Item 1. Interim Condensed Consolidated Financial Statements

MARKETWATCH.COM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                       September 30,   December 31,
                                                           2000           1999
                                                       ------------  ------------
                                                       (unaudited)
                          Assets
Current assets:
  Cash and cash equivalents ..........................     $48,395        $9,500
  Short term investments .............................          --         4,979
  Accounts receivable, net ...........................      13,007         8,073
  Prepaid expenses ...................................       3,732         3,699
                                                       ------------  ------------
          Total current assets .......................      65,134        26,251
Property and equipment, net ..........................      10,358         5,035
Investment in subsidiary .............................       1,346            --
Intangible assets, net ...............................       1,505         2,683
Goodwill, net ........................................      84,717       122,840
Other assets .........................................         100            46
                                                       ------------  ------------
          Total assets ...............................    $163,160      $156,855
                                                       ============  ============

         Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable ...................................      $5,756        $3,948
  Accrued expenses ...................................       5,083         3,415
  Deferred revenue ...................................          58           344
                                                       ------------  ------------
          Total current liabilities ..................      10,897         7,707
                                                       ------------  ------------

Stockholders' equity:
  Common stock .......................................         166           139
  Additional paid-in capital .........................     319,357       231,746
  Deferred compensation ..............................         (42)         (413)
  Contribution receivable ............................     (26,890)       (8,952)
  Accumulated deficit ................................    (140,328)      (73,372)
                                                       ------------  ------------
          Total stockholders' equity .................     152,263       149,148
                                                       ------------  ------------
          Total liabilities and
             stockholders' equity ....................    $163,160      $156,855
                                                       ============  ============

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

MARKETWATCH.COM, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

                                      Three Months Ended     Nine Months Ended

                                           September 30,         September 30,
                                    --------------------- ---------------------
                                       2000       1999       2000       1999
                                    ---------- ---------- ---------- ----------
Net revenues:
  Advertising......................    $8,356     $5,043    $26,277    $11,151
  Licensing........................     4,226      1,767     10,602      3,310
  Other............................       935        155      2,358        470
                                    ---------- ---------- ---------- ----------
       Total net revenues..........    13,517      6,965     39,237     14,931

Cost of revenues...................     5,606      2,734     15,400      6,133
                                    ---------- ---------- ---------- ----------
       Gross profit................     7,911      4,231     23,837      8,798
                                    ---------- ---------- ---------- ----------
Operating expenses:
  Product development..............     2,144      1,645      6,514      3,115
  General and administrative.......     3,853      2,447     10,540      6,222
  Sales and marketing..............     7,137      4,796     21,939     12,384
  CBS advertising..................     1,704      2,711     12,061      9,570
  Purchased in-process
    research and development.......        --         --         --        200
  Amortization of goodwill
    and intangibles................    12,849     12,850     38,549     17,134
                                    ---------- ---------- ---------- ----------
       Total operating expenses....    27,687     24,449     89,603     48,625
                                    ---------- ---------- ---------- ----------
Loss from operations...............   (19,776)   (20,218)   (65,766)   (39,827)
Interest income, net...............       883        222      1,346        949
Equity in loss of joint venture....    (1,416)        --     (2,536)        --
                                    ---------- ---------- ---------- ----------
Net loss...........................  ($20,309)  ($19,996)  ($66,956)  ($38,878)
                                    ========== ========== ========== ==========
Basic and diluted net loss per
  share............................    ($1.23)    ($1.45)    ($4.19)    ($3.07)
                                    ========== ========== ========== ==========
Shares used in the calculation
  of basic and diluted net loss
  per share........................    16,473     13,800     15,992     12,670
                                    ========== ========== ========== ==========

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

MARKETWATCH.COM, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)

                                                           Nine Months Ended
                                                             September 30,
                                                     ------------------------
                                                         2000          1999
                                                     -----------  -----------
Cash flows from operating activities:
  Net loss..........................................   ($66,956)    ($38,878)
  Adjustments to reconcile net loss to net
     cash used in operating activities:
     Equity in loss of joint venture................      2,536           --
     Provision for doubtful accounts................        450           31
     Depreciation and amortization..................     42,552       19,252
     Noncash charges from stockholders..............     12,061        9,570
     Changes in operating assets and liabilities:
       Accounts receivable..........................     (5,384)      (2,861)
       Prepaid expenses and other assets............        (87)      (4,384)
       Accounts payable and accrued expenses........      3,476        2,544
       Deferred revenue.............................       (286)         111
                                                     -----------  -----------
        Net cash used in operating activities.......    (11,638)     (14,615)
                                                     -----------  -----------
Cash flows from investing activities:
  Purchase of short term investments.................        --      (13,762)
  Sale of short term investments....................      4,979        8,500
  Acquisition of business, net of cash acquired......        --       (7,476)
  Purchase of property and equipment................     (8,202)      (2,715)
  Investment in joint venture.......................     (3,882)          --
                                                     -----------  -----------
        Net cash used in investing activities.......     (7,105)     (15,453)
                                                     -----------  -----------
Cash flows from financing activities:
  Issuance of common stock..........................      1,638       48,164
  Advances from DBC.................................         --       (3,946)
  Contributions from CBS and DBC.....................    56,000           --
                                                     -----------  -----------
        Net cash provided by financing activities...     57,638       44,218
                                                     -----------  -----------
Net change in cash..................................     38,895       14,150
Cash and cash equivalents at beginning of period....      9,500          140
                                                     -----------  -----------
Cash and cash equivalents at end of period..........    $48,395      $14,290
                                                     ===========  ===========

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

Note 1 - Organization and Nature of Business

The interim financial data as of September 30, 2000 and for the three and nine months ended September 30, 2000 and 1999 is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10- K for the year ended December 31, 1999. Additionally, certain items previously reported in specific financial statement captions have been reclassified to conform with the current presentation.

