdue University and an M.B.A. from
      Harvard Business School.





**Richard
      J. Pinola** ,
      age 60,
      has served as a director of the Company since October 2004. From July 1992
      until
      his retirement in December 2004, Mr. Pinola was President and Chief Executive
      Officer of Right Management Consultants, a career transition and organizational
      consulting firm which became a wholly-owned subsidiary of Manpower Inc. in
      January 2004. Mr. Pinola also serves as a director of K-Tron International,
      Nobel Learning Communities, Inc. and Kenexa Corporation, and serves on the
      Board
      of Trustees of King’s College in Wilkes-Barre, Pennsylvania. Mr. Pinola received
      a Bachelor of Science degree in accounting from King’s College and participated
      in post-graduate finance studies at the University of Scranton.




**Randall
      E. Poliner** ,
      age 50,
      has served as a director of the Company since 1998. Since 1993, Mr. Poliner
      has
      served as President of Antares Capital Corporation, a private venture capital
      firm investing equity capital in developmental and expansion stage companies.
      Mr. Poliner holds a Bachelor of Electrical Engineering from the Georgia
      Institute of Technology, an M.S. from Carnegie-Mellon University and an M.B.A.
      from Harvard Business School.





**Audit
      Committee**





The
      members of the Audit Committee are Messrs. Pinola (Chairman), O’Block and
      Poliner. The Board of Directors has determined that each Audit Committee member
      meets the Nasdaq financial knowledge requirements. In addition, the Board of
      Directors has determined that Mr. Poliner is an “audit committee financial
      expert” as defined by the SEC and “independent” as defined under Nasdaq rules.
      See Mr. Poliner’s biography for his relevant educatin and experience to meet the
“audit committee financial expert” standards. The primary function of the Audit
      Committee is to assist the Board of Directors in fulfilling its oversight
      responsibilities by reviewing the financial reports and other financial
      information provided by the Company to governmental bodies or the public; the
      Company's systems of internal controls regarding finance, accounting, legal
      compliance and ethics that management and the Board have established; and the
      Company's accounting and financial reporting process. The Audit Committee
      encourages continuous improvement of, and fosters adherence to, the Company's
      policies, procedures and practices at all levels.





**Compensation
      Committee**





The
      members of the Compensation Committee are Messrs. Poliner (Chairman) and
      O’Block. The Compensation Committee reviews and evaluates the compensation and
      benefits of all our officers, reviews general policy matters relating to
      compensation and benefits of employees of the Company and makes recommendations
      concerning these matters to the Board of Directors. The Compensation Committee
      also administers our stock option plans.





**Executive
      Officers**





The
      names, ages, and current positions of our executive officers as of March 15,
      2006 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.




60





**Executive
      Officers**





**Name**
            
            **Age**
            
            **Position**Thomas
                R. Evans
            
            51
            
            President,
                Chief Executive Officer and DirectorG.
                Cotter Cunningham
            
            43
            
            Senior
                Vice President-Chief Operating OfficerRobert
                J. DeFranco
            
            49
            
            Senior
                Vice President-Chief Financial OfficerDaniel
                P. Hoogterp
            
            46
            
            Senior
                Vice President-Chief Technology OfficerSteven
                L. Horowitz
            
            34
            
            Senior
                Vice President-Product and Business DevelopmentRichard
                G. Stalzer
            
            42
            
            Senior
                Vice President-Chief Revenue OfficerLynn
                Varsell
            
            45
            
            Senior
                Vice President-PublisherBruce
                J. Zanca
            
            45
            
            Senior
                Vice President-Chief Communications/Marketing
                Officer





**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 -
      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. 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.





**Daniel
      P. Hoogterp.** Mr.
      Hoogterp has served as Senior Vice President and Chief Technology officer since
      May 2005. Prior to that, he was Chief Executive Officer of TQuist, LLC, a
      technology consulting company, from November 2002. From February 2001 to
      September 2002, Mr. Hoogterp served as Executive Vice President and Chief
      Technology Officer of Enamics, Inc., a company specializing in business
      technology management. From July 1999 to February 2001, he served as Senior
      Vice
      President and Chief Technology Officer of Sagemaker, Inc., a provider of
      enterprise information portals. From March 1991 to July 1999, he served as
      Chief
      Executive Officer of Retrieval Technologies, Inc. Mr. Hoogterp received a
      Post-Graduate Certificate in Business from Heriott-Watt University’s Edinburgh
      Business School in Scotland in 2004.





**Steven
      L. Horowitz** .
      Mr.
      Horowitz has served as Senior Vice President, Product and Business Development
      since May 2005. Mr. Horowitz joined Bankrate as Vice President and Publisher
      in
      October of 2004. From 2002 to 2004, Mr. Horowitz served in various positions
      at
      America Online (Time Warner), most recently as Vice President eCommerce
      Classifieds. From 1998 to 2002, he held Director and Senior Manager positions
      with Yahoo! and GeoCities, Inc. specializing in business and sales strategy
      for
      their classifieds and local properties. Additionally, Mr. Horowitz served as
      Associate Director of Internet Marketing for BMG Music Club at BMG Direct,
      Bertelsmann (1998), Director of Internet Venues at a start-up entertainment
      website (1996 to 1997) and Online Publicist for Turner Entertainment Group
      at
      Tuner Broadcasting Systems, Inc. (1995 to 1996). Mr. Horowitz received a
      Bachelor of Arts degree with a Major in English from the State University of
      New
      York at Oswego in 1993.




61




**Richard
      G. Stalzer.** Mr.
      Stalzer has served as Senior Vice President and Chief Revenue Officer since
      February 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.




