SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 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, 2002

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

    For the Transition Period from __________________ to ___________________

                         Commission File Number 1-15831

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

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

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

    100 Pine Street, Suite 500
         San Francisco, CA                                  94111
(Address of Principal Executive Offices)                  (Zip Code)

                                 (415) 274-5650
              (Registrant's Telephone Number, Including Area Code)

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

    As of April 30, 2002,  20,732,379  shares of the registrant's  common stock,
$0.0001 par value, were outstanding.

<PAGE>

                             Ratexchange Corporation
                                    Form 10-Q
                    For the Three Months Ended March 31, 2002

<TABLE>
<CAPTION>
<S>                                                                                                      <C>
PART I  FINANCIAL INFORMATION                                                                            Page No.
                                                                                                         --------
        ITEM 1. Financial Statements (unaudited)

              Condensed Consolidated Statements of Operations for the three months ended
                March 31, 2002 and 2001................................................................       2

              Condensed Consolidated Statements of Financial Condition as of
                March 31, 2002 and December 31, 2001...................................................       3

              Condensed Consolidated Statements of Cash Flows for the three months ended
                March 31, 2002 and 2001................................................................       4

              Notes to Condensed Consolidated Financial Statements.....................................       5

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

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

PART II OTHER INFORMATION

        ITEM 1. Legal Proceedings......................................................................      18

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

        Signatures.....................................................................................      19
</TABLE>

<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

                             RATEXCHANGE CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31,
                                                                -------------------------------
                                                                    2002               2001
                                                                ------------       ------------
<S>                                                             <C>                <C>
Revenue:
     Commissions .........................................      $    522,585       $     35,328
     Principal transactions ..............................            18,608                 --
     Investment banking ..................................            25,673                 --
     Other ...............................................            25,527              4,500
                                                                ------------       ------------
          Total revenue ..................................           592,393             39,828
                                                                ------------       ------------

Operating expenses:
   Compensation and benefits (inclusive of non-cash
      expenses of $349,280 in 2002 and $1,544,574 in 2001)         1,204,075          2,864,699
   Brokerage and clearing fees ...........................           157,542                 --
   Professional services .................................           140,119            234,302
   Occupancy and equipment ...............................            80,423          2,104,895
   Communications and technology .........................            31,284            117,921
   Depreciation and amortization .........................            99,094            395,994
   Other .................................................           179,785          1,869,099
                                                                ------------       ------------
      Total operating expenses ...........................         1,892,322          7,586,910
                                                                ------------       ------------
Operating loss ...........................................        (1,299,929)        (7,547,082)
Interest income ..........................................            15,496            150,277
Interest expense .........................................          (363,772)                --
Other expense ............................................                --           (544,274)
                                                                ------------       ------------
Loss from continuing operations ..........................        (1,648,205)        (7,941,079)
Income from discontinued operations ......................            32,641            300,000
                                                                ------------       ------------
Net loss .................................................      $ (1,615,564)      $ (7,641,079)
                                                                ============       ============

Basic and diluted net loss per share .....................      $      (0.09)      $      (0.43)
                                                                ============       ============

Weighted average number of common shares .................        18,367,137         17,783,000
</TABLE>

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


                                       2
<PAGE>

                             RATEXCHANGE CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       March 31,        December 31,
                                                                                         2002               2001
                                                                                    -------------      -------------
                                     ASSETS
<S>                                                                                  <C>                <C>
Cash and cash equivalents.........................................................   $  3,348,150       $  4,358,091
Short-term investments............................................................        103,200                 --
Due from clearing broker..........................................................        443,819                 --
Accounts receivable...............................................................         37,500                 --
Notes receivable..................................................................          8,530              6,197
Equipment and fixtures, net.......................................................        575,524            674,618
Debt issuance costs...............................................................        663,904            658,434
Prepaid expenses and other assets.................................................        182,976            205,853
Assets of discontinued operations.................................................        785,227          1,603,588
                                                                                     ------------       ------------
      Total assets................................................................   $  6,148,830       $  7,506,781
                                                                                     ============       ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable..................................................................   $    487,458       $    401,505
Commissions payable...............................................................        213,677                 --
Accrued liabilities...............................................................      1,239,656          1,164,866
Due to clearing and other brokers.................................................         97,466                 --
Deferred revenue..................................................................         19,467                 --
Convertible notes payable, net....................................................      8,242,687          8,141,704
Liabilities of discontinued operations............................................        519,436          1,240,439
                                                                                     ------------       ------------
     Total liabilities............................................................     10,819,847         10,948,514
                                                                                     ------------       ------------

Commitments and contingencies

Stockholders' deficit:
   Preferred stock, $0.0001 par value;  60,000,000 shares authorized;  2,000,000
     shares issued and outstanding as of March 31, 2002 and December
     31, 2001; aggregate liquidation preference of $5,847,417.....................            200                200
   Common stock, $0.0001 par value; 300,000,000 shares authorized;
     18,412,379 and 18,328,204 shares issued and outstanding
     as of March 31, 2002 and December 31, 2001, respectively.....................          1,841              1,833
   Additional paid-in capital.....................................................     84,755,647         84,516,375
   Accumulated deficit............................................................    (89,428,705)       (87,730,641)
   Deferred compensation..........................................................             --           (229,500)
                                                                                    -------------      -------------
     Total stockholders' deficit..................................................     (4,671,017)        (3,441,733)
                                                                                    -------------      -------------
       Total liabilities and stockholders' deficit................................   $  6,148,830       $  7,506,781
                                                                                     ============       ============
</TABLE>