MarketWatch.com, Inc. (the "Company"), a leading Web-based provider of comprehensive, real-time business news, financial programming and analytic tools, was formed on October 29, 1997 in the state of Delaware as a limited liability company and was jointly owned by Data Broadcasting Corporation ("DBC") and CBS Broadcasting Inc. ("CBS") (collectively, the "Members"), with each Member owning a 50% interest in the Company. In February 2000, DBC completed a merger with the specialist asset valuation business, or the FTAM, of the Financial Times Group, which is a part of Pearson, plc. Upon the closing of the merger, the Financial Times Group transferred the FTAM to DBC in exchange for approximately 60% of the outstanding common stock of DBC.

Effective June 9, 1999, the Company completed its acquisition of BigCharts.com, Inc. ("BigCharts"), a Minnesota corporation, in a merger transaction for $6.0 million in cash, $110.9 million worth of MarketWatch.com common stock, and $38.6 million worth of options to purchase MarketWatch.com common stock which are issuable upon exercise of options to purchase BigCharts common stock assumed in the merger.

On January 6, 2000, the Company entered into a joint venture agreement with the Financial Times Group to establish Financial Times Marketwatch.com (Europe) Limited, an internet provider of real-time business news, financial programming and analytical tools. Under the agreement, the Company licenses its trademark and technology to the joint venture, contributes certain domain names and 500,000 pounds sterling in exchange for 500,000 shares of the joint venture. The Financial Times contributes trademarks for a royalty fee, provides 15.0 million pounds sterling worth of rate card advertising over five years and 500,000 pounds sterling in cash for 500,000 shares in the joint venture. Each company owns a 50% interest in the joint venture. The joint venture is accounted for using the equity method of accounting. In July 2000, the joint venture agreement was amended and the Company's ownership in the joint venture decreased from 50% to 40%.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. In June 2000, the SEC issued SAB No. 101B to defer the effective date of implementation of SAB No. 101 until the fourth quarter of fiscal 2000. The Company does not expect the adoption of SAB 101 to have a material effect on its financial position or results of operations.

In April 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation", an interpretation of APB Opinion No. 25 ("FIN 44"). Among other issues, FIN 44 clarifies (a) the definition of employee for purposes of applying Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is generally effective July 1, 2000. The Company has reviewed stock grants to determine the impact, if any, that may arise from implementation of FIN 44, and management does not expect the impact, if any, to be material to the financial statements.

Basic net loss per share is computed using the weighted average number of shares of common stock. Diluted net loss per share is computed using the weighted average number of shares of common stock and common equivalent shares outstanding during the period. Common equivalent shares consist of stock options (using the treasury stock method). Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

Options to purchase 2,417,097 and 1,691,557 shares of common stock were outstanding at September 30, 2000 and 1999, respectively, but were not included in the computation of diluted net loss per share because inclusion of such options would have been anti-dilutive.

On July 12, 2000, the Company's Board of Directors approved the adoption of the Employee Stock Purchase Plan and reserved 500,000 shares for issuance under the plan. In addition, on each January 1, the aggregate number of shares of the Company's Common Stock reserved for issuance under the Plan shall be increased automatically by a number of shares purchased under the Plan in the preceding calendar year; provided that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year.

Note 5 - Related Party Transactions

Under its license agreement with CBS, the Company expensed $593,000 and $418,000 for the three months ended September 30, 2000 and 1999, respectively, and $2.5 million and $798,000 for the nine months ended September 30, 2000 and 1999, respectively, related to licensing of CBS news content and trademarks. In addition, the Company has recorded advertising expenses of $1.7 million and $2.7 million at rate card value for the three months ended September 30, 2000 and 1999, respectively, and $12.1 million and $9.6 million for the nine months ended September 30, 2000 and 1999, respectively, for advertising and promotion provided by CBS. Rental payments to CBS for leasing of certain facilities were $176,000 and $79,000 for the three months ended September 30, 2000 and 1999, respectively,and $482,000 and $237,000 for the nine months ended September 30, 2000 and 1999, respectively. Included in accounts receivable at September 30, 2000 is $1.2 million owed to the Company by CBS.

Licensing revenues from DBC were $491,000 and $413,000 for the three months ended September 30, 2000 and 1999, respectively, and $1.5 million and $1.2 million for the nine months ended September 30, 2000 and 1999, respectively. In addition, the Company recognized revenue of $515,000 and $1.5 million for the three and nine months ended September 30, 2000, respectively, from television programming on CBS stations, and costs to CBS of $363,000 and $1.6 million for the three and nine months ended September 30, 2000, respectively, for production of the television programming.

DBC purchased $88,000 and $125,000 for the three months ended September 30, 2000 and 1999, respectively, and $208,000 and $390,000 for the nine months ended September 30, 2000 and 1999 respectively, of advertising under an insertion order. Included in accounts receivable at September 30, 2000 is $281,000 owed to the Company by DBC.

Direct charges for subscription revenues for certain DBC data feeds were $63,000 and $58,000 for the three month periods ended September 30, 2000 and 1999, respectively, and $233,000 and $171,000 for the nine months ended September 30, 2000 and 1999, respectively. Under the terms of the Amended and Restated Services Agreement, DBC agreed to provide the Company with certain general services including accounting, network operations, hosting of the Company's Web pages and data feeds. Allocated charges for these services totaled $175,000 and $455,000 for the three months ended September 30, 2000 and 1999, respectively, and $560,000 and $1.1 million for the nine months ended September 30, 2000 and 1999, respectively.

An executive of the Company is also a member of the Board of Directors of a customer. For the three and nine months ended September 30, 2000, $50,000 and $180,000, respectively, of advertising revenues were attributable to this customer.

