<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   (MARK ONE)

    {X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
                 FOR THE QUARTERLY PERIOD ENDED: March 31, 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: 0-30309

                               SCREAMINGMEDIA INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)




           DELAWARE                                     13-4042678
------------------------------             ------------------------------------
 (STATE OR OTHER JURISDICTION              (I.R.S. EMPLOYER IDENTIFICATION NO.)
              OF
INCORPORATION OR ORGANIZATION)

                      601 WEST 26TH ST., NEW YORK, NY 10001
     ---------------------------------------------------------------------
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 691-7900

  (FORMER NAME, FORMER ADDRESS, AND FORMER YEAR, IF CHANGED SINCE LAST REPORT:)
                                 NOT APPLICABLE

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
              -----              ------

As of May 8, 2001 there were 38,116,103 shares of the Registrant's common stock
outstanding.

<PAGE>

                               SCREAMINGMEDIA INC.

                                    FORM 10-Q

                          QUARTER ENDED MARCH 31, 2001

                                TABLE OF CONTENTS




                                                                        PAGE
                                                                        ----

PART I.   FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets -- March 31, 2001
          (unaudited) and December 31, 2000...........................    3

          Consolidated Statements of Operations -- Three
          months ended March 31, 2001 (unaudited) and 2000
          (unaudited).................................................    4

          Consolidated Statements of Cash Flows -- Three months ended
          March 31, 2001 (unaudited) and 2000 (unaudited)    .........    5

          Notes to Consolidated Financial Statements..................    6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................    8

Item 3.   Quantitative and Qualitative Disclosures About Market
          Risk........................................................   25

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...........................................   25

Item 2.   Changes in Securities and Use of Proceeds...................   25

Item 3.   Defaults upon Senior Securities.............................   26

Item 4.   Submission of Matters to a Vote of Security Holders.........   26

Item 5.   Other Information...........................................   26

Item 6.   Exhibits and Reports on Form 8-K............................   26


                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                               SCREAMINGMEDIA INC.


                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                MARCH 31,      DECEMBER 31,
                                                                  2001            2000
                                                              -------------   ------------
                                                               (Unaudited)
                                          ASSETS
<S>                                                          <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  28,892,461   $ 58,305,096
  Marketable securities.....................................     64,618,960     39,819,978
  Accounts receivable, net of allowance for doubtful
    accounts of $1,163,000 and $1,150,000 as of March 31,
    2001 and December 31 2000, respectively  ...............      3,561,990      3,968,123
  Prepaid expenses..........................................      1,571,055      1,229,680
                                                              -------------   ------------
    Total current assets....................................     98,644,466     103,322,877

PROPERTY AND EQUIPMENT--Net of accumulated depreciation.....     16,110,069      16,230,591
OTHER ASSETS................................................      2,718,728      2,713,059
                                                              -------------   ------------
    TOTAL ASSETS............................................  $ 117,473,263   $ 122,266,527
                                                              =============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable and accrued expenses.....................  $   4,709,580   $  4,281,053
  Deferred revenue..........................................      2,627,045      2,684,026
  Current portion of capital lease obligations..............      2,679,121      2,726,639
                                                              -------------   ------------
    Total current liabilities...............................     10,015,746      9,691,718
                                                              -------------   ------------
NONCURRENT LIABILITIES:
  Capital lease obligations, less current portion...........      2,923,366      3,399,617
                                                              -------------   ------------
    Total liabilities.......................................     12,939,112     13,091,335
                                                              -------------   ------------

STOCKHOLDERS' EQUITY:
  Common stock, $0.01 par value, 100,000,000 shares
    authorized and 39,539,351 issued and 37,967,812
    and 37,937,812 outstanding at March 31,
    2001 and December 31, 2000 .............................        395,394        395,394
  Additional paid-in capital................................    220,225,499    223,798,675
  Warrants..................................................      1,008,925      1,008,925
  Deferred compensation.....................................     (7,004,570)   (10,456,432)
  Treasury stock............................................       (981,225)      (999,956)
  Accumulated deficit.......................................   (109,189,745)  (104,581,127)
  Accumulated other comprehensive income....................         79,873          9,713
                                                              -------------   ------------
    Total stockholders' equity             .................    104,534,151    109,175,192
                                                              -------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             .....  $ 117,473,263   $ 122,266,527
                                                              =============   ============
</TABLE>

                 See accompanying notes to financial statements.


                                       3
<PAGE>


                               SCREAMINGMEDIA INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                         Three months ended March 31,
                                                       ------------------------------
                                                            2001           2000
                                                       -------------   --------------

<S>                                                    <C>            <C>
REVENUE:
  Services............................................  $  6,270,960   $  2,307,391
  License and set-up fees.............................     1,330,527        411,695
                                                        ------------   ------------
    Total revenue.....................................     7,601,487      2,719,086
                                                        ------------   ------------

OPERATING EXPENSES:
  Cost of services (excluding depreciation of
    $162,285 and $123,000 for the three months
    ended March 31, 2001, and 2000, respectively,
    shown below)......................................     2,218,748        947,516
  Research and development (excluding stock-based
    compensation of $(501,599) and $492,671 for the
    three months ended March 31, 2001 and 2000
    respectively, shown below)........................     1,855,381      1,205,696
  Sales and marketing (excluding stock-based
    compensation of $128,764 and $1,162,014 for the
    three months ended March 31, 2001 and 2000
    respectively, shown below)........................     4,320,000      4,195,193
  General and administrative (excluding stock-based
    compensation of $270,247 and $2,946,503 for the
    three months ended March 31, 2001 and 2000
    respectively, shown below)........................     3,838,556      2,377,697
  Depreciation and amortization.......................     1,486,526        549,421
  Stock-based compensation............................      (102,588)     4,601,188
                                                        ------------   ------------
    Total operating expenses..........................     13,616,623    13,876,711
                                                        ------------   ------------
OPERATING LOSS........................................    (6,015,136)   (11,157,625)
                                                        ------------   ------------
OTHER INCOME (EXPENSE):
  Interest income.....................................     1,432,090        268,273
  Interest expense....................................      (122,927)       (18,620)
  Foreign currency translation........................        97,355            --
                                                        ------------   ------------
Total other income (expense)..........................     1,406,518        249,653
                                                        ------------   ------------
NET LOSS..............................................    (4,608,618)   (10,907,972)
Deemed preferred stock dividends......................        --           (154,000)
                                                        ------------   ------------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS..............    (4,608,618)   (11,061,972)
                                                        ============   ============
Basic net loss per common share.......................  $       (.12)  $       (.70)
                                                        ============   ============
Weighted-average number of shares of common stock
  outstanding.........................................    37,964,145     15,783,191
                                                        ============   ============
</TABLE>



                 See accompanying notes to financial statements.