**Lynn
      Varsell.** Ms. Varsell
      was appointed Senior Vice President-Publisher in February 2006 after
      joining the Company in May, 2005. From 2003 to 2005, she served as
      iMedia Ad Sales Marketing Director for Discovery
      Communications overseeing 14 television networks. From 1999 to 2002,
      she served as Vice President, Design & Development for Official
      Payments Corp., specializing in processing consumer credit card payments for
      government taxes, fees and fines. From 1996 to 1999, she held various
      creative and development positions at Disney Internet Group including Creative
      Director of ABC.com, Oprah.com and Oscar.com where she was responsible for
      launching Oprah.com on the web and developing the first successful
      synch-to-broadcast event. Ms. Varsell holds a Bachelor of Arts degree with
      honors from Boston College and a Master Degree in Interactive Telecommunications
      from New York University Tisch School of the Arts.




**Bruce
      J. Zanca.** Mr. has
      served as Senior Vice President and Chief Communications/Marketing Officer
      since
      July 2004. From January 2002 to June 2004, Mr. Zanca owned and operated a
      communications and marketing consulting practice. From September 1999 to
      December 2001, Mr. Zanca was Senior Vice President of Communications and
      Administration at Official Payments Corp., specializing in processing consumer
      credit card payments for government taxes, fees and fines. From August 1998
      to
      June 1999 he served as Vice President - Corporate Communications at GeoCities,
      Inc., a community of personal Web sites on the Internet. From 1995 to 1998,
      Mr.
      Zanca was Vice President of Corporate Communications at U.S. News & World
      Report Magazine Group. From 1981 to 1992, Mr. Zanca was a press aide in the
      Reagan and Bush administrations. During the first Bush administration he was
      a
      White House Spokesman and deputy to Marlin Fitzwater.




**Code
      of Conduct and Ethics**





The
      Company has adopted the Bankrate, Inc. Code of Ethics (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, the Code of Business Conduct and Ethics and the
      Company’s Audit Committee Charter are publicly available on our website at
      http://www.bankrate.com/investor-relations/corpGovernance/corp-governance.asp.
      In addition, the Company will also provide to any person without charge, upon
      request, a copy of any of these documents. Such request may be made in writing
      to Robert J. DeFranco at 11760 US Highway One, Suite 500, North Palm Beach,
      FL
      33408, or by phone to 561-630-1230. If we make any substantive amendments to
      the
      finance code of ethics, the Code of Business Conduct and Ethics or grant any
      waiver, including any implicit waiver, from a provision of either code, we
      will
      disclose the nature of such amendment or waiver on that website or in a report
      on Form 8-K.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange of 1934, as amended, and regulations of 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 any
      written representations from reporting persons that no other reports were
      required of those persons, the Company believes that during fiscal 2005, all
      filing requirements applicable to its directors and executive officers were
      complied with in a timely manner except that Daniel P. Hoogterp filed a late
      Form 4 in June 2005. 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.




62




**ITEM
      11.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth, for the years indicated, the total compensation
      paid
      to or accrued for the Company's President and Chief Executive Officer and our
      four other most highly compensated executive officers during 2005 (collectively,
      the "Named Executive Officers").





**Long-Term
                Compensation Awards****Number
                of****Annual
                Compensation**
            
            **Securities**
            
            **All****Other
                Annual**
            
            **Underlying**
            
            **Other****Name
                and Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus
                (1)**
            
            **Compensation
                (2)**
            **Options**
            
            **Compensation**Thomas
                R. Evans
            
            
            2005
            
            $
            300,000
            
            $
            260,000
            
            $
            —
            
            
            —
            
            $
            —President,
                Chief Executive Officer
            
            
            2004
            
            
            161,539
            
            
            50,000
            
            
            —
            
            
            1,125,000
            
            
            —and
                Director
            
            
            2003
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —G.
                Cotter Cunningham
            
            
            2005
            
            $
            230,000
            
            $
            251,000
            
            $
            —
            
            
            36,000
            
            $
            —Senior
                Vice President-
            
            
            2004
            
            
            206,947
            
            
            74,235
            
            
            —
            
            
            50,000
            
            
            —Chief
                Operating Officer
            
            
            2003
            
            
            176,000
            
            
            110,812
            
            
            —
            
            
            —
            
            
            —Steven
                L. Horowitz
            
            
            2005
            
            $
            200,000
            
            $
            241,000
            
            $
            —
            
            
            —
            
            $
            —Senior
                Vice President-Product and
            
            
            2004
            
            
            38,462
            
            
            50,000
            
            
            —
            
            
            100,000
            
            
            —Business
                Development
            
            
            2003
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Richard
                G. Stalzer
            
            
            2005
            
            $
            225,000
            
            $
            189,125
            
            $
            —
            
            
            15,000
            
            $
            —Senior
                Vice President-
            
            
            2004
            
            
            194,712
            
            
            62,764
            
            
            —
            
            
            100,000
            
            
            13,929
            (3)Chief
                Revenue Officer
            
            
            2003
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Bruce
                J. Zanca
            
            
            2005
            
            $
            200,000
            
            $
            241,000
            
            $
            —
            
            
            —
            
            $
            —Senior
                Vice President-Chief
            
            
            2004
            
            
            84,462
            
            
            30,000
            
            
            —
            
            
            150,000
            
            
            —Communications/ Marketing
                  Officer
            
            
            2003
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —







(1)
            The
                amounts shown in this column reflect bonuses earned in each year.
                Under
                the Company’s 2005 Incentive Compensation Plan, awards were determined
                annually on the basis of performance in relation to certain predetermined
                financial goals, and were paid in February 2006. For 2005, the following
                awards were granted: Mr. Evans - $260,000; Mr. Cunningham - $250,000;
                Mr.
                Horowitz - $240,000; Mr. Stalzer - $188,125; and Mr. Zanca - $240,000.
                Special awards of $1,000 were granted by the Board of Directors to
                Mr.
                Cunningham, Mr. Horowitz, Mr. Stalzer and Mr. Zanca, paid in the
                third
                quarter of 2005. For 2004, the following awards were granted: Mr.
                Cunningham - $74,235; and Mr. Stalzer - $62,764. Awards in 2004 for
                Mr.
                Evans, Mr. Horowitz and Mr. Zanca were determined under the terms
                of their
                employment agreements.  For 2003, the following award was granted to
                Mr. Cunningham: $110,812.


