<PAGE>

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

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

    FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                                       OR

[ ] 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 000-27913

                               FREEMARKETS, INC.
             (Exact Name of Registrant as Specified in its Charter)

<Table>
<S>                                                            <C>
                          DELAWARE                                          04-3265483
      (State or Other Jurisdiction of Incorporation or         (I.R.S. Employer Identification No.)
                        Organization)

                     FREEMARKETS CENTER
                      210 SIXTH AVENUE
                       PITTSBURGH, PA                                         15222
          (Address of Principal Executive Offices)                          (Zip Code)
</Table>

                                 (412) 434-0500
              (Registrant's Telephone Number, Including Area Code)

     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 [ ]

     The number of shares of the registrant's common stock outstanding as of the
close of business on October 31, 2001 was 40,089,909.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                               FREEMARKETS, INC.

                                   FORM 10-Q
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                                     INDEX

<Table>
<Caption>
                                                                PAGE
                                                                ----
<S>                                                             <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
            Condensed Consolidated Balance Sheets as of
            September 30, 2001 (unaudited) and December 31,
            2000............................................      3
            Condensed Consolidated Statements of Operations
            for the three and nine months ended September
            30, 2001 and 2000 (unaudited)...................      4
            Condensed Consolidated Statements of Cash Flows
            for the nine months ended September 30, 2001 and
            2000 (unaudited)................................      5
            Notes to Condensed Consolidated Financial
            Statements......................................      6

Item 2. Management's Discussion and Analysis of Financial
  Condition and Results of Operations.......................     10

Item 3. Quantitative and Qualitative Disclosures About
  Market Risk...............................................     17

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings...................................     18

Item 6. Exhibits and Reports on Form 8-K....................     18

Signature...................................................     19
</Table>
<PAGE>

                        PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                       FREEMARKETS, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                ($ IN THOUSANDS)

<Table>
<Caption>
                                                              SEPTEMBER 30,    DECEMBER 31,
                                                                  2001             2000
                                                              -------------    ------------
                                                               (UNAUDITED)
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 61,089         $ 52,991
  Short-term marketable investments.........................      12,003           68,157
  Accounts receivable, net..................................      28,444           27,861
  Other current assets......................................       6,010            5,069
                                                                --------         --------
     Total current assets...................................     107,546          154,078
Long-term marketable investments............................      16,680               --
Property and equipment, net.................................      36,939           43,714
Goodwill and other assets, net..............................      16,356          264,754
                                                                --------         --------
     Total assets...........................................    $177,521         $462,546
                                                                ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $  4,675         $  9,517
  Accrued incentive compensation............................       7,515           10,235
  Accrued acquisition costs.................................         142            4,676
  Accrued restructuring costs...............................       1,379               --
  Other current liabilities.................................      17,992           16,890
  Short-term borrowings.....................................       3,703            3,703
  Current portion of long-term debt.........................         195              184
                                                                --------         --------

     Total current liabilities..............................      35,601           45,205
Long-term debt..............................................         392              544
                                                                --------         --------

     Total liabilities......................................      35,993           45,749
                                                                --------         --------

Commitments and contingencies
Stockholders' equity:
  Common stock..............................................         401              388
  Additional capital........................................     538,767          503,065
  Unearned stock-based compensation.........................        (302)            (556)
  Stock purchase warrants...................................      76,388           95,484
  Accumulated other comprehensive income (loss).............          85             (171)
  Accumulated deficit.......................................    (473,811)        (181,413)
                                                                --------         --------

     Total stockholders' equity.............................     141,528          416,797
                                                                --------         --------

     Total liabilities and stockholders' equity.............    $177,521         $462,546
                                                                ========         ========
</Table>

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
                                        3
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (UNAUDITED; $ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
                                                        THREE MONTHS ENDED           NINE MONTHS ENDED
                                                          SEPTEMBER 30,                SEPTEMBER 30,
                                                    --------------------------   --------------------------
                                                       2001           2000          2001           2000
                                                    -----------    -----------   -----------    -----------
<S>                                                 <C>            <C>           <C>            <C>
Revenues..........................................  $    37,806    $    23,772   $   102,767    $    51,642
                                                    -----------    -----------   -----------    -----------
Operating costs and expenses:
  Cost of revenues................................       18,165         14,280        51,966         31,579
  Research and development, excluding stock
    compensation..................................        4,683          5,321        15,446         13,000
  Sales and marketing, excluding stock
    compensation..................................       12,704         11,711        38,168         29,253
  General and administrative......................        7,219          9,852        25,413         22,794
  Stock compensation -- research and
    development...................................           30             80           128            364
  Stock compensation and warrant costs -- sales
    and marketing.................................        1,979          2,372         6,010          4,202
  Restructuring charges...........................                                     6,432             --
  Terminated merger-related costs.................                          --         3,385             --
  Goodwill impairment.............................                          --       204,261             --
  Goodwill amortization...........................        1,495         29,523        46,306         61,226
  Write-off of in-process research and
    development...................................           --             --            --          7,397
                                                    -----------    -----------   -----------    -----------
Total operating costs and expenses................       46,275         73,139       397,515        169,815
                                                    -----------    -----------   -----------    -----------
    Operating loss................................       (8,469)       (49,367)     (294,748)      (118,173)
Interest and other income, net....................          699          2,305         2,744          6,557
                                                    -----------    -----------   -----------    -----------
    Net loss before income taxes..................       (7,770)       (47,062)     (292,004)      (111,616)
Provision for income taxes........................          109             70           394            175
                                                    -----------    -----------   -----------    -----------
    Net loss......................................  $    (7,879)   $   (47,132)  $  (292,398)   $  (111,791)
                                                    ===========    ===========   ===========    ===========
Basic and diluted earnings per share..............  $     (0.20)   $     (1.25)  $     (7.45)   $     (3.03)
                                                    ===========    ===========   ===========    ===========
Shares used in computing basic and diluted
  earnings per share..............................   39,782,075     37,752,565    39,265,229     36,860,650
                                                    ===========    ===========   ===========    ===========
</Table>