On May 5, 2000, the Company issued 1,136,814 shares of the Company's common stock to each of DBC for $43.0 million in cash and the same number of shares to CBS for $13.0 million in cash and $30.0 million in rate card advertising and promotion over the next two years.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We completed our initial public offering in January 1999. Prior to the offering, we were a joint venture owned 50% each by DBC and CBS, and were formed as a limited liability company or LLC, in October 1997. We were formed as the successor to DBC's Online/News Business, which commenced operations in October 1995. When this joint venture was formed, CBS and DBC agreed that their contributions would be treated as having equal value. Immediately prior to the closing of our initial public offering, we were re-organized from a limited liability company into a corporation.

Since our formation as an LLC, we have operated as a provider of business news, financial programming and analytic tools, with services including news articles, feature columns and analytic tools, such as stock quotes and charting. These services are available free of charge. We sell advertising banners and sponsorships on our Web sites, license our content and tools, and sell subscriptions to certain DBC products. In addition, with the acquisition of BigCharts in September 1999, we are the leading provider of licensed online financial charting content to electronic brokers, financial publishers and portals.

We have several agreements with CBS and DBC that include the following:

• Upon formation of MarketWatch.com into a corporation, CBS agreed to contribute $30.0 million in rate card advertising through October 2002. The $30.0 million contribution was delivered in full by the end of the quarter ended June 30, 2000;
• CBS licenses its trademark and certain news content for royalties approximating 8% of all of our net revenues other than revenue attributable to DBC and certain other revenue. The license agreement expires in October 2005;
• DBC provides us with part of our Web site infrastructure and certain operational and administrative services at DBC's cost. DBC's service obligation expires on October 29, 2005. In addition, DBC pays us a monthly, per subscriber fee for delivery of our news to DBC subscribers, subject to a minimum payment of $100,000 per month. This obligation will expire in October 2002; and
• In May 2000, CBS contributed an additional $30.0 million in rate card advertising and promotion to be delivered between March 1, 2000 and May 5, 2002. CBS has delivered $3.1 million of the additional $30.0 million in advertising as of September 30, 2000.

On January 6, 2000, we entered into a joint venture agreement with the Financial Times Group to establish Financial Times Marketwatch.com (Europe) Limited, an Internet-based provider of real-time business news, financial programming and analytical tools. Our joint venture, FT.MarketWatch.com, provides free, real-time financial and market news to Europe's rapidly growing communities of individual investors. Under the agreement, we licensed our trademark and technology to the joint venture and contributed certain domain names and 500,000 pounds sterling in exchange for 500,000 shares of the joint venture. The Financial Times licensed its trademarks for a royalty fee, will provide 15.0 million pounds sterling worth of rate card advertising over five years and contributed 500,000 pounds sterling in cash for 500,000 shares in the joint venture. In July 2000, we contributed an additional $3.1 million to the joint venture to fund operations in accordance with the agreement, and our ownership percentage was decreased from 50% to 40%, although control over the joint venture operations remained equal between us and the Financial Times Group. In October, 2000 we contributed an additional $1.1 million to the joint venture to fund operations in accordance with the agreement.

Our revenue has grown during the year 2000 and our ability to generate significant revenue in the future is uncertain. Further, in view of the rapidly evolving nature of our business and our very limited operating history, we have little experience forecasting our revenues. Therefore, we believe that period-to-period comparisons of our financial results are not necessarily meaningful and you should not rely upon them as an indication of our future performance. To date, we have incurred substantial costs to create, introduce and enhance our services, to develop content, to build brand awareness and to grow our business. As a result, we have incurred operating losses in each fiscal quarter since we were formed. We expect operating losses and negative cash flows to continue for the foreseeable future as we intend to increase our operating expenses to grow our business. Because of non-cash charges in connection with our acquisition of BigCharts, we also expect to incur net losses. We may also incur additional costs and expenses related to content creation, technology, marketing or acquisitions of businesses and technologies to respond to changes in our rapidly changing industry. These costs could have an adverse effect on our future financial condition or operating results.

Net revenues are derived from the sale of advertising on our Web site, licensing of our content, distribution of television and radio broadcasts, subscription sales from MarketWatch RT and MarketWatch Live, and the sale of news to DBC, CBS and other customers. Net revenues increased by 93% to $13.5 million for the three months ended September 30, 2000 from $7.0 million for the three months ended September 30, 1999 and 163% to $39.2 million for the nine months ended September 30, 2000 from $14.9 million for the nine months ended September 30, 1999. The increases are due primarily to the increase in the number of ads placed on our Web sites, growth of our license revenue related to the acquisition of BigCharts, an increase in new customers, expansion of services to current customers, the launch of television broadcasts, and increased distribution of our radio broadcasts.

The increase in advertising revenues was caused by several interrelated factors, including the following:

• Increased number of advertisers;
• Increased users on our Web sites and resultant page views with advertisements contained on those pages;
• Increased inventory available for sale due to the BigCharts acquisition and the formation of strategic relationships such as Yahoo! and AOL;
• Increased size and productivity of our direct sales force;
• Increased rate card pricing for all ad placements; and
• Increased flexibility and sophistication of advertising packages offered to advertisers.

Substantially all of our advertising customers purchase advertising under short-term contracts. Customers can cease advertising on short notice without penalty. Advertising revenues would be adversely affected if we were unable to renew advertising contracts with existing customers or obtain new customers. We expect to continue to derive a majority of our future net revenues from selling advertisements. The market for Web advertising is intensely competitive, and advertising rates could be subject to pricing pressure in the future. If we are forced to reduce our advertising rates or we experience lower CPM's (cost per thousand page views) across our Web sites or lower click-through advertising rates as a result of such competition or otherwise, future revenues could be adversely affected.

