As Filed With the Securities and Exchange Commission on February 12, 2001

                                            Registration Statement No. 333-53316

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                AMENDMENT NO. 1
                                       TO
                                    FORM S-1
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


                             RATEXCHANGE CORPORATION
             (Exact name of registrant as specified in its charter)


            Delaware                                             11-2936371
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                                      7370
                          (Primary Standard Industrial
                           Classification Code Number)

                          185 Berry Street, Suite 3515
                         San Francisco, California 94107
                                 (415) 371-9800
               (Address, including zip code, and telephone number,
              including area code, of principal executive offices)

                              D. Jonathan Merriman
                      President and Chief Executive Officer
                             RateXchange Corporation
                          185 Berry Street, Suite 3515
                         San Francisco, California 94107
                                 (415) 371-9800
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                    Copy to:
                               George P. Barsness
                             Hogan & Hartson L.L.P.
                            555 Thirteenth St., N.W.
                             Washington, D.C. 20004
                                 (202) 637-5600

Approximate  date of commencement  of proposed sale to the public:  From time to
time after this registration statement becomes effective.

If any of the  securities  being  registered on this form are to be offered on a
delayed or continuous  basis  pursuant to Rule 415 under the  Securities  Act of
1933, please check the following box. | X |

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration   statement  for  the  same  offering.  |  |




If this form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. | |

If this form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration number of the earlier effective registration statement for the same
offering. | |

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. | |

                                    CALCULATION OF REGISTRATION FEE

  Title of Each Class of                                Proposed Maximum   Proposed Maximum      Amount of
     Securities to be                    Amount to be    Offering Price        Aggregate       Registration
      Registered (1)                    Registered (2)    Per Unit        Offering Price          Fee (6)
-------------------------               --------------  ----------------  ------------------   ------------
                                                                                  
Common Stock, $.0001 par value             4,319,532       $9.59(3)       $41,424,311.88(3)    $10,936
                                             117,630       $6.00(4)       $   705,780   (4)    $   186
                                             497,000       $2.00(5)       $   994,000   (5)    $   248.50


(1) This   registration   statement   covers  the  resale  by  certain   selling
    stockholders  of up to an  aggregate of  4,934,162  shares of common  stock,
    $.0001 par value, of RateXchange Corporation, 1,919,119 shares of which were
    previously  acquired by the selling  stockholders  and  3,015,043  shares of
    which  may be  acquired  by  such  selling  stockholders  upon  exercise  of
    presently outstanding warrants and/or options to purchase common stock.

(2) In the  event  of a stock  split,  stock  dividend  or  similar  transaction
    involving  our  common  stock,  to  prevent  dilution,  the number of shares
    registered will be automatically increased to cover the additional shares in
    accordance with Rule 416(a) under the Securities Act of 1933, as amended.

(3) Estimated  solely  for the  purpose  of  calculating  the  registration  fee
    pursuant to Rule 457(c),  based on the average of the bid and asked price of
    the Company's  securities of the same class on the OTC Bulletin  Board as of
    May 9, 2000.

(4) Estimated  solely  for the  purpose  of  calculating  the  registration  fee
    pursuant  to Rule  457(c),  based  on the  closing  price  of the  Company's
    securities of the same class as reported by the American  Stock  Exchange as
    of July 19, 2000.

(5) Estimated  solely  for the  purpose  of  calculating  the  registration  fee
    pursuant to Rule 457(c),  based on the average of the high and low prices of
    the Company's securities of the same class as reported by the American Stock
    Exchange as of December 28, 2000.

(6) The  registration  fee was  paid as  follows:  $10,936 in May  2000  for the
    registration of 4,319,532 shares,  $186 in July 2000 for the registration of
    117,630 shares and $248.50 in January 2001 for the  registration  of 497,000
    shares.



     This registration  statement constitutes a combined prospectus as such term
is used in Rule 429 under the  Securities  Act of 1933, as amended.  The earlier
filed  registration  statement to which this  registration  statement relates in
Registration No. 333-37004.

    The  registrant  hereby amends this  registration  statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further  amendment  which  specifically  states  that  this  registration
statement shall  thereafter  become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on
such date as the Securities  and Exchange  Commission,  acting  pursuant to said
Section 8(a), may determine.

================================================================================




Prospectus

185 Berry Street, Suite 3515
San Francisco, California 94107
(415) 371-9800

                                   RATEXCHANGE
                                   CORPORATION

                         4,934,162 SHARES OF COMMON STOCK

    With this prospectus, the selling stockholders identified in this prospectus
are offering up to 4,934,162 shares of our common stock.

    The selling  stockholders  may sell these shares  through  public or private
transactions, at prevailing market prices or at privately negotiated prices. The
selling  stockholders  will receive all of the net proceeds from the sale of the
shares  offered  with this  prospectus.  The selling  stockholders  will pay all
underwriting  discounts and selling commissions,  if any, applicable to the sale
of those shares. We will not receive any proceeds from the sale of the shares.

    Before purchasing any of the shares,  you should consider very carefully the
information  presented  under the caption "Risk Factors"  beginning on page 3 of
this prospectus.

    Our common stock is traded on the American  Stock  Exchange under the symbol
"RTX." On  February  2,  2000,  the  closing  price for our common  stock on the
American Stock Exchange was $2.90.

    Neither the  Securities  and Exchange  Commission  nor any state  securities
commission has approved or  disapproved  of these  securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                The date of this prospectus is February 13, 2001.




                               PROSPECTUS SUMMARY

    You should read this summary together with the more detailed information and
financial  statements  and notes  appearing  elsewhere in this  prospectus.  You
should carefully  consider,  among other things,  the matters set forth in "Risk
Factors."

The Company

    We operate a trading  system,  the RateXchange  Trading System,  that allows
market  participants to trade bandwidth.  We provide global trading solutions to
telecommunications   companies,   energy  marketers  and  merchants,   financial
institutions  and  commodity  traders,  with our advanced  technological  system
providing users with an efficient,  centralized  marketplace to bring buyers and
sellers  together.   Through  the  development  of  marketplaces  for  financial
instruments  related  to  telecommunications  products,  we  are  bringing  risk
management  tools and  practices  to the  communications  industry.  We  provide
participants  on our trading system with access to a secure  infrastructure  for
facilitating  the delivery of traded  bandwidth over any platform.  By providing
market  participants with an advanced trading system,  financial products and an
independent  physical  delivery  mechanism,  we are  enabling  the creation of a
liquid bandwidth trading market.

    We were  incorporated in Delaware in 1987. Our principal  executive  offices
are located at 185 Berry Street,  Suite 3515, San Francisco,  California  94107,
and our telephone number is (415) 371-9800.

The Offering

                                                                            
Common stock offered by RateXchange Corporation..........................      0 shares

Common stock offered by the selling stockholders.........................      4,934,162 shares

Common stock to be outstanding after this offering.......................      17,783,174 shares (1)

Use of proceeds..........................................................      We will not receive any proceeds from the sale
                                                                               of common stock by the selling stockholders

American Stock Exchange symbol...........................................      RTX

    The foregoing  information is based upon shares of common stock  outstanding
as of February 2, 2001.  The common  stock  offered by the selling  stockholders
includes  1,919,119  shares  that  were  previously   acquired  by  the  selling
stockholders   and  3,015,043  shares  that  may  be  acquired  by  the  selling
stockholders upon exercise of presently  outstanding  warrants and/or options to
purchase  common stock.  Except as otherwise  noted,  the shares  outstanding on
February 2, 2001 do not include shares  issuable upon exercise of any additional
outstanding stock options and warrants.

    We are registering the shares offered hereby to satisfy various  obligations
to the selling stockholders to register their resale of our common stock.

------------
(1) Assuming outstanding warrants and options are not exercised.


                                       2



                                  RISK FACTORS

    You should  carefully  consider the following risks before you decide to buy
our  securities.  If any of the following  risks actually  occur,  our business,
financial  condition or results of operations would likely suffer.  As a result,
the trading price of our securities could decline,  and you may lose all or part
of the money you paid to buy our securities.

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.

Our success  depends on our ability to secure  participation  in the RateXchange
Trading System and the development of a neutral  marketplace where  participants
can transact trades.

    The  success  of the  RateXchange  Trading  System  depends in part upon the
creation of a network of physically  interconnected  users.  To  facilitate  the
creation  of such a network we have  deployed  switching  capacity in nine major
metropolitan  areas in the United  States and one in London,  England.  While we
have  identified  target  users,  we cannot  assure  you that we will be able to
secure their  participation in the RateXchange  Trading System.  There is a risk
that we may not be able to enter into  sufficient  contractual  arrangements  on
favorable terms with such participants.

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

    At  September  30,  2000,  our  accumulated   deficit  since  inception  was
$49,943,702, including $27,926,732 related to stock grants and warrants. For the
first nine  months of 2000,  we  incurred a net loss of  $37,279,048,  including
$23,582,015 related to stock grants and warrants. We have incurred a net loss in
each year of our existence,  and have financed our development  stage operations
primarily through sales of equity securities.  We have recorded nominal revenues
from operations.  We expect to incur net losses for the foreseeable  future.  We
may  never  achieve  or  sustain  significant  revenues  or  profitability  on a
quarterly or annual basis.

If the RateXchange  Trading System does not achieve commercial  acceptance,  our
results will suffer.

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

We depend on the efforts of the Amerex Bandwith, 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
Bandwith,  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.


                                       3



    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 and minutes 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,  the GTX, 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.

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

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

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


                                       4



    We  have  developed  an  electronic   trading  system  for  trading  futures
contracts,  options on futures  contracts  and swaps for the purchase or sale of
bandwidth and other telecommunications  products.  Futures contracts and options
on futures  contracts are within the  jurisdiction of the CFTC.  Presently,  the
Commodity  Exchange Act provides that futures contracts may be entered into only
on a board of trade that has been  designated by the CFTC as a contract  market.
The CFTC has never determined whether some or all swap agreements are futures or
options contracts subject to regulation under the Commodity Exchange Act and the
CFTC's  regulations.  The CFTC has,  however,  issued a policy statement stating
that most swap  transactions  are not  appropriately  regulated  as  futures  or
options  contracts under the Commodity  Exchange Act or the CFTC's  regulations.
The CFTC has also issued rules exempting swap agreements from most provisions of
the  Commodity  Exchange  Act  and  the  CFTC's  regulations   provided  certain
conditions  were met.  The  exemptive  rules do not permit swaps to be traded on
traditional exchanges. Both the CFTC's policy statement, which is limited in its
application to cash-settled  swaps, and the CFTC's exemptive rules do not permit
swaps to be cleared and impose other  restrictions on swaps. As a result,  under
the currently  statutory and regulatory  scheme  applicable to swaps,  should we
elect in the future to list for trading or clear swap agreements, we may need to
request an exemption  from the CFTC to do so. The CFTC is under no obligation to
reach a decision within a certain period or to grant an exemption.

     Legislation that would make sweeping changes to the Commodity  Exchange Act
is presently awaiting Presidential  approval. If the legislation becomes law, it
may remove  some of the  regulatory  requirements  applicable  to our  providing
trading  and/or  clearing  services  for futures  contracts,  options on futures
contracts  and  swaps  involving   telecommunications   products.  Even  if  the
legislation  does become law, some of the services we may provide could still be
subject to CFTC  regulation.  We are  unable to  predict at this time,  however,
whether the legislation, if enacted, would have a material effect on our ability
to offer trading and/or clearing  services for futures  contracts and options on
futures contracts involving telecommunications products.

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.


                                       5



    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.

    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.


                                       6



    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 results of operations.

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

    Our success, in particular our ability to successfully  facilitate bandwidth
trades  and  provide  high-quality  customer  service,  largely  depends  on the
efficient  and  uninterrupted  operation  of  our  computer  and  communications
hardware  systems.  Our  systems  and  operations  are  vulnerable  to damage or
interruption  from  fire,  flood,   power  loss,   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.

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

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

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

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

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


                                       7



    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 and physical delivery hubs. 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  results of
operations.

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

    We rely on a variety of software and hardware  technologies  that we license
from third  parties,  including  our  database  and  Internet  server  software,
components of our online trading  software and  transaction-processing  software
which is used in 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.  The loss of our ability to
maintain or obtain upgrades to any of these technology  licenses could result in
delays in completing any proprietary software  enhancements and new developments
until  equivalent  technology  could be  identified,  licensed or developed  and
integrated. Any such delays could have a material adverse effect on our business
and results of operations.

The volatility of our securities prices may increase.

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

    o    Quarter to quarter variations in operating results;

    o    Adverse news announcements;

    o    The introduction of new products and services;

    o    Market  conditions  in  the  telecommunications  industry  in  general,

         Internet-based services and e-commerce; and

    o    General market conditions.

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


                                       8


    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.

             CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

    This prospectus  contains  forward-looking  statements that address numerous
matters, including the following:

    o    Trends we believe  may  affect our  business,  financial  condition  or
         results of operations;

    o    Factors that determine demand for our products;

    o    Advantages we believe will help us compete effectively; and

    o    Our strategies concerning the expansion of our operations.

    In some cases you can identify forward-looking  statements by terminology we
use,  including  "believes,"   "anticipates,"   "expects,"  "estimates,"  "may,"
"should,"  "could,"  "plans,"  "predicts,"  "potential,"  "continue"  or similar
terms.

    Although we believe that the expectations  reflected in the  forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity,  performance or achievements.  The forward-looking  statements involve
known and unknown risks,  uncertainties  and other factors that may cause actual
results to be materially  different from any future results expressed or implied
by the  forward-looking  statements.  These  factors  include those listed under
"Risk Factors" and elsewhere in this prospectus.  All forward-looking statements
contained in this  prospectus are expressly  qualified in their entirety by this
cautionary notice.

                                 USE OF PROCEEDS

    We will not receive any proceeds from the sale of any shares offered by this
prospectus.  We may, however, receive proceeds when the selling stockholders pay
to  exercise  their  warrants  and/or  options.  Selling  stockholders  are  not
obligated to exercise their  warrants or options,  and there can be no assurance
that they will choose to exercise all or any of these  warrants or options.  Our
gross proceeds,  assuming all warrants and options are exercised for cash, would
be  $33,471,342.  However,  we are unable to predict the exact amount of cash we
will receive upon exercise of the warrants because some warrants have a cashless
exercise  provision,  which allows the holder to pay for the warrant by reducing
the number of shares received upon exercise. We will use any proceeds we receive
for the  exercise  of warrants  and  options to augment our working  capital for
general corporate purposes.

                              SELLING STOCKHOLDERS

    The  table  below  lists the  selling  stockholders  and  other  information
regarding  the  beneficial  ownership of our common stock by each of the selling
stockholders.  This prospectus  relates to a total of 4,934,162 shares of common
stock,  3,015,043 of which are not currently  outstanding but may be acquired by
the selling  stockholders  upon exercise of outstanding  options and/or warrants
held by  individual  stockholders.  The first  column  provides the name of each
selling  stockholder and describes the stockholder's  position,  office or other
material   relationship  with  us,  if  any,  as  well  as  any  other  material
relationship  the  stockholder  has had within the past three years with us, our
predecessors  or any  affiliate of ours.  The second  column lists the number of
shares  of  common  stock  beneficially  owned by each  selling  stockholder  on
February  2, 2001.  The selling  stockholders  are  offering  only the shares of
common stock indicated in the third column.  The fourth and fifth columns assume
the selling  stockholders  dispose of all the shares offered by this  prospectus
and that the selling stockholders do not acquire any additional stock.


                                       9


    We are  registering  the shares for resale by the  selling  stockholders  in
accordance  with  registration  rights granted or offered to some of the selling
stockholders.  We will pay the registration and filing fees,  printing expenses,
listing fees,  blue-sky fees, if any, and fees and disbursements of our counsel,
but the  selling  stockholders  will  pay any  underwriting  discounts,  selling
commissions  and  similar  expenses  relating  to the  sale  of the  shares.  In
addition, we have agreed to indemnify some of the selling stockholders,  as well
as  certain  affiliated  parties,   against  specific   liabilities,   including
liabilities  under the  Securities Act of 1933, as amended,  in connection  with
this  offering.  Those  selling  stockholders  we have agreed to indemnify  have
agreed to indemnify us and our  directors  and  officers,  as well as any person
that controls us, against specific liabilities,  including liabilities under the
Securities Act.

    The  information  provided  in the table  below has been  obtained  from the
selling  stockholders.  To our  knowledge,  the selling  stockholders  have sole
voting  and  investment  power  with  respect  to these  securities,  except  as
otherwise indicated in the first column. The selling  stockholders may sell all,
some or none of their shares in this offering.

                                       10



                                                                                         Shares
                                                                    Maximum         Beneficially Owned
                                                     Shares        Number of         after Offering
                                                  Beneficially    Shares to be        (assuming all       Percentage of Common
Name of Selling Stockholder and Material          Owned Prior       Sold in         shares offered are      Stock Beneficially
Relationship, if any, with RateXchange            to Offering       Offering          actually sold)       Owned after Offering
--------------------------------------            -----------       --------          --------------       --------------------
                                                                                                        
ACDC Bookfront & Co.                                  82,300          82,300                    0                         *
     (AIM Equity Funds, Inc. on behalf of its
     portfolio, AIM Capital Development  Fund)
Altar Rock Fund, LP                                      836             836                    0                         *
American Masters Fund (Hilspen Series)                 2,800           2,800                    0                         *
Apodaca Investment Offshore Ltd.                      25,000          25,000                    0                         *
Apodaca Investment Partners, L.P.                     16,667          16,667                    0                         *
Arzumanov, Valeriy                                     2,083           2,083                    0                         *
Bald Eagle Fund, Ltd.                                    750             750                    0                         *
Band and Co., Nominee for Firstar                     20,833          20,833                    0                         *
Barr, Alison A.                                       18,750          18,750                    0                         *
Betje Partners, LP                                    24,125          24,125                    0                         *
Bi Coastal Consulting Corp.                           25,000          25,000                    0                         *
Cannell, Carlo J.                                     33,750          33,750                    0                         *
Cohanzick Partners, LP                                 4,167           4,167                    0                         *
Cole, Douglas                                        868,151         100,000              768,151                     3.77%
     Consultant and Former Director and
     Executive Officer of RateXchange
     Corporation
Columbia Avenue Advisors                              25,000          25,000                    0                         *
Counterpoint Master L.L.C.                           237,500         237,500                    0                         *
     Andrew Brown shares voting and
     disposition power over the securities
     held by this stockholder and offered
     pursuant to this prospectus
Cypress VI Partners                                   12,500          12,500                    0                         *
     Leonard Eber, as Managing Partner for
     the Eber Family Living Trust and the
     Eber Family Trusts Numbered One through
     Four, shares voting and disposition power
     over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Donaghy Sales, Inc.                                   23,000          21,000                2,000                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Edward O. Thorp & Associates, L.P.                     4,167           4,167                    0                         *
Elbaz, Elliott S.                                      6,250           6,250                    0                         *
Ellis, Ian P.                                          6,250           6,250                    0                         *
First Security Van Kasper                            459,020         459,020                    0                         *
     Placement Agent for RateXchange I, Inc.
     January 2, 2000 Bridge Loan;
     Co-Underwriter for RateXchange
     Corporation March 2000 Private
     Placement; D. Jonathan Merriman, Former
     Senior Managing Director of First
     Security Van Kasper, is a Director and
     President and Chief Executive Officer of
     RateXchange Corporation
Five Points Fund, L.P.                                75,000          75,000                    0                         *
Five Points Offshore Fund, Ltd.                       50,000          50,000                    0                         *
Forsythe McArthur Associates, Inc.                    69,500          69,500                    0                         *
     Lessor of RateXchange
Gerard, Klauer, Mattison & Co., Inc.                   3,975           3,975                    0                         *
     Placement Agent for RateXchange I,
     Inc. January 2, 2000 Bridge Loan
Germanotta, Joe                                        2,852           2,852                    0                         *
     Former Consultant to RateXchange
Gilston Corporation, Ltd.                             20,833          20,833                    0                         *
Golby, Wesley                                          4,500           4,500                    0                         *
Grange, Richard C.                                    84,404          84,404                    0                         *
     Former Director of predecessor of
     RateXchange I, Inc.
Gruber Family Foundation                               3,806           3,806                    0                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Gruber-McBaine International                          46,094          46,094                8,500                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus

                                       11


Grunewald, Brad K.                                    73,601          73,601                    0                         *
Guarantee & Trust Company TTEE FBO,                   12,500          12,500                    0                         *
     Paul Dwork Sep IRA
Hare & Co.  651653 (Hamilton College)                 17,351          17,351                    0                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Hare & Co. 705286 (L-3 Communications Corp.)           7,784           5,784                2,000                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Hart, Patti S. and Milledge A.                         4,167           4,167                    0                         *
Hicks, Ian and Anna                                   15,000           5,000               10,000                         *
Hilspen Capital Partners                               4,350           4,350                    0                         *
Hilspen Capital Partners, II                          24,750          24,750                    0                         *
Intercoastal Financial Services Corp.                100,000         100,000                    0                         *
Interra Ventures                                      45,000          45,000                    0                         *
Irvine Capital Partners, II LP                        25,000          25,000                    0                         *
Kalia, Paul                                           33,417          33,417                    0                         *
The Kaufmann Fund                                     20,833          20,833                    0                         *
Kensington Partners, L.P.                              3,229           3,229                    0                         *
Kensington Partners II, L.P.                             188             188                    0                         *
Khadar, Mohammad                                       4,167           4,167                    0                         *
Kingdon Associates                                    12,500          12,500                    0                         *
Kingdon Family Partnership, L.P.                       3,125           3,125                    0                         *
Kingdon Partners                                       7,197           7,197                    0                         *
Lagunitas Partners, L.P.                             238,882         225,882               13,000                         *
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Liberty-Stein Roe Small Company Growth                12,500          12,500                    0                         *
     Fund
Maroon Bells Capital Partners                        531,375         531,375                    0                     2.90%
     Significant Stockholder and Party to
     Financial Advisory Agreement with
     RateXchange Corporation
Mayfield, Ross                                       230,738          16,675              214,063                     1.04%
     Former Executive Officer of RateXchange
     Corporation
Mehra, Raj                                               417             417                    0                         *
Metzman, Mitch A.                                     12,500          12,500                    0                         *
MJE Partners                                           2,083           2,083                    0                         *
M. Kingdon Offshore, N.V.                             59,792          59,792                    0                         *
Mooney, Edward                                       576,667         100,000              476,667                     2.34%
     Former Executive Officer and Director
     of RateXchange Corporation, Currently a
     consultant to RateXchange; Party to
     Severance Agreement with RateXchange
New-Day Investment Partnership, L.P.                  12,500          12,500                    0                         *
North Olmsted Partners, LP                             4,167           4,167                    0                         *
Omni Resources, LLC                                   12,500          12,500                    0                         *
Ozada, Erinch R.                                       6,250           6,250                    0                         *
Pequot Scout Fund, L.P.                               83,334          83,334                    0                         *
     Pequot Capital Management, Inc., as
     investment advisor to this stockholder,
     shares voting and disposition power
     over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Phaeton, B.V.I.                                       49,625          49,625                    0                         *
Phoenix Partners, L.P.                                51,250          51,250                    0                         *
Pilgrim Baxter Hybrid Partners I, L.P.                37,500          37,500                    0                         *
     Pilgrim Baxter & Assoc., Ltd., as
     investment advisor to this stockholder,
     shares voting and disposition power
     over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Pilgrim Baxter Hybrid Partners II, L.P.                4,167           4,167                    0                         *
     Pilgrim Baxter & Assoc., Ltd., as
     investment advisor to this stockholder,
     shares voting and disposition power
     over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Poe, Fred W.                                          25,000          25,000                    0                         *
Prism Partners I, L.P.                                75,000          52,500               22,500                         *
Prism Partners II Offshore Fund                       75,000          15,000               60,000                         *
Prism Partners Offshore Fund                          75,000           7,500               67,500                         *

                                       12


Quantum Partners LDC                                 166,667         166,667                    0                         *
     Soros Fund Management LLC, as  Principal
     Investment Manager to this
     stockholder, shares voting and
     disposition power over the securities
     held by this stockholder and offered
     pursuant to this prospectus
Raptor Global Portfolio Ltd.                         186,665         186,665                    0                         *
Rawitser, Michael                                     12,500          12,500                    0                         *
Retirement Plan of Space Systems/Loral Inc.            5,784           5,784                    0                         *
     - Kane & Co. P51455
     Gruber & McBain Capital Management
     L.L.C. shares voting and disposition
     power over the securities held by this
     stockholder and offered pursuant to this
     prospectus
Rice, Philip                                          27,500          12,500               15,000                         *
     Executive Officer of RateXchange
     Corporation
Robb, Larry F.                                       215,625          93,750              121,875                         *
Rogers, Malcolm                                      808,000          43,000              765,000                     3.75%
     Significant Stockholder
     Janet L. Rogers shares voting and
     disposition power over the securities
     held by this stockholder and offered
     pursuant to this prospectus
Scheele, Michael J.                                  381,313         121,313              260,000                     1.27%
     Consultant to RateXchange Corporation
Schottenfeld Associates, LP                           20,833          20,833                    0                         *
Schow Family Trust                                   119,250         119,250                    0                         *
Sidana, Annupreet                                     11,250          11,250                    0                         *
Smith, Raymond M.; IRA Rollover
     Custodian                                        31,250          31,250                    0                         *
Special Situations Cayman Fund, L.P.                  27,083          27,083                    0                         *
Special Situations Fund III, L.P.                     91,667          91,667                    0                         *
Special Situations Private Equity Fund, L.P.          27,083          27,083                    0                         *
Special Situations Technology Fund, L.P.              20,833          20,833                    0                         *
Spirit Fund, Ltd.                                      8,333           8,333                    0                         *
Stein Roe Variable Investment Trust Small             37,500          37,500                    0                         *
     Company Growth, Var Series
Suyama, Roger,  Pacific Century                       12,500          12,500                    0                         *
Swindells, Theodore                                  839,969          45,000              794,969                     4.47%
Talisman Capital Opportunity Fund                    225,000         225,000                    0                         *
The Timken Living Trust U/A/D 9/14/99                 20,833          20,833                    0                         *
Tirman Family Limited Partnership                      6,250           6,250                    0                         *
     Geoffrey Tirman, General Partner of
     Tirman Family Limited Partnership,  shares
     voting and disposition power over the
     securities held by this stockholder and
     offered pursuant to this prospectus
Tonga Partners, LP                                    10,417          10,417                    0                         *
     Cannell Capital Management shares
     voting and disposition power over the
     securities held by this stockholder and
     offered pursuant to this prospectus
Trinity Fund, Ltd.                                    33,333          33,333                    0                         *
Ultimate Markets, Inc.                               350,000         175,000              175,000                         *
VICD Bipod & Co.                                       1,033           1,033                    0                         *
     (AIM Variable Insurance Funds, Inc. on
behalf of its portfolio, AIM Capital
Development Fund)
Warren, Robin                                         13,342          13,342                    0                         *
Wescott, Jr, Paul A.                                  82,250           6,250               76,000                         *
     Former Executive Officer of RateXchange
     Corporation
Wheeler, William                                      12,333          12,333                    0                         *
Whelan, Sean                                          25,805          25,805                    0                         *
     Founder and Former President of
RateXchange I, Inc., a subsidiary of
RateXchange Corporation
Windy Hill Investments NAMI, LLC                      12,500          12,500                    0                         *
WPG Institutional Networking Fund, L.P.                1,250           1,250                    0                         *
WPG Institutional Software Fund, L.P.                 18,859          18,859                    0                         *
WPG Networking Fund, L.P.                             10,304          10,304                    0                         *
WPG Raytheon Networking Fund, L.P.                    29,696          29,696                    0                         *
WPG Raytheon Software Fund, L.P.                      14,371          14,371                    0                         *
WPG Software Fund, L.P.                                8,437           8,437                    0                         *

----------

* The shares represent less than 1% of the outstanding shares of common stock.


