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

                                    FORM 10-Q

|X|   QUARTERLY REPORT PURSUANT TO 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 TRANSACTION PERIOD FROM_____________TO_____________

                        COMMISSION FILE NUMBER: 000-27411

                              PROMOTIONS.COM, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                                     13-3898912
--------                                                     ----------
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                         450 West 33rd Street, 7th Floor
                            New York, New York 10001
               (Address of principal executive offices) (Zip Code)

                                 (212) 971-9800
              (Registrant's telephone number, including area code)

      Indicate by check mark (X) 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 1, 2001, there were 14,437,845 shares of the registrant's common
stock outstanding.


                                       1
<PAGE>

                              PROMOTIONS.COM, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS

PART I   FINANCIAL INFORMATION                                              PAGE
                                                                            ----
Item 1.  Financial Statements

         Condensed Balance Sheets as of March 31, 2001 (unaudited)
         and December 31, 2000...........................................     3

         Condensed Statements of Operations for the three months
         ended March 31, 2001 and 2000 (unaudited).......................     4

         Condensed Statements of Cash Flows for the three
         months ended March 31, 2001 and 2000 (unaudited)................     5

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

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.............................     7

Item 3.  Qualitative and Quantitative Disclosures About Market Risk......    11

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings...............................................    11

Item 2.  Changes in Securities and Use of Proceeds.......................    11

Item 3.  Defaults Upon Senior Securities.................................    11

Item 4.  Submission of Matters to a Vote of Security Holders.............    11

Item 5.  Other Information...............................................    11

Item 6.  Exhibits and Reports on Form 8-K................................    11

         SIGNATURES......................................................    13


                                       2
<PAGE>

Part 1.
Item 1. FINANCIAL STATEMENTS

                              PROMOTIONS.COM, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   MARCH 31,        DECEMBER 31,
                                                                                     2001               2000
                                                                                     ----               ----
                                                                                  (UNAUDITED)
<S>                                                                              <C>                <C>
                                     ASSETS

Current assets:
  Cash and cash equivalents ...............................................      $ 15,257,151       $ 16,094,308
  Accounts receivable, net ................................................         2,023,192          3,641,869
  Prepaid expenses and other current assets ...............................         2,190,039          4,609,485
                                                                                 ------------       ------------
    Total current assets ..................................................        19,470,382         24,345,662
                                                                                 ------------       ------------
Fixed assets, net .........................................................         7,454,029          7,497,555
Restricted cash ...........................................................         1,600,000          1,600,000
Other assets ..............................................................           189,731            191,916
                                                                                 ------------       ------------
    Total assets ..........................................................      $ 28,714,142       $ 33,635,133
                                                                                 ============       ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ........................................................      $  3,953,323       $  3,820,472
  Accrued liabilities .....................................................         2,602,267          3,123,617
  Deferred revenues .......................................................         1,672,494          1,333,751
  Capital lease obligations ...............................................           774,696            790,645
  Notes payable-related party .............................................            29,703             29,703
                                                                                 ------------       ------------
    Total current liabilities .............................................         9,032,483          9,098,188
                                                                                 ------------       ------------
  Capital lease obligation, net of current portion ........................           766,767            928,368
  Other liabilities .......................................................             6,853              9,675
                                                                                 ------------       ------------
    Total liabilities .....................................................         9,806,103         10,036,231
                                                                                 ------------       ------------

Stockholders' equity:
  Common stock-par value $.01, 50,000,000 shares authorized, 14,241,244 and
    14,437,845 and 14,344,577 shares issued and outstanding at
    March 31, 2001(unaudited), and December 31, 2000, respectively ........           144,378            143,445
  Additional paid-in capital ..............................................        68,093,078         68,073,155
  Accumulated deficit .....................................................       (49,327,869)       (44,615,465)
  Deferred compensation ...................................................            (1,548)            (2,233)
                                                                                 ------------       ------------
    Total stockholders' equity ............................................        18,908,039         23,598,902
                                                                                 ------------       ------------
      Total liabilities and stockholders' equity ..........................      $ 28,714,142       $ 33,635,133
                                                                                 ============       ============
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.