(2)
              Other
                  compensation in the form of perquisites and other personal benefits
                  has
                  been omitted in accordance with the rules of the
                  Commission.
  (3)
              Consists
                  of 2004 reimbursed relocation expenses paid in
                  2005.




63





**Option
      Grants in Last Fiscal Year**





The
      following table sets forth all individual grants of stock options during the
      year ended December 31, 2005, to each of the Named Executive
      Officers.





**Individual
                Grants****Number
                of**
            
            **Percent
                of**
            
            
            
            
            
            **Potential
                Realizable****Securities**
            
            **Total
                Options**
            
            
            
            
            
            **Value
                at Assumed****Underlying**
            
            **Granted
                to**
            
            **Exercise
                or**
            
            
            
            **Annual
                Rates of Stock****Options**
            
            **Employees
                in**
            
            **Base
                Price**
            
            **Expiration**
            
            **Price
                Appreciation****Name**
            
            **Granted**
            
            **Fiscal
                Year**
            
            **Per
                Share**
            
            **Date**
            
            **for
                Option Term (1)****5%**
            
            **10%**Thomas
                R. Evans
            
            
            —
            
            
            —
            
            $
            —
            
            
            —
            
            $
            —
            
            $
            —G.
                Cotter Cunningham
            
            
            36,000
            
            
            5.2
            %
            
            18.44
            
            
            2/1/2012
            
            
            270,250
            
            
            629,796Steven
                L. Horowitz
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Richard
                G. Stalzer
            
            
            15,000
            
            
            2.2
            %
            
            18.44
            
            
            2/1/2012
            
            
            112,604
            
            
            262,415Bruce
                J. Zanca
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —





(1)  Amounts
      represent hypothetical gains that could be achieved for the respective options
      if exercised at the end of the option term. These gains are based on the fair
      market value per share on the date of grant and assumed rates of stock price
      appreciation of 5% and 10%, compounded annually, from the date the respective
      options were granted to their expiration date. These assumptions are mandated
      by
      the rules of the Commission and are not intended to forecast future appreciation
      of our stock price. The potential realizable value computation is net of the
      applicable exercise price, but does not take into account federal or state
      income tax consequences and other expenses of option exercises or sales of
      appreciated stock. Actual gains, if any, are dependent upon the timing of such
      exercise and the future performance of our Common Stock. There can be no
      assurance that the rates of appreciation in this table can be achieved. This
      table does not take into account any appreciation in the price of our common
      stock to date.





**Option
      Exercises in Last Fiscal Year and Year-End Option Values**





The
      following table summarizes the number of shares and value realized by each
      of
      the Named Executive Officers upon the exercise of options and the value of
      the
      outstanding options held by the Named Executive Officers at December 31,
      2005.





64





**Number
                of****Securities
                Underlying**
            
            **Value
                of Unexercised****Shares**
            
            
            
            **Unexercised
                Options**
            
            **In-the-Money
                Options****Acquired**
            
            **Value**
            
            **at
                Fiscal Year-End**
            
            **at
                Fiscal Year-End (1)****on
                Exercise**
            
            **Realized**
            
            **Exercisable**
            
            **Unexercisable**
            
            **Exercisable**
            
            **Unexercisable****Name**Thomas
                R. Evans
            
            
            —
            
            $
            —
            
            
            458,333
            
            
            666,667
            
            $
            9,260,000
            
            $
            13,497,500G.
                Cotter Cunningham
            
            
            20,000
            
            
            603,000
            
            
            49,458
            
            
            62,042
            
            
            1,135,741
            
            
            838,724Steven
                L. Horowitz
            
            
            7,500
            
            
            158,250
            
            
            21,667
            
            
            70,833
            
            
            416,433
            
            
            1,361,417Richard
                G. Stalzer
            
            
            —
            
            
            —
            
            
            45,833
            
            
            69,167
            
            
            647,167
            
            
            931,033Bruce
                J. Zanca
            
            
            —
            
            
            —
            
            
            53,125
            
            
            96,875
            
            
            1,137,406
            
            
            2,074,094





(1)
            Based
                on the fair market value of our Common Stock as of December 31, 2005
                of
                $29.52 per share as reported on the Nasdaq National Market, less
                the
                exercise price payable upon exercise of such
                options.





**Employment
      Agreements**





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.





On
      June
      21, 2004, Thomas R. Evans, was appointed President and Chief Executive Officer
      and entered into an employment agreement with the Company. Under the terms
      of
      the employment agreement, Mr. Evans is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria,. Under the terms of the employment
      agreement, Mr. Evans 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. Evans agrees not to compete with the Company and not to recruit
      any of the Company’s employees. Upon Mr. Evans’ 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.
      Mr.
      Evans was also granted options to purchase 600,000 shares of the Company’s
      common stock at $8.46, the fair market value on the date of grant. The options
      have a seven year term and vest as follows: 200,000 shares on July 1, 2005;
      and
      16,666.667 shares on the first day of each month beginning August 1, 2005 and
      ending July 1, 2007. On October 26, 2004, Mr. Evans was granted options to
      purchase 500,000 shares of the Company’s common stock at $10.01, the fair market
      value on the date of grant. The options have a seven year term and vest as
      to
      all 500,000 shares five years from the date of grant. Vesting accelerates if,
      at
      any point during the term of the option, the fair market value of the Company’s
      common stock is at or above the following incremental thresholds for ninety
      consecutive trading days; $20.00 - 100,000 shares; $22.50 - 50,000 shares;
      $25.00 - 75,000 shares; $27.50 - 50,000 shares; $30.00 - 75,000 shares; $32.50
      -
      75,000 shares; $35.00 - 75,000 shares.





