SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2001
                         Commission File No. 33-19139-NY

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

                 Delaware                                      11-2936371
    ---------------------------------                   ------------------------
       (State or Other Jurisdiction                     (IRS Employer ID Number)
    of Incorporation or Organization)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
     YES X     NO
        ---      -----

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

                17,783,000 shares common stock as of May 11, 2001
                                (Title of Class)
<PAGE>

                                                      Page 20
                                              RATEXCHANGE CORPORATION
                                                     FORM 10-Q
                                       FOR THE QUARTER ENDED MARCH 31, 2001

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                            Page

<S>  <C>                                                                                                   <C>
     Item 1 -

         Financial Statements

              Consolidated balance sheet as of March 31, 2001 (unaudited) and December 31, 2000             3

              Consolidated statement of operations (unaudited) for the three months ended March 31, 2001
                  and 2000                                                                                  4

              Consolidated statement of cash flows (unaudited) for the three months
                  ended March 31, 2001 and 2000                                                             5

              Notes to consolidated financial statements                                                    6

     Item 2 -

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

     Item 3 -

         Quantitative and Qualitative Disclosures About Market Risk                                        18

PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings                                                                            19

     Item 2 - Changes in Securities                                                                        19

     Item 6 - Exhibits and Reports on Form 8-K                                                             19

SIGNATURES                                                                                                 19
</TABLE>
                                     Page 2
<PAGE>

                                          Part I - Financial Information


Item 1.       Financial Statements
                                              RATEXCHANGE CORPORATION
                                           (A Development Stage Company)
                                            CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                       ASSETS                                               March 31,               December 31,
                                                                                          ---------------         ---------------
                                                                                               2001                    2000
                                                                                            Unaudited
                                                                                          ---------------         ---------------
<S>                                                                                          <C>                     <C>
Current assets
         Cash and cash equivalents                                                              $602,428              $2,115,152
         Accounts receivable (net of an allowance for doubtful accounts
            of $4,960 at March 31, 2001 and December 31, 2000)                                    58,828                  41,170
         Investment securities available for sale                                              7,487,279              12,124,635
         Interest receivable                                                                     147,309                 204,755
         Prepaid expenses                                                                         98,025                 116,360
                                                                                          ---------------         ---------------
                  Total current assets                                                         8,393,869              14,602,072

Property, equipment and software (net of accumulated depreciation of                           6,478,461               1,401,888
                $636,782 and $240,791 in 2001 and 2000)

Other assets
         Investment in affiliate                                                                  75,000                  75,000
         Deposits                                                                                158,530                 184,856
                                                                                          ---------------         ---------------
Total assets                                                                                 $15,105,860             $16,263,816
                                                                                          ===============         ===============

                                              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
         Accounts payable and accrued expenses                                               $ 2,041,475             $ 2,600,870
         Notes payable                                                                           500,000                       -
                                                                                          ---------------         ---------------
                  Total current liabilities                                                    2,541,475               2,600,870

Stockholders' equity
         Preferred stock, $.0001 par value, 60,000,000 shares authorized;
           2,000,000 issued and outstanding                                                          200                       -
         Common stock, $.0001 par value; 300,000,000 shares
            authorized; issued and outstanding: 17,783,000 shares
            in 2001 and 2000                                                                       1,778                   1,778
         Additional paid-in capital                                                           78,129,884              72,132,890
         Accumulated deficit                                                                 (65,034,627)            (57,393,548)
         Notes receivable on sales of common stock                                              (363,661)               (363,661)
         Accumulated other comprehensive loss                                                   (169,189)               (714,513)
                                                                                          ---------------         ---------------
                  Total stockholders' equity                                                  12,564,385              13,662,946
                                                                                          ---------------         ---------------
Total liabilities and stockholders' equity                                                   $15,105,860             $16,263,816
                                                                                          ===============         ===============

<FN>
See notes to financial statements
</FN>
</TABLE>
                                     Page 3
<PAGE>