                                       3
<PAGE>

                              PROMOTIONS.COM, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           THREE MONTHS ENDED
                                                                                                MARCH 31,
                                                                                                ---------
                                                                                         2001               2000
                                                                                         ----               ----
<S>                                                                                  <C>                <C>
Revenues ......................................................................      $  4,675,001       $  6,060,092
Operating expenses:
  Product development .........................................................         1,622,341          1,057,320
  Sales and marketing (inclusive of non-cash Matchlogic
    And Excite expense of $2,217,535 and $2,101,139) ..........................         5,501,076          8,727,560
  General and administrative ..................................................         2,490,201          2,676,689
                                                                                     ------------       ------------
    Total operating expenses ..................................................         9,613,618         12,461,569
                                                                                     ------------       ------------
  Loss from operations ........................................................        (4,938,617)        (6,401,477)
Interest income, net ..........................................................           226,209            406,624
                                                                                     ------------       ------------
Net loss attributable to common
  stockholders ................................................................      $ (4,712,408)      $ (5,994,853)
                                                                                     ============       ============
Basic and diluted net loss per share
  attributable to common
  stockholders ................................................................      $      (0.33)      $      (0.42)
                                                                                     ============       ============
Weighted average shares of common stock used in computing basic and diluted net
  loss per share attributable to common
  stockholders ................................................................        14,416,493         14,241,244
                                                                                     ============       ============
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.


                                       4
<PAGE>

                                 PROMOTIONS.COM
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                               MARCH 31,
                                                                                               ---------
                                                                                        2001               2000
                                                                                        ----               ----
<S>                                                                                 <C>                <C>
Cash flows from operating activities:
  Net loss ...................................................................      $ (4,712,408)      $ (5,994,853)
  Adjustments to reconcile net loss to net cash
    Provided by (used) in operating activities:
      Depreciation and amortization of fixed assets and patents ..............           798,931            361,377
      Amortization of deferred compensation expense ..........................               139             27,721
      Bad debt expense .......................................................           185,921            292,696
    Changes in operating assets and liabilities:
      Accounts receivable ....................................................         1,432,756         (2,398,284)
      Prepaid expenses and other current assets ..............................         2,419,446             70,521
      Other assets ...........................................................             2,185          1,802,296
      Accounts payable .......................................................           132,851          1,402,617
      Accrued liabilities ....................................................          (521,350)           122,993
      Other liabilities ......................................................            (2,822)            (1,947)
      Deferred revenue .......................................................           338,743            140,265
                                                                                    ------------       ------------
Net cash provided by (used) in operating actives .............................            74,392         (4,174,598)
                                                                                    ------------       ------------
Cash flows from investing activity:
  Payment of security deposit ................................................                --         (1,600,000)
  Purchase of fixed assets ...................................................          (755,405)        (1,230,700)
                                                                                    ------------       ------------
Net cash used in investing activity ..........................................          (755,405)        (2,830,700)
                                                                                    ------------       ------------
Cash flows from financing activities:
  Principal payments on notes payable-related party ..........................                --            (16,666)
  Principal payments on capital lease obligations ............................          (177,550)           (66,387)
  Exercise of employee stock options .........................................            21,406                 --
                                                                                    ------------       ------------
Net cash used by financing activities ........................................          (156,144)           (83,053)
                                                                                    ------------       ------------
Net decrease in cash for the period ..........................................          (837,157)        (7,088,351)
Cash and cash equivalents, beginning of period ...............................        16,094,308         34,647,630
                                                                                    ------------       ------------
Cash and cash equivalents, end of period .....................................      $ 15,257,151       $ 27,559,279
                                                                                    ============       ============
Cash paid during the period for interest .....................................      $     45,568       $     17,840
                                                                                    ============       ============
Supplemental disclosure of non-cash investing ,financing and other activities:
Barter transactions ..........................................................      $    885,000       $    629,011
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.