65





On
      July
      15, 2004, Bruce J. Zanca, was appointed Senior Vice President and Chief
      Communications/Marketing Officer and entered into an employment agreement with
      the Company. Under the terms of the employment agreement, Mr. Zanca is entitled
      to receive an annual base salary as stipulated in the employment agreement,
      an
      annual bonus contingent on achieving certain performance criteria. Under the
      terms of the employment agreement, Mr. Zanca 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. Zanca agrees not to compete with the Company and
      not
      to recruit any of the Company’s employees. Upon Mr. Zanca’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.
      Mr. Zanca was also granted options to purchase 150,000 shares of the Company’s
      common stock at $8.11, the fair market value on the date of grant. The options
      have a seven year term and vest as follows: 37,500 shares on July 15, 2005;
      and
      3,125 shares on the first day of each month beginning August 1, 2005 and ending
      July 15, 2008.





On
      August
      10, 2004, the Company and its former President and CEO (“former CEO”) entered
      into a Separation and General Release Agreement (the “Separation Agreement”)
      pursuant to the terms of an Executive Employment Agreement dated April 27,
      2002
      (the “Executive Employment Agreement”). The Separation Agreement provided, among
      other things, that the former CEO (i) resign as a director of the Company as
      of
      August 10, 2004; (ii) release and forever discharge the Company from any and
      all
      claims the former CEO had or may have against the Company; (iii) the former
      CEO’s last day as an employee of the Company was extended until October 21,
      2004; (iv) on August 19, 2004, the Company paid the former CEO $125,000, subject
      to standard withholdings and deductions for the payment of certain of the former
      CEO’s legal fees; (v) on August 19, 2004, the Company paid $54,207, subject to
      standard withholdings, for accrued vacation pay; (vi) on August 19, 2004, the
      Company paid $10,000 to a third party for outplacement and transitional
      counseling services; (vii) on August 19, 2004, the Company paid for the former
      CEO’s unpaid and reasonably approved business expenses; (viii) the Company will
      provide the former CEO with certain health insurance benefits through June
      21,
      2005 in accordance with the terms of the Executive Employment Agreement, and
      (ix) on October 21, 2004, the Company paid the former CEO $125,000, subject
      to
      standard withholdings.





On
      October 4, 2004, Steve Horowitz, was appointed Vice President and Publisher
      and
      entered into an employment agreement with the Company. Under the terms of the
      employment agreement, Mr. Horowitz is entitled to receive an annual base salary
      as stipulated in the employment agreement, an annual bonus contingent on
      achieving certain performance criteria. Under the terms of the employment
      agreement, Mr. Horowitz 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. Horowitz agrees not to compete with the Company and not to
      recruit any of the Company’s employees. Upon Mr. Horowitz’ 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 six month’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 three
      months after the termination date; and one-third payable six months from the
      termination date. Mr. Horowitz was also granted options to purchase 100,000
      shares of the Company’s common stock at $10.30, the fair market value on the
      date of grant. The options have a seven year term and vest as follows: 25,000
      shares on October 25, 2005; and 2,083.333 shares on the first day of each month
      beginning November 1, 2005 and ending October 25, 2008.





On
      May
      23, 2005, Lynn Varsell, was appointed Vice President-Publisher and entered
      into
      an employment agreement with the Company. Under the terms of the employment
      agreement, Ms. Varsell is entitled to receive an annual base salary as
      stipulated in the employment agreement, an annual bonus contingent on achieving
      certain performance criteria. Under the terms of the employment agreement,
      Ms.
      Varsell 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 six months thereafter, Ms.
      Varsell agrees not to compete with the Company and not to recruit any of the
      Company’s employees. Upon Ms. Varsell’ 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 six months’ base salary at the then-current
      rate payable in three equal installments; one-third payable 15 days after the
      termination date; one-third payable three months after the termination date;
      and
      one-third payable six months from the termination date. Ms. Varsell was also
      granted options to purchase 50,000 shares of the Company’s common stock at
      $17.13, the fair market value on the date of grant. The options have a
      seven-year term and vest as follows: 12,500 shares on May 23, 2006; and
      1,041.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 23, 2009.





66





On
      May
      31, 2005, Daniel P. Hoogterp, was appointed Senior Vice President-Chief
      Technology Officer and entered into an employment agreement with the Company.
      Under the terms of the employment agreement, Mr. Hoogterp is entitled to receive
      an annual base salary as stipulated in the employment agreement, an annual
      bonus
      contingent on achieving certain performance criteria, and a guaranteed bonus
      of
      $50,000 for 2005 that was paid in the first quarter of 2006. Under the terms
      of
      the employment agreement, Mr. Hoogterp 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
      six months thereafter, Mr. Hoogterp agrees not to compete with the Company
      and,
      for a period of one year thereafter, not to recruit any of the Company’s
      employees. Upon Mr. Hoogterp’ 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. Mr. Hoogterp was also
      granted options to purchase 80,000 shares of the Company’s common stock at
      $18.26, the fair market value on the date of grant. The options have a
      seven-year term and vest as follows: 20,000 shares on May 31, 2006; and
      1,666.667 shares on the first day of each month beginning April 1, 2006 and
      ending May 31, 2009.





**Compensation
      of Directors**





Richard
      J. Pinola received $25,000 in cash compensation in 2005 for serving as Audit
      Committee Chairman. No other employee nor non-employee directors receive any
      cash compensation for their services as such. Annually, on the first business
      day of the year, each non-employee director receives an option to purchase
      10,000 shares of the Company’s common stock at the fair market value on the date
      of grant. The Company reimburses each director for reasonable out-of-pocket
      expenses incurred in attending meetings of the Board of Directors and any of
      its
      committees.