                                              RATEXCHANGE CORPORATION
                                           (A Development Stage Company)

                                       CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                      Beginning of
                                                                                                       Development
                                                                                                    Stage (September
                                                                   Three Months ended                   30, 1998)
                                                                         March 31,                   through March
                                                                        (unaudited)                     31, 2001
                                                                2001                2000               (unaudited)
                                                            --------------    ------------------    ------------------
                                                                                  Restated
<S>                                                           <C>                  <C>                   <C>
REVENUE
Trading and Consulting                                           $339,828                     -              $431,051

EXPENSES
Selling, general and administrative
(includes   non-cash   expenses  of   $1,585,000   and
$9,088,000  for the  three  month  period  in 2001 and          7,190,916                                  58,812,812
2000)                                                                              $12, 481,209
Write off advances to potential investee                                -                     -             1,298,681
Depreciation and amortization                                     395,994                24,097               637,539
Purchase of subsidiaries (non-cash)                                     -                     -             1,597,118
                                                            --------------    ------------------    ------------------

     Total expenses                                             7,586,910            12,505,306            62,346,150

OTHER INCOME (EXPENSES)

Interest income                                                   150,277                58,867             1,321,469
Interest expense                                                        -              (150,896)           (1,852,505)
Loss on sale of security                                         (544,274)                    -              (544,274)
Other expense                                                           -                     -            (1,822,875)
                                                            --------------    ------------------    ------------------
Loss before taxes                                              (7,641,079)          (12,597,335)          (64,813,284)

Income tax provision (benefit)                                          -                     -                     -

                                                            --------------    ------------------    ------------------
NET LOSS                                                      ($7,641,079)         ($12,597,335)         ($64,813,284)
                                                            ==============    ==================    ==================

Basic and diluted net loss per share                               ($0.43)               ($0.85)
Weighted average number of common shares                       17,783,000            14,820,000
                                                            ==============    ==================

<FN>
See notes to financial statements
</FN>
</TABLE>
                                     Page 4
<PAGE>

                                              RATEXCHANGE CORPORATION
                                           (A Development Stage Company)
                                       CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                   Beginning of
                                                                                                                 the Development
                                                                                                                 Stage September
                                                                                 For the three months              30, 1998 to
                                                                                    ended March 31,                 March 31,
                                                                                2001               2000                2001
                                                                           ---------------     --------------    -----------------
                                                                            (Unaudited)         (Unaudited)         (Unaudited)
                                                                                                (Restated)
<S>                                                                           <C>               <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                    $(7,641,079)      $(12,597,335)        $(64,813,284)
  Adjustments to reconcile net loss to net cash used in operating
  activities
         Depreciation and amortization                                            395,994             24,097              636,785
         Write off advances to potential investee                                                                         206,898
         Stock options and warrants granted to service providers and
         strategic partners                                                       254,559                              17,644,772
         Stock options granted to employees below fair market value               724,140          7,566,083           11,115,572
         Stock options - termination adjustment                                   565,875                  -            1,612,333
         Warrants issued in relation to bridge financing                                -                  -            1,657,988
         Warrants for purchase of common stock issued for services                      -          1,522,264            1,559,461
         Loss on sale of security                                                 544,274                                 544,274
         Purchase of outstanding shares of RateXchange                                  -                  -            1,507,408
         (Increase) decrease in security deposits                                  26,325           (133,080)            (158,531)
         (Increase) decrease in interest receivable and other advances            108,216            142,850             (254,069)
         Increase (decrease) in accounts payable and accrued expenses            (586,536)         1,672,961            1,904,821
                                                                           ---------------     --------------    -----------------
                  Net cash used in operating activities                        (5,608,232)        (1,802,162)         (26,835,572)