                                       5
<PAGE>

                              PROMOTIONS.COM, INC.
            NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Promotions.com, Inc. (the "Company"), was incorporated and commenced operations
in the state of New York on January 8, 1996 as Webstakes, Inc. and was
reincorporated in the State of Delaware on June 5, 1996 as Netstakes, Inc. On
June 11, 1999, the Company changed its name to Webstakes.com, Inc. On January
27, 2000, the Company changed its name to Promotions.com, Inc. Promotions.com,
Inc. is an Internet promotion solutions company. Combining technology, data and
promotions expertise, the Company provides promotion solutions to help companies
achieve their overall marketing and business objectives. The Company generates
revenues through WEBSTAKES.COM, a web site dedicated to Internet sweepstakes
and promotions and PROMOTIONS.COM, a full service integrated Internet promotion
services group.

The Company has sustained net losses and negative cash flow from operating
activities since inception. The Company's ability to meet its obligations in the
ordinary course of business is dependent upon its ability to establish
profitable operations or raise additional financing through public or private
equity financing, collaborative or other arrangements with corporate sources, or
other sources of financing to fund operations.

Management believes that the Company's current cash resources coupled with
recent cost reductions will be sufficient to fund the Company's planned
expenditures through December 31, 2001. However, there can be no assurances that
the Company will achieve its planned results. If anticipated results are not
achieved, management has the intent and believes it has the ability to delay or
further reduce its expenditures so as to not require additional financial
resources if such resources are not available on terms acceptable to the
Company.

2. INTERIM FINANCIAL INFORMATION

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required under generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for the fair presentation of the
results of the interim periods presented in this filing have been made.
Operating results for the three month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001 or for any other future interim periods.

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the financial statements
and footnotes thereto included in the Company's Form 10-K for the year ended
December 31, 2000, as filed with the Securities and Exchange Commission.

The Company has made certain reclassifications within its financial statements
to more accurately present the financial results of the Company. Accordingly,
certain prior period balances have been reclassified to conform to the current
period presentation.

3. NET LOSS PER SHARE

Basic loss per share is computed using the weighted-average number of common
shares outstanding during the period. Diluted loss per share is computed using
the weighted-average number of common and common stock equivalent shares
outstanding during the period. Common stock equivalent shares are excluded from
the computation if their effect is antidilutive.

As the Company reported net losses at March 31, 2001 and 2000, all 3,092,728 and
2,494,711 of the options and warrants outstanding at March 31, 2001 and 2000,
respectively, were antidilutive and therefore, there were no reconciling items
between basic and diluted loss per share for the three months then ended.

4. SOFTWARE LICENSING AGREEMENT

Promotions.com launched Chakkalina.com, the Japanese equivalent to
Webstakes.com, in June 2000. In March 2001, ITX Corporation licensed
Promotions.com's iDialog direct marketing technology for $1.3 million in cash.
As part of the licensing agreement, ITX Corporation will use Promotions.com's
iDialog platform to run the Japanese sweepstakes portal, Chakkalina.com. The
Company recorded the $1.3 million as deferred revenue at March 31, 2001.
Payments totaling $800,000 were received from ITX Corporation during the three
months ended March 31, 2001. We also have $500,000 recorded as accounts
receivable related to this agreement at March 31, 2001.


                                       6
<PAGE>

                              PROMOTIONS.COM, INC.

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

The following discussion of the financial condition and results of operations of
Promotions.com, Inc. contains forward-looking statements relating to the future
events and the future performance of Promotions.com within the meaning of
section 21E of the Securities Exchange Act of 1934, as amended. Words such as
"may", "should", "anticipate", "believe", "plan" "estimate", "expect" and
"intend", and other similar expressions are intended to identify forward-looking
statements. These include, for example, statements regarding barter, future
revenues, general and administrative expenses, product development expenses and
sales and marketing expenses. Stockholders are cautioned that such statements
involve risks and uncertainties. Promotions.com, Inc. actual results and timing
of certain events could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under " Risk Factors" in Promotions.com, Inc. 10-K
and elsewhere in this report and in Promotions.com, Inc.'s. other public filings
on file with the Securities & Exchange Commission. All forward-looking
statements included in this document are based on information available to the
Company as of the date of this document, and Promotions.com, Inc. assumes no
obligation to update these cautionary statements or any forward-looking
statements.