**Compensation
      Committee Interlocks and Insider Participation**





The
      following non-employee directors were the members of the Compensation Committee
      of the Board of Directors during 2005: Randall E. Poliner (Chairman) and Robert
      P. O’Block. None of the members of the Compensation Committee is a current or
      former officer or employee of the Company.





**Compensation
      Committee Report on Executive Compensation**





***General***





The
      Compensation Committee of the Company's Board of Directors has furnished the
      following report on executive compensation in accordance with the rules and
      regulations of the Commission. This report outlines the duties of the
      Compensation Committee with respect to executive compensation, the various
      components of the Company's compensation program for executive officers and
      other key employees, and the basis on which the 2005 compensation was determined
      for the executive officers, with particular detail given to the 2005
      compensation for the Company's Chief Executive Officer.





***Compensation
      of Executive Officers Generally***





The
      Compensation Committee is responsible for establishing compensation levels
      for
      the executive officers of the Company, including the annual bonus plan for
      executive officers, and for administering the Company's equity compensation
      plans. The Compensation Committee is comprised of two independent directors:
      Messrs. Poliner (Chairman) and O’Block. The Compensation Committee's overall
      objective is to establish a compensation policy that will (1) attract, retain
      and reward executives who contribute to the achievement of the Company's
      business objectives; (2) motivate executives to attain these objectives; and
      (3)
      align the interests of executives with those of the Company's long-term
      investors. The Company compensates executive officers with a combination of
      salary and incentives designed to focus their efforts on maximizing both the
      near-term and long-term financial performance of the Company. In addition,
      the
      Company's compensation program rewards individual performance that furthers
      Company goals. The executive compensation program includes base salary,
      incentive bonuses, long-term equity incentive awards in the form of stock option
      grants, and other benefits. Each executive officer's compensation package is
      designed to provide an appropriately weighted mix of these elements, which
      cumulatively provide a level of compensation roughly equivalent to that paid
      by
      companies of similar size and complexity.





*Base
      Salary.* Base
      salary levels for each of the Company's executive officers, including the Chief
      Executive Officer, are generally set within a range of base salaries that the
      Compensation Committee believes are paid to executive officers at companies
      deemed comparable to the Company based on similarities in revenue levels,
      industry segments and competitive employment markets. In addition, the
      Compensation Committee generally takes into account the Company's past financial
      performance and future expectations, as well as the performance of the
      executives and changes in the executives' responsibilities. The annual base
      salary the Company has agreed to pay Mr. Evans ($300,000) is the amount
      specified in his employment agreement with the Company.





67





*Incentive
      Bonuses.* The
      Compensation Committee recommends the payment of bonuses to provide an incentive
      to executive officers. Bonuses are awarded only if the Company achieves or
      exceeds certain corporate performance objectives. The incentive bonus to each
      executive officer is based on the individual executive's performance as it
      relates to the Company's performance.





*Equity
      Incentives.* Stock
      options are used by the Company to provide a stock-based incentive to improve
      the Company's financial performance and to assist in the recruitment, retention
      and motivation of professional, managerial and other personnel. Stock options
      are also designed to align the interests of the Company's executive officers
      with those of its stockholders by encouraging executive officers to enhance
      the
      value of the Company, the price of the Common Stock, and hence, the
      stockholders’ return over the long term. Generally, stock options are granted to
      executive officers from time to time based primarily upon the individual's
      actual and/or potential contributions to the Company and the Company's financial
      performance over the long term. During the year ended December 31, 2005, options
      to purchase 196,000 shares of Common Stock were granted to the Company’s current
      executive officers.





***Compensation
      of the Chief Executive Officer***





The
      Committee annually reviews the performance and compensation of the Chief
      Executive Officer based on its assessment of past performance and its
      expectation of future contributions to the Company’s performance. On June 21,
      2004, Thomas R. Evans was appointed President and Chief Executive Officer and
      entered into an employment agreement with the Company. Under the terms of the
      employment agreement, the Company has agreed to pay Mr. Evans an annual salary
      of $300,000 and an annual bonus of at least $100,000. The Committee believes
      the
      compensation paid to Mr. Evans is reasonable.





Members
                of theCompensation
                CommitteeRandall
                E. Poliner, ChairmanRobert
                P. O’Block








**Policy
      with Respect to Qualifying Compensation for Deductibility**





Section
      162(m) of the Internal Revenue Code imposes a limit on tax deductions for annual
      compensation (other than performance-based compensation) in excess of one
      million dollars paid by a corporation to its Chief Executive Officer and the
      other four most highly compensated executive officers. The Company has not
      established a policy with regard to Section 162(m) of the Internal Revenue
      Code,
      because the Company has not paid and does not currently anticipate paying annual
      compensation in excess of one million dollars to any employee. None of the
      compensation paid by the Company in 2004 was subject to limitations on
      deductibility. The Board of Directors will continue to assess the impact of
      Section 162(m) on its compensation practices and determine what further action,
      if any, is appropriate.





**Stock
      Performance Graph**





The
      following graph provides a comparison of the cumulative total stockholder return
      on the Company's Common Stock for the period from December 31, 1999 through
      December 31, 2005, against the cumulative stockholder return during such period
      achieved by the Nasdaq Stock Market Index for U.S. Companies ("Nasdaq US")
      and
      the Hemscott Internet Information Providers Index ("Hemscott Group Index").
      The
      graph assumes that $100 was invested on December 31, 1999 in the Company's
      Common Stock and in each of the comparison indices, and assumes reinvestment
      of
      dividends.










