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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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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, 2003.



| ̈ |  | 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



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RATEXCHANGE CORPORATION

(Exact Name of Registrant as Specified in its Charter)



|Delaware                                                       |  | 11-2936371                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                              
|100 Pine Street, Suite 500 San Francisco, California           |  | 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 ̈



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ̈No x



As of April 30, 2003, 26,193,341 shares of the
registrants common stock, $0.0001 par value, were outstanding.



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##### Table Of Contents



Ratexchange Corporation

Form 10-Q

For the Three Months Ended March 31, 2003



|                                                                                                    |  | Page No.
|--------------------------------------------------------------------------------------------------- |  | --------
|PART I    FINANCIAL INFORMATION                                                                     |  |         
|                                                                                                   
|ITEM 1.    Financial Statements (unaudited)                                                         |  |         
|                                                                                                   
|Condensed Consolidated Statements of Operations For the Three Months Ended March 31, 2003 and 2002  |  | 3       
|                                                                                                   
|Condensed Consolidated Statements of Financial Condition as of March 31, 2003 and December 31, 2002 |  | 4       
|                                                                                                   
|Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2003 and 2002  |  | 5       
|                                                                                                   
|Notes to Condensed Consolidated Financial Statements                                                |  | 6       
|                                                                                                   
|ITEM 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations    |  | 10      
|                                                                                                   
|ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk                               |  | 21      
|                                                                                                   
|ITEM 4.    Controls and Procedures                                                                  |  | 21      
|                                                                                                   
|PART II    OTHER INFORMATION                                                                        |  |         
|                                                                                                   
|ITEM 1.    Legal Proceedings                                                                        |  | 22      
|                                                                                                   
|ITEM 6.    Exhibits and Reports on Form 8-K                                                         |  | 22      
|                                                                                                   
|Signatures                                                                                          |  | 23      
|                                                                                                   
|Certifications                                                                                      |  | 24      







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##### Table Of Contents



PART I. FINANCIAL
INFORMATION

Item 1. Financial Statements (unaudited)



RATEXCHANGE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                         |  | Three Months Ended March 31, |           
|---------------------------------------- |  | ---------------------------- | ----------
|                                         |  | 2003                         |           
|Revenue:                                 |  |                              |           
|Commissions                              |  | $                            | 1,279,841 
|Principal transactions                   |  |                              | 215,340   
|Investment banking                       |  |                              | 371,875   
|Other                                    |  |                              |          
|                                         |  |                              |           
|Total revenue                            |  |                              | 1,867,056 
|                                         |  |                              |           
|Operating expenses:                      |  |                              |           
|Compensation and benefits                |  |                              | 1,387,936 
|Brokerage and clearing fees              |  |                              | 302,520   
|Professional services                    |  |                              | 84,089    
|Occupancy and equipment                  |  |                              | 74,172    
|Communications and technology            |  |                              | 184,821   
|Depreciation and amortization            |  |                              | 15,230    
|Other                                    |  |                              | 436,813   
|                                         |  |                              |           
|Total operating expenses                 |  |                              | 2,485,581 
|                                         |  |                              |           
|Operating loss                           |  |                              | (618,525  
|Interest income                          |  |                              | 4,101     
|Interest expense                         |  |                              | (212,071  
|                                         |  |                              |           
|Loss from continuing operations          |  |                              | (826,495  
|Loss from discontinued operations        |  |                              |          
|                                         |  |                              |           
|Net loss                                 |  | $                            | (826,495  
|                                         |  |                              |           
|Basic and diluted net loss per share:    |  |                              |           
|Loss from continuing operations          |  | $                            | (0.04     
|                                         |  |                              |           
|Loss from discontinued operations        |  | $                            |          
|                                         |  |                              |           
|Net loss                                 |  | $                            | (0.04     
|                                         |  |                              |           
|Weighted average number of common shares |  |                              | 23,521,580



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



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RATEXCHANGE
CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)



|                                                                                                                                                                                                                                                  |  | March 31, 2003 |             |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|ASSETS                                                                                                                                                                                                                                            |  |                |             |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                         |  | $              | 1,208,586   |   |                   | $
|Securities owned:                                                                                                                                                                                                                                 |  |                |             |   |                   |  
|Marketable, at fair value                                                                                                                                                                                                                         |  |                | 557,089     |   |                   |  
|Not readily marketable, at estimated fair value                                                                                                                                                                                                   |  |                | 17,053      |   |                   |  
|Restricted cash                                                                                                                                                                                                                                   |  |                | 610,240     |   |                   |  
|Due from clearing broker                                                                                                                                                                                                                          |  |                | 183,548     |   |                   |  
|Accounts receivable, net                                                                                                                                                                                                                          |  |                | 16,195      |   |                   |  
|Equipment and fixtures, net                                                                                                                                                                                                                       |  |                | 65,132      |   |                   |  
|Debt issuance costs                                                                                                                                                                                                                               |  |                | 595,654     |   |                   |  
|Prepaid expenses and other assets                                                                                                                                                                                                                 |  |                | 151,958     |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total assets                                                                                                                                                                                                                                      |  | $              | 3,405,455   |   |                   | $
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                                             |  |                |             |   |                   |  
|Accounts payable                                                                                                                                                                                                                                  |  | $              | 280,712     |   |                   | $
|Commissions payable                                                                                                                                                                                                                               |  |                | 395,848     |   |                   |  
|Accrued liabilities                                                                                                                                                                                                                               |  |                | 464,354     |   |                   |  
|Due to clearing and other brokers                                                                                                                                                                                                                 |  |                | 50,102      |   |                   |  
|Securities sold, not yet purchased                                                                                                                                                                                                                |  |                | 5,100       |   |                   |  
|Capital lease obligation                                                                                                                                                                                                                          |  |                | 4,551       |   |                   |  
|Convertible notes payable, net                                                                                                                                                                                                                    |  |                | 8,529,387   |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total liabilities                                                                                                                                                                                                                                 |  |                | 9,730,054   |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Commitments and contingencies                                                                                                                                                                                                                     |  |                |             |   |                   |  
|Stockholders deficit:                                                                                                                                                                                                                            |  |                |             |   |                   |  
|Preferred stock, $0.0001 par value; 60,000,000 shares authorized; 619,999 and 499,999
shares issued and outstanding as of March 31, 2003 and December 31, 2002, respectively; aggregate liquidation preference of $1,871,108 as of March 31, 2003 |  |                | 62          |   |                   |  
|Common stock, $0.0001 par value; 300,000,000 shares authorized; 23,521,580 shares issued
and outstanding as of March 31, 2003 and December 31, 2002                                                                                               |  |                | 2,352       |   |                   |  
|Additional paid-in capital                                                                                                                                                                                                                        |  |                | 85,865,959  |   |                   |  
|Accumulated deficit                                                                                                                                                                                                                               |  |                | (92,192,972 | ) |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total stockholders deficit                                                                                                                                                                                                                       |  |                | (6,324,599  | ) |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total liabilities and stockholders deficit                                                                                                                                                                                                       |  | $              | 3,405,455   |   |                   | $
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  



