##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q


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(Mark One)

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

For the quarterly period ended March 31, 2002

OR

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

For the transition period from ____________ to ____________ .

Commission file number: 0-26811

NexPrise, Inc.

(Exact name of Registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction
of incorporation or organization) |  | 77-0465496
(I.R.S. Employer
Identification Number)

701 Palomar Airport Road, Suite 110
Carlsbad, CA 92009
760-804-1333
(Address, including zip code, and telephone
number, including area code, of Registrants principal
executive offices)

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

On March 31, 2002, 3,226,327 shares of the registrants common stock,
$.0002 par value per share, were issued and outstanding (reflects 1-for-15
reverse stock split effective April 22, 2002).





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TABLE OF CONTENTS



|                           |                                                                                               |                                                      |  |  |  |  |  | 
|-------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|                           |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                           |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                           |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                           |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                           | Item 3. Qualitative and Quantitative Disclosure about Market Risk                            
|PART II. OTHER INFORMATION
|                           | Item 1. Legal Proceedings                                                                    
|                           | Item 2. Changes in Securities and Use of Proceeds                                            
|                           | Item 3. Defaults upon Senior Securities                                                      
|                           | Item 4. Submission of Matters to a Vote of Securities Holders                                
|                           | Item 5. Other Information                                                                    
|                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                 
|EXHIBIT INDEX             
|EXHIBIT 3.3               



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##### Table of Contents



NEXPRISE, INC.

FORM 10-Q
For the Quarter Ended March 31, 2002

INDEX

|                             |  |                                                                                       |  |     
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                             |  |                                                                                       |  | Page
|                             |  |                                                                                       |  |     
|PART I FINANCIAL INFORMATION
|                            
|Item 1.                      |  | Unaudited Condensed Consolidated Financial Statements:                                |  |     
|                            
|                             |  | Balance Sheets as of March 31, 2002 and December 31, 2001                             |  | 3   
|                            
|                             |  | Statements of Operations for the Three Months Ended March 31, 2002 and 2001           |  | 4   
|                            
|                             |  | Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001           |  | 5   
|                            
|                             |  | Notes to Condensed Consolidated Financial Statements                                  |  | 7   
|                            
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13  
|                            
|Item 3.                      |  | Qualitative and Quantitative Disclosure about Market Risk                             |  | 24  
|                            
|PART II OTHER INFORMATION   
|Item 1.                      |  | Legal Proceedings                                                                     |  | 24  
|                            
|Item 2.                      |  | Changes in Securities and Use of Proceeds                                             |  | 24  
|                            
|Item 3.                      |  | Defaults Upon Senior Securities                                                       |  | 24  
|                            
|Item 4.                      |  | Submission of Matters to a Vote of Securities Holders                                 |  | 25  
|                            
|Item 5.                      |  | Other Information                                                                     |  | 25  
|                            
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                      |  | 25  
|                            
|SIGNATURE                    |  | 26                                                                                   

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NEXPRISE, INC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