CASH FLOWS FROM INVESTING ACTIVITIES
         Payment for purchase of equipment and software                          (542,900)          (505,413)          (2,185,580)
         Purchase of Halo Stock                                                         -                  -             (631,251)
         Purchase of investments available for sale                                     -                  -          (32,975,313)
         Sale of investments available for sale                                 4,638,408                  -           25,405,821
         Investment in Affiliates                                                       -                  -              (75,000)
                                                                           ---------------     --------------    -----------------
                  Net cash provided (used) by investing activities              4,095,508           (505,413)         (10,461,323)

CASH FLOWS FROM FINANCING ACTIVITIES
         Loans and other debt                                                           -          1,200,000            1,500,000
         Proceeds from common stock sales (net)                                         -         30,135,000           35,242,893
         Proceeds from notes receivable                                                 -          1,528,160            1,590,319
         Loan to employee stock purchase program                                        -                  -             (433,889)
                                                                           ---------------     --------------    -----------------
                  Net cash provided by financing activities                             -         32,863,160           37,899,323

                                                                           ---------------     --------------    -----------------
DECREASE IN CASH AND CASH EQUIVALENTS                                         (1,512,724)         30,555,585              602,428

CASH and CASH EQUIVALENTS BEGINNING OF PERIOD                                  2,115,152             451,615                    -
                                                                           ---------------     --------------    -----------------
CASH and CASH EQUIVALENTS END OF PERIOD                                       $  602,428         $31,007,200         $    602,428
                                                                           ===============     ==============    =================

<FN>
See notes to financial statements
</FN>
</TABLE>
                                     Page 5
<PAGE>

                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1   INTERIM FINANCIAL STATEMENTS AND BACKGROUND AND HISTORY

         The interim  financial  statements  presented  herein are unaudited and
         have been prepared in accordance  with the  instructions  to Form 10-Q.
         These  statements  should  be read in  conjunction  with the  financial
         statements and notes thereto included in our annual report on Form 10-K
         for the year  ended  December  31,  2000.  The  accompanying  financial
         statements  have not been audited.  The results of operations  and cash
         flows for the three months  ended March 31, 2001 may not be  indicative
         of the results  that may be expected  for the year ended  December  31,
         2001.

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

         RateXchange Corp. (formerly  NetAmerica.com  Corporation) is a Delaware
         corporation organized on May 6, 1987 for the purpose of seeking out and
         developing any general business  opportunity.  The Company's  operating
         subsidiary  RateXchange  I, Inc., a Delaware  corporation  organized in
         June 1999, has developed  proprietary  trading  software to support its
         electronic  trading  system for bandwidth and other  telecommunications
         products.   In  March  2001,  the  Company  acquired   Xpit.com.   This
         acquisition  enables the Company to offer  trading and risk  management
         systems to the futures industry.

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

         In  connection  with  the   preparation  of  the  Company's   financial
         statements for the year ended December 31, 2000, the Company discovered
         a  computational  error in the amount of  $1,522,264  related to a fair
         value  calculation for warrants issued to service  providers during the
         first  quarter  of  2000.  This  correction  was  made in the  year-end
         financial statements.  As a result, the first quarter 2000 consolidated
         statement of operations  and statement of cash flows have been restated
         to reflect a non-cash increase in selling,  general and  administrative
         expenses. This adjustment had no impact on total stockholders equity of
         the Company as of March 31, 2000.

         From   inception,   the   Company   has  been   primarily   engaged  in
         organizational  activities,  including  designing  and  developing  its
         website, recruiting personnel,  establishing office facilities, raising
         capital, developing infrastructure and developing a marketing plan. The
         Company began revenue generation activities in 1999 but nominal revenue
         has been  generated as of March 31, 2001.  Accordingly,  the Company is
         classified as a development stage company. Successful completion of the
         Company's  development  program  and,  ultimately,  the  attainment  of
         profitable  operations  is  dependent  upon  future  events,  including
         increasing its customer base,  implementing and successfully  executing
         its business and marketing  strategy and hiring and  retaining  quality
         personnel.  Negative developments in any of these conditions could have
         a  material  adverse  effect  on  the  Company's  business,   financial
         condition and results of operations.

