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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                   FORM 10-K/A
                                   (Mark One)

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
       ACT OF 1934
                  For the Fiscal Year ended December 31, 1999

[   ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
       EXCHANGE  ACT OF 1934
          For the Transition Period from ____________ to ____________

                       Commission File Number 33-19139-NY

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                             RATEXCHANGE CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

                Delaware                                        11-2936371
    (State or Other Jurisdiction of                          (I.R.S. Employer
     Incorporation or Organization)                         Identification No.)

      185 Berry Street, Suite 3515
           San Francisco, CA                                       94107
(Address of Principal Executive Offices)                        (Zip Code)

                                 (415) 371-9800
              (Registrant's Telephone Number, Including Area Code)


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

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


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

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

         The aggregate  market value of the voting and  non-voting  common stock
held by  non-affiliates of the registrant as of March 27, 2000 was approximately
$483,945,000.

         The  registrant  had issued and  outstanding  17,019,651  shares of its
common stock on March 27, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

         Part III  incorporates  information by reference from the  registrant's
2000 proxy  statement for its annual meeting of shareholders to be held on April
20, 2000.

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<PAGE>

                             RATEXCHANGE CORPORATION
                                   FORM 10-K/A
                      FOR THE YEAR ENDED DECEMBER 31, 1999

On November 13, 2000, RateXchange  Corporation (the "Company") hereby amends its
Annual  Report on Form 10-K for the year ended  December 31, 1999 to include the
following restated items:

                                     Part II

         Item 6. Selected Financial Data.

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

         Item 8. Financial Statements and Supplementary Data.



                                     Part IV

         Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.

                  (a)(3)  Exhibits:

27                Financial Data Schedules (EDGAR Version Only)



                                EXPLANATORY NOTE

         RateXchange  Corporation  (the "Company") has determined to restate its
consolidated financial statements for the years ended December 31, 1999 and 1998
and its condensed quarterly  financial  statements for periods affected thereby.
This amendment includes in Part II, Item 8 the Company's  restated  consolidated
financial  statements  for the years ended December 31, 1999 and 1998, and other
information relating to such restated financial  statements,  including Selected
Financial  Data (Part II, Item 6) and  Management's  Discussion  and Analysis of
Financial  Condition  and Results of Operations  (Part II, Item 7).  Information
regarding the effect of the restatement on the Company's financial condition and
results of  operations  is  included  in the notes to the  financial  statements
included  in Part II,  Item 8 of this  amendment.  This  amendment  also  amends
Executive Compensation (Part III, Item 11), Exhibits,  Financial Schedules,  and
Reports on Form 8-K (Part IV, Item 14) and the Index to Exhibits.


                                       2
<PAGE>

                                                          PART II

<TABLE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
For the Year                            1999            1998             1997          1996           1995
                                    (As restated)   (As restated)
                                    ------------    ------------    ------------    ------------    ------------
<S>                                 <C>             <C>             <C>             <C>             <C>
Revenue                             $       --      $       --      $       --      $       --      $       --

Net loss                              (9,298,789)     (3,144,522)           (200)         (1,961)         (2,561)

Basic and diluted loss per share           (0.72)          (1.92)

Weighted average number of common
shares:                               12,863,020       1,636,919         200,000         200,000         200,000

At End of Year

Total assets                        $  3,043,885    $    830,154    $       --      $       --      $        211

Stockholders' equity                $    318,829    $    700,654    $       (200)   $     (1,300)   $     (5,689)
</TABLE>


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

         As part of the  Company's  overall  strategy,  the  Company  decided to
retain a national  accounting  firm. In July 2000, the Company  selected  Arthur
Andersen,  LLP as its independent auditors. As a result of the Company's review,
certain  adjustments  were  determined  necessary  to the  Company's  previously
reported  financial  results for the years ended December 31, 1998 and 1999. See
note 3 to the financial statements for further information concerning the nature
of the adjustments.

         The  following  discussions  should  be read in  conjunction  with  our
consolidated financial statements contained herein under Item 8 of this report.

                                   Year Ended      Year Ended       Year Ended
                                  Dec. 31, 1999   Dec. 31, 1998    Dec. 31, 1997
                                  (As restated)   (As restated)
                                  -----------      -----------      -----------
Revenue                                  --               --               --
Expenses                          $ 9,431,212      $ 3,135,963      $       200
Interest income                   $   151,496      $     2,214
Net loss                          $(9,298,789)     $(3,144,522)     $      (200)

RESULTS OF OPERATIONS

1999 vs. 1998

Revenue

         We generated no revenues in 1999.

Expenses

         Our total  expenses for 1999 increased  substantially  compared to 1998
because we did not begin  operations  until  September  30,  1998.  As a result,
during 1998 we incurred  expenses  for three  months of that year  compared to a
full year of expenses for 1999.  Incurred expenses relate to finding and funding
a development stage enterprise.

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<PAGE>

We investigated many potential acquisition targets and succeeded in creating one
entity, Telenisus Corporation, and acquiring another entity, RateXchange I, Inc.

         We  funded  Telenisus  Corporation  only  to  the  extent  of  original
capitalization of $75,000. Any further funding of Telenisus was completed on its
own and did not affect our operations.

         RateXchange I, Inc. is now our only operating  subsidiary and it relies
on our financing activities for its operations.

         Total  expenses  for  1999  were  $9,431,212  of  which  the  principal
components were:

         o        $3,158,415  of common  stock,  warrants or options to purchase
                  common  stock of the Company  issued in  exchange  for various
                  services;

         o        $2,034,893  for  legal,   accounting,   consulting  and  other
                  operational expenses related to business development;

         o        $1,507,408  expensed in the purchase of the outstanding common
                  stock of RateXchange;

         o        $1,325,106 for payroll and payroll taxes;

         o        $501,839 for office and other administrative expenses;

         o        $413,681 due to  write-off  of advances to A1 Internet,  Inc.;
                  and

         o        $342,762 for travel.

         Total expenses for 1998 related to operations  since September 30, 1998
and included the activity of RateXchange Corporation and its subsidiary PolarCap
Inc..

Interest Income

         The only income we generated  during 1999 and 1998 was interest  income
on our subscription receivables.  Interest income for 1999 was $151,496 compared
to $2,214 for 1998.  The  increase in  interest  income is  attributable  to the
amount of subscription receivables carried during 1999 compared to 1998. Most of
the receivables have been collected and interest income from this source will be
substantially less in future periods.

1998 vs. 1997

Revenue

         We generated no revenues in 1998.

Expenses

         Total  expenses  for  1998  were  $3,135,963  of  which  the  principal
components were:

         o        $2,020,376  of common  stock or warrants  to  purchase  common
                  stock of the Company issued in exchange for various services;

         o        $885,000  due to write off of advances to A1  Internet,  Inc.;
                  and

         o        $89,710  expensed in the  purchase of the  outstanding  common
                  stock of PolarCap, Inc.

         Total expenses for 1997 were $200 for miscellaneous expenses.

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<PAGE>

Interest Income

         The  only  income  we  recorded  in 1998  was  interest  of  $2,214  on
subscriptions receivable. There was no interest income for 1997.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations to date  primarily  through the sale of
equity  securities.  We  have  been  unprofitable  since  inception  and we have
incurred net losses and negative cash flows from operations in each year.

         We had  negative  working  capital  of  $48,367 at  December  31,  1999
compared to working  capital of $700,654 at December 31,  1998.  At December 31,
1999, we had  subscription  receivables  in the amount of $1,590,319  which were
paid off in the first quarter of 2000.

         Our operating activities used $2,966,768 during the year ended December
31, 1999 due primarily to:

         o        increased business development activities;

         o        expansion of our executive management team;

         o        acquisitions and integration of acquisitions;

         o        identification   and  analysis  of   prospective   acquisition
                  candidates;

         o        legal, accounting and professional expenses; and

         o        other operating expenses.

         Our investing activities used $1,017,124 during the year ended December
31, 1999, due primarily to the purchase of equipment and for the identification,
acquisition and integration of acquisition targets.

         Financing   activities  generated  $3,991,991  during  the  year  ended
December 31, 1999  consisting  primarily of proceeds from sales of common stock.
The  proceeds  of  the  sales  of  common  stock  were  and  will  be  used  for
acquisitions,  business development, equipment purchases and for general working
capital. The various sales of common stock are as follows:

         o        Between  November  1998  and  March  1999,  we sold a total of
                  1,864,688 shares of our restricted common shares to accredited
                  investors.  The shares were sold at an effective  subscription
                  price of $1.07 per share. After deducting the expenses related
                  to the private placement,  we received  $1,745,000 in cash, of
                  which approximately  $1,631,188 was advanced to A1 Internet as
                  working capital and for debt repayment.

         o        In January  1999,  we sold  916,574  shares of common stock to
                  certain  related  parties  at a price  of $.10  per  share  in
                  exchange  for  notes  receivable.   In  March  1999,  we  sold
                  3,112,500  additional  common  shares  as  part  of the  above
                  private placement  offering at an effective price per share of
                  $1.07 for notes. As of December 31, 1999, we collected a total
                  of approximately $1,924,126 from note repayments from both the
                  January and March private placements.

         o        In the second quarter of 1999, we sold 515,188 shares of stock
                  for $1.60 per share in a second private placement and received
                  net proceeds of $628,272.

         Through our operating subsidiary, RateXchange I, Inc., we are executing
an overall business plan to develop an online marketplace for buying and selling
telecommunication  bandwidth and services  using our  electronic  trading system
that may require additional capital for among other uses:

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<PAGE>

         o        expansion into new domestic and international markets;

         o        development of additional products and services; and

         o        acquisitions.

        Our funding of working capital and current and future  operating  losses
may require  additional capital  investment.  We do not currently possess a bank
source of financing and we have not had any revenues. Subsequent to year end, we
closed a $32.8 million private placement. We anticipate that these funds will be
sufficient to facilitate our business plan and cover our operating  expenses for
the next twelve months.

        Our  business  and  operations  have not  been  materially  affected  by
inflation during the periods for which financial information is presented.

OUTLOOK

          RateXchange  operates an electronic  trading system that allows market
participants to trade bandwidth.  The company provides global trading  solutions
to telecommunications  companies,  energy merchants,  financial institutions and
commodity traders.  RateXchange's advanced technological platform provides users
with an  efficient,  centralized  marketplace  that  brings  buyers and  sellers
together.  Through the  development of marketplaces  for financial  instruments,
RateXchange   is  bringing   risk   management   tools  and   practices  to  the
communications  industry.  The company has deployed  neutral  delivery hubs that
provide  a  secure  infrastructure  for  facilitating  the  delivery  of  traded
bandwidth.  By providing market participants with an advanced electronic trading
system, financial products and an independent delivery mechanism, RateXchange is
enabling the creation of a liquid bandwidth trading market.

         We are a development stage company in an early stage of development and
we are subject to all the risks inherent in the  establishment of a new business
enterprise. To address these risks, we must:

         o        establish market acceptance for our electronic  trading system
                  and other products and services;

         o        implement and successfully  execute our business and marketing
                  strategy;

         o        respond to competitive developments;

         o        continue to develop and upgrade our electronic trading system;

         o        continue to attract,  retain and motivate qualified personnel;
                  and

         o        effectively  manage our  capital to support  the  expenses  of
                  developing and marketing new products and services.

         The foregoing  contains  forward-looking  statements that involve risks
and  uncertainties,  including  but  not  limited  to  changes  in our  business
strategy,  our inability to raise sufficient capital,  general market trends and
conditions,  and other risks  detailed  below in "Factors That May Affect Future
Results."  Actual results may vary materially from any future results  expressed
or implied by the forward-looking statements.

SUBSEQUENT EVENTS

Name Change

         On February 7, 2000,  we announced  our intention to change our name to
RateXchange Corporation,  subject to shareholder approval, which was effected on
April 20, 2000, and to focus our efforts on the business of RateXchange I.

                                       6
<PAGE>

Bridge Loan

         In February 2000,  RateXchange I Inc.  closed a $2,000,000  convertible
note offering.  The notes were convertible into RateXchange I, Inc. common stock
at a price per share to be determined in an anticipated  subsequent financing of
RateXchange  I.  Purchasers  of the notes also  received  warrants  to  purchase
RateXchange  I common  stock at $2.40 per  share,  subject to  adjustment.  As a
result of our new business  strategy the  subsequent  financing of RateXchange I
did not occur. Accordingly,  we offered to the note holders the right to convert
their notes into  RateXchange  Corporation  common stock at an exchange  rate of
$5.00 per share. In addition, we agreed to issue to such holders an aggregate of
500,000  warrants to purchase common stock at $5.00 per share. All RateXchange I
notes and warrants have been converted into shares except one note for $25,000.

Settlement of Dispute

         In 1999,  RateXchange entered into a term sheet agreement with a vendor
to  provide  specialized  consulting  and  computer  programming  to  assist  in
RateXchange's   business  plans  and  operations  in  the   business-to-business
e-commerce  niche it was  developing.  The term sheet was never finalized into a
formal  agreement,  but some services were  provided,  and certain cash payments
were made for the services that were rendered.  The term sheet also provided for
the vendor to receive a stock  position in  RateXchange of up to 10% for certain
services.  In February 2000 the Company entered into discussions with the vendor
concerning the 10% stock position in  RateXchange  because the formal  agreement
was never completed and the contemplated  services were not fully provided.  The
ultimate  outcome of these  discussions  was  uncertain at that time.  In August
2000,  the Company  reached an agreement for  settlement of the dispute with the
vendor, whereby the Company issued 175,000 shares, 175,000 warrants and $100,000
in cash. The market value of the settlement was $1.8 million.

Options and Warrants to purchase common stock

         Shareholders  authorized  the  1999  Stock  Option  Plan  during  1999.
Shareholders  authorized the 2000 Stock Option Plan on April 20, 2000. There are
options to purchase  8,000,000 shares  authorized for issuance under both plans.
On February  24,  2000,  the Board  authorized  additional  options to purchase,
4,290,000  shares  outside of either plan.  Total  options  granted to employees
during the first quarter of 2000 for less than fair market value were  3,940,000
for which the Company is  recognizing  related  compensation  expense,  over the
option  vesting  periods,  for the fair value of the stock on the date of grant,
which was $12, and the strike price of the options, which is $7.

         The  company  has also  granted  options  to  non-employee  consultants
totaling  275,000  for  which  the  company  has  recorded  related  expense  of
$2,131,250 in 2000.