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


                                       3
<PAGE>

                             RATEXCHANGE CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                        ----------------------------
                                                                           2002              2001
                                                                      --------------      -----------
<S>                                                                    <C>                <C>
Cash flows from operating activities:
 Net loss........................................................      $ (1,615,564)      $(7,641,079)
   Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation and amortization................................            99,094           395,994
    Common stock issued for services.............................            17,338                --
    Stock options and warrants granted to service providers and
      strategic partners.........................................                --           254,559
    Amortization of stock options granted to employees,
       directors and consultants.................................            36,458           724,140
    Stock options modified for terminated employees..............                --           565,875
    Amortization of deferred compensation........................           295,484                --
    Write-down of minority equity investment.....................                --           544,274
    Amortization of discounts on convertible notes payable.......           100,983                --
    Amortization of debt issuance costs..........................            17,030                --
    Loss on trading securities...................................            11,486                --
    Common stock received for advisory services..................            (1,400)               --
    Changes in operating assets and liabilities:
      Assets and liabilities of discontinued operations..........            97,358                --
      Due from clearing broker...................................          (443,819)               --
      Receivables................................................           (39,833)          108,216
      Prepaid expenses and other assets..........................            22,877            26,325
      Accounts payable and accrued liabilities...................           197,743                --
      Commissions payable........................................           213,677                --
      Due to clearing and other brokers..........................            97,466          (586,536)
      Deferred revenue...........................................            16,667                --
                                                                       ------------       -----------
          Net cash used in operating activities..................          (876,955)       (5,608,232)
Cash flows from investing activities:
    Purchase of equipment and fixtures...........................                --          (542,900)
    Purchase of short-term investments...........................          (202,855)               --
    Proceeds from sale of short-term investments.................            92,369         4,638,408
                                                                       ------------       -----------
          Net cash (used in) provided by investing activities....          (110,486)        4,095,508
Cash flows from financing activities:
    Debt issuance costs..........................................           (22,500)               --
                                                                       ------------       -----------
         Net cash used in financing activities...................           (22,500)               --
                                                                       -------------      -----------
Decrease in cash and cash equivalents............................        (1,009,941)       (1,512,724)
Cash and cash equivalents at beginning of period.................         4,358,091         2,115,152
                                                                       ------------       -----------
Cash and cash equivalents at end of period.......................      $  3,348,150       $   602,428
                                                                       ============       ===========

Supplementary disclosure of cash flow information:
   Cash paid during the year:
      Interest...................................................      $    141,167       $        --
      Income taxes...............................................      $         --       $        --
   Non-cash investing and financing activities:
      Preferred stock dividends..................................      $     82,500       $        --
      Common stock issued to settle accrued liabilities..........      $     37,000       $        --
</TABLE>

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


                                       4
<PAGE>

                             RATEXCHANGE CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.  Significant Accounting Policies

Interim Financial Statements

     The  interim   financial   statements   included   herein  for  Ratexchange
Corporation  (the  Company or  Ratexchange)  have been  prepared by the Company,
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  In the opinion of  management,  the financial  statements
included  in this  report  reflect  all normal  recurring  adjustments  that the
Company  considers  necessary  for  the  fair  presentation  of the  results  of
operations  for the interim  periods  covered and the financial  position of the
Company at the date of the interim  statement  of financial  condition.  Certain
information  and  footnote  disclosures  normally  included in annual  financial
statements prepared in accordance with accounting  principles generally accepted
in the United States have been  condensed or omitted  pursuant to such rules and
regulations.  However, the Company believes that the disclosures are adequate to
understand the information presented.  The operating results for interim periods
are not  necessarily  indicative of the  operating  results for the entire year.
These  financial  statements  should be read in  conjunction  with the Company's
December 31, 2001 audited  consolidated  financial  statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.

Critical Accounting Policies and Estimates

     The condensed  consolidated financial statements are prepared in accordance
with  accounting  principles  generally  accepted  in the United  States,  which
require  Ratexchange  to make  estimates and judgments  that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent  assets and liabilities.  On an on-going basis, the Company evaluates
its estimates,  including those related to bad debts,  investments,  stock-based
compensation, income taxes, and contingencies and litigation.  Ratexchange bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily  apparent from other  sources.  Actual results could differ
from those  estimates.  The Company believes the following  critical  accounting
policies  affect  its  more  significant  judgments  and  estimates  used in the
preparation of its consolidated financial statements.

     The Company recognizes  brokerage revenue once the trade is consummated and
the earnings process is complete.  Fees for investment banking advisory services
and consulting assignments are recognized when services for the transactions are
substantially  completed  under  the  terms of the  engagement,  fees  from such
services  are  fixed  or   determinable,   and  their  collection  is  probable.
Transaction-related expenses are deferred and recognized at the time the related
revenues are recognized.  Expense  reimbursements related to advisory activities
are recorded as a reduction of related non-compensation expenses.

    Ratexchange  maintains an  allowance  for  doubtful  accounts for  estimated
losses resulting from the inability of its customers to make required  payments.
If the  financial  condition of the  Company's  customers  were to  deteriorate,
resulting  in an  impairment  of  their  ability  to make  payments,  additional
allowances may be required.

     Ratexchange utilizes the Black-Scholes option pricing model to estimate the
fair  value  of  stock  options  and  warrants  granted  to  non-employees.  The
Black-Scholes  option pricing model was developed for use in estimating the fair
value  of  traded  options  that  have no  vesting  restrictions  and are  fully
transferable.  In addition,  option  pricing  models require the input of highly
subjective  assumptions  including  the  expected  stock price  volatility.  The
Company  uses  projected  volatility  rates,  which  are based  upon  historical
volatility rates trended into future years.  Because the Company's stock options
and warrants have characteristics  significantly  different from those of traded
options,  and because changes in the subjective input assumptions can materially
affect the fair value estimates, in management's opinion, the existing models do
not  necessarily  provide a  reliable  single  measure  of the fair value of the
Company's stock options and warrants.


                                       5
<PAGE>

                             RATEXCHANGE CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (unaudited)

     Ratexchange has concluded that it is more likely than not that its deferred
tax assets as of March 31, 2002 will not be realized  based on the scheduling of
deferred  tax  liabilities  and  projected  taxable  income.  The  amount of the
deferred  tax  assets  actually  realized,  however,  could  vary if  there  are
differences in the timing or amount of future reversals of existing deferred tax
liabilities or changes in the actual amounts of future  taxable  income.  Should
the  Company  determine  that it  would  be able to  realize  all or part of its
deferred tax asset in the future,  an adjustment to the deferred tax asset would
be recorded in the period such determination is made.

Newly Issued Accounting Standards

     In August 2001, the Financial  Accounting  Standards Board issued Statement
of  Financial   Accounting  Standards  (SFAS)  No.  143,  Accounting  for  Asset
Retirement  Obligation.  SFAS No. 143 is effective  for fiscal  years  beginning
after June 15, 2002,  and will  require  companies to record the fair value of a
liability  for asset  retirement  obligations  in the  period in which  they are
incurred,  which  typically  could be upon  completion  or  shortly  thereafter.
Management  does not believe the adoption of this  Standard will have a material
effect on the Company's financial position or results of operations.

Reclassification

     Certain  prior year  amounts have been  reclassified  to conform to current
year consolidated financial statement presentation.

2.  Net Loss per Share

     Basic loss per share is  computed by dividing  the net loss,  less  accrued
dividends on preferred  stock,  by the weighted  average number of common shares
outstanding.  Stock options and warrants  outstanding to purchase 20,925,746 and
15,516,781  shares of common stock as of March 31, 2002 and 2001,  respectively,
and 2,000,000  shares of convertible  preferred stock at March 31, 2002 were not
included  in  computing  diluted  loss per  share  because  their  effects  were
anti-dilutive.