                                       13



                              PLAN OF DISTRIBUTION

    The selling  stockholders,  or, subject to applicable  law, their  pledgees,
donees, distributees,  transferees or other successors in interest, may sell all
or portions of the shares from time to time while the registration  statement of
which this prospectus is a part remains effective.  The selling stockholders may
sell shares in public transactions, on or off the American Stock Exchange or any
exchange  with  which  we  register  or in  private  transactions.  The  selling
stockholders  may  sell  the  shares  at any  price  and in  different  types of
transactions  including,  but not  limited  to,  one or any  combination  of the
following:

    o    Ordinary  brokers  transactions  and  transactions  in which the broker
         solicits purchasers;

    o    Transactions involving cross or block trades or otherwise;

    o    Purchases by brokers,  dealers or underwriters as principals and resale
         by such purchasers for their own accounts pursuant to this prospectus;

    o    "At the market" to or through market makers or into an existing  market
         for the common stock;

    o    In other  ways not  involving  market  makers  or  established  trading
         markets, including direct sales to purchasers or sales effected through
         agents; or

    o    In privately negotiated transactions.

Selling stockholders may also sell shares pursuant to Rule 144 of the Securities
Act if available.

    Sales of the shares at less than market  prices may depress the market price
of our common  stock.  Moreover,  generally  the  selling  stockholders  are not
restricted as to the number of shares, which may be sold at any one time, and it
is possible that a significant number of shares could be sold at the same time.

    In effecting sales,  brokers or dealers engaged by the selling  stockholders
may arrange for other  brokers or dealers to  participate  in the  resales.  The
selling  stockholders may enter into hedging transactions with broker-dealers or
other financial  institutions,  and in connection with those  transactions,  the
broker-dealers or other financial  institutions may engage in short sales of the
shares.  The selling  stockholders  may also sell  shares  short and deliver the
shares to close out such short  positions.  The  selling  stockholders  may also
enter into option or other  transactions with  broker-dealers or other financial
institutions  that require  delivery to the  broker-dealers  or other  financial
institutions  of  the  shares,  which  the  broker-dealers  or  other  financial
institutions may resell pursuant to this prospectus.


                                       14


    Broker-dealers  may agree with the selling  stockholders to sell a specified
number  of shares  at a  stipulated  price per  share  and,  to the  extent  the
broker-dealers   are  unable  to  do  so  acting  as  agents  for  the   selling
stockholders,  to purchase as principals any unsold shares at the price required
to  fulfill  the  broker-dealers'   commitments  to  the  selling  stockholders.
Broker-dealers  who acquire  shares as  principals  may  thereafter  resell such
shares from time to time in transactions,  which may involve block  transactions
and sales to and through other  broker-dealers,  including  transactions  of the
nature  described above, in the  over-the-counter  market or otherwise at prices
and on terms  prevailing  at the time of the sale, at prices then related to the
then-current market price or in negotiated  transactions and, in connection with
such  resales,  may  pay to or  receive  from  the  purchasers  of  such  shares
commissions as described  above.  The selling  stockholders  may also pledge the
shares to  broker-dealers or other financial  institutions,  and upon a default,
the  broker-dealers  or other  financial  institutions  may affect  sales of the
pledged shares pursuant to this prospectus.

    Brokers,  dealers  or  agents  may  receive  compensation  in  the  form  of
commissions,   discounts  or  concessions  from  the  selling   stockholders  or
purchasers in amounts to be negotiated in connection  with the sale. The selling
stockholders   and  any   participating   brokers  or  dealers   may  be  deemed
"underwriters"  within the meaning of the Securities Act in connection with such
sales,  and  any  such   commission,   discount  or  concession  may  be  deemed
underwriting compensation.

    Information as to whether any underwriter that the selling  stockholders may
select, or any other broker-dealers,  are acting as principals or agents for the
selling  stockholders,  the compensation to be received by any underwriters that
the  selling  stockholders  may  select  or  by  any  broker-dealers  acting  as
principals or agents for the selling  stockholders,  and the  compensation to be
paid to other  broker-dealers,  in the  event  the  compensation  of such  other
broker-dealers  is in excess of usual and  customary  commissions,  will, to the
extent  required,  be  set  forth  in  a  supplement  to  this  prospectus.  Any
broker-dealers  participating  in any distribution of the shares may be required
to deliver a copy of this prospectus, including a prospectus supplement, if any,
to  any  person  who   purchases   any  of  the  shares  from  or  through  such
broker-dealers.

    During any time that the selling  stockholders are engaged in a distribution
of the  shares,  the  selling  stockholders  will be required to comply with the
Securities  Exchange  Act of 1934,  as amended.  With  certain  exceptions,  the
Exchange Act precludes the selling  stockholders,  any affiliated purchasers and
any  broker-dealers  or other persons who participate in such  distribution from
bidding  for or  purchasing,  or  attempting  to induce any person to bid for or
purchase any security that is the subject of the  distribution  until the entire
distribution is complete.  The Exchange Act also prohibits any bids or purchases
made in order to  stabilize  the  price of a  security  in  connection  with the
distribution of that security. All of the foregoing may affect the marketability
of the common stock.

    To comply  with some  state  securities  laws,  the  shares may be sold only
through registered or licensed brokers or dealers. The shares may not be sold in
some  states  unless the seller  meets the  applicable  state  notice and filing
requirements.

                          DESCRIPTION OF CAPITAL STOCK

Authorized Shares

    Our authorized capital stock consists of 300,000,000  common shares,  $.0001
par value per share,  and 60,000,000  shares of preferred  stock. On February 2,
2001, 17,783,174 shares of our common stock and no shares of our preferred stock
were issued and outstanding.

Common Stock

    Holders of our common stock are entitled to receive dividends, when, and as,
declared by our board of directors out of funds  available  therefore.  Any such
dividends  may be paid in cash,  property  or shares of the  common  stock.  The
outstanding  shares  of  common  stock  are  validly  issued,   fully  paid  and
non-assessable.

    Each  holder of our common  stock is  entitled  to one vote per share on all
matters  submitted  to the  vote of  stockholders,  including  the  election  of
directors.  Holders of common stock do not have  cumulative  voting rights.  The
absence of  cumulative  voting  means  that the  holders of more than 50% of the
shares  voting for the election of directors  can elect all directors if they so
choose.


                                       15


    Holders of our common stock have no  preemptive  or  conversion  rights,  no
redemption  or sinking  fund  provisions  and are not liable to further  call or
assessment.

    Holders  of our common  stock are  entitled  to share  ratably in any assets
available for distribution to holders of our equity  securities upon liquidation
of our company,  subject to distribution of the preferential  amount, if any, to
be distributed to any holders of preferred stock.

Preferred Stock

    Our certificate of incorporation  authorizes our board,  without any vote or
action by the holders of common  stock,  to issue  preferred  stock from time to
time in one or more series.  Our board is  authorized to determine the number of
shares  and  to  fix  the  powers,   designations,   preferences  and  relative,
participating,  optional  or other  special  rights of any  series of  preferred
stock. Issuances of our preferred stock, if convertible into common stock, would
be subject to the applicable  rules of the AMEX or other  organizations on which
our stock is then quoted or listed.  Depending on the terms of  preferred  stock
established  by our board of  directors,  any or all series of  preferred  stock
could have  preference over our common stock with respect to dividends and other
distributions  and upon our  liquidation.  If any shares of preferred  stock are
issued with voting powers,  or if additional  shares of common stock are issued,
the voting power of the outstanding common stock would be diluted.

    We believe that the  availability of preferred stock will provide  increased
flexibility to facilitate  possible future  financings and  acquisitions  and to
meet other corporate needs that might arise.

Transfer Agent and Registrar

    OTC Stock Transfer, Inc. is the transfer agent and  registrar for our common
stock.

                                    BUSINESS

Overview

    We operate a trading system,  the RateXchange  Trading System,  which allows
market  participants to trade bandwidth.  We provide global trading solutions to
telecommunications   companies,   energy  marketers  and  merchants,   financial
institutions  and  commodity  traders,  with our advanced  technological  system
providing users with an efficient,  centralized  marketplace to bring buyers and
sellers  together.   Through  the  development  of  marketplaces  for  financial
instruments  related  to  telecommunications  products,  we  are  bringing  risk
management  tools and  practices  to the  communications  industry.  We  provide
participants  on our trading system with access to a secure  infrastructure  for
facilitating  the delivery of traded  bandwidth over any platform.  By providing
market  participants with an advanced trading system,  financial products and an
independent  physical  delivery  mechanism,  we are  enabling  the creation of a
liquid bandwidth trading market.

Business Model

    We expect to  generate  revenues  by  providing  trading  services to energy
merchants,    telecommunications   companies,   service   providers,   financial
institutions  and  commodity  traders.  We also expect to derive  revenues  from
bandwidth  and  risk  management   consulting  services  through  our  RateXlabs
Technology Consulting,  through CustomAuctions and other web-enabled transaction
services,  and as a result of our  investment in  independent  delivery hubs for
physical delivery of contracts traded on the electronic trading system.

RateXchange Trading System

    Our software  powers the only  neutral,  online  trading  system that allows
companies  to buy,  sell  and  deliver  standard  wholesale  bandwidth  capacity
globally.  The  trading  system is similar to trading  platforms  that  dominate
on-line natural gas and electricity  commodity  trading.  The trading system was
developed in conjunction  with leading  energy,  utility and  telecommunications
companies.   The  RateXchange   Trading  System  enables  bandwidth  traders  to
pre-approve and manage  counterparty  credit.  Before trading on the RateXchange
Trading System, a company would check and pre-approve  credit for a large number
of potential  counterparties.  It would then enter the credit  information  in a
credit  matrix on the  system  that would  limit its  exposure  to a  particular
counterparty to the pre-approved amount.


                                       16


    Trades executed on the RateXchange Trading System can be delivered using our
delivery  hubs,  other  pooling  points,  or bilateral  interconnection.  Market
participants  are now able to trade a larger number of routes  regardless of the
presence of RateXchange delivery hubs. Trading will utilize the Master Bandwidth
Purchase and Sale Agreement,  based on the Bandwidth Trading Organization master
agreement,  but will support the trading of other standardized contracts. As the
bandwidth trading market matures,  we expect market participants will eventually
adopt a standardized contract similar to what has occurred in other commodities.
In the meantime, we provide the flexibility that market participants need.

    The  RateXchange  Trading  System  contains  features  common in the leading
electronic systems in other commodities  markets. The RateXchange Trading System
serves as a platform for bandwidth  trading,  but the system can also be used to
trade other products.  We have developed  extensive  intellectual  property with
regard to our  trading  system  that may be applied to other  telecommunications
products and other trading markets.

The RateXchange Trading System offers the following features to the market:

    Dynamic Counter-Party Credit Management System

    We employ a  counter-party  credit  management  system  that  allows  market
participants  to  select,  pre-approve  and set  credit  limits  for  particular
counter-parties. We have applied for a patent for this business process.

    Real-Time Capability

    The RateXchange  Trading System software  employs  technology that makes our
electronic trading system one of the fastest in the industry,  providing traders
on our  system  with  updated  information  in  real-time.  We  believe  we have
developed  significant  intellectual  property  regarding  trading bandwidth and
other telecommunications products in real-time.

Delivery Hubs

    We  have  established  delivery  hubs  in  neutral  co-location   facilities
connecting major domestic and  international  bandwidth  routes. We believe this
investment  will help to accelerate  development of a viable,  liquid market for
bandwidth  traded as a commodity  as these  pooling  points  allow for  physical
delivery of traded  contracts.  Our  delivery  hub  architecture  and  strategic
technology  partners provide us with a secure,  scalable,  high quality delivery
infrastructure connecting buyers' and sellers' networks.  Delivery hub equipment
currently is engineered to support bandwidth trades at the OC-12, OC-3, DS-3 and
DS-1  levels   domestically  and  at  the  STM-4,  STM-1,  E-3  and  E-1  levels
internationally.

    Interconnection  to independent  delivery hubs produces a number of benefits
to market participants, including:

    o    Quality of service monitoring;

    o    Reduces interconnection time;

    o    Reduces interconnection costs;

    o    Enables carriers to quickly connect their traded bandwidth circuits;

    o    Allows equal access to market data for service demand and pricing; and

    o    Facilitates risk and yield management  practices,  including  efficient
         trading of bandwidth assets.

    We presently  offer traders  access to ten delivery hubs in service with two
additional  hubs  scheduled  to be in  service  by the end of 2000.  These  hubs
provide market  participants  with the ability to trade and deliver bandwidth on
66 of the most liquid bandwidth routes in the world.  Market  participants  that
interconnect to our delivery hubs are charged an installation  fee and a monthly
port fee depending on the size of the connection. We will also charge additional
fees to provision traded bandwidth and to channelize connected bandwidth.  These
fees,  while  providing a revenue  stream to us, still  greatly  reduce a market
participant's cost of interconnection.

    We have an agreement with one of the largest energy  merchants and marketing
firms in which it will buy and deliver a circuit over two of our  delivery  hubs
in the first  quarter of 2001.  We have agreed to work jointly with this firm to
refine the already  developed  tagging  (work flow)  process  and  software  and
quality of service monitoring that has already been put


                                       17


in place by SAIC and us. Upon successful  completion of this testing process, we
anticipate that this energy merchant will more extensively  utilize our delivery
hubs for buying and selling of bandwidth.

Bandwidth Consulting--RateXlabs

    RateXlabs  provides  independent  economic  research and  confidential  risk
management consulting regarding bandwidth trading.  RateXlabs currently provides
bandwidth consulting services to two Fortune 100 companies.

CustomAuctions

    CustomAuctions,  launched in March 2000,  was  developed to  facilitate  the
trading of products with specific product,  geographic or financial requirements
that are not traded on the  RateXchange  Trading System.  CustomAuction  service
benefits include:

    o    Provision of specialized products to a large and pre-qualified market;

    o    Significant reduction in time and cost of the transaction;

    o    "Book-building" process to assure matching of supply/demand to contract
         and market design; and

    o    Market and contract design to assure optimal price discovery in auction
         events.

Other Revenue Sources

    As our business evolves and our online trading community grows, we expect to
derive revenues from the operation of other related  markets,  such as financial
and  derivative  contracts  related  to  bandwidth,  internet  access,  wireless
spectrum and  satellite  bandwidth.  We believe that the  intellectual  property
associated  with our trading system may also have  applications in other trading
markets and online exchanges.

Products and Markets

    In the quarter ended September 30, 2000, we began generating revenue from:

    o    Transaction  fees  on  trades  executed  through  our  trading  system,
         typically  generated  as  commissions  paid by both the  buyer  and the
         seller upon each trade; and

    o    Consulting fees earned by RateXlabs,  our bandwidth trading  consulting
         division, providing independent economic research and confidential risk
         management education.

     In addition to these revenue sources,  we anticipate  generating revenue in
the future from:

    o    Service  fees for  RateXchange  CustomAuctions  paid by the offeror for
         holding an auction event;

    o    Installation fees and monthly port fees for utilization of our delivery
         hubs; and

    o    Membership  fees  that  entitle  members  to  trading   privileges  and
         web-based, marketplace information services.

Bandwidth Trading Overview

    According  to the Hoover's  "Telecommunications  Industry  Summary,"  annual
global spending on telecom services is currently $726 billion and is expected to
grow to $1 trillion by 2001.  Technology and deregulation  continue to transform
the  telecommunications  market  from a  closed  industry  made up of  localized
monopolies to an  increasingly  competitive  marketplace.  Formerly  state-owned
carriers must both defend their own markets and pursue  opportunities  abroad to
remain  competitive.  New and  legacy  carriers  are taking  advantage  of rapid
advances  in  technology  to build  networks  with  drastically  lower  costs of
operation.  The number of carriers licensed to trade international voice traffic
in the U.S.  alone  has  doubled  in each of the past  three  years to well over
1,200.

    Traditionally,   the  telecommunications  market  has  been  fragmented  and
inefficient,  with non-standard  pricing and high  interconnection and switching
costs between carriers. As a result of market inefficiency:

    o    Bandwidth  trades are currently  conducted  bilaterally  with imperfect
         market data and no central marketplace;


                                       18


    o    Establishing and managing multiple  bilateral  relationships to conduct
         bandwidth  trades  results in redundant  costs,  marked by  fulfillment
         cycles that average 60-90 days;

    o    As many as nine out of 10 transactions  fail because of market changes,
         financial, contractual and quality issues and delivery delays; and

    o    Significant  price and volume exposure results in operational risks and
         costs for carriers of all sizes.

    Carriers  are  expected to continue to  aggressively  use  partnerships  and
outsource  agreements to penetrate new markets and alleviate congestion in their
current  networks.  These are the market factors behind the rapidly growing spot
and forward  markets in  bandwidth.  However,  despite  advances in hardware and
software    technologies   and   increasing   network    interconnection,    the
telecommunications  bandwidth market remains  inefficient due to static business
processes that continue to be utilized by carriers of all sizes. In response, we
have created an electronic trading system and a streamlined  delivery mechanism.
By  offering a trading  platform  that  effectively  brings  buyers and  sellers
together and a single standardized  contract and marketplace,  we believe we can
provide significant economic value to both parties through:

    o    Time Savings. We provide instantaneous access to bandwidth prices, thus
         facilitating information flow and transaction timing.

    o    Cost Savings.  The most readily quantifiable benefit to both purchasers
         and sellers of bandwidth is reduced  costs from trading on an exchange.
         Specifically,   cost   reductions   can  be  achieved  by   eliminating
         unnecessary costs and solving  inefficiencies  associated with existing
         buying processes among telecommunications carriers.

    o    Scalability.   Historically  as  a  result  of  market  inefficiencies,
         existing buying and selling practices have lacked  scalability and have
         been  unable  to meet the  growth  in  demand  for  bandwidth  trading.
         Conversely,  our online  marketplace  significantly  reduces timing and
         costs of effecting trades and subsequently  offers virtually  unlimited
         scalability.

    o    Network Optimization.  By providing the communications industry with an
         alternative sales channel,  we enable service providers to optimize the
         value of their network assets.

    o    Strategic  Risk  Management.  As a source of  pricing  information,  we
         provide market  participants the information  needed to manage the risk
         associated with fluctuations in supply and demand.

    The  entrance  of the  leading  energy  companies  into  the  communications
industry expands the total market  opportunity  presented by bandwidth  trading.
The same companies that played a significant role in the development of actively
traded energy and power commodity  markets are playing a significant role in the
development of the bandwidth market. The leading energy companies are at various
stages of entering  the  bandwidth  trading  market.  Enron,  El Paso Energy and
Williams are actively trading  bandwidth today.  Other companies such as Aquila,
Reliant and Dynegy have made public announcements regarding their plans to trade
bandwidth and are expected to enter the market soon.

Bandwidth as a Commodity

    Our long-term success is dependent, in part, on the continued development of
bandwidth as a tradeable  commodity.  In order for an active,  liquid  bandwidth
market to develop, the following characteristics need to be present:

Standardized Product

    The development of a commodity  market  requires a standard  product so that
participants from different industries can trade the same product.  Bandwidth as
traded on our  electronic  trading  system is defined as the  physical  means of
sending data over lines. The bandwidth  traded is a unit of capacity  (capacity)
through  which voice or data can be  transmitted  between two points (city pair)
with predetermined quality of service levels (quality). With capacity, city pair
and quality  predetermined,  the  physical  circuit is a  standardized  product.
Physical circuits are the basic building block underlying all telecommunications
products.  All types of communications from voice to Internet Protocol flow over
physical circuits.

    Our  electronic  trading  system  supports the trading of this  standardized
product and is capable of supporting the trading of other standardized  products
as new  markets  develop.  We believe the  flexibility  and  scalability  of our
electronic  trading  system  provides  us an  advantage  in the  development  of
additional trading markets.


                                       19


Standardized Contract

    The  development  of a liquid  commodity  market  requires the adoption of a
standardized  contract.  A standardized  contract allows market  participants to
complete  transactions  quickly by eliminating the need to prepare and negotiate
definitive  documentation for each transaction.  The standardized contract needs
to have standardized terms and conditions that define quality of service,  allow
for orderly  resolution  of disputes  and have  remedies in place for failure to
perform.  A group of industry  participants,  including  RateXchange and several
energy/utility  and  telecommunications  companies,  have  formed the  Bandwidth
Trading  Organization and are working toward the development of an industry-wide
standardized  contract. The contract is called the Master Bandwidth Purchase and
Sale Agreement.

    We have  adopted the Master  Bandwidth  Purchase  and Sale  Agreement as the
default agreement for trading on the RateXchange  Trading System, but the system
also  supports any number of different  contracts.  Eventually,  the market will
decide what the  standardized  contract is. Until the market  coalesces around a
standardized  contract,  we provide a platform  that supports the trading of any
contract.

    In November 2000, we entered into contracts with eight  carriers,  including
Tier 1 carriers headquartered in Asia, Europe and North America.

Interconnection

    Market  participants need a cost-effective and efficient way to make or take
delivery of traded  bandwidth.  The  development  of  efficient  interconnection
facilities should reduce the cost of bandwidth trading.  If market  participants
were interconnected  before trading the cost associated with each trade would be
reduced to the cost of connecting  and testing the circuit.  This is in contrast
to the present  situation where the  interconnection  and testing of circuits is
one of the most costly and time-consuming stages of the wholesale sales process.

    In order to accelerate development of a liquid market for bandwidth,  during
2000 we are establishing  twelve "delivery hubs" in major  metropolitan areas in
order to provide the interconnection necessary to facilitate a physical delivery
of traded contracts.  We believe other companies such as Enron and LighTrade are
also deploying pooling points to facilitate  interconnection.  The deployment of
delivery hubs by RateXchange and other companies reduces the cost and the amount
of time required for bandwidth trading.

    We have an  agreement  with one of the top energy  merchants  and  marketing
firms in which it will buy and deliver a circuit over two of our  delivery  hubs
in the first  quarter of 2001.  We have agreed to work jointly with this firm to
refine the already  developed  tagging  (work flow)  process  and  software  and
quality of service monitoring that has already been put in place by SAIC and us.
Upon  successful  completion of this testing  process,  we anticipate  that this
energy merchant will more  extensively  utilize our delivery hubs for buying and
selling of bandwidth.

Need For Price Transparency and Risk Management

    The  communications  industry has a strong need for price  transparency  and
risk management tools, such as efficient trading of bandwidth assets.  The rapid
decline in bandwidth pricing, along with the creation of applications that use a
lot of bandwidth,  has created uncertainty for users and suppliers of bandwidth.
A liquid,  commodity  market for bandwidth would provide both buyers and sellers
the information  needed to make sound  decisions.  The aggregation of buyers and
sellers in the market will lead to a forward price for  bandwidth.  This forward
pricing  could be used when  making  purchasing  decisions  or when  considering
laying or lighting fiber optic cable.

    The  aggregation of buyers,  sellers and transaction  data on  RateXchange's
Trading  System has provided  the  information  needed to bring risk  management
tools and practices to the communications industry. We believe we have, and will
continue to play, a leadership role in the emergence and validation of bandwidth
as a tradable commodity.


                                       20


Competitive Conditions

    Products, services and geographic location define the competitive conditions
for online bandwidth trading.  At this stage in the  telecommunications  trading
industry's development,  we believe that being the first company to establish an
electronic  trading  system  for  trading  bandwidth  is  significant.   Because
participation in an electronic trading system may require physical connection to
one of the system's interconnection  locations, once a carrier is connected, the
cost of moving  operations  to a new system would be  significant.  In addition,
building a critical mass of connected  carriers  creates a network effect,  with
each new  connection  enhancing  the value of the service to all  customers  and
raising  the  barrier  to  competition.  For these  reasons,  we are  focused on
attracting  large  numbers  of users to our  electronic  trading  system  and in
connecting significant numbers of carriers and other traders of bandwidth to our
delivery hubs.

    We believe we are well  positioned to compete  effectively  in the bandwidth
trading market for three reasons:

    o    Neutrality  - We believe  that some of our  competitors  intend to take
         positions in their own systems or exchanges as market makers. This will
         generate initial liquidity, but carrier reactions have been negative as
         these  companies  are  perceived as  competing  with their own exchange
         customers.

    o    First-mover  advantage  - We  believe  that  we are  one  of the  first
         bandwidth  electronic trading systems  established in the United States
         and among the first in the world. We also believe that we are currently
         one of the only United States electronic trading systems that provides:

         o   A neutral bandwidth  electronic  trading system with no other lines
             of business;

         o   Delivery hubs domestically and internationally; and

         o   A bid/ask market for bandwidth trading.

    o    Industry  experience - Our management  team's knowledge of key industry
         participants in the core market and expertise in telephony,  energy and
         financial markets adds credibility and reduces time to market.

