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 September 30, 2000

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF  1934

                         Commission File No. 33-19139-NY

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

<TABLE>
<CAPTION>
<S>                                                                      <C>
                            Delaware                                              11-2936371
-------------------------------------------------------------            -----------------------------
 (State or Other Jurisdiction of Incorporation or Organization)            (IRS Employer ID Number)

         185 Berry Street, Suite 3515, San Francisco, CA                             94107
-------------------------------------------------------------            -----------------------------
            (Address of Principal Executive Offices)                              (Zip Code)
</TABLE>


       Registrant's telephone number, including area code: (415) 371-9800


                                       n/a
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

     YES X     NO
        ---      -----


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

              18,013,174 shares common stock as of November 8, 2000
                                (Title of Class)


<PAGE>

<TABLE>


                             RATEXCHANGE CORPORATION
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

<CAPTION>
PART I - FINANCIAL INFORMATION                                                                            Page
<S>                                                                                                        <C>
     Item 1 -

         Financial Statements

              Consolidated Balance Sheet as of September 30, 2000 (unaudited) and December 31, 1999         3

              Consolidated Statement of Operations (unaudited) for the three and nine months ended
              September 30, 2000 and 1999                                                                   4

              Consolidated Statement of Cash Flows (unaudited) for the nine months ended
                September 30, 2000 and 1999                                                                 5

              Notes to Consolidated Financial Statements                                                    6

     Item 2 -

         Management's Discussion and Analysis of Financial Condition and

              Results of Operations                                                                         9

     Item 3 -

         Quantitative and Qualitative Disclosures About Market Risk                                        20

PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings                                                                            21

     Item 2 - Changes in Securities and Use of Proceeds                                                    21

     Item 6 - Exhibits and Reports on Form 8-K                                                             22

SIGNATURES                                                                                                 22
</TABLE>


                                     Page 2
<PAGE>




                                                 Part I - Financial Information

Item 1.       Financial Statements


<TABLE>
RATEXCHANGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET

<CAPTION>
                                                                                       September 30,         December 31,
                                                                                           2000                  1999
                                                                                        (unaudited)
                                                                                     ------------------    ------------------
<S>                                                                                      <C>                 <C>
ASSETS

Current assets
         Cash and cash equivalents                                                       $  4,924,064        $    536,615
         Accounts receivable                                                                   57,255                --
         Investments                                                                       14,010,049             387,500
         Interest receivable                                                                  301,165             150,608
         Prepaid expenses                                                                     197,114              11,647
         Notes receivable on stock sales                                                         --             1,590,319
                                                                                         ------------        ------------
                  Total current assets                                                     19,489,647           2,676,689

Property and equipment (net of accumulated depreciation of $182,939 in 2000 and
$18,677 in 1999)                                                                              693,365             188,891

Other assets
         Investment in affiliate                                                               75,000              75,000
         Deposits                                                                             245,265             103,305
                                                                                         ------------        ------------
Total assets                                                                             $ 20,503,277        $  3,043,885
                                                                                         ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
         Accounts payable and accrued expenses                                           $  2,086,408        $  1,840,056
         Short term debt                                                                       25,000             885,000
                                                                                         ------------        ------------
                  Total current liabilities                                                 2,111,408           2,725,056


Stockholders' equity
         Preferred Stock, 60,000,000 shares authorized; none  outstanding                        --                  --
         Common stock, $.0001 par value; 300,000,000 shares authorized; issued
         and outstanding; 17,764,304 shares and 14,087,425 shares                               1,777               1,409
         Additional paid in capital                                                        69,129,399          13,225,824
         Accumulated deficit                                                              (49,943,702)        (12,664,654)
         Notes receivable on stock sales                                                     (433,890)               --
         Accumulated other comprehensive loss                                                (361,715)           (243,750)
                                                                                         ------------        ------------
                       Total stockholders' equity                                          18,391,869             318,829
                                                                                         ------------        ------------
Total liabilities and stockholders' equity                                               $ 20,503,277        $  3,043,885
                                                                                         ============        ============
<FN>

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

                                                               Page 3
<PAGE>

<TABLE>
RATEXCHANGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>

                                                                                                                       Beginning of
                                                                                                                       Development
                                                                                                                          Stage
                                                                                                                       (September
                                                                                                                         30,1998)
                                               Three Months ended September 30,    Nine Months ended September 30,       through
                                                        (unaudited)                          (unaudited)               September 30,
                                               ------------------------------      ------------------------------      ------------
                                                                                                                           2000
                                                    2000             1999              2000              1999           (unaudited)
                                               ------------      ------------      ------------      ------------      ------------
<S>                                            <C>               <C>               <C>               <C>               <C>
REVENUE
Trading and Consulting                         $     52,755      $       --        $     57,255      $       --        $     57,255

EXPENSES
Selling, general and
     administrative
     (Includes non-cash
     expenses of $9,974,187 and
     $334,750 for the three
     month periods and
     $20,057,365 and $2,539,315
     for the nine month periods)                 16,333,853         1,888,127        34,071,021         5,173,829        43,723,721
Write off advances to potential
     investee                                          --            (631,250)             --             114,938         1,298,681
Depreciation and amortization                        62,983            13,409           164,262            23,402           182,938
Cost of acquiring subsidiary                           --                --                --                --           1,597,118
                                               ------------      ------------      ------------      ------------      ------------
     Total Expenses                              16,396,836         1,270,286        34,235,283         5,312,169        46,802,458