         In  October  2000, the Board of Directors approved and issued 2 million
options to the Company's new Chief Executive Officer. These options were granted
with a strike price equal to the fair value of the  Company's  stock on the date
of grant and vest over various periods.

Private Placement

         In March 2000,  the Company  completed a private  placement in which it
sold 2,733,329 shares of restricted common stock at a subscription  price of $12
per share plus warrants to purchase  1,366,673  shares of its common stock at an
exercise price of $14.40 per share. The warrants are immediately exercisable and
expire in three years. After deducting  $2,665,000 for costs associated with the
offering,  the Company  received  $30,135,000.  The  proceeds  are being used to
accelerate  deployment of our delivery hubs,  expand our online  marketplace for
telecommunications products and enhance our geographic reach and product line.

Strategic Alliance

         On September 17, 2000, the Company  entered into an alliance  agreement
with Amerex  Bandwidth,  Ltd. Under this agreement,  Amerex brokers will execute
trades   for  the   sales   or   purchase   of   Internet   protocol   products,
telecommunications  capacity  and/or other  telecommunications-related  products
over the Company's  electronic  trading system and we will share in the revenues
generated by the electronic  trading system.  In connection with this

                                       7
<PAGE>

agreement,  we issued to Amerex five  warrants  for an  aggregate  of  2,300,000
shares of our common  stock.  One warrant  for  300,000  shares with an exercise
price of $4.47 per share is currently  exercisable by Amerex. The remaining four
warrants each for 500,000  shares and with  exercise  prices of $4.47 per share,
$4.70 per share,  $4.92 per share and $5.37 per share,  will become  exercisable
upon the  earlier  of  September  17,  2005 or Amerex  executing  a  minimum  of
$1,000,000,  $3,000,000,  $5,000,000 and  $10,000,000,  in value of transactions
over our online electronic trading system

FACTORS THAT MAY AFFECT FUTURE RESULTS

         We operate in a highly  competitive  market  that  involves a number of
risks.  While we are  optimistic  about our long-term  prospects,  the following
discussion  highlights some risks and uncertainties that should be considered in
evaluating our growth outlook.  See  "Forward-Looking  Statements and Associated
Risks" in Part I of this annual report.

As a  development  stage company with a limited  operating  history in a new and
rapidly  changing  industry,  it is  difficult  to  evaluate  our  business  and
prospects.

         We are a  development  stage  company.  Our  activities  to  date  have
concentrated  on planning  and  developing  our  electronic  trading  system for
trading bandwidth and other telecommunications products.  Accordingly, we have a
limited  operating  history on which to base an  evaluation  of our business and
prospects.  Our prospects must be considered in light of the risks, expenses and
difficulties  frequently  encountered  by  companies  in  their  early  stage of
development,  particularly companies in new and rapidly evolving markets such as
online  commerce.  There  can be no  assurance  that we will  be  successful  in
addressing  these risks,  and the failure to do so could have a material adverse
effect on our business and results of operations.

Our success  depends on our ability to secure  participation  in our  electronic
trading  system and the creation of a neutral  network  where  participants  can
interconnect.

         The success of our online  electronic  trading  system depends upon the
creation of a network of physically  interconnected  users.  To  facilitate  the
creation of such a network we have deployed  leased  switching  capacity in nine
major metropolitan areas in the United States and one in London,  England. There
is a risk  that  we  may  not be  able  to  enter  into  sufficient  contractual
arrangements on favorable terms with participants.

We have a history of losses and expect to incur losses in the future, and we may
never achieve profitability.

         At December 31, 1999,  our  accumulated  deficit  since  inception  was
$12,664,654.  For the year ended  December 31,  1999,  we incurred a net loss of
$9,298,789.  We have incurred a net loss in each year of our existence, and have
financed our  development  stage  operations  primarily  through sales of equity
securities.  We have not  recorded any revenues  from  operations.  We expect to
incur net losses for the  foreseeable  future.  We may never  achieve or sustain
significant  revenues or  profitability  on a quarterly  or annual  basis in the
future.

If our electronic  trading system does not achieve  commercial  acceptance,  our
results will suffer.

         We  will  rely  largely  on a  single  source,  made  up  of  fees  and
commissions from transactions  facilitated on our electronic  trading system and
consulting services, for our revenues for the foreseeable future. Online trading
of  telecommunications  bandwidth and minutes  currently has only limited market
acceptance. As a result, our future ability to gain commercial acceptance of our
electronic   trading  system  is  critical  to  our  success.   Any  failure  to
successfully gain commercial  acceptance of our electronic  trading system would
not only have a material adverse effect on our business and results of operation
but also on our ability to seek additional revenue opportunities.

We may need  additional  capital in the future  and it may not be  available  on
acceptable terms.

          We may need additional working capital for additional  infrastructure,
software development,  marketing,  personnel,  general and administrative costs,
and to fund  losses  prior  to  achieving  profitability.  We may  need to raise
additional  funds through  additional  equity and/or debt financings to meet our
capital  requirements.  We  will  need  to

                                       8
<PAGE>

raise  additional  funds if we have  underestimated  our capital  needs or if we
incur  unexpected  expenses.  We cannot assure you that such  financings will be
available  in amounts or on terms  needed to meet our  requirements,  or at all.
Further,   our  lack  of  tangible  assets  to  pledge  could  prevent  us  from
establishing  a source of financing.  The inability to raise all needed  funding
would adversely  affect our ability to successfully  implement the objectives of
our business plan.

We  may  not  be  able  to  compete  successfully  against  current  and  future
competitors.

         The market for online  bandwidth and minutes  trading  services is new,
rapidly  evolving  and  highly  competitive,  as are  the  online  commerce  and
business-to-business e-commerce markets generally. We expect competition in this
market to intensify in the future. Several of our existing competitors,  such as
Band-X,  Arbinet and E-Speed  currently  operate online exchanges and have large
established customer bases. Our ability to compete with them will depend largely
upon our ability to capture  market share by obtaining  sufficient  participants
for our electronic trading system.

         In addition,  we compete with companies who trade,  broker or otherwise
assist in the buying and selling of  telecommunications  bandwidth  and minutes.
Therefore,  we  currently  or  potentially  compete  with  a  variety  of  other
companies,  including  lead-generation services and traditional offline brokers.
Many companies,  such as Band-X,  the GTX, Arbinet,  and Asia Capacity Exchange,
offer  e-commerce  services  to  buyers  and  sellers  of  bandwidth  and  other
telecommunications  products.  The  increased  use and  acceptance  of any other
method of  facilitating  the  buying and  selling  of excess  telecommunications
bandwidth  and minutes may  adversely  impact the  commercial  viability  of our
electronic trading system.

         Large  telecommunications  companies  have the ability and resources to
compete in the online  bandwidth  and minutes  trading  services  market if they
choose to do so, including launching their own online exchanges or other trading
services.   Many  of  our  competitors  have  substantially  greater  financial,
technical and marketing  resources,  larger  customer  bases,  longer  operating
histories,  greater name recognition and more  established  relationships in the
industry than we have. In addition, a number of these competitors may combine or
form strategic partnerships.  As a result, our competitors may be able to offer,
or bring to market  earlier,  products and services that are superior to our own
in terms of features,  quality, pricing or other factors. Our failure to compete
successfully with any of these companies could have a material adverse effect on
our business and results of operations.

         Increased pressure created by any present or future competitors,  or by
our  competitors  collectively,  could  have a  material  adverse  effect on our
business and results of operations.  Increased competition may result in reduced
commissions  and loss of market  share.  Further,  as a  strategic  response  to
changes in the  competitive  environment,  we may from time to time make certain
pricing,  service  or  marketing  decisions  or  acquisitions  that could have a
material adverse effect on our business and results of operations.  There can be
no assurance that we will be able to compete  successfully  against  current and
future competitors.  In addition, new technologies and the expansion of existing
technologies may increase the competitive pressures on us.

We may become subject to regulation by the Commodity Futures Trading  Commission
depending on the types of products and services we eventually introduce.

         We propose to develop an electronic trading system for trading spot and
forward   contracts   for  the   purchase  or  sale  of   bandwidth   and  other
telecommunications  products.  Spot  contracts  for the near term  delivery of a
commodity  are not  subject  to  regulation  by the  Commodity  Futures  Trading
Commission. Forward contracts, which impose binding obligations for the deferred
delivery of a commodity between commercial  parties,  also are excluded from the
CFTC's  jurisdiction.  We  currently  intend to operate our  electronic  trading
system in a manner  consistent  with  existing  regulatory  guidance  concerning
transactions and services that are not subject to regulation by the CFTC.

         The Commodity  Exchange Act provides that futures contracts may only be
entered into on an exchange  that has been  designated by the CFTC as a contract
market.  If we elected in the future to provide trading and/or clearing services
for futures contracts and options on futures  contracts,  we would have to apply
to  the  CFTC  for  designation  as  a  contract  market.  The  contract  market
designation  process is complicated,  time consuming,  and expensive.  We cannot
assure that we could satisfy all of the  regulatory  requirements  applicable to
obtaining designation as a contract market or predict how long the process would
take.

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<PAGE>

         Contract  markets  must  comply  on  an  ongoing  basis  with  numerous
regulatory  requirements.  Those  requirements  currently include submitting all
proposed  rules and  contracts,  and  proposed  changes  to  existing  rules and
contracts, to the CFTC for prior review and approval, implementing and enforcing
disciplinary  rules, and submitting  reports to the CFTC on, among other things,
trading volume, open contracts, and prices.

         The CFTC has never  determined  whether some or all swap agreements are
futures  contracts.  Nevertheless,  depending  on the  type  of  trading  and/or
clearing  services that we elected in the future to provide for swap agreements,
we may need to  request an  exemption  from the CFTC from the  requirement  that
futures  contracts  and  options  on  futures  contracts  only  be  traded  on a
CFTC-designated  contract  market.  The CFTC is under no  obligation  to reach a
decision within a certain period or to grant an exemption.

         Future  regulatory  changes also could affect our  operations.  Pending
regulatory  proposals,  if they become law, may remove some of the  obstacles to
our providing  trading and/or clearing  services for swap  agreements  involving
telecommunications  products.  Some  of  those  proposals  still  would  subject
possible  future services to CFTC  regulation.  We are unable to predict at this
time, however,  whether pending regulatory proposals,  if enacted, would have an
affect  on our  ability  to offer  trading  and/or  clearing  services  for swap
agreements,  futures  contracts  and  options  on  futures  contracts  involving
telecommunications products.

We are dependent on the continued  growth of online  commerce and the acceptance
by users of the Internet as a means for trading excess bandwidth and minutes.

         Our future  revenues and profits are  substantially  dependent upon the
widespread  acceptance  and  use of  the  Internet  and  online  services  as an
effective  medium of  commerce  by  businesses.  Rapid  growth in the use of and
interest in the Internet and online services is a recent  phenomenon,  and there
can be no assurance  that  acceptance and use will continue to develop or that a
sufficiently  broad base of businesses or customers will adopt,  and continue to
use, the Internet and online services as a medium of commerce.

         Demand and market  acceptance  for  recently  introduced  services  and
products over the Internet are subject to a high level of  uncertainty.  We will
rely on  customers  who have  historically  used  traditional  offline  means of
commerce to buy and sell excess telecommunications bandwidth and minutes. For us
to be  successful,  these  customers  must  accept  and  utilize  novel  ways of
conducting business and exchanging information over the Internet.

         Critical issues concerning the commercial use of the Internet,  such as
ease of access,  security,  reliability,  cost and  quality of  service,  remain
unresolved  and may affect the growth of Internet use or the  attractiveness  of
conducting  commerce online.  In addition,  the Internet and online services may
not be  accepted  as a viable  commercial  marketplace  for a number of reasons,
including   potentially   inadequate   development  of  the  necessary   network
infrastructure or delayed  development of enabling  technologies and performance
improvements.  To the extent that the Internet and online  services  continue to
experience significant growth, there can be no assurance that the infrastructure
of the Internet and online  services  will prove  adequate to support  increased
user  demands.  In addition,  the Internet or online  services  could lose their
viability  due to delays in the  development  or adoption of new  standards  and
protocols  required to handle  increased  levels of  Internet or online  service
activity. Changes in or insufficient availability of telecommunications services
to support the Internet or online  services also could result in slower response
times and adversely  affect usage of the Internet and online services  generally
and us in  particular.  If use of the  Internet  and  online  services  does not
continue to grow or grows more slowly than expected,  if the  infrastructure for
the Internet and online  services does not  effectively  support growth that may
occur, or if the Internet and online services do not become a viable  commercial
marketplace, we would be materially adversely affected.

We face online commerce security risks.

         We rely on encryption and authentication technology licensed from third
parties to provide the security and  authentication  necessary to effect  secure
transmission  of  confidential  information,  such as  bank  account  or  credit
information.  There can be no assurance that advances in computer  capabilities,
new  discoveries in the field of  cryptography,  or other events or developments
will not  result  in a  compromise  or breach  of the  algorithms  used by us to
protect  transaction  data. Any compromise of our security could have a material
adverse effect on us and our  reputation.  A party who is able to circumvent our
security  measures  could  misappropriate   proprietary   information  or  cause
interruptions  in our  operations.  We may be  required  to  expend  significant
capital and other  resources  to

                                       10
<PAGE>

protect against such security  breaches or to alleviate  problems caused by such
breaches.  To the extent that our activities or those of third party contractors
involve the storage and  transmission of proprietary  information,  such as bank
account or credit information, security breaches could damage our reputation and
expose us to a risk of loss or  litigation  and possible  liability  which could
have a material adverse effect on our business and results of operations.

Our  operating  results  could  be  impaired  if we are  or  become  subject  to
burdensome governmental regulation of online commerce.

         We are not  currently  subject to direct  regulation by any domestic or
foreign  governmental  agency,  other than regulations  applicable to businesses
generally,  including  e-commerce  companies.  However,  due to  the  increasing
popularity  and use of the Internet and other  online  services,  it is possible
that a  number  of laws and  regulations  may be  adopted  with  respect  to the
Internet or other online services covering issues such as:

         o        user privacy;

         o        pricing;

         o        content;

         o        copyrights;

         o        distribution; and

         o        characteristics and quality of products and services.