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



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RATEXCHANGE
CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                            |  | Three Months Ended March 31, |          
|--------------------------------------------------------------------------- |  | ---------------------------- | ---------
|                                                                            |  | 2003                         |          
|Cash flows from operating activities:                                       |  |                              |          
|Net loss                                                                    |  | $                            | (826,495 
|Adjustments to reconcile net loss to net cash used in operating
activities: |  |                              |          
|Depreciation and amortization                                               |  |                              | 15,230   
|Common stock issued for services                                            |  |                              |         
|Stock options and warrants granted or modified                              |  |                              | 31,250   
|Amortization of discounts on convertible notes payable                      |  |                              | 74,302   
|Amortization of debt issuance costs                                         |  |                              | 17,019   
|Unrealized (gain) loss on securities                                        |  |                              | (28,299  
|Common stock received for advisory services                                 |  |                              |         
|Changes in operating assets and liabilities:                                |  |                              |          
|Assets and liabilities of discontinued operations                           |  |                              |         
|Marketable securities owned                                                 |  |                              | 239,745  
|Due from clearing broker                                                    |  |                              | (59,495  
|Accounts receivable                                                         |  |                              | 11,466   
|Prepaid expenses and other assets                                           |  |                              | 10,211   
|Accounts payable                                                            |  |                              | 168,671  
|Commissions payable                                                         |  |                              | 70,497   
|Accrued liabilities                                                         |  |                              | 121,900  
|Due to clearing and other brokers                                           |  |                              | (13,448  
|Deferred revenue                                                            |  |                              |         
|                                                                            |  |                              |          
|Net cash used in operating activities                                       |  |                              | (167,446 
|Cash flows from investing activities:                                       |  |                              |          
|Purchase of equipment and fixtures                                          |  |                              | (26,595  
|                                                                            |  |                              |          
|Net cash used in investing activities                                       |  |                              | (26,595  
|Cash flows from financing activities:                                       |  |                              |          
|Debt issuance costs                                                         |  |                              |         
|                                                                            |  |                              |          
|Net cash used in financing activities                                       |  |                              |         
|                                                                            |  |                              |          
|Decrease in cash and cash equivalents                                       |  |                              | (194,041 
|Cash and cash equivalents at beginning of period                            |  |                              | 1,402,627
|                                                                            |  |                              |          
|Cash and cash equivalents at end of period                                  |  | $                            | 1,208,586
|                                                                            |  |                              |          
|                                                                           
|Supplementary disclosure of cash flow information:                          |  |                              |          
|Cash paid during the period:                                                |  |                              |          
|Interest                                                                    |  | $                            | 105,000  
|Income taxes                                                                |  | $                            |         
|Non-cash investing and financing activities:                                |  |                              |          
|Preferred stock dividends                                                   |  | $                            | 41,708   
|Common stock issued to settle accrued liabilities                           |  | $                            | 4,551    



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



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RATEXCHANGE
CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



1.    Significant Accounting Policies



Basis of Presentation



The interim financial statements included herein for
Ratexchange Corporation, or the Company, have been prepared, 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 2002 audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2002.



Institutional Brokerage Revenues



Agency commission revenue includes revenue resulting from
executing stock exchange-listed securities, over-the counter securities and other transactions as agent. Principal transactions consist of a portion of dealer spreads attributed to the Companys securities trading activities as principal in
NASDAQ-listed and other securities, and include transactions derived from activities as a market-maker. Additionally, principal transactions include gains and losses resulting from market price fluctuations that occur while holding positions in
trading security inventory. Revenue generated from institutional brokerage transactions and related expenses are recorded on a trade date basis.



Investment Banking Revenues



Investment banking revenue represents fees earned from private placement offerings, mergers and acquisitions, financial restructuring and
other advisory services provided to clients. Investment banking fees are recorded as revenue when the related service has been rendered and the client is contractually obligated to pay. Certain fees received in advance of services rendered are
recognized as revenue over the service period.



Stock-Based
Compensation



The Company uses the intrinsic
value-based method in accordance with Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, to account for employee stock-based compensation. Accordingly, compensation cost is recorded on the date of
grant to the extent the fair value of the underlying share of common stock exceeds the exercise price for a stock option or the purchase price for a share of common stock. Such compensation cost is amortized on a straight-line basis over the vesting
period of the individual award. Pursuant to Statement of Financial Accounting Standards, or SFAS, No. 123, Accounting for Stock-Based Compensation, the Company discloses the pro forma effect of using the fair value method of accounting for
employee stock-based compensation. Stock-based awards granted to nonemployees are accounted for pursuant to the fair value method in SFAS No. 123 and Issue No. 96-18 of the Emerging Issues Task Force. The associated expense is measured and
recognized by the Company over the period the services are performed by the nonemployee.



In December 2002, the Financial Accounting Standards Board, or FASB, issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS 148 amends SFAS 123 to provide
alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for financial statements for fiscal years ending after
December 15, 2002.



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RATEXCHANGE
CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

(unaudited)



The Company has elected to continue to account for its stock based compensation in accordance with the provisions of APB 25 and present
the pro forma disclosures required by SFAS 123 as amended by SFAS 148. Stock-based employee compensation for the three months ended March 31, 2003 and 2002 was accounted for under the intrinsic value method and, therefore, no compensation expense
was recognized for those stock options that had no intrinsic value at the date of grant.