The increase in license revenue was caused by several interrelated factors, including the following:

• Increase in the number of licensees;
• Increase in license products available due in part to the BigCharts acquisition and
• Increased size and productivity of our sales force.

License revenues depend on customer contract renewals and could decrease if customers choose to renew for lesser amounts, terminate early or forgo renewal as well as our ability to obtain new customers. A significant amount of our license revenue is earned from brokerages and financial service companies. The amount of license revenues depend on the number of users these customers have each month. If the number of users were to decrease, our license revenue would decrease. The growth of our license revenue could also be limited as there are a limited number of brokerages and financial service companies. In addition, certain license contracts guarantee the performance of our web sites. If our sites do not perform as guaranteed, license revenue would be adversely affected.

Cost of revenues primarily consists of costs related to advertising and news, including compensation, royalties payable to CBS and content providers, bandwidth costs associated with serving pages on our Web properties, fees paid for data, amortization of intangibles associated with the purchase of BigCharts, Web site infrastructure costs, costs of serving ads, costs related to license revenue including bandwidth and data fees, and costs related to subscriptions including exchange fees and communication lines.

Cost of revenues increased by 107% to $5.6 million for the three months ended September 30, 2000 from $2.7 million for the three months ended September 30, 1999 and increased 152% to $15.4 million for the nine months ended September 30, 2000 from $6.1 million for the nine months ended September 30, 1999. Cost of revenues increased due to the addition of news reporters and editors, costs associated with the production of our television and radio programs, additional equipment and bandwidth costs to accommodate increased traffic on our Web sites and license services, costs to serve advertisements on the site, amortization of intangibles, and royalties paid to CBS.

As a percentage of net revenues, cost of revenues were 41% and 39% for the three months ended September 30, 2000 and 1999, respectively, and 39% and 41% for the nine months ended September 30, 2000 and 1999, respectively. The decrease for the nine months as a percentage of net revenues is due to economies of scale for costs of news and network expenses. We expect cost of revenues in absolute dollars to increase in the future as a result of our intention to increase the number of our news and editorial staff, initial costs in excess of revenues related to broadcast and broadband products and the addition of equipment and bandwidth costs to support our Web sites' traffic in the future.

Product development expenses primarily consist of data source fees, compensation and benefits for Web site developers, designers and engineers to maintain the site and software engineers, and expenses for contract programmers and developers. Product development expenses increased by 31% to $2.1 million for the three months ended September 30, 2000 from $1.6 million for the three months ended September 30, 1999 and increased 110% to $6.5 million for the nine months ended September 30, 2000 from $3.1 million for the nine months ended September 30, 1999. Product development expenses increased due to the hiring of additional employees, the purchase of BigCharts and associated expenses and an increase in depreciation expense related to capital expenditures for technology as we develop our Web sites' infrastructure with the intention of discontinuing DBC services.

Product development expenses were 16% and 24% of net revenues for the three months ended September 30, 2000 and 1999, respectively, and 17% and 21% for the nine months ended September 30, 2000 and 1999, respectively. The decrease as a percentage of net revenues occurred because net revenues grew more quickly than personnel and infrastructure costs. In absolute dollars, we expect to continue to increase product development expenditures to maintain and enhance our Web sites and product offerings.

General and administrative expenses primarily consist of compensation and benefits for finance, business development and administrative personnel, allocations from DBC for administrative services, occupancy and facility costs, professional fees, depreciation charges and charges for bad debt. General and administrative expenses increased by 63% to $3.9 million for the three months ended September 30, 2000 from $2.4 million for the three months ended September 30, 1999 and increased 69% to $10.5 million for the nine months ended September 30, 2000 from $6.2 million for the nine months ended September 30, 1999. As a percentage of net revenues, general and administrative costs were 29% and 35% for the three months ended September 30, 2000 and 1999, respectively, and 27% and 42% for the nine months ended September 30, 2000 and 1999, respectively.

General and administrative expenses in absolute dollars increased due primarily to increased headcount, occupancy, legal, bad debt and consulting expenses. In addition, the increase related to costs of being a public company, as well as those related to the acquisition of BigCharts, including among others, travel expenses and professional service fees. The absolute dollar level of general and administrative expense is expected to increase in future periods as a result of an increase in personnel and costs.

Sales and marketing expenses primarily consist of non-cash promotion and advertising provided by CBS, online and offline advertisements, promotional materials, compensation, benefits and sales commissions to our direct sales force. Sales and marketing expenses increased by 17% to $8.8 million for the three months ended September 30, 2000 from $7.5 million for the three months ended September 30, 1999 and increased 55% to $34.0 million for the nine months ended September 30, 2000 from $22.0 million for the nine months ended September 30, 1999. As a percentage of net revenues, sales and marketing expenses were 65% and 108% for the three months ended September 30, 2000 and 1999, respectively, and 87% and 147% for the nine months ended September 30, 2000 and 1999, respectively. Sales and marketing expenses increased in absolute dollars due to a number of factors, including:

• An increase in amortization of promotions and advertising contributed by CBS during the nine months;
• Growth of our direct sales force and increased sales commissions from higher advertising sales;
• An increase in purchases of Web banner ads to promote our products and services;
• The cost of production of our television commercials and their broadcast; and,
• An increase in payments related to distribution relationships.

We anticipate that sales and marketing expenses in absolute dollars will increase in the near future as we continue to pursue an aggressive brand-building strategy through advertising and distribution and continue to build our direct sales organization and as we incur additional expenses relating to CBS' advertising contribution.

Of the $157.5 million purchase price for BigCharts, $152.5 million was allocated to goodwill, which is being amortized over 3 years, and $3.6 million was allocated to intangible assets, which are being amortized over periods ranging from 1.5 to 3.5 years.