         The adoption of any  additional  laws or  regulations  may decrease the
growth of the Internet or other online services,  which could, in turn, decrease
the  demand  for our  products  and  services  and  increase  our  cost of doing
business,  or  otherwise  have an adverse  effect on our business and results of
operations.  Moreover,  the  applicability  to the  Internet  and  other  online
services  of existing  laws in various  jurisdictions  governing  issues such as
property  ownership,  sales and other taxes and personal privacy to the Internet
and other online services is uncertain and may take years to resolve.

         We plan to facilitate  transactions between numerous customers residing
in various states and foreign  countries,  and such jurisdictions may claim that
we are required to qualify to do business as a foreign  corporation in each such
state and foreign country.  Our failure to qualify as a foreign corporation in a
jurisdiction  where it is  required  to do so  could  subject  us to  taxes  and
penalties.  Any new  legislation  or  regulation,  the  application  of laws and
regulations  from  jurisdictions  whose  laws  do  not  currently  apply  to our
business,  or the  application of existing laws and  regulations to the Internet
and other online  services could have a material  adverse effect on our business
and results of operations.

We may face liability for information retrieved from our website.

         Due to the fact that  material may be  downloaded  from our website and
subsequently distributed to others, there is a potential that claims may be made
against us for negligence, copyright or trademark infringement or other theories
based on the nature and  content of such  material.  Although  we carry  general
liability  insurance,  our insurance may not cover potential claims of this type
or may not be  adequate  to cover all costs  incurred  in defense  of  potential
claims or to indemnify us for all  liability  that may be imposed.  Any costs or
imposition  of  liability  that is not  covered  by  insurance  or in  excess of
insurance  coverage  could have a material  adverse  effect on our  business and
results of operations.

We are at risk of capacity constraints and face system development risks.

         The  satisfactory  performance,  reliability  and  availability  of our
electronic  trading  system are  critical to our  reputation  and our ability to
attract and retain users and maintain  adequate  customer  service  levels.  Our
revenues  depend on the number of users of our trading  system and the volume of
trading  that is  facilitated.  Any  system  interruptions  that  result  in the
unavailability of our website or reduced  performance of the electronic  trading
system could reduce the volume of bandwidth traded and the attractiveness of our
website as a means for such trading.

                                       11
<PAGE>

          There may be a significant need to upgrade the capacity of our website
in order to  handle  thousands  of  simultaneous  users  and  transactions.  Our
inability  to add  additional  software  and  hardware or to develop and upgrade
further  our  existing  technology,  transaction-processing  systems  or network
infrastructure to accommodate increased traffic on our electronic trading system
or increased trading volume through our online trading or transaction-processing
systems may cause  unanticipated  system  disruptions,  slower  response  times,
degradation  in levels of  customer  service and  impaired  quality and speed of
trade  processing,  any of which  could  have a material  adverse  effect on our
business and results of operations.

Our business and operations would suffer in the event of system failures.

         Our  success,  in  particular  our ability to  successfully  facilitate
bandwidth trades and provide high-quality  customer service,  largely depends on
the efficient  and  uninterrupted  operation of our computer and  communications
hardware  systems.  Our  systems  and  operations  are  vulnerable  to damage or
interruption  from  fire,  flood,   power  loss,   telecommunications   failure,
break-ins,  earthquake and similar events. Despite the implementation of network
security measures,  our servers are vulnerable to computer viruses,  physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and fulfill customer orders.

If we do not respond  effectively  to  technological  change,  our service could
become obsolete and our business will suffer.

         To remain  competitive,  we must  continue  to enhance  and improve the
responsiveness, functionality and features of our electronic trading system. The
Internet  and  the  online  commerce   industry  are   characterized   by  rapid
technological change, changes in user and customer requirements and preferences,
frequent new product and service  introductions  embodying new  technologies and
the  emergence of new industry  standards  and  practices  that could render our
existing  electronic  trading  system and  proprietary  technology  and  systems
obsolete.  Our success will depend,  in part, on our ability to license  leading
technologies useful in our business,  enhance our existing services, develop new
services and technology that address the increasingly  sophisticated  and varied
needs of our prospective  customers,  and respond to technological  advances and
emerging industry standards and practices on a cost-effective and timely basis.

         The development of the electronic  trading system and other proprietary
technology  entails  significant  technical and business risks.  There can be no
assurance that we will  successfully use new  technologies  effectively or adapt
our electronic trading system and proprietary technology to user requirements or
emerging  industry  standards.  Our  failure  to adapt in a  timely  manner  for
technical,  legal,  financial or other reasons, to changing market conditions or
customer requirements,  could have a material adverse effect on our business and
results of operations.

If we do not effectively  manage growth, our ability to provide trading services
will suffer.

         To manage the expected growth of our operations and personnel,  we will
be  required  to improve  existing  and  implement  new  transaction-processing,
operational and financial systems, procedures and controls, and to expand, train
and manage a growing employee base. Further, we will be required to maintain and
expand our relationships  with various hardware and software  vendors,  Internet
and other online  service  providers  and other third  parties  necessary to our
business.  If we are unable to manage growth effectively,  we will be materially
adversely affected.

We need to hire and retain qualified personnel to sustain our business.

         We are  currently  managed  by a small  number  of key  management  and
operating  personnel.  We do not maintain "key man"  insurance on, any employee.
Our  future  success  depends,  in part,  on the  continued  service  of our key
executive,  management, and technical personnel, many of whom have only recently
been hired,  and our ability to attract  highly  skilled  employees.  If any key
officer or employee  were  unable or  unwilling  to  continue  in their  present
positions,  our business could be harmed. From time to time we have experienced,
and we expect to  continue to  experience,  difficulty  in hiring and  retaining
highly skilled employees.  Competition for employees in our industry is intense,
particularly  in the San  Francisco  Bay area  where we are  located.  If we are
unable to retain our key employees or attract, assimilate or retain other highly
qualified  employees in the future,  that may have a material  adverse effect on
our business and results of operations.

                                       12
<PAGE>

Our success is dependent on our ability to protect our intellectual property.

         Our  performance  and ability to compete is dependent to a  significant
degree on our proprietary technology,  including,  but not limited to the design
of our electronic  trading  system and delivery hubs. We regard our  copyrighted
material,  trade  secrets and similar  intellectual  property as critical to our
success, and we rely on trademark and copyright law, trade secret protection and
confidentiality  and/or  license  agreements  with  our  employees,   customers,
partners and others to protect our proprietary rights. We cannot assure you that
we will be able to secure  significant  protection  for any of our  intellectual
property.  It is possible that our  competitors  or others will adopt product or
service  names  similar to our marks,  thereby  inhibiting  our ability to build
brand identity and possibly leading to customer confusion.

         We generally have entered into  agreements  containing  confidentiality
and  non-disclosure  provisions  with our  employees  and  consultants  who have
limited  access to and  distribution  of our software,  documentation  and other
proprietary  information.  We  cannot  assure  you that the  steps we take  will
prevent  misappropriation  of our technology or that agreements entered into for
that purpose will be enforceable. Notwithstanding the precautions we have taken,
it might be possible for a third party to copy or  otherwise  obtain and use our
software   independently.   Policing  unauthorized  use  of  our  technology  is
difficult,  particularly  because  the global  nature of the  Internet  makes it
difficult to control the ultimate  destination  or security of software or other
data  transmitted.  The laws of other  countries  may  afford  us  little  or no
effective protection of our intellectual property.

         Effective   trademark,   service  mark,   copyright  and  trade  secret
protection  may not be  available in every  country  where our services are made
available  online.  In the future,  we may also need to file lawsuits to enforce
our intellectual  property rights,  protect our trade secrets, and determine the
validity and scope of the proprietary rights of others. Such litigation, whether
successful or unsuccessful,  could result in substantial  costs and diversion of
resources,  which  could  have a material  adverse  effect on our  business  and
results of operations.

We may not be able to secure  licenses  for  technology  from  third  parties on
commercially reasonable terms.

         We rely on a variety of  software  and  hardware  technologies  that we
license from third parties, including our database and Internet server software,
components of our online trading software, and  transaction-processing  software
which is used in our  electronic  trading  system to perform key  functions.  We
cannot assure you that these third party technology licenses will continue to be
available to us on  commercially  reasonable  terms.  The loss of our ability to
maintain or obtain upgrades to any of these technology  licenses could result in
delays in completing any proprietary software  enhancements and new developments
until  equivalent  technology  could be  identified,  licensed or developed  and
integrated. Any such delays could have a material adverse effect on our business
and results of operations.

The volatility of our securities prices may increase.

         The market price of our common  stock has in the past been,  and may in
the future  continue to be,  volatile.  A variety of events may cause the market
price of our common stock to fluctuate significantly, including:

         o        quarter to quarter variations in operating results;

         o        adverse news announcements;

         o        the introduction of new products and services;

         o        market  conditions  in  the  telecommunications   industry  in
                  general, Internet-based services and e-commerce; and

         o        general market conditions.

         In  addition,   the  stock  market  in  recent  years  has  experienced
significant price and volume  fluctuations  that have particularly  affected the
market prices of equity  securities  of many  companies in our business and that
often have been unrelated to the operating performance of such companies.  These
market fluctuations may adversely impact the price of our common stock.

                                       13
<PAGE>

We may be  required  to issue  stock in the future that will dilute the value of
our existing stock.

         We have a significant number of outstanding  options and warrants.  The
exercise  of all of the  outstanding  options  and  warrants  would  dilute  the
then-existing  shareholders' percentage ownership of our common stock. Any sales
resulting  from the exercise of options and warrants in the public  market could
adversely affect  prevailing market prices for our common stock.  Moreover,  our
ability to obtain  additional  equity capital could be adversely  affected since
the holders of  outstanding  options  will likely  exercise  the options when we
would  also wish to enter the market to obtain  capital on terms more  favorable
than those  provided  by the  options.  We lack  control  over the timing of any
exercise or the number of shares issued or sold if exercises occur.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  following  financial  statements  are  included in Part II of this
report:

         o        Report of Independent Public Accountants.

         o        Consolidated  Balance Sheet (Restated) as of December 31, 1999
                  and December 31, 1998

         o        Consolidated  Statement of Operations (Restated) for the years
                  ended  December 31, 1999,  December 31, 1998, and December 31,
                  1997

         o        Consolidated  Statement of Stockholders' Equity (Restated) for
                  the years  ended  December  31,  1997,  December  31, 1998 and
                  December 31, 1999

         o        Consolidated  Statement of Cash Flows (Restated) for the years
                  ended  December 31, 1999,  December 31, 1998, and December 31,
                  1997

         o        Notes to Consolidated Financial Statements

         Schedules  other than those  listed  above are  omitted  because of the
         absence of  conditions  under  which they are  required  or because the
         required  information is presented in the financial statements or notes
         thereto.

                                       14
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of RateXchange Corporation and Subsidiaries

We have audited the  accompanying  consolidated  balance  sheets of  RateXchange
Corporation  and  Subsidiaries  (a Delaware  corporation)  (a development  stage
company)  as of  December  31,  1999  and  1998  and  the  related  consolidated
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended  December 31, 1999 and 1998 (1999 and 1998  restated - see Note 3) and for
the period from September 30, 1998 (beginning of development  stage) to December
31, 1999. 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 audit. The Company's consolidated
statement of operations,  stockholders' equity and cash flows for the year ended
December 31, 1997 were audited by other auditors whose report dated February 29,
2000, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted
in the 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  consolidated  financial  position  of
RateXchange  Corporation and  Subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and cash flows from the years ended December 31,
1999  and  1998  and for the  period  from  September  30,  1998  (beginning  of
development   stage)  to  December  31,  1999,  in  conformity  with  accounting
principles generally accepted in the United States.

Arthur Andersen LLP

San Francisco, California
November 9, 2000



                                       15
<PAGE>

                           INDEPENDENT AUDITORS REPORT

To the
Board of Directors and Stockholders
of RateXchange Corporation and Subsidiaries

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders' equity and cash flows of RateXchange Corporation (previously named
NetAmerica.com  Corporation)  (a  Delaware  corporation)  (a  development  stage
company)  for the year ended  December 31, 1997.  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 audit.

We conducted an audit in accordance with generally accepted auditing  standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows from the year ended  December  31, 1997 for  RateXchange  Corporation
(previously  named  NetAmerica.com  Corporation),  in conformity  with generally
accepted accounting principles.

Crouch, Bierwolf & Chisholm
February 29, 2000
Salt Lake City, Utah

                                       16
<PAGE>
<TABLE>
RATEXCHANGE CORPORATION
(A Development Stage Company)
<CAPTION>
CONSOLIDATED BALANCE SHEET

ASSETS                                                                        December 31,
                                                                      ----------------------------
                                                                          1999            1998
                                                                      (As restated)   (As restated)
                                                                      ------------    ------------
<S>                                                                   <C>             <C>
Current assets
         Cash and cash equivalents                                    $    536,615    $    528,516
         Interest receivable                                               150,608           1,638
         Prepaid expenses                                                   11,647            --
         Notes receivable on sales of common stock                       1,590,319         300,000
         Short term investments                                            387,500            --
                                                                      ------------    ------------
                  Total current assets                                   2,676,689         830,154

Property and equipment (net of accumulated depreciation of $18,677)        188,891            --

Other assets

         Investment in affiliate                                            75,000            --
         Deposits                                                          103,305            --
                                                                      ------------    ------------
Total assets                                                          $  3,043,885    $    830,154
                                                                      ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

         Accounts payable and accrued expenses                        $  1,840,056    $    129,500
         Short term debt                                                   885,000            --
                                                                      ------------    ------------
                  Total current liabilities                              2,725,056         129,500

Stockholders' equity

         Common stock, $.0001 par value; 300,000,000 shares
         authorized; issued and outstanding: 14,087,425 shares
         and 7,243,023 shares in 1999 and 1998                               1,409             724
         Additional paid in capital                                     13,225,824       4,065,795
         Retained deficit                                              (12,664,654)     (3,365,865)
         Accumulated other comprehensive loss                             (243,750)           --
                                                                      ------------    ------------
                  Total stockholders' equity                               318,829         700,654
                                                                      ------------    ------------
Total liabilities and stockholders' equity                            $  3,043,885    $    830,154
                                                                      ============    ============
<FN>
See notes to financial statements.
</FN>
</TABLE>