OTHER INCOME (EXPENSE)

Interest income                                     392,300            43,782           604,561            94,590           758,271
Interest expense
     (Includes  non-cash expenses
     of $1,801,775 and $0 for the
     three month periods and
     $1,801,775 and $0 for the
     nine month periods)                         (1,581,234)          (10,521)       (1,882,706)          (10,521)       (1,912,552)
Other expenses (net)
     (Includes  non-cash  expenses
     of $222,875  and $0 for the
     three month periods and
     $1,722,875 and $0 for
     the nine month periods)                       (324,375)             --          (1,822,875)             --          (1,822,875)
                                               ------------      ------------      ------------      ------------      ------------
Loss before taxes                               (17,857,390)       (1,237,025)      (37,279,048)       (5,228,100)      (49,722,359)

Income tax provision (benefit)                         --                --                --                --                --
                                               ------------      ------------      ------------      ------------      ------------

NET LOSS                                       $(17,857,390)     $ (1,237,025)     $(37,279,048)     $ (5,228,100)     $(49,722,359)
                                               ============      ============      ============      ============      ============

Basic and diluted net loss per
     share                                     $      (1.03)     $      (0.10)     $      (2.28)     $      (0.46)
Weighted average number of
     shares of common stock                      17,356,043        12,773,266        16,334,695        11,326,388

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

                                                               Page 4
<PAGE>

<TABLE>
RATEXCHANGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>

                                                                                                                       Beginning of
                                                                                                                        Development
                                                                                                                           Stage
                                                                                                                      (September 30,
                                                                                  For the Nine Months ended            1998) through
                                                                                        September 30,                  September 30,
                                                                               ---------------------------------       -------------
                                                                                   2000                 1999                2000
                                                                               ------------        ------------        ------------
<S>                                                                            <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                                  $(37,279,048)       $ (5,228,100)       $(49,722,359)
     Adjustments to reconcile net loss to net cash
     provided by operating activities:
         Depreciation and amortization                                              164,262              23,402             182,938
         Write off advances to potential investees                                     --               114,938             206,898
         Stock options granted to employees below
          fair market value                                                       9,127,572                --             9,127,572
         Stock options - termination adjustments                                    941,564                --               941,564
         Stock options and warrants granted to
          service providers and strategic
          partners                                                               11,711,104           1,339,500          13,270,565
         Warrants issued in relation to bridge financing                          1,801,775                --             1,801,775
         Cost of acquiring subsidiary                                                  --                  --             1,507,408
         Stock for services/expenses                                                   --             1,199,815           3,619,330
         Increase in deposits                                                      (141,960)               --              (245,265)
         Increase in accounts receivable and other assets                          (393,279)           (357,478)           (555,534)
         Increase (decrease) in accounts payable and
             accrued expenses                                                       246,352             753,322           1,976,893
                                                                               ------------        ------------        ------------
                  TOTAL                                                         (13,821,658)         (2,154,601)        (17,888,215)

CASH FLOWS FROM INVESTING ACTIVITIES
         Purchase of short term investments                                     (26,099,845)               --           (26,099,845)
         Sale of short term investments                                          12,484,257                --            12,484,257
         Payment for purchase of equipment                                         (667,984)           (482,319)           (875,552)
         Investment in Telenisus Corporation                                           --                  --               (75,000)
         Loan to employee stock purchase program                                   (433,890)               --              (433,890)
         Purchase of Halo stock                                                        --                  --              (631,251)
                                                                               ------------        ------------        ------------
                  TOTAL                                                         (14,717,462)           (482,319)        (15,631,281)

CASH FLOWS FROM FINANCING ACTIVITIES
         Proceeds from loans and other debt (net)                                 1,200,000             350,000           1,610,000
         Net proceeds from stock sales                                           30,136,250           1,913,088          35,243,241
         Proceeds from note receivable                                            1,590,319                --             1,590,319
                                                                               ------------        ------------        ------------
                  TOTAL                                                          32,926,569           2,263,088          38,443,560


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  4,387,448            (373,832)          4,924,064

CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD                                                                 536,615             528,516
                                                                               ------------        ------------        ------------
CASH AND CASH EQUIVALENTS END OF PERIOD                                        $  4,924,064        $    154,684        $  4,924,064
                                                                               ============        ============        ============
<FN>
See notes to financial statements
</FN>
</TABLE>

                                                               Page 5
<PAGE>



                    RATEXCHANGE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1   INTERIM FINANCIAL STATEMENTS AND BACKGROUND AND HISTORY

         The interim  financial  statements  presented  herein are unaudited and
         have been prepared in accordance  with the  instructions  to Form 10-Q.
         These  statements  should  be read in  conjunction  with the  financial
         statements  and notes  thereto  included  in our annual  report on Form
         10-K/A for the year ended December 31, 1999. The accompanying financial
         statements  have not been audited.  The results of operations  and cash
         flows for the three and nine months ended September 30, 2000 may not be
         indicative  of the  results  that may be  expected  for the year  ended
         December 31, 2000.