**Nasdaq**
            
            **Hemscott****December
                31,**
            
            **Bankrate,
                Inc.**
            
            **Market
                Index**
            
            **Group
                Index**2000
            
            $
            100
            
            $
            100
            
            $
            1002001
            
            
            346
            
            
            80
            
            
            552002
            
            
            2,048
            
            
            56
            
            
            462003
            
            
            6,585
            
            
            84
            
            
            1272004
            
            
            7,367
            
            
            91
            
            
            1862005
            
            
            15,702
            
            
            93
            
            
            282





68





The
      Stock
      Performance Graph shall not be deemed incorporated by reference by any general
      statement incorporating by reference this Annual Report on Form 10-K into any
      filing under the Securities Act of 1933, as amended, or the Securities Exchange
      Act of 1934, as amended, except to the extent that the Company specifically
      incorporates this information by reference, and shall not otherwise be deemed
      filed under either of such Acts.





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





**SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**





The
      following table sets forth the amount and percent of shares of Common Stock
      that, at February 28, 2006, are deemed under the rules of the Securities and
      Exchange Commission (the "Commission") to be "beneficially owned" by each member
      of the Board of Directors, by each nominee for election to the Board of
      Directors, by each executive officer of the Company named in the Summary
      Compensation Table below, by all directors and executive officers of the Company
      as a group, and by any person or "group" (as that term is used in the Securities
      Exchange Act of 1934, as amended (“Exchange Act”)) known to the Company to be a
      "beneficial owner" of more than 5% of the outstanding shares of Common Stock
      as
      of that date. The information concerning the beneficial ownership of the
      Company’s directors and officers is based solely on information provided by
      those individuals.





**Beneficial
      Ownership Table**





**Common
                Stock****Beneficially
                Owned (1)****Number
                of****Shares
                of**
            
            **Percentage**Name
                of Beneficial Owner
            
            **Common
                Stock**
            
            **of
                Class**Peter
                C. Morse (2)
            
            
            5,115,625
            
            
            32.1
            %*Principal
                Stockholder and Chairman of the Board*Fidelity
                Management & Research Company (3)
            
            
            1,590,843
            
            
            9.3
            %*Principal
                Stockholder*Trafelet
                & Company, LLC (4)
            
            
            1,552,600
            
            
            9.1
            %*Principal
                Stockholder*Wellington
                Management Company, LLP (5)
            
            
            1,190,964
            
            
            7.0
            %*Principal
                Stockholder*Capital
                Research and Management Company (6)
            
            
            872,530
            
            
            5.1
            %*Principal
                Stockholder*Thomas
                R. Evans (7)
            
            
            650,000
            
            
            3.9
            %*President,
                Chief Executive Officer and Director*Randall
                E. Poliner (8)
            
            
            607,165
            
            
            3.8
            %*Director*Robert
                P. O'Block (9)
            
            
            465,325
            
            
            2.9
            %*Director*G.
                Cotter Cunningham (10)
            
            
            111,175
            
            
            **Senior
                Vice President-Chief Operating Officer*Bruce
                J. Zanca (11)
            
            
            66,625
            
            
            **Senior
                Vice President-Chief Communications/Marketing Officer*William
                C. Martin (12)
            
            
            65,715
            
            
            **Director*Richard
                G. Stalzer (13)
            
            
            58,542
            
            
            **Senior
                Vice President-Chief Revenue Officer*Richard
                J. Pinola (14)
            
            
            40,000
            
            
            **Director*Steven
                L. Horowitz (15)
            
            
            37,500
            
            
            **Senior
                Vice President-Product and Business Development*All
                current executive officers and directors as a group (13 persons)
            
            
            7,278,453
            
            
            42.6
            %





*
        Less
        than 1% of the outstanding Common Stock.
 (1)
                For
                    purposes of calculating the percentage beneficially owned, the
                    number of
                    shares of Common Stock deemed outstanding includes (i) 15,878,967
                    shares
                    outstanding at February 28, 2006, and (ii) shares issuable by
                    the Company
                    pursuant to options held by the respective persons which may
                    be exercised
                    within 60 days following the February 28, 2006. The shares issuable
                    pursuant to options are considered to be outstanding and beneficially
                    owned by the person holding such options for the purpose of computing
                    the
                    percentage ownership of such person but are not treated as outstanding
                    for
                    the purpose of computing the percentage ownership of any other
                    person.


69




(2)
            Includes
                65,000 shares of Common Stock issuable upon exercise of stock options.
                The
                address of Mr. Morse is 100 Front Street, Suite 900, West Conshohocken,
                Pennsylvania 19428.





(3)
            Based
                solely on information in a Schedule 13G/A filed with the Commission
                on
                February 10, 2006. The address of Fidelity Management & Research
                Company is 82 Devonshire Street, Boston, MA
                02109.





(4)
            Based
                solely on information in a Schedule 13G/A filed with the Commission
                on
                February 14, 2006. The address of Trafelet & Company, LLC is 900 Third
                Avenue, 5th Floor, New York, NY
                10022.





(5)
            Based
                solely on information in a Schedule 13G filed with the Commission
                on
                February 14, 2006. The address of Wellington Management Company,
                LLC is 75
                State Street, Boston, MA 02109.





(6)
            Based
                solely on information in a Schedule 13G filed with the Commission
                on
                February 10, 2006. The address of Capital Research and Management
                Company
                is 333 South Hope Street, Los Angeles, CA
                90071.





(7)
            Represents
                650,000 shares of Common Stock issuable to Mr. Evans upon exercise
                of
                stock options which includes 75,000 shares and 50,000 shares from
                a
                performance-based grant that vested on March 10, 2006 and March
                14, 2006, respectively.





(8)
            Includes
                65,000 shares of Common Stock issuable to Mr. Poliner upon exercise
                of
                stock options.





(9)
            Includes
                65,000 shares of Common Stock issuable to Mr. O'Block upon exercise
                of
                stock options.





(10)
            Includes
                64,125 shares of Common Stock issuable to Mr. Cunningham upon exercise
                of
                stock options.





(11)
            Includes
                65,625 shares of Common Stock issuable to Mr. Zanca upon exercise
                of stock
                options.