Competitors

    The market for online bandwidth and minutes trading services is new, rapidly
evolving   and   highly   competitive,   as  are   the   online   commerce   and
business-to-business  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 our electronic trading system.

    In addition, we compete with companies who trade, broker or otherwise assist
in  the  buying  and  selling  of  telecommunications   bandwidth  and  minutes.
Therefore,  we  currently  or  potentially  compete  with  a  variety  of  other
companies,  including  lead-generation services and traditional offline brokers.
Many companies,  such as Band-X,  the GTX, 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 our electronic trading system.

Target Customers

    The market for domestic and international  bandwidth includes dominant major
Tier 1 carriers, such as AT&T, WorldCom, NTT, Deutsche Telecom,  Pangea, KDD and
Teleglobe , as well as wholesale-only carriers,  resellers,  brokers, energy and
utility companies and large  multinational  corporations.  Customer  interviews,
surveys and a review of the industry press indicate:

    o    Customers have significant frustrations with the current process;

    o    Customers see benefits to trading with us;

    o    Customers have indicated  willingness to  interconnect  with us and are
         willing to pay for our services; and

    o    In addition to carriers, large corporate users of bandwidth and telecom
         products may become  direct users to purchase  selected  bandwidth on a
         domestic or international city-to-city basis.


                                       21


Intellectual Property

    We have applied for several  trademarks  covering  specific  businesses  and
products  offered on our Internet web site. We have also  registered  copyrights
for the RateXchange  trading system web page designs.  Patent  applications  are
pending for several processes of the RateXchange  electronic  trading system. We
do not have any franchises.

General Development of Business

    During  the  fourth  quarter  of  2000,  we made  certain  additions  to our
management team to reflect our focus on trading bandwidth and telecommunications
products among a wide range of market participants.

    On October 5, 2000, D. Jonathan  Merriman,  formally  Managing  Director and
Head of the Equity Capital Markets Group at First Security Van Kasper, was named
as our President and Chief Executive Officer.  On October 20, 2000, Steven Town,
co-Chief Executive Officer of Amerex, was elected to our Board of Directors.  On
November 27, 2000,  Dean Barr,  the Global Chief  Investment  Officer of Deutche
Asset Management, was elected to our Board of Directors.

    On September 17, 2000, we announced that we had launched our new RateXchange
Trading System, and the formalization of our strategic alliance with Amerex. The
combination of the RateXchange Trading System with Amerex's brokering experience
and market  relationships is expected to help create a liquid bandwidth  trading
market.  This electronic trading system should enable market participants of all
sizes to participate in the rapidly evolving  bandwidth market.  The RateXchange
Trading  System is similar to trading  platforms  that have been  successful  in
on-line natural gas and electricity  commodity trading.  The RateXchange Trading
System enables bandwidth traders to pre-approve and manage counterparty  credit.
Trades executed over the  RateXchange  Trading System can be delivered using our
delivery   hubs,   other  pooling  points  or  bilateral   connections.   Market
participants  are now able to trade a larger number of routes  regardless of the
presence  of our  delivery  hubs.  Trading  on the  RateXchange  Trading  System
supports the master bandwidth purchase and sale agreement based on the bandwidth
trading  organization  master  agreement  and also supports the trading of other
standardized contracts.

    Amerex has successfully  completed  several  bandwidth trades since May 2000
and is currently quoting over 60 city-pair bandwidth markets using the Bandwidth
Trading  Organization  master  agreement.  Amerex is a leading  energy and power
broker. Under our agreement with Amerex,  Amerex brokers will execute trades for
the sales or purchase of telecommunications capacity, Internet protocol products
and/or other  telecommunications-related  products over our RateXchange  trading
system and we will share in the revenues  generated by the  RateXchange  trading
system. In connection with this agreement, we issued to Amerex five warrants for
an aggregate of 2,300,000  shares of our common  stock.  One warrant for 300,000
shares with an exercise  price of $4.47 per share,  is currently  exercisable by
Amerex.  The remaining four warrants,  each for 500,000 shares and with exercise
prices of $4.47 per share, $4.70 per share, $4.92 per share and $5.37 per share,
will  become  exercisable  upon the  earlier  of  September  17,  2005 or Amerex
executing a minimum of $1,000,000,  $1,000,000,  $3,000,000 and  $5,000,000,  of
value of transactions over the RateXchange Trading System.

    On September 15, 2000, RateXchange announced that our RateXlabs division had
established a bandwidth trading consulting  practice.  Two Fortune 100 companies
have engaged  RateXlabs to provide the expertise needed to develop a competitive
advantage  in  the  emerging  bandwidth  trading  industry.  RateXlabs  provides
independent economic research and risk management consulting regarding bandwidth
trading.

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

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

    On August 7, 2000,  we completed the beta trial of the  RateXchange  trading
system, a new market service for bandwidth  trading designed with the assistance
of several of our customers.

    On July 31, 2000, we announced we would expand the deployment of our neutral
delivery hubs under an agreement  with TeleCity UK Limited,  a leading  European
carrier-independent Internet infrastructure service provider.


                                       22


    On July 24, 2000, we announced that six of the 12 delivery hubs we expect to
deploy this year are fully operational for immediate  delivery of one-month spot
and one-year forward contracts on 15 different city-pair routes. As of September
30, 2000, eight delivery hubs were fully operational.

    On July 17, 2000, we announced  that we had  appointed a  telecommunications
industry consultant, Gordon (Don) Hutchins, Jr., to our board of directors.

    On July 10, 2000,  we announced we had received an American  Stock  Exchange
listing. Our common stock commenced trading on the AMEX under the new symbol RTX
on July 10, 2000.

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

    On July 6, 1999, we acquired 100% of the outstanding stock of Rate Exchange,
Inc.,  a Colorado  corporation,  through a merger of Rate  Exchange,  Inc.  into
RateXchange  I,  Inc.,  our  wholly  owned  Delaware  subsidiary.  The  Delaware
subsidiary was the surviving  entity. We paid 574,998 shares of common stock and
$450,000 in a note that was due one year from the date of closing.  This note is
now fully paid.

    In  1999,  we  changed  our  name  to  NetAmerica.com  Corporation.  Shortly
thereafter,  we incorporated Telenisus Corporation,  a Delaware corporation,  as
one of our wholly owned  subsidiaries.  Telenisus is a development stage company
that is  seeking  to become a single  source  provider  of secure  and  reliable
Internet-based  business-to-business services to corporate customers,  carriers,
Internet service providers and marketers of telecommunications services. Through
acquisitions  and internal  business  development,  Telenisus seeks to develop a
full suite of  Internet  and data  network  management  tools  that will  enable
customers to increase  productivity,  to reduce costs and to access a wide range
of Internet, e-commerce, security and communication applications from a one-stop
network service delivery provider.

    In November 1999,  Telenisus  announced the closing of its first independent
private placement financing. The common stock issued in this financing, together
with stock issued in a Telenisus-subsidiary  acquisition, reduced our percentage
ownership interest in Telenisus to less than 10%. Telenisus used the proceeds of
the financing to expand its management team and to accelerate development of its
four service  families:  virtual  private  networks,  managed  firewall/security
services, Web site and application hosting and e-commerce.  Telenisus is focused
on delivering its business Internet  solutions to large and mid-sized  corporate
customers.  Because of  subsequent  financings,  our  ownership  in Telenisus is
currently below 5%. Our investment is carried at cost on the balance sheet.

    In  September   1998,  in  connection  with  our  strategy  to  acquire  and
consolidate  Internet service providers,  we also entered into an agreement with
NetAmerica,  Inc., a Washington  corporation,  under which we agreed to purchase
the outstanding stock of Net America, Inc. Net America, Inc. subsequently agreed
to be renamed A1  Internet,  Inc. and agreed to assign and transfer to us all of
its right,  title and interest in the name "Net America." We determined in March
1999  that it was not in our  best  interest  to  complete  the  purchase  of A1
Internet's stock after A1 Internet  acknowledged that some  representations made
to us were  inaccurate.  Consequently,  on March 16,  1999,  we entered  into an
agreement with A1 Internet to abandon the stock purchase.

    On  September  30,  1998,  we  acquired  PolarCap,  Inc. As a result of this
acquisition,  PolarCap  became  our  wholly  owned  subsidiary.  PolarCap  is  a
California  corporation  that was  organized  in April  1997 for the  purpose of
investing in and developing rights to a variety of software technologies related
to multimedia, development tools and applications technologies.

    We were originally incorporated as Venture World, Ltd. on May 6, 1987, under
the laws of the State of Delaware,  for the purpose of  developing  or acquiring
general business opportunities. We had no material operations from 1992 to 1998.


                                       23


Research and Development

    We  conduct   on-going   research  in  the  areas  of   commoditization   of
telecommunications  bandwidth in evolving pricing models for bandwidth and other
telecommunications  products and services, and we are developing future products
and services based on this research. During 2000, we estimate that we have spent
approximately  $400,000 to commission  proprietary  university-based and private
sector  research  in  these  areas.  During  1999,  we  estimate  that we  spent
approximately  $100,000 to commission  proprietary  university-based and private
sector  research in these areas.  Before 1999,  we did not have any  significant
expenditures for research and development.

Employees

    As of February 2, 2001, our  subsidiaries  and we employed  approximately 35
people.  We believe our relations with our employees are good. Our employees are
not subject to any collective bargaining agreements.

                                   PROPERTIES

    Our  principal  facility is located at 185 Berry  Street,  Suite  3515,  San
Francisco,  California.  We hold a lease on this facility.  We believe that this
property  is  suitable  for our  immediate  needs.  However,  we may  expand our
facilities or relocate in the future.

                                LEGAL PROCEEDINGS

    On February 3, 2000, we filed a lawsuit  against  Wavve  Telecommunications,
Inc.  in the San  Francisco  County  Superior  Court  (Case No.  309608).  Other
defendants  named in the  lawsuit  include  Robert W.  Ingraham,  Gran  Columbia
Resources, Inc. (aka Wavve Telecommunications, Inc.) and Does One through Fifty.
In July 2000 the case was transferred to Sacramento  County Superior Court.  The
lawsuit involves claims for breach of contract,  promissory estoppel,  fraud and
deceit,  intentional  interference  with a  contract  and  prospective  economic
advantage,  and unfair and unlawful business practices. We are seeking in excess
of  $1  million  in  compensatory  damages,   exemplary  damages,  interest  and
attorneys'  fees.  The  parties  have  completed  the  pleading  stages  and are
currently engaged in discovery. No trial date has been set.

    On February 24, 2000, Concentric Network Corporation filed a lawsuit against
NetAmerica,  Inc.,  aka A1  Internet,  Inc.,  and us 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 services  agreement  between A1  Internet  and  Concentric.
Concentric is asking for compensatory damages of at least $167,794, restitution,
costs and attorneys' fees. The matter is currently pending in the Superior Court
and will soon proceed to arbitration. No arbitration date has been set.

    From time to time, we are a party to various legal proceedings incidental to
our  business.  Other  than  the  proceedings  mentioned  above,  none of  these
proceedings is material to the conduct of our business,  operations or financial
condition.


                                       24


          MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

    Our common  stock  trades on the American  Stock  Exchange  under the symbol
"RTX." The closing  price of our common  stock on February 2, 2001 was $2.90 per
share.  Before July 10, 2000,  our stock traded on the OTC Bulletin  Board.  The
following  table sets forth the range of the high and low sales prices per share
of our common  stock for the  fiscal  quarters  indicated,  as  reported  by the
American Stock Exchange or OTC, as applicable.  Before December 18, 1998,  there
was no public trading market for our common stock.

                                                       High              Low
                                                    ---------        ----------
2001
 First Quarter                                      $ 2 11/16        $    1 7/8
  (through February 1, 2001)

 2000
 Fourth Quarter                                     $   4 1/8        $    1 1/4
 Third Quarter                                          6 3/8                 3
 Second Quarter                                        22 1/8            5 3/16
 First Quarter                                         43 1/4             5 5/8

 1999
 Fourth Quarter                                     $   8 7/8        $    3 3/4
 Third Quarter                                          6 3/4             4 3/8
 Second Quarter                                         7 1/4             5 1/2
 First Quarter                                          6 7/8             4 1/2


Approximate Number of Equity Security Holders

    On February 2, 2001,  there were 316  stockholders  of record of our common
stock.  Because brokers and other  institutions  on behalf of stockholders  hold
many of such shares,  we are unable to estimate the total number of stockholders
represented by these record holders.

Dividends

    We have  never  paid  dividends  on our  common  stock.  We  intend  for the
foreseeable  future to continue the policy of retaining  our earnings to finance
the development and growth of our business.


                                       25


                      SELECTED CONSOLIDATED FINANCIAL DATA

    The  following  selected  consolidated  financial  data  should  be  read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations  and our  consolidated  financial  statements  and related
notes included elsewhere in this prospectus.

                                                   STATEMENTS OF OPERATIONS DATA

                                   Nine Months
                                      Ended                                 Year Ended December 31,
                                    Sept. 30,     --------------------------------------------------------------------------------
                                      2000            1999            1998              1997              1996           1995
                                 -------------    ------------   -------------     -------------     -------------    ------------
                                  (unaudited)    (As restated)  (As restated)
                                                                                                     
Revenue                          $     57,255     $         --     $        --        $     --          $     --       $     --

Net Loss                         $(37,279,048)    $ (9,298,789)    $(3,144,522)       $   (200)         $ (1,961)      $ (2,561)

Basic and Diluted
loss per share                   $      (2.28)    $      (0.72)    $     (1.92)       $     --          $     --       $     --

Weighted average
number of common
stock:                             16,334,695       12,863,020       1,636,919          200,000          200,000        200,000


                                                        BALANCE SHEET DATA

                                     As of                                   As of December 31,
                                   Sept. 30,      --------------------------------------------------------------------------------
                                     2000             1999            1998             1997            1996              1995
                                 -----------      -----------     ------------     ------------    ------------      -------------
                                  (unaudited)    (As restated)  (As restated)
                                                                                                     
Total assets                      $20,503,277     $ 3,043,885       $ 830,154         $   --          $    --          $   211

Long-term debt, less              $        --     $        --       $      --         $   --          $    --          $    --
  current portion
Stockholders' equity              $18,391,869     $   318,829       $ 700,654         $ (200)         $(1,300)         $(5,689)


                                                SUPPLEMENTARY FINANCIAL INFORMATION

                                For the          For the           For the          For the           For the           For the
                             quarter ended    quarter ended     quarter ended    quarter ended     quarter ended     quarter ended
                             September 30,      June 30,          March 31,      December 31,      September 30,       June 30,
                                 2000             2000              2000             1999              1999              1999
                            -------------    -------------     --------------   --------------    --------------    --------------
                                                                                (As restated)     (As restated)     (As restated)
                                                                          (unaudited)
                                                                                                     
Revenue                      $     52,755     $      5,000      $          --      $      --         $      --          $    --

Net Loss                     $(17,857,390)    $ (8,346,587)      $(11,075,071)     $(4,186,311)      $(1,237,025)      $(1,391,109)

Per Share Net Loss
     Basic                   $      (1.03)    $      (0.49)     $       (0.75)     $     (0.28)      $     (0.10)      $     (0.12)
     Diluted                 $      (1.03)    $      (0.49)     $       (0.75)     $     (0.28)      $     (0.10)      $     (0.12)




                                                                26




                               For the             For the quarter    For the quarter      For the quarter          For the
                            quarter ended               ended              ended                ended            quarter ended
                              March 31,             December 31,       September 30,          June 30,             March 31,
                                1999                    1998               1998                 1998                 1998
                           -------------          ----------------   ----------------     ----------------       -------------
                           (As restated)            (As restated)
                                                                        (unaudited)

                                                                                                    
Revenue                     $         --             $        --         $     --              $    --             $     --

Net Loss                    $ (2,599,966)            $(3,136,385)        $ (8,137)             $    --             $     --


Per Share Net Loss
     Basic                  $      (0.27)            $     (1.92)        $     --              $    --             $     --
     Diluted                $      (0.27)            $     (1.92)        $     --              $    --             $     --



                                                                27


                     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  related  notes  included   elsewhere  in  this
prospectus.

                                       Nine Months Ended September 30,                   Year Ended December 31,
                                       -------------------------------     --------------------------------------------------
                                           2000               1999               1999             1998                1997
                                       -----------       ---------------    ---------------  ---------------       ----------
                                       (unaudited)        (As restated)     (As restated)     (As restated)
                                                                                                      
                                      $     57,255                 --                 --               --                --

    Revenue
    Expenses
    (including
    selling, general
    and administrative)               $ 34,235,283         $ 5,312,169        $ 9,431,212      $ 3,135,963           $  200
                                      ------------         -----------        -----------      -----------           ------
    Net loss                          $(37,279,048)        $(5,228,100)       $(9,298,789)     $(3,144,522)          $ (200)
                                      ============         ===========        ===========      ===========           ======


Results of Operations

Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September
30, 1999

Revenue

    We  generated  revenue of $57,255  during the first nine months of 2000 from
consulting,  trading commissions and banner ads. We did not generate any revenue
in the comparable period of 1999.

Expenses

    Our  total  expenses  were  $34,235,283  in the  first  nine  months of 2000
compared to  $5,312,169  in the  comparable  period of 1999.  The  increase  was
primarily due to non-cash  expenses  associated with option grants and warrants.
The major components of our expenses for the first nine months of 2000 were:

    Non-cash Expenses

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

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

    o    $3,561,000 for options granted to service providers;

    Cash Expenses

    o    $3,880,000 in payroll costs;

    o    $2,584,000 in outside services;

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

    o    $2,454,000 in delivery equipment costs.

Interest Income

    Interest  income for the first nine months of 2000 was $604,561  compared to
$94,590 for the same period in 1999.  The increase in interest  income is due to
interest earned on the net proceeds from our March 2000 private placement.

Interest and other expense

    Interest and other expenses include non-cash charges related to:


                                       28


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

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

Net Loss

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

Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

Revenue

    We did not generate any operating revenues in 1999.

Expenses

    Our total expenses for 1999 increased substantially compared to 1998 because
we did not begin operations  until September 30, 1998. As a result,  during 1998
we incurred  expenses for three  months of that year  compared to a full year of
expenses for 1999. Incurred expenses relate to finding and funding a development
stage  enterprise.  We  investigated  many  potential  acquisition  targets  and
succeeded in creating one entity,  Telenisus Corporation,  and acquiring another
entity, RateXchange I, Inc.

    We  funded   Telenisus   Corporation   only  to  the   extent  of   original
capitalization of $75,000. Any further funding of Telenisus was completed on its
own and did not affect our operations.

    RateXchange  I, Inc. is now our only  operating  subsidiary and it relies on
our financing activities for its operations.

    Total expenses for 1999 were $9,431,212,  of which the principal  components
were:

    o    $3,158,415 of common stock, warrants or op]tions to purchase our common
         stock issued in exchange for various services;

    o    $2,034,893  for legal,  accounting,  consulting  and other  operational
         expenses related to business development;

    o    $1,507,408  expensed in the purchase of the outstanding common stock of
         RateXchange;

    o    $1,325,106 for payroll and payroll taxes;

    o    $501,839 for office and other administrative expenses;

    o    $413,681 due to write-off of advances to A1 Internet, Inc.; and

    o    $342,762 for travel.

    Total expenses for 1998 related to operations  since  September 30, 1998 and
included our activity and that of our  subsidiary  PolarCap Inc. See "Year Ended
December 31, 1998 Compared to Year Ended December 31, 1997" below.

Interest Income

    The only income we generated during 1999 and 1998 was interest income on our
subscription  receivables.  Interest  income for 1999 was  $151,496  compared to
$2,214 for 1998. The increase in interest  income is  attributable to the amount
of  subscription  receivables  carried during 1999 compared to 1998. Most of the
receivables  have been  collected  and interest  income from this source will be
substantially less in future periods.

Net Loss

    Net loss  totaled  $9,298,789  for 1999  compared  to  $3,144,522  for 1998,
reflecting the greater expenses in 1999 compared to 1998.

Year Ended December 31, 1998 Compared with Year Ended December 31, 1997


                                       29


Revenue

    We did not generate any operating revenues in 1998.

Expenses

    Total expenses for 1998 were $3,135,963,  of which the principal  components
were:

    o    $2,020,376 of common stock or warrants to purchase  common stock of the
         Company issued in exchange for various services;

    o    $885,000 due to write off of advances to A1 Internet, Inc.; and

    o    $89,710  expensed in the  purchase of the  outstanding  common stock of
         PolarCap, Inc.

    Total expenses for 1997 were $200 for miscellaneous expenses.

Interest Income

    The only income we recorded in 1998 was interest of $2,214 on  subscriptions
receivable. There was no interest income for 1997.

Net Loss

    Net loss totaled  $3,144,522 in 1998  compared to $200 for 1997,  reflecting
the greater expenses in 1998 compared to 1997.

Liquidity and Capital Resources

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

    We had working  capital of  $17,378,239  at September  30, 2000  compared to
negative  working capital of $48,367 on December 31, 1999. At December 31, 1999,
we had common stock subscription receivables in the amount of $1,590,319,  which
were  paid off in the first  quarter  of 2000.  In March  2000 we closed a $32.8
million private  placement,  netting $30.1 million after  expenses.  These funds
should be sufficient to cover our  operations and working  capital  requirements
for the next twelve months.  Nevertheless,  we may be forced to seek  additional
financing sooner than expected.

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

    o    Increased marketing and development;

    o    Expansion of our executive management team;

    o    Increased professional services and consulting costs;

    o    Development of our trading platform;

    o    Deployment of our delivery hubs; o Software licenses; and

    o    Office expansion.

    Our operating  activities used $2,966,768 during the year ended December 31,
1999 due primarily to:

    o    Increased business development activities;

    o    Expansion of our executive management team;

    o    Acquisitions and integration of acquisitions;

    o    Identification and analysis of prospective acquisition candidates; and


                                       30


    o    Legal, accounting and professional expenses.

    Our investing  activities used  $14,717,462  during the first nine months of
2000,  due  primarily  to  investing  the  proceeds  from our March 2000 private
placement.

    Financing activities  generated  $32,926,569 during the first nine months of
2000.  Financing  activities  during the nine months  ended  September  30, 2000
consisted primarily of proceeds from sales of our common stock. Between February
and March 2000, we sold to accredited  investors a total of 2,733,329  shares of
our restricted  common shares at a  subscription  price of $12.00 per share plus
warrants to purchase  1,366,673  shares of our common stock at an exercise price
of $14.40 per share.  After deducting the expenses  related to the offering,  we
received  $30,135,000.  The  proceeds of the sales of common  stock were used in
part  to  accelerate   deployment  of  our  delivery  hubs,  expand  our  online
marketplace for telecommunications products and enhance our geographic reach and
product line.

    Financing activities generated $3,991,991 during the year ended December 31,
1999,  consisting primarily of proceeds from sales of common stock. The proceeds
of the sales of common  stock were and will be used for  acquisitions,  business
development,  equipment  purchases and for general working capital.  The various
sales of common stock are as follows:

    o    Between  November  1998 and March  1999,  we sold a total of  1,864,688
         shares of our  restricted  common shares to accredited  investors.  The
         shares were sold at an effective subscription price of $1.07 per share.
         After  deducting  the  expenses  related to the private  placement,  we
         received  $1,745,000 in cash,  of which  approximately  $1,631,188  was
         advanced to A1 Internet as working capital and for debt repayment.

    o    In January  1999,  we sold  916,574  shares of common  stock to certain
         related  parties  at a price of $.10 per  share in  exchange  for notes
         receivable. The board has placed restrictions on this stock so that the
         stock cannot be sold,  traded,  assigned,  transferred or pledged until
         the company  reaches  $10,000,000  in gross revenues on a one year time
         period.  In March 1999, we sold 3,112,500  additional  common shares as
         part of the above private placement  offering at an effective price per
         share of $1.07 for notes. As of December 31, 1999, we collected a total
         of approximately  $1,924,126 from note repayments from both the January
         and March private placements.

    o    In the second  quarter  of 1999,  we sold  515,188  shares of stock for
         $1.60 per share in a second private placement and received net proceeds
         of $628,272.

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

    We are  executing  an  overall  business  plan that may  require  additional
capital for, among other uses:

    o    Development of additional products and services;

    o    Expansion into new domestic and international markets; and

    o    Potential acquisitions.

    Furthermore, our funding of working capital and current and future operating
losses will 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.


Recent Accounting Pronouncements

    New Accounting  Standard:  In June 1998, the Financial  Accounting Standards
Board issued  Statement  No. 133,  Accounting  for  Derivative  Instruments  and
Hedging  Activities.   This  statement  establishes   accounting  and  reporting
standards for derivative  contracts and for hedging activities.  FAS No. 133, as
extended by FAS No. 137, is effective for fiscal years  beginning after June 15,
2000 and is currently not  applicable to us because we do not enter into hedging
or derivative transactions.


                                       31


    Outlook

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

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

    o    Continue to retain, attract and motivate qualified personnel;

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

    o    Implement and successfully execute our business and marketing strategy;

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

    o    Continue to develop and upgrade the RateXchange trading system.

Forward-Looking Statements

    This  section,  and  other  sections  of this  prospectus,  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  Exchange Act of
1934,  including,  among  others,  those  statements  preceded by,  following or
including  the words  "believe,"  "expect,"  "intend,"  "anticipate"  or similar
expressions.  These forward-looking  statements are based largely on our current
expectations and are subject to a number of risks and uncertainties.  Our actual
results could differ materially from these forward-looking statements. Important
factors to consider in evaluating such forward-looking statements include:

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

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

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

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

    o    Other risks described under "Risk Factors."

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

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    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.

                                   MANAGEMENT

    The  following  sets forth certain  information  regarding our directors and
executive officers as of December 28, 2000.