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

         RateXchange Corp. (formerly  NetAmerica.com  Corporation) is a Delaware
         corporation organized on May 6, 1987 for the purpose of seeking out and
         developing any general  business  opportunity.  In May 2000, we changed
         our name to  RateXchange  Corporation  to reflect  the  focusing of our
         efforts on the  business  of  creating an  electronic  marketplace  for
         telecommunications   products.   The  Company's  operating   subsidiary
         RateXchange I, Inc., a Delaware corporation organized in June 1999, has
         developed  proprietary  trading  software  to  support  its  electronic
         trading system for bandwidth and other telecommunications products.

         The Company has generated nominal revenues from its planned operations.
         The Company is defined as a  development  stage  company in  accordance
         with Financial Accounting Standard No. 7. The Company had no operations
         or business before September 30, 1998. Cumulative results of operations
         since the start of the development stage,  September 30, 1998, when the
         Company purchased PolarCap, have been reported separately.

         From   inception,   the   Company   has  been   primarily   engaged  in
         organizational  activities,  including  designing  and  developing  its
         website, recruiting personnel,  establishing office facilities, raising
         capital, developing infrastructure and developing a marketing plan. The
         Company began revenue generation activities in 1999 but nominal revenue
         has been generated as of September 30, 2000.  Accordingly,  the Company
         is classified as a development stage company.  Successful completion of
         the Company's  development program and,  ultimately,  the attainment of
         profitable  operations  is  dependent  upon  future  events,  including
         increasing its customer base,  implementing and successfully  executing
         its business and marketing  strategy and hiring and  retaining  quality
         personnel.  Negative developments in any of these conditions could have
         a  material  adverse  effect  on  the  Company's  business,   financial
         condition and results of operations.

NOTE 2   CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

         We consider all highly liquid  investment  securities  with  maturities
         from date of purchase of three  months or less to be cash  equivalents.
         Short-term  investments  consist  of debt  securities  with  maturities
         between three months and twelve months.

         Management determines the appropriate  classification of investments at
         the time of purchase and reevaluates such determination at each balance
         sheet date. To date, all marketable  securities have been classified as
         available-for-sale  and are carried at fair value with unrealized gains
         and losses, if any, included in stockholders'  equity. At September 30,
         2000,  the  company's  investment  in  short  term  securities  had  an
         unamortized cost of $14,371,764. Realized gains and losses and declines
         in value of securities  judged to be other than  temporary are included
         in other  income,  net.  Interest and dividends on all  securities  are
         included in other income, net.

                                     Page 6
<PAGE>

                    RATEXCHANGE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3   PRIVATE PLACEMENT

         In March 2000,  the Company  completed a private  placement in which it
         sold  2,733,329  shares of  restricted  common stock at a  subscription
         price of $12 per share plus  warrants to purchase  1,366,673  shares of
         its common stock at an exercise price of $14.40 per share. The warrants
         are immediately  exercisable and expire in three years. After deducting
         $2,665,000 for costs  associated with the offering the Company received
         $30,135,000.  The  Company  has used a portion of the  proceeds of this
         offering to  implement  its  business  strategy  for creating an online
         marketplace  and exchange  where market  participants  can buy and sell
         bandwidth and trade bandwidth contracts.

NOTE 4   REVENUE RECOGNITION

         The Company  recognizes trading revenue once a trade is consummated and
         the earnings process is complete. Consulting and advertising revenue is
         recognized as the related services are performed.

NOTE 5   LOSS PER SHARE AND AVERAGE SHARES OUTSTANDING

         Basic  loss  per  share is  computed  by  dividing  the net loss by the
         weighted  average  number of common  shares  outstanding.  Options  and
         warrants  on shares of common  stock  were not  included  in  computing
         diluted  loss  per  share  because  their  effects  were   antidilutive
         (8,087,500 options and 5,450,043 warrants).

NOTE 6   COMMITMENTS AND CONTINGENCIES

         In 1999,  RateXchange entered into a term sheet agreement with a vendor
         to provide specialized consulting and computer programming to assist in
         RateXchange's  business plans and operations in the e-commerce niche it
         was  developing.  The term  sheet  was  never  finalized  into a formal
         agreement,  but some services were provided,  and certain cash payments
         were made for the  services  that were  rendered.  The term  sheet also
         provided for the vendor to receive a stock  position in  RateXchange of
         up to 10% for  certain  services.  In  early  2000  the  Company  began
         discussions  with the  vendor  concerning  the 10%  stock  position  in
         RateXchange  because the formal  agreement was never  completed and the
         contemplated services were not fully provided.  The ultimate outcome of
         these  discussions  was  uncertain at that time.  In August  2000,  the
         Company  reached an agreement  for  settlement  of the dispute with the
         vendor, whereby the Company issued 175,000 shares, 175,000 warrants and
         $100,000  in  cash.  The  total  market  value  of  the  settlement  of
         $1,822,875 million is recorded in the Company's statement of operations
         for the nine months ended September 30, 2000.