If the Company were to recognize compensation expense over the relevant service period under the fair value method with respect to stock options granted for the three months ended March 31, 2003 and
all prior periods, net loss would have increased, resulting in pro forma net loss and net loss per share as presented below:



|                                                                                                  |  | Three Months Ended March 31, |           
|------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                                                  |  | 2003                         |           
|Net loss, as reported                                                                             |  | $                            | (826,495  
|Add: Stock-based employee compensation expense included in reported net
loss                      |  |                              | 31,250    
|Less: Stock-based employee compensation expense determined under fair value method for
all awards |  |                              | (662,176  
|                                                                                                  |  |                              |           
|Pro forma net loss                                                                                |  | $                            | (1,457,421
|                                                                                                  |  |                              |           
|Basic and diluted net loss per share, as reported                                                 |  | $                            | (0.04     
|                                                                                                  |  |                              |           
|Basic and diluted net loss per share, pro forma                                                   |  | $                            | (0.06     
|                                                                                                  |  |                              |           



Newly Issued
Accounting Standards



In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 nullifies previous guidance on accounting for costs associated with exit or disposal activities and requires a liability for these costs to be
recognized and measured at its fair value in the period in which the liability is incurred. SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. The adoption of this Standard did not have a material effect on the
Companys financial position or results of operations.



In November 2002, the Emerging Issues Task Force, or EITF, reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Management does
not believe the adoption of this Standard will have a material effect on the Companys financial position or results of operations.



In November 2002, the FASB issued FASB Interpretation, or FIN, No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 clarifies the requirements of SFAS No. 5, Accounting for Contingencies, relating to the guarantors accounting for and disclosures of certain guarantees
issued. The initial recognition and measurement provisions of the Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantors fiscal year-end. The adoption of
this Interpretation did not have a material effect on the Companys financial position or results of operations.





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RATEXCHANGE
CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

(unaudited)



In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN No. 46 clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or in which equity investors do not bear the residual
economic risks. The Interpretation applies to variable interest entities, or VIEs, created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. It applies in the fiscal year or interim period beginning
after June 15, 2003, to VIEs in which an enterprise holds a variable interest that was acquired before February 1, 2003. Management does not believe the adoption of this Interpretation 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 19,774,185 and 20,925,746 shares of common stock as of March 31, 2003 and 2002, and 619,999 and 2,000,000 shares of convertible preferred stock at March 31, 2003 and 2002, respectively, were not included in computing diluted loss per
share because their effects were anti-dilutive.



|                                            |  | Three Months Ended March 31, |           
|------------------------------------------- |  | ---------------------------- | ----------
|                                            |  | 2003                         |           
|Net loss                                    |  | $                            | (826,495  
|Preferred stock dividends                   |  |                              | (41,696   
|                                            |  |                              |           
|Net loss available to common stockholders   |  | $                            | (868,191  
|Weighted-average number of common shares    |  |                              | 23,521,580
|                                            |  |                              |           
|Basic and diluted net loss per common share |  | $                            | (0.04     
|                                            |  |                              |           



3.    Regulatory Requirements



RTX Securities Corporation, a wholly-owned subsidiary, is a broker-dealer subject to Rule 15c3-1 of the Securities Exchange Act of 1934, which specifies uniform minimum net capital requirements, as defined, for their
registrants. As of March 31, 2003, RTX Securities had regulatory net capital, as defined, of $604,000, which exceeded the amount required by $498,000. RTX Securities is exempt from Rules 15c3-3 and 17a-13 under the Securities Act of 1934 because it
does not carry customer accounts, nor does it hold customer securities or cash.



4.    Subsequent Events



On April 3, 2003, the Company completed a private placement financing with gross proceeds of $2,750,000. The Company issued 8,750,000 shares of Series B convertible preferred stock at a purchase price of $0.20 per share and
convertible promissory notes with aggregate principle of $1,000,000. The preferred stock can be converted by the holders at a ratio of 1:1 into the Companys common stock. The promissory notes can be converted to common stock at a rate of $0.20
per share. In connection with the private placement, the Company also issued warrants to purchase 3,437,500 shares of common stock. The warrants issued to the holders of Series B preferred stock have an exercise price of $0.30 per share and a
three-year term. The warrants issued to the holders of the convertible promissory notes have an exercise price of $0.30 per share and a five-year term. The transaction included institutions and accredited investors. The convertible notes were
recorded in the statements of financial condition during the second quarter of 2003 net of a discount resulting from the relative fair value of the stock warrants in the amount of $129,000. The discount will be amortized over the five-year term.



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RATEXCHANGE
CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

(unaudited)



4.    Subsequent EventsContinued



On April 3, 2003, the Company exercised its right to cancel the convertible promissory note held by Forsythe
McArthur Associates, Inc., or Forsythe, dated September 1, 2001 with principal sum of $5,949,042 and accruing interest at a rate equal to 9.0% per annum. Forsythe received the following restructured consideration in full and complete satisfaction of
all obligations owed to it by the Company:



| | a. |  | $500,000 in cash;
| | -- |  | -----------------

| | b. |  | 2,000,000 shares of the Companys common stock, including demand registration rights; and
| | -- |  | -----------------------------------------------------------------------------------------

| | c. |  | a new promissory note of principal sum equal to $1,000,000 bearing interest at 3.5% per annum payable quarterly in cash, maturing on December 31, 2005.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



The Company will record a gain in
the amount of $3,088,000 during the second quarter of 2003 as a result this transaction.



The following unaudited pro forma balance sheet presents the effect of the private placement financing and the exercise of the option to cancel the convertible promissory note held by Forsythe as of
March 31, 2003 assuming that these transactions had occurred as of that date.



