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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2002

Commission File No. 0-25681

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

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 and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

The number of outstanding shares of the issuer’s common stock as of October 31, 2002 was as follows: 13,996,950 shares of Common Stock, $.01 par value.

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Bankrate, Inc.
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2002
Index

Introductory Note

         This Report and our other communications and statements may contain “forward-looking statements,” including statements about our beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. For information concerning these factors and related matters, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Report, and the following sections of our Annual Report on Form 10-K for the year ended December 31, 2001 (the “2001 Form 10-K”): (a) “Risk Factors” in Item 1, “Business,” and (b) “Introduction” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Bankrate, Inc.
Condensed Balance Sheets
(Unaudited)

See accompanying notes to condensed financial statements.

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Bankrate, Inc.
Condensed Statements of Operations
(Unaudited)

See accompanying notes to condensed financial statements.

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Bankrate, Inc.
Condensed Statements of Cash Flows
(Unaudited)

See accompanying notes to condensed financial statements.

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BANKRATE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)

NOTE 1 – ORGANIZATION AND ACCOUNTING POLICIES

         Bankrate, Inc. (the “Company”) owns and operates an Internet-based consumer banking marketplace. The Company’s flagship Web site, Bankrate.com, is the Web’s leading aggregator of information on over 100 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.

         The Company has incurred net losses in each of its last six fiscal years and had an accumulated deficit of approximately $55 million as of September 30, 2002. The Company is working to manage its cash by actively controlling expenses and pursuing additional sources of revenue. For instance, since early 2000, the Company has substantially reduced marketing expenditures and sold or shut down under-performing, non-core business units. The Company has also reduced employment levels of continuing operations and consolidated its physical locations. In February 2002, the Company completed the early repayment of its $4,350,000 convertible subordinated note payable, including accrued interest, for $3,400,000 (see Note 5). Based on these actions and the Company’s current strategic initiatives, the Company believes its existing capital resources will be sufficient to satisfy its cash requirements into 2004. However, there are no assurances that such actions will ensure cash sufficiency through 2004 or that reducing marketing or other expenses will not curtail revenue growth.

         The Company may consider additional options, which include, but are not limited to, the following: forming strategic partnerships or alliances; considering other strategic alternatives, including a merger or sale of the Company, or an acquisition; or raising new debt and/or equity capital. There can be no assurance that the Company will be able to raise any funds or realize its strategic alternatives on favorable terms or at all.

         Further, the Company is vigorously defending the legal proceedings discussed in Note 3 below. Management could be required to spend significant amounts of time and resources defending these proceedings, which may impact the operations of the Company.

         The unaudited interim condensed financial statements for the three and nine months ended September 30, 2002 and 2001 included herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

         In the opinion of management, the accompanying unaudited interim condensed financial statements reflect all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly the financial position of the Company at September 30, 2002, and the results of its operations for the three and nine months ended September 30, 2002 and 2001, and its cash flows for the nine months ended September 30, 2002 and 2001. The results for the three and nine months ended September 30, 2002 are unaudited and are not necessarily indicative of the expected results for the full year or any future period.

         The unaudited condensed financial statements included herein should be read in conjunction with the financial statements and related footnotes included in the Company’s 2001 Form 10-K.

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         Online publishing revenue includes barter revenue, which represents the non-cash 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. In January 2000, the Company adopted Emerging Issues Task Force (“EITF”) 99-17, “Accounting for Advertising Barter Transactions.” In accordance with EITF 99-17, barter transactions have been valued based on similar cash transactions that have occurred within six months prior to the date of the barter transaction. Revenue from barter transactions is recognized as income when advertisements are run 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. At December 31, 2001 and September 30, 2002 the Company recorded prepaid expenses of approximately $8,000 and $23,000, respectively, for barter advertising to be received. Barter revenue was approximately $641,000 and $2,403,000, representing approximately 9% and 13% of total revenue, respectively, for the three and nine months ended September 30, 2002, and was approximately $450,000 and $1,915,000 representing approximately 11% and 15% of total revenue, respectively, for the three and nine months ended September 30, 2001.

         Basic and diluted net income (loss) per share are computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution, under the treasury stock method, that could occur if options or other contracts to issue common stock were exercised or converted into common stock.

         The weighted average number of common shares outstanding used in computing diluted net income per share for the three and nine months ended September 30, 2002 includes the shares resulting from the dilutive effect of outstanding stock options. For the three and nine months ended September 30, 2001, 566,379 and 710,729 shares attributable to the exercise of outstanding stock options were excluded from the calculation of diluted loss per share because the effect was antidilutive.

         In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS No. 141 became effective immediately, except with regard to business combinations initiated prior to July 1, 2001, and SFAS No. 142 became effective January 1, 2002.

         Furthermore, any goodwill and intangible assets determined to have indefinite useful lives acquired in a purchase business combination completed after June 30, 2001 will not be amortized. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 continued to be amortized until the adoption of SFAS No. 142. SFAS No. 141 requires, upon adoption of SFAS No.142, that goodwill acquired in a prior purchase business combination be evaluated and any necessary reclassifications be made in order to conform to the new criteria in SFAS No. 141 for recognition apart from goodwill. Any impairment loss is measured as of the date of the adoption and recognized as a cumulative effect of a change in accounting principles in the first interim period. The Company’s adoption of SFAS No. 142 on January 1, 2002 did not result in any impairment adjustment.

         In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived

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assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002 and is not expected to have a material impact on the Company’s financial statements.

         In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets,” which supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operation - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. While SFAS No. 144 retains many of the fundamental provisions of SFAS No. 121, it establishes a single accounting model for long-lived assets to be disposed of by sale, and resolves certain implementation issues not previously addressed by SFAS No. 121. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and, when adopted on January 1, 2002, did not have a material impact on the Company’s financial statements.

         In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” Among other things, SFAS 145 rescinds SFAS No. 4, “Reporting Gains and Losses From Extinguishment of Debt,” which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for fiscal years beginning after May 15, 2002, with early application encouraged. The Company adopted SFAS No. 145 on January 1, 2002 and complied with its provisions when recording the gain on the early repayment of its $4,350,000 10% convertible subordinated note payable. See Note 5 below.

         In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which requires, among other things, recording a liability for costs associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. SFAS No. 146 also provides that commitment to an exit plan or a plan of disposal expresses only management’s future actions and, therefore, does not meet the requirement for recognizing a liability and the related expense. The provisions of SFAS No. 146 are effective prospectively for exit and disposal activities initiated after December 31, 2002, with early application encouraged and, when adopted on January 1, 2003, it is not expected to have a material impact on the Company’s financial statements.

NOTE 2 – 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 is primarily engaged in the sale of advertising in the Consumer Mortgage Guide rate tables, newsletter subscriptions, and licensing of research information. The Company evaluates the performance of its operating segments based on segment profit (loss).

         The Company had one online customer which accounted for approximately 10% and 13%, respectively, of total revenue for the three and nine months ended September 30, 2002. Sales to no other customer exceed 10% of total revenue for the periods presented. No revenues were generated outside of the United States.

         Summarized segment information as of September 30, 2002 and 2001, and for the three and nine months ended September 30, 2002 and 2001, is presented below.

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