         The Company is involved in the following lawsuit:

         On February 24, 2000,  Concentric  Network  Corporation filed a lawsuit
         against NetAmerica, Inc., aka A1 Internet, Inc., and the Company in the
         Superior Court of California for the County of Santa Clara (CV 784335).
         The lawsuit  involves  claims for breach of contract and common  counts
         based on A1 Internet's nonperformance in a service agreement between A1
         Internet and  Concentric  related to the  Company's  former  operations
         during 1999.  Concentric is asking for compensatory damages of at least
         $167,794, restitution, costs and attorney fees. The matter is currently
         pending in Superior  Court and will soon  proceed to  arbitration.  The
         Company has fully reserved for this contingency.

 NOTE 7  OPTIONS AND WARRANTS FOR PURCHASE OF COMMON STOCK

         Shareholders  authorized  the  1999  Stock  Option  Plan  during  1999.
         Shareholders  authorized  the 2000 Stock Option Plan on April 20, 2000.
         There are options to purchase  8,000,000 shares authorized for issuance
         under both plans. On February 24, 2000, the Board authorized additional
         options to purchase  4,290,000  shares  outside of either  plan.  Total
         options  granted to  employees  during the first  quarter for less than
         fair  market  value were  3,940,000  for which the  Company  recognized
         related  compensation  expense of $8,481,424 and $837,503 for the first
         nine months and third quarter of 2000.

                                     Page 7
<PAGE>

         The company also granted options to non-employee  consultants  totaling
         275,000 for which the company  recorded  related  expense of $2,287,250
         and $156,000 for the nine months and third quarter ended  September 30,
         2000.

         On September 17, 2000, the Company  entered into an alliance  agreement
         with Amerex Bandwidth,  Ltd. Under this agreement,  Amerex brokers will
         execute  trades  for  the  sales  or  purchase  of   telecommunications
         capacity,      Internet      protocol     products     and/or     other
         telecommunications-related   products  over  the  Company's  electronic
         trading  system  and we will  share in the  revenues  generated  by the
         electronic trading system. In connection with this agreement, we issued
         to Amerex five  warrants for an  aggregate  of 2,300,000  shares of our
         common stock.  One warrant for 300,000 shares with an exercise price of
         $4.47 per share is currently  exercisable by Amerex. The remaining four
         warrants each for 500,000 shares and with exercise  prices of $4.47 per
         share,  $4.70 per  share,  $4.92 per  share and $5.37 per  share,  will
         become  exercisable  upon the earlier of  September  17, 2005 or Amerex
         executing  a  minimum  of   $1,000,000,   $1,000,000,   $3,000,000  and
         $5,000,000,  in  value  of  transactions  over  our  online  electronic
         trading system.

NOTE 8   SHORT TERM DEBT

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

<TABLE>
NOTE 9   COMPREHENSIVE LOSS

           The comprehensive loss for the first nine months and third quarter of
2000 and 1999 was:

<CAPTION>
                                                                   Three Months Ended                     Nine Months Ended
                                                                      September 30                           September 30
                                                           --------------------------------        --------------------------------
                                                                2000                1999               2000                1999
                                                           ------------        ------------        ------------        ------------
<S>                                                        <C>                 <C>                 <C>                 <C>
Net loss                                                   $(17,857,390)       $ (1,237,025)       $(37,279,048)       $ (5,228,100)
Other Comprehensive Income:
Unrealized gains (losses) on investments                       (521,513)               --              (117,965)               --
                                                           ------------        ------------        ------------        ------------
Comprehensive loss                                         $(18,378,903)       $ (1,237,025)       $(37,397,013)       $ (5,228,100)
                                                           ============        ============        ============        ============
</TABLE>

                                     Page 8
<PAGE>


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

         The  following  discussion  should  be read  in  conjunction  with  our
Consolidated  Financial  Statements and the notes thereto presented in "Item 1 -
Financial   Statements."  The  information  set  forth  in  this   "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
includes forward-looking  statements that involve risks and uncertainties.  Many
factors could cause actual results to differ  materially from those contained in
the forward-looking statements below. See "Outlook."

OVERVIEW

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

Recent Developments

        The following events have occurred since September 30, 2000:

On October 6, 2000,  RateXchange appointed Jon Merriman as its new President and
Chief Executive  Officer.  Mr.  Merriman,  a former Executive Vice President and
Senior  Managing  Director for  securities  firm First Security Van Kasper and a
Director of RateXchange,  will lead RateXchange's focus on trading operations as
the  company  continues  its  efforts  to  develop  a liquid  bandwidth  trading
marketplace.

On October 23, 2000,  RateXchange  appointed Eric Handa as Managing  Director of
the  Asia-Pacific  Region,  as the  company  seeks to extend  its reach into the
Asia-Pacific  market.  Prior to joining  RateXchange,  Mr.  Handa was a Regional
Trading Director of Asia Capacity Exchange (ACE-ASIA).

On November 9, 2000,  RateXchange announced the appointment of Steven W. Town to
the company's  Board of Directors.  Mr. Town serves as Co-CEO of Amerex  Natural
Gas, Amerex Power and Amerex Bandwidth. Mr. Town began his commodities career in
1987 in the  retail  futures  industry  prior to  joining  the  Amerex  Group of
Companies.  He began the Amerex futures and forwards  brokerage group in natural
gas in 1990,  in  Washington  D.C.,  and moved this unit of Amerex to Houston in
1992. Amerex currently provides energy,  power and bandwidth  brokerage services
to the leading energy companies.