|                                                |  | As Reported |             |   | Private Financing |   |           | Forsythe Retirement |  |   | Pro Forma  |  
|----------------------------------------------- |  | ----------- | ----------- | - | ----------------- | - | --------- | ------------------- |  | - | ---------- | -
|ASSETS                                          |  |             |             |   |                   |   |           |                     |  |   |            |  
|Cash and cash equivalents                       |  | $           | 1,208,586   |   |                   | $ | 2,750,000 |                     |  | $ | (500,000   | )
|Securities owned:                               |  |             |             |   |                   |   |           |                     |  |   |            |  
|Marketable, at fair value                       |  |             | 557,089     |   |                   |   |          |                     |  |   |           |  
|Not readily marketable, at estimated fair value |  |             | 17,053      |   |                   |   |          |                     |  |   |           |  
|Restricted cash                                 |  |             | 610,240     |   |                   |   |          |                     |  |   |           |  
|Due from clearing broker                        |  |             | 183,548     |   |                   |   |          |                     |  |   |           |  
|Accounts receivable, net                        |  |             | 16,195      |   |                   |   |          |                     |  |   |           |  
|Equipment and fixtures, net                     |  |             | 65,132      |   |                   |   |          |                     |  |   |           |  
|Debt issuance costs                             |  |             | 595,654     |   |                   |   |          |                     |  |   |           |  
|Prepaid expenses and other assets               |  |             | 151,958     |   |                   |   |          |                     |  |   | (35,225    | )
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|Total assets                                    |  | $           | 3,405,455   |   |                   | $ | 2,750,000 |                     |  | $ | (535,225   | )
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|LIABILITIES AND STOCKHOLDERS DEFICIT           |  |             |             |   |                   |   |           |                     |  |   |            |  
|Accounts payable                                |  | $           | 280,712     |   |                   | $ |          |                     |  | $ |           |  
|Commissions payable                             |  |             | 395,848     |   |                   |   |          |                     |  |   |           |  
|Accrued liabilities                             |  |             | 464,354     |   |                   |   |          |                     |  |   |           |  
|Due to clearing and other brokers               |  |             | 50,102      |   |                   |   |          |                     |  |   |           |  
|Securities sold, not yet purchased              |  |             | 5,100       |   |                   |   |          |                     |  |   |           |  
|Capital lease obligation                        |  |             | 4,551       |   |                   |   |          |                     |  |   |           |  
|Note payable                                    |  |             |            |   |                   |   |          |                     |  |   | 1,105,000  |  
|Convertible notes payable, net                  |  |             | 8,529,387   |   |                   |   | 870,785   |                     |  |   | (5,128,455 | )
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|Total liabilities                               |  |             | 9,730,054   |   |                   |   | 870,785   |                     |  |   | (4,023,455 | )
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|Stockholders deficit:                          |  |             |             |   |                   |   |           |                     |  |   |            |  
|Preferred stock, Series A                       |  |             | 62          |   |                   |   |          |                     |  |   |           |  
|Preferred stock, Series B                       |  |             |            |   |                   |   | 875       |                     |  |   |           |  
|Common stock                                    |  |             | 2,352       |   |                   |   |          |                     |  |   | 200        |  
|Additional paid-in capital                      |  |             | 85,865,959  |   |                   |   | 2,206,014 |                     |  |   | 399,800    |  
|Accumulated deficit                             |  |             | (92,192,972 | ) |                   |   | (327,674  | )                   |  |   | 3,088,230  |  
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|Total stockholders deficit                     |  |             | (6,324,599  | ) |                   |   | 1,879,215 |                     |  |   | 3,488,230  |  
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  
|Total liabilities and stockholders deficit     |  | $           | 3,405,455   |   |                   | $ | 2,750,000 |                     |  | $ | (535,225   | )
|                                                |  |             |             |   |                   |   |           |                     |  |   |            |  





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



This Quarterly Report on Form 10-Q, including this Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of
our management. Words such as may, will, should, expects, anticipates, targets, goals, projects, intends, plans,
believes, seeks, estimates, predicts, potential or continue, variations of such words, and similar expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking statements. Readers are
cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any
forward-looking statements. Readers are referred to risks and uncertainties identified under Risk Factors beginning on Page 14 and elsewhere herein. We undertake no obligation to revise or update publicly any forward-looking statements
for any reason.



Overview



We are a securities broker-dealer and investment bank serving
emerging growth companies and institutional investors. We provide sales and trading services primarily to institutions, as well as advisory and investment banking services to our corporate clients. Our RTX Securities Corporation subsidiary is
registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc.



Our aim is to fill the void in San Francisco-based investment banking services for emerging-growth companies by offering research,
brokerage, investment banking, advisory and corporate services for our institutional and corporate clients. By the end of the 1990s, many of the investment banking firms that previously served emerging-growth companies were acquired by large
commercial banks and subsequently refocused to serve larger clients and larger transactions. We plan to fill this gap by originating differentiated research for our institutional investor clients and providing specialized services for our
emerging-growth corporate clients. The market sectors for our research focus include technology, telecommunications, consumer growth and life technology. Within these sectors, the industries covered include branded consumer, communications and
networking, data storage, enterprise software, entertainment and leisure, health enabling technology and service, restaurant, specialty consumer finance and wireless telecommunication. Our mission is to become a leader in the researching, advising,
financing and trading of emerging growth companies.



Business
Environment



The pace of global economic
growth remained slow during the first quarter of 2003. Uncertainty regarding the sustainability of the economic recovery, against a background of rising geopolitical tensions, led to lower equity prices and reduced corporate activity. In the United
States, the economy continued to grow at a modest pace, consistent with the subdued fourth quarter. Although there were some signs of a recovery in manufacturing, the labor market remained soft and weak consumer confidence dampened retail spending.
In addition, continued weakness in capital spending and concerns about the growth in corporate earnings and the geopolitical situation resulted in difficult market conditions. Industry-wide equity underwriting volumes and completed mergers and
acquisitions declined significantly from weak fourth quarter levels.



Our securities broker-dealer and investment banking activities are linked to the capital markets. In addition, our business activities are focused in the technology, telecommunications, consumer growth and life technology
sectors. By their nature, our business activities are highly competitive and are not only subject to general market conditions, volatile trading markets and fluctuations in the volume of market activity, but also to the conditions affecting the
companies and markets in our areas of focus.



Fluctuations in revenues also occur due to the overall level of market activity, which, among other things, affects the flow of investment dollars and the size, number and timing of investment banking transactions. In addition, a
downturn in the level of market activity can lead to a decrease in brokerage commissions. Therefore, revenues in any particular period may not be representative of full-year results and may vary significantly from year to year and from quarter to
quarter.



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The financial
services industry continues to be affected by an increasingly competitive environment. The relaxation of banks barriers to entry into the securities industry and expansion by insurance companies into traditional brokerage products, coupled
with the repeal of laws separating commercial and investment banking activities, has increased the number and size of companies competing for a similar customer base. Many of such competitors have greater capital resources and additional associated
services with which to pursue these activities.



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 us 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 condensed
consolidated financial statements.



Revenue Recognition



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 to date have been expensed as incurred.



Allowance for doubtful accounts



We maintain an allowance for doubtful accounts for estimated losses resulting from the inability or unwillingness 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.



Stock-Based Compensation



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. Our stock options and warrants have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates.



Deferred Tax Valuation Allowance



We have concluded that it is more likely than not that our deferred tax assets as of March 31, 2003 and December 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 will be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset will be recorded in
the period such determination is made.