|                                     |                                                                                                          |                                            |        |          |             |  |              |          |        |  | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | -------- | ----------- |  | ------------ | -------- | ------ |  | 
|                                     |                                                                                                          |                                            |        |          | March 31,   |  | December 31,
|                                     |                                                                                                          |                                            |        |          | 2002        |  | 2001        
|                                     |                                                                                                          |                                            |        |          | (unaudited) |  | (1)         
|                                     |                                                                                                          |                                            |        |          |             |  |             
|ASSETS                               |                                                                                                          |                                            |        |          |             |  |              |         
|Current assets:                      |                                                                                                          |                                            |        |          |             |  |              |         
|                                     | Cash and cash equivalents                                                                                |                                            | $      | 3,390    |             |  | $            | 13,565   |       
|                                     | Short-term investments                                                                                   |                                            |        | 13,800   |             |  |              | 8,150    |       
|                                     | Accounts receivable  net of allowance of $198 and $182                                                  |                                            |        | 787      |             |  |              | 760      |       
|                                     | Other current assets                                                                                     |                                            |        | 1,430    |             |  |              | 1,406    |       
|                                     | Current assets relating to discontinued operations                                                       |                                            |        | 150      |             |  |              | 290      |       
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|                                     |                                                                                                          | Total current assets                       |        |          | 19,557      |  |              |          | 24,171 | 
|Restricted cash                      |                                                                                                          |                                            | 520    |          |             |  | 520          |         
|Property and equipment, net          |                                                                                                          |                                            | 2,080  |          |             |  | 2,675        |         
|Equity investments                   |                                                                                                          |                                            | 1,870  |          |             |  | 3,033        |         
|Goodwill                             |                                                                                                          |                                            | 11,652 |          |             |  | 11,652       |         
|Other long-term assets, net          |                                                                                                          |                                            | 12,243 |          |             |  | 10,574       |         
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|                                     |                                                                                                          | Total assets                               |        | $        | 47,922      |  |              | $        | 52,625 | 
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                          |                                            |        |          |             |  |              |         
|Current liabilities:                 |                                                                                                          |                                            |        |          |             |  |              |         
|                                     | Accounts payable                                                                                         |                                            | $      | 727      |             |  | $            | 665      |       
|                                     | Accrued compensation                                                                                     |                                            |        | 874      |             |  |              | 960      |       
|                                     | Accrued expenses                                                                                         |                                            |        | 4,338    |             |  |              | 5,400    |       
|                                     | Deferred revenue                                                                                         |                                            |        | 625      |             |  |              | 525      |       
|                                     | Other current liabilities                                                                                |                                            |        |         |             |  |              | 114      |       
|                                     | Accrued liabilities relating to discontinued operations                                                  |                                            |        | 379      |             |  |              | 715      |       
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|                                     |                                                                                                          | Total current liabilities                  |        |          | 6,943       |  |              |          | 8,379  | 
|Notes payable                        |                                                                                                          |                                            | 11,843 |          |             |  | 8,803        |         
|Commitments and contingencies        |                                                                                                          |                                            |        |          |             |  |              |         
|Stockholders equity:                |                                                                                                          |                                            |        |          |             |  |              |         
|                                     | Preferred stock, no par value; 2,500 shares
authorized; none issued and outstanding                      |                                            |        |          |             |  |              |          |       
|                                     | Common stock, $.0002 par value; 175,000 shares
authorized; 3,226 and 3,087 shares issued and
outstanding |                                            |        | 10       |             |  |              | 10       |       
|                                     | Additional paid-in capital                                                                               |                                            |        | 631,893  |             |  |              | 631,082  |       
|                                     | Deferred compensation                                                                                    |                                            |        | (822     | )           |  |              | (592     | )     
|                                     | Accumulated deficit                                                                                      |                                            |        | (602,091 | )           |  |              | (595,130 | )     
|                                     | Accumulated other comprehensive income                                                                   |                                            |        | 146      |             |  |              | 73       |       
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|                                     |                                                                                                          | Total stockholders equity                 |        |          | 29,136      |  |              |          | 35,443 | 
|                                     |                                                                                                          |                                            |        |          |             |  |              |         
|                                     |                                                                                                          | Total liabilities and stockholders equity |        | $        | 47,922      |  |              | $        | 52,625 | 
|                                     |                                                                                                          |                                            |        |          |             |  |              |         



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|(1) |  | Derived from audited financial statements
|--- |  | -----------------------------------------

See accompanying notes to condensed consolidated financial statements.