GENERAL DEVELOPMENT OF BUSINESS

         Since March 2000,  the company has focused on the  business of creating
an  electronic  marketplace  for  telecommunication  products.  In March 2000 we
closed a $32.8 million private placement,  netting $30.1 million after expenses.
These funds should be sufficient  to cover our  operations  and working  capital
requirements for the next twelve months.  On May 5, 2000, we changed our name to
RateXchange Corporation to more accurately reflect our new business focus.

         On July 10,  2000,  RateXchange  announced  it had received an American
Stock Exchange (AMEX) listing.  The company's common stock commenced  trading on
the AMEX under the new symbol RTX on July 10, 2000.

         On   July   17,   2000,   RateXchange   announced   it  had   appointed
telecommunications  industry  consultant,  Gordon  (Don)  Hutchins,  Jr., to the
company's  board  of  directors.   Hutchins'  long-standing   relationships  and
extensive  experience is expected to provide  RateXchange  with critical insight
into the global telecommunications market.


                                     Page 9
<PAGE>

         On July 24,  2000,  RateXchange  announced  that six of the 12 delivery
hubs it will deploy this year are fully  operational  for immediate  delivery of
one-month Spot and one-year Forward contracts on 15 different  city-pair routes.
As of September 30, 2000, eight delivery hubs were fully operational.

         On July 31, 2000,  RateXchange announced it would expand the deployment
of its neutral delivery hubs via an agreement with TeleCity,  a leading European
carrier-independent Internet infrastructure service provider.

         On  August  7,   2000,   RateXchange   completed   the  beta  trial  of
RateXmatch(TM),  a new market  service for bandwidth  trading  designed with the
assistance of several RateXchange customers.

         On August 16, 2000,  RateXchange and Amerex Bandwidth,  LTD.  announced
the signing of a letter of intent to form a strategic alliance to accelerate the
trading  of  bandwidth  products.  The  partnership  will  promote  the  use  of
RateXchange's  neutral  electronic  trading  system  as a vehicle  for  building
liquidity in bandwidth trading.

         On August 23, 2000,  RateXchange  completed a  Trans-Pacific  bandwidth
trade.  The trade of  capacity  between  Hong Kong and Los  Angeles is the first
Trans-Pacific trade completed by RateXchange.

         On  September  15,  2000,  RateXchange  announced  that  its  RateXlabs
division has established a bandwidth trading  consulting  practice.  Two Fortune
100 companies have engaged  RateXlabs to provide the expertise needed to develop
a competitive  advantage in the emerging  bandwidth trading industry.  RateXlabs
provides independent economic research and risk management  consulting regarding
bandwidth trading. The company believes that these consulting services provide a
useful purpose in educating potential market participants and that these efforts
may lead to future sources of revenue.

         On  September  17,  2000,  the Company  announced  that it had launched
RateXmatch(TM),   RateXchange's   new  electronic   trading   system,   and  the
formalization  of its Strategic  Alliance with Amerex.  The  combination  of the
RateXmatch(TM)  electronic trading system with Amerex's brokering experience and
market  relationships  will help create a liquid bandwidth trading market.  This
electronic  trading  system  will  enable  market  participants  of all sizes to
participate  in  the  rapidly  evolving  bandwidth  market.  The  RateXmatch(TM)
electronic  trading  system  is  similar  to  trading  platforms  that have been
successful  in  on-line   natural  gas  and   electricity   commodity   trading.
RateXmatch(TM)  enables bandwidth traders to pre-approve and manage counterparty
credit.  Trades executed on RateXmatch(TM) can be delivered using  RateXchange's
delivery  hubs,  other  pooling  points,  or bilateral  interconnection.  Market
participants  are now able to trade a larger number of routes  regardless of the
presence of RateXchange  delivery hubs.  Trading on RateXmatch(TM)  will utilize
the Master Bandwidth Purchase and Sale Agreement (based on the Bandwidth Trading
Organization   Master   Agreement)   but  will  support  the  trading  of  other
standardized contracts.

         Amerex Bandwidth has successfully  completed  several  bandwidth trades
since May and is currently quoting over 60 city-pair bandwidth markets using the
Bandwidth  Trading  Organization  (BTO)  Master  Agreement.  Amerex is a leading
energy and power  broker.  Under this  agreement,  Amerex  brokers  will execute
trades  for the  sales or  purchase  of  telecommunications  capacity,  Internet
protocol  products  and/or other  telecommunications-related  products  over the
Company's  electronic  trading system and RateXchange will share in the revenues
generated by the electronic  trading system.  In connection with this agreement,
RateXchange  issued to Amerex five warrants for an aggregate of 2,300,000 shares
of the Company's  common stock.  One warrant for 300,000 shares with an exercise
price of $4.47 per share is currently  exercisable by Amerex. The remaining four
warrants each for 500,000  shares and with  exercise  prices of $4.47 per share,
$4.70 per share,  $4.92 per share and $5.37 per share,  will become  exercisable
upon the  earlier  of  September  17,  2005 or Amerex  executing  a  minimum  of
$1,000,000,  $1,000,000,  $3,000,000  and  $5,000,000,  in value of transactions
over the Company's online electronic trading system.