NOTE 2   CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

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

                                     Page 6
<PAGE>

                    RATEXCHANGE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Management determines the appropriate  classification of investments at
         the time of purchase and reevaluates such determination at each balance
         sheet date. To date, all marketable  securities have been classified as
         available-for-sale  and are carried at fair value with unrealized gains
         and losses,  if any,  included in  stockholders'  equity.  At March 31,
         2001, the company's  investment in securities  available for sale had a
         amortized cost of $7,651,953. Realized gains and losses and declines in
         value of securities  judged to be other than  temporary are included in
         other  income,  net.  Interest  and  dividends  on all  securities  are
         included in other income, net.

NOTE 3   SERIES A PREFERRED STOCK

         In the first  quarter of 2001, in connection  with the  acquisition  of
         Xpit.com,  the  Company  issued  2  million  shares  of  its  Series  A
         Convertible  Preferred  Stock with a cumulative  dividend of 6%. The 6%
         dividend  is based on a share  price of $2.75  per  share to be paid in
         additional  shares of Series A Preferred  Stock. The Series A Preferred
         Stock is  convertible  into common  shares of the Company at an initial
         exchange rate of $2.75  subject to adjustment in subsequent  periods as
         described  in  the   Certificate  of  Designation   for  the  Series  A
         Convertible  Preferred  Stock.  The  holder  of each  share of Series A
         Preferred  Stock  has the  right to one vote for each  share of  Common
         Stock into which such share of Series A  Preferred  Stock could then be
         converted. In the event of any liquidation,  dissolution, or winding up
         of the Company,  whether  voluntary or involuntary,  the holders of the
         Series  A  Preferred  Stock  are  entitled  to  receive,  prior  and in
         preference  to any  distribution  of any assets or surplus funds of the
         Company to the holders of common stock,  the aggregate  amount of $2.75
         per share (as adjusted for any stock dividend,  combinations, or splits
         with  respect  to such  shares).  The Series A  preferred  stock is not
         redeemable.

NOTE 4   LOSS PER SHARE AND AVERAGE SHARES OUTSTANDING

         Basic loss per share is computed by dividing the net loss, less accrued
         dividends on preferred stock ($17,000 in the first quarter of 2001), by
         the weighted  average  number of common  shares  outstanding.  Options,
         warrants and convertible preferred stock on shares of common stock were
         not included in computing  diluted loss per share because their effects
         were  antidilutive.   (10,154,000   options,   5,652,000  warrants  and
         2,000,000 convertible preferred shares).

NOTE 5   COMMITMENTS AND CONTINGENCIES

         The Company is involved in the following lawsuit:

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

                                     Page 7
<PAGE>

NOTE 6   COMPREHENSIVE LOSS

         The comprehensive loss for the first quarter of 2001 and 2000 was:

<TABLE>
<CAPTION>
                                                                     Three Months Ended March 31,
                                                                       2001               2000
                                                                   -------------    --------------
<S>                                                                <C>              <C>
                  Net loss                                         $(7,641,079)     $(12,597,335)
                  Other Comprehensive Income:
                  Unrealized gains (losses) on investments              (1,050)                 -
                                                                   -------------    --------------
                  Comprehensive loss                               $(7,642,129)     $(12,597,335)
</TABLE>

NOTE 7   ACQUISITION OF SUBSIDIARY

         On March 12, 2001, the Company  completed the  acquisition of Xpit.com,
         Inc.  ("Xpit"),  a privately held Idaho Corporation for $5.5 million in
         preferred stock,  cash and notes payable.  The acquisition  enables the
         Company to offer  trading  and risk  management  systems to the futures
         industry.   Xpit  will  operate  as  a   wholly-owned   subsidiary   of
         RateXchange.  Under the terms of the transaction,  the Company acquired
         100% of the outstanding  common shares of Xpit in exchange for $500,000
         in cash; a $500,000  two-year  note bearing  interest at 7%;  2,000,000
         Series A  Convertible  Preferred  Shares;  and $4.9  million in royalty
         payments tied to the achievement of Xpit's projected revenues from 2001
         through 2003. The acquisition  price of $5.5 million has been allocated
         primarily to the software technology acquired.