                                       4
<PAGE>

                               SCREAMINGMEDIA INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                     For the three months ended March 31,
                                                         -----------------------------
                                                             2001           2000
                                                         ------------   ------------
<S>                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.............................................  $ (4,608,618)  $(10,907,972)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization......................     1,486,526        549,421
    Stock-based compensation...........................      (188,838)     4,601,188
    Stock warrants issued for services.................        86,250
  Changes in operating assets and liabilities:
     Decrease (increase) in account receivable..........      406,133       (988,884)
    (Increase) decrease in prepaid expenses and other
      assets...........................................      (486,600)     1,177,368
    Increase in accounts payable and accrued
      expenses.........................................       428,527        701,349
    (Decrease) increase in deferred revenue............       (56,974)     1,005,062
                                                         ------------   ------------
      Net cash used in operating activities............    (2,933,594)    (3,862,468)
                                                         ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment...................    (1,226,448)    (1,363,908)
  Purchase of investments and marketable securities....   (24,798,982)      --
                                                         ------------   ------------
      Net cash used in investing activities............   (26,025,430)    (1,363,908)
                                                         ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligation..................      (523,771)      (182,908)
Proceeds from exercise of warrants and stock options...        --            405,006
                                                         ------------   ------------
Net cash (used) provided by financing activities.......      (523,771)       222,098
                                                         ------------   ------------
Effect of exchange rate changes on cash
and cash equivalents...................................        70,160          --
NET DECREASE IN CASH AND CASH EQUIVALENTS..............   (29,412,635)    (5,004,278)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD..........    58,305,096     22,121,667
                                                         ------------   ------------
CASH AND CASH EQUIVALENTS END OF PERIOD................  $ 28,892,461   $ 17,117,389
                                                         ============   ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest...............................  $    122,927   $    18,620
                                                         ============   ============
  Cash paid for income taxes...........................  $     --       $     --
                                                         ============   ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
    Fixed assets acquired under capital leases.........  $    164,254   $    267,136
                                                         ============   ============
    Warrant issued for common stock to sublessor in
     connection with new lease.........................  $     --       $    740,000
                                                         ============   ============
    Warrant granted for media services.................  $     --       $        101
                                                         ============   ============
    Common stock issued to board member...............   $     86,250   $    --
                                                         ============   ============
</TABLE>

                 See accompanying notes to financial statements.


                                       5
<PAGE>

                               SCREAMINGMEDIA INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                   (UNAUDITED)

1.  BASIS OF PRESENTATION

             The consolidated financial statements of which these notes are part
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, in the opinion of our management, the Consolidated
Financial Statements include all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial information for
such periods. These Consolidated Financial Statements should be read in
conjunction with our Consolidated Financial Statements and the notes thereto
included in our Annual Report on Form 10-K, for the year ended December 31,
2000.


2.    RECLASSIFICATIONS

     Certain reclassifications have been made in the March 31, 2000 financial
statements to conform to the classifications used in the March 31, 2001
financial statements.


3.       IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended in June 2000 by
Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting
for Certain Derivative Instruments and Certain Hedging Activities," which
requires companies to recognize all derivatives as either assets or liabilities
in the balance sheet and measure such instruments at fair value. As amended by
Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB 133," the provisions of SFAS 133 were adopted by the Company as of
January 1, 2001. Adoption of SFAS 133, as amended by SFAS 138, did not have a
material impact on the Company's results of operations or financial position
during the first quarter of 2001.




4.  CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents. At March 31, 2001 and December 31, 2000 the Company had cash
and cash equivalents of $28.9 million and $58.3 million, respectively.



5.  MARKETABLE SECURITIES

     Marketable securities consist of corporate notes and
bonds with a maturity date greater than three months when purchased. Management
has classified ScreamingMedia's marketable securities as available-for-sale
securities in the accompanying consolidated financial statements.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholders' equity. Realized
gains and losses on available-for-sale securities are included in other income.
Gains and losses, both realized and unrealized, are measured using the specific
identification method. Market value is determined by the most recently traded
price of the security at the balance sheet date. At March 31, 2001, the Company
had marketable securities of approximately $64.6 million.



                                       6
<PAGE>

    Marketable securities investments as of March 31, 2001 consist of the
following:




                                                      UNREALIZED
                                                        HOLDING        FAIR
                                           COST          GAINS         VALUE
                                        -----------   -----------   -----------

Corporate Notes and Bonds.............  $64,444,897   $ 174,063     $64,618,960
                                        ===========   ===========   ===========





                                                                      FAIR
                                                        COST          VALUE
                                                     -----------   -----------

Due within one year................................  $29,662,649   $29,721,760
Due after one year through five years..............   34,782,248    34,897,200
                                                     -----------   -----------
Total marketable securities........................  $64,444,897   $64,618,960
                                                     ===========   ===========




                                       7
<PAGE>

    Available-for-sale securities are carried at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity as of
March 31, 2001. The Company does not hold these securities for speculative or
trading purposes. The Company did not have marketable securities as of March 31,
2000.



6.   NET LOSS PER COMMON SHARE

     Basic net loss per share was computed by dividing net loss attributable
to common stockholders by the weighted average number of common shares
outstanding. Diluted net loss per share has not been presented since the impact
of options, warrants and the conversion of preferred shares would have been
antidilutive.



7.  STOCKHOLDER EQUITY

    TREASURY STOCK--During the first quarter of 2001, the Company issued 30,000
shares of common stock from shares held in treasury stock to a board member and
recorded compensation expense of $86,250 in connection with such grants. Such
compensation expense equaled the fair value of the stock at the time of
issuance.



8. STOCK BASED COMPENSATION

In connection with the grant of stock options to employees, the Company has
reversed previously recognized deferred stock based compensation expense of
approximately $3,622,500 for the three months ended March 31, 2001. This
reversal relates to previously recognized but unearned stock based compensation
expense of forfeited, unvested stock options granted to terminated employees.


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 the consolidated
financial statements and related notes contained herein and the information
contained in our Annual Report on form 10-K for the year ended December 31,
2000, as filed with the Securities and Exchange Commission on April 2, 2001.
This discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. We may identify these statements by
the use of words such as "believe", "expect", "anticipate", "intend", "plan" and
similar expressions. These forward-looking statements involve several risks and
uncertainties. Our actual results may differ materially from those set forth in
these forward-looking statements as a result of a number of factors, including
those described under the caption "Risk Factors" herein and in our Annual Report
on Form 10-K as filed with the United States Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this quarterly
report, and we caution you not to rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business as addressed elsewhere in this quarterly report.





                                       8
<PAGE>

REVENUE

Our revenue is composed of services revenue and license and set-up fees. We
derive our services revenue primarily from distributing digital content directly
to our customers' Web sites. Our contracts typically have an initial term of one
year. We charge our customers recurring monthly content, delivery and processing
fees. In certain cases we require prepayment ranging from one to twelve months.
In addition, we charge certain of our customers an upfront maintenance fee. We
recognize revenue for the contracted services fees ratably over the life of the
contract. We record billed amounts due from clients in excess of revenue
recognized as deferred revenue. We report our revenue net of allowances and
rebates.

    License and set-up fees are charged for our proprietary Siteware software
and building custom filters enabling the customer to receive customized content.
License and set-up fees are charged upfront and vary according to the version
and functionality of SiteWare selected and the number of custom filters created.
License fees are either charged annually, or one time, while set-up fees are
charged one time only. We recognize license and set-up fees ratably over the
life of the contract. We record billed amounts due from clients in excess of
revenue recognized as deferred revenue.

    Our revenues are comprised of:

    (1) Services revenues:

       (a) Content revenue is derived from distributing targeted licensed
           content directly to our customers' Web sites, intranets, extranets
           and wireless networks.

       (b) Delivery and processing fees are charged, primarily, based on the
           amount of data delivered through our digital content network.