OVERVIEW

During the first quarter, revenue was generated primarily by on-line promotion
and email direct marketing services. Principally all of the Company's historical
revenues have been derived from the sale of on-line promotion and email direct
marketing services. We expect to derive substantially all of our revenues from
the sale of on-line promotion and email direct marketing services for the
foreseeable future.

We recognize revenues from promotion services ratably over the period during
which we provide promotion services, provided that no significant obligations
remain and collection of the resulting receivable is reasonably assured.
Payments received from customers prior to providing promotion services are
recorded as deferred revenue and are recognized as revenue ratably as the
services are provided. With respect to revenue generated from WEBSTAKES.COM, we
generally guarantee a minimum number of impressions, or times that the
customer's name, logo or other identifier appears in web or email newsletter
pages viewed by visitors to WEBSTAKES.COM, and/or times that our visitors are
delivered to our customer's web site. To the extent that these minimum
guarantees are not met, we defer recognition of the corresponding revenues until
the guaranteed levels are achieved.

PROMOTIONS.COM services provide custom turnkey solutions to create and manage
promotions on a customer's own web site. Revenues are derived principally from
contracts in which the Company typically provides services for the creation,
administration and implementation of the promotion. The contracts typically
include cancellation clauses ranging from 30 to 60 days. Since there is
significant up front customized design work incurred before a promotion begins,
the Company has in the past recognized the portion of revenue related to the
customized design work at the time the work is performed. The remaining revenue
was recognized ratably in the period in which the promotion was run, provided
that no significant company obligations remained. During the second quarter of
2000, the Company decided to change its revenue recognition policy related to
PROMOTIONS.COM services to recognize revenues ratably over the period during
which we provide promotion services, provided that no significant obligations
remain and collection of the resulting receivable is reasonably assured. The
Company has accounted for this change in accordance with FASB Statement No.3,
"Reporting Accounting Changes in Interim Financial Statements." The cumulative
effective of the change in accounting principal was not significant.

Revenues include barter transactions in which we exchange promotion or direct
marketing services for advertising and prizes. Revenues from these barter
transactions are recorded as promotion revenues at the lower of the estimated
fair value of the goods or services received or delivered and are recognized
when we deliver the promotion services. Advertising expenses related to barter
are recognized when our advertisements are run on the reciprocal web site, which
is typically in the same period as the corresponding barter revenues are
recognized. Prize expenses related to barter are recognized when prizes are
awarded.

The period-to-period comparisons of our historical operating results should not
be relied upon as indicative of future performance. Our annual report should be
considered in light of the risks, expenses and difficulties encountered by
companies in the early stages of development, particularly companies in the
extremely volatile Internet industry. We anticipate that we will incur operating
losses for the foreseeable future. Our revenues are highly dependent on revenues
from internet companies and are susceptible to the recent volatility in the
internet market and the high number of internet companies decreasing their
marketing budgets, therefore we are not able to predict future revenue patterns.


                                       7
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 AND 2000

Revenues. Revenues primarily result from the sale of on-line promotion and email
direct marketing services. Revenues were approximately $4.7 million and $6.1
million for the three months ended March 31, 2001 and 2000. We recorded barter
revenues of approximately $885,000 and $629,000 for the three months ended March
31, 2001 and 2000. At March 31, 2001 and 2000 barter revenues were 19% and 10%
of our total revenues. Barter transactions allow the Company to acquire members
and increase the size of our database without having to spend capital. We
currently spend approximately $600,000 per quarter to acquire members. The
period- period increase in barter is directly related to our efforts to increase
barter transactions as a percentage of revenue. As part of our efforts to
streamline cost and preserve our cash we utilize some of our unsold inventory in
barter transactions. We would like our barter transactions to be approximately
15%-25% of our revenue in the future. We expect this will have no impact on our
cash revenue as we only intend to use unsold inventory in barter transactions.