                                                 17
<PAGE>

RATEXCHANGE CORPORATION
(A Development Stage Company)
<TABLE>

CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
                                                                                                         Beginning of
                                                                                                         Development
                                                                                                           Stage
                                              For the Year       For the Year        For the Year       (September 30,
                                                 ended                                  ended           1998) though
                                              December 31,      ended December       December 31,       December 31,
                                                  1999             31, 1998              1997               1999
                                             (As restated)      (As restated)                           (As restated)
                                             ---------------    ----------------    ---------------     --------------
<S>                                         <C>                 <C>                 <C>                 <C>
REVENUE                                     $       --          $       --          $         --        $       --

EXPENSES
Selling, general and administrative            7,491,447           2,161,253                 200           9,652,700
(includes non-cash expenses of $3,158,415
in 1999 and $2,020,376 in 1998)
Write off advances to potential investee         413,681             885,000                --             1,298,681
Depreciation and amortization                     18,676                --                  --                18,676
Purchase of subsidiaries                       1,507,408              89,710                --             1,597,118
                                            ------------        ------------        ------------        ------------
     Total expenses                            9,431,212           3,135,963                 200          12,567,175

OTHER INCOME (EXPENSES)

Interest income                                  151,496               2,214                --               153,710
Interest expense                                 (19,073)            (10,773)               --               (29,846)
                                            ------------        ------------        ------------        ------------
Loss before taxes                             (9,298,789)         (3,144,522)               (200)        (12,443,311)

Income tax provision (benefit)                      --                  --                  --                  --
                                            ------------        ------------        ------------        ------------
Net loss                                    $ (9,298,789)       $ (3,144,522)       $       (200)       $(12,443,311)
                                            ============        ============        ============        ============

Basic and diluted net loss per share        $      (0.72)       $      (1.92)               --
Weighted average number
of common shares                              12,863,020           1,636,919             200,000
                                            ============        ============        ============


<FN>
See notes to financial statements.
</FN>
</TABLE>

                                                          18
<PAGE>


RATEXCHANGE CORPORATION
(A Development Stage Company)

<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
                                           Number                                                Accumulated
                                          of Shares                                                other
                                             of                                                    compre-        Compre-
                                           Common          Par         Paid-In       Retained      hensive        hensive
                                            stock         Value        Capital        Deficit        loss           loss
                                         -----------   -----------   -----------    -----------   -----------   -----------
<S>                                          <C>       <C>           <C>            <C>                <C>         <C>
Balance at December 31, 1996                 200,000   $        20   $   219,823    $  (221,143)       --               --

Contribution by officer/directors               --            --           1,300           --          --               --

Comprehensive and net loss                      --            --            --             (200)       --              (200)
                                         -----------   -----------   -----------    -----------   -----------   -----------
Balance, December 31, 1997                   200,000            20       221,123       (221,343)       --               --

Shares issued for services at $.001        1,000,000           100           900           --          --               --

Shares issued for acquisition at $.001     2,400,000           240         2,160           --          --               --

Shares issued for conversion of
debt at $.34                               1,399,773           140     1,492,998           --          --               --

Shares issued for services at $1.00           87,000             9        92,794           --          --               --

Shares issued for cash at $1.07            1,106,250           110     1,179,890           --          --               --

Less:  Offering costs                           --            --        (118,000)          --          --               --

Shares issued for notes receivable
at an average price of $0.29               1,050,000           105     1,119,930           --          --               --

Warrants issued at $2.00 per share
(Note 11)                                       --            --          74,000           --          --               --


Comprehensive and net

loss (As restated)                              --            --            --       (3,144,522)       --         (3,144,522)
                                         -----------   -----------   -----------    -----------   -----------   -----------
Balance, December 31,                      7,243,023           724     4,065,795     (3,365,865)       --               --
1998 (As restated)

Options/Warrants issued from $.05
to $2.75  per share (Note 11)                   --            --       1,448,441           --          --               --

Shares issued for cash and notes
at $0.10 per share (Note 8)                  916,574            92       977,618           --          --               --
Shares issued for cost
reimbursement at $0.10 per share
(Note 8)                                     322,500            32       343,979           --          --               --
Shares issued for cash and notes
at $1.07 per share (note 8)                3,870,938           387     4,047,713           --          --               --
</TABLE>


                                                             19
<PAGE>

RATEXCHANGE CORPORATION
(A Development Stage Company)
<TABLE>

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
                                  Number of                                                    Accumulated
                                  shares of                                                       other          Compre-
                                   Common         Par          Paid-In         Retained          compre-         hensive
                                    Stock         Value        Capital          Deficit        hensive loss       loss
                                 ------------    --------    ------------    --------------    ------------    ------------
<S>                                  <C>              <C>        <C>             <C>              <C>           <C>
Shares issued for conversion         193,186          19         206,898                --              --
of A1 Internet debt at $1.07
(Note 7 & Note 8)

Shares issued for services at
$1.07 per share (Note 8)             268,500          27         287,206                --              --

Shares issued for note
conversion at $1.00 per share
(Note 8)                              30,000           3          31,998                --              --

Shares issued for services at
$1.07 per share (Note 8)              30,000           3          31,998                --              --

Shares issued for cash at
$1.60 per share (net) (Note 8)       515,188          52         628,220                --              --

Shares issued for services at
$1.60  per share (Note 8)            122,518          12         196,017                --              --

Shares issued to acquire
outstandinq shares of
RateXchange at $1.60 per
share (Note 6 & Note 8)              574,998          58         919,942                --              --
Comprehensive loss:
     Net loss  (As restated)                                                   (9,298,789)                     $(9,298,789)
     Other comprehensive loss:
         Change in unrealized
         loss on securities                                                                      (243,750)       (243,750)
                                                                                                               ------------
Comprehensive loss                                                                                             $(9,542,539)
                                 ------------    --------    ------------    --------------    ------------    ============
Balance, December 31,            $14,087,425      $1,409     $13,225,824     $(12,664,654)      $(243,750)
1999 (As restated)               ============    ========    ============    ==============    ============
<FN>
See notes to financial statements.
</FN>
</TABLE>

                                                             20
<PAGE>


RATEXCHANGE CORPORATION
(A Development Stage Company)

<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
                                                                                                            Beginning of
                                                                                                                the
                                                                                                            Development
                                                                                                               Stage
                                                            For the Year    For the Year                    September 30,
                                                               Ended             Ended         For the        1998 to
                                                             December 31,     December 31,   Year Ended     December 31,
                                                                1999             1998         December         1999
                                                            (As restated)   (As restated)     31, 1997     (As restated)
                                                            ------------    ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                  $ (9,298,789)   $ (3,144,522)   $       (200)   $(12,443,311)
  Adjustments to reconcile net loss to net cash
   used in operating activities
         Depreciation and amortization                            18,676            --              --            18,676
         Write off advances to potential investee                206,898            --              --           206,898
         Common stock issued for services/expenses             1,672,954       1,946,376            --         3,619,330
         Warrants for purchase of common stock issued for
         services                                              1,485,461          74,000            --         1,559,461
         Purchase of outstanding shares of RateXchange         1,507,408            --              --         1,507,408
         Increase in interest receivable and prepaid
         expenses                                               (160,617)         (1,638)           --          (162,255)
         Increase (decrease) in accounts payable and
         accrued expenses                                      1,601,241         129,300          (1,100)      1,730,541
                                                            ------------    ------------    ------------    ------------
                  TOTAL                                       (2,966,768)       (996,484)         (1,300)     (3,963,253)

CASH FLOWS FROM INVESTING ACTIVITIES
         Payment for purchase of equipment                      (207,568)           --              --          (207,568)
         Security deposits                                      (103,305)           --              --          (103,305)
         Advances to A-1 Internet                               (631,251)           --              --          (631,251)
         Investment in Telenisus Corporation                     (75,000)           --              --           (75,000)
                                                            ------------    ------------    ------------    ------------
                  TOTAL                                       (1,017,124)           --              --        (1,017,124)

CASH FLOWS FROM FINANCING ACTIVITIES
         Loans and other debt                                    410,000            --              --           410,000
         Proceeds from common stock sales                      3,581,991       1,525,000           1,300       5,106,991
                                                            ------------    ------------    ------------    ------------
                  TOTAL                                        3,991,991       1,525,000           1,300       5,516,991

                                                            ------------    ------------    ------------    ------------
INCREASE  IN CASH AND CASH EQUIVALENTS                             8,099         528,516            --           536,615

CASH and CASH EQUIVALENTS BEGINNING OF YEAR                      528,516            --              --              --
                                                            ------------    ------------    ------------    ------------
CASH and CASH EQUIVALENTS END OF YEAR                       $    536,615    $    528,516    $       --      $    536,615
                                                            ============    ============    ============    ============

Supplementary cash flow information
Cash paid for:
         Interest                                                   --              --              --              --
         Taxes                                                      --              --              --              --
Stock issuances for:
         Services and expenses                              $  3,158,415    $  2,020,376            --      $  5,178,791
         Purchase of outstanding shares of RateXchange      $    920,000            --              --      $    920,000
         Commission on stock sales                          $    196,029            --              --      $    196,029
         A1 Internet settlement                             $    206,898            --              --      $    206,898
<FN>
See notes to financial statements.
</FN>
</TABLE>

                                                             21
<PAGE>

                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


NOTE 1     BACKGROUND AND HISTORY

           RateXchange  Corporation  (the  Company) is a  consolidated  group of
           companies including the parent corporation,  RateXchange  Corporation
           and  its  subsidiaries,   RateXchange  I,  Inc.  and  PolarCap,  Inc.
           (PolarCap).

           RateXchange  Corporation  (formerly  Netamerica.com  Corporation  and
           formerly Venture World, Ltd.) is a Delaware corporation  organized on
           May 6, 1987 for the purpose of seeking out and developing any general
           business opportunity.

           RateXchange I, a Delaware  corporation  organized in June 1999, is in
           the business of  business-to-business  e-commerce  seeking to develop
           new exchange services for the telecommunications market.

           PolarCap is a California  corporation  organized on April 7, 1997 for
           the purpose of  investing  in and  developing  rights to a variety of
           software  technologies  related to multimedia,  development tools and
           application  technologies.  PolarCap  is  in  the  process  of  being
           liquidated.

           The Company is in its  planning  stages for its  eventual  day to day
           business  and  has  not  generated  any  revenues  from  its  planned
           operations.  The Company is defined as a development stage company in
           accordance with Financial  Accounting Standard No. 7. The Company had
           no  operations  or business  before  September  30, 1998.  Cumulative
           results  of  operations  since  the start of the  development  stage,
           September 30, 1998, when the Company  purchased  PolarCap,  have been
           reported separately.

           From   inception,   the  Company  has  been   primarily   engaged  in
           organizational  activities,  including  designing and  developing its
           website,   recruiting  personnel,   establishing  office  facilities,
           raising  capital and  developing a marketing  plan. The Company began
           revenue  generation  activities  in  1999  but no  revenue  has  been
           generated  as of  December  31,  1999.  Accordingly,  the  Company is
           classified as a development stage company.  Successful  completion of
           the Company's development program and, ultimately,  the attainment of
           profitable  operations  is dependent  upon future  events,  including
           obtaining adequate  financing to fulfill its development  activities,
           increasing its customer base, implementing and successfully executing
           its business and marketing  strategy and hiring and retaining quality
           personnel.  Negative  developments in any of these  conditions  could
           have a material adverse effect on the Company's  business,  financial
           condition and results of operations.

NOTE 2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           Principles of Consolidation

           The  consolidated   financial  statements  include  the  accounts  of
           RateXchange  Corporation and its  subsidiaries.  Collectively,  these
           entities are referred to as the Company. All significant intercompany
           transactions and accounts have been eliminated.

           Cash, and Cash Equivalents

           The Company  considers  all highly  liquid debt  instruments  with an
           original maturity of three months or less to be cash equivalents.

           Investments

           The Company classifies its debt and marketable equity securities into
           one   of   three   categories:    trading,    available-for-sale   or
           held-to-maturity.  Trading securities are bought and held principally
           for  the  purpose  of  selling  in the  near  term.  Held-to-maturity
           securities are those securities which the Company has the ability and
           intent to hold until maturity.  All other  securities not included in
           trading or  held-to-maturity  are  classified as  available-for-sale.
           Available-for-sale   securities   are   recorded   at   fair   value.
           Held-to-maturity  securities are recorded at amortized cost, adjusted
           for  the   amortization   or  accretion  of  premiums

                                       22
<PAGE>

                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           or  discounts.  Unrealized  gains and losses,  net of the related tax
           effect, on  available-for-sale  securities are reported as a separate
           component of other comprehensive income in shareholders' equity until
           realized.  Premiums and  discounts are amortized or accreted over the
           life of the related  investment  security as an  adjustment  to yield
           using the effective interest method. Dividend and interest income are
           recognized when earned.  Realized gains and losses for securities are
           included   in   earnings   and  are   derived   using  the   specific
           identification method for determining the cost of securities sold.

           Management  determines the appropriate  classification of investments
           at the time of purchase and reevaluates  such  determination  at each
           balance  sheet date. To date,  all  marketable  securities  have been
           classified as  available-for-sale  and are carried at fair value with
           unrealized  gains  and  losses,  if any,  included  in  stockholders'
           equity.  These  securities are reported as short-term  investments on
           the  consolidated  balance  sheet.  Realized  gains  and  losses  and
           declines in value of securities judged to be other than temporary are
           included  in  other  income,  net.  Interest  and  dividends  on  all
           securities are included in other income, net.

           Nonmonetary Transactions

           Nonmonetary  transactions  are  transactions  for  which  no cash was
           exchanged and for which shares of common stock or options or warrants
           to purchase common stock were exchanged for goods and services. These
           transactions  are  recorded  at the fair  market  value of the equity
           instruments issued at the time of the transaction and reported in the
           statement of operations as services are rendered.

           Loss Per Share and Weighted Average Shares Outstanding

           Basic  loss per share is  computed  by  dividing  the net loss by the
           weighted  average  number of common shares  outstanding.  Options and
           warrants on shares of common  stock were not  included  in  computing
           diluted  loss per  share  because  their  effects  were  antidilutive
           (2,990,000 options and 625,000 warrants).

           Deposits

           The Company issued a letter of credit as security in connection  with
           an operating lease of its office. This letter of credit is secured by
           a certificate of deposit in the amount of $103,305.

           Comprehensive loss

           Comprehensive loss includes the net loss reported on the statement of
           operations and changes in the fair value of investments classified as
           available for sale which is reported as a component of  stockholders'
           equity.