(12)
            Includes
                52,500 shares of Common Stock issuable to Mr. Martin upon exercise
                of
                stock options.





(13)
            Represents
                60,781 shares of Common Stock issuable to Mr. DeFranco upon exercise
                of
                stock options.





(14)
            Represents
                58,542 shares of Common Stock issuable to Mr. Stalzer upon exercise
                of
                stock options.





(15)
            Includes
                35,000 shares of Common Stock issuable to Mr. Pinola upon exercise
                of
                stock options.





(16)
            Represents
                37,500 shares of Common Stock issuable to Mr. Horowitz upon exercise
                of
                stock options.





**Equity
      Compensation Plan Information**





The
      following table summarizes information about the Company's equity compensation
      plans as of December 31, 2005. All outstanding awards relate to the Company's
      Common Stock. For additional information about the Company's equity compensation
      plans, see Note 3 to the consolidated financial statements in Item 8.
      above.


**Number
                  of securities**
                **to
                  be issued upon**
                **exercise
                  of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Weighted
                  average**
                **exercise
                  price of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Number
                  of securities**
                **remaining
                  available**
                **for
                  future issuance**
                **under
                  equity**
                **compensation
                  plans**
                **(excluding
                  securities**
                **reflected
                  in column (a))****Plan
                  Category**
              
              **(a)**
              
              **(b)**
              
              **(c)**Equity
                  compensation plans approved by securities holders (1)
              
              
              2,631,955
              
              $
              12.69
              
              
              553,000Equity
                  compensation plans not approved by securities holders
              
              
              —
              
              
              —
              
              
              —Total
              
              
              2,631,955
              
              $
              12.69
              
              
              553,000
 
 (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 3 to the consolidated financial
                  statements in Item 8. above for more information about these
                  plans.
 
 **ITEM
                  13.**
              **CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 None.





70





**ITEM
                14.**
            **PRINCIPAL
                ACCOUNTING FEES AND SERVICES**





**Information**  **Regarding
      Our Independent Public Accountants**





KPMG
      LLP
      served as our independent accountants for the fiscal year ended December 31,
      2005. This firm was appointed by our Audit Committee and was ratified by
      stockholders at the 2005 annual meeting. KPMG LLP has been our independent
      registered public accountants since 1998.




**Audit
      and Non-Audit Fees**





The
      following table presents fees for professional audit services rendered by KPMG
      LLP for
      the
      audit of the Company’s annual financial statements for the years ended December
      31, 2005 and 2004 and fees billed for other services rendered by KPMG LLP during
      those periods.





**Year
                Ended December 31,****2005**
            
            **2004**Audit
                fees (1)
            
            $
            369,150
            
            $
            285,000Audit
                related fees (2)
            
            
            44,370
            
            
            —Tax
                fees (3)
            
            
            18,500
            
            
            16,000$
            432,020
            
            $
            301,000





(1)
            Audit
                fees billed to the Company by KPMG LLP for auditing the Company’s annual
                financial statements, the audit of internal controls over financial
                reporting and reviewing the financial statements included in the
                Company’s
                Quarterly Reports on Form 10-Q that were filed with the Securities
                and
                Exchange Commission.





(2)
            Audit
                related fees billed by KPMG LLP.





(3)
            Tax
                fees billed by KPMG LLP include fees related to preparing the 2005
                and
                2004 U.S. corporate income and state income and franchise tax
                returns.





**Policy
      on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent
      Auditor**





The
      Audit
      Committee of the Board of Directors has implemented procedures under the
      Company’s Audit Committee Pre-Approval Policy for Audit and Non-Audit Services
      (the “Pre-Approval Policy”) to ensure that all audit and permitted non-audit
      services provided to the Company are pre-approved by the Audit Committee.
      Specifically, the Audit Committee pre-approves the use of KPMG LLP for specific
      audit and non-audit services, within approved monetary limits. If a proposed
      service has not been pre-approved pursuant to the Pre-Approval Policy, then
      it
      must be specifically pre-approved by the Audit Committee before it may be
      provided by KPMG LLP. Any pre-approved services exceeding the pre-approved
      monetary limits require specific approval by the Audit Committee. The Audit
      Committee may delegate pre-approval authority to one or more of its members
      when
      expedition of services is necessary. All of the audit-related, tax and all
      other
      services provided by KPMG LLP to the Company in 2005 were approved by the Audit
      Committee by means of specific pre-approvals or pursuant to the procedures
      contained in the Pre-Approval Policy.




The
      Audit
      Committee has determined that all non-audit services provided by KPMG LLP in
      2005 were compatible with maintaining its independence in the conduct of its
      auditing functions.





**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**





**Documents
      Filed as Part of This Report:**





(1)
            Financial
                Statements.




71




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.





(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.





Exhibits
            Description


2.1
            Agreement
                and Plan of Reorganization dated November 20, 2005, by and among
                Bankrate,
                Inc., FastFind, LLC, and Wescoco LLC - incorporated herein by reference
                to
                Exhibit 2.1 of the Registrant’s Form 8-K (filed 12/6/05) (No.
                0-25681).




2.2
            Agreement
                and Plan of Merger dated November 20, 2005, by and among Bankrate,
                Inc.,
                Sub 1, Sub 2, Mortgage Market Information Services, Inc. and Interest.com,
                Inc., Scarlett Enterprises, Ltd., and James R. De Both - incorporated
                herein by reference to Exhibit 2.2 of the Registrant’s Form 8-K (filed
                12/6/05) (No. 0-25681).




3.1
            Amended
                and Restated Articles of Incorporation - incorporated herein by reference
                to Exhibit 3.1 of the Registrant’s Form S-1/A (filed 4/16/99) (No.
                333-74291).




3.2
            Articles
                of Amendment to Amended and Restated Articles of Incorporation -
                incorporated herein by reference to Exhibit 2.2 of the Registrant’s Form
                10-Q (filed 11/13/00) (No.
                0-25681).