The period-to-period decrease in revenues was primarily attributable to the
cancellation of certain long-term contracts, customers making smaller purchases
and continued pricing pressure on internet advertising rates from the
WEBSTAKES.COM division of the Company. The Company has been adversely affected
by the decline in marketing related expenses associated with its business to
consumer dot-com customers. In conjunction with this slowdown, the Company is
experiencing increasing competition which is resulting in a decrease in rate
cards and has shifted our pricing model, from a "cost-per-click" and
"cost-per-thousand" to a "cost-per-action" pricing model. In the past the
Company had a cost-per-click and cost-per-thousand pricing model where we were
only required to deliver a visitor to our customer's web site or to show a
customer's advertisement on a determined amount of our web pages in order for us
to earn revenue. A cost-per-action pricing model requires the Company to not
only deliver the aforementioned, but also our members must perform a specific
action once on the site such as purchasing a product or registering as a member
of the site in order for us to earn revenue. In the fourth quarter of 2000 and
continuing into the first quarter 2001, we began to experience a number of
customers requesting this type of pricing model since it is perceived to have a
higher return on marketing investment. There has been tremendous volatility in
the online media market. Market prices for Web-based promotional services have
decreased due to competitive and market factors. There can be no assurances that
customers will continue to purchase promotional services, that customers will
not continue to make smaller and shorter term purchases, or that market prices
for Web-based promotional services will not continue to decrease due to
competitive or other market factors.

Promotions.com launched Chakkalina.com, the Japanese equivalent to
Webstakes.com, in June 2000. In March 2001, ITX Corporation licensed
Promotions.com's iDialog direct marketing technology for $1.3 million in cash.
As part of the licensing agreement, ITX Corporation will use Promotions.com's
iDialog platform to run the Japanese sweepstakes portal, Chakkalina.com. The
Company recorded the $1.3 million as deferred revenue at March 31, 2001.
Payments totaling $800,000 were received from ITX Corporation during the three
months ended March 31, 2001. We also have $500,000 recorded as accounts
receivable related to this agreement at March 31, 2001.

Product Development Expenses. Product development expenses include the personnel
costs associated with the design and development of WEBSTAKES.COM and
PROMOTIONS.COM, our promotions infrastructure and technology, as well as
software licensing costs. Product development expenses were approximately $1.6
million or 34% and $1.1 million or 18% of total revenues for the three months
ended March 31, 2001 and 2000. The period-to-period increase reflects the
difference in the Company's business operations for the three months ended March
31 2001 compared to the three months ended March 31, 2000. The three months
ended March 31, 2001 included expenses related to the enhanced features for
WEBSTAKES.COM, PROMOTIONS.COM and the Japanese web site, while none of these
expenses were incurred during first quarter 2000. In light of the recent
reorganization, we do not plan to introduce as many new products or features
during 2001 and we have put our international expenditures on hold, which
included selling our Japanese operations. We also reduced the number of
engineers at the end of the first quarter of 2001. We therefore expect these
expenses to continue to decrease in future quarters, however if revenue
continues to decline such expenses may raise as a percentage of revenue.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of
advertising costs, salaries and commissions of sales and marketing personnel,
costs of trade shows, conventions and marketing materials and other marketing
expenses. Sales and marketing expenses were approximately $5.5 million or 117%
of total revenues and $6.6 million or 108% of total revenues for the three
months ended March 31, 2001 and 2000. The period-to-period decrease in absolute
dollars reflects the reorganization plan the Company put into place in the
fourth quarter of 2000. The period-to-period increase as a percentage of revenue
is due to the decline in revenue during the period. While we decreased expenses,
revenue also decreased but at a greater percentage then we were able to decrease
expenses. During the fourth quarter reorganization we reduced the number of
sales and marketing employees, cut our marketing expenditures, eliminated
certain consultants, reduced the number of trade shows and conventions we attend
and decreased the purchasing of marketing collateral. In addition we had a
further reduction in staff at March 30, 2001. We therefore expect, in the near
future, these expenses to decrease, in absolute dollars, as we continue our
efforts to streamline costs, however if revenue continues to decline such
expenses may raise as a percentage of revenue.