Of the $157.5 million purchase price for BigCharts, $200,000 was allocated to in-process research and development, which was expensed in full upon completion of the acquisition in June 1999.

Interest income of $883,000 and $222,000 for the three months ended September 30, 2000 and 1999, respectively, and $1.3 million and $949,000 for the nine months ended September 30, 2000 and 1999, respectively, resulted from interest earned on the proceeds from our initial public offering and subsequent additional funding from CBS and DBC in May 2000.

We recorded 40% of the loss incurred by FT MarketWatch.com for the three months ended September 30, 2000 and 50% of the loss for the six months ended June 30, 2000 based on our ownership in the joint venture. Our portion of the loss was $1.4 million for the three months ended September 30, 2000 and $2.5 million for the nine months ended September 30, 2000.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily from cash contributed and advanced by DBC and CBS, revenues from advertising and licensing sales and the proceeds from our initial public offering. Our cash, cash equivalents and short term investments totaled $48.4 million at September 30, 2000, compared to $14.5 million at December 31, 1999.

Cash used in operating activities of $11.6 million for the nine months ended September 30, 2000 was primarily due to a net loss of $67.0 million, offset by non-cash charges of $12.1 million for advertising provided by CBS and $42.6 million in depreciation of property and equipment and amortization of goodwill and intangibles. Significant uses of cash in operations for the nine months ended September 30, 2000 include costs associated with increased sales and marketing activities to establish and promote our products and services, increased headcount and related expenses, and an increase in accounts receivable, partially offset by an increase in accounts payable and accrued expenses.

Cash used in operating activities of $14.6 million for the nine months ended September 30, 1999 was primarily due to a net loss of $38.9 million, offset by non- cash charges of $9.6 million for advertising provided by CBS, $19.3 million in depreciation of property and equipment and amortization of goodwill and intangibles, and a write-off of in-process research and development related to the acquisition of BigCharts of $200,000. Significant uses of cash in operations for the nine months ended September 30, 1999 include costs associated with increased sales and marketing activities to establish and promote our products and services and costs of directors and officers' insurance premiums incurred as a result of becoming a public company and an increase in accounts receivable with a decrease in accounts payable and accrued expenses.

Cash used in investing activities was $7.1 million for the nine months ended September 30, 2000 and consisted primarily of the sale of short-term investments, offset by capital expenditures and the investment in our joint venture with the Financial Times Group. Capital expenditures have generally consisted of purchases of computer hardware and software and leasehold improvements related to leased facilities and are expected to increase in future periods. We have experienced a substantial increase in capital expenditures and operating lease arrangements since inception, which is consistent with increased staffing and increased infrastructure to run the web site and internal systems. We also anticipate additional cash contributions to support the growth of our joint venture with the Financial Times Group.

Cash used in investing activities of $15.5 million for the nine months ended September 30, 1999 consisted primarily of the purchase of short-term investments, the purchase of BigCharts, and capital expenditures. The BigCharts purchase included a cash payment of $6.0 million to stockholders and financial advisors of BigCharts, and $1.5 million in acquisition costs.

Cash provided by financing activities was $57.6 million for the nine months ended September 30, 2000. In May 2000, we issued 1,136,814 shares of our common stock to each of DBC, for $43.0 million in cash, and CBS for $13.0 million in cash and $30.0 million in rate card advertising.

Cash provided by financing activities was $44.2 million for the nine months ended September 30, 1999 resulting from the initial public offering completed in January 1999 of 3,162,500 shares of common stock at $17 per share with proceeds of $43.9 million, net of underwriting and offering expenses, and the repayment of amounts owed to DBC.

As of September 30, 2000, commitments under noncancellable operating leases totaled $15.7 million through December 31, 2010. We have entered into certain agreements with Yahoo!, Inc., or Yahoo!, and America Online, Inc., or AOL, to make payments for advertising and slotting over the next three years. In addition, we are obligated to pay Yahoo! a fee based on the amount of traffic directed to our Web site each month through the expiration of the agreement in December 2000. As of September 30, 2000, we are committed to pay $5.1 million to AOL over the next three years and a minimum of $1.6 million to Yahoo! in 2000.

To date, we continue to be partially dependent on DBC for our financial and operational services and related support functions. We believe the implementation of financial, operational and management systems and controls; and reporting systems and procedures will be necessary to support the continued expansion of our operations. Consequently, we intend to expend working capital to support the development of infrastructure.

Under the terms of the LLC agreement between CBS and DBC and, subsequently, the credit agreement between us and DBC, DBC agreed to advance us up to an aggregate of $5.0 million on a revolving basis through October 29, 2000. Borrowings will bear interest at a variable rate per annum equal to The Chase Manhattan Bank's prime rate plus 2% and are due on October 29, 2000. As of September 30, 2000, there were no advances outstanding from DBC under this credit agreement.

We believe our recent receipt of $56.0 million in cash and $30.0 million in non-cash rate card advertising from the sale of our common stock to CBS and DBC and our credit agreement with DBC will be sufficient to meet our anticipated needs for working capital and capital expenditures for at least the next 12 months. We may need to raise funds sooner if we acquire any additional businesses, products or technologies. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then-current stockholders would be reduced. However, if CBS or DBC elects to maintain its percentage interest pursuant to the exercise of the purchase right under its stockholders' agreements, then CBS or DBC would not necessarily suffer a reduction in its ownership. Furthermore, such equity securities might have rights, preferences, or privileges senior to those of our common stock.

Factors That May Affect Future Operating Results

CBS:

We would need to change the name of our Web sites and devote substantial resources towards building a new brand name if our license agreement with CBS was terminated or not renewed. This agreement also has a number of risks associated with it. CBS can require us to remove any content on our Web sites that it determines conflicts with, interferes with or is detrimental to its reputation or business or for certain other reasons. We are also required to conform to CBS's guidelines for the use of its trademarks. CBS has the right to approve all materials, such as marketing materials, that include any CBS trademarks. CBS also has control over the visual and editorial presentation of its television news content on our Web sites. Because of these restrictions, we may not be able to perform our desired marketing activities.