3.3
            Amended
                and Restated Bylaws- incorporated herein by reference to Exhibit
                3.2 of
                the Registrant’s Form S-1/A (filed 4/16/99) (No.
                333-74291).




10.1
            Executive
                Employment Agreement effective June 21, 2004, between Thomas R. Evans
                and
                the Company - incorporated herein by reference to Exhibit 10.1 of
                the
                Registrant’s Form 10-Q (filed 6/30/04) (No. 0-25681).
                *




10.2
            Executive
                Employment Agreement effective July 15, 2004, between Bruce J. Zanca
                and
                the Company-
                incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form
                10-K (filed 3/16/05) (No. 0-25681).
                *




10.3
            Executive
                Employment Agreement effective October 4, 2004, between Steve Horowitz
                and
                the Company-
                incorporated herein by reference to Exhibit 10.3 of the Registrant’s Form
                10-K (filed 3/16/05) (No. 0-25681).
                *




10.4
            Sublease
                Agreement dated November 18, 2004, between the Company and New Cingular
                Wireless Services, Inc. f/k/a AT&T Wireless Services, Inc. -
                incorporated herein by reference to Exhibit 10.4 of the Registrant’s Form
                10-K (filed 3/16/05) (No. 0-25681).




10.5
            Aggregator
                Agreement effective January 1, 2005 between the Company and iHomeowners,
                Inc.-
                incorporated herein by reference to Exhibit 10.5 of the Registrant’s Form
                10-K (filed 3/16/05) (No. 0-25681).
                #




10.6
            Marketing
                Agreement effective January 21, 2005 between the Company and LowerMyBills,
                Inc.-
                incorporated herein by reference to Exhibit 10.6 of the Registrant’s Form
                10-K (filed 3/16/05) (No. 0-25681).
                #




10.7
            Bankrate,
                Inc. 1997 Equity Compensation Plan - incorporated herein by reference
                to
                Exhibit 10.5 of the Registrant’s Form S-1 (filed 2/11/99) (No. 333-74291).
                *




10.8
            Bankrate,
                Inc. 1999 Equity Compensation Plan - incorporated herein by reference
                to
                Exhibit 10.6 of the Registrant’s Form S-1 (filed 2/11/99) (No. 333-74291).
                *




10.9
            Form
                of Stock Option Agreement under the 1997 Equity Compensation Plan
                and 1999
                Compensation Plan - incorporated herein by reference to Exhibit 10.7
                of
                the Registrant’s Form S-1 (filed 2/11/99) (No. 333-74291).
                *




72




10.10
            Executive
                Employment Agreement dated January 1, 2004 between G. Cotter Cunningham
                and Bankrate, Inc. - incorporated herein by reference to Exhibit
                10.14 on
                Registrant’s Form 10-K (filed 3/15/04) (No.
                0-25681). *




10.11
            Executive
                Employment Agreement dated January 1, 2004 between Robert J. DeFranco
                and
                Bankrate, Inc. - incorporated herein by reference to Exhibit 10.15
                on
                Registrant’s Form 10-K (filed 3/15/04) (No.
                0-25681). *




10.12
              Executive
                  Employment Agreement effective May 23, 2005 between Lynn E. Varsell
                  and
                  Bankrate, Inc. *+


10.13
              Executive
                  Employment Agreement dated May 31, 2005 between Daniel P. Hoogterp
                  and
                  Bankrate, Inc.-
                  incorporated herein by reference to Exhibit 10.1 on Registrant’s Form 10-Q
                  (filed 8/9/05) (No.
                  0-25681). *


10.14
              Lease
                  Agreement dated November 3, 2005 between Gardens Plaza Investors,
                  LLC andBankrate,
                  Inc. +


11.1
              Statement
                  re Computation of Per Share Earnings.
                  **


21.1
              Subsidiaries
                  of the Registrant. +


23.1
              Consent
                  of KPMG LLP. +


31.1
            Certification
                of Chief Executive Officer Pursuant to Securities 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 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
                +




+
            File
                herewith.


#
            An
                application has been submitted to the Securities and Exchange Commission
                for confidential treatment of portions of this exhibit pursuant to
                Rule
                24b-2 of the Securities Exchange Act of 1934, as amended. These portions
                have been omitted from this
                exhibit.


**
            Information
                required to be presented in Exhibit 11 is provided in note 1 to the
                consolidated financial statements under Part II, Item 8 of this Form
                10-K
                in accordance with the provisions of FASB Statement of Financial
                Accounting Standards (SFAS) No. 128,*Earnings
                per Share*.





73





**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 16th day of March, 2006.








By:
            /s/ Thomas
              R. EvansThomas
              R. EvansPresident
                and Chief
              Executive 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
            
            DatePresident
            
            March
                16, 2006/s/Thomas
              R. Evans
            
            Chief
                Executive OfficerThomas
                R. Evans
            
            (Principal
                Executive Officer)Senior
                Vice President
            
            March
                  16, 2006/s/ Robert
              J. DeFranco
            
            Chief
                Financial OfficerRobert
                J. DeFranco
            
            (Principal
                Financial and Accounting Officer)Senior
                Vice President
            
            March
                  16, 2006/s/ G.
              Cotter Cunningham
            
            Chief
                Operating OfficerG.
                Cotter Cunningham/s/ William
              C. Martin
            
            Director
            
            March
                  16, 2006William
                C. Martin/s/ Peter
              C. Morse
            
            Director
            
            March
                  16, 2006Peter
                C. Morse/s/ Robert
              P. O'Block
            
            Director
            
            March
                  16, 2006Robert
                P. O'Block/s/ Richard
              J. Pinola
            
            Director
            
            March
                  16, 2006Richard
                J. Pinola/s/ Randall
              E. Poliner
            
            Director
            
            March
                  16, 2006Randall
                E. Poliner




74