<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,
                                                                   ----------------------------
                                                                     2002                2001
                                                                     ----                ----
<S>                                                             <C>                 <C>
    Net loss...........................................         $  (1,615,564)      $  (7,641,079)
    Preferred stock dividends..........................               (82,500)                 --
                                                                -------------       -------------
    Net loss available to common stockholders..........            (1,698,064)         (7,641,079)
    Weighted-average number of common shares...........            18,367,137          17,783,000
                                                                -------------       -------------
    Basic and diluted net loss per common share........         $      (0.09)       $      (0.43)
                                                                =============       =============
</TABLE>

3.  Comprehensive Loss

     Comprehensive  loss  includes  the net loss  reported  on the  consolidated
statements of operations and changes in the fair value of investments classified
as available for sale.

<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,
                                                                   ----------------------------
                                                                     2002                2001
                                                                     ----                ----
<S>                                                             <C>                 <C>
    Net loss...........................................         $  (1,615,564)      $  (7,641,079)
    Change in unrealized loss on securities............                    --               1,050
                                                                -------------       -------------
    Comprehensive loss.................................         $  (1,615,564)      $  (7,640,029)
                                                                =============       =============
</TABLE>


                                       6
<PAGE>

                             RATEXCHANGE CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (unaudited)

4.  Discontinued Operations

     In 2001,  the Company  formed RMG  Partners  Corporation  (RMG) as a wholly
owned  subsidiary  to  provide  risk  management  solutions  through  the use of
derivative  trading  strategies.  An  affiliate  of the  principals  of RMG,  BL
Partners,  LLC,  has the right to  purchase  the  Company's  interest in RMG for
$300,000 commencing in April 2002. In February 2002, the Company received notice
from BL Partners,  LLC that it intended to exercise its right to purchase RMG in
April 2002 in accordance with the terms of the agreement.

     RMG represents a component of the Company's business.  Pursuant to SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company
has  reclassified the balances  pertaining to RMG on its condensed  consolidated
financial statements to reflect the expected disposition of this subsidiary. The
revenues,  expenses, assets and liabilities,  and cash flows of these operations
have been  segregated  in the  Company's  condensed  consolidated  statements of
financial  condition,  condensed  consolidated  statements  of  operations,  and
condensed  consolidated  statements of cash flows for all periods  presented and
have been separately reported as "discontinued operations."

     The  Company  reported  $33,000 and  $300,000  as income from  discontinued
operations,  or $0.00 and $0.02 per common  share,  for the three  months  ended
March 31, 2002 and 2001,  respectively.  The income from discontinued operations
is comprised  of revenue and expenses of $730,000 and $697,000  during the three
months  ended March 31, 2002 and  $300,000  and $0 during the three months ended
March 31, 2001, respectively.

     The major classes of assets and liabilities of  discontinued  operations as
of March 31, 2002 and December 31, 2001 are as follows:

                                                  March 31,         December 31,
                                                    2002                2001
                                                    ----                ----
    Assets:
         Cash and cash equivalents.......      $     676,202       $   1,448,634
         Investments.....................                 --             125,000
         Other...........................            109,025              29,954
                                               -------------       -------------
              Total......................      $     785,227       $   1,603,588
                                               =============       =============

    Liabilities:
         Accrued liabilities.............      $     505,349       $   1,166,973
         Other...........................             14,087              73,466
                                               -------------       -------------
              Total......................      $     519,436       $   1,240,439
                                               =============       =============

5.  Regulatory Requirements

     The Company's broker-dealer  subsidiaries,  RTX Securities Corporation (RTX
Securities)  and RMG, are subject to Rule 15c3-1 of the  Securities and Exchange
Commission, which specify uniform minimum net capital requirements,  as defined,
for their  registrants.  As of March 31, 2002, RTX Securities had regulatory net
capital,  as  defined,  of  $666,688,  which  exceeded  the amount  required  by
$620,519.  As of March 31, 2002, RMG had regulatory net capital,  as defined, of
$177,442, which exceeded the amount required by $114,825. RTX Securities and RMG
do not carry customer  accounts,  nor do they hold customer  securities or cash.
Both broker-dealers are exempt from Rules 15c3-3 and 17a-13 under the Securities
Act of 1934.

6.  Subsequent Event

     On April 9, 2002, BL Partners,  LLC exercised its right to purchase RMG for
$300,000 in  accordance  with the terms of its  agreement.  The  Chairman of RMG
obtained control over 1,149,876 shares of Ratexchange  common stock by attaining
certain  revenue goals set forth in the agreement.  These shares of common stock
were not issued or outstanding as of March 31, 2002.


                                       7
<PAGE>

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

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations contains certain  forward-looking  statements that involve
risks  and  uncertainties.  Ratexchange  has set  forth in its Form  10-K Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations-Risk  Factors," as filed with the Securities and Exchange  Commission
on March 28, 2002, a detailed  statement of risks and uncertainties  relating to
the  Company's  business.  In addition,  set forth below under the heading "Risk
Factors" is a further discussion of certain of those risks as they relate to the
period  covered by this report,  the  Company's  near-term  outlook with respect
thereto, and the forward-looking  statements set forth herein.  Investors should
review this quarterly  report in combination with the Form 10-K in order to have
a more  complete  understanding  of  the  principal  risks  associated  with  an
investment in the Company's common stock.

Overview

     Ratexchange  is an  innovative  brokerage  services  firm that combines our
expertise in bandwidth  and other  emerging  commodity  markets with  securities
brokerage and investment  banking  activities.  RTX  Securities,  a wholly-owned
subsidiary, is a NASD licensed, fully disclosed broker-dealer offering sales and
trading services to institutions  and private  clients,  as well as advisory and
investment  banking  services to our  corporate  clients.  Through our  emerging
commodities  division,  we  are  developing  channels  to  maximize  profits  by
providing valuable and marketable information to RTX Securities.

     Ratexchange  recognizes  revenue  from  brokerage  and  investment  banking
activities  through RTX  Securities  and to a lesser extent from  consulting and
information services through our emerging commodities  division. We get paid for
our  investment  banking  and  brokerage  services  in the form of  commissions,
transaction  fees,  merger and  acquisition  advisory  fees and capital  markets
services  fees. We believe that our  consulting  and  information  services will
begin to generate revenues in the form of subscription  fees,  transaction fees,
professional services fees and management fees.