                                    Page 10
<PAGE>

<TABLE>
Results of Operations for Three and Nine Months Ended September 30, 2000

         The following table  summarizes our results of operations for the first
nine months and third quarter of 2000, compared to the same periods of 1999.

<CAPTION>
                                                                  Nine Months Ended                       Three Months Ended
                                                                     September 30                             September 30
                                                           --------------------------------        --------------------------------
                                                               2000                1999                2000                1999
                                                           ------------        ------------        ------------        ------------
<S>                                                        <C>                                     <C>
Revenue                                                    $     57,255                --          $     52,755                --
Expenses (including selling,                               $(34,235,283)       $ (5,312,169)       $(16,396,836)       $ (1,270,286)
          General and administrative)
Net loss                                                   $(37,279,048)       $ (5,228,100)       $(17,857,390)       $ (1,237,025)
</TABLE>


Revenue

         We  generated  revenue of  $57,255  and  $52,755  during the first nine
months and third quarter of 2000 from consulting, trading commissions and banner
ads. We generated no revenue in the comparable periods of 1999.

Expenses

         Our total expenses were  $34,235,283  and $16,396,836 in the first nine
months and third quarter of 2000 compared to  $5,312,169  and  $1,270,286 in the
comparable periods of 1999. The major components of our expenses were:

         Non-cash Expenses

         o        $9,128,000  and $1,484,000 in expenses  associated  with below
                  market stock option grants to employees;

         o        $7,368,000 in both periods associated with the warrants issued
                  or to be issued in  conjunction  with the  strategic  alliance
                  established with Amerex

         o        $11,711,104  and  $9,579,854  for  options  granted to service
                  providers;

         Cash Expenses

         o        $3,880,000 and $1,910,000 in payroll costs;

         o        $2,584,000 and $725,000 in outside services;

         o        $1,140,000 and $287,000 in marketing costs; and

         o        $2,454,000 and $1,719,000 in delivery equipment costs.

Interest Income:

         Interest income for the first nine months and third quarter of 2000 was
$604,561  and  $392,300  compared to $94,590 and $43,782 for the same periods in
1999. The increase in interest  income is due to interest earned on the proceeds
from the private placement.

Interest and other expense:

         Interest and other expenses include non cash charges related to:

         o        $1,723,000 in stock and warrants to buy stock in settlement of
                  a dispute;

         o        $1,801,775  fair  value  adjustment   classified  as  interest
                  expense  associated  with  conversion of our bridge notes into
                  stock and warrants.

                                    Page 11
<PAGE>

Net Loss:

         During the first nine  months and third  quarter of 2000,  we  incurred
losses of  $37,279,048  and  $17,857,390  compared to losses of  $5,228,100  and
$1,237,025  during the same period in 1999. The major components of the net loss
comprised non cash  expenses for stock options and warrants to purchase  company
stock of $23,582,015 and $11,998,837 for the first nine months and third quarter
of 2000 and expenditures  associated with developing the business of $13,697,033
and $5,858,553  for the first nine months and third quarter of 2000.  Because we
are developing a unique  electronic  trading system,  we anticipate that we will
continue  to  incur  operating  losses  and  cash  flow   deficiencies  for  the
foreseeable future.

Liquidity and Capital Resources

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

         We had working capital of $17,378,239 at September 30, 2000 compared to
negative  working capital of $48,367 on December 31, 1999. At December 31, 1999,
we had common stock subscription receivables in the amount of $1,590,319,  which
were due and payable in 2001.  In March 2000 we closed a $32.8  million  private
placement,   netting  $30.1  million  after  expenses.  These  funds  should  be
sufficient to cover our operations and working capital requirements for the next
twelve months.  Nevertheless,  we may need to seek additional  financing  sooner
than  expected  in order  to  accelerate  market  penetration  through  mergers,
acquisitions or additional strategic relationships.

         Our operating  activities used $13,821,658 during the first nine months
of 2000 due primarily to our:

         o        increased marketing and development;

         o        expansion of our executive management team; and

         o        increased professional services and consulting costs.

         Our investing  activities used $14,717,463 during the first nine months
of 2000, due primarily to investing the proceeds from the private placement.

         In March 2000,  we executed a Master Lease Line  Commitment  Agreement,
which has a minimum  term of either 36 or 48 months  depending  upon the type of
equipment  we  lease.  Pursuant  to this  agreement,  we are  entitled  to lease
equipment that has a cost or sale price which, in the aggregate, does not exceed
$10,000,000.  Our periodic lease payments are determined by multiplying the cost
or sale price of the equipment leased by a lease rate factor of either .03277 or
 .02633,  depending upon the type of equipment.  We are also  responsible for all
taxes,  shipping,  transportation,  installation,  services  and other  expenses
related to the equipment we lease pursuant to the agreement.