Our license agreement with CBS will expire on October 29, 2005, and CBS will have no obligation to renew it. CBS will also have the right to terminate this agreement if:

• we breach a material term or condition of the agreement;
• we become insolvent or subject to bankruptcy or similar proceedings;
• a competitor of CBS acquires 15% or more of our voting power;
• we issue voting securities to, or actively participate in the acquisition of our voting power by a CBS competitor that results in such competitor directly or indirectly owning 9% or more of our voting power;
• or we discontinue using the MarketWatch trademark and do not establish a substitute mark acceptable to CBS.

If our agreement with CBS is terminated prior to the end of its term, our business could be adversely affected. Also, we have no formal agreement with CBS with respect to any of our correspondents who provide reports to CBS or any of its affiliates. Therefore, there can be no assurance that these services will continue in the future.

CBS agreed, subject to certain limitations, to provide us an aggregate rate card amount of $30.0 million of advertising and on-air promotions during the period from October 29, 1997 through October 29, 2002 per the Amended Service Agreement, and has agreed to provide an additional $30.0 million in advertising during the period from March 1, 2000 through May 5, 2002 per the Stock Purchase Agreement dated March 28, 2000. We have recognized $33.1 million of this rate card amount through September 30, 2000. However, the timing and placement of certain of these advertisements and promotions are subject to CBS's discretion. CBS could discontinue promoting us in the manner that it currently does. CBS also makes no guarantees to us as to the demographic composition or size of the audience that views certain promotions. This advertising and on-air promotion, as well as our association with the CBS brand, are important elements of our strategy to increase our brand awareness.

We may not be able to continue to attract a sufficient amount of user traffic and advertisers to our Web sites without the CBS name and logo or promotion from CBS.

DBC:

DBC currently provides delayed financial data to us at no charge. It also provides real-time financial data to us for dissemination to subscribers of certain of MarketWatch.com subscription services in exchange for a percentage of the subscription fee. DBC provides us with certain general services, including accounting services. We reimburse DBC for its actual costs of providing these services. DBC pays us through October 2002 a monthly per-subscriber fee for delivery of our news to all DBC subscribers, other than certain commercial ones, with a minimum payment of $100,000 per month.

Although the stockholders' agreement among CBS, DBC and us contains certain non-competition provisions, these provisions have certain exceptions and do not provide for an exclusive relationship with DBC.

If DBC fails to provide these services satisfactorily, we would be required to perform these services ourselves or obtain these services from another provider. Replacing these services could cause us to incur additional costs. We may not be able to replace these services on commercially reasonable terms or if we choose to perform these services ourselves, we may not be able to perform them adequately. During any such transition, our services could be disrupted for an indefinite period of time and, as a result, we could lose a substantial number of users and advertisers.

CONTROL BY CBS AND DBC:

As of September 30, 2000, CBS and DBC each owned approximately 34.1% of our outstanding common stock. CBS and DBC have certain rights to have representatives on our board of directors generally based upon the percentage of our voting securities that they hold. Currently, CBS has four representatives and DBC has three. As a result of their share ownership and other rights, CBS and DBC collectively are able to control our management and affairs, elect a majority of our board of directors and approve significant corporate transactions. This concentration of ownership and other rights could also delay or prevent a change in control.

If a competitor of CBS directly or indirectly acquires more than 30% of the voting power of DBC or substantially all of DBC's assets at a time when DBC beneficially owns at least 10% of our outstanding common stock, CBS may within 45 days either:

• purchase all of our securities held by DBC; or
• require DBC to place these securities in a trust that would then dispose of the securities with a view to maximizing the sale price while disposing of such shares as promptly as reasonably practicable.

DBC would forfeit its board representation in either event. We cannot predict which option, if any, CBS would elect in such an event.

Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. These factors include:

• The early stage of our development, particularly given that we did not become a separate legal entity until October 1997;
• The level of Web usage;
• Traffic levels on our Web sites, which can fluctuate significantly as a result of business and financial news events;
• The demand for advertising on our Web sites as well as on the Web in general;
• The demand for license of our technology and news;
• The ability to develop a new service, including broadband services and tools and the success of our joint ventures in Europe and Asia;
• Changes in rates paid for Web advertising resulting from competition or other factors;
• Our ability to enter into or renew our marketing and distribution agreements;
• The amount and timing of our costs related to our marketing efforts or other initiatives;
• The amount and timing of costs related to our new product development efforts;
• Fees we may pay for distribution or content agreements or other costs we incur as we expand our operations;
• New services introduced by us or our competitors;
• Competitive factors;
• Technical difficulties or system downtime affecting the Web generally or the operation of our Web sites;
• Economic conditions specific to the Web as well as general economic conditions; or
• Our ability to migrate our financial, administrative and operational systems from DBC to our own internal systems.

Therefore, our operating results for any particular quarter may not be indicative of future operating results.

We expect that over time our revenues will come from a mix of advertising, content licensing, broadcasting and subscription service fees. However, we expect to be substantially dependent on advertising revenues for the foreseeable future. Therefore, our quarterly revenues and operating results are likely to be particularly affected by the level of our advertising revenue in each quarter. Our operating expenses are based on our expectations of our future revenues and are relatively fixed in the short term. If we have lower revenues, particularly advertising revenues, than we expect, we may not be able to quickly reduce our spending in response. Our cost structure could also change dramatically as we increasingly operate independently from DBC. If we continue to rely on DBC for the services, we will be required to reimburse DBC for its costs in providing the services. We will have little control over the amount of these costs, which could be substantial. In addition, we have and will continue to significantly increase our operating expenses to grow our business. Any shortfall in our revenues would have a direct impact on our operating results for a particular quarter and these fluctuations could affect the market price of our Common Stock in a manner unrelated to our long term operating performance.