     In 2001, we formed RMG Partners Corporation as a wholly owned subsidiary to
provide  risk  management  solutions  through  the  use  of  derivative  trading
strategies.  An affiliate of the  principals  of RMG, BL Partners,  LLC, has the
right to purchase our interest in RMG for $300,000  commencing in April 2002. In
February  2002,  we received  notice from BL  Partners,  LLC that it intended to
exercise its right to purchase RMG in April 2002 in accordance with the terms of
the  agreement.  On April 9,  2002,  BL  Partners,  LLC  exercised  its right to
purchase RMG for $300,000.  The Chairman of RMG obtained  control over 1,149,876
shares of Ratexchange  common stock by attaining certain revenue goals set forth
in the agreement. These shares of common stock were not issued or outstanding as
of March 31, 2002.

Critical Accounting Policies and Estimates

     The condensed  consolidated financial statements are prepared in accordance
with  accounting  principles  generally  accepted  in the United  States,  which
require  Ratexchange  to make  estimates and judgments  that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent  assets and  liabilities.  On an  on-going  basis,  we  evaluate  our
estimates,  including  those  related  to bad debts,  stock-based  compensation,
income  taxes,  and  contingencies  and  litigation.  We base our  estimates  on
historical  experience and on various other  assumptions that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily apparent from other sources.  Actual results could differ from those
estimates. We believe the following critical accounting policies affect our more
significant  judgments and estimates used in the preparation of our consolidated
financial statements.

     We  recognize  brokerage  revenue  once the  trade is  consummated  and the
earnings process is complete.  Fees for investment banking advisory services and
consulting  assignments  are recognized when services for the  transactions  are
substantially  completed  under  the  terms of the  engagement,  fees  from such
services  are  fixed  or   determinable,   and  their  collection  is  probable.
Transaction-related expenses are deferred and recognized at the time the related
revenues are recognized.  Expense  reimbursements related to advisory activities
are recorded as a reduction of related non-compensation expenses.


                                       8
<PAGE>

     We maintain  an  allowance  for  doubtful  accounts  for  estimated  losses
resulting from the inability of our customers to make required payments.  If the
financial  condition  of our  customers  were to  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.

     We utilize the  Black-Scholes  option  pricing  model to estimate  the fair
value of stock options and warrants granted to non-employees.  The Black-Scholes
option  pricing  model was  developed  for use in  estimating  the fair value of
traded options that have no vesting restrictions and are fully transferable.  In
addition,   option  pricing  models  require  the  input  of  highly  subjective
assumptions  including  the expected  stock price  volatility.  We use projected
volatility rates, which are based upon historical  volatility rates trended into
future  years.  Because our stock  options  and  warrants  have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimates,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of our stock options and warrants.

     We have  concluded  that it is more likely than not that its  deferred  tax
assets as of March 31,  2002 will not be  realized  based on the  scheduling  of
deferred  tax  liabilities  and  projected  taxable  income.  The  amount of the
deferred  tax  assets  actually  realized,  however,  could  vary if  there  are
differences in the timing or amount of future reversals of existing deferred tax
liabilities or changes in the actual amounts of future taxable income. Should we
determine that we would be able to realize all or part of our deferred tax asset
in the future,  an adjustment to the deferred tax asset would be recorded in the
period such determination was made.

Results of Operations

Overview

     The results of our  continuing  operations for the three months ended March
31,  2002 and 2001  exclude  the revenue and  expenses  attributed  to RMG.  The
results  of  operations  related  to  RMG  have  been  separately   reported  as
discontinued   operations.   Additionally,   the  Company's   overall  level  of
expenditures  decreased  in 2002 as compared to 2001 as we shifted our  strategy
during  2001  away  from  the   hardware-intensive   facilitation  of  brokering
telecommunications  bandwidth  through  our  own  network  hubs to  operating  a
securities  broker-dealer  and  aggregating  price and  market  data  related to
bandwidth and other emerging commodities for sale to third parties.

Revenue

     Revenue from  continuing  operations  was  $592,000 and $40,000  during the
three  months  ended  March 31,  2002 and 2001,  respectively.  The  increase in
revenue  of  approximately  $552,000,  or  1,380%,  from  2001 to  2002  was due
primarily to an increase in our  securities  broker-dealer  revenue of $567,000,
offset by a decrease in emerging commodity brokerage revenue of $35,000.  During
the three  months ended March 31, 2002,  one customer  accounted  for 32% of our
revenue from continuing operations,  while no single customer accounted for more
than 10% of our revenue from continuing operations during the three months ended
March 31, 2001.

Compensation and Benefits

     Compensation  and benefits were $1,204,000 and $2,865,000  during the three
months   ended  March  31,  2002  and  2001,   respectively.   The  decrease  of
approximately  $1,661,000,  or 58%,  from 2001 to 2002 was due to a decrease  in
non-cash stock-based compensation of $1,195,000 and a decrease in headcount from
35 in  March  2001 to 19 in  March  2002,  partially  offset  by  higher  broker
commissions.

Brokerage and Clearing Fees

     RTX  Securities  is a  fully-disclosed  broker-dealer,  which has engaged a
third party  clearing  broker to perform  all of the  clearance  functions.  The
clearing  broker-dealer  processes and settles the customer transactions for RTX
Securities and maintains the detailed customer records.  Additionally,  security
trades  are  executed  by  third-party  broker-dealers  and  electronic  trading
systems. We did not incur these expenses during the three months ended March 31,
2001 since RTX Securities was formed in December 2001.


                                       9
<PAGE>

Professional Services

     Professional  services expenses were $140,000 and $234,000 during the three
months   ended  March  31,  2002  and  2001,   respectively.   The  decrease  of
approximately  $94,000,  or 40%, from 2001 to 2002 was  primarily  attributed to
lower legal fees.  Legal costs during 2001 resulted in part from the preparation
of our registration statement in connection with an uncompleted secondary equity
offering.

Occupancy and Equipment

     Occupancy and equipment  expenses  were $80,000 and  $2,105,000  during the
three  months  ended  March 31,  2002 and 2001,  respectively.  The  decrease of
approximately  $2,025,000,  or 96%,  from  2001 to 2002 was the  result of costs
related to the transporting telecommunications bandwidth through our own network
hubs during 2001.  Occupancy  and equipment  expenses  incurred in 2001 included
$1,073,000 for co-location  costs,  $459,000 for equipment rental,  $293,000 for
equipment  expense,  and  $190,000 for  development  of our  electronic  trading
system.