           Use of Estimates

           The preparation of financial  statements in conformity with generally
           accepted accounting  principles requires management to make estimates
           and  assumptions   that  affect   reported   amounts  of  assets  and
           liabilities  and results of  operations.  Actual results could differ
           from those estimates.

NOTE 3   RESTATEMENT OF PREVIOUSLY REPORTED RESULTS

As part of the  Company's  overall  strategy,  the  Company  decided to retain a
national  accounting  firm. In July 2000, the Company  selected Arthur Andersen,
LLP as its independent  auditors.  As a result of the Company's review,  certain
adjustments  were  determined  necessary to the  Company's  previously  reported
financial  results  for the  years  ended  December  31,  1998 and  1999.  These
adjustments  relate to the  valuation  of common  stock  issued in exchange  for
services received,  conversion of bridge financing and arrangement of financing,
and other miscellaneous  adjustments to the timing of the recognition of certain
expenses.  Management  has made all  adjustments  considered  necessary  for the
restated financial statements to be fairly presented.

The following  statements of operation and balance sheets  reconcile  previously
reported and restated information.

                                       23
<PAGE>
<TABLE>
                                          RATEXCHANGE CORPORATION AND SUBSIDIARIES

                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<CAPTION>
 Ratexchange                                            Improper                                  Adjustment
Corporation                                            valuation                    To offset     to record
Reconciliation of Statement of                        assigned to                   write off        or
Operations Year ended December 31,     Ratexchange      shares,                     of advances   reclassify
1999                                   Corporation    options and     Purchase of   with market   expenses in
                                           as           warrants      outstanding    value of        the         Ratexchange
                                       previously      issued for     shares of       shares      appropriate   Corporation as
                                        reported        services       Polarcap      received       period         restated
                                      -------------- --------------- ------------- ------------- ------------- ----------------
<S>                                     <C>          <C>             <C>            <C>           <C>             <C>
 REVENUE                                $       --   $       --      $       --     $       --    $       --      $       --

 EXPENSES
 Selling, general & administrative         5,048,614    2,426,440           3,727          6,050         6,616       7,491,447
 Write off advances to potential
 investee                                    863,750                                    (450,069)                      413,681
 Depreciation and amortization                25,093                      (14,952)                       8,535          18,676
 Purchase of subsidiaries                  1,537,300                      (29,892)                                   1,507,408
                                        ------------ ------------    ------------   ------------  ------------    ------------
 Total expenses                            7,474,757    2,426,440         (41,117)      (444,019)       15,151       9,431,212

 OTHER INCOME (Expenses)

 Interest income                             151,276                                                      220         151,496
 Interest expense                            (13,019)                                                  (6,054)        (19,073)
 Other income                                    220                                                     (220)           --
 Loss allocated to minority interest           7,000                                                   (7,000)           --
                                        ------------ ------------    ------------   ------------  ------------    ------------
 Loss before taxes                        (7,329,280)  (2,426,440)         41,117        444,019       (28,205)     (9,298,789)

Income tax provision                            --           --              --             --            --              --
                                        ------------ ------------    ------------   ------------  ------------    ------------
 NET LOSS                               $ (7,329,280)$ (2,426,440)   $     41,117   $    444,019  $    (28,205)   $ (9,298,789)
                                        ============ ============    ============   ============  ============    ============
 Basic and diluted net loss per share   $      (0.57)                                                             $      (0.72)
                                        ============                                                              ============
Weighted average number of shares         12,863,020                                                                12,863,020
                                        ============                                                              ============
</TABLE>
                                                             24

<PAGE>


<TABLE>
                                              RATEXCHANGE CORPORATION AND SUBSIDIARIES

                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<CAPTION>
Ratexchange Corporation                                                 Improper
Reconciliation of Statement of Operations                              valuation
Year ended December 31, 1998                                            assigned to                    Adjustment
                                                        Ratexchange       shares,                      to record
                                                        Corporation    options and      Purchase of   expenses in
                                                             as          warrants       outstanding        the          Ratexchange
                                                         previously      issued for      shares of     appropriate    Corporation as
                                                          reported       services        Polarcap         period          restated
                                                        -----------     -----------     -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>             <C>             <C>
REVENUE                                                 $      --       $      --       $      --       $      --       $      --

EXPENSES

Selling, General & Administrative                           174,176       1,918,277                          68,800       2,161,253
Write off advances to potential investee                    885,000                                                         885,000
Depreciation and Amortization                                 4,363                          (3,738)           (625)           --
Purchase of subsidiary                                       44,855                          44,855                          89,710
                                                        -----------     -----------     -----------     -----------     -----------

Total Expenses                                            1,108,394       1,918,277          41,117          68,175       3,135,963

OTHER INCOME (Expenses)

Interest income                                               2,214                                                           2,214
Interest expense                                            (10,773)                                                        (10,773)
                                                        -----------     -----------     -----------     -----------     -----------

Loss before taxes                                        (1,116,953)     (1,918,277)        (41,117)        (68,175)     (3,144,522)
                                                        -----------     -----------     -----------     -----------     -----------

Income tax provision                                           --              --              --              --              --

                                                        -----------     -----------     -----------     -----------     -----------
NET LOSS                                                $(1,116,953)    $(1,918,277)    $   (41,117)    $   (68,175)    $(3,144,522)
                                                        ===========     ===========     ===========     ===========     ===========

Basic  and diluted net loss per share                   $     (0.68)                                                    $     (1.92)
                                                        ===========                                                     ===========

Weighted average number  of shares                        1,636,919                                                       1,636,919
                                                        ===========                                                     ===========
</TABLE>

                                                                 25

<PAGE>


<TABLE>
                                              RATEXCHANGE CORPORATION AND SUBSIDIARIES

                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<CAPTION>
Balance Sheet
Reconciliation
As of December 31, 1999                                      Improper                    To offset    Adjustments
                                                            valuation                   write off of      to
                             Ratexchange                   assigned to                    advances    expenditures
                             Corporation                 shares, options  Purchase of    with market   and funds
                                 as                        and warrants   outstanding     value of  received in the    Ratexchange
                             originally    Adjustments      issued for     shares of       shares      appropriate     Corporation
                              reported     made in 1998      services      Polarcap       received       period        as restated
                             -----------   ------------    -----------    -----------    -----------   -----------    ------------
<S>                          <C>            <C>            <C>            <C>            <C>           <C>            <C>
ASSETS
Current assets
Cash and cash equivalents    $   451,615                                                               $    85,000    $    536,615
Interest receivable              150,608                                                                                   150,608
Prepaid expenses                   5,814                                                                     5,833          11,647
Short term investments                                                                   $   387,500                       387,500
Note receivable on sales
  of common stock              1,787,531                                                    (197,212)                    1,590,319
                             -----------    -----------    -----------    -----------    -----------   -----------    ------------
Total current assets           2,395,568           --             --             --          190,288        90,833       2,676,689


Property & equipment (Net)       175,349    $    (6,875)                                                    20,417         188,891

Other assets

Investment in affiliate           75,000                                                                                    75,000

Goodwill                                        (41,117)                  $    41,117                                         --

Deposits                         103,305                                                                                   103,305
                             -----------    -----------    -----------    -----------    -----------   -----------    ------------
Total assets                 $ 2,749,222    $   (47,992)   $      --      $    41,117    $   190,288   $   111,250    $  3,043,885
                             ===========    ===========    ===========    ===========    ===========   ===========    ============


Current liabilities

Accounts payable and
  accrued expenses           $ 1,639,301    $    61,300                                                $   139,455    $  1,840,056

Accrued taxes                     85,000                                                                   (85,000)           --

Short term debt                  800,000                                                                    85,000         885,000
                             -----------    -----------    -----------    -----------    -----------   -----------    ------------
Total current liabilities      2,524,301         61,300           --             --             --         139,455       2,725,056


Stockholders' equity

Common stock                       1,409                                                                                     1,409

Additional paid in capital     8,891,088      1,918,277    $ 2,426,440                        (9,981)                   13,225,824
Accumulated other
  comprehensive loss                                                                        (243,750)                     (243,750)
Retained deficit              (8,667,576)    (2,027,569)    (2,426,440)   $    41,117        444,019       (28,205)    (12,664,654)
                             -----------    -----------    -----------    -----------    -----------   -----------    ------------
Total stockholders' equity       224,921       (109,292)          --           41,117        190,288       (28,205)        318,829
                             -----------    -----------    -----------    -----------    -----------   -----------    ------------
Total liabilities and
  stockholders' equity       $ 2,749,222    $   (47,992)   $      --      $    41,117    $   190,288   $   111,250    $  3,043,885
                             ===========    ===========    ===========    ===========    ===========   ===========    ============
</TABLE>

                                                                 26

<PAGE>


<TABLE>
                                              RATEXCHANGE CORPORATION AND SUBSIDIARIES

                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<CAPTION>
Balance Sheet Reconciliation                                             Improper
As of December 31, 1998                                                 valuation
                                                                        assigned to                     Adjustment
                                                        Ratexchange       shares,                        to record
                                                       Corporation     options and      Purchase of    expenditures
                                                            as           warrants       outstanding       in the        Ratexchange
                                                        originally      issued for       shares of      appropriate     Corporation
                                                         reported        services         Polarcap         period       as restated
                                                        -----------     -----------     -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>             <C>             <C>
ASSETS

Current assets

Cash and cash equivalents                               $   528,516                                                     $   528,516
Interest receivable                                           1,638                                                           1,638
Prepaid expenses
Note receivable on sales of common stock                    300,000                                                         300,000
                                                        -----------     -----------     -----------     -----------     -----------
Total current assets                                        830,154                                                         830,154

Property & equipment (Net)                                    6,875                                     $    (6,875)

Other assets

Investment in affiliate
Goodwill                                                     41,117                     $   (41,117)
Deposits
                                                        -----------     -----------     -----------     -----------     -----------
Total assets                                            $   878,146            --       $   (41,117)    $    (6,875)    $   830,154
                                                        ===========     ===========     ===========     ===========     ===========

Current liabilities
Accounts payable and accrued expenses                   $    68,200                                     $    61,300     $   129,500
                                                        -----------     -----------     -----------     -----------     -----------
Total current liabilities                                    68,200                                          61,300         129,500

Stockholders' equity

Common Stock                                                    724                                                             724
Additional paid in capital                                2,147,518     $ 1,918,277                                       4,065,795

Retained deficit                                         (1,338,296)     (1,918,277)        (41,117)        (68,175)     (3,365,865)
Accumulated other comprehensive loss
Notes receivable on sale of common stock                                                                      --              --
                                                        -----------     -----------     -----------     -----------     -----------
Total stockholders' equity                                  809,946            --           (41,117)        (68,175)        700,654
                                                        -----------     -----------     -----------     -----------     -----------
Total liabilities and stockholders'
  equity                                                $   878,146     $      --       $   (41,117)    $    (6,875)    $   830,154
                                                        ===========     ===========     ===========     ===========     ===========
</TABLE>

                                                                 27

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


         The following describes the nature of the reconciling items:

         The valuation assigned to shares issued for services -

         These adjustments represent the effect of shares,  options and warrants
         that were issued in various  transactions  in exchange for services and
         were  originally  recorded  at values  below the then fair value of the
         Company's stock.

         Purchase of outstanding shares of Polarcap -

         In the previously reported financial statements the Company incorrectly
         recorded  its  purchase of the  outstanding  shares of Polarcap in 1998
         using purchase accounting.  Accordingly,  the Company recorded goodwill
         of $89,710 that was previously amortized and fully written off in 1999.
         The  purchase of the  outstanding  shares of Polarcap  should have been
         reflected  as an  acquisition  of assets with the excess  consideration
         charged to expense  immediately.  This  adjustment  records  the excess
         consideration of $41,117 charged to expense.

         Net the writeoff of advances against the value of shares received -

         To  compensate  the  Company  for  the  write  off of  advances  to A-1
         Internet,  in September 1999, the Company received common stock in Halo
         Corporation  with a fair value of  $631,250.  At December  31, 1999 the
         value of this  investment was $387,500.  The Company  improperly  wrote
         down the carrying value of the investment.

         Adjustments to record expenses in the appropriate period -

         These  adjustments  relate  to  miscellaneous  accruals  that  were not
         reflected in the appropriate period.

NOTE 4   INCOME TAXES

         As of December 31, 1999,  the Company had a federal net operating  loss
         carryforward of $9,293,259  which will expire in the years 2007 through
         2020  for  state  and  federal   purposes.   This  net  operating  loss
         carryforward has not been reflected in the financial  statements as the
         likelihood of future tax benefit from such operating loss carryforwards
         is remote. Accordingly, the potential tax benefits of the net operating
         loss carryforwards,  estimated based upon current tax rates at December
         31, 1999, have been offset by a valuation allowance in the same amount.

         Significant  components  of  the  company's  deferred  tax  assets  and
         liabilities are as follows

                                                            December 31,
                                                        1999            1998
                                                    -----------     -----------
Deferred tax assets:
         Net operating loss carryforward            $ 3,773,063     $ 1,314,334
         Options and warrants for services              603,097          74,000
         Start up cost carryforward                   1,726,967
         Unrealized loss on securities                   98,861
                                                    -----------     -----------
         Gross deferred tax assets                    6,161,988       1,388,334
Valuation allowance                                  (6,161,988)     (1,388,334)
                                                    -----------     -----------
Net deferred tax asset                              $      --       $      --
                                                    ===========     ===========


         The net change in the valuation  allowance for the year ended  December
         31, 1999 and 1998 was an increase of $4,773,654 and $3,279,693.

                                       28

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


NOTE 5   PROPERTY AND EQUIPMENT

         The  Company  capitalizes  purchases  of  long-lived  assets  that  are
         expected to give benefit to the Company over the life of the asset. The
         Company also capitalizes improvements and costs that increase the value
         of or extend the life of the asset.

         Capitalized  assets are depreciated  over the estimated useful lives of
         the assets (5 years for furniture  and  fixtures,  3 years for computer
         equipment) on a straight line basis.

            Property and Equipment consists of the following:

                                                              December 31,
                                                         1999             1998
                                                      ---------         --------
Furniture and fixtures                                $  10,520         $   --
Computer equipment and software                         197,047             --
                                                      ---------         --------
                                                        207,567             --
Less:  Accumulated depreciation                         (18,676)            --
                                                      ---------         --------
                                                      $ 188,891         $   --
                                                      =========         ========


         Depreciation expense for 1999 is $18,676.