        Name              Age                               Position
--------------------     ---------       ---------------------------------------
D. Jonathan Merriman      40             President and Chief Executive Officer

Donald H. Sledge          60             Chairman of the Board of Directors

Dean S. Barr              40             Director

Gordon Hutchins, Jr.      51             Director

Ronald E. Spears          51             Director


                                       32


Steven W. Town            40             Director

Christopher J. Vizas      50             Director



    D.  Jonathan  Merriman,  40, has served as our Chief  Executive  Officer and
President  since October 2000. He has served as a Director  since February 2000.
In June 1998,  Mr.  Merriman  became  Managing  Director  and Head of the Equity
Capital Markets Group and member of the Board of Directors at First Security Van
Kasper. In this capacity,  he oversaw the Research,  Institutional Sales, Equity
Trading,  Syndicate and Derivatives Trading departments.  He is currently on the
Boards of Directors of Leading Brands, Inc., Fiberstars, Inc., SSE Telecom, Inc.
and the Internet  Venture Fund,  LLC.  From June 1997,  Mr.  Merriman  served as
Managing  Director and head of Capital  Markets at The Seidler  Companies in Los
Angeles, where he also served on the firm's Board of Directors.  Before Seidler,
Mr. Merriman was Director of Equities for Dabney/Resnick/Imperial, LLC. In 1989,
Mr.  Merriman  co-founded  the  hedge  fund  company  Curhan,  Merriman  Capital
Management,  Inc.,  which  managed  money  for high net  worth  individuals  and
corporations. Before Curhan, Merriman Capital Management, Inc., he worked in the
Risk  Arbitrage  Department  at Bear Stearns & Co. as a  trader/analyst.  He has
completed coursework at New York University's  Graduate School of Business.  Mr.
Merriman received his Batchelor of Arts in Psychology from Dartmouth College.


    Donald H.  Sledge,  60,  serves as our  Chairman  of the Board.  Mr.  Sledge
previously  served as Chairman and Chief  Executive  Officer from  February 2000
until  October  2000.  He has  been a  director  since  September  1999 and from
September  1999 until February of 2000 he served as President,  Chief  Executive
Officer and Chairman of our subsidiary  RateXchange I. Mr. Sledge is currently a
general partner in Fremont Communications,  a venture capital fund, based in San
Francisco.  From 1996 to September  1999,  Mr.  Sledge was  president  and Chief
Executive  Officer  of TeleHub  Communications  Corporation,  a next  generation
ATM-based  telecommunications  company.  From 1994 to 1995, Mr. Sledge served as
President  and Chief  Operating  Officer of WCT, a  $160-million  long  distance
telephone  company that was one of Fortune  Magazine's 25 fastest growing public
companies before it was acquired by Frontier Corporation. From 1993 to 1994, Mr.
Sledge was head of operations  for New T&T, a Hong  Kong-based  start-up.He  was
Chairman and Chief Executive Officer of New Zealand Telecom  International  from
1991 to  1993  and a  member  of the  executive  board  of  TCNZ,  where  he led
privatization  and public  offerings  and  served as  managing  director  of New
Zealand's largest operating telephone company,  Telecom Auckland Ltd. One of the
subsidiaries of Telehub  Communications,  Telehub Network Services  Corporation,
filed for bankruptcy several months after Mr. Sledge resigned from Telehub.  Mr.
Sledge also served as president and Chief  Executive  Officer of Pacific Telesis
International.  Since  November 1997, Mr. Sledge also has served on the Board of
Directors of eGlobe,  Inc., a voice-based  applications  services provider.  Mr.
Sledge holds a Masters of Business  Administration  and Batchelor of Arts degree
in industrial management from Texas Technological University.

    Dean S. Barr,  40, has served as one of our directors  since  November 2000.
Mr. Barr is currently  the Global  Chief  Investment  Officer of Deutsche  Asset
Management,  a  position  he has held since  1999.  In this  role,  Mr.  Barr is
responsible for $600 billion in investment  assets  worldwide for Deutsche Bank.
Before joining Deutsche Bank, Mr. Barr served as Global Chief Investment Officer
of Active  Strategies  and Global  Director of Research at State  Street  Global
Advisors where he was responsible for $120 billion in active investment  assets.
Mr. Barr co-founded and served from 1988 to 1997 as Chief  Executive  Officer of
Advanced Investment Technology , a quantitative asset manager with $1 billion in
assets under management,  until State Street Global Advisors  purchased Advanced
Investment Technology.  Mr. Barr began his career in 1984 at Goldman Sachs where
he worked on early trading  applications for computer program trading.  Mr. Barr
received  his  undergraduate  degree from  Cornell  University  and received his
Masters in Business Administration from New York University.

    Gordon "Don"  Hutchins,  Jr., 51, has served as one of our  directors  since
June 2000.  Since  January 1996,  Mr.  Hutchins has served as a director of Star
Telecommunications,  Inc., an international long distance carrier.  Mr. Hutchins
is  president  and Chief  Executive  Officer of GH  Associates,  Inc., a McLean,
Virginia-based management consulting firm. The firm advises domestic and foreign
telecommunications  companies regarding competitive long distance, local access,
and  wireless  services,  with  particular  emphasis  in the areas of  strategic
planning,  marketing,  finance, mergers and acquisitions and regulatory affairs.
Before  founding GH Associates  in 1989,  Mr.  Hutchins  served as President and
Chief Executive Officer of Institutional  Communications  Company, a competitive
local exchange carrier in


                                       33


Washington,  D.C., as senior vice president - sales and marketing of WilTel (now
WorldCom), and as president and Chief Executive Officer of LDX NET, an intercity
fiber optic network headquartered in St. Louis, Missouri. Mr. Hutchins is also a
former  board  member  of the  Telecommunications  Resellers  Association  and a
founder  of  its  predecessor  organization,  the  Telecommunications  Marketing
Association.  Mr. Hutchins received his Bachelor of Science degree in electrical
engineering  from the  University of  Massachusetts  and his Masters of Business
Administration from University of Dallas.

    Ronald E.  Spears  has  served as one of our  directors  since  March  2000.
Throughout  his  20-year   career,   he  has  managed   telecommunications   and
professional   service   start-ups,   as  well  as  established   long  distance
powerhouses.   Since  June  2000,  Mr.  Spears  has  led  the  formulation   and
implementation  of  corporate-wide  development  related to strategic  planning,
marketing  and   communications,   business  alliances  as  Vaultus',   formerly
MobileLogic,  President and Chief Executive  Officer.  Mr. Spears joined Vaultus
after serving as the President and Chief Executive Officer of CMGI Solutions, an
enterprise  focused  Internet  solutions  provider  from April 1999 to May 2000.
Before joining CMGI Solutions, Mr. Spears served as president and COO of e.spire
Communications,  one of the nation's fastest growing  integrated  communications
providers, from February 1998 to April 1999 where he managed day-to-day business
operations  and saw  significant  growth in revenue and market share.  From June
1995 to January 1998 he was  corporate  vice  president  at Citizens  Utilities,
managing that company's  independent  telephone company operations in 13 states.
He also served as President of MCI WorldCom,  Inc.'s Midwest  Division from 1984
to 1990. A pioneer of the competitive long distance  industry,  Mr. Spears began
his  career  in  telecommunications  as a  manager  of AT&T  Longlines  in 1978,
following  eight years as an officer in the U.S.  Army.  He is a graduate of the
United Military Academy at West Point and also holds a Master's Degree in Public
Service from Western Kentucky University.

    Steven W. Town,  40, has served as one of our directors  since October 2000.
Mr. Town currently  serves as Co-Chief  Executive  Officer of the Amerex Natural
Gas,  Amerex Power and Amerex  Bandwidth,  Ltd.  Mr. Town began his  commodities
career in 1987 in the retail futures  industry prior to joining the Amerex Group
of  Companies.  He began the Amerex  futures  and  forwards  brokerage  group in
natural  gas in 1990,  in  Washington  D.C.,  and  moved  this unit of Amerex to
Houston in 1992.  During Mr. Town's tenure as Co-Chief  Executive  Officer,  the
Amerex  companies  have  become the  leading  brokerage  organizations  in their
respective  industries.  Amerex currently  provides energy,  power and bandwidth
brokerage  services to many of the energy  companies.  Mr. Town is a graduate of
Oklahoma State University.

    Christopher  Vizas,  50, has served as one of our directors  since  February
2000. He is the Chairman and Chief Executive  Officer of eGlobe,  Inc. Mr. Vizas
was elected  Chairman of eGlobe's Board of Directors in November 1997. Mr. Vizas
served as eGlobe's acting Chief Executive Officer from November 1997 to December
1997, when he became eGlobe's Chief  Executive  Officer.  Before joining eGlobe,
Mr. Vizas was a co-founder of, and since Ocober 1995,  served as Chief Executive
Officer of Quo Vadis  International,  an investment and financial advisory firm.
Before  forming  Quo Vadis  International,  he was Chief  Executive  Officer  of
Millennium Capital Development,  a merchant banking firm, and of its predecessor
Kouri Telecommunication & Technology from 1994 to 1995. Before joining Kouri Mr.
Vizas  shared  in  the  founding  and  development  of a  series  of  technology
companies,  including Orion Network Sstems, Inc. of which he was a founder and a
principal executive.  From April 1987 to 1992, Mr. Vizas served as Vice Chairman
of Orion, an international  satellite  communications  company,  and served as a
Director from 1982 until 1992. Before pursuing his business interests, Mr. Vizas
held various  positions in the United  States  Government,  serving in the White
House  Office of  Telecommunications  Policy,  as  Special  Counsel  to the U.S.
Privacy  Commission and on the staff of the U.S. House of  Representatives.  Mr.
Vizas is a graduate of Yale University.



                                       34


OTHER KEY EMPLOYEES


    Nick Cioll, 42, is our Senior Vice President of Trading Operations. We hired
Mr. Cioll in 1999. Mr. Cioll brings to us a broad range of experience, including
business-to-business  E-commerce, and trading and commodities expertise from the
electricity, energy, chemicals and metals industries. He was the Chief Financial
Officer of an  affiliate  of Freeport  McMoRan  from 1993 to 1995.  From 1998 to
1999, Mr. Cioll was the Vice President of Marketing and Business Development for
Automated   Power   Exchange,   a  leading   business-to-business   exchange  in
electricity.  From 1988 to 1990, Mr. Cioll was the commodities manager at Kaiser
Aluminum. Mr. Cioll has a Batchelor of Science degree in economics, a Masters in
Business  Administration and a Master of Science degree in finance  equivalency,
and is a licensed certified public accountant.

    Terry Ginn, 55, is our Senior Vice President of Software Engineering.  Since
1999,  Mr. Ginn has led the Software  Engineering  and  Development  department,
developing the  architecture  and the platform on which the  electronic  trading
system will operate. As the Director of SRI International from 1993 to 1999, Mr.
Ginn was responsible for planning, marketing, program management, operations and
personnel  management.  While  working at Hughes  Aircraft  Company from 1990 to
1993, Mr. Ginn directed the research and developement  department.  From 1977 to
1990 Mr. Ginn performed initial systems  requirements  analysis and design using
object-oriented  techniques,  and he developed software processes and procedures
at Lockheed Sanders. Mr. Ginn holds a Batchelor of Science and Master of Science
degree in mathematics from the University of Kentucky.


    Stephen  E.  Kanaval,  43,  has  served  as our  Senior  Vice  President  of
Derivatives  since 2000.  Before  joining us, Mr.  Kanaval served as Senior Vice
President of Equity Capital Markets Group at First Security Van Kasper from 1999
to 2000. In this  capacity,  he oversaw the Listed and OTC trading  departments,
and was  responsible  for capital  commitment for the firm. He was on the merger
committee for the Wells Fargo merger,  and directed the expansion of the trading
floor.  Mr. Kanaval  previously was director of Market Neutral trading for Husic
Capital  from 1997 to 1998 where he worked on a team  managing  $300  million in
assets within the firm.  Before Husic,  Mr.  Kanaval was Founder,  President and
Chief  Executive  Officer  of  Chicago  Arbitrage  Group  from  1988 to 1998,  a
derivatives trading firm in Chicago  specializing in developing trading strategy
and  execution  for  institutions  and high  net  worth  clients.  He was on the
original  Futures  Task Force at Morgan  Stanley from 1984 to 1987 and was floor
manager for Index Arbitrage Trading for Morgan Stanley at the Chicago Mercantile
Exchange.  He also was a market maker at the Chicago Mercantile  Exchange on and
off for two decades. Mr. Kanaval attended Franklin University School of Business
in Columbus Ohio.


    Russell Matulich, 37, is our Senior Vice President of Sales Origination.  We
hired Mr.  Matulich in 1999. As the vice president of global sales and marketing
for WorldPort Communications from 1998 until 1999, Mr. Matulich managed a global
sales force that targeted  carriers,  high-end  corporate  accounts and internet
service providers,  primarily in Europe. From 1997 to 1998 Mr. Matulich held the
position of Vice President of Carrier Sales at Frontier Telecommunications.  Mr.
Matulich is a sales and marketing  executive with over 15 years of experience in
the  development,   implementation  and  management  of  innovative  and  highly
successful   sales  and  marketing   programs  for  both  start-up  venture  and
world-leading   telecommunications   corporations   competing  in  international
markets.


                                       35


                             EXECUTIVE COMPENSATION

    The following table sets forth  information  regarding the compensation paid
for  services  rendered  during the last  three  completed  fiscal  years to the
individual  who served as our chief  executive  officer in 1999 and to our other
executive  officers  whose total  salary and bonus for 1999  exceeded  $100,000.
Information is also presented for three current and former executive officers of
our subsidiary,  RateXchange I, Inc., who we appointed executive officers of our
company in February 2000.

                           SUMMARY COMPENSATION TABLE
                                                                                                  Long-Term Compensation
                                                                                                          Awards
                                                                 Annual Compensation              ----------------------
                                                      ---------------------------------------
                                                                                                   Securities Underlying
                Name and Principal Position              Year          Salary        Bonus                Options
                ---------------------------           ---------    -------------  -----------     ----------------------
                                                                                           
          Gordon Reichard, Jr. (1)
                President and
                Chief Executive Officer                  1999      $0             $0                   0
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a
          Douglas Cole (2)
                Chairman and Chief Executive Officer     1999      $126,000       $125,000             100,000
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a
          Edward Mooney (3)
                Executive Vice President, Secretary
                and Treasurer                            1999      $90,000        $125,000             100,000
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a
          Donald Sledge (4)
                Chairman and Chief Executive Officer     1999      $94,653        $75,000              100,000
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a
          Ross Mayfield (5)
                President                                1999      $87,619        $0                   100,000
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a
          Paul Wescott (6)
                Chief Operating Officer                  1999      $64,230        $0                   150,000
                                                         1998      n/a            n/a                  n/a
                                                         1997      n/a            n/a                  n/a

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

(1) Mr. Reichard was hired as an officer in April 1999 and resigned in September 1999.

(2) Mr.  Cole was hired as an officer on April 1, 1999 and  resigned in February
    2000.  Mr.  Cole's  annual  salary  was  $168,000,  plus a bonus,  under his
    employment  agreement.  Mr.  Cole's  bonus of $125,000  accrued at year-end.
    However, the bonus was not paid to Mr. Cole until 2000.

(3) Mr.  Mooney  was  hired  as an  officer  on April 1,  1999 and  resigned  as
    Executive  Vice President in February 2000 and as Secretary and Treasurer in
    March 2000. Mr. Mooney's annual salary was $120,000, plus a bonus, under his
    employment  agreement.  Mr. Mooney's bonus of $125,000  accrued at year-end.
    However, the bonus was not paid to Mr. Mooney until 2000.

(4) Mr.  Sledge was hired on September  15, 1999 as one of our  directors and as
    the Chairman and Chief Executive  Officer of RateXchange I, Inc., one of our
    subsidiaries.  Mr.  Sledge was  appointed  our Chairman and Chief  Executive
    Officer in February  2000 and  currently  serves as Chairman of our Board of
    Directors.  Mr. Sledge's annual salary with our company was $300,000, plus a
    bonus,   under  his   employment   agreement.   Mr.   Sledge  also  received
    approximately  $1,000 each month for car allowance and approximately  $1,000
    each month for payment of whole life insurance premiums.


                                       36


(5) Mr.  Mayfield was hired as an executive  officer of RateXchange I, Inc., one
    of our  subsidiaries,  in July 1999.  While  employed at  RateXchange I, Mr.
    Mayfield  served,  at various times during 1999, as Vice  President of Sales
    and Marketing,  Chief Operating Officer and President. Mr. Mayfield's annual
    salary at  RateXchange I during 1999 was $165,000,  plus a bonus,  under his
    employment agreement. We appointed Mr. Mayfield as our President in February
    2000. Mr.  Mayfield's  employment with  RateXchange and its subsidiaries was
    terminated effective August 15, 2000.

(6) Mr. Wescott was hired as an executive officer of RateXchange I, Inc., one of
    our  subsidiaries,  in September 1999.  While employed at RateXchange I, Mr.
    Wescott  served,  at  various  times  during  1999,  as  an  Executive  Vice
    President,   Chief   Operating   Officer  and  Vice  President  of  Business
    Development.  Mr.  Wescott's  annual salary at RateXchange I during 1999 was
    $165,000,  plus bonuses,  under his employment  agreement.  We appointed Mr.
    Wescott  our  Chief  Operating  Officer  in  February  2000.  Mr.  Wescott's
    employment with RateXchange and its  subsidiaries  was terminated  effective
    October 1, 2000.


                        OPTION GRANTS IN LAST FISCAL YEAR

    The following table sets forth information  regarding options granted during
fiscal year 1999 to the named executive  officers.  No stock appreciation rights
were granted in 1999.

                                                Individual Grants
                          ----------------------------------------------------------
                           Number of     Percent of                                         Potential Realizable Value at
                           Securities   Total Options                                    Assumed Annual Rates of Stock Price
                           Underlying    Granted to      Exercise or                        Appreciation for Option Term
                            Options      Employees in  Base Price Per   Expiration
          Name              Granted        1999          Share(1)          Date              5% ($)              10% ($)
    -------------------   ----------  --------------  --------------  --------------  ----------------------------------
                                                                                             
    Gordon Reichard, Jr.    250,000         8.20%          $ 1.60          1/2004          $ 110,520           $ 244,204

    Douglas Cole            100,000         3.28%          $ 1.60          1/2004          $  44,205           $  97,682

    Edward Mooney           100,000         3.28%          $ 1.60          1/2004          $  44,205           $  97,682

    Donald Sledge           100,000         3.28%          $ 2.75         10/2004          $  75,977           $ 167,890

    Ross Mayfield            40,000         1.31%          $ 2.50          7/2004          $  27,628           $  61,051
                             60,000         1.97%          $ 2.75          7/2004          $  45,586           $ 100,734

    Paul Wescott            150,000         4.92%          $ 2.75          9/2004          $ 113,966           $ 251,835

---------------
(1) The  exercise  prices of the  options  included  in this table  reflect  the
    board's  bona fide  estimation  of market value of the shares on the various
    grant dates.


           FEBRUARY 2000 OPTION GRANTS TO THE NAMED EXECUTIVE OFFICERS

    On February 24, 2000,  the following  non-qualified,  non-plan  options were
granted to our named  executive  officers.  Each of the  shares of common  stock
underlying the options granted has an exercise price of $7.00.

    o    Douglas Cole was granted an option to purchase 100,000 shares of common
         stock for his  services as a  director.  Mr.  Cole's  options are fully
         vested.

    o    Edward  Mooney was  granted  an option to  purchase  100,000  shares of
         common stock for his  services as a  consultant.  Fifty  percent of Mr.
         Mooney's  options  vested  immediately  and the remainder  will vest on
         February 24, 2001.

    o    Donald  Sledge was  granted an option to purchase  1,500,000  shares of
         common  stock for his  services  as our  Chairman  and Chief  Executive
         Officer.   Five  hundred   thousand  of  Mr.  Sledge's  options  vested
         immediately, 300,000 vested on January 1, 2001 and 300,000 will vest on
         January 1, 2002.  Four hundred  thousand of the options vested when our
         common stock traded for ten consecutive days above $20.00 in the spring
         of 2000.

    o    Ross Mayfield was granted 300,000 options for his services as executive
         officer.   Seventy-five  thousand  of  Mr.  Mayfield's  options  vested
         immediately,  another  75,000  options  vested on May 28,  2000 and the
         remainder of Mr. Mayfield's options will vest on February 15, 2001.


                                       37

    o    Paul Wescott was granted  250,000 options for his services as our Chief
         Operating  Officer.  Sixty-two  thousand five hundred of Mr.  Wescott's
         options vested  immediately,  an additional 62,500 options will vest on
         February  24,  2001 and  beginning  March 24, 2001  continuing  through
         September 24, 2001, 1/36 of his remaining  options will vest per month,
         with the remainder being cancelled.


                                       38


          SECURITIES UNDERLYING UNEXERCISED OPTIONS AT FISCAL YEAR END
                       AND FISCAL YEAR-END OPTION VALUES

    The following table sets forth information with respect to each of the named
executive officers  concerning the number of securities  underlying  unexercised
options at the end of fiscal year 1999 and the 1999 fiscal year-end value of all
unexercised  in-the-money  options  held by such  individuals.  No options  were
exercised by any named executive officer in fiscal year 1999.

                                          Number of Securities
                                               Underlying                  Value of Unexercised
                                         Unexercised Options(#)         In-the-Money Options($)(1)
                                     -----------------------------    ----------------------------
          Name                         Exercisable  Unexercisable       Exercisable  Unexercisable
    ---------------                  -----------------------------    ----------------------------
                                                                        
    Gordon Reichard, Jr.                250,000             0           $1,100,000            0
    Douglas Cole                        100,000             0           $  440,000            0
    Edward Mooney                       100,000             0           $  440,000            0
    Donald Sledge                       100,000             0           $  325,000            0
    Ross Mayfield                             0       100,000                    0   $  335,000
    Paul Wescott                         37,500       112,500           $  121,875   $  365,625

------------------
(1) Market  values of underlying  securities  at exercise or year-end  minus the
exercise price.


Compensation of Directors

    Our  directors  may receive  stock option grants for service on our board of
directors.  Messrs.  Cole and Mooney each received  options to purchase  100,000
shares of our common  stock in January  1999 at an  exercise  price of $1.60 per
share for their  services as board  members.  Douglas  Glen,  who  resigned as a
director  in March 2000,  received  options to  purchase  175,000  shares of our
common  stock in April  1999 at an  exercise  price of $1.60  per  share for his
service as a board member.  For their services on the board, Mr. Sledge and John
Dixon,  who resigned as a director in February  2000,  each received  options to
purchase 100,000 shares of our common stock in October 1999 at an exercise price
of $2.75 per  share.  Our  non-employee  directors  receive  $500 for each board
meeting   attended  in  person  and  $100  for  each  board   meeting   attended
telephonically,  plus out-of-pocket expenses.  There is no separate compensation
for committee meeting attendance.

    EMPLOYMENT AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS

    Effective April 1, 1999, we entered into employment  agreements with each of
Messrs. Cole and Mooney. Mr. Cole's employment  agreement provided for an annual
base salary of $168,000,  an annual  incentive bonus of up to 100% of Mr. Cole's
base salary,  option rights and other employee  benefits.  Under this agreement,
Mr. Cole's  employment  could be terminated for cause or upon death,  and all of
our obligations to pay compensation and provide benefits would thereafter cease.
Mr.  Cole's  employment  also could be  terminated  without cause if we paid Mr.
Cole's base salary for 180 days following termination.

    Mr.  Mooney's  employment  agreement  provided  for an annual base salary of
$120,000,  an annual  incentive bonus of up to 100% of Mr. Mooney's base salary,
option rights and other employee  benefits.  Under this agreement,  Mr. Mooney's
employment  could  be  terminated  for  cause  or  upon  death,  and  all of our
obligations to pay compensation and provide benefits would thereafter cease. Mr.
Mooney's  employment  also  could  be  terminated  without  cause if we paid Mr.
Mooney's base salary for 180 days following termination.

    As part of our  restructuring  to focus on the  business of  RateXchange  I,
Inc., Mr. Cole agreed to resign his position as an executive officer,  effective
February 2000. Mr. Mooney  resigned his positions as a director and an executive
officer in February  2000. In March 2000,  Mr. Mooney  resigned as Secretary and
Treasurer.  Under severance agreements Messrs. Cole and Mooney executed with us,
Mr. Cole and Mr. Mooney will receive six-months' severance pay.

    In  February  2000,  we  appointed  Donald  Sledge  our  Chairman  and Chief
Executive  Officer,  Ross  Mayfield  our  President  and Paul  Wescott our Chief
Operating  Officer.  Previously these individuals were officers of RateXchange I
since the fourth  quarter of 1999. In March 2000,  we appointed  Philip Rice our
Executive Vice President and Chief Financial  Officer.  In connection with these
appointments,  we entered  into  separate  employment  agreements  with  Messrs.
Sledge, Rice, Mayfield and Wescott.


                                       39


    Mr. Sledge's employment agreement provided for him to serve as President and
Chief Executive Officer of RateXchange I with an annual base salary of $300,000,
an  annual  incentive  bonus  of up to 50% of base  salary,  a 10%  interest  in
RateXchange I, Inc., an expense reimbursement and other employee benefits. Under
this  agreement,  Mr.  Sledge's  employment  may be terminated for cause or upon
death or  disability so long as we pay all  compensation  owed as of the date of
termination.  Mr. Sledge's  employment may be terminated without cause if we pay
him  severance  pay equal to one year's  annual  salary  and a bonus  payment of
$150,000.  In October 2000, Mr. Sledge resigned as Chief Executive Officer,  but
continues to serve as Chairman.

    Mr.  Rice's  employment  agreement  provided  for an annual  base  salary of
$200,000,  an annual  incentive  bonus of up to 50% of his base  salary,  option
rights and other employee benefits.  Under this agreement, Mr. Rice's employment
could be  terminated  for  cause,  or upon death or  disability,  and all of our
obligations to pay compensation and provide benefits would thereafter cease. Mr.
Rice's employment also could be terminated  without cause if we paid to Mr. Rice
his base salary for twelve months following  termination,  as well as a lump sum
payment of $100,000, and provided Mr. Rice other specified benefits.

    Mr. Mayfield's  employment  agreement  provided for an annual base salary of
$165,000,  an annual incentive bonus of up to 50% of Mr. Mayfield's base salary,
option rights and other employee benefits.  Under this agreement, Mr. Mayfield's
employment could be terminated for cause or upon death or disability, and all of
our obligations to pay compensation and provide benefits would thereafter cease.
Mr. Mayfield's  employment also could be terminated without cause if we paid Mr.
Mayfield's  base salary for twelve months  following  termination,  as well as a
lump sum  payment  of  $100,000,  and  provided  Mr.  Mayfield  other  specified
benefits.