Communications and Technology

     Communications and technology expenses were $31,000 and $118,000 during the
three  months  ended  March 31,  2002 and 2001,  respectively.  The  decrease of
approximately  $87,000,  or  74%,  from  2001  to 2002  was  due to  $47,000  of
accounting  software  licenses  fees in 2001 that were not  incurred in 2002 and
lower telephone charges.

Depreciation and Amortization

     Depreciation  and  amortization  costs were $99,000 and $396,000 during the
three  months  ended  March 31,  2002 and 2001,  respectively.  The  decrease of
approximately $297,000, or 75%, from 2001 to 2002 was due mostly to depreciation
expense  recorded in 2001 for certain  software  assets that were disposed of in
late 2001.

Other Operating Expenses

     Other  operating  expenses  were $180,000 and  $1,869,000  during the three
months   ended  March  31,  2002  and  2001,   respectively.   The  decrease  of
approximately  $1,689,000,  or 90% from 2001 to 2002 was primarily attributed to
$1,017,000  for  outside  services,  $272,000  for travel  costs,  $124,000  for
marketing expenses and $105,000 for property taxes.

Interest Income

     Interest  income was $15,000 and  $150,000  during the three  months  ended
March 31, 2002 and 2001,  respectively.  The decrease of approximately $135,000,
or 90%, from 2001 to 2002 was due to a lower average balance of interest earning
assets,  which was  significantly  lower during the three months ended March 31,
2002 as compared to the similar period in 2001.

Interest Expense

     Interest  expense was  $364,000  and $0 during the three months ended March
31, 2002 and 2001,  respectively.  The 2002  amount  consisted  of $246,000  and
$118,000 for interest  expense and  amortization  of discounts and debt issuance
costs related to the convertible  notes payable issued during the fourth quarter
2001, respectively.

Other Expense

     In 1998, we began  negotiations  to acquire a third party.  The acquisition
never closed and negotiations  were terminated in 1999. We advanced funds to the
potential investee during the negotiation period which the third party agreed to
repay. In lieu of cash, we received common stock of the  privately-held  company
in our settlement with the third party.  During the three months ended March 31,
2001, we sold a portion of the common stock for a realized loss of $544,000.


                                       10
<PAGE>

Income from Discontinued Operations

     Income from  discontinued  operations  was $33,000 and $300,000  during the
three  months  ended  March  31,  2002  and  2001,  respectively.   Income  from
discontinued  operations  is  comprised  of revenue and expenses of $730,000 and
$697,000 during the three months ended March 31, 2002 and $300,000 and $0 during
the three months ended March 31, 2001, respectively. The discontinued operations
were sold in April 2002.

Liquidity and Capital Resources

     As of March 31, 2002,  our  principal  source of liquidity was our cash and
cash equivalents, amounting to $3.3 million.

     Cash used in our  operating  activities  during the three months ended 2002
and 2001 was $877,000 and $5,608,000,  respectively. Cash used in our operations
in 2002 was primarily  attributable to a net loss adjusted for non-cash  charges
related to stock-based  compensation,  amortization  of discounts on convertible
notes  payable,   amortization   of  debt  issuance  costs,   depreciation   and
amortization,   loss  on  securities   and  changes  in  operating   assets  and
liabilities.

     Cash used in our investing  activities  during the three months ended March
31, 2002 was $110,000,  while cash provided by our investing  activities  during
the three  months  ended March 31, 2001 was  $4,096,000.  Investment  activities
include the purchase of  short-term  investments  of $203,000 in 2002,  proceeds
from the sale of  short-term  investments  of $92,000 in 2002 and  $4,638,000 in
2001 and purchase of property and equipment of $543,000 in 2001.

     Cash used in our financing  activities  during the three months ended March
31, 2002 and 2001 was $23,000 and $0, respectively. Financing activities consist
of  additional  debt  issuance  costs paid in 2002  related to our  issuance  of
convertible notes payable during the fourth quarter of 2001.

     We  believe  that  our  existing  cash  balances  and  investments  will be
sufficient  to meet our  liquidity and capital  spending  requirements  at least
through the end of the first quarter 2003.  However,  we have been  unprofitable
since  inception,  have  incurred net losses in each year and, to date,  we have
generated only limited revenues. Furthermore, our funding of working capital and
current and future operating losses may require additional  capital  investment.
We cannot be certain that additional debt or equity  financing will be available
when required or, if available,  that we can secure it on terms  satisfactory to
us.

Adjusted Results of Operations

    The table below sets forth adjusted net loss and adjusted net loss per share
data to assist readers in understanding our cash-based operating results.  These
adjustments  are  not in  accordance  with,  or an  alternative  to,  accounting
principles  generally accepted in the United States and may be different for the
presentation of financial information provided by other companies.

                                              Three Months Ended March 31,
                                              ----------------------------
                                                    2002           2001
                                                    ----           ----

Net loss..............................        $ (1,615,564)   $ (7,641,079)
Adjustments:
     Stock-based compensation.........             349,280       1,544,574
     Depreciation and amortization....              99,094         395,994
     Loss on write-down of security...                  --         544,274
     Interest expense (non-cash)......             118,013              --
                                              ------------    ------------
Adjusted net loss.....................        $ (1,049,177)   $ (5,156,237)
                                              ============    ============
Basic and diluted adjusted net
     loss per common share............        $      (0.06)   $      (0.29)
                                              ============    ============
Weighted average number of
     common shares outstanding........          18,367,137      17,783,000


                                       11
<PAGE>

Risk Factors

     Investing in our securities  involves a high degree of risk. In addition to
the other information  contained in this quarterly report,  including reports we
incorporate  by  reference,  you should  consider the following  factors  before
investing in our securities.

     We are a company with a limited operating  history in a changing  industry,
it is difficult to evaluate our business and prospects.

     Our  activities  to  date  have  concentrated  primarily  on  planning  and
developing  our  electronic  trading  system  for  brokering  telecommunications
bandwidth and other  telecommunications  products.  In September  2000, we began
operating  the  Ratexchange   Trading  System  for  trading   telecommunications
bandwidth and in December 2001 we  established  a securities  broker-dealer  and
investment  bank, RTX  Securities  Corporation.  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. There
can be no assurance that we will be successful in addressing these risks and our
failure  to do so could  have a  material  adverse  effect on our  business  and
results of operations.

     Our ability to attain a positive cash flow and become profitable depends on
our ability to generate and maintain greater revenues while incurring reasonable
expenses.  This, in turn,  depends,  among other things,  on the  development of
telecommunications   bandwidth   brokering  as  a  viable   commercial   market,
development of securities trading and investment banking business as well as our
ability to: establish, maintain and increase our client base; manage the quality
of services delivered by us and third party brokers and customers supporting our
trading system,  securities and banking  businesses;  compete  effectively  with
existing and potential  competitors;  further develop our business model; manage
expanding operations; and attract and retain qualified personnel.