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Results of Operations



Three Months ended March 31, 2003 Compared to Three
Months ended March 31, 2002



Revenue



Revenue from continuing operations was $1,867,000 and
$592,000 during the three months ended March 31, 2003 and 2002, respectively. The increase in revenue of approximately $1,275,000, or 215%, from 2002 to 2003 was attributed to the growth of our securities broker-dealer operations.



Agency commissions amounted to $1,280,000, or 69%, of our
revenue during the three months ended March 31, 2003. This represented a 145% increase over the $523,000 recognized during the three months ended March 31, 2002. The higher agency commissions were primarily attributed to the hiring of additional
sales and research professionals and an increase in the number of active client accounts during 2003 as compared to the similar period in 2002.



Principal transactions revenue, including proprietary trading for our own account, amounted to $215,000, or 12%, of our revenue during the
three months ended March 31, 2003. This represented a 1,057% increase compared to the $19,000 recognized during the three months ended March 31, 2002. We received approval from the NASD to trade proprietary positions during the second quarter of
2002.



Investment banking revenue amounted to
$372,000, or 20%, of our revenue during the three months ended March 31, 2003. This represented a 1,349% increase compared to the $26,000 recognized during the three months ended March 31, 2002. Investment banking revenue resulted primarily from
advisory service fees in connection with the closing of two transactions.



During the three months ended March 31, 2003, one customer accounted for 12% of our revenue from continuing operations, while one customer accounted for 32% of our revenue from continuing operations during the three months
ended March 31, 2002. During the three months ended March 31, 2003, two sales professionals each accounted for more than 10% of our revenue from continuing operations and combined accounted for 44%. Two sales professionals each accounted for more
than 10% of our revenue from continuing operations during the three months ended March 31, 2002, and combined accounted for 93%.



Compensation and Benefits



Compensation and benefits expense was $1,388,000 and $909,000 during the three months ended March 31, 2003 and 2002, respectively. The
increase of approximately $479,000, or 53%, from 2002 to 2003 was due primarily to higher commissions and variable compensation. Our headcount has increased from 19 in March 2002 to 46 in March 2003.



Brokerage and Clearing Fees



Brokerage and clearing fees were $303,000 and $158,000 during
the three months ended March 31, 2003 and 2002, respectively. The increase of approximately $145,000, or 92%, from 2002 to 2003 was due to greater volume of brokerage transactions during the first quarter of 2003 as compared to the similar period in
2002. 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.



Professional Services



Professional services expense was $84,000 and $140,000 during the three months ended March 31, 2003 and 2002, respectively. The decrease
of approximately $56,000, or 40%, from 2002 to 2003 was primarily attributed to outside consulting services incurred in connection with the winding down of our bandwidth trading business during 2002.



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Occupancy and Equipment



Occupancy and equipment expense was $74,000
and $80,000 during the three months ended March 31, 2003 and 2002, respectively. The decrease of approximately $6,000, or 8%, from 2002 to 2003 was the result of certain costs incurred during 2002 that pertained to the bandwidth trading business
that we exited during 2001.



Communications and Technology



Communications and technology expense was
$185,000 and $31,000 during the three months ended March 31, 2003 and 2002, respectively. The increase of approximately $154,000, or 497%, from 2002 to 2003 was due to higher telephone and data service fees incurred in our brokerage operations
during 2003. The higher telephone and data service charges are the result of increased headcount and the opening of offices in California and Massachusetts.



Depreciation and Amortization



Depreciation and amortization expense was $15,000 and $99,000 during the three months ended March 31, 2003 and 2002, respectively. The
decrease of approximately $84,000, or 85%, from 2002 to 2003 was due primarily to the disposal of equipment and fixtures not utilized during the fourth quarter of 2002. We purchased $31,000 of equipment and fixtures and did not dispose of any
equipment or fixtures during the first quarter of 2003.



Other
Operating Expenses



Other operating expense
was $437,000 and $180,000 during the three months ended March 31, 2003 and 2002, respectively. The increase of approximately $257,000, or 143%, from 2002 to 2003 was attributed to a loss on the settlement of a brokerage transaction with a contra
broker-dealer, as well as higher insurance expense. We expect to recover the amount of the loss from the brokerage transaction. However, since the outcome of the transaction is being administered by the United Stated Bankruptcy Court, the timing of
any recovery is uncertain, and accordingly, has not been recognized in the accompanying condensed consolidated financial statements.



Interest Income



Interest income was $4,000 and $15,000 during the three months ended March 31, 2003 and 2002, respectively. The decrease of approximately
$11,000, or 73%, from 2002 to 2003 was due to a lower average balance of interest earning assets, which decreased during the three months ended March 31, 2003 as compared to the similar period in 2002.



Interest Expense



Interest expense was $212,000 and $364,000 during the three
months ended March 31, 2003 and 2002, respectively. The 2003 amount consisted of $121,000 for interest expense and $91,000 for amortization of discounts and debt issuance costs, while the 2002 amount consisted of $246,000 for interest expense and
$118,000 for amortization of discounts and debt issuance costs. The decline in interest expense resulted from the modified terms of the convertible note payable held by Forsythe, which became effective January 1, 2003. For further information
concerning this transaction, see Note 4 to the condensed consolidated financial statements.



Loss from Discontinued Operations



Loss from discontinued operations was $0 and $263,000 during the three months ended March 31, 2003 and 2002, respectively. Loss from discontinued operations in 2002 was comprised of revenue and
expenses in the amount of $730,000 and $993,000, respectively. The discontinued operations were sold in April 2002.



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Liquidity and Capital
Resources



Historically, we have satisfied
our liquidity and regulatory capital needs through the issuance of equity and debt securities. As of March 31, 2003, we had long-term convertible notes payable of $8,529,000, net of certain discounts. In April 2003, we exercised a right we purchased
in November 2002 that allowed us to cancel the $5,949,042 convertible promissory note held by Forsythe, in exchange for the following restructured consideration in full and complete satisfaction of all obligations owed to them by us: (i) $500,000,
(ii) 2,000,000 shares of our common stock, and (iii) a new promissory note of principal sum equal to $1,000,000 bearing interest at 3.5% per annum payable quarterly in cash, maturing on December 31, 2005.



Our principal assets consist of cash and cash equivalents,
marketable securities held for trading purposes, restricted cash, receivables and equipment and fixtures. As of March 31, 2003, liquid assets consisted primarily of cash and cash equivalents of $1,209,000 and marketable securities of $557,000, for a
total of $1,766,000. In April 2003, we completed a private placement financing with gross proceeds of $2,750,000. We issued 8,750,000 shares of Series B convertible preferred stock at a purchase price of $0.20 per share and convertible promissory
notes with aggregate principle of $1,000,000.