We have incurred operating losses in each fiscal quarter since we were formed. We expect operating losses and negative cash flows to continue for the foreseeable future as we intend to significantly increase our operating expenses to grow our business.

We believe that advertising sales in traditional media, such as television and radio, generally are lower in the first and third calendar quarters of each year. Our market appears to have made the transition from an emerging to a more developed medium with seasonal and cyclical patterns which may continue in the future. Therefore, as our industry follows the same seasonal patterns as those in the traditional media, we have experienced and should continue to experience lower advertising revenues in the first and third calendar quarters of each year. Furthermore, traffic levels on our Web sites typically fluctuate with the occurrence of significant events in the business and financial news, such as fluctuations in the stock markets, which could cause changes in our audience size.

Although our predecessor business has been operating since October 1995, we did not become a separate legal entity until October 1997 when we were formed as a limited liability company and we introduced our CBS.MarketWatch.com Web site. Furthermore, we acquired BigCharts in September 1999.

We have been substantially dependent and continue to be partially dependent on DBC to host our CBS.MarketWatch.com Web site and for some of our financial, administrative and operational services and related support functions. We are gradually moving our Web servers to third party data centers and will continue to do so through 2000. We are also in process of implementing our own financial reporting system, which we expect will be fully implemented by the end of 2000. If we are not able to successfully transition our systems and servers from DBC, we may not be able to perform these financial, administrative, operational and support functions. In addition, we believe that we will need further improvements in these systems, controls and procedures to manage growth. Our future financial performance could be adversely affected if we or DBC do not perform these functions effectively or if we do not implement these systems, controls and procedures successfully.

We depend on establishing and maintaining distribution relationships with high-traffic Web sites for a significant portion of our traffic. For example, for the month of September 2000, over 6% of our traffic came from Yahoo! and AOL. There is intense competition for placements on these sites, and we may not be able to enter into such relationships on commercially reasonable terms or at all. Even if we enter into distribution relationships with these Web sites, they themselves may not attract significant numbers of users. Therefore, our sites may not receive additional users from these relationships. Moreover, we may have to pay significant fees to establish these relationships and renewal of significant distribution agreements is not certain.

Occasionally we enter into agreements with advertisers, content providers or other high traffic Web sites that require us to exclusively feature these parties in certain sections of our Web site. Existing and future exclusivity arrangements may prevent us from entering into other content agreements, advertising or sponsorship arrangements or other strategic relationships. Many companies we may pursue for a strategic relationship also offer competing services. As a result, these competitors may be reluctant to enter into strategic relationships with us. Our business could be adversely affected if we do not establish and maintain additional strategic relationships on commercially reasonable terms or if any of our strategic relationships do not result in increased use of our Web sites.

It is important to our advertisers that we accurately measure the demographics of our user base and the delivery of advertisements on our Web sites. We depend on third parties to provide these measurement services. If they are unable to provide these services in the future, we would be required to perform them ourselves or obtain them from another provider. This could cause us to incur additional costs or cause interruptions in our business during the time we are replacing these services. We are implementing additional systems designed to record demographic data on our users. If we do not develop these systems successfully, we may not be able to accurately evaluate the demographic characteristics of our users. Companies may not advertise on our Web sites or may pay less for advertising if they do not perceive our measurements or measurements made by third parties to be reliable.

We believe that we will need to expand our business and operations both to operate as an entity independent from DBC and in order to support a growing business. This growth is likely to continue to place a significant strain on our resources. As we grow, we will implement new operational and financial systems, procedures and controls. If we are unable to accomplish any of these, our business could be adversely affected.

We believe that our Web sites will be more attractive to advertisers if we develop a larger audience comprised of demographically-favorable users. Accordingly, we intend to introduce additional or enhanced services in the future in order to retain our current users and attract new users. If we introduce a service that is not favorably received our current users may not continue using our service as frequently. New users could also choose a competitive service over ours.

We may also experience difficulties that could delay or prevent us from introducing new services. Furthermore, these services may contain errors that are discovered after the services are introduced. We may need to significantly modify the design of these services on our Web site to correct these errors. Our business could be adversely affected if we experience difficulties in introducing new services or if these new services are not accepted by users.

Our business depends on businesses and consumers continuing to increase their use of the Web for obtaining news and financial information as well as for conducting commercial transactions. Our business would be adversely affected if Web usage does not continue to grow. Web usage may be inhibited for a number of reasons, such as:

• Inadequate network infrastructure;
• Security concerns;
• Inconsistent quality of service; and
• Availability of cost-effective, high-speed service.

If Web usage grows, the Internet infrastructure may not be able to support the demands placed on it by this growth or its performance and reliability may decline. In addition, Web sites have experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays frequently occur in the future, Web usage, as well as usage of our Web sites, could grow more slowly or decline.

Our business relies on our ability to serve Web pages in a consistent and timely manner. If the traffic on our Web sites grows at a rate that our current communication lines cannot support, our pages will be served at a slower rate or we will be unable to serve pages at all. We also rely on certain third party providers for a significant amount of our current bandwidth capacity. If these providers are unable to maintain their service level agreements or we are unable to obtain additional bandwidth as our traffic grows, our business would be adversely affected.

Our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. In addition, unauthorized persons may improperly access our data. A number of popular Web sites have recently experienced attacks from "hackers" and other intrusions. Any actions like these could harm us. Actions like these may be very expensive to remedy and could damage our reputation and discourage new and existing users from using our site.