    Mr.  Wescott's  employment  agreement  provided for an annual base salary of
$200,000,  an annual  incentive  bonus of up to 50% of his base  salary,  option
rights  and  other  employee  benefits.  Under  this  agreement,  Mr.  Wescott's
employment  could be terminated for cause, or upon death or disability,  and all
of our obligations to pay  compensation  and provide  benefits would  thereafter
cease.  Mr.  Wescott's  employment also could be terminated  without cause if we
paid to Mr. Wescott his base salary for twelve months following termination,  as
well as a lump sum payment of $100,000, and provided Mr. Wescott other specified
benefits.

    Effective August 15, 2000, Mr. Mayfield's employment was terminated. Under a
separation agreement entered into with Mr. Mayfield,  he received or is entitled
to receive:

    o    His annual salary through February 15, 2001;

    o    Lump sum payments of $50,000 on August 18, 2000 and $82,250 on February
         15, 2001;

    o    Accelerated  vesting  of a total of  93,750  stock  options  previously
         granted to him,  together  with an extension  for two years from August
         15, 2000 within which to exercise the options; and

    o    Full  benefits  for Mr.  Mayfield and his family  through  February 15,
         2001.

    Effective October 1, 2000, Mr. Wescott's employment was terminated.  Under a
separation  agreement entered into with Mr. Wescott,  he received or is entitled
to receive:

    o    His annual salary through March 31, 2001;

    o    Lump sum payments of $75,000 on October 2, 2000,  $25,000 on January 2,
         2001, $100,000 on April 1, 2001, and $50,000 on April 2, 2001; and

    o    Accelerated  vesting of a total of 173,956  stock  options held by him,
         together  with an  extension  for two years  following  October 1, 2000
         within which to exercise  137,500 of the options and a 90-day  exercise
         period beginning on October 1, 2001 to exercise 36,456 of the options.

    Effective  October  5,  2000,  Mr.  Sledge  was named our  Chairman  and Mr.
Merriman was named our President and Chief Executive Officer.  Effective on that
date,  Mr.  Sledge's  employment  agreement was amended to reflect his change in
status from President and Chief Executive Officer to Chairman. As Chairman,  Mr.
Sledge was employed on a part-time basis to render  executive,  policy and other
management  services to us of the type customarily  performed by persons serving
in such capacity.  Under the amendment to his employment agreement, Mr. Sledge's
annual  salary  was  reduced  to  $120,000  per  year and any  entitlement  to a
guaranteed bonus for 2000 or for any future year was eliminated.

    Effective January 21, 2001, Mr. Rice resigned.

                                       40


    In connection with Mr. Merriman's appointment as our new President and Chief
Executive Officer, we entered into an employment agreement with Mr. Merriman. We
subsequently amended that agreement, effective December 11, 2000. Mr. Merriman's
amended employment  agreement,  which has a term of three years,  provides for a
decrease  in his annual  base  salary  from  $300,000  to  $100,000,  subject to
increase at our  discretion.  Mr. Merriman has the ability to earn an additional
$200,000,  should the Company secure additional financing. The amended agreement
also includes a $200,000 bonus payable on January 2, 2001, expense reimbursement
and other employee benefits.  Under his employment  agreement,  Mr. Merriman has
been awarded  ten-year  stock  options,  which will be incentive  options to the
extent  permissible  under Section 422 of the Internal  Revenue Code of 1986, as
amended,  to  purchase a total of  2,000,000  shares of our  common  stock at an
exercise price of $3.19 per share, as follows:


    o    Options to purchase 500,000 shares vesting on October 5, 2000;

    o    Options to purchase 500,000 shares vesting on January 1, 2005,  subject
         to  acceleration  of vesting upon the completion of a financing for $15
         million and further subject, in either case, to continued employment on
         such date;

    o    Options to purchase 250,000 shares vesting on October 5, 2001,  subject
         to continued employment on that date;

    o    Options to purchase 250,000 shares vesting on October 5, 2002,  subject
         to continued employment on that date;

    o    Options to purchase 250,000 shares vesting on January 1, 2007,  subject
         to acceleration of vesting  immediately  following the first quarter of
         positive earnings before interest, taxes, depreciation and amortization
         after  January 2001 and further  subject,  in either case, to continued
         employment on such date; and

    o    Options to purchase 250,000 shares vesting on January 1, 2006,  subject
         to  acceleration  of vesting  immediately  after the  common  stock has
         traded on AMEX at a price of $7.00 per share or more for 30 consecutive
         trading days, subject, in either case, to continued  employment on such
         date.

    The vesting of the stock  options will  accelerate,  and Mr.  Merriman  will
additionally be entitled to receive a payment of $1.0 million from  RateXchange,
upon:

    o    A sale of all or substantially all of our assets;

    o    A  merger  of our  company  with  another  entity  where we are not the
         surviving  entity or where our  stockholders  immediately  prior to the
         merger own less than 50% of our voting stock following the merger; or

    o    A  change  in the  membership  of the  board  of  directors  such  that
         individuals  who,  as of  October  5,  2000,  constitute  our  board of
         directors cease for any reason to constitute at least a majority of the
         board of directors;  provided that any  individual  becoming a director
         subsequent  to  October  5, 2000  whose  election,  or  nomination  for
         election  by our  stockholders,  was  approved  by a vote of at least a
         majority of the directors then  comprising the incumbent board shall be
         considered  as though  the  individual  were a member of the  incumbent
         board,  but excluding,  for this purpose,  any individual whose initial
         assumption  of office  occurs  as a result  of an actual or  threatened
         election  contest  with respect to the election or removal of directors
         or other actual or threatened solicitation of proxies or consents by or
         on behalf of a person other than our board of directors.

    Under Mr. Merriman's employment agreement,  Mr. Merriman's employment may be
terminated  for  cause  or  upon  death  or  disability  so  long  as we pay all
compensation  owed as of the  date of  termination.  Mr.  Merriman's  employment
agreement may be  terminated  by us without cause if we pay to Mr.  Merriman his
base salary for twelve  months  following  termination,  any bonus that had been
earned  but not paid at the  time of  termination  and all  other  benefits  and
compensation  he would have been entitled to receive under the agreement had his
employment  not been  terminated.  All stock  options  granted  to him under his
employment  also would  immediately  vest.  Mr.  Merriman  would be  entitled to
receive the same payments and  acceleration  of the vesting of his options if he
were to terminate his  employment  for "good reason," as that term is defined in
his employment agreement.


                                       41


           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Before creating the compensation committee during 1999, members of our board
of directors  performed all functions  currently  delegated to the  compensation
committee. During 1999, the following directors served as compensation committee
members:  Douglas Cole, John Dixon and Douglas Glen. Currently, our compensation
committee is composed of Jonathan  Merriman,  Ronald Spears and Gordon Hutchins,
Jr. John Dixon,  Douglas Glen and Douglas Cole  resigned  from the  compensation
committee in 2000 when they resigned from our board of directors.

    Douglas Cole

    In addition to his  membership  on our board of directors and as a member of
the compensation committee,  until February 2000, Mr. Cole was our President and
Chief  Executive  Officer.  Furthermore,  in  1999,  Mr.  Cole  served  as chief
executive officer of PolarCap,  Inc., our wholly owned subsidiary and a director
of RateXchange I, Inc., another subsidiary.

    Mr.  Cole is acting  chief  executive  officer  and a  director  of  Fulcrum
International,  Inc. Mr. Glen, one of our former compensation committee members,
was also a director of Fulcrum and has served on its  compensation  committee or
board equivalent.

    Mr. Cole was  promisor on two notes held by us for the purchase of shares of
our common stock in the principal  amounts of $22,257.40  and $125,000 and dated
January 2, 1999, and December 18, 1998, respectively.  Interest on each note was
6.5 % APR,  and,  together  with any unpaid  principal on the notes,  was due on
January 2, 2001,  and December 18, 2000,  respectively.  The greatest  aggregate
amount  outstanding  on the notes  during  1999 was  approximately  $23,703  and
$133,000,  respectively,  on December 31, 1999. In February 2000, Mr. Cole fully
satisfied his obligations under the January 2, 1999 note;  however,  because Mr.
Cole paid the entire principal amount owed under this note early at our request,
we agreed to waive unpaid accrued interest in the approximate  amount of $1,500.
In March 2000,  Mr. Cole paid the December 18, 1998 note in full,  including all
accrued interest.

    John Dixon

    During 1999, John Dixon was a member of our compensation committee; however,
he has never been an officer or employee of RateXchange or its subsidiaries. Mr.
Dixon resigned as a director in February 2000.

    Douglas Glen

    During  1999,  Douglas  Glen was a  member  of our  compensation  committee;
however,  he has  never  been an  officer  or  employee  of  RateXchange  or its
subsidiaries.  Mr. Glen is a director  of Fulcrum  International,  Inc.  and has
served on that company's compensation  committee or board equivalent.  Mr. Cole,
one of our former compensation  committee members, is the acting chief executive
officer and a director of Fulcrum.  Mr. Glen resigned as one of our directors in
March 2000.

    Edward Mooney

    Mr. Mooney,  who  participated in Board  deliberations  regarding  executive
officer compensation, also served as our Executive Vice President, Secretary and
Treasurer  during 1999. Mr. Mooney resigned as both Executive Vice President and
director in February 2000 and resigned as Secretary and Treasurer in March 2000.
In  addition,  during 1999 Mr.  Mooney  served as a director and as secretary of
RateXchange  I, Inc.,  and as a director of  Telenisus  Corporation,  one of our
former subsidiaries. Currently, he is a consultant to Maroon Bells Capital, LLC,
a merchant banking firm that is a party to a consulting agreement with us.


                                       42


    On December 15,  1998,  we entered  into an advisory  agreement  with Maroon
Bells Capital Partners,  Inc. for 18 months with an automatic  12-month renewal.
In February  2000 we extended the term of this  agreement  until  January  2001.
Under the advisory  agreement,  Maroon Bells provides us with specified advisory
and business  development  services in exchange for a monthly  advisory  fee. In
addition, Maroon Bells will be paid a success fee upon the completion of certain
merger and acquisition and business  development  activities on our behalf.  The
cost of the Maroon Bells consulting  agreement to us during 1999 was $120,000 in
advisory  fees,  $315,800 in success fees for financings  and  acquisitions  and
warrants to  purchase  250,000 of our shares at $2.75 per share.  We  anticipate
paying to Maroon Bells at least  $120,000 in advisory fees and at least $150,000
in structuring and financing success fees during 2000.

    Mr.  Mooney was  promisor  on a note held by us for the  purchase of 400,000
shares of our common stock in the amount of $87,520 and dated December 18, 1998.
The note was secured and accrued  interest at a rate of 6.5% APR, with principal
and interest due in two years on December 18, 2000. The largest aggregate amount
owed by Mr.  Mooney during 1999 was  approximately  $93,550 on December 31, 1999
and during 1998 was  approximately  $87,710 on December  31,  1998.  In February
2000, Mr. Mooney paid the note in full, including all accrued interest.

    Donald Sledge

    As a board member, Mr. Sledge participated in board deliberations  regarding
executive  officer  compensation.  Mr. Sledge was appointed our Chief  Executive
Officer  in  February  2000  and  also  served  as Chief  Executive  Officer  of
RateXchange  I, Inc.  during  1999.  Mr.  Sledge's  son is also an  employee  of
RateXchange I, Inc., earning a base salary of approximately $70,000 annually.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth information regarding beneficial ownership of
our common stock as  of February 8, 2001,  by (a) each person who is known by us
to own beneficially more than five percent of our outstanding  common stock, (b)
each of our  directors,  (c) each of the named  executive  officers  and (d) all
directors and executive officers as a group.

Name of Beneficial Owner                                         Common Stock Beneficially Owned           Percentage (1)
------------------------                                         -------------------------------           --------------
                                                                                                       
Dean S. Barr (2)                                                            83,750                                 *

Douglas Cole (3)                                                           660,074                               3.58%

Gordon Hutchins, Jr. (4)                                                    66,667                                 *

Ross Mayfield (5)                                                          416,675                               2.29%

D. Jonathan Merriman (6)                                                 1,126,000                               5.95%

Edward Mooney (7)                                                          577,000                               3.14%

Gordon Reichard, Jr. (8)                                                   250,000                               1.39%

Philip Rice (9)                                                             32,500                                 *

Donald H. Sledge (10)                                                    1,305,000                               6.84%

Ronald E. Spears (11)                                                      100,000                                 *

Steven W. Town (12)                                                         50,000                                 *

Christopher Vizas (13)                                                     100,000                                 *

Paul Wescott (14)                                                          186,458                               1.03%

All directors and executive officers as a group (15)                     4,954,124                              21.79%


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

    * Less than one percent.


                                       43


(1)   Applicable  percentage  ownership is based on 17,783,174  shares of common
      stock  outstanding  as of  February 8, 2001.  Pursuant to the rules of the
      Securities and Exchange  Commission,  shares shown as "beneficially" owned
      include all shares of which the  persons  listed have the right to acquire
      beneficial  ownership  within 60 days of February 8,  2001,  including (a)
      shares subject to options,  warrants or any other right exercisable within
      60 days  of  February 8, 2001,  even  if these  shares  are not  currently
      outstanding, (b) shares attainable through conversion of other securities,
      even if these shares are not currently outstanding, (c) shares that may be
      obtained  under  the  power to revoke a trust,  discretionary  account  or
      similar  arrangement  and (d) shares that may be obtained  pursuant to the
      automatic  termination  of  a  trust,  discretionary  account  or  similar
      arrangement.  This information is not necessarily indicative of beneficial
      ownership for any other purpose. Our directors and executive officers have
      sole voting and  investment  power over the shares of common stock held in
      their names, except as noted in the following footnotes.

(2)   Includes  27,500 shares and 6,250 warrants  (exercisable at $5.00) held by
      members  of Mr.  Barr's  family.  Includes  50,000  currently  exercisable
      options to purchase common stock at $1.56.

(3)   Includes  37,500  shares held by members of Mr.  Cole's  family.  Includes
      currently  exercisable  options to purchase 100,000 shares of common stock
      at $1.60 per share, and 100,000 shares of common stock at $7.00 per share.
      Mr. Cole resigned as our Chief Executive Officer in February 2000 and as a
      director in June 2000.

(4)   Includes Mr.  Hutchins  currently  exercisable  options to purchase 66,667
      shares of common stock at $5.69 per share. Mr. Hutchins also holds options
      to  purchase  33,333  shares  of  common  stock  that  are  not  currently
      exercisable.

(5)   Includes Mr. Mayfield's  currently  exercisable options to purchase 40,000
      shares of common stock at $2.50 per share,  60,000  shares of common stock
      at $2.75 per share, and 300,000 shares of common stock at $7.00 per share.

(6)   Includes Mr. Merriman's currently  exercisable options to purchase 100,000
      shares of common  stock at $7.00  per share and  500,000  shares of common
      stock at $3.19 per share.  Mr.  Merriman  also holds  options to  purchase
      1,500,000 shares of common stock that are not currently exercisable.


(7)   Includes Mr. Mooney's  currently  exercisable  options to purchase 100,000
      shares of common  stock at $160 per  share  and  100,000  shares of common
      stock at $7.00 per share.


(8)   Includes Mr. Reichard's currently  exercisable options to purchase 250,000
      shares of common stock at $1.60 per share.

(9)   Includes Mr. Rice's currently exercisable warrant to purchase 4,167 shares
      of common  stock at $14.40  per  share.

(10)  Includes Mr. Sledge's  currently  exercisable  options to purchase 100,000
      shares of common stock at $2.75 per share and  1,200,000  shares of common
      stock at $7.00 per share. Mr. Sledge holds additional  options to purchase
      300,000 shares of common stock that are not currently exercisable.

(11)  Includes Mr.  Spears'  currently  exercisable  options to purchase 100,000
      shares of common stock at $7.00 per share.

(12)  Includes  Mr.  Town's  currently  exercisable  options to purchase  50,000
      shares of common  stock at $2.87 per share.  Mr. Town also holds option to
      purchase 50,000 shares of common stock that are not currently exercisable.

(13)  Includes  Mr.  Vizas'  currently  exercisable  options to purchase 100,000
      shares of common stock at $7.00 per share.

(14)  Includes Mr. Wescott's  currently  exercisable options to purchase 112,500
      shares of common stock at $2.75 per share,  67,708  shares of common stock
      at $7.00 per share and a currently  exercisable  warrant to purchase 2,083
      shares of common stock at $14.40 per share. Mr. Wescott also holds options
      to  purchase  an  additional  31,248  shares of common  stock that are not
      currently exercisable.


                                       44


(15)  The  total  for  directors  and  executive  officers  as a group  includes
      1,387,149 shares of common stock, 3,496,875 shares  subject to outstanding
      stock options that are currently exercisable, and 62,500 shares subject to
      outstanding warrants that are currently exercisable.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    As part of a transaction  agreed to in October 1998,  our board of directors
authorized  the  issuance  to  Theodore  Swindells,  Douglas  Cole  and  another
unrelated  party a total of 666,574 shares of our common stock in exchange for a
total of $66,657 in secured notes dated January 2, 1999.  Our board of directors
has placed  restrictions on this stock so that the stock cannot be sold, traded,
assigned, transferred or pledged until we reach $10,000,000 in gross revenues in
a one-year  period.  Mr. Cole was one of our directors  and executive  officers.
Interest on the notes was 6.5% APR and,  together  with any unpaid  principal on
the notes, was due on January 2, 2001. The greatest aggregate amount outstanding
on the notes during 1999 was $70,990,  on December 31, 1999.  In February  2000,
the parties fully satisfied their  obligations  under the January 2, 1999 notes.
Because Messrs.  Swindells and Cole paid the entire  principal amount owed under
these notes early at our request,  we agreed to waive unpaid accrued interest in
the approximate  amount of $4,700.  During 1999, 1998 and 1997, the Company,  in
its periodic reports filed with the Securities Exchange  Commission,  listed Mr.
Swindells' beneficial ownership to be in excess of 5%.

    Maroon Bells has a consulting  agreement  with us, which  includes a monthly
retainer of $10,000, and can earn cash or stock for successfully assisting us in
obtaining  financing.  Theodore Swindells is a principal of Maroon Bells. Edward
Mooney, a former director and executive  officer of ours, is now a consultant to
Maroon Bells.  Mr. Mooney's  interest in the consulting  agreement is limited to
his interest in Maroon Bells as a consultant to that company.  Mr. Mooney is not
a stockholder of Maroon Bells.

    In March  1999,  we sold  525,000  shares of our  common  stock to  Theodore
Swindells in exchange for a note in the amount of $560,000 and bearing  interest
at a rate of 6.5% APR, due in March 2001. Mr.  Swindells'  obligation under this
note was fully satisfied in February 2000. Because Mr. Swindells paid the entire
principal  amount  owed  under the note more than one year  early,  we agreed to
waive  all  interest  accrued  in  the  amount  of  approximately   $25,000.  In
conjunction  with a private offering of our securities in February 2000, we paid
the investment banking firm First Security Van Kasper a commission consisting of
7% of the aggregate  proceeds of the offering and warrants to purchase shares of
our common  stock in an amount  equal to 7% of the  common  stock  purchased  by
investors  at an  exercise  price of $12.00  per  share  and 7% of the  warrants
purchased by investors at an exercise price of $14.40 per share. Mr. Merriman, a
member of our board of directors since February 2000 and our President and Chief
Executive  Officer  since  October  2000,  is a director of First  Security  Van
Kasper.  He  previously  was managing  director  and head of First  Security Van
Kasper's Equity Capital Markets Group.

    In February 2000,  RateXchange I, Inc. closed a $2,000,000  convertible note
offering.  The notes offered were  convertible  into  RateXchange I, Inc. common
stock  at a price  per  share  to be  determined  in an  anticipated  subsequent
financing of  RateXchange I, Inc. As a result of our new business  strategy,  we
offered to such note  holders  the right to convert  their notes into our common
stock at an exchange  rate of $5.00 per share.  In addition,  we agreed to issue
such holders an aggregate of 500,000  warrants to purchase common stock at $5.00
per share.  As of  December  13,  2000,  note  holders  have  elected to convert
$1,975,000 of the notes.

    Under the offer to convert  the  RateXchange  I, Inc.  notes into our common
stock and  warrants to purchase  our common  stock,  First  Security Van Kasper,
Venture  Fund I elected to convert  its  $525,000  note into  105,000  shares of
common stock,  as well as accepted a warrant to purchase an  additional  131,250
shares at $5.00 per share. In addition, we issued to First Security Van Kasper a
warrant to  purchase  40,770  shares of our  common  stock at $5.00 per share to
compensate  First Security Van Kasper for its services as placement agent during
the RateXchange I, Inc. convertible note offering.

    Under the offer to convert  the  RateXchange  I, Inc.  notes into our common
stock and warrants to purchase our common stock,  Theodore  Swindells elected to
convert his $100,000  note into 20,000  shares of our common  stock,  as well as
accepted a warrant to purchase an additional 25,000 shares at $5.00 per share.

    For a description of other transactions  involving our directors and us, see
the transactions presented under the caption "Compensation  Committee Interlocks
and Insider Participation."


                                       45


                              ABOUT THIS PROSPECTUS

    This  prospectus is part of a registration  statement we have filed with the
Securities and Exchange  Commission to register  4,934,162  shares of our common
stock. This prospectus does not include all of the information  contained in the
registration  statement  and the  exhibits to the  registration  statement.  For
further  information  about the shares,  and us you should read the registration
statement and the exhibits to the registration  statement.  Statements contained
in this prospectus  concerning  documents we have filed with the SEC as exhibits
to the registration  statement or otherwise are not necessarily complete and, in
each instance, you should refer to the actual filed document.

    We have not authorized  anyone to provide you with any  information  that is
different  from  the  information  contained  in this  prospectus.  The  selling
stockholders  are offering to sell and seeking  offers to buy the shares only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this  prospectus,  regardless
of the time of delivery of this prospectus or of the sale of any shares.

                       WHERE YOU CAN FIND MORE INFORMATION

    We are  required to file  annual,  quarterly  and special  reports and proxy
statements and other  information with the SEC. Our SEC filings are available to
the public over the  Internet at the SEC's web site at  http://www.sec.gov.  You
may also read and copy any document we file at the SEC's Public  Reference  Room
at 450 Fifth Street,  Mail Stop 1-2, N.W.,  Washington,  D.C. 20549. Please call
the SEC at  1-800-SEC-0330  for additional  information on the public  reference
rooms.

                                  LEGAL MATTERS

    The validity of 497,000 of the shares of common stock offered  hereby by the
selling  stockholders  has been  passed  upon for us by Hogan & Hartson  L.L.P.,
Washington,  D.C.  The  validity  of the  balance of the shares of common  stock
offered hereby by the selling  stockholders has been passed upon for us by Snell
& Wilmer L.L.P., Salt Lake City, Utah.

                                     EXPERTS

    Our consolidated  financial  statements as of December 31, 1999 and 1998 and
for the years then ended  included in this  document have been audited by Arthur
Andersen LLP,  independent  public  accountants,  as stated in their report with
respect  thereto,  and are  included  in this  document  in  reliance  upon  the
authority  of said firm as experts in  accounting  and  auditing  in giving said
reports.

    The  statements of operations and cash flows for the year ended December 31,
1997 has been  audited  by  Crouch,  Bierwolf  &  Chisholm,  independent  public
accountants,  as  indicated  in their  reports  with  respect  thereto,  and are
included  herein in  reliance  upon the  authority  of said firm as  experts  in
accounting and auditing.


                                       46



                                     INDEX TO FINANCIAL STATEMENTS

                             Financial Statements of RateXchange Corporation


                                                                                                           
Reports of Independent Auditors.........................................................................      F-2

Consolidated Balance Sheet as of December 31, 1999 and December 31, 1998................................      F-4

Consolidated Statement of Operations for the years ended December 31, 1999, December 31, 1998,
And December 31, 1997...................................................................................      F-5

Consolidated Statement of Stockholders' Equity for the period December 31, 1996 to December 31, 1999....      F-6

Consolidated Statement of Cash Flows for the years ended December 31, 1999, December 31, 1998,
And December 31, 1997...................................................................................      F-8

Notes to Consolidated Financial Statements..............................................................      F-9

Unaudited Consolidated Balance Sheet as of September 30, 2000...........................................      F-23

Unaudited Consolidated Statement of Operations for the nine months ended September 30, 2000 and 1999....      F-24

Unaudited Consolidated Statement of Cash Flows for the nine months ended
September 30, 2000 and 1999.............................................................................      F-25

Notes to Unaudited Consolidated Financial Statements....................................................      F-26


                                                      F-1


Report of Independent Public Accountants

To the Board of  Directors  and  Stockholders  of  RateXchange  Corporation  and
Subsidiaries

We have audited the  accompanying  consolidated  balance  sheets of  RateXchange
Corporation  and  Subsidiaries  (a Delaware  corporation)  (a development  stage
company)  as of  December  31,  1999  and  1998  and  the  related  consolidated
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended  December 31, 1999 and 1998 (1999 and 1998  restated - see Note 3) and for
the period from September 30, 1998 (beginning of development  stage) to December
31, 1999. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit. The Company's consolidated
statement of operations,  stockholders' equity and cash flows for the year ended
December 31, 1997 were audited by other auditors whose report dated February 29,
2000, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
RateXchange  Corporation and  Subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and cash flows from the years ended December 31,
1999  and  1998  and for the  period  from  September  30,  1998  (beginning  of
development   stage)  to  December  31,  1999,  in  conformity  with  accounting
principles generally accepted in the United States.

Arthur Andersen LLP

San Francisco, California
November 9, 2000


                                      F-2


                           INDEPENDENT AUDITORS REPORT

To the Board of  Directors  and  Stockholders  of  RateXchange  Corporation  and
Subsidiaries

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders' equity and cash flows of RateXchange Corporation (previously named
NetAmerica.com  Corporation)  (a  Delaware  corporation)  (a  development  stage
company)  for the year ended  December 31, 1997.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted an audit in accordance with generally accepted auditing  standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows from the year ended  December  31, 1997 for  RateXchange  Corporation
(previously  named  NetAmerica.com  Corporation),  in conformity  with generally
accepted accounting principles.