RTX Securities, as a broker-dealer, is subject to Rule 15c3-1 of the Securities Exchange Act of 1934, which specifies uniform minimum net capital requirements, as defined, for their registrants. As of March 31, 2003, RTX Securities
had regulatory net capital, as defined, of $604,000, which exceeded the amount required by $498,000.



Cash and cash equivalents decreased by $194,000 during the three months ended March 31, 2003. Cash used in operating activities was
$167,000, primarily attributed to our net loss adjusted for certain non-cash expenses and gains, as well as increases and decreases in operating assets and liabilities. Non-cash expenses included depreciation and amortization, stock based
compensation and amortization of discounts on convertible notes payable. Cash used in investing activities was $27,000, reflecting the purchase of equipment and fixtures.



We believe that our existing cash balances and investments, including the cash raised through our private
financing in April 2003, will be sufficient to meet our liquidity and capital spending requirements. 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.



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.



It is difficult to evaluate our business and prospects because we have a
limited operating history.



In December
2001, we acquired a securities broker-dealer firm and created RTX Securities Corporation, a wholly-owned subsidiary, that began actively engaging in providing securities brokerage and investment banking services in January 2002. This is an entirely
new business for us, and is a complete break with the business previously engaged in by us, the bandwidth brokerage business. 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. We cannot assure you 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 our securities brokerage and investment banking business, as well as our ability to:



| |  |  | establish, maintain and increase our client base;
| | - |  | -------------------------------------------------



| |  |  | manage the quality of our services;
| | - |  | -----------------------------------



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| |  |  | compete effectively with existing and potential competitors;
| | - |  | ------------------------------------------------------------



| |  |  | further develop our business activities;
| | - |  | ----------------------------------------



| |  |  | 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 the cash flow and profits necessary to sustain our business expectations, which makes our ability to successfully implement 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. For these and other reasons, we cannot assure you that we will not require higher gross revenues, and an increased number of clients, securities brokerage and investment banking transactions, and/or more time in order for us to
complete the development of our business that we believe we need to be able to cover our operating expenses, or obtain the funds necessary to finance this development. It is more likely than not that our estimates will prove to be inaccurate because
actual events more often than not differ from anticipated events. Furthermore, in the event that financing is needed in addition to the amount that is required for this development, we cannot assure you that such financing will be available on
acceptable terms, if at all. Accordingly, we can neither assure nor represent to you that our business will ever generate a positive cash flow or be profitable.



We have a history of operating losses and negative cash flow and we anticipate losses and negative cash flow to continue
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 since our inception and financed our operations primarily through sales of equity and debt securities. We
incurred net losses of $3,405,000, $30,072,000 and $44,729,000 for the years ended December 31, 2002, 2001 and 2000, respectively, and negative cash flow from operations of $3,434,000, $13,360,000 and $17,161,000 in 2002, 2001 and 2000,
respectively. At March 31, 2003, our accumulated deficit since inception was $92,193,000. We expect operating losses and negative cash flow to continue for the foreseeable future. We may never achieve a positive cash flow and profitability and even
if we do, we may not sustain or increase them on a quarterly or annual basis in the future. If we are unable to achieve and sustain a positive cash flow and profitability, we may be unable to continue our operations.



The markets for securities brokerage and investment banking services are
highly competitive. If we are not able to compete successfully against current and future competitors, our business and results of operations will be adversely affected.



We are engaged in the highly competitive financial services and investment industries. We compete with large
Wall Street securities firms, securities subsidiaries of major commercial bank holding companies, U.S. subsidiaries of large foreign institutions, major regional firms, smaller niche players, and those offering competitive services via the Internet.
Many competitors have greater personnel and financial resources than we do. Larger competitors are able to advertise their products and services on a national or regional basis and may have a greater number and variety of distribution outlets for
their products, including retail distribution. Discount and Internet brokerage firms market their services through aggressive pricing and promotional efforts. In addition, some competitors have much more extensive investment banking activities than
we do and therefore, may possess a relative advantage with regard to access to deal flow and capital.



Increased pressure created by any current or future competitors, or by our competitors collectively, could materially and adversely affect
our business and results of operations. Increased competition may result in reduced revenue 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 materially



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and adversely affect our
business and results of operations. We cannot assure you 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 experience reduced revenues due to
declining market volume, price and liquidity, which can also cause counterparties to fail to perform.



Our revenues may decrease in the event of a decline in the market volume of securities transactions, prices or liquidity. Declines in the
volume of securities transactions and in market liquidity generally result in lower revenues from trading activities and commissions. Lower price levels of securities may also result in a reduction in our revenues from corporate finance fees, as
well as losses from declines in the market value of securities held by us in trading. Sudden sharp declines in market values of securities can result in illiquid markets and the failure of counterparties to perform their obligations, as well as
increases in claims and litigation, including arbitration claims from customers. In such markets, we may incur reduced revenues or losses in our principal trading, market-making, investment banking, and advisory services activities.



We may experience significant losses if the value of our marketable
security positions deteriorates.



We conduct
securities trading, market-making and investment activities for our own account, which subjects our capital to significant risks. These risks include market, credit, counterparty and liquidity risks, which could result in losses for us. These
activities often involve the purchase, sale or short sale of securities as principal in markets that may be characterized as relatively illiquid or that may be particularly susceptible to rapid fluctuations in liquidity and price.



We may experience significant fluctuations in our quarterly operating
results due to the nature of our business and therefore may fail to meet profitability expectations.



Our revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including:



| |  |  | the level of institutional brokerage transactions and the level of commissions we receive from those transactions;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the valuations of our principal investments;
| | - |  | --------------------------------------------



| |  |  | the number of capital markets transactions completed by our clients, and the level of fees we receive from those transactions; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | variations in expenditures for personnel, consulting and legal expenses, and expenses of establishing new business units, including marketing and technology
expenses.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



We record our revenues
from a capital markets advisory transaction only when we have rendered the services and the client is contractually obligated to pay; generally, most of the fee is earned only after the transaction closes. Accordingly, the timing of our recognition
of revenue from a significant transaction can materially affect our quarterly operating results.



We have registered one of our subsidiaries as a securities broker-dealer and, as such, are subject to substantial regulations. If we fail to comply with these regulations, our business will be
adversely affected.