                                       8
<PAGE>

General and Administrative Expenses. General and administrative expenses consist
primarily of services and related costs of general corporate functions,
including finance, accounting and facilities costs. General and administrative
expenses were approximately $2.5 million or 53% of total revenues and $2.7
million or 44% of total revenues for the three months ended March 31, 2001 and
2000. The absolute dollar decrease in general and administrative expenses
reflects the reorganization plan the Company put into place in the fourth
quarter of 2000. The period-to-period increase as a percentage of revenue is due
to the decline in revenue during the period. While we decreased expenses,
revenue also decreased but at a greater percentage then we were able to decrease
expenses. During the fourth reorganization we reduced the number of general and
administrative employees, we closed certain offices and consolidated other
offices, and negotiated better terms with certain vendors. We therefore expect,
in the near future, these expenses to decrease as we continue our efforts to
streamline costs, however if revenue continues to decline such expenses may
raise as a percentage of revenue.

Interest Income (Expense), Net. Interest income, net of expense, consists
primarily of interest earned on our cash balance and the interest expense on our
outstanding debt. We recognized net interest income of approximately $226,000
and $407,000 for the three months ended March 31, 2001 and 2000. The decrease
was primarily attributable to a decrease in the average cash balance invested,
principally due to continued losses from operations. Interest income in future
periods is likely to go down as a result of a reduction in average cash balances
invested and maintained by the Company and changes in the prevailing interest
rate of its investments.

Income Taxes. No income tax benefit is reflected in the financial statements as
a valuation allowance was provided for deferred tax assets relating to net
operating losses. As of December 31, 2000, we had approximately $41.4 million of
federal net operating loss carryforwards for tax reporting purposes to offset
future taxable income. Our federal net operating loss carry forwards expire in
the years 2013 through 2020.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through the private
and public placement of equity securities and the incurrence of indebtedness. On
September 24, 1999, we completed the initial public offering of 3,575,000 shares
of common stock for gross proceeds of $50.1 million and net proceeds of $44.9
million, after deducting expenses of the offering.

The Company has sustained net losses and negative cash flow from operating
activities since inception. The Company's ability to meet its obligations in the
ordinary course of business is dependent upon its ability to establish
profitable operations or raise additional financing through public or private
equity financing, collaborative or other arrangements with corporate sources, or
other sources of financing to fund operations.

Net cash provided by operating activities was approximately $74,000 for the
three months ended March 31, 2001 compared to net cash used in operating
activities of approximately $4.2 million for the three months ended March 31,
2000. The decrease in cash used in operations was primarily due to a decrease in
prepaid expenses and other assets combined with decreases in accounts receivable
and net loss offset by a decrease in accounts payable. The decrease in prepaid
expenses and other assets is directly related to the amortization of our prepaid
assets with Matchlogic, Inc. and Excite.

Net cash used in investing activities was approximately $755,000 and $2.8
million for the three months ended March 31, 2001 and 2000. As of March 31,
2001, our principal capital commitments consisted of obligations outstanding
under capital leases. We used $755,000 in investing activities for capital
expenditures, primarily the acquisition of equipment and the build out of our
new corporate office. In addition, we used $1.6 million in 2000 as a security
deposit on our new corporate office. We estimate that our capital expenditures
will be approximately $3.0 million for 2001. We currently expect that our
principal capital expenditures through 2001 will relate to improvements to our
technical infrastructure.

Net cash used by financing activities was approximately $156,000 and $83,000 for
the three months ended March 31, 2001 and 2000. Net cash used in financing
activities in 2001 was primarily attributable to principal payments on capital
lease obligations off-set by the exercise of employee stock options. Net cash
used in financing activities in 2000 was primarily attributable to principal
payments on notes payable and capital lease obligations.