Crouch, Bierwolf & Chisholm
February 29, 2000
Salt Lake City, Utah


                                      F-3



                               RATEXCHANGE CORPORATION (A Development Stage Company)

                                         Consolidated Balance Sheet

ASSETS                                                                                     December 31,
                                                                                   -----------------------------
                                                                                        1999           1998
                                                                                    (As restated)  (As restated)
                                                                                   --------------- -------------
                                                                                             
Current assets
         Cash and cash equivalents                                                 $    536,615    $   528,516
         Interest receivable                                                            150,608          1,638
         Prepaid expenses                                                                11,647             --
         Notes receivable on sales of common stock                                    1,590,319        300,000
         Short term investments                                                         387,500             --
                                                                                   ------------    -----------
                  Total current assets                                                2,676,689        830,154

Property and equipment (net of accumulated depreciation of $18,677)                     188,891             --

Other assets

         Investment in affiliate                                                         75,000             --
         Deposits                                                                       103,305             --
                                                                                   ------------    -----------
Total assets                                                                       $  3,043,885    $   830,154
                                                                                   ============    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

         Accounts payable and accrued expenses                                     $  1,840,056    $   129,500
         Short term debt                                                                885,000             --
                                                                                   ------------    -----------
                  Total current liabilities                                           2,725,056        129,500

Stockholders' equity

         Common stock, $.0001 par value; 300,000,000 shares
         authorized; issued and outstanding: 14,087,425 shares
         And 7,243,023 shares in 1999 and 1998                                            1,409            724
         Additional paid in capital                                                  13,225,824      4,065,795
         Retained deficit                                                           (12,664,654)    (3,365,865)
         Accumulated other comprehensive loss                                          (243,750)            --
                                                                                   ------------    -----------
                  Total stockholders' equity                                            318,829        700,654
                                                                                   ------------    -----------
Total liabilities and stockholders' equity                                         $  3,043,885    $   830,154
                                                                                   ============    ===========

See notes to financial statements.



                                                         F-4



                                  RATEXCHANGE CORPORATION (A Development Stage Company)

                                        Consolidated Statement of Operations

                                                                                                          Beginning of
                                                                                                           Development
                                                                                                              Stage
                                                          For the Year    For the Year                   (September 30,
                                                              ended           ended      For the Year     1998) though
                                                          December 31,    December 31,       ended        December 31,
                                                              1999            1998       December 31,         1999
                                                          (As restated)   (As restated)      1997         (As restated)
                                                          ------------    -------------  ------------     -------------
                                                                                              
REVENUE                                                   $        --     $        --     $      --       $         --

EXPENSES

Selling, general and administrative                         7,491,447       2,161,253           200          9,652,700
(includes non-cash expenses of $3,158,415
in 1999 and $2,020,376 in 1998)
Write off advances to potential investee                      413,681         885,000            --          1,298,681
Depreciation and amortization                                  18,676              --            --             18,676
Purchase of subsidiaries                                    1,507,408          89,710            --          1,597,118
                                                          -----------     -----------     ---------       ------------
     Total expenses                                         9,431,212       3,135,963           200         12,567,175

Other Income (Expenses)

Interest income                                               151,496           2,214            --            153,710
Interest expense                                              (19,073)        (10,773)           --            (29,846)
                                                          -----------     -----------     ---------       ------------
Loss before taxes                                          (9,298,789)     (3,144,522)         (200)       (12,443,311)

Income tax provision (benefit)                                     --              --            --                 --
                                                          -----------     -----------     ---------       ------------
Net loss                                                  $(9,298,789)    $(3,144,522)    $    (200)      $(12,443,311)
                                                          ===========     ===========     =========       ============

Basic and diluted net loss per share                      $     (0.72)    $     (1.92)           --
Weighted average number
of common shares                                           12,863,020       1,636,919       200,000
                                                          ===========     ===========     =========

See notes to financial statements.



                                                         F-5



                                        RATEXCHANGE CORPORATION (A Development Stage Company)

                                           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                 Number                                                Accumulated
                                                of Shares                                                 other
                                                   of                                                    compre-       Compre-
                                                 Common           Par       Paid-In        Retained      hensive       hensive
                                                  stock          Value      Capital         Deficit       loss          loss
                                                --------        ------   -----------     -----------   ------------  ---------
                                                                                                 
Balance at December 31, 1996                     200,000        $   20   $   219,823     $  (221,143)      --               --

Contribution by officer/directors                     --            --         1,300              --       --               --

Comprehensive and net loss                            --            --            --            (200)      --      $      (200)
                                                --------        ------   -----------     -----------     -----     -----------
Balance, December 31, 1997                       200,000            20       221,123        (221,343)      --               --

Shares issued for services at $.001            1,000,000           100           900              --       --               --

Shares issued for acquisition at $.001         2,400,000           240         2,160              --       --               --

Shares issued for conversion of
debt at $.34                                   1,399,773           140     1,492,998              --       --               --

Shares issued for services at $1.00               87,000             9        92,794              --       --               --

Shares issued for cash at $1.07                1,106,250           110     1,179,890              --       --               --

Less:  Offering costs                                 --            --      (118,000)             --       --               --

Shares issued for notes receivable
At an average price of $0.29                   1,050,000           105     1,119,930              --       --               --

Warrants issued at $2.00 per share
(Note 11)                                             --            --        74,000              --       --               --


Comprehensive and net
loss (As restated)                                    --            --            --      (3,144,522)      --      $(3,144,522)
                                                --------        ------   -----------     -----------     -----     -----------
Balance, December 31,                          7,243,023           724     4,065,795      (3,365,865)      --               --
1998 (As restated)

Options/Warrants issued from $.05
To $2.75  per share (Note 11)                         --            --     1,448,441              --       --               --

Shares issued for cash and notes
At $0.10 per share (Note 8)                      916,574            92       977,618              --       --               --
Shares issued for cost
reimbursement at $0.10 per share
(Note 8)                                         322,500            32       343,979              --       --               --
Shares issued for cash and notes
At $1.07 per share (note 8)                    3,870,938           387     4,047,713              --       --               --




                                                                  F-6



                                              RATEXCHANGE CORPORATION (A Development Stage Company)

                                                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                   Number of                                                             Accumulated
                                   shares of                                                                other          Compre-
                                    Common            Par           Paid-In           Retained             compre-         hensive
                                     Stock           Value          Capital            Deficit          hensive loss        loss
                               ----------------  ------------  ---------------  ------------------   ----------------   ------------
                                                                                                      
Shares issued for conversion            193,186            19          206,898                  --                 --
of A1 Internet debt at $1.07
(Note 7 & Note 8)

Shares issued for services at
$1.07 per share (Note 8)                268,500            27          287,206                  --                 --

Shares issued for note
conversion at $1.00 per share
(Note 8)                                 30,000             3           31,998                  --                 --

Shares issued for services at
$1.07 per share (Note 8)                 30,000             3           31,998                  --                 --

Shares issued for cash at
$1.60 per share (net) (Note             515,188            52          628,220                  --                 --
8)

Shares issued for services at
$1.60  per share (Note 8)               122,518            12          196,017                  --                 --

Shares issued to acquire
outstandinq shares of
RateXchange at $1.60 per
share (Note 6 & Note 8)                 574,998            58          919,942                  --                 --
Comprehensive loss:
     Net loss  (As restated)                                                            (9,298,789)                     $(9,298,789)
     Other comprehensive
loss:
         Change in unrealized

         loss on securities                                                                                  (243,750)     (243,750)
                                                                                                                        -----------
Comprehensive loss                                                                                                      $(9,542,539)
                               ----------------  ------------  ---------------  ------------------   ----------------   ===========
Balance, December 31,
1999 (As restated)             $     14,087,425  $      1,409  $    13,225,824  $      (12,664,654)  $       (243,750)
                               ================  ============  ===============  ==================   ================

See notes to financial statements.



                                                                 F-7



                                             RATEXCHANGE CORPORATION (A Development Stage Company)

                                                    Consolidated Statement of Cash Flows

                                                                                                              Beginning of
                                                                                                                   the
                                                                                                               Development
                                                                                                                  Stage
                                                                  For the Year   For the Year                 September 30,
                                                                      Ended          Ended        For the        1998 to
                                                                  December 31,   December 31,   Year Ended    December 31,
                                                                      1999           1998        December         1999
                                                                  (As restated)  (As restated)   31, 1997     (As restated)
                                                                  -----------    -----------     -------      ------------
                                                                                                  
         CASH FLOWS FROM OPERATING ACTIVITIES
           Net loss                                               $(9,298,789)   $(3,144,522)    $  (200)     $(12,443,311)
           Adjustments to reconcile net loss to net cash
            used in operating activities
                  Depreciation and amortization                        18,676             --          --           18,676
                  Write off advances to potential investee            206,898             --          --          206,898
                  Common stock issued for services/expenses         1,672,954      1,946,376          --        3,619,330
                  Warrants for purchase of common stock issued for
                  Services                                          1,485,461         74,000          --        1,559,461
                  Purchase of outstanding shares of RateXchange     1,507,408             --          --        1,507,408
                  Increase in interest receivable and prepaid
                  Expenses                                           (160,617)        (1,638)         --         (162,255)
                  Increase (decrease) in accounts payable and
                  accrued expenses                                  1,601,241        129,300      (1,100)       1,730,541
                                                                  -----------    -----------     -------      -----------
                           TOTAL                                   (2,966,768)      (996,484)     (1,300)      (3,963,253)

         CASH FLOWS FROM INVESTING ACTIVITIES
                  Payment for purchase of equipment                  (207,568)            --          --         (207,568)
                  Security deposits                                  (103,305)            --          --         (103,305)
                  Advances to A-1 Internet                           (631,251)            --          --         (631,251)
                  Investment in Telenisus Corporation                 (75,000)            --          --          (75,000)
                                                                  -----------    -----------     -------      -----------
                           TOTAL                                   (1,017,124)            --          --       (1,017,124)

         CASH FLOWS FROM FINANCING ACTIVITIES
                  Loans and other debt                                410,000             --          --          410,000
                  Proceeds from common stock sales                  3,581,991      1,525,000       1,300        5,106,991
                                                                  -----------    -----------     -------      -----------
                           TOTAL                                    3,991,991      1,525,000       1,300        5,516,991
                                                                  -----------    -----------     -------      -----------
         INCREASE  IN CASH AND CASH EQUIVALENTS                         8,099        528,516          --          536,615

         CASH and CASH EQUIVALENTS BEGINNING OF YEAR                  528,516             --          --               --
                                                                  -----------    -----------     -------      -----------
         CASH and CASH EQUIVALENTS END OF YEAR                    $   536,615    $   528,516     $    --      $   536,615
                                                                  ===========    ===========     =======      ===========

         Supplementary cash flow information
         Cash paid for:
                  Interest                                                 --             --          --               --
                  Taxes                                                    --             --          --               --
         Stock issuances for:
                  Services and expenses                           $ 3,158,415    $ 2,020,376          --      $ 5,178,791
                  Purchase of outstanding shares of RateXchange   $   920,000             --          --      $   920,000
                  Commission on stock sales                       $   196,029             --          --      $   196,029
                  A1 Internet settlement                          $   206,898             --          --      $   206,898

See notes to financial statements.



                                                                  F-8


                    RATEXCHANGE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999

Note 1   Background and History

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

    RateXchange  Corporation (formerly  Netamerica.com  Corporation and formerly
    Venture World, Ltd.) is a Delaware corporation  organized on May 6, 1987 for
    the purpose of seeking out and developing any general business opportunity.

    RateXchange  I, a Delaware  corporation  organized  in June 1999,  is in the
    business of business-to-business  e-commerce seeking to develop new exchange
    services for the telecommunications market.

    PolarCap  is a  California  corporation  organized  on April 7, 1997 for the
    purpose of  investing  in and  developing  rights to a variety  of  software
    technologies  related  to  multimedia,  development  tools  and  application
    technologies. PolarCap is in the process of being liquidated.

    The Company is in its  planning  stages for its eventual day to day business
    and has not generated any revenues from its planned operations.  The Company
    is defined as a  development  stage  company in  accordance  with  Financial
    Accounting  Standard No. 7. The Company had no operations or business before
    September 30, 1998.  Cumulative results of operations since the start of the
    development stage,  September 30, 1998, when the Company purchased PolarCap,
    have been reported separately.

    From  inception,  the Company has been primarily  engaged in  organizational
    activities,  including  designing  and  developing  its  portal,  recruiting
    personnel,  establishing office facilities, raising capital and developing a
    marketing plan. The Company began revenue generation  activities in 1999 but
    no revenue has been  generated  as of December 31,  1999.  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 obtaining
    adequate  financing to fulfill its  development  activities,  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 Summary of Significant Accounting Policies

    Principles of Consolidation

    The consolidated  financial  statements  include the accounts of RateXchange
    Corporation and its subsidiaries.  Collectively, these entities are referred
    to as the Company.  All significant  intercompany  transactions and accounts
    have been eliminated.

    Cash, and Cash Equivalents

    The Company  considers all highly liquid debt  instruments  with an original
    maturity of three months or less to be cash equivalents.


                                      F-9


    Investments

    The Company classifies its debt and marketable equity securities into one of
    three categories: trading,  available-for-sale or held-to-maturity.  Trading
    securities are bought and held principally for the purpose of selling in the
    near term. Held-to-maturity securities are those securities that the Company
    has the ability and intent to hold until maturity.  All other securities not
    included    in   trading   or    held-to-maturity    are    classified    as
    available-for-sale.  Available-for-sale  securities  are  recorded  at  fair
    value.  Held-to-maturity securities are recorded at amortized cost, adjusted
    for the amortization or accretion of premiums or discounts. Unrealized gains
    and losses, net of the related tax effect, on available-for-sale  securities
    are  reported  as a  separate  component  of other  comprehensive  income in
    shareholders' equity until realized. Premiums and discounts are amortized or
    accreted over the life of the related  investment  security as an adjustment
    to yield using the effective  interest method.  Dividend and interest income
    are  recognized  when earned.  Realized  gains and losses for securities are
    included  in  earnings  and are derived  using the  specific  identification
    method for determining the cost of securities sold.

    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.  These  securities are
    reported  as  short-term  investments  on the  consolidated  balance  sheet.
    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.

    Nonmonetary Transactions

    Nonmonetary  transactions  are  transactions for which no cash was exchanged
    and for which  shares of common  stock or options or  warrants  to  purchase
    common stock were exchanged for goods and services.  These  transactions are
    recorded at the fair market  value of the equity  instruments  issued at the
    time of the  transaction  and  reported in the  statement of  operations  as
    services are rendered.

     Loss Per Share and Weighted Average Shares Outstanding

    Basic loss per share is computed by  dividing  the net loss by the  weighted
    average number of common shares outstanding.  Options and warrants on shares
    of common  stock  were not  included  in  computing  diluted  loss per share
    because  their  effects  were  antidilutive  (2,990,000  options and 625,000
    warrants).

    Deposits

    The  Company  issued a letter of credit as security  in  connection  with an
    operating  lease of its  office.  This  letter  of credit  is  secured  by a
    certificate of deposit in the amount of $103,305.

    Comprehensive loss

    Comprehensive  loss  includes  the net loss  reported  on the  statement  of
    operations  and  changes  in the fair  value of  investments  classified  as
    available  for sale,  which is  reported  as a  component  of  stockholders'
    equity.

    Use of Estimates

    The  preparation  of  financial  statements  in  conformity  with  generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions  that  affect  reported  amounts of assets and  liabilities  and
    results of operations. Actual results could differ from those estimates.

Note 3 Restatement of Previously Reported Results

    As part of the Company's overall  strategy,  the Company decided to retain a
    national  accounting  firm.  In  July  2000,  the  Company  selected  Arthur
    Andersen,  LLP as its  independent  auditors.  As a result of the  Company's
    review,  certain  adjustments  were  determined  necessary to the  Company's
    previously  reported financial results for the years ended December 31, 1998
    and 1999. These  adjustments  relate to the valuation of common stock issued
    in exchange  for  services  received,  conversion  of bridge  financing  and
    arrangement of financing, and other miscellaneous  adjustments to the timing
    of the recognition of certain expenses.  Management has made all adjustments
    considered  necessary  for the restated  financial  statements  to be fairly
    presented.


                                      F-10


    The  following   statements  of  operation  and  balance  sheets   reconcile
    previously reported and restated information.

        RateXchange Corporation Reconciliation of Statement of Operations Year ended December 31, 1999

                                                           Improper                               Adjustment
                                                           valuation                  To offset    to record
                                                          assigned to                 write off       or
                                            RateXchange     shares,                  of advances  reclassify
                                            Corporation   options and   Purchase of  with market  expenses in
                                                as         warrants     outstanding   value of        the      RateXchange
                                            previously    issued for     shares of     shares     appropriate Corporation as
                                             reported      services      Polarcap     received      period      restated
                                           ------------  ------------  -----------  -----------  -----------   -----------
                                                                                             
        REVENUE                            $         --  $        --     $     --    $       --    $     --    $        --

        EXPENSES

        Selling, general & administrative     5,048,614    2,426,440        3,727         6,050       6,616      7,491,447
        Write off advances to potential
        Investee                                863,750                                (450,069)                   413,681
        Depreciation and amortization            25,093                   (14,952)                    8,535         18,676
        Purchase of subsidiaries              1,537,300                   (29,892)                               1,507,408
                                           ------------  -----------     --------    ----------    --------    -----------
        Total expenses                        7,474,757    2,426,440      (41,117)     (444,019)     15,151      9,431,212

        OTHER INCOME (Expenses)

        Interest income                         151,276                                                 220        151,496
        Interest expense                        (13,019)                                             (6,054)       (19,073)
        Other income                                220                                                (220)            --
        Loss allocated to minority
            interest                              7,000                                              (7,000)            --
                                           ------------  -----------     --------    ----------    --------    -----------
        Loss before taxes                    (7,329,280)  (2,426,440)      41,117       444,019     (28,205)    (9,298,789)

        Income tax provision                         --           --           --            --          --             --
                                           ------------  -----------     --------    ----------    --------    -----------
        NET LOSS                           $ (7,329,280) $(2,426,440)    $ 41,117    $  444,019    $(28,205)   $(9,298,789)
                                           ============  ===========     ========    ==========    ========    ===========
        Basic and diluted net loss per
           share                           $      (0.57)                                                       $     (0.72)
                                           ============                                                        ===========
       Weighted average number of shares     12,863,020                                                         12,863,020
                                           ============                                                        ===========



                                                                F-11



              RateXchange Corporation Reconciliation of Statement of Operations Year ended December 31, 1998


                                                                   Improper
                                                                   valuation
                                                                  assigned to               Adjustment
                                                    RateXchange     shares,                  to record
                                                    Corporation   options and   Purchase of expenses in
                                                        as         warrants     outstanding     the       RateXchange
                                                    previously    issued for     shares of  appropriate Corporation as
                                                     reported      services      Polarcap     period       restated
                                                   -----------   -----------     --------    --------     -----------
                                                                                           
             REVENUE                               $        --   $        --     $     --    $     --     $        --

             Expenses

             Selling, General & Administrative         174,176     1,918,277                   68,800       2,161,253
             Write off advances to potential
             investee                                  885,000                                                885,000

             Depreciation and Amortization               4,363                     (3,738)       (625)             --
             Purchase of subsidiary                     44,855                     44,855                      89,710
                                                   -----------   -----------     --------    --------     -----------

             Total Expenses                          1,108,394     1,918,277       41,117      68,175       3,135,963

             OTHER INCOME (Expenses)

             Interest income                             2,214                                                  2,214
             Interest expense                          (10,773)                                               (10,773)
                                                   -----------   -----------     --------    --------     -----------

             Loss before taxes                      (1,116,953)   (1,918,277)     (41,117)    (68,175)     (3,144,522)
                                                   -----------   -----------     --------    --------     -----------

             Income tax provision                           --            --           --          --              --
                                                   -----------   -----------     --------    --------     -----------
             NET LOSS                              $(1,116,953)  $(1,918,277)    $(41,117)   $(68,175)    $(3,144,522)
                                                   ===========   ===========     ========    ========     ===========

             Basic  and diluted net loss per       $     (0.68)                                           $     (1.92)
                                                   ===========                                            ===========
             share

             Weighted average number  of shares      1,636,919                                              1,636,919
                                                   ===========                                            ===========



                                                              F-12



                                Balance Sheet Reconciliation As of December 31, 1999

                                                              Improper                   To offset    Adjustments
                                                              valuation                write off of       to
                                RateXchange                  assigned to                 advances    expenditures
                                Corporation                shares, options Purchase of  with market    and funds
                                    as                      and warrants   outstanding   value of     received in     RateXchange
                                originally     Adjustments   issued for     shares of     shares    the appropriate   Corporation
                                 reported     made in 1998    services      Polarcap     received       period        as restated
                               ------------  ---------------------------- -----------  -----------  --------------  -------------
                                                                                               
  ASSETS
  Current assets
  Cash and cash equivalents    $   451,615                                                             $  85,000    $    536,615
  Interest receivable              150,608                                                                               150,608
  Prepaid expenses                   5,814                                                                 5,833          11,647
  Short term investments                                                                $  387,500                       387,500
  Note receivable on sales
    of common stock              1,787,531                                                (197,212)                    1,590,319
                               -----------    -----------    ----------     -------     ----------     ---------    ------------
  Total current assets           2,395,568             --            --          --        190,288        90,833       2,676,689


  Property & equipment (Net)       175,349    $    (6,875)                                                20,417         188,891

  Other assets

  Investment in affiliate           75,000                                                                                75,000

  Goodwill                                        (41,117)                  $41,117                                           --

  Deposits                         103,305                                                                               103,305
                               -----------    -----------    ----------     -------     ----------     ---------    ------------
  Total assets                 $ 2,749,222    $   (47,992)   $       --     $41,117     $  190,288     $ 111,250    $  3,043,885
                               ===========    ===========    ==========     =======     ==========     =========    ============


  Current liabilities

  Accounts payable and
    accrued expenses           $ 1,639,301    $    61,300                                              $ 139,455    $  1,840,056

  Accrued taxes                     85,000                                                               (85,000)             --

  Short term debt                  800,000                                                                85,000         885,000
                               -----------    -----------    ----------     -------     ----------     ---------    ------------
  Total current liabilities      2,524,301         61,300            --          --             --       139,455       2,725,056


  Stockholders' equity

  Common stock                       1,409                                                                                 1,409

  Additional paid in capital     8,891,088      1,918,277    $2,426,440                     (9,981)                   13,225,824
  Accumulated other
    comprehensive loss                                                                    (243,750)                     (243,750)
  Retained deficit              (8,667,576)    (2,027,569)   (2,426,440)    $41,117        444,019       (28,205)    (12,664,654)
                               -----------    -----------    ----------     -------     ----------     ---------    ------------
  Total stockholders' equity       224,921       (109,292)           --      41,117        190,288       (28,205)        318,829
                               -----------    -----------    ----------     -------     ----------     ---------    ------------
  Total liabilities and
    stockholders' equity       $ 2,749,222    $   (47,992)   $       --     $41,117     $  190,288     $ 111,250    $  3,043,885
                               ===========    ===========    ==========     =======     ==========     =========    ============



                                                                F-13



                                        Balance Sheet Reconciliation As of December 31, 1998

                                                                     Improper
                                                                     valuation
                                                                    assigned to               Adjustment
                                                      RateXchange     shares,                  to record
                                                      Corporation   options and  Purchase of expenditures
                                                          as         warrants    outstanding    in the     RateXchange
                                                      originally    issued for    shares of   appropriate  Corporation
                                                       reported      services     Polarcap      period     as restated
                                                     -----------   -----------    --------     --------    -----------
                                                                                           
            ASSETS

            Current assets

            Cash and cash equivalents                $   528,516                                          $   528,516
            Interest receivable                            1,638                                                1,638
            Prepaid expenses
            Note receivable on sales of common
               stock                                     300,000                                              300,000
                                                     -----------   -----------    --------     --------   -----------
            Total current assets                         830,154                                              830,154

            Property & equipment (Net)                     6,875                               $ (6,875)

            Other assets

            Investment in affiliate

            Goodwill                                      41,117                  $(41,117)
            Deposits
                                                     -----------   -----------    --------     --------   -----------
            Total assets                             $   878,146            --    $(41,117)    $ (6,875)  $   830,154
                                                     ===========   ===========    ========     ========   ===========

            Current liabilities

            Accounts payable and accrued expenses    $    68,200                               $ 61,300   $   129,500
                                                     -----------   -----------    --------     --------   -----------
            Total current liabilities                     68,200                                 61,300       129,500

            Stockholders' equity

            Common Stock                                     724                                                  724
            Additional paid in capital                 2,147,518   $ 1,918,277                              4,065,795

            Retained deficit                          (1,338,296)   (1,918,277)    (41,117)     (68,175)   (3,365,865)
            Accumulated other comprehensive loss
            Notes receivable on sale of common stock                                                 --            --
                                                     -----------   -----------    --------     --------   -----------

            Total stockholders' equity                   809,946            --     (41,117)     (68,175)      700,654
                                                     -----------   -----------    --------     --------   -----------
            Total liabilities and stockholders'
              Equity                                 $   878,146   $        --    $(41,117)    $ (6,875)  $   830,154
                                                     ===========   ===========    ========     ========   ===========

    The following describes the nature of the reconciling items:

    The valuation assigned to shares issued for services -

    These adjustments represent the effect of shares,  options and warrants that
    were  issued in various  transactions  in  exchange  for  services  and were
    originally  recorded  at values  below the then fair value of the  Company's
    stock.

    Purchase of outstanding shares of Polarcap -

    In the previously  reported  financial  statements  the Company  incorrectly
    recorded  its purchase of the  outstanding  shares of Polarcap in 1998 using
    purchase accounting.  Accordingly,  the Company recorded goodwill of $89,710
    that was previously amortized and fully written off in 1999. The purchase of
    the  outstanding  shares  of  Polarcap  should  have  been  reflected  as an
    acquisition  of assets  with the  excess  consideration  charged  to expense
    immediately.  This adjustment  records the excess  consideration  of $41,117
    charged to expense.

    Net the writeoff of advances against the value of shares received -

    To compensate the Company for the write off of advances to A-1 Internet,  in
    September 1999, the Company received common stock in Halo Corporation with a
    fair value of $631,250.  At December  31, 1999 the value of this  investment
    was $387,500.  The Company  improperly  wrote down the carrying value of the
    investment.