       (c) We provide our customers technical product support under maintenance
           agreements.

    (2) License and set-up fees:

       (a) Licensing revenue consists of fees for licenses of our proprietary
           SiteWare software suite that allows our customers to receive
           customized content. Licensing fees vary according to the version and
           functionality of SiteWare selected.

       (b) Set-up fees include charges for building custom filters which enable
           the customer to receive customized content and adapters, which enable



                                       9
<PAGE>

           us to integrate Siteware into third party applications of major
           content management and personalization software vendors.

    COST OF SERVICES

    Cost of services consists of content royalty fees, certain payroll and
related expenses, fees paid to network providers for bandwidth, and monthly fees
for housing our servers in third-party network data centers. Content royalty
fees are calculated monthly, based on the volume of a provider's content used by
our customers. Under existing contracts with content providers, we generally pay
royalties on content that is used by our customers. In certain cases, the
content arrangement is based on fixed fees or subject to a minimum charge.
Payroll and related expenses pertain to the staff associated with the
customization and implementation of our SiteWare, filters and adapters, content
engineers, certain network operations and professional services staff.

    RESEARCH AND DEVELOPMENT EXPENSES

    Research and development expenses consist primarily of salaries and related
personnel costs associated with the research, design and development of software
applications and services supporting our business. To date, all research and
development costs have been expensed as incurred.

    SALES AND MARKETING EXPENSES

    Sales and marketing expenses consist primarily of salaries of related
personnel, sales commissions, customer support, tradeshows, advertising,
marketing collateral, promotional and public relations expenses.

    GENERAL AND ADMINISTRATIVE EXPENSES

    General and administrative expenses consist primarily of personnel and
related costs for general corporate functions including accounting, finance,
human resources, legal and other administrative functions, as well as provisions
for doubtful accounts and bad debt expense.

STOCK-BASED COMPENSATION

    We recorded a charge for the amortization of deferred stock-based
compensation of approximately $(103,000) and $4,601,188 million for the three
months ended March 31, 2001 and 2000, respectively. Stock-based compensation is
a result of the issuance of stock options to employees, directors and affiliated
parties with exercise prices per share determined for financial reporting
purposes to be below the fair market value per share of our common stock at the
date of the applicable grant.
This difference is recorded as a reduction of stockholders' equity and amortized
as non-cash compensation expense on an accelerated basis over the vesting period
of the related options.


                                       10
<PAGE>


RESULTS OF OPERATIONS

     The following table sets forth our results of operations as a percentage of
revenue for the periods indicated.

<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS ENDED
                                                                         MARCH 31,
                                                             ---------------------------------
                                                               2001          2000
                                                             --------      --------

<S>                                                            <C>          <C>
Revenue:
  Services ................................................     82%            85%
  License and set-up fees .................................     18             15
                                                               ----           ----
    Total revenue .........................................    100%           100%
                                                               ====           ====
Operating expenses:
  Cost of services (excluding depreciation of 2%
    and 11% for the three months ended March 31, 2001
   and 2000 respectively shown below) .....................      29%            35%
  Research and development (excluding stock-based
    compensation of (6%) and 18% for the three months ended
    March 31, 2001 and 2000 respectively,
    shown below) ..........................................      25             44
  Sales and marketing (excluding stock-based
    compensation of 2% and 43% for the three months
    ended March 31, 2001 and 2000,
    respectively, shown below) ............................      57            155
  General and administrative (excluding stock-based
    compensation of 3% and 108% for the three months
    ended March 31, 2001 and 2000,
    respectively, shown below) ............................      50             87
  Depreciation and amortization ...........................      20             20
  Stock-based compensation ................................      (1)           169
                                                               ----           ----
    Total operating expenses ..............................     180            510
                                                               ----           ----
Operating loss ............................................     (80)          (410)
Other income, net .........................................      19              9
                                                               ----           ----
    Net loss ..............................................    (61)%          (401)%
                                                               ====           ====
</TABLE>




                                       11
<PAGE>


THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000


    REVENUE.  Total revenue increased to $7.6 million for the three months ended
March 31, 2001, from $2.7 million for the three months ended March 31, 2000.
This increase was due to an overall increase in our annual contract value and
an increase in customers to 1,085 at March 31, 2001 from 780 at March 31,
2000.

    Services revenue totaled $6.3 million for the three months ended March 31,
2001, an increase of $4.0 million or 172% over services revenues of $2.3 million
for the three months ended March 31, 2000. This increase was attributable to the
increase in our customer base, new content services offerings and follow-on
orders from existing customers.

    License and set-up fee revenue totaled $1.3 million for the three months
ended March 31, 2001, an increase of $919,000 or 223% over license and set-up
fee revenue of $412,000 for the three months ended March 31, 2000. This was due
to an increase in the number of customers and the average size of license and
set-up fees.

    COST OF SERVICES.  Cost of services increased to $2.2 million for the three
months ended March 31, 2001, from $948,000 for the three months ended March 31,
2000. This increase in absolute dollars was due to an increase in services
revenue resulting in higher content royalty fees paid to content providers
and an increase in the number of employees in the implementation and content
engineering, network operations, and professional services departments. As a
percentage of revenue, cost of services decreased to approximately 29% for the
three months ended March 31, 2001 from approximately 35% for the three months
ended March 31, 2000. We anticipate that the cost of services will continue to
grow in absolute dollars as we expand our business.


    RESEARCH AND DEVELOPMENT.  Research and development expenses increased to
$1.9 million for the three months ended March 31, 2001, from $1.2 million for
the three months ended March 31, 2000. The absolute dollar increase was due
to direct personnel costs and further development of our SiteWare software
suite, Content Engine, hosting platform and other products. As a percentage
of revenue, research and development expenses decreased to approximately 25%
for the three months ended March 31, 2001 from approximately 44% for the
three months ended March 31, 2000. The decrease in research and development
as a percentage of total revenue resulted primarily because significant
revenue growth outpaced increases in research and development expenditures.

    SALES AND MARKETING.  Sales and marketing expenses increased to $4.3
million for the three months ended March 31, 2001, from $4.2 million for the
three months ended March 31, 2000. As a percentage of revenue, sales and
marketing expenses decreased to approximately 57% for the three months ended
March 31, 2001 from approximately 155% for the three months ended March 31,
2000. The decrease in sales and marketing as a percentage of total revenue
resulted primarily because significant revenue growth outpaced increases in
sales and marketing expenditures.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
to $3.8 million for the three months ended March 31, 2001, from $2.4 million for
the three months ended March 31, 2000. As a percentage of revenue, general and
administrative expenses decreased to approximately 50% for the three months
ended March 31, 2001 from approximately 87% for the three months ended March 31,
2000. The increase in absolute dollars resulted from an increase in personnel,
certain facilities costs, accounting and legal fees, bad debt expense and bad
debt reserves. General and administrative expenses decreased as a percentage of
total revenue primarily because significant revenue growth outpaced increases in
general and administrative expenditures.

    STOCK-BASED COMPENSATION. In connection with the grant of stock options to
employees, the Company has reversed previously recognized deferred stock based
compensation expense of approximately $3,622,500 for the three months ended
March 31, 2001. This reversal relates to previously recognized but unearned
stock based compensation expense of forfeited, unvested stock options granted to
employees.