NOTE 6   ACQUISITION OF SUBSIDIARY

         On September 30, 1998,  the Company  purchased  all of the  outstanding
         stock of PolarCap, Inc. for 2,400,000 shares of stock. At September 30,
         1998 Polarcap had negative net worth of $87,310. The value of the stock
         was issued at $.001, for a cost of $2,400 in 1998. The Company expensed
         $89,710 representing the excess of consideration given in shares issued
         and liabilities assumed for the assets of Polarcap.

         In the third quarter of 1999, the Company purchased all the outstanding
         common stock of Rate Exchange, Inc., a Colorado corporation, seeking to
         develop new exchange services for the  telecommunications  market.  The
         Company  paid  574,998 in shares of common stock and $450,000 in a note
         for a total cost of  $1,395,000  ($920,000  in stock and  $450,000 in a
         note plus out of pocket  expenses of  $25,000).  Under the terms of the
         transaction two of the owners/employees of RateXchange became employees
         of  the  company  responsible  for  exploring  the  development  of the
         business.  On the date of purchase,  RateXchange had negative net worth
         of $112,408.  The company  expensed a total of $1,507,408  representing
         the  excess of  consideration  given in shares  and  notes  issued  and
         liabilities assumed for the assets of RateXchange.

NOTE 7   ADVANCES TO POTENTIAL INVESTEE

         On September 30, 1998 the Company  negotiated,  and later terminated by
         mutual  agreement,  a purchase of 100% of the ownership of  NetAmerica,
         Inc.,  subsequently  renamed A1 Internet,  Inc.,  an Internet  services
         provider  company  based in Seattle,  Washington.  Between the time the
         Company  agreed  to  purchase  (September  30,  1998),  which was never
         consummated,  and the time the termination agreement was reached (March
         1999), the Company advanced $1,738,769 ($1,531,871 in cash and $206,898
         in stock) the cash portion of which was  eventually  written off as bad
         debt.  After the March  agreement  was reached,  A1 Internet  agreed to
         repay certain of the costs incurred prior to the  termination.  As part
         of its plan to repay the costs,  A1 Internet  informed the Company that
         it had entered into an agreement with another potential acquiror,  Halo
         Holdings of Nevada,  Inc., to sell  substantially  all of its assets in
         exchange  for  shares  of  common  stock  and   assumption  of  certain
         liabilities,  including A1 Internet's  obligations  to the Company.  In
         September 1999, after further negotiations,  the Company agreed with A1
         Internet to the following settlement:

                                       29

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


         o     The Company retained certain rights to the name "NetAmerica;"

         o     A1 Internet  transferred  to the Company its  interest in 100,000
               shares of Halo restricted stock;

         o     The Company agreed to pay $85,000 of past due payroll taxes of A1
               Internet from 1998; and

         o     All further  obligations of the Company to issue stock or options
               to A1 Internet were canceled.

NOTE 8   COMMON STOCK TRANSACTIONS

         In general all stock transactions conducted during the period for which
         no cash was exchanged and for which shares of stock were  exchanged for
         assets or goods and  services  were  recorded at fair market  value.  A
         number of shares as indicated below were issued at below market values.
         The Company  recorded  expense related to these issues of $1,519,047 in
         1999 and $2,007,203 in 1998.

         Common stock transactions during 1999 are as follows:

         During the  fourth  quarter of 1998,  the board of  directors  approved
         several  stock  transactions  that were not  completed and issued until
         1999:

         o     916,574  shares of stock  issued for  $91,657 in notes to related
               parties.  ($0.10) (January). The board has placed restrictions on
               this stock so that the stock  cannot be sold,  traded,  assigned,
               transferred or pledged until the Company  reaches  $10,000,000 in
               gross revenues in a one year time period.

         o     322,500  shares issued for cost  reimbursements  of $32,250 ($.10
               per share) (January).

         The remaining stock issuances were approved and issued in 1999:

         o     758,438  shares of stock were issued for $728,100 (Net of $80,900
               commissions). ($1.07) (February).

         o     3,112,500  shares  of stock  issued  for  $3,320,000  in notes to
               related parties and other investors. ($1.07) (March).

         o     268,500  shares  of  stock  issued  for  $287,233  of  legal  and
               consulting services. ($1.07) (March).

         o     193,186  shares of stock issued for $206,898 of debt to creditors
               of A1 Internet. ($1.07, average) (March and May).

         o     30,000  shares of stock issued  instead of a $30,000  outstanding
               note payable. ($1.00) (March).

         o     30,000 shares for services rendered of $32,000. ($1.07) (March).

         o     515,188 shares of stock issued for $1.60 per share, or a total of
               $628,272. (Net of $196,029 in commission paid in stock of 122,518
               shares - see below) (May and June).

         o     122,518  shares issued for  commissions  on private  placement at
               $1.60 per share. ($1.60 per share) (June).

         o     574,998  shares  of stock  issued  for  $1.60  per share for Rate
               Exchange, Inc. (July).

                                       30

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


NOTE 9   SUBSCRIPTIONS RECEIVABLE /NOTE RECEIVABLE- RELATED PARTY

         In January  1999,  the Company  sold  916,574  shares in  exchange  for
         $91,657 in notes  payable to a related  party and other  investors at a
         price of $.10 per share. (See Note 8 for restrictions placed on stock).

         In March 1999, the Company sold 3,112,500 shares to a related party and
         other  investors in exchange for $3,320,000 in notes payable at a price
         of $1.07 per share.

         Of the total subscriptions receivable/note receivable issued during the
         year  of  $3,411,657  and  $300,000  issued  in  1998,  $1,924,126  was
         collected.  Interest is being assessed at 6.5% and accrued  interest on
         the  subscription  receivable  was $150,608 at December  31, 1999.  The
         company has determined  that 197,212 of the remaining  receivables  are
         uncollectible and has written off these receivables.

         Subsequent  to year end, the board of  directors of the Company  waived
         the interest on the  purchase of  3,112,500  shares when the notes were
         collected  in full by February  25, 2000  (originally  due by March 31,
         2001).

NOTE 10  COMMITMENTS AND CONTINGENCIES

         Future annual  minimum lease  payments  under  noncancelable  operating
         leases as of December 31, 1999 were:

         Year
         ----
         2000                                                 $195,900
         2001                                                  200,112
         2002                                                  204,336
                                                              --------
                                                              $600,348
                                                              ========


         Rent expense totaled $42,077 in 1999.

         The Company is also involved in the following legal matter as follows:

         Gregory K.  Martin v.  NetAmerica.,  Inc. et al. In the spring of 1999,
         Gregory K. Martin,  a former officer of both NetAmerica  (Seattle)(NAI)
         and the  Company,  brought  suit  against the Company and others in the
         Superior Court of Washington  (Civil Action No.  99-2-09171-OSEA).  The
         suit  related  to,  among  other  things,   Mr.   Martin's  claims  for
         compensation,  reimbursement for business  expenses,  certain insurance
         benefits, payment of certain other obligations guaranteed by Mr. Martin
         (or  reimbursement  of payments made by him as  guarantor),  payment of
         certain  tax  and  other  obligations  of  a  company  referred  to  as
         SRG/Quantum  that  were  purportedly  assumed  by NAI and the  Company,
         issuance of options to purchase stock of the Company and other remedies
         relating to the terminated acquisition and other transactions. The suit
         was conditionally  settled by an agreement dated May 22, 1999 among NAI
         (referred to therein as "A1"), the Company and Mr. Martin (with William
         Fritts  undertaking  certain  limited  obligations).  Pursuant  to that
         agreement,  Mr. Martin took a voluntary  non-suit,  i.e.  dismissed his
         suit without  prejudice.  Mr. Martin may have the ability to attempt to
         void the  settlement  pursuant to  noncompliance  on the part of NAI to
         their part of the settlement.  As of December 31, 1999, the Company has
         fulfilled  all  of  its  current   obligations   under  the  settlement
         agreement.

                                       31

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


NOTE 11  OPTIONS/WARRANTS FOR PURCHASE OF COMMON STOCK

         Stock  Option  Plans  -  Shareholders  approved  the  1999  RateXchange
         Corporation  Stock  Option  Plan  during  1999 (1999  Plan).  There are
         3,000,000  options  available  under  the plan that may be  granted  to
         employees,  officers, directors and consultants. The option plan allows
         grantees to acquire shares of the Companys'  common stock at a purchase
         price  generally  equal to the fair market  value on the date of grant.
         Options generally expire five years from date of grant.

         Separate  from the 1999 Plan the Company has also issued  warrants that
         generally expire five years from the date of grant.

<TABLE>
         A summary of warrant and option activity follows:


<CAPTION>
Warrants:                                                                      1999                             1998
                                                                 --------------------------------   --------------------------------
                                                                 Number of       Weighted average    Number of      Weighted average
                                                                  shares          exercise price      shares         exercise price
                                                                  ------          --------------      ------         --------------
<S>                                                               <C>                <C>                                 <C>
Outstanding at beginning of year                                  100,000            $   2.00            --              $   --
Granted                                                           525,000                1.69         100,000                2.00
Exercised                                                            --                  --              --                  --
Canceled                                                             --                  --              --                  --
                                                                  -------            --------         -------            --------

Outstanding at end of year                                        625,000                1.74         100,000                2.00
                                                                  =======            ========         =======            ========

Exercisable at end of year                                        625,000                1.74         100,000                2.00
                                                                  =======            ========         =======            ========




Options:                                                                       1999                             1998
                                                                 --------------------------------   --------------------------------
                                                                 Number of       Weighted average    Number of      Weighted average
                                                                  shares          exercise price      shares         exercise price
                                                                  ------          --------------      ------         --------------
Outstanding at beginning of year                                     --              $   --              --              $   --
Granted                                                         3,050,000                2.24            --                  --
Exercised                                                            --                  --              --                  --
Canceled                                                           60,000                2.50            --                  --
                                                                ---------            --------         -------            --------

Outstanding at end of year                                      2,990,000                2.23            --                  --
                                                                =========            ========         =======            ========

Exercisable at end of year                                      1,287,500                1.96            --                  --
                                                                =========            ========         =======            ========
</TABLE>


         As permitted by Financial  Accounting  Standard No.123  "Accounting for
         Stock-Based  Compensation,"  the Company has elected to account for its
         stock  option  plan  under APB No.25  "Accounting  for Stock  Issued to
         Employees."  Accordingly,  no compensation cost has been recognized for
         these plans when options were issued with  exercise  prices equal to or
         greater than the fair market value of the  Company's  stock on the date
         of grant.

                                       32

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


         Had  compensation  cost for the stock option plan been determined based
         on the fair value at the grant date  consistent  with FAS  No.123,  the
         Company's net earnings and earnings per share are estimated as follows:

                                                     1999              1998
                                               --------------    --------------
Net loss
         As reported                           $   (9,298,789)   $   (3,144,522)
         Pro Forma                             $  (11,085,439)   $   (3,144,522)

Net loss per share (basic and diluted)
         As reported                                    (0.72)            (1.92)
         Pro forma                                      (0.86)            (1.92)
                                               ==============     =============

         The weighted average fair value of options and warrants granted in 1999
         was $0.73 and  $1.04.  The  weighted  average  fair  value of  warrants
         granted in 1998 was $0.74.  Each option grant was valued at the date of
         grant using the  Black-Scholes  option pricing model with the following
         weighted average assumptions:


                                                     1999
                                               --------------
         Risk-free interest rate                     5.7%
         Dividend yield                                0%
         Volatility                                  100%
         Average expected term (years)                 2
                                               ==============

<TABLE>
         Options and warrants issued to third party service  providers under the
         1999 plan or by resolution of the Board of Directors as of December 31,
         1999 were:

<CAPTION>
                                               Outstanding                                   Exercisable
                            ---------------------------------------------------     -------------------------------
                                                                   Weighted
                                              Weighted             Average                               Weighted
                                               Average            Remaining                              Average
           Range of            Warrant/        Exercise          Contractual           Warrants/         Exercise
       exercise prices         Options          Price            Life (years)          Options            Price
      -----------------     ------------    -------------     -----------------     ------------     --------------
<S>                             <C>              <C>                      <C>           <C>                <C>
         $ .05 - $ .99          275,000          $   .10                  4.06          275,000            $  0.10
         $1.00 - $1.99          530,000          $  1.55                  4.17          325,000            $  1.52
         $2.00 - $2.75          850,000          $  2.64                  4.62          650,000            $  2.61
      -----------------     ------------    -------------     -----------------     ------------     --------------
                              1,655,000                                               1,250,000
                            ============                                            ============
</TABLE>


<TABLE>
         Employee stock options  outstanding and exercisable under the 1999 plan
         as of December 31, 1999 were:

<CAPTION>
                                               Outstanding                                   Exercisable
                            ---------------------------------------------------     -------------------------------
                                                                   Weighted
                                              Weighted             Average                               Weighted
                                               Average            Remaining                              Average
           Range of            Warrant/        Exercise          Contractual           Warrants/         Exercise
       exercise prices         Options          Price            Life (years)          Options            Price
      -----------------     ------------    -------------     -----------------     ------------     --------------
<S>                             <C>              <C>                      <C>           <C>                <C>
         $ .05 - $ .99             --                --                    --              --                 --
         $1.00 - $1.99             --                --                    --              --                 --
         $2.00 - $2.75        1,960,000          $  2.38                  4.65          662,500            $  2.10
      -----------------     ------------    -------------     -----------------     ------------     --------------
                              1,960,000                                                 662,500
                            ============                                            ============
</TABLE>

                                                        33

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


         Certain options and warrants were issued during 1999 for less than fair
         market value or for services  rendered by  non-employees  for which the
         Company recognized related expense of $2,327,350.

NOTE 12  SHORT TERM DEBT

         The  Company  issued  a note  for  $450,000  for the  purchase  of Rate
         Exchange,  Inc (Note 6). The note  carried an interest  rate of 6%. The
         note was paid in January 2000.

         During December 1999, RateXchange I Inc received $435,000 in short-term
         loans in connection  with a $2,000,000  bridge loan  agreement  reached
         with  various  investors.  The  remaining  $1,565,000  was  received in
         January and February  2000. The $2 million of bridge loans were used as
         interim  financing of  RateXchange  I Inc.  activities.  The loans bore
         interest  at 10% and were to mature six months from the  completion  of
         the  funding  of the loan  (completed  February  2000).  The notes were
         convertible  into RateXchange I, Inc. common stock at a price per share
         to be determined in an anticipated  subsequent financing of RateXchange
         I.  Purchasers  of  the  notes  also  received   warrants  to  purchase
         RateXchange I common stock at $2.40 per share, subject to adjustment.