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
                                        4
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (UNAUDITED; $ IN THOUSANDS)

<Table>
<Caption>
                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                              ----------------------
                                                                2001         2000
                                                              ---------    ---------
<S>                                                           <C>          <C>
Cash flows from operating activities:
  Net loss..................................................  $(292,398)   $(111,791)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
  Depreciation and amortization.............................     13,842        6,486
  Provision for bad debts...................................      2,388          647
  Loss on disposal of property and equipment................      1,138        2,502
  Stock compensation and warrant costs......................      6,138        4,566
  Goodwill amortization.....................................     46,306       61,226
  Non-cash restructuring costs..............................      2,179           --
  Goodwill impairment.......................................    204,261           --
  Write-off of in-process research and development..........         --        7,397
Cash provided by (used in) changes in:
  Accounts receivable.......................................     (3,908)     (15,737)
  Other assets..............................................       (940)      (4,744)
  Accounts payable..........................................     (4,842)      (2,084)
  Other liabilities.........................................       (761)      18,564
                                                              ---------    ---------
          Net cash used in operating activities.............    (26,597)     (32,968)
                                                              ---------    ---------
Cash flows from investing activities:
  Acquisitions, net of cash acquired........................         --      (16,660)
  Purchases of marketable investments.......................    (54,534)    (133,291)
  Maturities of marketable investments......................     94,195       85,163
  Proceeds from disposal of property and equipment..........      2,544           --
  Investment in Adexa, Inc..................................     (6,000)          --
  Capital expenditures, net.................................    (12,854)     (27,782)
  Patent and trademark costs, net...........................       (186)        (130)
                                                              ---------    ---------
          Net cash provided by (used in) investing
            Activities......................................     23,165      (92,700)
                                                              ---------    ---------
Cash flows from financing activities:
  Repayment of debt.........................................       (140)      (4,113)
  Proceeds from fees applied to customer warrant............      9,375        3,250
  Proceeds from issuance of common stock....................        754           --
  Options and warrants exercised............................      1,541        1,795
                                                              ---------    ---------
          Net cash provided by financing Activities.........     11,530          932
                                                              ---------    ---------
Net change in cash and cash equivalents.....................      8,098     (124,736)
Cash and cash equivalents at beginning of period............     52,991      177,204
                                                              ---------    ---------
Cash and cash equivalents at end of period..................  $  61,089    $  52,468
                                                              =========    =========
Supplemental non-cash disclosure:
  Issuance of stock and assumption of options in connection
     with acquisition.......................................  $      --    $ 333,594
                                                              =========    =========
  Change in amounts due from customer characterized as
     payment for warrant....................................  $     938    $   1,875
                                                              =========    =========
</Table>

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
                                        5
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (UNAUDITED; $ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1.  BASIS OF PRESENTATION

     The unaudited condensed consolidated financial statements have been
prepared by FreeMarkets, Inc. and Subsidiaries (the "Company") and reflect all
adjustments (all of which are normal and recurring in nature) that, in the
opinion of management, are necessary for a fair presentation of the interim
periods presented. The results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for any subsequent
quarter or for the entire year ending December 31, 2001. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC"). The unaudited condensed consolidated financial
statements and notes included herein should be read in conjunction with the
Company's audited consolidated financial statements and notes for the year ended
December 31, 2000, included in the Company's Annual Report on Form 10-K/A filed
with the SEC on May 10, 2001. Certain prior year amounts have been reclassified
to conform with the current presentation.

NOTE 2.  EARNINGS PER SHARE

     The computation of earnings per share is as follows:

<Table>
<Caption>
                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                  SEPTEMBER 30,               SEPTEMBER 30,
                            -------------------------   -------------------------
                               2001          2000          2001          2000
                            -----------   -----------   -----------   -----------
<S>                         <C>           <C>           <C>           <C>
Net loss..................  $    (7,879)  $   (47,132)  $  (292,398)  $  (111,791)
Weighted average common
  shares used in computing
  basic and diluted
  earnings per share......   39,782,075    37,752,565    39,265,229    36,860,650
Basic and diluted earnings
  per share...............  $     (0.20)  $     (1.25)  $     (7.45)  $     (3.03)
</Table>

     The following potentially dilutive common shares were excluded because
their effect was antidilutive:

<Table>
<Caption>
                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                  SEPTEMBER 30,               SEPTEMBER 30,
                            -------------------------   -------------------------
                               2001          2000          2001          2000
                            -----------   -----------   -----------   -----------
<S>                         <C>           <C>           <C>           <C>
Stock options and
  warrants................    5,010,793    10,102,258     5,439,269    11,602,510
</Table>

NOTE 3.  ACQUISITIONS

     In March 2000, the Company acquired iMark.com, Inc. ("iMark"), a
business-to-business online marketplace for surplus equipment and inventory. The
Company issued 1,573,725 shares of its common stock and assumed 176,275 options
with an aggregate total value of $333.6 million, in exchange for all of the
outstanding shares and options of iMark. The acquisition was accounted for as a
purchase business combination, and the goodwill and other intangible assets of
$336.3 million were being amortized on a straight-line basis over 36 months
through May 15, 2001. See Note 4 to the Condensed Consolidated Financial
Statements regarding goodwill impairment. In-process research and development of
$7.4 million was written off as a non-recurring charge upon consummation of the
acquisition.