    OTHER INCOME, NET. Other income, net includes interest income from cash and
cash equivalents and marketable securities offset by interest on capital leases.
Other income, net, increased to $1.4 million for the three months ended March
2001 from $250,000 in 2000. The significant increase from 2000 to 2001 was due
to interest income earned on



                                       12
<PAGE>

higher cash balances, cash equivalents and investments in marketable securities
resulting from a private placement in July 2000 and our initial public offering
in August 2000.


QUARTERLY OPERATING RESULTS


 The following table sets forth our unaudited quarterly operating results
for the years ended December 31, 1999 and 2000 and the three months ended March
31, 2001. This information has been derived from our unaudited interim financial
statements. In our opinion, this unaudited information has been prepared on a
basis consistent with our audited financial statements
contained in our Annual Report on Form 10-K for the fiscal year ended 2000 filed
April 2, 2001 and includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for the
quarters presented. Historical results for any quarter are not necessarily
indicative of the results to be expected for any future period.



                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                     --------------------------------------------------------------------------------------------
                                      JUNE 30  SEPTEMBER 30, DECEMBER 31,  MARCH 31 JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
                                       1999       1999           1999        2000      2000        2000        2000       2001
                                     -------  ------------  ------------  --------  --------  ------------- ----------- ---------
                                                        (IN THOUSANDS EXCEPT PER SHARE DATA)

<S>                                 <C>         <C>        <C>           <C>       <C>         <C>          <C>          <C>
Revenue:
  Services................           $    324    $    683   $  1,244      $ 2,307   $  4,038    $  5,525     $  6,622     $  6,271
  License and set-up
    fees..................                 69         135        263          412        667       1,059        1,234        1,330
                                     --------    --------   --------      -------   --------    --------     --------     --------
    Total revenue.........                393         818      1,507        2,719      4,705       6,584        7,856        7,601
Operating expenses:
  Cost of services
    (excluding
    depreciation of $0,
    $2, $31, $86, $126,
    $123, $256, $151 and $162
    in the first quarter
    of 1999 through the
    first quarter of
    2001, respectively, as
    shown below)..........                102         301        554          947      1,427       1,985        1,543        2,219
  Research and development
    (excluding stock-based
    compensation of $0,
    $0, $0, $64, $493,
    $657, $439, $431 and $(502) in
    the first quarter of
    1999 through the
    first quarter of
    2001, respectively, as
    shown below)..........                209         244        435        1,206      1,354       1,835        1,960        1,855
  Sales and marketing
    (excludes stock-based
    compensation of $0,
    $12, $700, $1,110,
    $1,162, $1,374, $1,171,
    $812 and $129 in the first
    quarter of 1999
    through the first
    quarter of 2001,
    respectively, as shown
    below)................                470       1,483      1,986        4,195      4,528       6,156        5,884        4,320
  General and
    administrative
    (excludes stock-based
    compensation of $0,
    $122, $987, 3,067,
    $2,946, $3,219,
    $2,499, $2,372 and $270 in
    the first quarter of
    1999 through the
    first quarter of
    2001, respectively, as
    shown below)..........                491         876      2,272        2,378      2,176       2,199        4,071        3,839
Depreciation and
  amortization............                 35         125        279          549        732         936        1,417        1,487
  Stock-based
    compensation..........                134       1,687      4,241        4,602      5,249       4,109        3,616         (103)
                                     --------    --------   --------      -------   --------    --------     --------     --------
    Total operating
      expenses............              1,441       4,716      9,768       13,877     15,466      17,220       18,491       13,617
                                     --------    --------   --------      -------   --------    --------     --------     --------
</TABLE>



                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                 -------------------------------------------------------------------------------------------------
                                  JUNE 30   SEPTEMBER 30, DECEMBER 31,  MARCH 31  JUNE 30,  SEPTEMBER 30, DECEMBER 31,   MARCH 31,
                                   1999        1999           1999        2000      2000        2000          2000         2001
                                  -------  ------------  ------------  --------  --------  ------------- -------------  ----------
                                                (IN THOUSANDS EXCEPT PER SHARE DATA)

<S>                              <C>         <C>        <C>         <C>          <C>         <C>        <C>             <C>

Operating loss.................    (1,048)     (3,898)     (8,261)    (11,158)    (10,761)    (10,636)    (10,635)        (6,016)
                                 --------    --------    --------    --------    --------    --------    --------        -------
Other income ..................        31          24         273         250         113       1,161       1,522          1,407
                                 --------    --------    --------    --------    --------    --------    --------        -------
Net loss ......................    (1,017)     (3,874)     (7,988)    (10,908)    (10,648)     (9,475)     (9,113)        (4,609)
                                 ========    ========    ========    ========    ========    ========    ========        =======

Deemed preferred stock
  dividends ...................       --          --          (102)       (154)       (155)    (50,215)       --            --
                                  --------    --------    --------    --------    --------    --------    --------       -------
Loss attributable to
  common stockholders .........   $ (1,017)   $ (3,874)   $ (8,090)   $(11,062)   $(10,803)   $(59,690)     (9,113)       (4,609)
                                  ========    ========    ========    ========    ========    ========    ========       =======
Basic net loss per common
  share .......................      (0.08)      (0.31)      (0.65)      (0.88)      (0.85)      (2.16)       (.24)         (.12)
                                  ========    ========    ========    ========    ========    ========    ========       =======
Weighted-average number of
  shares used in
  computation of basic and
  diluted net loss per
  share .......................     12,302      12,474      12,476      12,526      12,773      27,594      37,932        37,964
                                  ========    ========    ========    ========    ========    ========    ========       =======
PRO-FORMA BASIC NET LOSS
  PER COMMON SHARE
Loss attributable to
  common stockholders .........     (1,017)     (3,874)     (8,090)    (11,062)    (10,803)    (59,690)     (9,112)       (4,609)
Add amortization of
  deferred stock
  compensation ................        134       1,687       4,241       4,601       5,249       4,109       3,616          (103)
Add deemed preferred stock
  dividends ...................        --          --           102         154         155      50,215        --           --
                                  --------    --------    --------    --------    --------    --------    --------       -------
Net loss in computing pro
  forma basic net loss per
  common share ................       (883)     (2,187)     (3,747)     (6,307)     (5,399)     (5,366)     (5,496)       (4,712)
                                  ========    ========    ========    ========    ========    ========    ========       =======
Shares used in computation
  of basic net loss per
  common share ................     12,302      12,474      12,476      12,526      12,773      27,594      37,932        37,964
Add pro forma adjustment
  to reflect weighted
  average effect of the
  assumed conversion of
  convertible preferred
  stock .......................      4,046       4,121      10,877      11,349      11,349       6,958        --            --
                                  ========    ========    ========    ========    ========    ========    ========       =======
Shares used in computing
  pro forma basic net loss
  per common share ............     16,348      16,595      23,353      23,875      24,122      34,552      37,932        37,964
                                  ========    ========    ========    ========    ========    ========    ========       =======
Pro forma basic net loss
  per common share.............   $  (0.05)   $  (0.13)   $  (0.16)   $  (0.26)   $  (0.22)   $  (0.16)   $  (0.14)      $ (0.12)
                                  ========    ========    ========    ========    ========    ========    ========       =======
</TABLE>


    *Certain reclassifications have been made to the 1999 and 2000 financial
statements to conform with the 2001 presentation

NET LOSS PER SHARE

     Basic net loss per share was computed by dividing net loss attributable to
common stockholders by the weighted average number of common shares outstanding.
Diluted net loss per share has not been presented since the impact of options,
warrants and the conversion of preferred shares would have been antidilutive.