     If we do  achieve  a  positive  cash flow and  profitability,  we cannot be
certain  that we will be able to  sustain or  increase  them on a  quarterly  or
annual basis in the future.  Our inability to achieve or maintain  profitability
or positive cash flow could result in disappointing  financial  results,  impede
implementation  of our growth  strategy or cause the market  price of our common
stock to  decrease.  Accordingly,  we cannot  assure you that we will be able to
generate profits, which makes our ability to implement successfully our business
plan uncertain.

     Because we are a developing company,  the factors upon which we are able to
base our  estimates  as to the gross  revenues  and the number of  participating
clients  that will be  required  for us to attain a  positive  cash flow and any
additional  financing that may be needed for this purpose, are unpredictable and
extremely  limited.  In  addition,  the  business in which we operate is new and
rapidly changing.  For these and other reasons, we can give no assurance that we
will not require higher gross revenues,  a greater number of clients,  a greater
numbers of securities  and banking  transactions,  a greater  number of emerging
commodity  transactions  and/or  more  time  in  order  for us to  complete  the
development that we believe we need to be able to cover our operating  expenses,
or obtain the funds  necessary to finance  this  development.  In fact,  because
actual  events more often than not differ from  anticipated  events,  it is more
likely than not that our estimates will prove to be inaccurate.  Furthermore, in
the event that  financing  is needed in  addition to the amount that is required
for this development,  we cannot assure that such financing will be available on
acceptable  terms, if at all.  Accordingly,  we can neither assure nor represent
that our business will ever generate a positive cash flow or be profitable.

     We have a history of operating losses and we anticipate losses and negative
cash flow for the foreseeable future. Unless we are able to generate profits and
positive cash flow we may not be able to continue operations.

     We have  incurred  net losses and  generated  only  nominal  revenues  from
operations  since our inception and financed our  operations  primarily  through
sales of equity and debt  securities.  We incurred net losses of $1,616,000  and
$7,641,000 during the three months ended March 31, 2002 and 2001,  respectively,
and negative  cash flow from  operations of $877,000 and  $5,608,000  during the
three months ended March 31, 2002 and 2001, respectively.  As of March 31, 2002,
our accumulated  deficit since inception was  $89,429,000.  We expect net losses
and negative cash flow to continue, at least into the fourth quarter of 2002. We
may  never  achieve  profitability  and  even if we do,  we may not  sustain  or
increase it on a quarterly  or annual  basis in the future.  If we are unable to
achieve or sustain profitability, we may be unable to continue our operations.


                                       12
<PAGE>

     We may require additional funding in the event our revenues do not meet our
projections,  our  expenses are greater  than we  anticipate,  or to finance the
further  development  of  our  business.  Our  inability  to  obtain  additional
financing, if required, would have an adverse effect on our business.

     We expect that our current liquidity,  together with our existing resources
will be  sufficient to meet our cash  requirements  for at least the next twelve
months.  However,  if  our  actual  costs  are  higher  than  projected  or  our
contemplated future revenues fall below our current expectations, we may require
additional  financing before the expiration of twelve months.  In such event, we
will be forced to seek additional financing, most likely from one or more public
or private equity or debt offerings. We currently have no commitments for any of
such  additional  funding  and may not be able to  raise  needed  cash on  terms
acceptable  to us or at all.  Financings  may be on terms that are  dilutive  or
potentially  dilutive to our stockholders.  Further, our lack of tangible assets
to pledge could prevent us from  establishing a source of financing.  If sources
of financing are required, but are insufficient or unavailable,  we will need to
modify our growth and operating plans to the extent of available funding,  which
would have an adverse  effect on the  successful  implementation  of our planned
business development.

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

     The  markets  for  securities   brokerage,   investment  banking  and  data
aggregation  for emerging  commodities  are highly  competitive.  Our ability to
compete  with other  companies  will depend  largely upon our ability to capture
market share by obtaining  sufficient  participants for the Ratexchange  Trading
System and customers for our brokerage and banking services.

     Increased pressure created by any current 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 fees 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 also could have a
material  adverse  effect on our business and results of  operations.  We cannot
assure that we will be able to compete  successfully  against current and future
competitors.  In  addition,  new  technologies,  services  and the  expansion of
existing technologies or services 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  have  developed  an  electronic  trading  system  for  trading  futures
contracts,  options on futures  contracts  and swaps for the purchase or sale of
bandwidth and other emerging commodity  products.  Futures contracts and options
on futures  contracts  are  within the  jurisdiction  of the  Commodity  Futures
Trading Commission (CFTC).  Currently,  the Commodity Exchange Act provides that
futures  contracts  may be  entered  into only on a board of trade that has been
designated  by the CFTC as a  contract  market.  The CFTC has  never  determined
whether some or all swap agreements are futures or options  contracts subject to
regulation under the Commodity Exchange Act and the CFTC's regulations. The CFTC
has, however,  issued a policy statement stating that most swap transactions are
not appropriately  regulated as futures or options contracts under the Commodity
Exchange Act or the CFTC's regulations. The CFTC has also issued rules exempting
swap  agreements  from most  provisions  of the  Commodity  Exchange Act and the
CFTC's regulations  provided certain  conditions are satisfied.  These exemptive
rules do not permit  swaps to be traded on  traditional  exchanges.  Neither the
CFTC's policy  statement,  which is limited in its  application to  cash-settled
swaps,  nor the CFTC's  exemptive  rules  permit  swaps to be cleared,  and both
impose other restrictions on swaps. As a result, under the current statutory and
regulatory scheme applicable to swaps, should we elect in the future to list for
trading or clearing of swap agreements, we may need to request an exemption from
the CFTC to do so. The CFTC is under no obligation to reach a decision  within a
certain period or to grant an exemption.

     We have registered as a securities  broker-dealer and, as such, are subject
to substantial  regulations.  Our failure to comply with these  regulations  may
adversely affect our business.