We have a financing agreement with a leasing Company for the leasing of
equipment in an amount up to $1.0 million in operating and/or capital leases,
collateralized by certain accounts receivable and the equipment purchased
pursuant to the agreement. During 2000, the financing agreement was increased to
$2.0 million in exchange for the Company issuing warrants to purchase 13,345
shares of the Company's common stock. As of March 31, 2001 we have approximately
$1.5 million of equipment outstanding under the agreement. The leases have terms
of up to three years and the interest rates under the leases range from 8 1/2%
to 13%. We are required to make monthly payments of interest and principal under
the leases.


                                       9
<PAGE>

We have a two-year sponsorship agreement with Excite under which Excite agreed
to promote WEBSTAKES.COM through ad banner placements and links to WEBSTAKES.COM
and its promotions on Excite.com, WebCrawler.com and Classified2000.com. We
prepaid Excite $5.6 million in 1999 for this two year agreement. At Home
Corporation, the parent company of Excite, is one of our principal stockholders.
Each quarter we recognize approximately $683,000 of expense related to this
agreement and we will continue to recognize such expenses through the second
quarter of 2001.

We have a service agreement with MatchLogic, a wholly owned subsidiary of
Excite, pursuant to which MatchLogic will provide ad serving and targeting, data
processing, analysis, enhancement and other services to Promotions.com. The term
of the agreement is two years. We prepaid MatchLogic $13.1 million, in 1999 for
this two-year agreement. Each quarter we recognize approximately $1.5 million of
expense related to this agreement and we will continue to recognize such
expenses through the second quarter of 2001.

In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of new class B mandatorily redeemable
convertible preferred stock to a group of investors, including among others, At
Home Corporation, XL Ventures, a subsidiary of Vertis Holdings Inc., and
Travelers, for an aggregate purchase price of $40.0 million. Upon completion of
the initial public offering, the class B mandatorily redeemable convertible
preferred stock automatically converted into 6,666,668 shares of common stock.
The class A mandatorily redeemable convertible preferred stock and class B
mandatorily redeemable convertible preferred stock are not to be available for
reissue. The excess of the consideration paid to the holders of the class A
mandatorily redeemable convertible preferred stock over the carrying amount of
the class A mandatorily redeemable convertible preferred stock represents a
deemed dividend or return to the holders of the class A mandatorily redeemable
convertible preferred stock of $8.7 million.

In November 2000, we signed an agreement to license software to help improve our
email service capabilities. The license agreement is for one year and requires
twelve monthly payments of $47,500. Upon signing the agreement we prepaid the
first three months of service.

Management believes that the Company's current cash resources coupled with
recent cost reductions will be sufficient to fund the Company's planned
expenditures for the next twelve months. Our future liquidity and capital
requirements depend on numerous factors. For example, if we cannot attain
profitability in the near future our continued losses from operations will
affect future capital requirements, which could result in requiring us to obtain
additional financing to fund operations. The Company believes it has the ability
to delay or further reduce its expenditures so as to not require additional
financial resources if such resources are not available on terms acceptable to
the Company. However, there can be no assurances that the Company will achieve
its intent. If that happens and adequate funds are not available on acceptable
terms, we may be unable to fund our business, successfully promote our brand
name, develop or enhance our services or respond to competitive pressures. There
can be no assurances that any required additional financing will be available on
terms favorable to us, or will be available at all. Any of these events could
have a material adverse effect on our business, results of operations or
financial condition. In addition, we are exploring certain strategic
alternatives including a merger, sale or spin-off of certain assets and business
units.

The Company recently received a delisting notice from the Nasdaq National Market
for its inability to maintain a minimum bid price of $1.00 over the previous
thirty consecutive trading days as required by the Marketplace Rule
4310(c)(8)(B). The Company appealed this decision and has requested a hearing
before the Nasdaq Listing Qualifications Panel. The Company will continue to
trade under the symbol PRMO on Nasdaq's National Market pending the outcome of
these proceedings. In the event the Company's request for continued listing on
the National Market is not granted, the Company will pursue other listing
alternatives.


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<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency Rate Fluctuations. Promotions.com's results of operations, financial
position and cash flows are not materially affected by changes in the relative
values of non-U.S. currencies to the U.S. dollar.