Pro forma basic net loss excludes the amortization of deferred stock
compensation and deemed preferred stock dividends of, $134, $1,687, $4,343,
$4,756, $5,404, $54,324, $3,616 and $(103) for the three months ending June 30,
1999 through March 31, 2001 (in thousands), respectively.

    Pro forma basic net loss per common share has been computed as described
above and also gives effect, even if anti-dilutive, to common equivalent shares
from preferred stock as if such conversion had occurred at the beginning of the
period or at the date of original issuance, if later.


                                       15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations through private sales of equity and debt
securities and through our initial public offering. Sales of equity securities
include $57.9 million of net proceeds from our August 2000 initial public
offering of common stock and $46.2 million of net proceeds received from the
July 2000 private placement of convertible preferred stock, which converted into
common stock upon the completion of our initial public offering. As of March 31,
2001 we had cash and cash equivalents and marketable securities of approximately
$93.5 million.

    As of March 31, 2001, our principal commitments consisted of obligations
outstanding under a series of capital leases of computer and networking
equipment and our facilities leases. We entered into capital lease arrangements
for computer, network and telephony equipment. Additionally, we entered into
other capital leases for the design and implementation of our new financial
systems. A leasing company is the beneficiary of a $3.6 million standby letter
of credit with a bank securing our lease arrangement with them. At the end of
each lease term, we have the option to purchase the equipment, typically at the
lesser of fair market value or 10% of gross asset value. We presently intend to
exercise the purchase option for the majority of the leases.

    We operate from leased premises in New York, San Francisco, Miami and
London. Our current aggregate annual rental obligations under these leases are
approximately $1.5 million for the year ended December 31, 2001. Our capital
expenditures were $1.2 million and $1.4 million, for the three months ended
March 31, 2001 and 2000, respectively, consisting principally of computers,
hardware, software and professional services to design our new financial
systems, networking equipment and the build-out of our headquarters.

    For the three months ended March 31, 2001 and 2000, respectively, net cash
used in operating activities was approximately $2.9 million and $3.9 million,
respectively. The net cash used in operating activities for the three months
ended March 31, 2001 resulted primarily from net losses of $4.6 million offset
by $1.4 million in non-cash charges, an increase in accounts payable and accrued
expenses and deferred revenue. The net cash used in operating activities for the
three months ended March 31, 2000 resulted primarily from net losses of $10.9
million, offset by non-cash charges of $5.2 million, a $1.0 million increase in
deferred revenue and an increase in trade accounts receivable of $1.0 million.

    For the three months ended March 31, 2001 and 2000, net cash used in
investing activities was $26.0 million and $1.4 million, respectively. The net
cash used in investing activities for the three months ended March 31, 2001 was
for
the purchase of marketable securities and equipment, $24.8 million and $1.2,
respectively. The net cash used in investing activities for the three months
ended March 31, 2000 was for the purchase of equipment.

    For the three months ended March 31, 2001 and 2000 net cash used and
provided by financing activities was $524,000 and $222,000, respectively. Net
cash used by financing activities for the three months ended March 31, 2001, was
for repayments
of our capital lease obligations. Net cash provided by financing activities for
the three months ended March 31, 2000 were from capital lease repayments of
$183,000, offset by proceeds from the sale of stock whose net proceeds were
$405,000.

    We believe that our current cash and cash equivalents, and marketable
securities will be sufficient to meet our operating expenses, for at least the
next eighteen months. We believe that changes in the market environment over the
past year have increased the value of corporate cash reserves as well as the
relative importance of bringing expenses more in line with revenues over time
and reducing our reliance on external sources of capital. Management is
extremely focused on monitoring costs and has implemented company wide
cost-saving incentive programs. In addition, if we undertake significant
acquisitions or make significant strategic investments, we may need to raise
additional funds within that time. We may also need to raise



                                       16
<PAGE>

additional funds if competitive pressures force us to make unforeseen
expenditures, such as to acquire or develop new technology. If we need to raise
additional funds, we will likely do so through the issuance and sale of equity
securities. If this were to occur, the percentage ownership of our stockholders
could be reduced, our stockholders may experience additional dilution and these
securities may have rights, preferences or privileges senior to those of our
stockholders. We cannot assure you that additional financing will be available
on terms favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our expansion, take
advantage of unanticipated opportunities, develop or enhance services or
products or otherwise respond to competitive pressures would be significantly
limited. Our business, results of operations and financial condition could be
materially adversely affected by these limitations.

        RECENT ACCOUNTING PRONOUNCEMENTS-- In June 1998, the FASB issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended in June 2000 by Statement of Financial Accounting
Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments
and Certain Hedging Activities," which requires companies to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
such instruments at fair value. As amended by Statement of Financial Accounting
Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB 133," the provisions
of SFAS 133 were adopted by the Company as of January 1, 2001. Adoption of SFAS
133, as amended by SFAS 138, did not have a material impact on the Company's
results of operations or financial position during the first quarter of 2001.



                                  RISK FACTORS

An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below before deciding to invest in shares
of our common stock. The trading price of our common stock could decline due to
any of these risks, in which case you could lose all or part of your investment.
In assessing these risks, you should also refer to the other information in this
and our other public filings, including our financial statements and the related
notes.

                          RISKS RELATED TO OUR BUSINESS

BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT WILL BE DIFFICULT FOR YOU TO
EVALUATE OUR BUSINESS.

    It is difficult to value our business and evaluate our prospects because of
our limited operating history. We began our current line of business at the end
of 1997 and began focusing exclusively on this business in the latter part of
1998. Accordingly, we have limited financial and operating data that is relevant
to our current business. Our business model is unproven, which creates a risk
that our performance will not meet the expectations of investors and that the
value of our common stock will decline.

WE HAVE A HISTORY OF SIGNIFICANT OPERATING LOSSES AND EXPECT TO INCUR
SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE.

    We expect to incur operating losses and experience negative cash flow for
the foreseeable future. We have incurred significant losses since we began our
current line of business in 1997. As of March 31, 2001, we had an accumulated
deficit of $109.2 million. We incurred net losses of $4.6 million and $10.9
million for the three months ended March 31, 2001 and 2000 respectively, not
including deemed preferred stock dividends relating to the sale and conversion
of preferred stock. We expect to incur additional losses as we incur additional
costs and expenses related to:

    - sales and marketing activities;

    - employing additional personnel;

    - funding our international operations;

    - software and product development;

    - establishing strategic relationships; and


                                       17
<PAGE>

    - increasing the number of content providers.

    We cannot predict when we will operate profitably, if ever. Our ability to
achieve profitability will depend on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. We
cannot be certain that if we were to achieve profitability, we would be able to
sustain or increase profitability.

OUR QUARTERLY FINANCIAL RESULTS MAY BE VOLATILE AND COULD CAUSE OUR STOCK PRICE
TO FLUCTUATE.