    Adjustments to record expenses in the appropriate period -


                                      F-14


    These adjustments  relate to miscellaneous  accruals that were not reflected
in the appropriate period.

Note 4  Income Taxes

    As of December  31,  1999,  the Company  had a federal  net  operating  loss
    carryforward of $9,293,259  which will expire in the years 2007 through 2020
    for state and federal purposes. This net operating loss carryforward has not
    been  reflected in the financial  statements as the likelihood of future tax
    benefit from such operating loss carryforwards is remote.  Accordingly,  the
    potential tax benefits of the net operating  loss  carryforwards,  estimated
    based upon  current tax rates at December  31,  1999,  have been offset by a
    valuation allowance in the same amount.

    Significant  components of the company's deferred tax assets and liabilities
are as follows

                                                           December 31,
                                                   --------------------------
                                                        1999          1998
                                                   ------------- ------------
     Deferred tax assets:
              Net operating loss carryforward       $ 3,773,063   $ 1,314,334
              Options and warrants for services         603,097        74,000
              Start up cost carryforward              1,726,967
              Unrealized loss on securities              98,861
                                                    -----------   -----------
              Gross deferred tax assets               6,161,988     1,388,334
     Valuation allowance                             (6,161,988)   (1,388,334)
                                                    -----------   -----------
     Net deferred tax asset                         $        --   $        --
                                                    ===========   ===========

    The net change in the valuation  allowance  for the year ended  December 31,
    1999 and 1998 was an increase of $4,773,654 and $3,279,693.

Note 5 Property and Equipment

    The Company capitalizes  purchases of long-lived assets that are expected to
    give  benefit to the Company  over the life of the asset.  The Company  also
    capitalizes  improvements and costs that increase the value of or extend the
    life of the asset.

    Capitalized  assets are depreciated  over the estimated  useful lives of the
    assets (5 years for furniture and fixtures,  3 years for computer equipment)
    on a straight-line basis.

    Property and Equipment consists of the following:

                                                       December 31,
                                                  --------------------
                                                    1999         1998
                                                  ---------- ---------
              Furniture and fixtures              $ 10,520       $ --
              Computer equipment and software      197,047         --
                                                  --------       ----
                                                   207,567         --
              Less:  Accumulated depreciation      (18,676)        --
                                                  --------       ----
                                                  $188,891       $ --
                                                  ========       ====

    Depreciation expense for 1999 is $18,676.

Note 6 Acquisition of Subsidiary

    On September 30, 1998, the Company purchased all of the outstanding stock of
    PolarCap, Inc. for 2,400,000 shares of stock. At September 30, 1998 Polarcap
    had  negative  net worth of  $87,310.  The value of the stock was  issued at
    $.001,  for  a  cost  of  $2,400  in  1998.  The  Company  expensed  $89,710
    representing  the  excess  of  consideration  given  in  shares  issued  and
    liabilities assumed for the assets of Polarcap.


                                      F-15


    In the third  quarter of 1999,  the Company  purchased  all the  outstanding
    common  stock of Rate  Exchange,  Inc., a Colorado  corporation,  seeking to
    develop new exchange services for the telecommunications market. The Company
    paid  574,998 in shares of common  stock and  $450,000 in a note for a total
    cost of  $1,395,000  ($920,000  in stock and  $450,000 in a note plus out of
    pocket  expenses of $25,000).  Under the terms of the transaction two of the
    owners/employees  of RateXchange became employees of the company responsible
    for exploring  the  development  of the  business.  On the date of purchase,
    RateXchange had negative net worth of $112,408. The Company expensed a total
    of $1,507,408  representing the excess of consideration  given in shares and
    notes issued and liabilities assumed for the assets of RateXchange.

Note 7 Advances to Potential Investee

    On September 30, 1998 the Company negotiated, and later terminated by mutual
    agreement,  a  purchase  of  100%  of the  ownership  of  NetAmerica,  Inc.,
    subsequently  renamed A1  Internet,  Inc.,  an  Internet  services  provider
    company based in Seattle, Washington. Between the time the Company agreed to
    purchase (September 30, 1998), which was never consummated, and the time the
    termination  agreement  was  reached  (March  1999),  the  Company  advanced
    $1,738,769  ($1,531,871  in cash and  $206,898 in stock) the cash portion of
    which was eventually  written off as bad debt. After the March agreement was
    reached,  A1 Internet agreed to repay certain of the costs incurred prior to
    the  termination.  As part of its  plan to  repay  the  costs,  A1  Internet
    informed  the Company  that it had entered  into an  agreement  with another
    potential acquiror, Halo Holdings of Nevada, Inc., to sell substantially all
    of its assets in  exchange  for  shares of common  stock and  assumption  of
    certain liabilities,  including A1 Internet's obligations to the Company. In
    September  1999,  after  further  negotiations,  the Company  agreed with A1
    Internet to the following settlement:

    o    The Company retained certain rights to the name "NetAmerica;"

    o    A1 Internet  transferred  to the Company its interest in 100,000 shares
         of Halo restricted stock;

    o    The  Company  agreed to pay  $85,000  of past due  payroll  taxes of A1
         Internet from 1998; and

    o    All further  obligations of the Company to issue stock or options to A1
         Internet were canceled.

Note 8 Common Stock Transactions

    In general all stock  transactions  conducted during the period for which no
    cash was exchanged  and for which shares of stock were  exchanged for assets
    or goods and services were recorded at fair market value. A number of shares
    as indicated below were issued at below market values.  The Company recorded
    expense  related to these issues of  $1,519,047  in 1999 and  $2,007,203  in
    1998.

    Common stock transactions during 1999 are as follows:

    During the fourth quarter of 1998, the board of directors  approved  several
    stock transactions that were not completed and issued until 1999:

    o    916,574 shares of stock issued for $91,657 in notes to related parties.
         ($0.10) (January).  The board has placed  restrictions on this stock so
         that the stock cannot be sold, traded, assigned, transferred or pledged
         until the Company  reaches  $10,000,000 in gross revenues in a one year
         time period.

    o    322,500  shares  issued for cost  reimbursements  of $32,250  ($.10 per
         share) (January).

    The remaining stock issuances were approved and issued in 1999:

    o    758,438  shares of stock  were  issued  for  $728,100  (Net of  $80,900
         commissions). ($1.07) (February).

    o    3,112,500  shares of stock  issued for  $3,320,000  in notes to related
         parties and other investors. ($1.07) (March).

    o    268,500  shares of stock  issued for  $287,233 of legal and  consulting
         services. ($1.07) (March).

    o    193,186  shares of stock issued for $206,898 of debt to creditors of A1
         Internet. ($1.07, average) (March and May).

    o    30,000  shares of stock issued  instead of a $30,000  outstanding  note
         payable. ($1.00) (March).

    o    30,000 shares for services rendered of $32,000. ($1.07) (March).


                                      F-16


    o    515,188  shares of stock  issued  for $1.60  per  share,  or a total of
         $628,272.  (Net of  $196,029  in  commission  paid in stock of  122,518
         shares - see below) (May and June).

    o    122,518 shares issued for commissions on private placement at $1.60 per
         share. ($1.60 per share) (June).

    o    574,998  shares of stock issued for $1.60 per share for Rate  Exchange,
         Inc. (July).

Note 9 Subscriptions Receivable/Note Receivable-Related Party

    In January 1999,  the Company sold 916,574 shares in exchange for $91,657 in
    notes payable to a related party and other  investors at a price of $.10 per
    share. (See Note 8 for restrictions placed on stock).

    In March 1999,  the Company  sold  3,112,500  shares to a related  party and
    other  investors in exchange for  $3,320,000  in notes payable at a price of
    $1.07 per share.

    Of the total subscriptions receivable/note receivable issued during the year
    of  $3,411,657  and  $300,000  issued  in 1998,  $1,924,126  was  collected.
    Interest is being assessed at 6.5% and accrued  interest on the subscription
    receivable  was $150,608 at December 31,  1999.  The Company has  determined
    that 197,212 of the remaining  receivables are uncollectible and has written
    off these receivables.

    Subsequent  to year end, the board of  directors  of the Company  waived the
    interest on the purchase of 3,112,500  shares when the notes were  collected
    in full by February 25, 2000 (originally due by March 31, 2001).

Note 10 Commitments and Contingencies

    Future annual minimum lease payments under noncancelable operating leases as
of December 31, 1999 were:

                                 Year
                             ------------
                                 2000        $ 195,900
                                 2001          200,112
                                 2002          204,336
                                             ---------
                                             $ 600,348
                                             =========

    Rent expense totaled $42,077 in 1999.

    The Company is also involved in the following legal matter as follows:

    Gregory K. Martin v. NetAmerica., Inc. et al. In the spring of 1999, Gregory
    K.  Martin,  a former  officer  of both  NetAmerica  (Seattle)(NAI)  and the
    Company,  brought suit against the Company and others in the Superior  Court
    of Washington (Civil Action No. 99-2-09171-OSEA). The suit related to, among
    other  things,  Mr.  Martin's  claims for  compensation,  reimbursement  for
    business  expenses,  certain  insurance  benefits,  payment of certain other
    obligations  guaranteed by Mr. Martin (or  reimbursement of payments made by
    him as guarantor), payment of certain tax and other obligations of a company
    referred  to as  SRG/Quantum  that were  purportedly  assumed by NAI and the
    Company,  issuance  of options to  purchase  stock of the  Company and other
    remedies relating to the terminated acquisition and other transactions.  The
    suit was conditionally  settled by an agreement dated May 22, 1999 among NAI
    (referred  to therein as "A1"),  the Company and Mr.  Martin  (with  William
    Fritts undertaking certain limited obligations). Pursuant to that agreement,
    Mr.  Martin took a voluntary  non-suit,  i.e.,  dismissed  his suit  without
    prejudice. Mr. Martin may have the ability to attempt to void the settlement
    pursuant  to  noncompliance  on  the  part  of  NAI  to  their  part  of the
    settlement.  As of December 31, 1999,  the Company has  fulfilled all of its
    current obligations under the settlement agreement.

Note 11 Options/Warrants for Purchase of Common Stock

    Stock Option Plans - Shareholders approved the 1999 RateXchange  Corporation
    Stock  Option Plan  during 1999 (1999  Plan).  There are  3,000,000  options
    available  under  the  plan  that may be  granted  to  employees,  officers,
    directors and consultants. The option plan allows grantees to acquire shares
    of the Companys'  common stock at a purchase  price  generally  equal to the
    fair market value on the date of grant.  Options generally expire five years
    from date of grant.


                                      F-17


    Separate  from the 1999  Plan the  Company  has also  issued  warrants  that
    generally expire five years from the date of grant.

    A summary of warrant and option activity follows:

                           Warrants:                           1999                              1998
                -----------------------------    --------------------------------  ---------------------------------
                                                    Number of   Weighted average      Number of   Weighted average
                                                     shares      exercise price        shares      exercise price
                                                 ------------- ------------------  ------------- -------------------
                                                                                              
                Outstanding at beginning of
                year                                 100,000          $ 2.00                --           $  --

                Granted                              525,000            1.69           100,000            2.00
                Exercised                                 --              --                --              --
                Canceled                                  --              --                --              --
                                                     -------           -----            ------          ------

                Outstanding at end of year           625,000            1.74           100,000            2.00
                                                     =======          ======           =======          ======

                Exercisable at end of year           625,000            1.74           100,000            2.00
                                                     =======          ======           =======          ======



                           Options:                            1999                              1998
                -----------------------------    --------------------------------  ---------------------------------
                                                    Number of   Weighted average      Number of   Weighted average
                                                     shares      exercise price        shares      exercise price
                                                 ------------- ------------------  ------------- -------------------
                Outstanding at beginning of
                year                                      --          $   --                --             $--

                Granted                            3,050,000            2.24                --              --
                Exercised                                 --             --                 --              --
                Canceled                              60,000            2.50                --              --
                                                   ---------          ------                --             ---

                Outstanding at end of year         2,990,000            2.23                --              --
                                                   =========          ======               ===             ===

                Exercisable at end of year         1,287,500            1.96                --              --
                                                   =========          ======               ===             ===


    As  permitted  by  Financial  Accounting  Standard  No.123  "Accounting  for
    Stock-Based  Compensation," the Company has elected to account for its stock
    option  plan under APB No.25  "Accounting  for Stock  Issued to  Employees."
    Accordingly,  no compensation  cost has been recognized for these plans when
    options were issued with  exercise  prices equal to or greater than the fair
    market value of the Company's stock on the date of grant.

    Had compensation cost for the stock option plan been determined based on the
    fair value at the grant date consistent  with FAS No.123,  the Company's net
    earnings and earnings per share are estimated as follows:

                                                         1999          1998
                                                    -------------  ------------
    Net loss

             As reported                            $ (9,298,789)  $(3,144,522)
             Pro Forma                              $(11,085,439)  $(3,144,522)

    Net loss per share (basic and diluted)
             As reported                                   (0.72)        (1.92)
             Pro forma                                     (0.86)        (1.92)

    The weighted  average fair value of options and warrants granted in 1999 was
    $0.73 and $1.04. The weighted average fair value of warrants granted in 1998
    was  $0.74.  Each  option  grant was  valued at the date of grant  using the
    Black-Scholes  option-pricing  model  with the  following  weighted  average
    assumptions:

                                                           1999

             Risk-free interest rate                       5.7%
             Dividend yield                                  0%
             Volatility                                    100%
             Average expected term (years)                   2

    Options and warrants issued to third party service  providers under the 1999
    plan or by  resolution  of the Board of  Directors  as of December  31, 1999
    were:


                                      F-18




                                                         Outstanding                      Exercisable
                                             ----------------------------------- ----------------------------
                                                                      Weighted
                                                         Weighted      Average                     Weighted
                                                          Average     Remaining                     Average
          Range of                            Warrant/   Exercise    Contractual    Warrants/      Exercise
       exercise prices                         Options     Price    Life (years)     Options         Price
    ------------------------                ---------------------  ------------ -------------  -------------

                                                                                     
        $ .05 - $ .99                         275,000     $  .10        4.06         275,000        $ 0.10
        $1.00 - $1.99                         530,000     $ 1.55        4.17         325,000        $ 1.52
        $2.00 - $2.75                         850,000     $ 2.64        4.62         650,000        $ 2.61
                                            ---------                              ---------
                                            1,655,000                              1,250,000
                                            =========                              =========


    Employee stock options outstanding and exercisable under the 1999 plan as of
December 31, 1999 were:

                                                       Outstanding                      Exercisable
                                            ----------------------------------- ----------------------------
                                                                      Weighted
                                                         Weighted      Average                     Weighted
                                                          Average     Remaining                     Average
          Range of                            Warrant/   Exercise    Contractual    Warrants/      Exercise
       exercise prices                         Options     Price    Life (years)     Options         Price
    ------------------------                ---------------------  ------------ -------------  -------------
                                                                                     
        $ .05 - $ .99                            --           --          --             --             --
        $1.00 - $1.99                            --           --          --             --             --
        $2.00 - $2.75                       1,960,000     $ 2.38        4.65         662,500        $ 2.10
                                            ---------                              ---------
                                            1,960,000                                662,500
                                            =========                              =========

    Certain  options and  warrants  were  issued  during 1999 for less than fair
    market value or for services rendered by non-employees for which the Company
    recognized related expense of $2,327,350.

Note 12 Short Term Debt

    The Company  issued a note for $450,000  for the purchase of Rate  Exchange,
    Inc (Note 6). The note carried an interest  rate of 6%. The note was paid in
    January 2000.

    During  December  1999,  RateXchange  I Inc received  $435,000 in short-term
    loans in connection  with a $2,000,000  bridge loan  agreement  reached with
    various  investors.  The  remaining  $1,565,000  was received in January and
    February 2000. The $2 million of bridge loans were used as interim financing
    of RateXchange I Inc. activities. The loans bore interest at 10% and were to
    mature six months from the completion of the funding of the loan  (completed
    February 2000).  The notes were  convertible into RateXchange I, Inc. common
    stock at a price per share to be  determined  in an  anticipated  subsequent
    financing of RateXchange I.  Purchasers of the notes also received  warrants
    to  purchase  RateXchange  I common  stock at $2.40 per  share,  subject  to
    adjustment.

    Subsequent  to December  31,1999,  as a result of the company's new business
    strategy, the company offered to the investors in the $2 million bridge loan
    the right to convert their notes into RateXchange  Corporation  common stock
    at an exchange rate of $5.00 per share.  In addition,  the Company agreed to
    issue such holders an aggregate of 500,000 warrants to purchase common stock
    at $5.00 per share.  Any note holders who declined  this offer were entitled
    to rescind their  original  investment  and receive their  principal back in
    full,  including  accrued  interest.  As a result of this  offer all  notes,
    except  $25,000,  were  converted to new shares of  RateXchange  Corporation
    common stock.

Note 13 Investment in Affiliate

    During  1999,  the  Company  created a wholly  owned  subsidiary,  Telenisus
    Corporation,  a Delaware corporation,  for the purpose of providing internet
    services to small to mid-sized corporations and  telecommunications  service
    providers.  The Company funded the initial  capital of Telenisus of $75,000.
    It  subsequently  loaned  Telenisus  additional  funds to start  operations.
    Telenisus has funded  operations  from its own equity and debt financing and
    has paid back the Company all loans except for the initial capitalization of
    $75,000.  As of  December  31,  1999,  as a  result  of  Telenisus'  sale of
    additional shares to new investors,  the Company's interest in Telenisus had
    dropped  to less  than  5%  ownership  and  the  Company  is  recording  its
    investment in Telenisus at cost.


                                      F-19


Note 14 Related Party Transactions

    During 1998,  the Company  entered into a consulting  contract  with a major
    shareholder  that pays a monthly  consulting fee plus an incentive bonus for
    1) any  successful  acquisition  of business  enterprises,  or 2) successful
    capital funding of a least  $5,000,000 in 1998 or 1999. The incentive awards
    are $250,000 in cash, warrants to purchase 250,000 shares of common stock at
    $1.00, and a mergers and acquisition fee for any acquisition  during 1998 or
    1999. At December 31, 1999, the Company accrued  $315,800 in cash incentives
    relating to completed  financing and mergers and  acquisitions  fee based on
    the value of the RateXchange acquisition.

Note 15 Minority Interest

    During  1999,  the  Company  issued  10% of the  outstanding  shares  of its
    subsidiary,  RateXchange to the chief executive officer of RateXchange as an
    incentive  for  employment.  The shares were issued at fair value based upon
    the value of RateXchange at the time of its acquisition.

Note 16 Subsequent Events

    In March 2000,  the Company  completed a private  placement in which it sold
    2,733,329 shares of restricted  common stock at a subscription  price of $12
    per share plus warrants to purchase  1,366,673 shares of its common stock at
    an  exercise  price of  $14.40  per  share.  The  warrants  are  immediately
    exercisable and expire in three years. After deducting  $2,665,000 for costs
    associated with the offering, the Company received $30,135,000.

    In 1999,  RateXchange  entered into a term sheet  agreement with a vendor to
    provide  specialized  consulting  and  computer  programming  to  assist  in
    RateXchange's  business  plans and  operations  in the  business-to-business
    e-commerce niche it was developing.  The term sheet was never finalized into
    a formal  agreement,  but some  services  were  provided,  and certain  cash
    payments were made for the services that were rendered.  The term sheet also
    provided for the vendor to receive a stock  position in RateXchange of up to
    10% for certain  services.  In early 2000 the Company began discussions with
    the vendor  concerning  the 10% stock  position in  RateXchange  because the
    formal agreement was never completed and the contemplated  services were not
    fully provided.  The ultimate outcome of these  discussions was uncertain at
    that time. In August 2000,  the Company  reached an agreement for settlement
    of the dispute with the vendor,  whereby the Company issued 175,000  shares,
    175,000  warrants and $100,000 in cash. The total value of the settlement of
    $1.8 million is recorded in the Company's 2000 financial statements.

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

    Shareholders authorized the 1999 Stock Option Plan during 1999. Shareholders
    authorized  the 2000 Stock Option Plan on April 20, 2000.  There are options
    to purchase  8,000,000  shares  authorized for issuance under both plans. On
    February  24,  2000,  the Board  authorized  additional  options to purchase
    4,290,000  shares outside of either plan. Total options granted to employees
    during  the  first  quarter  of 2000 for less than fair  market  value  were
    3,940,000 for which the Company is recognizing related compensation expense,
    over the option vesting periods, for the fair value of the stock on the date
    of grant, which was $12, and the strike price of the options, which is $7.

    In 2000,  the Company has also granted  options to purchase  275,000  common
    shares  to  non-employee  consultants  for which the  Company  has  recorded
    related expense of $2,131,250.

    In  October  2000,  the Board of  Directors  approved  and  issued 2 million
    options to the Company's  new Chief  Executive  Officer.  These options were
    granted with a strike price equal to the fair value of the  Company's  stock
    on the date of grant and vest over various periods.


                                      F-20


    On September 17, 2000, the Company  entered into an alliance  agreement with
    Amerex  Bandwidth,  Ltd. Under this  agreement,  Amerex brokers will execute
    trades  for  the  sales  or   purchase  of   Internet   protocol   products,
    telecommunications capacity and/or other telecommunications-related products
    over the Company's  electronic  trading system and the company will share in
    the revenues  generated by the electronic trading system. In connection with
    this agreement,  the company issued to Amerex five warrants for an aggregate
    of 2,300,000 shares of our common stock. One warrant for 300,000 shares with
    an exercise price of $4.47 per share is currently exercisable by Amerex. The
    remaining four warrants each for 500,000 shares and with exercise  prices of
    $4.47 per share,  $4.70 per share, $4.92 per share and $5.37 per share, will
    become  exercisable  upon  the  earlier  of  September  17,  2005 or  Amerex
    executing a minimum of $1,000,000,  $3,000,000,  $5,000,000 and $10,000,000,
    in value  of  transactions  over the  company's  online  electronic  trading
    system.


                                      F-21



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


                                                                                 September 30,
                                                                                     2000        December 31,
                                                                                  (unaudited)       1999
                                                                                 ------------    ------------
                                                                                           
ASSETS

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

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

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

Liabilities and Stockholders' Equity

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


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

See notes to financial statements.



                                                F-22



                    RATEXCHANGE CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

                                                                   Beginning of
                                                                    Development
                                                                       Stage
                                                                    (September
                                                                     30,1998)
                                                                     through
                                   Nine Months ended September 30, September 30,
                                   ------------------------------- -------------
                                       2000              1999         2000
                                   ---------------  -------------- -------------
                                                          
REVENUE
Trading and consulting             $     57,255    $       --      $     57,255

EXPENSES
Selling, general and
     Administrative
     (Includes non-cash
     expenses of $20,057,365
     and $2,539,315)                  5,173,829      43,723,721      34,071,021
Write off advances to potential
     Investee                              --           114,938       1,298,681
Depreciation and amortization           164,262          23,402         182,938
Cost of acquiring subsidiary               --              --         1,597,118
                                   ------------    ------------    ------------
   Total Expenses                    34,235,283       5,312,169      46,802,458

Other Income (Expense)

Interest income                         604,561          94,590         758,271
Interest expense
     (Includes non-cash expenses
     of $1,801,775 and $0)           (1,882,706)        (10,521)     (1,912,552)
Other expenses (net)
     (Includes non-cash expenses
     of  $1,722,875 and $0)
                                     (1,822,875)           --        (1,822,875)
                                   ------------    ------------    ------------
Loss before taxes                   (37,279,048)     (5,228,100)    (49,722,359)

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

NET LOSS                           $(37,279,048)   $ (5,228,100)   $(49,722,359)
                                   ============    ============    ============

Basic and diluted net loss per
     Share                         $      (2.28)   $      (0.46)
Weighted average number of
     shares of common stock          16,334,695      11,326,388


See notes to financial statements.



                                      F-23



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

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

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

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


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

        CASH AND CASH EQUIVALENTS
        BEGINNING OF PERIOD                                              536,615         528,516
                                                                    ------------    ------------    ------------
        CASH AND CASH EQUIVALENTS END OF PERIOD                     $  4,924,064    $    154,684    $  4,924,064
                                                                    ============    ============    ============

See notes to financial statements



                                                       F-24


                    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  for interim  financial
    statements.  These  statements  should  be  read  in  conjunction  with  the
    financial statements and notes thereto for the year ended December 31, 1999.
    The accompanying  financial statements have not been audited. The results of
    operations  and cash flows for the nine months ended  September 30, 2000 may
    not be  indicative  of the results  that may be expected for the year ending
    December 31, 2000.

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

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

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

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

NOTE 2  CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

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

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


                                      F-25


NOTE 3  PRIVATE PLACEMENT

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

NOTE 4  REVENUE RECOGNITION

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

NOTE 5  LOSS PER SHARE AND AVERAGE SHARES OUTSTANDING

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

NOTE 6  COMMITMENTS AND CONTINGENCIES

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

    The Company is involved in the following lawsuit:

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

NOTE 7  OPTIONS AND WARRANTS FOR PURCHASE OF COMMON STOCK

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

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


                                      F-26


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

NOTE 8  SHORT TERM DEBT

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

NOTE 9  COMPREHENSIVE LOSS

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

                                                         Nine Months Ended
                                                           September 30
                                                    --------------------------
                                                        2000          1999
                                                    ------------   -----------
Net loss                                            $(37,279,048)  $(5,228,100)
Other Comprehensive Income:
Unrealized gains (losses) on investments                (117,965)           --
                                                    ------------   -----------
Comprehensive loss                                  $(37,397,013)  $(5,228,100)
                                                    ============   ===========



                                      F-27




====================================================================================================================================
                                                                                    
We have not authorized  any dealer,  salesperson or other person
to give any  information or represent  anything not contained in
this   prospectus.   You  must  not  rely  on  any  unauthorized
information.  This  prospectus does not offer to sell or buy any
shares in any jurisdiction where it is unlawful. The information
in this prospectus is current only as of its date.