     Also in March 2000, the Company purchased substantially all of the assets
of Surplus Record, Inc. and SR Auction, Inc. (collectively, "Surplus Record")
for $18.0 million in cash. Surplus Record consists of a directory and network of
dealers and buyers and an online surplus asset trade site for business surplus,
new and used industrial equipment, machinery and machine tools. The acquisition
was accounted for as a purchase business

                                        6
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
             (UNAUDITED; $ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

combination, and the excess of the purchase price over the fair value of the net
assets acquired of $17.9 million was allocated to goodwill, which is being
amortized on a straight-line basis over 36 months.

     The following unaudited pro forma financial information presents the
Company's results of operations as if the acquisitions of iMark and Surplus
Record occurred at the beginning of the period presented. The write-off of
in-process research and development has been excluded because it is
non-recurring. The unaudited pro forma financial information does not
necessarily reflect the results of operations that would have occurred had the
Company, iMark and Surplus Record constituted a single entity during such
period.

<Table>
<Caption>
                                                             NINE MONTHS ENDED
                                                             SEPTEMBER 30, 2000
                                                             ------------------
<S>                                                          <C>
Revenues...................................................      $  52,413
Goodwill amortization......................................        (88,569)
Net loss...................................................       (138,378)
Basic and diluted earnings per share.......................          (3.60)
</Table>

NOTE 4.  RESTRUCTURING CHARGES, GOODWILL IMPAIRMENT AND TERMINATED
         MERGER-RELATED COSTS

     During the second quarter of 2001 ("Q2 2001"), the Company recorded $6.4
million of restructuring charges, $204.3 million for goodwill impairment and
$3.4 million of terminated merger-related costs.

     In April 2001, the Company closed its Austin, Texas office, formerly the
headquarters of its iMark subsidiary, and centralized the Company's asset
recovery operations at its corporate headquarters in Pittsburgh, Pennsylvania.
As a result of the closing of the Austin office, the Company recorded a $3.1
million restructuring charge covering the severance costs, lease termination
costs and non-cash write-off of assets related to the Austin office. In June
2001, the Company closed two foreign offices and terminated certain employees in
those and other offices. As a result, the Company recorded a $3.3 million
restructuring charge covering severance and lease termination costs. The
restructuring reserve activity for the period ended September 30, 2001 was:

<Table>
<Caption>
                                            INITIAL   AMOUNTS        BALANCE AT
                                            CHARGE    UTILIZED   SEPTEMBER 30, 2001
                                            -------   --------   ------------------
<S>                                         <C>       <C>        <C>
Employee severance and termination benefit
  costs...................................  $2,347    $(1,818)         $  529
Asset write-offs..........................   2,179     (2,179)             --
Lease costs...............................   1,719       (963)            756
Other termination costs...................     187        (93)             94
                                            ------    -------          ------
     Total................................  $6,432    $(5,053)         $1,379
                                            ------    -------          ------
</Table>

     Furthermore, the Company re-evaluated its product and technology strategy,
and decided that the Company will no longer use the technology platform or the
market strategy that it acquired with iMark. As a result of this decision to
abandon the technology and strategy acquired with iMark, the Company recorded a
$204.3 million impairment charge in Q2 2001 to fully write-off the remaining
unamortized balance.

     In addition, in February 2001, the Company signed a definitive agreement to
acquire Adexa, Inc., a provider of software products that enable collaborative
commerce. However, in June 2001, FreeMarkets and Adexa mutually agreed to
terminate their proposed merger without payment of any termination fees due to
the challenging economic and market conditions. The Company had incurred
merger-related costs of approximately $3.4 million related to financial advisor
and other professional fees, which were all expensed in Q2 2001.

                                        7
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
             (UNAUDITED; $ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5.  COMPREHENSIVE INCOME OR LOSS

     Other comprehensive income or loss includes the net effect of foreign
currency translation adjustments and unrealized gains or losses on short-term
investments. Including net loss from the condensed consolidated statements of
operations, comprehensive loss was $8.1 million, $47.0 million, $292.1 million
and $111.9 million for the three and nine months ended September 30, 2001 and
2000, respectively.

NOTE 6.  SEGMENT REPORTING

     Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company operates in one segment, business-to-business
electronic commerce. The Company markets its services in the United States and
in foreign countries through its sales personnel and its subsidiaries.

     The Company serves its customers from offices in the United States and 11
foreign countries. Many of the Company's customers are multi-national customers.
As of September 30, 2001, over 95% of the Company's assets were located in the
United States, while over 85% of the Company's revenues were derived from
customers whose headquarters are located in the United States.

NOTE 7.  NEW ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133, which is effective
for all quarters beginning January 1, 2001, establishes accounting and reporting
standards for derivative financial instruments and hedging activities related to
those instruments. The adoption of this standard did not have a material impact
on the Company's consolidated financial statements.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, all
business combinations will be accounted for under the purchase method. Under
SFAS No. 142, goodwill will no longer be amortized, but will be reduced only if
it is found to be impaired. Goodwill will be tested for impairment annually or
more frequently when events or circumstances occur indicating that goodwill
might be impaired. A fair-value based impairment test would be used to measure
goodwill for impairment. The provisions of these statements are effective for
all business combinations completed after July 1, 2001 and fiscal years
beginning after December 15, 2001 for existing goodwill. Management believes the
adoption of these standards will have a material impact on the Company's
consolidated financial statements as goodwill will no longer be amortized
beginning in fiscal year 2002.