     We registered  our wholly owned  subsidiary  with the SEC and the NASD as a
securities   broker-dealer  in  December  2001  and  are  subject  to  extensive
regulation under federal and state laws. The principal purpose of regulation and
discipline of  broker-dealers  is the protection of customers and the securities
markets rather than


                                       13
<PAGE>

protection  of creditors  and  stockholders  of  broker-dealers.  The SEC is the
federal agency charged with  administration of the federal securities laws. Much
of  the   regulation  of   broker-dealers,   however,   has  been  delegated  to
self-regulatory  organizations,   such  as  the  NASD  and  national  securities
exchanges.  The  NASD  is  our  primary  self-regulatory   organization.   These
self-regulatory  organizations adopt rules (which are subject to approval by the
SEC) that  govern the  industry  and  conduct  periodic  examinations  of member
broker-dealers.   Broker-dealers   are  also  subject  to  regulation  by  state
securities  commissions  in  the  states  in  which  they  are  registered.  The
regulations  to which  broker-dealers  are  subject  cover  all  aspects  of the
securities business, including net capital requirements,  sales methods, trading
practices among  broker-dealers,  capital structure of securities firms,  record
keeping and the conduct of directors,  officers and  employees.  The SEC and the
self-regulatory bodies may conduct administrative proceedings,  which can result
in censure,  fine,  suspension or expulsion of a broker-dealer,  its officers or
employees.  If we fail to comply with these rules and regulations,  our business
would be materially and adversely affected.

     If we lose the services of our executive officers,  or if we cannot recruit
and retain additional skilled personnel, our business may suffer.

     We  depend  on  the  continued  services  and  performance  of D.  Jonathan
Merriman,  our Chairman and Chief Executive Officer,  for our future success. We
currently have an employment agreement with Mr. Merriman,  which ends on October
8, 2003 but can be terminated by either party on 60 day's notice.

     In addition to Mr. Merriman,  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 his or her
current  position,  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. If we are unable to retain our key employees
or attract,  integrate or retain other highly qualified employees in the future,
such failure may have a material  adverse  effect on our business and results of
operations.

     We may be unable to effectively manage rapid growth that we may experience,
which could place a continuous strain on our resources.

     We plan to expand our  operations.  Our growth,  if it occurs,  will impose
significant demands on our management, financial, technical and other resources.
To manage our future growth we must adapt to changing  business  conditions  and
improve  existing  systems  or  implement  new  systems  for our  financial  and
management  controls,  reporting  systems and procedures  and expand,  train and
manage a growing employee base.  Furthermore,  in order to achieve rapid growth,
we may acquire technologies or products or enter into strategic  alliances.  For
us to succeed we must make our  existing  technology,  business and systems work
effectively  with  those  of  any  strategic  partners  without  undue  expense,
management distraction or other disruptions to our business. In addition, we may
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 fail to manage any of the above growth
challenges  successfully,  we may be unable to implement  our business  plan. If
that  occurs,  our  financial  results  may  suffer  and we could be  materially
adversely affected.

     We may not be able to protect and enforce our intellectual property rights,
which  could  result in the loss of our rights,  loss of  business or  increased
costs.

     Our  performance  and  ability to compete is  dependent  to a degree on our
proprietary technology,  including, but not limited to the design of the trading
and data aggregation  capabilities of the Ratexchange  Trading System. We regard
our  copyrighted   material,   software   design,   trade  secrets  and  similar
intellectual  property as necessary to our success, and we rely on trademark and
copyright  laws,  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. If we are unable to
secure or  protect  our marks and  systems,  it could  result in the loss of our
rights to our marks and  systems,  or the loss of business.  In addition,  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.


                                       14
<PAGE>

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

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

     Third  parties may claim that our business  activities  infringe upon their
proprietary  rights. From time to time in the ordinary course of business we may
be subject to claims of  infringement  of third  parties'  trademarks  and other
intellectual  property  rights.  Such  claims  could  subject us to  significant
liability and result in  invalidation of our  proprietary  rights.  These claims
could also be time-consuming and expensive to defend,  even if we ultimately are
not found liable.  In addition,  these claims could divert our management's time
and attention from the operation of our business.

     Our  business  is  dependent  on the  development  and  maintenance  of the
Internet infrastructure.

     Our success will depend,  in part,  upon the development and maintenance of
the Internet  infrastructure  as a reliable  network backbone with the necessary
speed, data capacity and security,  and timely development of enabling products,
such as high-speed  modems, for providing reliable Internet access and services.
We  cannot  assure  you  that  the  Internet  infrastructure  will  continue  to
effectively  support  the  demands  placed on it as the  Internet  continues  to
experience  increased  numbers of users,  greater  frequency of use or increased
bandwidth  requirements  of  users.  Even  if the  necessary  infrastructure  or
technologies  are  developed,  we may have to expend  considerable  resources to
adapt our  offerings  accordingly.  Furthermore,  in the past,  the Internet has
experienced a variety of outages and other delays.  Any future outages or delays
could affect our ability to use the Internet as a successful  trading medium. If
any of these events  occur,  our business,  results of operations  and financial
condition could be materially and adversely affected.

     We  may  be  adversely   affected  by  government   regulations  and  legal
uncertainties associated with the Internet.

     Laws  and  regulations  directly  applicable  to  Internet  communications,
commerce and advertising  are becoming more  prevalent,  but the legislative and
regulatory  treatment  of the  Internet  remains  largely  unsettled.  The  U.S.
Congress  has  adopted  Internet  laws  regarding  copyright,  taxation  and the
protection of children.

     In addition,  a number of other legislative and regulatory  proposals under
consideration by federal,  state,  local and foreign  governments  could lead to
additional laws and regulations affecting, among other things:

      o      the right to collect and use personally identifiable information;
      o      pricing;
      o      intellectual property;
      o      online content;
      o      user privacy;
      o      taxation;
      o      access charges;
      o      distribution;
      o      liability for third-party activities; and
      o      characteristics and quality of products and services.


                                       15
<PAGE>

     The adoption of any additional  laws or regulations may decrease the growth
of the  Internet or other online  services,  which  could,  in turn,  reduce 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,  courts may seek to apply existing laws not explicitly relating to the
Internet  in ways that  could  impact  the  Internet,  and it may take  years to
determine  whether and how laws such as those governing  intellectual  property,
privacy, libel and taxation will affect the Internet and our use of it.

     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.

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

     Our success, in particular our ability to successfully facilitate bandwidth
and securities  brokerage 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, telecommunication failures,
break-ins,  earthquake and similar events. Despite the implementation of network
security measures,  our servers are vulnerable to computer viruses,  physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and fulfill customer orders.

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

     To  remain  competitive,  we must  continue  to  enhance  and  improve  the
responsiveness,  functionality  and features of the Ratexchange  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 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 our other  proprietary  technology  entails  significant
technical  and  business  risks.   There  can  be  no  assurance  that  we  will
successfully use new technologies effectively or adapt proprietary technology to
user  requirements  or emerging  industry  standards.  Our failure to adapt in a
timely manner to changing market  conditions or customer  requirements,  whether
for technical,  legal, financial or other reasons, could have a material adverse
effect on our business and results of operations.