         Subsequent  to  December  31,1999,  as a result  of the  company's  new
         business  strategy,  the  company  offered to the  investors  in the $2
         million  bridge loan the right to convert their notes into  RateXchange
         Corporation  common  stock at an exchange  rate of $5.00 per share.  In
         addition,  the company  agreed to issue such  holders an  aggregate  of
         500,000  warrants to purchase common stock at $5.00 per share. Any note
         holders who declined this offer were entitled to rescind their original
         investment and receive their principal back in full,  including accrued
         interest.  As a result of this offer all notes,  except  $25,000,  were
         converted to new shares of RateXchange Corporation common stock.

NOTE 13  INVESTMENT IN AFFILIATE.

         During 1999, the Company created a wholly owned  subsidiary,  Telenisus
         Corporation,  a Delaware  corporation,  for the  purpose  of  providing
         internet   services   to   small   to   mid-sized    corporations   and
         telecommunications  service  providers.  The Company funded the initial
         capital of  Telenisus  of $75,000.  It  subsequently  loaned  Telenisus
         additional funds to start  operations.  Telenisus has funded operations
         from its own equity and debt  financing  and has paid back the  Company
         all loans  except for the  initial  capitalization  of  $75,000.  As of
         December 31, 1999, as a result of Telenisus' sale of additional  shares
         to new  investors,  the Company's  interest in Telenisus had dropped to
         less than 10% ownership and the Company is recording its  investment in
         Telenisus at cost.

NOTE 14  RELATED PARTY TRANSACTIONS

         During 1998,  the Company  entered into a  consulting  contract  with a
         major shareholder that pays a monthly  consulting fee plus an incentive
         bonus for 1) any successful acquisition of business enterprises,  or 2)
         successful  capital funding of a least  $5,000,000 in 1998 or 1999. The
         incentive  awards are  $250,000 in cash,  warrants to purchase  250,000
         shares of common stock at $1.00,  and a mergers and acquisition fee for
         any acquisition  during 1998 or 1999. At December 31, 1999, the Company
         accrued $315,800 in cash incentives relating to completed financing and
         merger's  and  acquisitions  fee based on the value of the  RateXchange
         acquisition.

NOTE 15  MINORITY INTEREST

         During 1999,  the Company issued 10% of the  outstanding  shares of its
         subsidiary,  RateXchange, to the chief executive officer of RateXchange
         as an incentive  for  employment.  The shares were issued at fair value
         based upon the value of Ratexchange at the time of its acquisition.

                                       34

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


NOTE 16  SUBSEQUENT EVENTS

         In March 2000,  the Company  completed a private  placement in which it
         sold  2,733,329  shares of  restricted  common stock at a  subscription
         price of $12 per share plus  warrants to purchase  1,366,673  shares of
         its common stock at an exercise price of $14.40 per share. The warrants
         are immediately  exercisable and expire in three years. After deducting
         $2,665,000 for costs associated with the offering, the Company received
         $30,135,000.

         In 1999,  RateXchange entered into a term sheet agreement with a vendor
         to provide specialized consulting and computer programming to assist in
         RateXchange's business plans and operations in the business-to-business
         e-commerce niche it was developing.  The term sheet was never finalized
         into a formal agreement,  but some services were provided,  and certain
         cash payments were made for the services that were  rendered.  The term
         sheet  also  provided  for the vendor to  receive a stock  position  in
         RateXchange  of up to 10% for  certain  services.  In  early  2000  the
         Company  began  discussions  with the vendor  concerning  the 10% stock
         position  in  RateXchange   because  the  formal  agreement  was  never
         completed and the  contemplated  services were not fully provided.  The
         ultimate  outcome of these  discussions  was uncertain at that time. In
         August 2000,  the Company  reached an agreement  for  settlement of the
         dispute with the vendor,  whereby the Company  issued  175,000  shares,
         175,000  warrants  and  $100,000  in  cash  .The  total  value  of  the
         settlement of $1.8 million is recorded in the Company's  2000 financial
         statements.

         In February 2000,  RateXchange I Inc.  closed a $2,000,000  convertible
         note  offering.  The notes were  convertible  into  RateXchange I, Inc.
         common stock at a price per share to be  determined  in an  anticipated
         subsequent  financing of  RateXchange  I.  Purchasers of the notes also
         received  warrants to purchase  RateXchange I common stock at $2.40 per
         share, subject to adjustment. As a result of the company's new business
         strategy  the  subsequent  financing  of  RateXchange  I did not occur.
         Accordingly,  the  company  offered  to the note  holders  the right to
         convert  their notes into  RateXchange  Corporation  common stock at an
         exchange rate of $5.00 per share.  In addition,  the company  agreed to
         issue to such  holders an  aggregate  of 500,000  warrants  to purchase
         common stock at $5.00 per share.  All  RateXchange I notes and warrants
         have been converted into shares except one note for $25,000.

         Shareholders  authorized  the  1999  Stock  Option  Plan  during  1999.
         Shareholders  authorized  the 2000 Stock Option Plan on April 20, 2000.
         There are options to purchase  8,000,000 shares authorized for issuance
         under both plans. On February 24, 2000, the Board authorized additional
         options to purchase  4,290,000  shares  outside of either  plan.  Total
         options granted to employees  during the first quarter of 2000 for less
         than  fair  market  value  were  3,940,000  for which  the  Company  is
         recognizing  related  compensation  expense,  over the  option  vesting
         periods,  for the fair  value of the stock on the date of grant,  which
         was $12, and the strike price of the options, which is $7.

         In 2000,  the company  has also  granted  options to  purchase  275,000
         common  shares to  non-employee  consultants  for which the company has
         recorded related expense of $2,131,250.

         In October 2000, the Board  of Directors  approved and issued 2 million
         options to the Company's  new Chief  Executive  Officer.  These options
         were  granted  with a  strike  price  equal  to the  fair  value of the
         Company's stock on the date of grant and vest over various periods.

         On September 17, 2000, the Company  entered into an alliance  agreement
         with Amerex Bandwidth,  Ltd. Under this agreement,  Amerex brokers will
         execute trades for the sales or purchase of Internet protocol products,
         telecommunications  capacity  and/or  other  telecommunications-related
         products over the Company's  electronic  trading system and the company
         will share in the revenues  generated by the electronic trading system.
         In connection  with this  agreement,  the company issued to Amerex five
         warrants for an aggregate of 2,300,000  shares of our common stock. One
         warrant for 300,000 shares with an exercise price of $4.47 per share is
         currently  exercisable by Amerex.  The remaining four warrants each for

                                       35

<PAGE>


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999


         500,000 shares and with exercise  prices of $4.47 per share,  $4.70 per
         share,  $4.92 per share and $5.37 per share,  will  become  exercisable
         upon the earlier of September 17, 2005 or Amerex executing a minimum of
         $1,000,000,   $3,000,000,  $5,000,000  and  $10,000,000,  in  value  of
         transactions over the company's online electronic trading system.

                                       36

<PAGE>
                                    PART III

ITEM 11. EXECUTIVE COMPENSATION

                             EXECUTIVE COMPENSATION
<TABLE>
         The following table sets forth  information  regarding the compensation
paid for services  rendered during the last three completed  fiscal years to our
Chief  Executive  Officer  and  other  executive  officers,  as well as  certain
executive  officers of our  subsidiary,  RateXchange  I, Inc.,  who we appointed
executive  officers in February 2000,  and whose annual salary,  bonus and other
compensation exceeded $100,000 in 1999.
<CAPTION>
                                            SUMMARY COMPENSATION TABLE

                                                                                      Long-Term Compensation
                                                                               --------------------------------------
                                              Annual Compensation                      Awards             Payouts
                                   -------------------------------------------         ------             -------

Name and Principal                                                             Restricted   Securities
Position                                                     Other Annual      Stock        Underlying    LTIP        All Other
                           Year    Salary       Bonus        Compensation      Awards       Options       Payouts     Compensation
                           ----    ------       -----        ------------      ------       -------       -------     ------------
<S>                        <C>     <C>          <C>          <C>               <C>          <C>           <C>         <C>
Douglas Cole (1)           1999    $126,000     $125,000     $0                $0           100,000       $0          $0
      Chairman and Chief
      Executive Officer    1998    N/A          N/A          N/A               N/A          N/A           N/A         N/A

                           1997    N/A          N/A          N/A               N/A          N/A           N/A         N/A


Edward Mooney (2)          1999    $90,000      $125,000     $0                $0           100,000       $0          $0
      Executive Vice
      President,           1998    N/A          N/A          N/A               N/A          N/A           N/A         N/A
      Secretary and
      Treasurer            1997    N/A          N/A          N/A               N/A          N/A           N/A         N/A


Donald Sledge (3)          1999    $94,653      $75,000      $0                $0           100,000       $0          $0
      Chairman and Chief
      Executive Officer    1998    N/A          N/A          N/A               N/A          N/A           N/A         N/A

                           1997    N/A          N/A          N/A               N/A          N/A           N/A         N/A


                                                                     37

<PAGE>

Ross Mayfield (4)          1999    $87,619      $0           $0                $0           100,000       $0          $0
      President
                           1998    N/A          N/A          N/A               N/A          N/A           N/A         N/A

                           1997    N/A          N/A          N/A               N/A          N/A           N/A         N/A


Paul Wescott (5) Chief     1999    $64,230      $0           $0                $0           150,000       $0          $0
      Operating Officer
                           1998    N/A          N/A          N/A               N/A          N/A           N/A         N/A

                           1997    N/A          N/A          N/A               N/A          N/A           N/A         N/A

<FN>
(1)   Mr. Cole was hired as an officer on April 1, 1999 and resigned in February
      2000. Mr. Cole's annual salary was $168,000 plus a bonus,  pursuant to his
      employment agreement.  Mr. Cole's bonus of $125,000 accrued at year end on
      the  Company's  books;  however,  the bonus was not paid to Mr. Cole until
      2000.

(2)   Mr.  Mooney  was  hired as an  officer  on April 1, 1999 and  resigned  as
      Executive  Vice  President in February 2000 and as Secretary and Treasurer
      in March 2000.  Mr.  Mooney's  annual  salary was  $120,000  plus a bonus,
      pursuant  to his  employment  agreement.  Mr.  Mooney's  bonus of $125,000
      accrued at year end on the  Company's  books;  however,  the bonus was not
      paid to Mr. Mooney until 2000.

(3)   Mr.  Sledge was hired on September 15, 1999 as one of our directors and as
      the Chairman and CEO of RateXchange I, Inc., one of our subsidiaries.  Mr.
      Sledge was appointed our Chairman and Chief Executive  Officer in February
      2000. Mr. Sledge's annual salary at RateXchange was $300,000 plus a bonus,
      pursuant  to  his   employment   agreement.   Mr.   Sledge  also  received
      approximately $1,000 each month for car allowance and approximately $1,000
      each month for payment of whole life insurance premiums.

(4)   Mr. Mayfield was hired as an executive officer of RateXchange I, Inc., one
      of our  subsidiaries,  in July 1999.  While employed at RateXchange I, Mr.
      Mayfield served,  at various times during 1999, as Vice President of Sales
      and  Marketing,  Chief  Operating  Officer and President.  Mr.  Mayfield's
      annual salary at  RateXchange  I during 1999 was  $165,000,  plus a bonus,
      pursuant to his  employment  agreement.  We appointed Mr.  Mayfield as our
      President in February 2000.

(5)   Mr. Wescott was hired as an executive  officer of RateXchange I, Inc., one
      of our  subsidiaries,  in September 1999. While employed at RateXchange I,
      Mr.  Wescott  served,  at various times during 1999, as an Executive  Vice
      President,   Chief  Operating  Officer  and  Vice  President  of  Business
      Development.  Mr. Wescott's annual salary at RateXchange I during 1999 was
      $165,000, plus bonuses, pursuant to his employment agreement. We appointed
      Mr. Wescott our Chief Operating Officer in February 2000.
</FN>
</TABLE>
                                       38

<PAGE>


                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
      The  following  table sets forth  information  regarding  options  granted
during fiscal year 1999 to the named executive  officers.  No stock appreciation
rights were granted in 1999.
<CAPTION>
                                             Individual Grants
                          -------------------------------------------------------------
                          Number of       Percent of
                          Securities      Total Options                                     Potential Realizable Value at
                          Underlying      Granted to       Exercise or                   Assumed Annual Rates of Stock Price
                          Options         Employees in     Base Price Per   Expiration      Appreciation for Option Term
Name                      Granted         1999             Share(1)         Date             5% ($)             10% ($)
------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>              <C>              <C>             <C>                <C>
Douglas Cole              100,000         3.28%            $1.60            1/2004          $44,205.05         $97,681.60

Edward Mooney             100,000         3.28%            $1.60            1/2004          $44,205.05         $97,681.60

Donald Sledge             100,000         3.28%            $2.75            10/2004         $75,977.42         $167,890.25

Ross Mayfield             40,000          1.31%            $2.50            7/2004          $27,628.15         $61,051.00

                          60,000          1.97%            $2.75            7/2004          $45,586.45         $100,734.15

Paul Wescott              150,000         4.92%            $2.75            9/2004          $113,966.13        $251,835.37
<FN>
(1)   The  exercise  prices of the options  included  in this table  reflect the
      board's bona fide  estimation of market value of the shares on the various
      grant dates.  The shares  underlying  each of these options are restricted
      shares.  In  addition,  Company  shares  are  currently  traded on the OTC
      Bulletin  Board,  making it difficult to determine the value of restricted
      shares of the same class.
</FN>
</TABLE>

                                       39

<PAGE>

          SECURITIES UNDERLYING UNEXERCISED OPTIONS AT FISCAL YEAR END
                        AND FISCAL YEAR-END OPTION VALUES

         The following table sets forth  information with respect to each of the
named  executive  officers  concerning  the  number  of  securities   underlying
unexercised  options at the end of fiscal year 1999 and the 1999 fiscal year-end
value of all  unexercised  in-the-money  options  held by such  individuals.  No
options were exercised by any named executive officer in fiscal year 1999.