NOTE 8.  SECURITIES CLASS ACTION COMPLAINTS

     Since April 27, 2001, eleven securities fraud class action complaints have
been filed against the Company and two executive officers in federal court in
Pittsburgh, Pennsylvania. The complaints, all of which assert the same claims,
stem from the Company's announcement on April 23, 2001 that, as a result of
discussions with the staff of the SEC, the Company was considering amending its
2000 financial statements for the purpose of reclassifying fees earned by the
Company under a service contract with Visteon Corporation ("Visteon"). All of
the cases have been consolidated into a single proceeding. On October 30, 2001,
the Company filed a motion seeking to dismiss all of the cases in their
entirety. That motion is still pending before the Court. In addition, on
September 24, 2001, an individual claiming to be a FreeMarkets shareholder filed
a shareholder's derivative action, nominally on behalf of FreeMarkets, against
all of the Company's directors and certain of its executive officers.
FreeMarkets is also named as a nominal defendant. The suit is based on the same
facts alleged in the foregoing securities fraud class actions and has been
stayed pending a ruling on the Company's motion to dismiss

                                        8
<PAGE>

                       FREEMARKETS, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
             (UNAUDITED; $ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

those class actions. The Company and the individual defendants believe that the
plaintiffs' allegations are completely without merit and they intend to defend
these claims vigorously.

     Since July 31, 2001, several securities fraud class action complaints have
been filed in the United States District Court for the Southern District of New
York alleging violations of the securities laws in connection with the Company's
December 1999 initial public offering ("IPO"). The complaints allege that
underwriters in the IPO received excessive commissions and entered into unlawful
agreements with certain of their clients pursuant to which those clients
purchased the Company's stock in the after-market for the purpose of
artificially inflating the price of the Company's shares. In three of the
complaints, the Company and certain of its officers are named as defendants,
together with the underwriters that are the subject of the plaintiffs'
allegations. The Company and the individual defendants believe that the claims
asserted against them are without merit, and they intend to defend these claims
vigorously.

NOTE 9.  SUBSEQUENT EVENT

     In October 2001, the Company entered the third amendment to its bank credit
agreement which provides for a $20.0 million revolving credit facility and a
$4.0 million term loan to be paid in 36 equal installments commencing in
December 2001.

     Funds borrowed under the term loan and the line of credit may be used for
working capital requirements and general corporate purposes. As with the
previous facility, the new credit facility contains restrictive covenants and
other financial reporting requirements.

                                        9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our condensed
consolidated financial statements and related notes contained in this Quarterly
Report on Form 10-Q ("Form 10-Q").

     Certain statements contained in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different than any expressed or implied by
these forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other comparable
terminology. Furthermore, in addition to the risks described in this Form 10-Q,
we are subject to specific risks and uncertainties related to our business
model, strategies, markets and legal and regulatory environment. For a detailed
discussion of some of the risks, please see the risk factors included in our
Annual Report on Form 10-K/A for the year ended December 31, 2000, as filed with
the SEC on May 10, 2001.

OVERVIEW

     FreeMarkets creates business-to-business online auctions and provides
electronic commerce technology and services to buyers of industrial parts, raw
materials, commodities and services. We have created more than 16,600 online
auctions -- which we call "markets" -- for more than $25.4 billion worth of
goods and services for our customers. We estimate, based upon the difference
between the prices that our customers have historically paid and the lowest
prices that are identified in our auctions, that our markets have resulted in
potential estimated savings of over $5.2 billion for our customers.

     We combine our proprietary technology platform with an in-depth knowledge
of the supply markets for direct materials, which are the industrial parts and
raw materials that are incorporated into finished products by manufacturing
companies. Because direct materials are often custom-made to buyers'
specifications, there are no catalogs or price lists to enable buyers to make
price comparisons. The fragmentation of many supply markets and the importance
of product quality in supplier selection further complicate the purchasing
process. Because this complexity leads to market inefficiencies, we think that
buyers of direct materials often pay prices that are too high.

     Our online markets help buyers of direct materials, as well as indirect
materials and services, obtain lower prices and make better purchasing
decisions. In a FreeMarkets online market, suppliers from around the world can
submit bids in a real-time, interactive competition that is designed to be fair
to all participants. We offer customers our FullSource solution, in which we
help the customer identify and screen suppliers, and assemble a request for
quotation that provides detailed, clear and consistent information for suppliers
to use as a basis for their competitive bids. We also offer our QuickSource
solution, which enables customers to use our technology to run their own online
markets. In addition, we operate the FreeMarkets Asset Exchange for buyers and
sellers of surplus assets and inventory.

DETERMINATION OF ONLINE MARKET VOLUME AND ACHIEVABLE SAVINGS

     We believe that one indicator of our market acceptance is the dollar volume
of materials, commodities and services for which we create online markets on
behalf of our customers. We measure this online market volume by multiplying the
lowest bid price per unit in each online market by the estimated number of units
that our customer expects to purchase. When our customers specify multi-year
purchases in a request for quotation, we calculate online market volume for the
estimated term.

     Online market volume does not necessarily correlate with either our
revenues or our operating results in any particular period due to the
seasonality of our customers' purchasing needs, the timing of the addition of
new customers, the length of the customer contracts and the industry in which
the items in the online markets will be used. We believe that online market
volume may be correlated with revenues and operating results over periods of one
year or longer; however, because of our limited operating history, a strong
correlation has not yet been

                                        10
<PAGE>

demonstrated. Moreover, online market volume has varied in the past, and we
expect it to vary in the future. The following table sets forth our online
market volume for the periods indicated:

<Table>
<Caption>
                                         THREE MONTHS ENDED    NINE MONTHS ENDED
                                           SEPTEMBER 30,         SEPTEMBER 30,
                                         ------------------    ------------------
                                          2001       2000       2001       2000
                                         -------    -------    -------    -------
<S>                                      <C>        <C>        <C>        <C>
Online market volume (in millions).....   4,230      2,933     11,446      6,477
</Table>

     We believe that the savings identified for customers through our online
markets is an indicator of the effectiveness of our online market services. To
estimate these savings, we compare the last price paid by our customer against
the lowest bid price for those items in our online market. Actual savings that
our customers achieve may not equal these estimates because our customer may not
select the lowest bid price, the parties may agree to change price terms after
our online market or our customer may not actually buy all or any of the
auctioned items.