Market Risks. Our accounts receivable are subject, in the normal course of
business, to collection risks. We regularly assess these risks and have
established policies and business practices to protect against the adverse
effects of collection risks. As a result, Promotions.com does not anticipate any
material losses in this area.

Interest Rate Risk. Our investments are classified as cash and cash equivalents
with original maturities of three months or less. Therefore, changes in the
market's interest rates do not affect the value of the investments as recorded
by Promotions.com.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NONE.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(A) Changes in Securities:

NONE.

(B) Use of Proceeds:

NONE.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE.

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

NONE.

ITEM 5. OTHER INFORMATION

On May 7, 2001, Arnold Greenberg resigned as a member of the Company's board of
directors for personal reasons. The Company is seeking a replacement director
for Mr. Greenberg, accordingly the Company's Proxy materials for its 2001 Annual
Meeting filed with the commission on April 30, 2001 will be revised prior to the
mailing date to reflect this change.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) The following is a list of exhibits filed as part of this report on Form
10-Q. Where so indicated by footnote, exhibits that were previously filed are
incorporated by reference. For exhibits incorporated by reference, the location
of the exhibit in the previous is indicated parenthetically except for those
situations where the exhibit number was the same as set forth below.

Exhibit
Number            Description
-------           -----------

3.1(1)            - Certificate of Incorporation
3.2(1)            - Certificate of Amendment to the Certificate of
                    Incorporation, dated February 23, 1999
3.3(1)            - Certificate of Amendment to the Certificate of Incorporation
                    dated January 17, 1999
3.4(1)            - Certificate of Amendment to the Certificate of
                    Incorporation, dated June 11, 1999
3.5(1)            - Amended and Restated Bylaws
3.6(3)            - Amended and Restated Bylaws dated September 29, 1999


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<PAGE>

3.7(7)            - Certificate of Ownership and Merger dated January 26, 2000
10.1(1)(2)        - Netstakes, Inc. Stock Option Plan
10.2(1)(2)        - 1999 Equity Compensation Plan
10.3(1)           - Master Lease Agreement No.L6731 with Leasing Technologies
                    International, Inc. dated November 19, 1999
10.4(1)           - Master Service Agreement between Registrant and Frontier
                    Global Center dated February 8, 1999
10.5(1)(2)        - Letter Agreement between Registrant and Steven H. Krein,
                    dated June 11, 1999
10.6(1)(2)        - Letter Agreement between Registrant and Daniel Feldman,
                    dated June 11, 1999
10.7(1)           - Stock Purchase Agreement dated June 11, 1999
10.8(4)           - Master Lease Agreement between Registrant and 450 Westside
                    Partners, LLC dated January 12, 2000
10.9(6)           - Warrant Agreement between Registrant and Leasing
                    Technologies International Dated June 29, 2000
10.10(5)          - Employee Stock Purchase Plan

(1)   Filed as an exhibit to the Registrants Registration Statement on Form S-1
      (Registration No. 333-80593) filed with the Commission on June 14, 1999,
      amended and incorporated herein by reference.

(2)   Compensatory plans and arrangements for executives and others.

(3)   Filed as an exhibit on Form 10-Q filed on November 15, 1999 and
      incorporated herein by reference.

(4)   Filed as an exhibit on Form 10-K filed on March 30, 2000 and incorporated
      herein by reference.

(5)   Filed as an appendix on Form DEFR 14A filed on May 11, 2000 and
      incorporated herein by reference.

(6)   Filed as an exhibit on From 10Q filed on August 14, 2000 and incorporated
      herein by reference.

(7)   Filed as an exhibit on Form 10-K filed on April 2, 2001 and incorporated
      herein by reference.

(a)   Reports on form 8-K

NONE.


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<PAGE>

SIGNATURES

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

Date: May 15, 2001               Promotions.com, Inc.


                                 By: /s/ Lawrence M. Quartaro
                                     -------------------------------------------
                                     Lawrence M. Quartaro
                                     Chief Financial Officer
                                     (Principal Financial and
                                     Accounting Officer Duly Authorized Officer)


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