         Financing activities generated $32,926,570 during the first nine months
of 2000.  Financing  activities  during the nine months ended September 30, 2000
consisted primarily of proceeds from sales of common stock. Between February and
March 2000, we sold to accredited  investors a total of 2,733,329  shares of our
restricted  common  shares plus  warrants to  purchase  1,366,673  shares of our
common stock at an exercise price of $14.40 per share. The shares were sold at a
subscription  price of $12.00 per share. After deducting the expenses related to
the offering, we received $30,135,000. The proceeds of the sales of common stock
are being used to accelerate  deployment of our delivery hubs, expand our online
marketplace for telecommunications products and enhance our geographic reach and
product line.

         We are executing an overall  business  plan that  requires  significant
additional capital for among other uses:

         o        expansion into new domestic and international markets;

         o        development of additional products and services; and

         o        acquisitions.

        Furthermore,  our  funding of working  capital  and  current  and future
operating losses may require additional capital investment.  We do not currently
possess a bank source of financing and we have had nominal revenues.

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

                                    Page 12
<PAGE>

Outlook

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

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

         o        continue to retain, attract and motivate qualified personnel;

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

         o        implement and successfully  execute our business and marketing
                  strategy;

         o        respond to competitive  developments and market  conditions in
                  the global telecommunications industry; and

         o        continue to develop and upgrade our electronic trading system.



Forward-Looking Statements

        This  Outlook  section,  and other  sections of this  document,  include
certain "forward-looking  statements" within the meaning of that term in Section
27A of the  Securities  Act of 1933,  and Section 21E of the  Securities  Act of
1934,  including,  among  others,  those  statements  preceded by,  following or
including  the words  "believe,"  "expect,"  "intend,"  "anticipate"  or similar
expressions.  These forward-looking  statements are based largely on our current
expectations and are subject to a number of risks and uncertainties.  Our actual
results could differ materially from these forward-looking statements. Important
factors to consider in evaluating such forward-looking statements include:

         o        changes in our  business  strategy or an  inability to execute
                  our strategy due to unanticipated changes in the market;

         o        our  ability to raise  sufficient  capital  to meet  operating
                  requirements;

         o        various competitive factors that may prevent us from competing
                  successfully in the marketplace;

         o        changes in external  competitive  market  factors  which might
                  impact trends in our results of operations; and

         o        other risks described below in "Factors That May Affect Future
                  Results."

In light of these risks and  uncertainties,  there can be no assurance  that the
events  contemplated by the  forward-looking  statements  contained in this Form
10-Q will in fact occur.

FACTORS THAT MAY AFFECT FUTURE RESULTS

         We operate in a highly  competitive  and rapidly  changing  market that
involves  a  number  of  risks.  While we are  optimistic  about  our  long-term
prospects, the following discussion highlights some risks and uncertainties that
should be considered in evaluating our growth outlook.



                                    Page 13
<PAGE>

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

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

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

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

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

         At September 30, 2000,  our  accumulated  deficit  since  inception was
$49,722,359,  including $ 26,121,330  related to stock grants and warrants.  For
the nine months ended  September 30, 2000, we incurred a net loss of $37,279,048
including  $23,582,015 related to stock grants and warrants.  We have incurred a
net loss in each year of our existence,  and have financed our development stage
operations  primarily  through  sales of  equity  securities.  We have  recorded
nominal  revenues  from  operations.  We  expect  to incur  net  losses  for the
foreseeable  future.  We may never  achieve or sustain  significant  revenues or
profitability on a quarterly or annual basis in the future.

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

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

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

          We  may  need  additional  working  capital  for  additional  software
development,  marketing,  general and  administrative  costs, and to fund losses
prior to achieving profitability.  We may need to raise additional funds through
additional  equity and/or debt financings to meet our capital  requirements.  We
will need to raise additional funds if we have  underestimated our capital needs
or if we incur  unexpected  expenses.  We cannot assure you that such financings
will be available in amounts or on terms needed to meet our requirements,  or at
all.  Further,  our lack of  tangible  assets to pledge  could  prevent  us from
establishing  a source of financing.  The inability to raise all needed  funding
would adversely  affect our ability to successfully  implement the objectives of
our business plan.

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

         The market for online  bandwidth and minutes  trading  services is new,
rapidly  evolving  and  highly  competitive,  as are  the  online  commerce  and
business-to-business e-commerce markets generally. We expect competition in this
market  to  intensify  in  the  future.   Several  companies  such  as  E-Speed,
Intercontinental  Exchange and Altra  currently  operate online  marketplaces in
other commodities and have large established customer bases. These companies may
start  bandwidth  trading  marketplaces.  Our ability to compete  with them will
depend largely upon our ability to capture market share by obtaining  sufficient
participants for our electronic trading system.

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

                                    Page 14
<PAGE>

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

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

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

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

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

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

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

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

                                    Page 15
<PAGE>

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

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

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

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

We face online commerce security risks.

         We rely on encryption and authentication technology licensed from third
parties to provide the security and  authentication  necessary to effect  secure
transmission  of  confidential  information,  such as  bank  account  or  credit
information.  There can be no assurance that advances in computer  capabilities,
new  discoveries in the field of  cryptography,  or other events or developments
will not  result  in a  compromise  or breach  of the  algorithms  used by us to
protect  transaction  data. Any compromise of our security could have a material
adverse effect on us and our  reputation.  A party who is able to circumvent our
security  measures  could  misappropriate   proprietary   information  or  cause
interruptions  in our  operations.  We may be  required  to  expend  significant
capital and other  resources  to protect  against such  security  breaches or to
alleviate problems caused by such breaches. To the extent that our activities or
those of third  party  contractors  involve  the  storage  and  transmission  of
proprietary  information,  such as bank account or credit information,  security
breaches  could  damage  our  reputation  and  expose  us to a risk  of  loss or
litigation and possible  liability which could have a material adverse effect on
our business and results of operations.