     Many of our agreements with customers provide for incentive compensation
based on online market volume and/or savings. These agreements may calculate
online market volume or savings differently than the methods we use to calculate
online market volume and savings for the purposes described above.

REVENUES

     We generate revenues under service agreements with our customers. Our
service agreements typically provide us with revenues from fixed monthly fees,
and may also include performance incentive payments based on volume and/or
savings. The revenue structure in a particular service agreement may vary,
depending upon the needs of our customer and the conventional practices in the
supply market where our customer obtains its materials, commodities or services.
The monthly fees that we receive are for the use of our technology, supplier and
supply market information, market making and market operations staff and
facilities. Negotiated monthly fees vary by customer, and reflect both the
anticipated online market volume and the staffing, expertise and technology we
anticipate committing to complete the services requested by our customers. Fixed
monthly fees constitute a majority of our revenues, and we expect that these
monthly fees will continue to constitute a majority of our revenues. We
recognize revenues from our fixed monthly fees ratably as we provide services.
Our agreements range in length from a few months to as many as five years. At
any given time, we have agreements of varying lengths with staggered
expirations. Some of our service agreements permit early termination by our
customers without penalty.

     Many of our agreements include performance incentive payments that are
contingent upon our customer achieving specific online market volume and/or
savings, as set forth in the respective agreements. We recognize these revenues
as the thresholds are achieved. We expect that as our online market volume
grows, the revenues attributable to these incentive payments will also grow over
time in terms of absolute dollars, but not necessarily as a percentage of
revenues.

     However, we exclude from revenues the amounts that we earn under a contract
with Visteon Corporation ("Visteon") pursuant to which we provide access to our
technology and perform services for Visteon. Visteon pays us fixed monthly fees
plus variable fees if specified volume thresholds are exceeded. When we executed
the service contract in April 2000, we granted a warrant for 1.75 million shares
to Visteon with an exercise price of $.01 per share, and we receive marketing
and public relations benefits as a result of our relationship with Visteon. The
warrant was valued at $95.5 million using the Black-Scholes pricing model at the
time of the grant. Because of the grant of this warrant, we are required to
exclude from our revenues the fees we earn from Visteon, and to allocate those
fees as payment for the warrant. However, we view our relationship with Visteon
as a customer relationship, and for all business and operational purposes in
which revenue is a factor in the decision, including budgets, forecasts,
allocation of resources, sales compensation and bonus decisions and other
performance indicators, we treat the fees we earn from Visteon in the same
manner as revenues from other customers. Accordingly, we have referred, where
applicable, to "revenues plus fees" throughout Management's Discussion and
Analysis of Financial Condition and Results of Operations in order to accurately
describe our analysis of our operations.

                                        11
<PAGE>

     Below is a reconciliation of revenues under generally accepted accounting
principles with revenues plus the fees earned under our service contract with
Visteon:

<Table>
<Caption>
                                        THREE MONTHS ENDED    NINE MONTHS ENDED
                                           SEPTEMBER 30,        SEPTEMBER 30,
                                        -------------------   ------------------
                                          2001       2000       2001      2000
                                        --------   --------   --------   -------
<S>                                     <C>        <C>        <C>        <C>
Revenues plus fees characterized as
  payment for warrant.................  $40,619    $26,584    $111,205   $56,767
Less fees characterized as payment for
  warrant.............................   (2,813)    (2,812)     (8,438)   (5,125)
                                        -------    -------    --------   -------
Revenues..............................  $37,806    $23,772    $102,767   $51,642
                                        =======    =======    ========   =======
</Table>

     Our service contract with Visteon is a standard customer agreement (except
for the warrant). The contract with Visteon has a five-year term ending in 2005,
and, as of September 30, 2001, provided for a fixed monthly payment stream
larger than any other customer contract. We do not expect to recognize revenues
under our Visteon service contract for either the fixed or any variable fees we
earn because we have determined, as a result of a review by the staff of the
SEC, that we must allocate those fees as payment for the warrant that we granted
to Visteon.

LIMITED OPERATING HISTORY

     Our limited operating history makes predicting future operating results
very difficult. We believe that you should not rely on the period-to-period
comparison of our operating results to predict our future performance. You must
consider our prospects in light of the risks, expenses and difficulties
encountered by companies in new and rapidly evolving markets. We may not be
successful in addressing these risks and difficulties. Although we have
experienced significant percentage growth in revenues in recent periods, we may
not be able to sustain our prior growth rates. Our prior growth may not be
indicative of future operating results.

     The continued slowdown in the economy did have an affect on our operations
in Q3 2001 as evidenced by the decline in online market volume from $4.6 billion
in Q2 2001 to $4.2 billion in Q3 2001 and a slowdown in the growth of our total
customers over the same period. Based on these trends, we believe that the
economic slowdown has caused customers to defer or postpone their purchasing
decisions and has increased sales cycles for our products and services In
addition, the amount of fixed monthly fees that we are able to negotiate for
prospective customers may be adversely affected based on lower anticipated
market volume from our customers. The amount of revenue we earn from variable
fees, such as performance incentive payments based on volume and/or savings, may
also decline as a result of lower volumes.