    Our revenues and operating results may vary significantly from quarter to
quarter. Because of these fluctuations, our results in any quarter may not be
indicative of future performance and it may be difficult for investors to
properly evaluate our results. It is possible that in some future periods our
revenues or earnings may fall below the expectations of investors and result in
the market price of our common stock declining. The factors that may cause our
financial results to vary from quarter to quarter include:

    - the demand for our services;

    - the value, timing and renewal of contracts with customers and content
      providers;

    - the amount and timing of operating costs and capital expenditures; and

    - the performance of our technology.

    These factors, which are largely beyond our control, together with our
limited operating history and unproven business model, make it difficult to
forecast our future revenues or results of operations accurately. We also have
imited meaningful historical financial data upon which to base planned operating
expenses. A substantial portion of our operating expenses is related to
personnel costs, marketing programs and overhead, which cannot be adjusted
quickly. Our operating expense levels reflect, in part, our expectations of
future revenues. If actual revenues on a quarterly basis are below management's
expectations, or if our expenses precede increased revenues, both gross margins
and results of operations would be materially adversely affected.

LOSING MAJOR CONTENT PROVIDERS MAY LEAVE US WITH INSUFFICIENT BREADTH OF CONTENT
TO RETAIN AND ATTRACT CUSTOMERS.

    We do not generate original content and are therefore highly dependent upon
third-party content providers. If we were to lose one of our major content
providers and were not able to obtain similar content from another source, our
services would be less attractive to customers. In addition, we cannot be
certain that we will be able to license content from our current or new
providers on favorable terms in the future, if at all. If we are unable to add
content providers to our network, we may not be able to attract new customers in
sufficient numbers to expand our business.

IF WE ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL PROFESSIONAL STAFF, OUR GROWTH
WILL BE LIMITED.

    Our ability to grow, increase our market share and develop our products



                                       18
<PAGE>

depends in large part on our ability to hire, retain and manage highly skilled
employees, including technical, sales, marketing and business development
personnel. Companies in our industry and similar industries compete intensely to
hire and retain qualified personnel, and we cannot assure you that we will be
able to attract the employees we need, or that we will be able to retain the
services of those we have hired. We cannot assure you that we will be able to
prevent the unauthorized use or disclosure of our proprietary knowledge,
practices and procedures if our employees leave us.

IF WE LOSE ANY OF OUR SENIOR MANAGERS OR OTHER KEY PERSONNEL, OUR BUSINESS MAY
BE OPERATED LESS EFFECTIVELY.

    We depend on the continued services and performance of our senior management
and other key personnel including technical and sales personnel. If we lose the
services of our senior managers or any of our other executive officers or key
employees, we may not be able to operate our business as effectively as we
anticipate, and our operating results may suffer.

IF WE DO NOT CONTINUE TO DEVELOP OUR TECHNOLOGY, OUR SERVICES MAY QUICKLY BECOME
OBSOLETE.

    The market for Internet products and services is characterized by rapidly
changing technology, evolving industry standards and customer demands and
frequent new product introductions and enhancements. To be successful, we will
have to continually improve the performance, features and reliability of our
products and services. We cannot assure you that our technological development
will advance at the pace necessary to sustain our growth. Additionally, new
Internet or telecommunications technologies may require us to alter our
technology and products to avoid them becoming obsolete. Improving our current
products and developing and introducing new products will require significant
research and development.

OUR LIMITED EXPERIENCE SELLING AND MARKETING OUR SERVICES MAY IMPEDE EXPANSION
OF OUR BUSINESS.

    We have had relatively little experience marketing our services and may not
be able to successfully implement our sales and marketing initiatives. Marketing
our services in order to expand our customer base is crucial to the success of


                                       19
<PAGE>

our business. The majority of our sales people were hired since the beginning of
1999. We may be unable to hire, retain, integrate and motivate sales and
marketing personnel. New sales and marketing personnel may also require a
substantial period of time to become effective. Unsuccessful sales or marketing
efforts or a material lengthening of our sales cycle could have material adverse
effects on our revenues.

IF EQUIPMENT FAILURES INTERRUPT THE DISTRIBUTION OF CONTENT TO OUR CUSTOMERS, WE
MAY LOSE CUSTOMERS AND OUR REPUTATION MAY BE ADVERSELY AFFECTED.

    Our services will only be attractive to current and prospective customers if
we are able to process and distribute content quickly and reliably. Any failure
of the computer equipment we use or the third-party telecommunications networks
on which we rely for distribution could interrupt or delay our service. This
could lead to customers canceling contracts and could damage our reputation,
which could limit our ability to attract additional customers and lead to a drop
in the value of our common stock.

    Substantially all of our own computer and communications hardware is located
in our headquarters and on the premises of our server hosting providers located
in New York City. We also depend on the Internet to distribute our content. All
of these systems are vulnerable to damage or interruption from fire, flood,
power loss, earthquake, malicious damage, including hacking and computer
viruses, telecommunications failure and similar events.

WE MAY BE UNABLE TO EXPAND OUR COMPUTER SYSTEMS QUICKLY ENOUGH TO SUPPORT DEMAND
FOR OUR SERVICES.

    Our future success will depend in part on our ability to expand our computer
systems rapidly in order to accommodate significant increases in content
processing volume. We may be unable to expand the capacity of our existing
systems or develop new systems to enable us to process a larger amount of
content, or to provide our services to a larger number of customers. If we are
unable to expand our systems, we may suffer service interruptions that could
make our services less attractive to customers.

    Most of our software systems are internally developed, and we rely on our
employees and third-party contractors to develop and maintain these systems. If
any of our software developers or these contractors become unavailable to us, we
may experience difficulty in improving and maintaining our systems. Although we
are continually enhancing and expanding our infrastructure, we have experienced
periodic systems interruptions, which we believe may continue to occur. Failure
to maintain high-capacity data transmission would adversely affect our
reputation and business.

WE FACE INTENSE COMPETITION THAT COULD IMPAIR OUR ABILITY TO GROW AND ACHIEVE
PROFITABILITY.

    We face significant competition in the market for digital content. We may
experience greater competition in the future as we address a wider range of
market segments, additional entrants join the market and existing competitors
offer new or upgraded products. Barriers to new entrants are relatively low. If
we fail to compete successfully, we could lose market share, or be forced to
lower our prices or spend more on marketing, which would reduce our margins.

    We compete with companies that are focused on aggregating third-party
content and distributing it to online customers. We also compete with
traditional wire services that have adapted their own content for use by Web
sites. We also compete with a wide range of providers of different types of
content that can be used on Web sites, such as directories, maps, photographs,
stock tickers and video clips. Finally, we compete with companies that create
and sell software that enables their customers to aggregate and distribute


                                       20
<PAGE>


digital content and/or to integrate digital content from external sources into
their web platforms. We do not believe that any of these competitors is
currently dominant.

    Some of our competitors offer products with different pricing models,
delivery systems and types of content, and these differences could prove
attractive to potential customers. In the future, these competitors or others
might offer products with the features we currently provide, or other features
desired by potential customers.

    Many of our current and potential competitors have longer operating
histories, larger customer or user bases, and significantly greater financial,
marketing and other resources than we do. These competitors can devote
substantially more resources than we can to business development and may adopt
aggressive pricing policies. In addition, larger, well-established and
well-financed entities may acquire, invest in or form joint ventures with our
competitors as the use of the Internet and other online services increases.
Increased competition from these or other competitors could adversely affect our
business.