     Because our business involves the transmission of information, we may incur
liability for information retrieved from or transmitted over the Internet.

     We may be subject to claims relating to information  that is posted or made
available  on  our  web  site,  including  claims  for  defamation,   obscenity,
negligence  or copyright or  trademark  infringement.  We also may be subject to
claims based on the nature,  publication or distribution of our content or based
on errors or false or  misleading  information  provided on our web site.  These
types of claims  have  been  brought,  sometimes  successfully,  against  online
services in the past.  We could also be sued for the content that is  accessible
from  our web site  through  links to other  Internet  sites.  Although  we have
commercial  liability insurance with $2 million coverage, a $5 million umbrella,
errors and  omissions and  directors  and officers  coverage,  awards may exceed
these  amounts.  Our insurance may not provide for coverage for certain of these
types of claims and,  therefore,  may not adequately protect us against them. In
addition,  we could incur  significant costs in investigating and defending such
claims,  even if we  ultimately  are not found  liable.  If any of these  events
occur,  our business,  results of operations  and financial  condition  could be
materially and adversely affected.


                                       16
<PAGE>

     Computer viruses may cause our systems to incur delays or interruptions and
may increase our expenses or liabilities.

     Computer  viruses  may cause our systems to incur  delays or other  service
interruptions,  which may cause us to incur  additional  operating  expenses  to
correct problems we may experience. In addition, the inadvertent transmission of
computer  viruses could expose us to a material  risk of loss or litigation  and
possible  liability.  Moreover,  if a  computer  virus  affecting  our system is
publicly  disclosed,  our reputation could be materially damaged and our visitor
traffic may decrease.

Forward-Looking Statements

     Some of the statements  contained,  or incorporated  by reference,  in this
quarterly report discuss future expectations,  contain projections of results of
operations or financial condition or state other "forward-looking"  information.
Those statements are subject to known and unknown risks, uncertainties and other
factors  that could  cause the actual  results to differ  materially  from those
contemplated by the statements.  The  "forward-looking"  information is based on
various factors and was derived using numerous  assumptions.  In some cases, you
can identify these so-called  "forward-looking  statements" by words like "may,"
"will," "should," "expects," "plans,"  "anticipates,"  "believes,"  "estimates,"
"predicts,"  "potential"  or "continue" or the negative of those words and other
comparable  words.  You should be aware that those  statements  only reflect our
predictions.  Actual  events or  results  may  differ  substantially.  Important
factors that could cause our actual results to be materially  different from the
forward-looking  statements are disclosed  throughout this report,  particularly
under the heading "Risk Factors" above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The   following   discussion   about  market  risk   disclosures   involves
forward-looking  statements.  Actual results could differ  materially from those
projected in the forward-looking  statements.  We may be exposed to market risks
related to changes in interest rates and foreign currency  exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

     Our  exposure  to market risk  resulting  from  changes in  interest  rates
relates  primarily to our investment  portfolio and long term debt  obligations.
Our  interest  income and cash flows may be  impacted  by changes in the general
level of U.S.  interest rates. We do not hedge this exposure  because we believe
that  we are  not  subject  to any  material  market  risk  exposure  due to the
short-term  nature of our  investments.  We would not  expect an  immediate  10%
increase or decrease in current  interest rates to have a material effect on the
fair market value of our investment portfolio.

     Our long term debt obligations bear interest at a fixed rate.  Accordingly,
an immediate 10% increase or decrease in current  interest  rates would not have
an impact on our  interest  expense or cash flows.  The fair market value of our
long term fixed interest rate debt is subject to interest rate risk.  Generally,
the fair  market  value of fixed  interest  rate debt will  increase as interest
rates fall and decrease as interest rates rise. We would not expect an immediate
10% increase or decrease in current  interest rates to have a material impact on
the fair market value of our long term debt obligations.

Foreign Currency Risk

     We do not have any foreign  currency  denominated  assets or liabilities or
purchase  commitments and have not entered into any foreign currency  contracts.
Accordingly,  we are not exposed to  fluctuations in foreign  currency  exchange
rates.


                                       17
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     Martin v.  Ratexchange  - On October 3, 2001,  Gregory  Martin and Patricia
Whitney filed a lawsuit  against  Ratexchange  Corporation  in the United States
District Court for the Western District of Washington, C01-1565R alleging breach
of  contract.  In 1998,  Mr.  Martin  was the  President  and CEO of  NetAmerica
International  Corporation (NAMI), a predecessor of Ratexchange Corporation.  In
December of 1998, Mr. Martin was terminated  from his employment  with NAMI. The
claims allege breach of agreements associated with Mr. Martin's employment.  The
complaint asks for damages of approximately  $150,000. Mr. Martin had filed suit
previously in a Washington  State court.  That matter was dismissed  following a
settlement  in May of  1999.  Mr.  Martin  has now  revived  his  claim  against
Ratexchange.  The  matter  is  being  defended  by  Ratexchange  and  is in  the
preliminary  stages of litigation.  We have recorded the estimated loss exposure
in the consolidated balance sheet as of March 31, 2002.

     Additionally,  from  time to time,  we are  involved  in  ordinary  routine
litigation incidental to our business.

ITEM 6. Exhibits and Reports on Form 8-K

(a)  Exhibit      Description
     -------      -----------
     10.39        Stock Purchase Agreement between Ratexchange and BL Partners,
                  LLC, dated April 9,  2002.

     10.40        Assignment and Bill of Sale between Ratexchange and  Forsythe-
                  McArthur & Associates, Inc.

     10.41        Equipment Purchase  Agreement  between  Ratexchange and Enavis
                  Networks, Inc., dated April 8, 2002.

(b)  Reports on Form 8-K

     Form 8-KA (Item 4 reported) filed on April 15, 2002.


                                       18
<PAGE>

                                   SIGNATURES

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

                                    RATEXCHANGE CORPORATION


    April 30, 2002                  By: /s/ D. JONATHAN MERRIMAN
                                    ----------------------------
                                    D. Jonathan Merriman,
                                    Chairman of the Board and
                                    Chief Executive Officer
                                    (Duly Authorized Officer)


    April 30, 2002                  By: /s/ GREGORY S. CURHAN
                                    -------------------------
                                    Gregory S. Curhan
                                    Executive Vice President and
                                    Chief Financial Officer
                                    (Principal Financial Officer)


                                       19