NOTE 8   NEW ACCOUNTING STANDARD

         In the first  quarter of 2001,  the Company  was  required to adopt the
         provisions  of  Financial   Accounting   Standard  Statement  No.  133,
         Accounting for Derivative  Instruments and Hedging Activities (FAS 133)
         as  amended  by  FAS  137  and  FAS  138.  This  statement  establishes
         accounting  and reporting  standards for  derivative  contracts and for
         hedging  activities.   As  the  Company  does  not  currently  use  any
         derivative  instruments  or engage in hedging  activities,  adoption of
         this new standard had no impact on the Company's  consolidated  results
         of operations or consolidated financial position.

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

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

         We provide trading, consulting and information services enabling market
         participants  to maximize their assets.  These trading  solutions allow
         network  providers,  energy  merchants,   financial  institutions,  and
         commodity managers engaged on the RateXchange  Trading System (RTS) and
         RateXchange  Futures  System (RFS) the ability to trade  bandwidth  and
         futures  globally.  Our consulting  solutions  practice  provides asset
         valuation  tools,  risk  management   strategies  and  analytics.   The
         information  solutions  group  provides  pricing  information,   market
         research,  and industry background.  We are a trading solutions company
         enabling the creation of liquid  marketplaces  for  bandwidth and other
         telecommunications products.

General Development of Business

         During the first  quarter of 2001,  we made  certain  additions  to our
         management  team to reflect our focus on  providing  trading  solutions
         products to a wide range of market participants.

                                     Page 8
<PAGE>

         In February,  2001, Patrick Arbor, former Chairman of the Chicago Board
         of Trade,  and E.  Russell  Braziel,  former  Chairman of Altra  Energy
         Technologies, Inc. were elected to our Board of Directors.

         On March 21,  2001,  we signed an  agreement  with  TeleCity,  Plc.,  a
         European managed services provider,  marking the launch of our Internet
         access brokering service,  "IP Access".  This new product offering will
         allow ISPs, carriers,  other service providers and major enterprises to
         purchase  quality-assured Internet access bandwidth from major backbone
         ISPs.  TeleCity  is  building  and will  manage the  physical  exchange
         facilities  upon  which  the  RateXchange  Trading  System  (RTS)  will
         operate.  The service will be launched initially in London and expanded
         to other TeleCity locations later in the year.

         On March 12, 2001, we announced the acquisition of Xpit.com ("Xpit"), a
         privately  held company  that seeks to become the  dominant  electronic
         platform   for  the   execution  of  futures  and  options  on  futures
         transactions  worldwide.  Xpit has developed a web-enabled,  high-speed
         trading and risk management system that provides  traders,  brokers and
         financial  institutions  the ability to both  execute and clear  listed
         futures  contracts on a global  basis.  The product  provides us with a
         front-end  trading  platform  that  serves as its entry  point into the
         derivatives  trading  markets.  Xpit  will  operate  as a  wholly-owned
         subsidiary  of  RateXchange  Corp.,  and  the  trading  system  will be
         referred to as the RateXchange Futures System (RFS).

         On January 10,  2001,  RateXchange  and The London  Satellite  Exchange
         announced the first global  alliance that provides  bandwidth users the
         ability to fill both satellite and fiber optic  bandwidth  requirements
         at the same time. This alliance  diversifies  both  companies'  product
         offerings by allowing  users to package total  bandwidth  requirements.
         The London  Satellite  Exchange  operates an on-line  exchange  for the
         satellite industry.