SOME OF OUR CUSTOMERS ARE RECENTLY ESTABLISHED INTERNET COMPANIES WHO POSE
CREDIT RISKS. THE FAILURE OF THESE CUSTOMERS TO PAY THEIR BILLS HAS LED TO A
LOSS OF REVENUE, A TREND WHICH MAY CONTINUE.

    While our strategy is to attract large and mid-sized customers, a number of
our customers are smaller Internet companies. Many of these companies have
limited operating histories, operate at a loss and have limited cash reserves
and limited access to additional capital. With some of these customers, we have
experienced difficulties collecting accounts receivable. As a result, our
allowance for doubtful accounts as of March 31, 2001 was $1.2 million. We may
continue to encounter these difficulties in the future. If any significant part
of our customer base continues to experience commercial difficulties or is
unable or unwilling to pay our fees for any reason, our business will suffer.

FAILURE TO RETAIN EXISTING CUSTOMERS AND ATTRACT NEW CUSTOMERS COULD ADVERSELY
AFFECT OUR BUSINESS AND OPERATING RESULTS.

    During the first quarter of 2001 we added 101 new customers and provided
additional services to 53 of our existing customers. However, we also lost 331
customers during this same period. Many of the customers we lost during this
period were emerging Internet companies with limited operating histories,
limited cash reserves and operating at a loss. While our strategy is to continue
to target large and mid-sized enterprise customers, a significant number of our
customers continue to comprise smaller Internet companies similar to those that
we lost in the first quarter of 2001. We cannot assure you that we will be able
to continue to attract new customers at the same rate as we have done in the
past, or that we will be able to retain existing customers.

IF THE CONTENT WE DISTRIBUTE IS UNLAWFUL OR CAUSES INJURY, WE MAY HAVE TO PAY
FINES OR DAMAGES.

    The publication or dissemination of content that we have distributed may
give rise to liability for defamation, negligence, breach of copyright, patent,
trade secret or trademark infringement or other claims or charges based on the
nature of the content. As a distributor of this content, we may be directly or
indirectly liable to claims or charges of this nature.

    In addition, we could be exposed to liability arising from the activities of
our customers or their users with respect to the unauthorized duplication of, or
insertion of inappropriate material into, the content we supply. Although we


                                       21
<PAGE>

carry general liability insurance, our insurance may not cover claims of these
types or may be inadequate to indemnify us for all liability that may be imposed
on us.

IF WE DISTRIBUTE CONTENT TO UNAUTHORIZED RECIPIENTS, WE MAY HAVE TO PAY DAMAGES
TO OUR CONTENT PROVIDERS.

    Our proprietary software technologies enable us to deliver content we
receive from participating content providers only to customers who have been
authorized to access that content. We might inadvertently distribute content to
a customer who is not authorized to receive it, which could subject us to a
claim for damages from the information provider or harm our reputation in the
marketplace.

IF WE ARE UNABLE TO MAINTAIN OUR REPUTATION AND EXPAND OUR NAME RECOGNITION, WE
MAY HAVE DIFFICULTY ATTRACTING NEW BUSINESS AND RETAINING CURRENT CUSTOMERS AND
EMPLOYEES, AND OUR BUSINESS MAY SUFFER.

    We believe that establishing and maintaining a good reputation and name
recognition is critical for attracting and retaining customers and employees. We
also believe that the importance of reputation and name recognition is
increasing, and will continue to increase, due to the growing number of
providers of Internet services. If our reputation is damaged or if potential
customers are not familiar with us or the services we provide, we may be unable
to attract new, or retain existing, customers and employees. Promotion and
enhancement of our name will depend largely on our success in continuing to
provide effective services. If customers do not perceive our services to be
effective or of high quality, our brand name and reputation will suffer.

PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED AND EFFORTS TO PROTECT OUR
INTELLECTUAL PROPERTY MAY BE INADEQUATE, TIME-CONSUMING AND EXPENSIVE.

    We regard our trademarks, service marks, copyrights, trade secrets and
similar intellectual property as critical to our success. The unauthorized
reproduction or other misappropriation of our trademarks or other intellectual
property could diminish the value of our proprietary rights or reputation. If
this were to occur, our business could be materially and adversely affected.

    We rely upon a combination of trademark and copyright law, patent law, trade
secret protection and confidentiality and license agreements with our employees,
customers and others to protect our proprietary rights. We have received and
have filed a number of trademarks and service marks, and have filed several
patent applications with the United States Patent and Trademark Office. However,
registrations and patents may only be granted in selected cases, and there can
be no assurance that we will be able to secure these or additional registrations
or patents. Furthermore, policing and enforcement against the unauthorized use
of our intellectual property rights could entail significant expenses and could
prove difficult or impossible.

THIRD PARTIES MAY CLAIM THAT WE HAVE BREACHED THEIR INTELLECTUAL PROPERTY
RIGHTS, WHICH COULD DIVERT MANAGEMENT'S ATTENTION AND RESULT IN EXPENSE TO
DEFEND OR SETTLE CLAIMS.

    Third parties may bring claims of copyright or trademark infringement,
patent violation or misappropriation of creative ideas or formats against us
with respect to content that we distribute or our technology or marketing
techniques and terminology. These claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management attention,
require us to enter into costly royalty or licensing arrangements or limit our
ability to distribute content or prevent us from utilizing important
technologies, ideas or formats.

WE COULD FACE ADDITIONAL RISKS AND CHALLENGES AS WE EXPAND INTERNATIONALLY AND
MAY FACE UNEXPECTED COSTS IN DEVELOPING INTERNATIONAL REVENUES.

    We have begun to invest financial and managerial resources to expand our
operations in international markets. We opened offices in London, Paris and in
Miami in order to service the European and Latin American markets, respectively.
If our revenues from international operations, and particularly from our




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<PAGE>

operations in Europe and Latin America, do not exceed the expense of
establishing and maintaining these operations, our business, financial condition
and operating results will suffer. We have only limited experience in
international operations, and we may not be able to capitalize on our investment
in these markets.

POTENTIAL ACQUISITIONS AND STRATEGIC INVESTMENTS MAY RESULT IN INCREASED
EXPENSES, DIFFICULTIES IN INTEGRATING TARGET COMPANIES AND DIVERSION OF
MANAGEMENT'S ATTENTION.

    We anticipate that from time to time we may be reviewing one or more
acquisitions or strategic investments or other opportunities to expand our range
of technology and products and to gain access to new markets. Growth through
acquisitions or strategic investments entails many risks, including the
following:

    - our management's attention may be diverted during the acquisition and
      integration process;

    - we may face costs, delays and difficulties of integrating the acquired
      company's operations, technologies and personnel into our existing
      operations, organization and culture;

    - the adverse impact on earnings of amortizing the acquired company's
      intangible assets may be significant;

    - we may issue new equity securities to pay for acquisitions, which would
      dilute the holdings of existing stockholders;

    - the timing of an acquisition or our failure to meet operating expectations
      for acquired businesses may impact adversely on our financial condition;
      and

    - we may be adversely affected by expenses of any undisclosed or potential
      legal liabilities of the acquired company, including intellectual
      property, employment and warranty and product liability-related problems.

If realized, any of these risks could have a material adverse effect on our
business, financial condition and operating results.

                   RISKS OF DOING BUSINESS OVER THE INTERNET

IF THE INTERNET DOES NOT CONTINUE TO GROW AS A MEDIUM FOR COMMERCE, WE WILL NOT
SUCCEED.