Because we have
registered RTX Securities with the Securities and Exchange Commission, or SEC, and the National Association of Securities Dealers, Inc., or NASD, as a securities broker-dealer, we 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 protection of creditors and stockholders of broker-dealers. The Securities and Exchange Commission 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 SEC approval, 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



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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 may be materially and adversely affected.



The regulatory environment in which we operate is also subject to change. Our business may be adversely
affected as a result of new or revised legislation or regulations imposed by the SEC, other United States or foreign governmental regulatory authorities or the NASD. We also may be adversely affected by changes in the interpretation or enforcement
of existing laws and rules by these governmental authorities and the NASD.



Our business may suffer if we lose the services of our executive officers or operating personnel.



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 days notice. The agreement contains provisions that obligate us to make certain payments to Mr.
Merriman and substantially reduce vesting periods of options granted to him if we should terminate him without cause or certain events resulting in a change of control of our board were to occur.



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. Our business could be harmed if any key officer or employee were unable or unwilling to continue in his or her current position. 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 significant. 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.



Our business may suffer if we can not recruit or retain skilled professionals.



We have a number of revenue producers employed by our securities brokerage and investment banking subsidiary.
We do not have employment contracts with these employees. The loss of one or more of these employees could adversely affect our business and results of operations. During the three months ended March 31, 2003, two sales professionals combined
accounted for 44% of our revenue from continuing operations.



We are able to recruit and retain investment banking, research and sales and trading professionals, in part because our business model provides that we pay our revenue producing employees a percentage of their earned revenue.
Compensation and benefits is our largest expenditure and this variable compensation component represents a significant proportion of this expense. Compensation for our employees is derived as a percentage of our revenue regardless of the
profitability of the Company. Therefore, we may continue to pay individual revenue producers, including officers of the Company acting in a revenue producing capacity, a significant amount of cash compensation as the overall business experiences
negative cash flows and/or net losses. We may not be able to recruit or retain revenue producing employees if we modify or eliminate the variable compensation component from our business model.



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



We plan to expand our operations. Our growth, if it occurs, will impose significant demands on our management, financial, technical and
other resources. 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 in
order to manage our future growth. Furthermore, we may acquire existing companies or enter into strategic alliances with third parties, in order to achieve rapid growth. For us to succeed, we must make our existing business and systems work
effectively with those of any strategic partners without undue expense, management distraction or other disruptions to our business. We may be unable to implement our business plan if we fail to manage any of the above growth challenges
successfully. Our financial results may suffer and we could be materially and adversely affected if that occurs.





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



Our success, in particular our ability to successfully facilitate securities brokerage transactions 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. Additionally,
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. Any of the foregoing problems could materially adversely affect
our business or future results of operations.



We are highly
dependent on proprietary and third-party systems, therefore system failures could significantly disrupt our business.



Our business is highly dependent on communications and information systems, including systems provided by our clearing brokers. Any
failure or interruption of our systems, the systems of our clearing broker or third party trading systems could cause delays or other problems in our securities trading activities, which could have a material adverse effect on our operating results.



In addition, our clearing brokers provide our
principal disaster recovery system. We cannot assure you that we or our clearing brokers will not suffer any systems failure or interruption, including one caused by an earthquake, fire, other natural disaster, power or telecommunications failure,
act of God, act of war or otherwise, or that our or our clearing brokers back-up procedures and capabilities in the event of any such failure or interruption will be adequate.



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



Our success will depend, in part, upon the
development and maintenance of the Internet and telecommunications 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. 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 in our securities
brokerage operations. Our business, results of operations and financial condition could be materially and adversely affected if any of these events occur.



We may incur liability for information retrieved from or transmitted over the Internet because our business involves the transmission of information.



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 or other third-party posting locations. Although we have commercial general liability insurance with $1 million coverage per occurrence and $2 million in the
aggregate, an umbrella policy with $5 million of coverage and errors and omissions and directors and officers coverage, awards may exceed policy 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. Our business, results of operations and financial condition could be
materially and adversely affected if any of these events occur.



Our common stock price may be volatile, which could adversely affect the value of your shares.



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:



| |  |  | variations in quarterly operating results;
| | - |  | ------------------------------------------





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| |  |  | our announcements of significant contracts, milestones, acquisitions;
| | - |  | ---------------------------------------------------------------------



| |  |  | our relationships with other companies;
| | - |  | ---------------------------------------



| |  |  | our ability to obtain needed capital commitments;
| | - |  | -------------------------------------------------



| |  |  | additions or departures of key personnel;
| | - |  | -----------------------------------------



| |  |  | sales of common stock or termination of stock transfer restrictions;
| | - |  | --------------------------------------------------------------------



| |  |  | general economic conditions, including conditions in the securities brokerage and investment banking markets;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | changes in financial estimates by securities analysts; and
| | - |  | ----------------------------------------------------------



| |  |  | fluctuation in stock market price and volume.
| | - |  | ---------------------------------------------



Many of these factors are beyond our control. Any one of the factors noted herein could have an adverse effect on the value of our common
stock.



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 and that often have been unrelated to the operating performance of such companies. These market
fluctuations have adversely impacted the price of our common stock and may do so in the future.



In the past, following periods of volatility in the market price of a companys securities, securities class action litigation often has been instituted against that company. Such litigation is
expensive and diverts managements attention and resources. We cannot assure you that we will not be subject to such litigation.



Your ability to sell your shares may be restricted because there is a limited trading market for our common stock.



Although our common stock is currently traded on the American
Stock Exchange, a trading market in our stock has been sporadic. Accordingly, you may not be able to sell your shares when you want or at the price you want.



Your ability to sell your shares could be significantly adversely affected because our common stock could be delisted from trading on the American
Stock Exchange.



Although our common stock
is listed for trading on the American Stock Exchange, it could be delisted because we may be unable to satisfy certain American Stock Exchange listing guidelines including market value, market price, financial condition and results of operations
criteria. We cannot assure you that we will be able to satisfy these guidelines on a continuing basis. Accordingly, although we have not received written notification of noncompliance from the American Stock Exchange with respect to this matter, we
cannot represent to you that our common stock will continue to be listed. If the listing is not retained and our common stock is thereafter quoted only on the OTC Electronic Bulletin Board, a significantly less liquid market than the American Stock
Exchange, a stockholder may find it even more difficult to dispose of, or to obtain accurate quotations as to the price of, the common stock. In addition, depending on several factors including, among others, the future market price of our common
stock, these securities could become subject to the so-called penny stock rules that impose additional sales practice and market making requirements on broker-dealers who sell and/or make a market in such securities. These factors could
affect the ability or willingness of broker-dealers to sell and/or make a market in our common stock and the ability of purchasers of our common stock to sell their shares in the secondary market. A delisting could also negatively affect our ability
to raise additional capital in the future.