                                        12
<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth condensed consolidated statement of
operations data as a percentage of revenues plus fees for the periods indicated:

<Table>
<Caption>
                                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                                          SEPTEMBER 30,          SEPTEMBER 30,
                                                        ------------------     ------------------
                                                        2001         2000      2001         2000
                                                        -----        -----     -----        -----
<S>                                                     <C>          <C>       <C>          <C>
Revenues plus fees characterized as payment for
  warrant.............................................   100%         100%      100%         100%
     Less fees characterized as payment for warrant...     7           11         8            9
                                                        ----         ----      ----         ----
Revenues..............................................    93           89        92           91
Operating costs and expenses:
  Cost of revenues....................................    45           54        47           56
  Research and development, excluding stock
     compensation.....................................    11           20        14           23
  Sales and marketing, excluding stock compensation...    31           44        34           52
  General and administrative..........................    18           37        23           40
  Stock compensation -- research and development......     0            0         0            1
  Stock compensation and warrant costs -- sales and
     marketing........................................     5            9         5            7
  Restructuring charges...............................    --           --         6           --
  Terminated merger-related costs.....................    --           --         3           --
  Goodwill impairment.................................    --           --       183           --
  Goodwill amortization...............................     4          111        42          108
  Write-off of in-process research and development....    --           --        --           13
                                                        ----         ----      ----         ----
     Operating loss...................................   (21)        (186)     (265)        (209)
Interest and other income, net........................     2            9         2           12
                                                        ----         ----      ----         ----
     Net loss before income taxes.....................   (19)        (177)     (263)        (197)
Provision for income taxes............................     0            0         0            0
                                                        ----         ----      ----         ----
     Net loss.........................................   (19%)       (177%)    (263%)       (197%)
                                                        ====         ====      ====         ====
</Table>

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

     All references to "Q3 2001" and "Q3 2000" are for the three months ended
September 30, 2001 and 2000, respectively. All references to "Nine Months 2001"
and "Nine Months 2000" are for the nine months ended September 30, 2001 and
2000, respectively.

REVENUES

     Revenues plus fees increased 53% from $26.6 million in Q3 2000 to $40.6
million in Q3 2001 and increased 96% from $56.8 million in Nine Months 2000 to
$111.2 million in Nine Months 2001. The increase in revenues plus fees is
primarily attributable to an increased number of new customers for which we
conducted online markets, as well as increased use of our services by existing
customers. The number of customers served increased 48% from 84 in Q3 2000 to
124 in Q3 2001. One additional indicator of our market acceptance is the dollar
volume of materials, commodities and services that we auction for our customers.
Online market volume increased 44% from $2.9 billion in Q3 2000 to $4.2 billion
in Q3 2001 and increased 77% from $6.5 billion in Nine Months 2000 to $11.4
billion in Nine Months 2001. Revenues in Q3 2000 and Q3 2001 exclude fees earned
from Visteon of $2.8 million. Revenues in Nine Months 2000 and Nine Months 2001
exclude fees earned from Visteon of $5.1 million and $8.4 million, respectively.

OPERATING COSTS AND EXPENSES

     COST OF REVENUES.  Cost of revenues increased from $14.3 million in Q3 2000
to $18.1 million in Q3 2001 and from $31.6 million in Nine Months 2000 to $52.0
million in Nine Months 2001. As a percentage of revenues plus fees, cost of
revenues decreased from 54% in Q3 2000 to 45% in Q3 2001 and from 56% in Nine
Months

                                        13
<PAGE>

2000 to 47% in Nine Months 2001. The increase in absolute dollar amounts from Q3
2000 to Q3 2001 and Nine Months 2000 to Nine Months 2001 reflects an increase in
the number of market making staff, the increased cost of our operations due to
the expansion of our office space and services into international locations, as
well as an increase in the number of customers that we serve. Cost of revenues
includes the costs we incur in performing our obligations under the Visteon
service contract, even though the fees we earn under that contract are excluded
from revenues.

     The decrease in cost of revenues as a percentage of revenues plus fees from
Q3 2000 to Q3 2001 and from Nine Months 2000 to Nine Months 2001 is primarily
the result of increased staff productivity as our personnel became more
specialized in various market making activities. Also, we have attained some
operating efficiencies from our investments in information tools to automate
portions of our market making process, as well as organizing our market making
staff in such a way to take advantage of our domain supply vertical expertise.
Although we will continue to invest in the growth of our business, we expect
cost of revenues as a percentage of revenues plus fees to continue to decrease
in the near future, and stabilize thereafter.

     RESEARCH AND DEVELOPMENT, EXCLUDING STOCK COMPENSATION.  Research and
development costs decreased from $5.3 million, or 20% of revenues plus fees in
Q3 2000 to $4.7 million, or 11% of revenues plus fees in Q3 2001 and increased
from $13.0 million, or 23% in Nine Months 2000 to $15.4 million, or 14% in Nine
Months 2001. The decrease in absolute dollar amounts from Q3 2000 to Q3 2001
relates primarily to a decrease in the number of outsourced consulting staff and
associated costs as a result of the Q2 2001 restructuring. The increase in
absolute dollar amounts from Nine Months 2000 to Nine Months 2001 relates
primarily to the continued development of our BidWare software, other market
making technology that is designed to further improve staff productivity, and
our QuickSource solution. We expect that research and development costs will
remain relatively constant as a percentage of revenues plus fees in future
periods.

     SALES AND MARKETING, EXCLUDING STOCK COMPENSATION.  Sales and marketing
costs increased from $11.7 million, or 44% of revenues plus fees in Q3 2000 to
$12.7 million, or 31% of revenues plus fees in Q3 2001 and from $29.3 million,
or 52% in Nine Months 2000 to $38.2 million, or 34% in Nine Months 2001. The
increase in absolute dollars reflects a growth in sales and marketing staff and
public relations costs as we pursued our brand and business development strategy
and accelerated our spending on potential future growth. We expect that our
sales and marketing costs will remain relatively constant as a percentage of
revenues plus fees in the near future, and decrease slightly thereafter.

     GENERAL AND ADMINISTRATIVE.  General and administrative costs decreased
from $9.9 million, or 37% of revenues plus fees in Q3 2000 to $7.2 million, or
18% of revenues plus fees in Q3 2001 and increased from $22.8 million, or 40% in
Nine Months 2000 to $25.4 million, or 23% in Nine Months 2001. The decrease in
absolute dollars from Q3 2000 to Q3 2001 is primarily attributable to a decrease
in the number of personnel in the areas of human resources, legal, finance and
facilities management. The increase in absolute dollars from Nine Months 2000 to
Nine Months 2001 can be attributed to the expansion of our infrastructure from
four offices at the end of 1999 to sixteen offices at the end of Q3 2001, many
of which are international offices to support our growing customer base. We
expect that general and administrative costs will continue to decrease as a
percentage of revenues plus fees in future periods.