    Because most of our present and anticipated customers are operators of
commercial Web sites, demand for our services will depend in large part on
continued growth in use of the Internet. There are critical issues concerning
the commercial use of the Internet that remain unresolved. If the Internet
develops more slowly than we expect as a commercial or business medium, demand
for our services will be lower than we expect.

LEGAL UNCERTAINTIES AND GOVERNMENT REGULATION OF THE INTERNET COULD INHIBIT
GROWTH OF THE INTERNET AND E-COMMERCE.

    Many legal questions relating to the Internet remain unclear and these areas
of uncertainty may be resolved in ways that damage our business. It may take
years to determine whether and how existing laws governing matters such as
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, new laws and regulations that apply directly to Internet
communications, commerce and advertising are becoming more prevalent. For
example, the U.S. Congress has recently passed Internet-related legislation
concerning copyrights, taxation, and the online privacy of children. As the use
of the Internet and the prevalence of e-commerce grow, there may be calls for
further regulation, such as more stringent consumer protection laws. Finally,
our distribution arrangements and customer contracts could subject us to the
laws of foreign jurisdictions in unpredictable ways.

    These possibilities could affect us adversely in a number of ways. New



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<PAGE>

regulation could make the Internet less attractive to users, resulting in slower
growth in its use and acceptance than we expect. Complying with new regulations
could result in additional cost to us, which could reduce our margins, or it
could leave us at risk of potentially costly legal action. We may be affected
indirectly by legislation that fundamentally alters the practicality or
cost-effectiveness of utilizing the Internet, including the cost of transmitting
over various forms of network architecture, such as telephone networks or cable
systems, or the imposition of various forms of taxation on Internet-related
activities. Regulators continue to evaluate the best telecommunications policy
regarding the transmission of Internet traffic.

                         RISKS RELATED TO OUR SECURITIES

VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT STOCKHOLDERS.

    The stock market in general, and in particular the market for
Internet-related stocks, has recently experienced extreme price fluctuations. At
times, Internet-related stocks have traded at prices and multiples that are
substantially above the historical levels of the stock market in general. Since
estimates of the value of Internet-related companies have little historical
basis and often vary widely, fluctuations in our stock price may not be
correlated in a predictable way to our performance or operating results. Our
stock price may also fluctuate as a result of factors that are beyond our
control or unrelated to our operating results. We expect our stock price to
fluctuate as a result of factors such as:

    - variations in our actual or anticipated quarterly operating results or
      those of our competitors;

    - announcements by us or our competitors of technological innovations;

    - introduction of new products or services by us or our competitors;

    - conditions or trends in the Internet industry;

    - changes in the market valuations of other Internet companies;

    - announcements by us or our competitors of significant acquisitions; and

    - our entry into strategic partnerships or joint ventures.

WE DO NOT INTEND TO PAY DIVIDENDS.

    We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any cash dividends in the foreseeable future.

WE ARE EFFECTIVELY CONTROLLED BY OUR EXECUTIVE OFFICERS AND DIRECTORS AND THE
INTERESTS OF THESE STOCKHOLDERS COULD CONFLICT WITH YOUR INTERESTS.

    Our executive officers and directors, in the aggregate, beneficially own
approximately 46.79% of our outstanding common stock on a fully diluted basis.
As a result, these stockholders, if acting together, would be able to exert
considerable influence on any matters requiring approval by our stockholders,
including the election of directors, amendments to our charter and by-laws and
the approval of mergers or other business combination transactions. The
ownership position of these stockholders could delay, deter or prevent a change
in control of ScreamingMedia and could adversely affect the price that investors
might be willing to pay in the future for shares of our common stock.

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, WHICH COULD
DEPRESS OUR STOCK PRICE.

    Delaware corporate law and our certificate of incorporation and bylaws
contain provisions that could have the effect of delaying, deferring, or
preventing a change in control of ScreamingMedia that stockholders may consider



                                       24
<PAGE>

favorable or beneficial. These provisions could discourage proxy contests and
make it more difficult for you and other stockholders to elect directors and
take other corporate actions. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock.
These provisions include:

    - a staggered board of directors, so that it would take three successive
      annual meetings to replace all directors;

    - prohibition of stockholder action by written consent; and

    - advance notice requirements for the submission by stockholders of
      nominations for election to the board of directors and for proposing
      matters that can be acted upon by stockholders at a meeting.

In addition, we have entered into a stockholder rights agreement that makes it
more difficult for a third party to acquire us without the support of our board
of directors and principal stockholders.





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Sensitivity. The primary objective of our investment Interest
Rate Sensitivity. We do not enter into financial instrument transactions for
trading purposes. Some of our investments may be subject to market risk which
means that a change in prevailing interest rates may cause the principal amount
of the investment to fluctuate.

    Exchange Rate Sensitivity. We consider our exposure to foreign currency
exchange rate fluctuations to be minimal as we currently do not have significant
amount of revenue and assets denominated in a foreign currency and have minimal
expenses paid in a foreign currency. Currently, the exposure is primarily
related to revenue and operating expenses in U.K. We anticipate that in the
future, the proportion of our operating expenses paid in foreign currencies will
increase and that the number of foreign currencies in which we earn our revenue
will also increase. Accordingly, we may be subject to exposure from adverse
movements in foreign currency exchange rates in relation to these revenues and
expenses. We do not currently use derivative financial instruments. As of March
31, 2001 the effect of foreign exchange rate fluctuations was not material.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     There are no pending legal proceedings to which we are a party.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS


     From the date of receipt of funds from our initial public offering through
March 31, 2001, the net proceeds of the offering have been used to support our
domestic sales and marketing activities, the expansion of our international
operations, product development and for general corporate purposes. We also may
use a portion of the net proceeds to invest in complementary businesses or
technologies, although we have no present commitments or agreements with respect
to any material acquisition or investment. None of the net proceeds from the
offering was paid directly or indirectly to any director, officer, general
partner or their associates, or to any persons owning 10% or more of any class
of equity securities. Pending application of the net proceeds towards one of the
above uses, the net proceeds have been invested in interest-bearing,
investment-grade securities.



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<PAGE>


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         We did not submit any matters to a vote of security holders during the
First quarter of fiscal year ended December 31, 2001.

ITEM 5. OTHER INFORMATION

Michael H. Jordan was elected as director on January 11, 2001 to fill the
vacancy created by the resignation of Kenneth B. Lerer, whose resignation
was accepted on January 11, 2001.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Reports on Form 8-K: no reports on form 8K were filed by the Registrant
during the first quarter of the fiscal year ending December 31, 2001.

    (b) Exhibits

         None.





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<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                          SCREAMINGMEDIA INC.
                                            (Registrant)




<TABLE>
<CAPTION>
                     SIGNATURE                                   TITLE                     DATE
                     ---------                                   -----                     ----


<S>                                                   <C>                           <C>
                /s/ ALAN S. ELLMAN                     President, Chief Operating    May 15, 2001
---------------------------------------------------       Officer and Director
                  Alan S. Ellman

                /s/ KEVIN C. CLARK                    Chief Executive Officer and    May 15, 2001
---------------------------------------------------             Director
                  Kevin C. Clark

               /s/ DAVID M. OBSTLER                     Chief Financial Officer      May 15, 2001
---------------------------------------------------
                 David M. Obstler
</TABLE>



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