         Subsequent  to the end of the  first  quarter,  on  April 9,  2001,  we
         announced the formation of RMG Partners,  Corporation.,  a wholly owned
         subsidiary,  created to provide market-based  solutions through the use
         of derivative trading strategies. To provide these services, we hired a
         group of six employees who formerly served as a transaction structuring
         and execution team at Wells Fargo Van Kasper, Inc.

Results of Operations for Three Months Ended March 31, 2001

         The following table  summarizes our results of operations for the first
quarter of 2001, compared to the same period of 2000.

                                                        Three Months Ended
                                                             March 31
                                                  ------------------------------
                                                     2001             2000
                                                  -------------   --------------
                                                                     Restated
                 Revenue                              $340,000               -
                 Expenses (including selling,      $(7,587,000)    $(12,505,000)
                  general and administrative)
                 Net loss                          $(7,641,000)    $(12,597,000)

Revenue

         We generated  revenue of $340,000 during the first quarter of 2001 from
         consulting, trading commissions and banner ads. We generated no revenue
         in the comparable period of 2000.

Expenses

         Our  total  expenses  were  $7,587,000  in the  first  quarter  of 2001
         compared to  $12,505,000  in the  comparable  period of 2000. The major
         components of our expenses were:

         Non-cash Expenses

                                     Page 9
<PAGE>

         o    $724,000 in the first  quarter of 2001  compared to  $7,566,000 in
              the first quarter of 2000 for amortization expense associated with
              the year 2000 grant of below market stock options to employees;

         o    $566,000  in the  first  quarter  of 2001 for  option  revaluation
              related to  terminated  employees.  There were no such expenses in
              the first quarter of 2000;

         o    $255,000 in the first  quarter of 2001,  compared to $1,522,000 in
              the  first  quarter  of  2000,  for  options  granted  to  service
              providers.

         Cash Expenses

         o    $1,285,000  in  payroll  costs  during  the first  quarter of 2001
              compared to $1,123,000 in the first quarter of 2000;

         o    $1,032,000  in outside  services  during the first quarter of 2001
              compared to $607,000 during the first quarter of 2000, and;

         o    $1,823,000  in the first  quarter of 2001  compared to $290,000 in
              the first quarter of 2000 for delivery equipment costs.

Interest Income:

         Interest income for the first quarter of 2001 was $150,000  compared to
         $59,000 for the same period in 2000. The increase in interest income is
         due to interest earned on a larger average investment portfolio.

Net Loss:

         During the first  quarter  of 2001,  we  incurred a loss of  $7,641,000
         compared  to  $12,597,000  during  the same  period in 2000.  The major
         components of the net loss for the first quarter of 2001, were non cash
         expenses for stock  options and warrants to purchase  company  stock of
         $1,585,000 and expenditures  associated with developing the business of
         $6,396,000.  Because  we are  developing  a unique  electronic  trading
         system,  we anticipate that we will continue to incur operating  losses
         and cash flow deficiencies for the foreseeable future.

Liquidity and Capital Resources

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

         We had working  capital of  $5,848,000  at March 31,  2001  compared to
         $12,001,000 on December 31, 2000.

         In April, 2001, the Company received an irrevocable commitment from two
         investors  to acquire a total of $9.0  million of newly  issued  common
         shares of the Company. The sale of shares will settle on or before July
         10, 2001.  These funds should be sufficient to cover our operations and
         working capital  requirements for the next twelve months. We are taking
         the following steps to achieve profitability:

         o    We are pursuing additional revenue generating opportunities;

         o    We have  exited  the  delivery  hub  business  and  are  exploring
              potential  sales to operators of delivery  hubs whereby they would
              operate and own our delivery hub equipment;

         o    We are reducing our personnel costs; and

         o    We are reducing our marketing and public relations costs.