     STOCK COMPENSATION AND WARRANT COSTS.  We recorded $2.0 million of unearned
stock compensation related to employee stock options granted in June and July
1999, which is being amortized over a five-year period ending June 2004. In Q3
2001 and Nine Months 2001, $48,000 and $205,000, respectively, were amortized
related to these grants. In Q3 2000 and Nine Months 2000, $127,000 and $578,000,
respectively, were amortized related to these grants. In April 2000, we recorded
$95.5 million of unearned warrant costs related to the warrant granted to
Visteon. This value was calculated using the Black-Scholes pricing model at the
date of grant and is being amortized over a five-year period ending April 2005.
In Q3 2001 and Nine Months 2001, $4.8 million and $14.3 million, respectively,
were amortized related to this warrant, with $2.8 million and $8.4 million,
respectively, reflected as a reduction to our revenues (reducing the revenues
under the Visteon service contract to zero) and $2.0 million and $5.9 million,
respectively, as stock compensation and warrant costs -- sales and marketing. In
Q3 2000 and Nine Months 2000, $4.8 million and $8.7 million, respectively, were
amortized related to this warrant, with $2.8 million and $5.1 million,
respectively, reflected as a reduction to our revenues

                                        14
<PAGE>

(reducing the revenues under the Visteon service contract to zero) and $2.0
million and $3.6 million, respectively, as stock compensation and warrant
costs -- sales and marketing.

     GOODWILL.  In connection with our acquisitions of iMark and Surplus Record
in March 2000, we recorded goodwill of $354.3 million, of which $1.5 million and
$29.5 million were amortized in Q3 2001 and Q3 2000, respectively, and $46.3
million and $61.2 million were amortized in Nine Months 2001 and Nine Months
2000. In Nine Months 2001, we re-evaluated our product and technology strategy
and determined that we are no longer using the technology platform or the market
strategy that we acquired with iMark. As a result of this determination and the
closing of our Austin facility, we recorded a $204.3 million impairment charge
in Q2 2001.

     RESTRUCTURING CHARGES.  In Nine Months 2001, we recorded a $6.4 million
restructuring charge covering the severance and facility closing costs related
to our Austin office, as well as severance costs associated with other employees
who have left the Company.

     TERMINATED MERGER-RELATED COSTS.  In February 2001, we signed a merger
agreement to acquire Adexa, Inc., a provider of software products that enable
collaborative commerce. However, in June 2001, both parties mutually agreed to
terminate their proposed merger without payment of any termination fees due to
the recent challenging economic and market conditions. We incurred
merger-related costs of approximately $3.4 million related to financial advisor
and other professional fees, which were all expensed in Nine Months 2001.

     WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT.  In connection with our
acquisition of iMark in March 2000, we recorded a one-time write-off of
in-process research and development of $7.4 million.

     INTEREST AND OTHER INCOME, NET.  Interest and other income decreased from
$2.3 million in Q3 2000 to $699,000 in Q3 2001 and from $6.6 million in Nine
Months 2000 to $2.7 million in Nine Months 2001. The decrease was primarily
attributable to reduced interest income in Nine Months 2001 on decreased cash
and short-term investment balances in 2001 compared to 2000.

LIQUIDITY AND CAPITAL RESOURCES

     We have historically satisfied our cash requirements primarily through a
combination of revenues, equity financing transactions and bank borrowings. In
December 1999, we closed our IPO, which resulted in net proceeds of $182.2
million. As of September 30, 2001, we had cash and cash equivalents of $61.1
million, marketable investments of $28.7 million and working capital of $71.9
million.

     Net cash used in operating activities totaled $33.0 million in Nine Months
2000 and $26.6 million in Nine Months 2001. The use of cash in Nine Months 2000
and Nine Months 2001 related primarily to the operating loss generated by our
investment in the growth of our business, including an increase in personnel
from 806 as of September 30, 2000 to 988 as of September 30, 2001, among other
investments such as additional international offices and sales personnel. Net
cash used in operating activities included non-cash adjustments of $61.2 million
and $46.3 million of goodwill amortization in Nine Months 2000 and Nine Months
2001, respectively, and $204.3 million of goodwill impairment in Nine Months
2001. Net cash used in operating activities in nine months 2001 and nine months
2000 does not reflect $9.4 million and $3.3 million, respectively, received
under our service contract with Visteon.

     Net cash used in investing activities totaled $92.7 million in Nine Months
2000, while net cash provided by investing activities totaled $23.2 million in
Nine Months 2001. Our use of cash in investing activities in Nine Months 2000
were from our continued additions to and upgrade of computing and
telecommunications equipment. Also in Nine Months 2000, we used $133.3 million
to purchase marketable investments and $16.7 million related to acquisitions
that closed in March 2000, partially offset by maturities of marketable
investments of $85.2 million. Cash provided by investing activities in Nine
Months 2001 resulted primarily from maturities of marketable investments
totaling $94.2 million, partially offset by purchases of marketable investments
of $54.5 million, as well as capital expenditures of $12.9 million and a $6.0
million investment in Adexa.

     Net cash provided by financing activities totaled $932,000 in Nine Months
2000 and $11.5 million in Nine Months 2001. In Nine Months 2000, our positive
financing cash flows related to the $3.3 million received under

                                        15
<PAGE>

our service contract with Visteon and $1.8 million from options exercised,
partially offset by repayment of debt associated with the acquisition of iMark
in March 2000. The positive financing cash flows in Nine Months 2001 primarily
reflect the $9.4 million received under our service contract with Visteon. We
are required to classify these receipts as payment for the warrant that we
granted to Visteon in April 2000.