We expect to derive a substantial amount of our revenues from advertising for the foreseeable future. No standards have been widely accepted to measure the effectiveness of Web advertising. If such standards do not develop, existing advertisers may not continue their current levels of Web advertising. Furthermore, advertisers that have traditionally relied upon other advertising media may be reluctant to advertise on the Web. Advertisers that already have invested substantial resources in other advertising methods may be reluctant to adopt a new strategy. Our business would be adversely affected if the market for Web advertising fails to develop or develops more slowly than expected. In addition, our advertising packages are sold in campaigns ranging from less than 2 weeks to a year or more. Advertisers generally have the right to cancel a campaign with two weeks notice without penalty. Therefore, advertising revenues would be adversely affected if we fail to maintain a desirable medium for on-line advertising.

Different pricing models are used to sell advertising on the Web. It is difficult to predict which, if any, will emerge as the industry standard. This makes it difficult to project our future advertising rates and revenues. For example, advertising rates based on the number of "click throughs," or user requests for additional information made by clicking on the advertisement, instead of rates based solely on the number of impressions, or times an advertisement is displayed, could adversely affect our revenues because impression-based advertising comprises a substantial majority of our current advertising revenues. Our advertising revenues could be adversely affected if we are unable to adapt to new forms of Web advertising. Moreover, "filter" software programs that limit or prevent advertising from being delivered to a Web user's computer are available. Widespread adoption of this software could adversely affect the commercial viability of Web advertising.

For the three months ended September 30, 2000 we derived 31% of our total revenues from licensing of our content. We expect to derive a significant amount of our revenues from these licenses for the foreseeable future. License revenues depend on customer contract renewals and could decrease if customers choose to renew for lesser amounts, terminate early or forgo renewal as well as our ability to obtain new customers. A significant amount of our license revenue is earned from brokerages and financial service companies. The amount of license revenues depend on the number of users these customers have each month. If the number of users were to decrease, our license revenue would decrease. The growth of our license revenue could also be limited as there are a limited number of brokerages and financial service companies. In addition, certain license contracts guarantee the performance of our web sites. If our sites do not perform as guaranteed, license revenue would be adversely affected.

The need to securely transmit confidential information over the Internet has been a significant barrier to electronic commerce and communications over the Web. Any well-publicized compromise of security could deter more people from using the Web or from using it to conduct transactions that involve transmitting confidential information, such as stock trades or purchases of goods or services. Because many of our advertisers seek to advertise on our Web sites to encourage people to use the Web to purchase goods or services, our business could be adversely affected.

We may also incur significant costs to protect against the threat of security breaches or to alleviate problems caused by such breaches.

We have a non-disclosure policy displayed on our Web sites. Our policy is not to willfully disclose any individually identifiable information about any user to a third party without the user's consent. This policy is accessible to users of our personalized services when they initially register. Despite this policy, however, if third persons were able to penetrate our network security or otherwise misappropriate our users' personal information or credit card information, we could be subject to liability. These could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims. They could also include claims for other misuses of personal information, such as for unauthorized marketing purposes. These claims could result in litigation. In addition, the Federal Trade Commission and other states have been investigating certain Internet companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if they chose to investigate our privacy practices.

We may be subjected to claims for defamation, negligence, copyright or trademark infringement or based on other theories relating to the information we publish on our Web sites. These types of claims have been brought, sometimes successfully, against online services as well as other print publications in the past. We could also be subjected to claims based upon the content that is accessible from our Web sites through links to other Web sites. Our insurance may not adequately protect us against these types of claims.

The trading price of our stock has been and may continue to be subject to wide fluctuations. From January 1, 2000 through September 30, 2000, the closing sale price of our common stock on the Nasdaq National Market ranged from $8.00 to $45.00. As of September 29, 2000, the closing sale price was $8.00. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of our operating performance.

Interest rate sensitivity. The primary objective of our investment activities is to preserve principal while maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we have invested in may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk, we maintain our portfolio of cash in money market funds and short- term investments classified as "available for sale." In general, money market funds and short-term investments are not subject to market risk because the interest paid on such funds fluctuates with the prevailing interest rate. As of September 30, 2000, all of our investments mature in 90 days or less.

Exchange Rate Sensitivity. We consider our exposure to foreign currency exchange rate fluctuations to be minimal, as we do not have any sales denominated in foreign currencies. We have not engaged in any hedging transactions to date.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently aware of any legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our financial position or results of operations.

ITEM 2. CHANGE IN SECURITIES AND USED PROCEEDS

On May 5, 2000, we issued 1,136,814 to each of DBC for $43.0 million in cash and CBS for $13.0 million in cash and an additional $30.0 million in rate card advertising to be delivered between March 1, 2000 and May 5, 2002. The issuance of shares of our common stock was made in reliance on Section 4(2) and/or Regulation D promulgated under the Securities Act. As of September 30, 2000 $9.6 million of the proceeds to the company have been used for working capital and $3.1 million have been used to fund our joint venture.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURTIY HOLDERS

None.

ITEM 5. OTHER INFORMATION

Effective October, 2000 Carl Spielvogel resigned from our board of directors.

Effective July 12, 2000, Mr. Alan Hirschfield resigned from our board of directors, and the Board appointed Mr. Giles Spackman to serve as a member of our board.

On July 12, 2000 the Company's Board of Directors approved the adoption of the Employee Stock Purchase Plan and reserved 500,000 shares for issuance under the plan. In addition, on each January 1, the aggregate number of shares of the Company's Common Stock reserved for issuance under the Plan shall be increased automatically by a number of shares purchased under the Plan in the preceding calendar year; provided that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

1. Index to Exhibits

The exhibits filed as part of this Form 10-Q are listed in the Index to Exhibits immediately preceding such exhibits, which Index to Exhibits is incorporated herein by reference.

2. Reports on the Form 8-K