                                    Page 10
<PAGE>

         In addition,  we have  substantially  completed the  development of the
         RateXchange   Trading   System  and  do  not   anticipate   significant
         expenditures  related  to  it.  Nevertheless,   we  may  need  to  seek
         additional financing sooner than expected in order to accelerate market
         penetration  through  mergers,  acquisitions  or  additional  strategic
         relationships.  As  the  Company  has  exited  from  the  delivery  hub
         business,  we are  currently in the process of assessing the status and
         likely use of the operating  leases covering the related  equipment and
         facilities.  We expect to make final determination as to the likely use
         of these  leases in the near  future and may take a non-cash  charge at
         that time.

         Our operating  activities used  $5,608,000  during the first quarter of
         2001 due primarily to:

         o    Costs   associated  with   accelerating   the  deployment  of  the
              RateXchange Trading System;

         o    increased business development activities;

         o    delivery hub infrastructure.


         Our investing  activities generated $4,096,000 during the first quarter
         of 2001, due to sales of investments.

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

         o    expansion into new domestic and international markets;

         o    development of additional products and services, and

         o    acquisitions.

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

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

Outlook

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

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

         o    Continue to retain, attract and motivate qualified personnel;

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

         o    Implement  and  successfully  execute our business  and  marketing
              strategy;

         o    Respond to competitive  developments and market  conditions in the
              global communications industry; and

         o    Continue to develop and upgrade our electronic trading system.


         The foregoing  contains  forward-looking  statements that involve risks
         and uncertainties, including but not limited to changes in our business
         strategy,  our inability to raise  sufficient  capital,  general market
         trends and conditions,  and other risks detailed below in "Factors That
         May Affect Future Results." Actual results may vary materially from any
         future results expressed or implied by the forward-looking statements.

                                    Page 11
<PAGE>

Forward-Looking Statements

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

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

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

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

         o    changes in external  competitive market factors or in our internal
              budgeting  process  which  might  impact  trends in our results of
              operations, and

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

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

Factors That May Affect Future Results

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

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

         We are a  development  stage  company.  Our  activities  to  date  have
         concentrated  primarily  on  planning  and  developing  our  electronic
         trading  system  for  trading  bandwidth  and other  telecommunications
         products. In September 2000, we began operating the RateXchange Trading
         System for trading bandwidth.  Accordingly, we have a limited operating
         history on which to base an evaluation  of our business and  prospects.
         Our prospects  must be  considered in light of the risks,  expenses and
         difficulties  frequently  encountered by companies in their early stage
         of  development,  particularly  companies  in new and rapidly  evolving
         markets such as online commerce. There can be no assurance that we will
         be successful in addressing these risks, and our failure to do so could
         have  a  material  adverse  effect  on  our  business  and  results  of
         operations.

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

         At  March  31,  2001,  our  accumulated  deficit  since  inception  was
         $64,813,000, including $35,138,000 related to stock grants, options and
         warrants.  For the first  quarter  of 2001,  we  incurred a net loss of
         $7,641,000,  including $1,585,000 related to stock grants and warrants.
         We have  incurred  a net loss in each year of our  existence,  and have
         financed our development  stage operations  primarily  through sales of
         equity  securities.  We have recorded nominal revenues from operations.
         We expect to incur net losses for the foreseeable  future. We may never
         achieve or sustain significant revenues or profitability on a quarterly
         or annual basis.

         If the RateXchange Trading System and RateXchange Futures System do not
         achieve commercial acceptance, our results will suffer.

                                    Page 12
<PAGE>

         We expect to rely  largely on fees and  commissions  from  transactions
         facilitated on the  RateXchange  Trading  System,  RateXchange  Futures
         System and related  consulting  services,  for the foreseeable  future.
         Online trading of  telecommunications  bandwidth and minutes  currently
         has only limited market  acceptance,  as does online trading of futures
         contracts.   As  a  result,  our  future  ability  to  gain  commercial
         acceptance of the RateXchange  Trading System and  RateXchange  Futures
         System is critical to our  success.  Any failure to  successfully  gain
         commercial acceptance of the RateXchange Trading System and RateXchange
         Futures  System  would not only have a material  adverse  effect on our
         business  and  operating  results,  but  also  on our  ability  to seek
         additional revenue opportunities.