                          Number of Securities
                                Underlying             Value of Unexercised
                          Unexercised Options(#)    In-the-Money Options($)(1)
     Name               Exercisable Unexercisable   Exercisable Unexercisable
--------------
Douglas Cole             100,000              0     $440,000              0
Edward Mooney            100,000              0     $440,000              0
Donald Sledge            100,000              0     $325,000              0
Ross Mayfield                  0        100,000     $      0        335,000
Paul Wescott              37,500        112,500     $121,875        365,625
------------------

(1)   Market values of underlying  securities at exercise or year-end  minus the
      exercise price.


COMPENSATION OF DIRECTORS

      Directors of the Company may receive  stock  option  grants for service on
the board at the sole discretion of non-interested  board members.  Messrs. Cole
and Mooney each  received  options to purchase  100,000  shares of the Company's
common stock in January  1999 at an exercise  price of $1.60 per share for their
services as board members.  Mr. Glen received options to purchase 175,000 shares
of Company  stock in April 1999 at an exercise  price of $1.60 per share for his
service as a board member. For their services on the board,  Messrs.  Sledge and
Dixon each  received  options to  purchase  100,000  shares of Company  stock in
October 1999 at an exercise price of $2.75 per share. RateXchange's non-employee
directors  receive $500 for each board  meeting  attended in person and $100 for
each board meeting attended  telephonically,  plus out-of-pocket expenses. There
is no separate compensation for committee meeting attendance.

EMPLOYMENT AND TERMINATION AGREEMENTS

      As part of our  restructuring  to focus on the business of  RateXchange I,
Inc.,  Mr. Cole agreed to resign his  position  as an  executive  officer of the
Company,  effective  February  2000.  Mr.  Mooney  resigned  his  positions as a
director and an executive  officer in February  2000. In March 2000,  Mr. Mooney
resigned as  Secretary  and  Treasurer  of the  Company.  Pursuant to  severance
agreements the Company and Messrs.  Cole and Mooney  executed,  Mr. Cole and Mr.
Mooney will continue to provide consulting  services to us during our transition
phase.  During this phase,  Messrs. Cole and Mooney will receive consulting fees
and  six-months'  severance pay. They may also receive  performance  bonuses and
health insurance.

      Also in February  2000, we appointed  Donald Sledge our Chairman and Chief
Executive Officer, Ross Mayfield our President and Paul Wescott our Chief
Operating  Officer.  In March 2000, we appointed  Philip Rice our Executive Vice
President  and Chief  Financial  Officer.  We have executed or intend to execute
separate employment agreements with Messrs. Sledge, Rice, Mayfield and Wescott.


                                       40

<PAGE>

      Mr. Sledge's  employment  agreement  provides for an annual base salary of
$300,000,  an annual incentive bonus of up to 50% of base salary, stock purchase
rights, an expense  reimbursement and other employee benefits.  Pursuant to this
agreement,  Mr. Sledge's employment may be terminated for cause or upon death or
disability  so  long  as we  pay  all  compensation  owed  as  of  the  date  of
termination.  Mr. Sledge's  employment may be terminated without cause if we pay
(1)  severance  pay equal to one year's annual salary and (2) a bonus payment of
$150,000.

      Mr.  Rice's  employment  agreement  provides  for an annual base salary of
$200,000,  an annual  incentive  bonus of up to 50% of his base  salary,  option
rights and other  employee  benefits.  Pursuant to this  agreement,  Mr.  Rice's
employment may be terminated for cause, or upon death or disability,  and all of
our obligations to pay compensation and provide benefits shall thereafter cease.
Mr. Rice's employment may be terminated  without cause if we pay to Mr. Rice his
base  salary  for twelve  months  following  termination,  as well as a lump sum
payment of $100,000, and provide Mr. Rice certain other benefits.

      We intend to enter into an  employment  agreement  with Mr.  Mayfield that
provides for an annual base salary of $165,000,  an annual incentive bonus of up
to 50% of Mr. Mayfield's base salary, option rights and other employee benefits.
Pursuant to this  agreement,  Mr.  Mayfield's  employment  may be terminated for
cause  or  upon  death  or  disability,  and  all  of  our  obligations  to  pay
compensation  and  provide  benefits  shall  thereafter  cease.  Mr.  Mayfield's
employment may be terminated  without cause if we pay Mr. Mayfield's base salary
for  twelve  months  following  termination,  as well as a lump sum  payment  of
$100,000, and provide Mr. Mayfield certain other benefits.

      We intend to enter into an  employment  agreement  with Mr.  Wescott  that
provides for an annual base salary of $200,000,  an annual incentive bonus of up
to 50% of his base salary,  option rights and other employee benefits.  Pursuant
to this agreement, Mr. Wescott's employment may be terminated for cause, or upon
death or disability,  and all of our obligations to pay compensation and provide
benefits shall  thereafter  cease.  Mr.  Wescott's  employment may be terminated
without  cause  if we pay to Mr.  Wescott  his base  salary  for  twelve  months
following  termination,  as well as a lump sum payment of $100,000,  and provide
Mr. Wescott certain other benefits.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Prior to creating the Compensation  Committee during 1999,  members of the
board performed all functions currently delegated to the committee. During 1999,
the following directors served as Compensation Committee members:  Douglas Cole,
John Dixon and Douglas Glen. Currently,  the Compensation  Committee is composed
of Jonathan Merriman, Ronald Spears and Gordon Hutchins, Jr. John Dixon, Douglas
Glen and Douglas Cole resigned from the  Committee in 2000 in  conjunction  with
their resignations from the board.

      Douglas Cole

      In  addition  to his  membership  on  the  Compensation  Committee,  until
February 2000 Mr. Cole was our Chief Executive Officer,  President and Principal
Financial  Accounting  Officer.  Furthermore,  in 1999, Mr. Cole served as Chief
Executive Officer of PolarCap, Inc., our wholly-owned subsidiary and director of
RateXchange I, Inc., another subsidiary.

      Mr.  Cole is acting  Chief  Executive  Officer  and a director  of Fulcrum
International,  Inc. Mr. Glen, one of our former Compensation Committee members,
was also a director of Fulcrum and has served on its  compensation  committee or
board equivalent.

      Mr. Cole was  promisor on two notes held by us for the purchase of Company
shares in the principal  amounts of $22,257.40 and $125,000 and dated January 2,
1999,  and December 18, 1998,  respectively.  Interest on both notes was 6 1/2 %
APR, and, together with any unpaid principal on the notes, was due on January 2,
2001,  and December  18,  2000,  respectively.  The  greatest  aggregate  amount
outstanding  on the notes during 1999 was  approximately  $23,703 and  $133,000,
respectively,  on December 31, 1999. In February 2000, Mr. Cole fully  satisfied
his obligations under the January 2, 1999 note;  however,  because Mr. Cole paid
the entire principal amount owed under this note early at our request, we agreed
to waive unpaid accrued interest in the approximate  amount of $1,500.  In March
2000,  Mr. Cole paid the December 18, 1998 note in full,  including  all accrued
interest.


                                       41

<PAGE>

      John Dixon

      During  1999,  John Dixon was as a member of the  Compensation  Committee;
however,  he has  never  been an  officer  or  employee  of the  Company  or its
subsidiaries. Mr. Dixon resigned as a director in February 2000.

      Douglas Glen

      During  1999,  Douglas  Glen was a member of the  Compensation  Committee;
however,  he has  never  been an  officer  or  employee  of the  Company  or its
subsidiaries.  Mr. Glen is a director  of Fulcrum  International,  Inc.  and has
served on that company's compensation  committee or board equivalent.  Mr. Cole,
one of our Compensation Committee members, is the acting Chief Executive Officer
and a director of Fulcrum. Mr. Glen resigned as our director in March 2000.

      Edward Mooney

      Mr. Mooney, who participated in board  deliberations  regarding  executive
officer compensation, also served as our Executive Vice President, Secretary and
Treasurer  during  1999.  Mr.  Mooney  resigned  as both  executive  officer and
director  in February  2000.  In  addition,  during  1999 Mr.  Mooney  served as
Director and Secretary of  RateXchange  I, Inc.,  one of our  subsidiaries,  and
Director of Telenisus Corporation, one of our former subsidiaries. Currently, he
is an employee of Maroon Bells  Capital  Partners,  Inc., a merchant  investment
banking firm that is a party to a consulting agreement with us.

      On December 15, 1998,  we entered into an advisory  agreement  with Maroon
Bells Capital  Partners,  Inc. for 18 months with an automatic 12 month renewal.
We anticipate  renewing the contract until at least January 2001. MBCP is one of
our significant shareholders.  Pursuant to the advisory agreement, MBCP provides
certain  advisory  and business  development  services in exchange for a monthly
advisory fee. In addition,  MBCP will be paid a success fee upon the  completion
of certain merger and  acquisition  and business  development  activities on our
behalf. The cost of the MBCP consulting agreement to us during 1999 was $120,000
in advisory fees,  $315,800 in success fees for financings and  acquisitions and
warrants to  purchase  250,000 of our shares at $2.75 per share.  We  anticipate
paying to MBCP at least  $120,000  in  advisory  fees and at least  $150,000  in
structuring and financing success fees during 2000.

      Mr.  Mooney was  promisor on a note held by us for the purchase of 400,000
Company  shares in the amount of $87,520 and dated  December 18, 1998.  The note
was secured and accrued  interest at a rate of six and one-half percent (6 1/2%)
APR,  with  principal  and interest  due in two years on December 18, 2000.  The
largest  aggregate  amount  owed by Mr.  Mooney  during  1999 was  approximately
$93,550 on December  31, 1999.  In February  2000,  Mr.  Mooney paid the note in
full, including all accrued interest.

      Donald Sledge

      As  a  board  member,  Mr.  Sledge  participated  in  board  deliberations
regarding  executive  officer  compensation.  Mr. Sledge was appointed our Chief
Executive Officer in February 2000 and also served as Chief Executive Officer of
RateXchange  I, Inc.  during  1999.  Mr.  Sledge's  son is also an  employee  of
RateXchange I, Inc., earning a base salary of approximately $70,000 annually.


                                       42

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         The  following  constitutes a list of financial  statements,  financial
statement schedules and exhibits required to be used in this report:

(a)      List of documents filed as part of Form 10-K.

1.       Financial Statements:

         Reports of Independent Public Accountants

         Consolidated  Balance  Sheets as of December  31, 1999 and December 31,
         1998

         Consolidated  Statements of Operations for the years ended December 31,
         1999, December 31, 1998 and December 31, 1997

         Consolidated Statements of Stockholders' Equity for the period December
         31, 1996 to December 31, 1999

         Consolidated  Statements of Cash Flows for the years ended December 31,
         1999, December 31, 1998 and December 31, 1997

         Notes to Consolidated Financial Statements for the years ended December
         31, 1999, December 31, 1998 and December 31, 1997

2.       Financial Statement Schedules:

         The required schedules are omitted because of the absence of conditions
         under which they are  required or because the required  information  is
         presented in the financial statements or notes thereto.

3.       Exhibits:

         The Company hereby files as part of this Form 10-K the exhibits  listed
on the Exhibit Index.

(b)      Reports on Form 8-K:  None.

(c)      Exhibits.

         The Company hereby files as part of this Form 10-K the exhibits  listed
on the Exhibit Index.

(c)      Financial Statement Schedules.

         Not applicable.


                                       43

<PAGE>

                                   SIGNATURES

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

                                   RATEXCHANGE CORPORATION

November 14, 2000                  By: /s/ Philip Rice
                                      ------------------------------------------
                                        Philip Rice
                                        Executive Vice President and Chief
                                        Financial Officer



                                       44

<PAGE>

<TABLE>
<CAPTION>
                                  EXHIBIT INDEX

Exhibit No.                         Document Description                           Page No.
-----------                         --------------------                           --------
<S>           <C>
3.1           Certificate of Incorporation,  as amended  (incorporated herein by
              reference  to  Exhibit  3.1 to the  Company's  Form  10-Q  for the
              quarter ended September 30, 1999).

3.2           Amended and Restated Bylaws  (incorporated  herein by reference to
              Exhibit  3.2 to  RateXchange's  Form  10-Q for the  quarter  ended
              September 30, 1999).

10.1          Agreement  and  Plan  of  Merger  between   RateXchange  and  Rate
              Exchange,  Inc.  dated  June  1,  1999,  (incorporated  herein  by
              reference  to  Exhibit  10.1 to  RateXchange's  Form  10-Q for the
              quarter ended September 30, 1999).

10.2          Acquisition  Agreement  between  RateXchange  and  PolarCap,  Inc.
              (incorporated herein by reference to Exhibit 2.01 to RateXchange's
              Form 8-K/A filed on October 8, 1998).

10.3+         Employment  Agreement between  RateXchange and Edward Mooney dated
              April 1,  1999  (incorporated  by  reference  to  Exhibit  10.3 to
              RateXchange's Form 10-Q for the quarter ended September 30, 1999).

10.4+         Promissory Note of Edward Mooney dated December 18, 1998.

10.5 + */     Form of Severance Agreement between RateXchange and Edward Mooney.
       --

10.6 +        Employment  Agreement  between RateXchange  and Douglas Cole dated
              April 1,  1999  (incorporated  by  reference  to  Exhibit  10.4 to
              RateXchange's Form 10-Q for the quarter ended September 30, 1999).

10.7 + */     Form of Severance Agreement between RateXchange and Douglas Cole.
       --

10.8 +        Employment  Agreement  between  RateXchange  I, Inc. and Donald H.
              Sledge  dated  September  15, 1999  (incorporated  by reference to
              Exhibit  10.5 to  RateXchange's  Form 10-Q for the  quarter  ended
              September 30, 1999).

10.9 + */     Form of Employment  Agreement between RateXchange and each of Paul
       --     Wescott and Phillip Rice.

10.10         Employment Agreement between  RateXchange  and Ross Mayfield dated
              July 2, 1999.

10.11 +       1999  Stock  Option  Plan  (incorporated  herein by  reference  to
              Exhibit 4.1 to  RateXchange's  Registration  Statement on Form S-8
              (Reg. No. 333-43776)).

10.12         Advisory  Agreement  between  RateXchange and Maroon Bells Capital
              Partners, Inc. dated December 15, 1998.

10.13         Promissory Note of Theodore Swindells dated March 30, 1999.

10.14         Term Sheet dated July 23, 1999  between  RateXchange  I, Inc.  and
              Ultimate Markets, Inc.

21.1*/        List of Subsidiaries
    --

27.1          Restated Financial Data Schedule (For SEC Use Only)


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

+        Represents management contract or compensatory plan or arrangement.

* /      Previously filed.
--
</TABLE>
                                       45