Issues related to
Arthur Andersen LLP may impede our ability to access the capital markets.



If the SEC ceases accepting financial statements audited by Arthur Andersen LLP, we would be unable to access the public capital markets unless Ernst & Young LLP, our current independent accounting
firm, or another independent accounting firm, is able to audit the financial statements originally audited by Arthur Andersen LLP. In addition, investors in any subsequent offerings for which we use Arthur Andersen LLPs audit reports will not
be entitled to recovery against Arthur Andersen LLP under Section 11 of the Securities Act for any material misstatements or omissions in those financial statements. Furthermore, Arthur Andersen LLP will be unable to participate in the due
diligence process that would customarily be performed by potential investors in our



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securities, which process
includes having Arthur Andersen LLP perform procedures to assure the continued accuracy of its report on our audited financial statements and to confirm its review of unaudited interim periods presented for comparative purposes. As a result, we may
not be able to bring to the market successfully an offering of our securities. Consequently, our financing costs may increase or we may miss attractive market opportunities.



Anti-takeover provisions of the Delaware General Corporation Law could discourage a merger or other type of corporate
reorganization or a change in control even if it could be favorable to the interests of our stockholders.



The Delaware General Corporation Law contains provisions that may enable our management to retain control and resist our takeover. These
provisions generally prevent us from engaging in a broad range of business combinations with an owner of 15% or more of our outstanding voting stock for a period of three years from the date that such person acquires his or her stock. Accordingly,
these provisions could discourage or make more difficult a change in control or a merger or other type of corporate reorganization even if it could be favorable to the interests of our stockholders.



Because our board can issue common stock without stockholder approval, you
could experience substantial dilution.



Our
board of directors has the authority to issue up to 300,000,000 shares of common stock and to issue options and warrants to purchase shares of our common stock without stockholder approval in certain circumstances. Future issuance of additional
shares of our common stock could be at values substantially below the price at which you may purchase our stock and, therefore, could represent further substantial dilution. In addition, our board could issue large blocks of our common stock to fend
off unwanted tender offers or hostile takeovers without further stockholder approval.



Our ability to issue preferred stock may adversely affect your rights as a common stockholder and be used as an anti take-over device.



Our Articles of Incorporation authorize our board of directors to issue up to 60,000,000 shares of preferred
stock without approval from our stockholders. If you purchase our common stock, this means that the board of directors has the right, without your approval as a common stockholder, to fix the relative rights and preferences of the preferred stock.
This would affect your rights as a common stockholder regarding, among other things, dividends and liquidation. We could also use the preferred stock to deter or delay a change in control of our company that may be opposed by our management even if
the transaction might be favorable to you as a common stockholder.



Our officers and directors exercise significant control over our affairs, which could result in their taking actions of which other stockholders do not approve.



Our executive officers and directors, current and past, and entities affiliated with them, currently control
approximately 25% of our outstanding common stock prior to any conversion of any outstanding notes and/or exercise of options and warrants. These stockholders, if they act together, will be able to exercise substantial influence over all matters
requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control of us and might
affect the market price of our common stock.



Any exercise of
outstanding options and warrants will dilute then-existing stockholders percentage of ownership of our common stock.



We have a significant number of outstanding options and warrants. Shares issuable upon the exercise of these options and warrants, at
prices ranging currently from approximately $0.18 to $14.40 per share, represent approximately 31% of our total outstanding stock on a fully diluted basis. The exercise of all of the outstanding options and warrants would dilute the then-existing
stockholders 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 and warrants may exercise them at a time when we would also wish to enter the market to obtain capital on terms more favorable than those provided by such
options and warrants. We lack control over the timing of any exercise or the number of shares issued or sold if exercises occur.



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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 equity prices, interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, trading or
any other purpose.



Equity Price Risk



The potential for changes in the market value of our trading
positions is referred to as market risk. Our trading positions result from proprietary trading activities. Equity price risks result from exposures to changes in prices and volatilities of individual equities and equity indices. We seek
to manage this risk exposure through diversification and limiting the size of individual positions within the portfolio. The effect on earnings and cash flows of an immediate 10% increase or decrease in equity prices generally is not ascertainable
and could be positive or negative, depending on the positions we hold at the time. We do not establish hedges in related securities or derivatives.



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.



Item 4.    Controls and Procedures



|a. |  | Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Report, the
Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the
Exchange Act)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b. |  | Changes in internal controls. There were no significant changes in the Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART
II.    OTHER INFORMATION



Item 1.    Legal Proceedings



We are not currently a defendant or plaintiff in any material lawsuits or arbitration. From time to time, however, we are involved as a defendant or plaintiff in various actions that arise in the
ordinary course of business. We believe that the ultimate disposition of these matters will not have a material adverse effect on our business, financial condition or results of operations.



Item 6.    Exhibits and Reports on Form 8-K



(a) Exhibits



|
|
|
|
|



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



None.



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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, 2003 |  |                        
| |  |                |  |                        





| |  |                |  | 
| |  | -------------- |  | 
|
| |  | April 30, 2003 |  | 
| |  |                |  | 



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CERTIFICATIONS



I, D. Jonathan
Merriman, certify that:



|1. |  | I have reviewed this Quarterly Report on Form 10-Q of Ratexchange Corporation (the Registrant);
|-- |  | -------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Registrant and we have:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee
of Registrants board of directors (or persons performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize
and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The Registrants other certifying officer and I have indicated in this Quarterly Report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date: April 30, 2003



/S/    D. JONATHAN MERRIMAND. Jonathan Merriman Chairman of the Board and Chief Executive
Officer








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CERTIFICATIONS

I, Gregory S. Curhan, certify that:



|1. |  | I have reviewed this Quarterly Report on Form 10-Q of Ratexchange Corporation;
|-- |  | ------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Registrant and we have:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee
of Registrants board of directors (or persons performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize
and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The Registrants other certifying officer and I have indicated in this Quarterly Report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date: April 30, 2003



/S/    GREGORY S. CURHANGregory S. Curhan Chief Financial Officer








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EXHIBIT
INDEX



|Exhibit No. |  | Description                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|99.1        |  | Certificate of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|           
|99.2        |  | Certificate of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.



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