         We depend on the  efforts of the Amerex  Bandwidth,  Ltd.  brokers  who
         execute trades on our trading system to generate revenues for us.

         In September  2000,  we entered into a strategic  alliance  with Amerex
         Bandwidth, Ltd., a leading energy and power broker. Under our agreement
         with Amerex,  Amerex brokers execute trades for the sale or purchase of
         telecommunications  capacity,  Internet  protocol products and/or other
         telecommunications-related products on our trading system, and we share
         with Amerex the revenues  generated by these  trades.  As a result,  we
         depend on the efforts of the Amerex brokers who execute those trades to
         generate  revenues for us. There can be no assurance that these brokers
         will be successful in expanding our business.

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

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

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

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

         In addition,  we compete with companies who trade,  broker or otherwise
         assist in the buying and selling of  telecommunications  bandwidth  and
         minutes.  Therefore, we currently or potentially compete with a variety
         of other companies,  including lead-generation services and traditional
         offline  brokers.  Many companies,  such as Band-X,  Arbinet,  and Asia
         Capacity  Exchange,  offer  services to buyers and sellers of bandwidth
         and other telecommunications products. The increased use and acceptance
         of any other  method of  facilitating  the buying and selling of excess
         telecommunications  bandwidth  and  minutes  may  adversely  impact the
         commercial viability of the RateXchange Trading System.

                                    Page 13
<PAGE>

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

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

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

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

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

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

       We face online commerce security risks.

                                    Page 14
<PAGE>

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

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

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

         o    User privacy;

         o    Pricing;

         o    Content;

         o    Intellectual property;

         o    Distribution; and

         o    Characteristics and quality of products and services.


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

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

         We may face liability for information retrieved from our portal.

                                    Page 15
<PAGE>

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

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

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

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

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

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

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

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

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

                                    Page 16
<PAGE>

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

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

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

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

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

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

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

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

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

                                    Page 17
<PAGE>

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

         The volatility of our securities prices may increase.

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

         o    Quarter to quarter variations in operating results;

         o    Adverse news announcements;

         o    The introduction of new products and services;

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

         o    General market conditions.

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

         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.  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  their options and warrants at a time
         when we would also wish to enter the market to obtain  capital on terms
         more favorable than those provided by the options. We lack control over
         the timing of any  exercise  or the number of shares  issued or sold if
         exercises occur.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Short Term Investments

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

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

                                    Page 18
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         There  were no  material  additions  to, or  changes  in status of, any
         ongoing,  threatened  or  pending  legal  proceedings  during the three
         months  ended  March 31,  2001.  From  time to time,  we are a party to
         various legal  proceedings  incidental  to our business.  None of these
         proceedings  is  considered by management to be material to the conduct
         of our business, operations or financial condition.

Item 2.  Changes in Securities and Use of Proceeds.

         a) Not applicable.

         b) Not applicable.

         c) In March 2001, we issued  2,000,000 shares of our preferred stock in
            partial consideration of our acquisition of Xpit.com Inc.

         d) Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

         a) Exhibits

         Exhibit No.                      Exhibit Name
         -----------                      ------------
         27.1                             Financial Data Schedule

         b) Reports on Form 8-K

         On March 16, 2001 we filed a Form 8-K  announcing  that we had acquired
         Xpit.com Inc.

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
         the  registrant  has duly caused this report to be signed on its behalf
         by the undersigned  thereunto duly  authorized.  Dated this 14th day of
         May, 2001.

                                     RATEXCHANGE CORPORATION


                                     By:  /s/ MICHAEL CAIRNS
                                          -----------------------------------
                                          Michael Cairns
                                          Senior Vice President Finance and
                                          Chief Accounting Officer

                                    Page 19