                      TABLE OF CONTENTS                                                  4,934,162 Shares
                                                            Page                          of Common Stock
                                                            ----
PROSPECTUS SUMMARY............................................2
RISK FACTORS..................................................3
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
 STATEMENTS...................................................9
USE OF PROCEEDS...............................................9
SELLING STOCKHOLDERS..........................................9
PLAN OF DISTRIBUTION.........................................14                        RateXchange Corporation
DESCRIPTION OF CAPITAL STOCK.................................15
BUSINESS.....................................................16
PROPERTIES...................................................24
LEGAL PROCEEDINGS............................................24
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                                         ------------------
 STOCKHOLDER MATTERS.........................................25
SELECTED CONSOLIDATED FINANCIAL DATA.........................26                               PROSPECTUS
SUPPLEMENTARY FINANCIAL INFORMATION..........................26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF                                                   ------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................28
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
 RISK........................................................32
MANAGEMENT...................................................32
EXECUTIVE COMPENSATION.......................................36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION..42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 AND MANAGEMENT..............................................43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............45
ABOUT THIS PROSPECTUS........................................46
WHERE YOU CAN FIND MORE INFORMATION..........................46
LEGAL MATTERS................................................46
EXPERTS......................................................46



====================================================================================================================================






                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.  Other Expenses of Issuance and Distribution

    The  following  table  sets  forth the costs and  expenses  payable by us in
connection  with  the sale of  securities  being  registered.  All  amounts  are
estimated except the SEC registration fee.

                       SEC registration fee.........    $ 11,371
                       Legal fees and expenses......    $ 75,000
                       Printing fee.................    $  5,000
                       Accounting fees and expenses.    $  5,000
                       Transfer agent fees and          $    200
                       expenses.....................
                       Miscellaneous................    $  1,500
                                                        --------
                       Total........................    $ 98,071

Item 14.  Indemnification of Directors and Officers

    Delaware General Corporation Law Section 145 provides for indemnification of
directors   and   officers   in  terms   sufficiently   broad  to  permit   such
indemnification,   under  certain  circumstances,   for  liabilities  (including
reimbursement  for expenses  incurred) arising under the Securities Act of 1933.
In addition,  Delaware law provides that a corporation may purchase and maintain
insurance on behalf of an officer or director against liability  incurred by the
officer or director as an officer or director.

    Our  Certificate of  Incorporation  and Bylaws require that we indemnify our
directors and officers to the fullest  extent  allowed  under  Delaware law. Our
Bylaws also provide that we may purchase and maintain insurance on behalf of our
officers and directors  against any liability  asserted against them as officers
and directors.  Currently,  we carry directors and officers liability insurance,
which may  insure  against  officer  or  director  liability  arising  under the
Securities Act.

    Insofar as  indemnification  for liabilities under the Securities Act may be
permitted  to  directors,  officers  or persons  controlling  us pursuant to the
foregoing provisions, we have been informed that in the opinion of the SEC, such
indemnification  is against public policy as expressed in the Securities Act and
is therefore unenforceable.

Item 15. Recent Sales of Unregistered Securities

    UNREGISTERED EQUITY SECURITIES SOLD WITHIN THE PAST THREE YEARS

    o    In September 1998, we exchanged  2,400,000  shares of our common stock,
         valued at $2,400,  for all  outstanding  shares of  PolarCap,  Inc.  We
         issued these shares to  accredited  investors in reliance  upon Section
         4(2) of the Securities Act.

    o    In October  1998,  we exchanged  1,000,000  shares of our common stock,
         valued at $1,000,  for services  provided by several  employees  and/or
         consultants who were also accredited investors.  We issued these shares
         in  reliance  upon  Section  4(2) of the  Securities  Act if  1933,  as
         amended.

    o    From September through December 1998, we issued 1,399,773 shares of our
         common stock to various  accredited  investors in exchange for $474,699
         in notes previously issued by us and held by these investors. We issued
         these shares in reliance upon Section 4(2) of the Securities Act.

    o    In December  1998,  we  exchanged  87,000  shares of our common  stock,
         valued  at  $87,000,   for  services   provided  by  employees   and/or
         consultants who were also accredited investors.  We issued these shares
         in reliance upon Section 4(2) of the Securities Act.

    o    In December  1998,  we issued  1,050,000  shares of our common stock to
         various  related  parties in exchange for $300,000 in notes  previously
         issued by us and held by these parties.  Because these related  parties
         were  accredited  investors,  we issued these  shares in reliance  upon
         Section 4(2) of the Securities Act.

    o    In January 1999, we issued to certain related parties 916,574 shares of
         our  common  stock for  $91,657  in  notes.  We  issued  the  shares to
         accredited  investors in reliance  upon Section 4(2) of the  Securities
         Act.

    o    In January 1999, we issued to certain service  providers 322,500 shares
         of our common  stock for cost  reimbursement.  The costs were valued at
         $32,250. We issued the shares to accredited  investors in reliance upon
         Section 4(2) of the Securities Act.


                                      II-1


    o    In a private placement  conducted between November 1998 and March 1999,
         we issued to certain private placement  investors and related parties a
         total of  758,438  shares of our  common  stock for cash and  3,112,500
         shares of common  stock for  notes at an  effective  purchase  price of
         $1.07 per share  ($4,048,100  net).  We issued the shares to accredited
         investors in reliance upon Section 4(2) of the Securities Act.

    o    In March 1999, we issued to certain services  providers  268,500 shares
         of our common stock for services. The services were valued at $287,233.
         We issued the shares to  accredited  investors in reliance upon Section
         4(2) of the Securities Act.

    o    Between  March and May 1999, we issued to A1 Internet,  Inc.  creditors
         193,186 shares of our common stock to settle and discharge  obligations
         owed by A1 Internet to creditors.  These obligations  totaled $216,879.
         We issued the shares to  accredited  investors in reliance upon Section
         4(2) of the Securities Act.

    o    In March 1999, we issued to certain service  providers 30,000 shares of
         our common stock for services  valued at $32,000.  We issued the shares
         to accredited investors in reliance upon Section 4(2) of the Securities
         Act.

    o    In March 1999, we issued to certain services providers 30,000 shares of
         our  common  stock for  $30,000  in  notes.  We  issued  the  shares to
         accredited  investors in reliance  upon Section 4(2) of the  Securities
         Act.

    o    In a private  placement  conducted between May and June 1999, we issued
         to certain private placement investors a total of 515,188 shares of our
         common stock for cash at a price of $1.60 per share  ($628,272 net). We
         issued an additional  122,518 shares (valued at $196,029) of our common
         stock as commissions in this private placement. We issued the shares to
         accredited  investors in reliance  upon Section 4(2) of the  Securities
         Act.

    o    On July 6, 1999, we issued 574,998 shares  ($920,000  aggregate) of our
         common stock to the  stockholders  of Rate  Exchange I, Inc. to acquire
         all of the  outstanding  stock of Rate  Exchange,  Inc.  We issued  the
         shares to  accredited  investors  in reliance  upon Section 4(2) of the
         Securities Act.

    o    Between  December 1998 and November  1999, we granted to our employees,
         officers,  directors,  consultants  and  advisors a total of  2,990,000
         options and 625,000  warrants to purchase shares of our common stock at
         exercise prices ranging from $.05 to $2.75. We issued the securities in
         reliance  upon  Rule  506  of  Regulation  D and  Section  4(2)  of the
         Securities Act.

    o    In February 2000, we issued  198,898  shares of our  restricted  common
         stock to certain  warrant holders upon such warrant  holders'  cashless
         exercise of certain of our warrants. We issued the shares to accredited
         investors in reliance upon Section 4(2) of the Securities Act.

    o    In February  2000, we granted to our  employees,  officers,  directors,
         consultants and advisors  options to purchase  4,215,000  shares of our
         restricted  common stock at an exercise  price of $7.00 per share.  The
         options are exercisable  pursuant to a vesting schedule and they expire
         on February 24, 2005.  We issued the  securities  in reliance upon Rule
         506 of Regulation D and Section 4(2) of the Securities Act.

    o    Between  February and March 2000, we sold to certain private  placement
         investors 2,733,329 shares of our restricted common stock at a price of
         $12.00 per share plus  warrants  to  purchase  1,366,673  shares of our
         common stock at an exercise price of $14.40 per share. The warrants are
         immediately  exercisable  and expire in three  years.  After  deducting
         $2,665,000   for  expenses   related  to  the  offering,   we  received
         $30,135,000.  We issued  the  securities  to  accredited  investors  in
         reliance upon Rule 506 of Regulation D of the Securities Act.

    o    Between February and March 2000, we issued to various service providers
         additional  warrants to purchase  804,620 shares of our common stock in
         exchange for services.  The exercise  prices of the warrants range from
         $5.00 to $14.40  per share and the  warrants  expire  between  2003 and
         2005. We issued the securities to accredited investors in reliance upon
         Rule 506 of Regulation D and Section 4(2) of the Securities Act.

    o    In April 2000, we issued 116,522 shares of our restricted  common stock
         to certain warrant holders upon such warrant holders' cashless exercise
         of  certain  of our  warrants.  We  issued  the  shares  to  accredited
         investors in reliance upon Section 4(2) of the Securities Act.

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

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


                                      II-2


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

Item 16.  Exhibits

         (a)   The following exhibits are filed herewith:

3.1      Certificate  of  Incorporation,  as  amended  (incorporated  herein  by
         reference  to Exhibit 3.1 to  RateXchange's  Registration  Statement on
         Form S-1 (Reg. No. 333-37004)).


3.2      Amended and Restated Bylaws, as amended.


5.1      Opinion of Hogan & Hartson L.L.P.

5.2      Opinion of Snell & Wilmer L.L.P.  (incorporated by reference to Exhibit
         5.1 to RateXchange's Registration  Statement  on  Form  S-1  (Reg.  No.
         333-37004)).

10.1     Agreement and Plan of Merger  between  RateXchange  and Rate  Exchange,
         Inc.  dated June 1, 1999  (incorporated  herein by reference to Exhibit
         10.1 to  RateXchange's  Form 10-Q for the quarter  ended  September 30,
         1999).

10.2     Acquisition   Agreement   between   RateXchange   and  PolarCap,   Inc.
         (incorporated herein by reference to Exhibit 2.01 to RateXchange's Form
         8-K/A filed on October 8, 1998).

10.3+    Employment  Agreement between RateXchange and Edward Mooney dated April
         1, 1999  (incorporated  by reference  to Exhibit 10.3 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 1999).

10.4     Promissory Note of Edward Mooney dated December 18, 1998  (incorporated
         by reference to Exhibit 10.4 to RateXchange's  Form 10-K/A for the year
         ended December 31, 1999).

10.5+*   Form of Severance Agreement between RateXchange and Edward Mooney.

10.6+    Employment  Agreement between  RateXchange and Douglas Cole dated April
         1, 1999  (incorporated  by reference  to Exhibit 10.4 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 1999).

10.7+*   Form of Severance Agreement between RateXchange and Douglas Cole.

10.8+*   Employment  Agreement between  RateXchange I, Inc. and Donald H. Sledge
         dated September 15, 1999.

10.9+    Amendment  No. 1 to  Employment  Agreement  of Donald H.  Sledge  dated
         October 5, 2000.

10.10+   Employment  Agreement between  RateXchange and Ross Mayfield dated July
         2, 1999  (incorporated  by reference to Exhibit 10.10 to  RateXchange's
         Form 10-K/A for the year ended December 31, 1999).

10.11+   Separation Agreement between RateXchange and Ross Mayfield dated August
         18, 2000  (incorporated  by reference to Exhibit 10.3 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 2000).

10.12+   Employment Agreement between RateXchange and Paul Wescott dated July 5,
         2000  (incorporated by reference to Exhibit 10.4 to RateXchange's  Form
         10-Q for the quarter ended September 30, 2000).

10.13+   Separation  Agreement between RateXchange and Paul Wescott dated August
         28, 2000  (incorporated  by reference to Exhibit 10.5 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 2000).


                                      II-3


10.14+*  Employment Agreement between RateXchange and Philip Rice dated February
         29, 2000.

10.15+*  Employment Agreement between RateXchange and D. Jonathan Merriman dated
         October 5, 2000.

10.16+   1998  Employee/Consultant  Stock Compensation Plan (incorporated herein
         by reference to Exhibit 10.1 to RateXchange's Registration Statement on
         Form S-8 (Reg. No. 333-65729)).

10.17+   1999 Stock Option Plan (incorporated herein by reference to Exhibit 4.1
         to  RateXchange's   Registration   Statement  on  Form  S-8  (Reg.  No.
         333-43776)).

10.18+   Form of  Non-Qualified,  Non-Plan Stock Option Agreement dated February
         24, 2000  between  RateXchange  and  Phillip  Rice,  Nick  Cioll,  Paul
         Wescott,  Ross  Mayfield,  Russ  Matulich,  Terry Ginn,  Donald Sledge,
         Christopher  Vizas,  Douglas Cole,  Ronald Spears and Jonathan Merriman
         (incorporated by reference to Exhibit 4.2 to RateXchange's Registration
         Statement on Forms S-8 (Reg. No. 333-43776).

10.19+*  Schedule of non-plan option grants made under  Non-Qualified,  Non-Plan
         Stock Option Agreements to directors and executive officers.

10.20+*  2000 Stock Option Plan, as amended.

10.21    Advisory  Agreement  between   RateXchange  and  Maroon  Bells  Capital
         Partners,  Inc. dated December 15, 1998  (incorporated  by reference to
         Exhibit 10.12 to RateXchange's  Form 10-K/A for the year ended December
         31, 1999).

10.22    Promissory   Note  of   Theodore   Swindells   dated   March  30,  1999
         (incorporated  by  reference  to Exhibit  10.13 to  RateXchange's  Form
         10-K/A for the year ended December 31, 1999).

10.23    Term Sheet dated July 23, 1999 between RateXchange I, Inc. and Ultimate
         Markets,   Inc.   (incorporated   by  reference  to  Exhibit  10.14  to
         RateXchange's Form 10-K/A for the year ended December 30, 1999)

10.24    Settlement  Agreement  and Full General  Mutual  Release by and between
         RateXchange  and  Ultimate   Markets,   Inc.,  dated  August  28,  2000
         (incorporated by reference to Exhibit 10.6 to  RateXchange's  Form 10-Q
         for the quarter ended September 30, 2000).

10.25    Master Equipment Lease Agreement dated March 16, 2000  (incorporated by
         reference to Exhibit 10.6 to  RateXchange's  Registration  Statement on
         Form S-1 (Reg. No. 333-37004)).

10.26*/**Agreement  between   RateXchange  and  Amerex  Bandwidth,   Ltd.  Dated
         September 17, 2000, including Warrants.

10.27*   Multi Site Colocation  Commitment  Agreement by and between RateXchange
         and COLO.com dated February 17, 2000.

10.28*   Co-location  License  by and  between  RateXchange  and  Switch  & Data
         Facilities Company dated March 1, 2000.

10.29    Facilities  Management  Agreement  between  RateXchange and Telecity UK
         Limited dated July 11, 2000  (incorporated by reference to Exhibit 10.2
         to RateXchange's Form 10-Q for the quarter ended September 30, 2000).

10.30*/**Master   Agreement   between   RateXchange  and  Science   Applications
         International Corporation dated February 2, 2000.

21.1     List of Subsidiaries of RateXchange  (incorporated  herein by reference
         to Exhibit  21.1 to  RateXchange's  Registration  Statement on Form S-1
         (Reg. No. 333-37004)).


                                      II-4


23.1     Consent of Arthur Andersen LLP.

23.2     Consent of Crouch, Beirwolf & Chisholm.

23.3     Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).

23.4     Consent of Snell & Wilmer L.L.P.

24.1*    Power of Attorney.

+   Represents management contract or compensatory plan or arrangement.

*   Previously filed.

**  Certain  confidential  portions  of this  Exhibit  were  omitted by means of
    redacting a portion of the text. This Exhibit has been filed separately with
    the  Secretary  of the  Securities  and  Exchange  Commission  without  such
    redaction  pursuant to our  Application  Requesting  Confidential  Treatment
    under Rule 406 of the Securities Act.

    (b)  Not applicable.

Item 17.  Undertakings.

The undersigned registrant hereby undertakes:

    (1) To file,  during any period in which  offers or sales are being made,  a
post-effective amendment to this registration statement:

        (i) To  include  any  prospectus  required  by Section  10(a)(3)  of the
    Securities  Act of 1933;  (ii) To  reflect  in the  prospectus  any facts or
    events  arising after the effective date of the  registration  statement (or
    the most recent post-effective amendment thereof) which,  individually or in
    the aggregate,  represent a fundamental  change in the information set forth
    in the registration statement.  Notwithstanding the foregoing,  any increase
    or decrease in volume of  securities  offered (if the total  dollar value of
    securities  offered  would not  exceed  that which was  registered)  and any
    deviation from the low or high end of the estimated  maximum  offering range
    may be reflected in the form of  prospectus  filed with the  Securities  and
    Exchange  Commission  pursuant  to Rule  424(b)  if, in the  aggregate,  the
    changes in volume and price  represent  no more than a 20 percent  change in
    the  maximum  aggregate  offering  price  set forth in the  "Calculation  of
    Registration Fee" table in the effective registration statement; and

        (iii) To include any  material  information  with respect to the plan of
    distribution not previously  disclosed in the registration  statement or any
    material change to such information in the registration statement.

    (2) That, for the purpose of determining  any liability under the Securities
Act of 1933,  each  such  post-effective  amendment  shall be deemed to be a new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

    (3) To remove from  registration by means of a post-effective  amendment any
of the securities being registered which remain unsold at the termination of the
offering.

    (4) Insofar as indemnification  for liabilities arising under the Securities
Act of 1933, may be permitted to directors,  officers and controlling persons of
the  registrant  pursuant  to  the  foregoing  provisions,   or  otherwise,  the
registrant  has been advised that in the opinion of the  Securities and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
Securities  Act of 1933 and is,  therefore,  unenforceable.  In the event that a
claim for  indemnification  against such liabilities  (other than the payment by
the  registrant  of  expenses  incurred  or  paid  by  a  director,  officer  or
controlling  person of the registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities being registered,  the registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification  by it is  against  public  policy  as  expressed  in  the
Securities  Act of 1933 and will be governed by the final  adjudication  of such
issue.


                                      II-5


                                   Signatures


    Pursuant to the  requirements  of the Securities Act of 1933, the registrant
has  duly  caused  this  Amendment  No.  1 to be  signed  on its  behalf  by the
undersigned,  thereunto duly authorized, in the City of San Francisco,  State of
California on the 12th day of February, 2001.


                                                  RATEXCHANGE CORPORATION

                                                  By: /s/ D. Jonathan Merriman
                                                     ---------------------------
                                                  D. Jonathan Merriman
                                                  President and Chief Executive
                                                  Officer



    Pursuant to the  requirements  of the Securities Act of 1933, this Amendment
No. 1 has been  signed by the  following  persons  in the  capacities  indicated
below, on the 12th day of February, 2001.

                Signature                                           Title
                                         
/s/ D. Jonathan Merriman                    President, Chief Executive Officer and Director
------------------------------------        (principal executive officer)
D. Jonathan Merriman

             *                              Senior Vice President, Finance and Chief Accounting
------------------------------------        Officer (principal financial and accounting officer)
Michael I. Cairns

             *                              Chairman
------------------------------------
Donald H. Sledge

             *                              Director
------------------------------------
Dean S. Barr

             *                              Director
------------------------------------
Gordon Hutchins, Jr.

             *                              Director
------------------------------------
Ronald E. Spears

                                            Director
------------------------------------
Steven W. Town

                                            Director
------------------------------------
Christopher J. Vizas

* By Attorney-in-Fact

/s/ D. Jonathan Merriman
------------------------------------
D. Jonathan Merriman



                                                           II-6








Exhibit No.                      Exhibit Description
-----------                      -------------------

3.1      Certificate  of  Incorporation,  as  amended  (incorporated  herein  by
         reference  to Exhibit 3.1 to  RateXchange's  Registration  Statement on
         Form S-1 (Reg. No. 333-37004)).


3.2      Amended and Restated Bylaws, as amended.


5.1      Opinion of Hogan & Hartson L.L.P.

5.2      Opinion of Snell & Wilmer L.L.P.  (incorporated by reference to Exhibit
         5.1 to RateXchange's Registration  Statement  on  Form  S-1  (Reg.  No.
         333-37004)).

10.1     Agreement and Plan of Merger  between  RateXchange  and Rate  Exchange,
         Inc.  dated June 1, 1999  (incorporated  herein by reference to Exhibit
         10.1 to  RateXchange's  Form 10-Q for the quarter  ended  September 30,
         1999).

10.2     Acquisition   Agreement   between   RateXchange   and  PolarCap,   Inc.
         (incorporated herein by reference to Exhibit 2.01 to RateXchange's Form
         8-K/A filed on October 8, 1998).

10.3+    Employment  Agreement between RateXchange and Edward Mooney dated April
         1, 1999  (incorporated  by reference  to Exhibit 10.3 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 1999).

10.4     Promissory Note of Edward Mooney dated December 18, 1998  (incorporated
         by reference to Exhibit 10.4 to RateXchange's  Form 10-K/A for the year
         ended December 31, 1999).

10.5+*   Form of Severance Agreement between RateXchange and Edward Mooney.

10.6+    Employment  Agreement between  RateXchange and Douglas Cole dated April
         1, 1999  (incorporated  by reference  to Exhibit 10.4 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 1999).

10.7+*   Form of Severance Agreement between RateXchange and Douglas Cole.

10.8+*   Employment  Agreement between  RateXchange I, Inc. and Donald H. Sledge
         dated September 15, 1999.

10.9+    Amendment  No. 1 to  Employment  Agreement  of Donald H.  Sledge  dated
         October 5, 2000.

10.10+   Employment  Agreement between  RateXchange and Ross Mayfield dated July
         2, 1999  (incorporated  by reference to Exhibit 10.10 to  RateXchange's
         Form 10-K/A for the year ended December 31, 1999).

10.11+   Separation Agreement between RateXchange and Ross Mayfield dated August
         18, 2000  (incorporated  by reference to Exhibit 10.3 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 2000).

10.12+   Employment Agreement between RateXchange and Paul Wescott dated July 5,
         2000  (incorporated by reference to Exhibit 10.4 to RateXchange's  Form
         10-Q for the quarter ended September 30, 2000).

10.13+   Separation  Agreement between RateXchange and Paul Wescott dated August
         28, 2000  (incorporated  by reference to Exhibit 10.5 to  RateXchange's
         Form 10-Q for the quarter ended September 30, 2000).

10.14+*  Employment Agreement between RateXchange and Philip Rice dated February
         29, 2000.

10.15+*  Employment Agreement between RateXchange and D. Jonathan Merriman dated
         October 5, 2000.


                                      II-7


10.16+   1998  Employee/Consultant  Stock Compensation Plan (incorporated herein
         by reference to Exhibit 10.1 to RateXchange's Registration Statement on
         Form S-8 (Reg. No. 333-65729)).

10.17+   1999 Stock Option Plan (incorporated herein by reference to Exhibit 4.1
         to  RateXchange's   Registration   Statement  on  Form  S-8  (Reg.  No.
         333-43776)).

10.18+   Form of  Non-Qualified,  Non-Plan Stock Option Agreement dated February
         24, 2000  between  RateXchange  and  Phillip  Rice,  Nick  Cioll,  Paul
         Wescott,  Ross  Mayfield,  Russ  Matulich,  Terry Ginn,  Donald Sledge,
         Christopher  Vizas,  Douglas Cole,  Ronald Spears and Jonathan Merriman
         (incorporated by reference to Exhibit 4.2 to RateXchange's Registration
         Statement on Forms S-8 (Reg. No. 333-43776).

10.19+*  Schedule of non-plan option grants made under  Non-Qualified,  Non-Plan
         Stock Option Agreements to directors and executive officers.

10.20+*  2000 Stock Option Plan, as amended.

10.21    Advisory  Agreement  between   RateXchange  and  Maroon  Bells  Capital
         Partners,  Inc. dated December 15, 1998  (incorporated  by reference to
         Exhibit 10.12 to RateXchange's  Form 10-K/A for the year ended December
         31, 1999).

10.22    Promissory   Note  of   Theodore   Swindells   dated   March  30,  1999
         (incorporated  by  reference  to Exhibit  10.13 to  RateXchange's  Form
         10-K/A for the year ended December 31, 1999).

10.23    Term Sheet dated July 23, 1999 between RateXchange I, Inc. and Ultimate
         Markets,   Inc.   (incorporated   by  reference  to  Exhibit  10.14  to
         RateXchange's Form 10-K/A for the year ended December 30, 1999)

10.24    Settlement  Agreement  and Full General  Mutual  Release by and between
         RateXchange  and  Ultimate   Markets,   Inc.,  dated  August  28,  2000
         (incorporated by reference to Exhibit 10.6 to  RateXchange's  Form 10-Q
         for the quarter ended September 30, 2000).

10.25    Master Equipment Lease Agreement dated March 16, 2000  (incorporated by
         reference to Exhibit 10.6 to  RateXchange's  Registration  Statement on
         Form S-1 (Reg. No. 333-37004)).

10.26*/**Agreement  between   RateXchange  and  Amerex  Bandwidth,   Ltd.  Dated
         September 17, 2000, including Warrants.

10.27*   Multi Site Colocation  Commitment  Agreement by and between RateXchange
         and COLO.com dated February 17, 2000.

10.28*   Co-location  License  by and  between  RateXchange  and  Switch  & Data
         Facilities Company dated March 1, 2000.

10.29    Facilities  Management  Agreement  between  RateXchange and Telecity UK
         Limited dated July 11, 2000  (incorporated by reference to Exhibit 10.2
         to RateXchange's Form 10-Q for the quarter ended September 30, 2000).

10.30*/**Master   Agreement   between   RateXchange  and  Science   Applications
         International Corporation dated February 2, 2000.

21.1     List of Subsidiaries of RateXchange  (incorporated  herein by reference
         to Exhibit  21.1 to  RateXchange's  Registration  Statement on Form S-1
         (Reg. No. 333-37004)).


23.1     Consent of Arthur Andersen LLP.

23.2     Consent of Crouch, Beirwolf & Chisholm.

23.3     Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).

23.4     Consent of Snell & Wilmer L.L.P.

24.1*    Power of Attorney.


--------
+        Represents management contract or compensatory plan or arrangement.
*        Previously filed.
**       Certain confidential  portions of this Exhibit were omitted by means of
         redacting a portion of the text. This Exhibit has been filed separately
         with the Secretary of the  Securities and Exchange  Commission  without
         such  redaction  pursuant to our  Application  Requesting  Confidential
         Treatment under Rule 406 of the Securities Act.


                                      II-8