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

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

         o        user privacy;

         o        pricing;

                                    Page 16
<PAGE>

         o        content;

         o        copyrights;

         o        distribution; and

         o        characteristics and quality of products and services.

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

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

We may face liability for information retrieved from our website.

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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



                                    Page 18
<PAGE>

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

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

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

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

The volatility of our securities prices may increase.

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

         o        quarter to quarter variations in operating results;

         o        adverse news announcements;

         o        the introduction of new products and services;

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

         o        general market conditions.

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

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

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



                                    Page 19
<PAGE>

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

Short Term Investments

         Our  exposure  to market  risks for changes in  interest  rates  relate
primarily to investments in debt securities issued by U.S.  government  agencies
and corporate debt securities. We place our investments with high credit quality
issuers  and,  by policy,  limit the amount of the  credit  exposure  to any one
issuer.

         Our general  policy is to limit the risk of  principal  loss and ensure
the safety of invested  funds by  limiting  market and credit  risk.  All highly
liquid  investments with less than three months to maturity are considered to be
cash  equivalents.  Investments with maturities  between three and twelve months
are  considered to be short-term  investments.  Investments  with  maturities in
excess of twelve months are  considered to be long-term  investments.  We do not
expect any material loss with respect to our investment portfolio.


                                    Page 20
<PAGE>



                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.

                There were no  material  additions  to, or changes in status of,
         any ongoing,  threatened or pending legal proceedings  during the three
         months  ended September 30, 2000. From time to  time, we are a party to
         various legal  proceedings  incidental  to our business.  None of these
         proceedings  is  considered by management to be material to the conduct
         of our business, operations or financial condition.

Item 2.       Changes in Securities and Use of Proceeds.

         a)   Not applicable.

         b)   Not applicable.

         c)   In  July  2000,  some  of our  subsidiary's  bridge  note  holders
              converted  their  bridge notes and related  warrants  into 275,000
              shares of our restricted common stock at an exchange rate of $5.00
              per  share  plus  warrants  to  purchase  343,750  shares  of  our
              restricted  common stock at an exercise  price of $5.00 per share.
              All of these  bridge note holders were  accredited  investors.  We
              converted  these notes and  warrants in reliance  upon Rule 506 of
              Regulation D and Section 4(2) of the Securities Act.

              In August 2000, we issued  175,000 shares of our common stock plus
              warrants to purchase 175,000 shares of common stock at an exercise
              price  of $5.00  per  share to a  single  accredited  investor  in
              settlement  of a claim.  We issued  the  shares  and  warrants  in
              reliance upon Section 4(2) of the Securities Act.

              In September and October  2000,  holders of all but $25,000 of our
              subsidiary's  remaining  bridge  notes  converted  their notes and
              related  warrants into a total of 120,000 shares of our restricted
              common stock at an exchange  rate of $5.00 per share plus warrants
              to  purchase a total of 150,000  shares of our  restricted  common
              stock at an exercise price of $5.00 per share. All of these bridge
              note holders were accredited  investors.  We converted these notes
              and warrants in reliance upon Section 4(2) of the Securities Act.

         d)   Not applicable.

Item 6.       Exhibits and Reports on Form 8-K

a)       Exhibits

         Exhibit No.        Exhibit Name
         -----------        ------------

         10.1              Alliance  agreement between  RateXchange  Corporation
                           and Amerex Bandwidth Ltd., dated September 17, 2000

         10.2              Facilities  Management  Agreement between RateXchange
                           Corporation  and  Telecity UK Limited  dated July 11,
                           2000

         10.3+             Separation Agreement between RateXchange  Corporation
                           and Ross Mayfield dated August 18, 2000

         10.4+             Employment  Agreement  between  RateXchange  and Paul
                           Wescott dated July 5, 2000

         10.5+             Separation Agreement between RateXchange  Corporation
                           and Paul Wescott dated August 18, 2000

         10.6              Settlement  Agreement and Full General Mutual Release
                           by and between  RateXchange  Corporation and Ultimate
                           Markets, Inc. dated August 28, 2000

         27.1              Financial Data Schedule

         b)    Reports on Form 8-K


                                    Page 21
<PAGE>

         On July 27, 2000 we filed a Form 8-K announcing  that on July 20, 2000,
we engaged Arthur Andersen, L.L.P. as our new independent accountants.

On August 16, 2000, we filed a Form 8-K announcing that we had signed a letter
of intent to form a strategic alliance with Amerex Bandwidth, Ltd.

                                    Page 22

<PAGE>

                                   SIGNATURES

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

Dated this 14th day of November, 2000.

                             RATEXCHANGE CORPORATION

                             By:  /s/ Philip Rice
                                ------------------------------------------------
                                  Philip Rice
                                  Executive Vice President and
                                  Chief Financial Officer


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