     Prior to November 2000, we had in place a $10.0 million bank facility,
consisting of a $5.0 million revolving line of credit and two equipment loans
originally totaling $5.0 million. In November 2000, we entered into a one-year
$25.0 million revolving credit facility. As of September 30, 2001, $3.7 million
was drawn under the facility and the interest rate was 6%. At September 30,
2001, $13.3 million was available for borrowings based on eligible accounts
receivable. In October 2001, we entered into the third amendment to our bank
credit facility agreement, consisting of a $20.0 million revolving credit
facility and a $4.0 million term loan to be paid in 36 equal installments
commencing in December 2001, $3.7 million of which was used to retire borrowings
under the old revolving credit facility. Borrowing under the revolving credit
facility and the term loan bear interest at the lender's prime rate and prime
rate + 0.50%, respectively.

     Our bank credit facility contains restrictive covenants, including a
limitation on capital expenditures, additional indebtedness and payment of
dividends. We are also required to satisfy minimum tangible net worth, maximum
net loss and quick ratios each quarter. We have pledged substantially all of our
tangible assets as collateral for the bank credit facility.

     Capital expenditures were $27.8 million in Nine Months 2000 and $12.9
million in Nine Months 2001. Capital expenditures over these periods were
primarily made to purchase computer and telecommunications equipment and for
furnishings in our new corporate headquarters and other offices, as well as for
expansion of our network and server capacity. We funded these capital
expenditures through a combination of sales of our equity securities and bank
borrowings. We intend to fund future capital expenditures through a combination
of proceeds from our IPO, bank borrowings and cash from operations. As a result
of the significant investments we made in our operations, infrastructure and
personnel in 2000 and Nine Months 2001, we expect to continue to decrease our
capital expenditures in future periods.

     We will continue to invest in the growth of our business; while at the same
time, we expect to generate positive net cash flows in Q4 2001 as a result of
cost controls and increased revenues. In Q1 2002, we anticipate negative net
cash flows as a result of the timing of our annual incentive-based compensation
payments, with positive net cash flows for the remainder of 2002. We may decide
to use resources to fund acquisitions of complementary businesses and
technologies. We believe that our current resources will be sufficient to meet
our working capital and capital expenditures for at least the next 18 to 24
months. If we are unable to control costs, our resources may be depleted, and
accordingly our current resources may be sufficient for a shorter period. In
either event, thereafter, we may find it necessary to obtain additional
financing. In the event that additional financing is required, we may not be
able to raise it on terms acceptable to us, if at all.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133, which is effective for all
quarters beginning January 1, 2001, establishes accounting and reporting
standards for derivative financial instruments and hedging activities related to
those instruments. The adoption of this standard did not have a material impact
on our consolidated financial statements.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, all
business combinations will be accounted for under the purchase method. Under
SFAS No. 142, goodwill will no longer be amortized, but will be reduced only if
it is found to be impaired. Goodwill will be tested for impairment annually or
more frequently when events or circumstances occur indicating that goodwill
might be impaired. A fair-value based impairment test would be used to measure
goodwill for impairment. The provisions of these statements are effective for
all business combinations completed after July 1, 2001 and fiscal years
beginning after December 15, 2001 for existing goodwill. We believe the adoption
of these standards will have a material impact on our consolidated financial
statements as goodwill will no longer be amortized beginning in fiscal year
2002.

                                        16
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in our market risk exposure during the
three months ended September 30, 2001 that would require an update to the
disclosure in our Annual Report on Form 10-K/A, as filed with the SEC on May 10,
2001.

                                        17
<PAGE>

                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     We previously reported that eleven securities fraud class action complaints
were filed against the Company and two executive officers in federal court in
Pittsburgh, Pennsylvania. The complaints, all of which assert the same claims,
stem from our announcement on April 23, 2001 that, as a result of discussions
with the staff of the SEC, we were considering amending our 2000 financial
statements for the purpose of reclassifying fees earned by the Company under a
service contract with Visteon. All of the cases have been consolidated into a
single proceeding. On October 30, 2001, we filed a motion seeking to dismiss all
of the cases in their entirety. That motion is still pending before the Court.
In addition, on September 23, 2001, an individual claiming to be a FreeMarkets
shareholder's derivative action, nominally on behalf of FreeMarkets, against all
of the Company's directors and certain of its executive officers. FreeMarkets is
also named as a nominal defendant. The suit is based on the same facts alleged
in the foregoing securities fraud class actions and has been stayed pending a
ruling on the Company's motion to dismiss those class actions.

     As we previously reported, since July 31, 2001, several securities fraud
class action complaints have been filed in the United States District Court for
the Southern District of New York alleging violations of the securities laws in
connection with our IPO. The complaints allege that underwriters in the IPO
received excessive commissions and entered into unlawful agreements with certain
of their clients pursuant to which those clients purchased shares of our common
stock in the after-market for the purpose of artificially inflating the price of
the shares. In three of the complaints, the Company and certain of its officers
are named as defendants, together with the underwriters that are the subject of
the plaintiffs' allegations.

     In each instance, we believe that the plaintiffs' allegations are
completely without merit, and we intend to defend all claims vigorously.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     None.

     (b) Reports on Form 8-K.

     None.

                                  * * * * * *

                                        18
<PAGE>

                                   SIGNATURE

     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 in the City of
Pittsburgh, Commonwealth of Pennsylvania on November 14, 2001.

                                         FREEMARKETS, INC.

                                         By: /s/ JOAN S. HOOPER
                                           -------------------------------------
                                           JOAN S. HOOPER
                                           Executive Vice President and Chief
                                             Financial Officer
                                           (Principal Financial and Accounting
                                             Officer)

                                        19