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NEXPRISE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

|                                                                                                           |                                     |   |                 |       |      |   |         |        | 
|---------------------------------------------------------------------------------------------------------- | ----------------------------------- | - | --------------- | ----- | ---- | - | ------- | ------ | 
|                                                                                                           |                                     |   | Three Months   
|                                                                                                           |                                     |   | Ended March 31,
|                                                                                                           |                                     |   |                
|                                                                                                           |                                     |   | 2002            |       | 2001
|                                                                                                           |                                     |   |                 |       |     
|Net revenues                                                                                               |                                     | $ | 674             |       |      | $ |        |       
|Cost of revenues                                                                                           |                                     |   | 537             |       |      |   |        |       
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|                                                                                                           | Gross profit                        |   |                 | 137   |      |   |         |       | 
|Operating Expenses:                                                                                        |                                     |   |                 |       |      |   |         |       
|                                                                                                           | Research
and development            |   |                 | 1,799 |      |   |         | 13,401 | 
|                                                                                                           | In
process research and development |   |                 | 399   |      |   |         |       | 
|                                                                                                           | Sales
and marketing                 |   |                 | 1,671 |      |   |         | 4,984  | 
|                                                                                                           | General
and administrative          |   |                 | 1,723 |      |   |         | 6,187  | 
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|                                                                                                           | Total
operating expenses            |   |                 | 5,592 |      |   |         | 24,572 | 
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|Operating loss                                                                                             |                                     |   | (5,455          | )     |      |   | (24,572 | )     
|Interest expense                                                                                           |                                     |   | (177            | )     |      |   | (4,022  | )     
|Interest income and other, net                                                                             |                                     |   | 20              |       |      |   | 2,491   |       
|Investment losses                                                                                          |                                     |   | (1,349          | )     |      |   | (2,736  | )     
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|Loss before extraordinary item                                                                             |                                     |   | (6,961          | )     |      |   | (28,839 | )     
|Extraordinary item: gain from retirement of bonds, net                                                     |                                     |   |                |       |      |   | 125,840 |       
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|Net income (loss)                                                                                          |                                     | $ | (6,961          | )     |      | $ | 97,001  |       
|                                                                                                           |                                     |   |                 |       |      |   |         |       
|Basic and diluted loss per share before extraordinary item                                                 |                                     | $ | (2.22           | )     |      | $ | (9.39   | )     
|Basic and diluted income per share from extraordinary item                                                 |                                     |   |                |       |      |   | 40.96   |       
|Basic and diluted net income (loss) per share                                                              |                                     |   | (2.22           | )     |      |   | 31.57   |       
|Weighted average common shares outstanding used in computing
basic and diluted net income (loss) per share |                                     |   | 3,131           |       |      |   | 3,072   |       

See accompanying notes to condensed consolidated financial statements.

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NEXPRISE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

|                                                                                     |  |                                                   |                                                     |   |                 |        |          |   |          |         |  
|------------------------------------------------------------------------------------ |  | ------------------------------------------------- | --------------------------------------------------- | - | --------------- | ------ | -------- | - | -------- | ------- | -
|                                                                                     |  |                                                   |                                                     |   | Three Months   
|                                                                                     |  |                                                   |                                                     |   | Ended March 31,
|                                                                                     |  |                                                   |                                                     |   |                
|                                                                                     |  |                                                   |                                                     |   | 2002            |        | 2001    
|                                                                                     |  |                                                   |                                                     |   |                 |        |         
|Operating Activities                                                                 |  |                                                   |                                                     |   |                 |        |          |  
|Net loss before extraordinary item                                                   |  | $                                                 | (6,961                                              | ) |                 | $      | (28,839  | )
|Extraordinary item                                                                   |  |                                                   |                                                    |   |                 |        | 125,840  |  
|Adjustments to reconcile net income (loss) to net cash used in
operating activities: |  |                                                   |                                                     |   |                 |        |          |  
|                                                                                     |  | Depreciation and amortization                     |                                                     |   | 605             |        |          |   | 2,420    |        
|                                                                                     |  | Amortization of intangible assets                 |                                                     |   | 874             |        |          |   |         |        
|                                                                                     |  | Amortization of deferred stock-based compensation |                                                     |   | 86              |        |          |   | 133      |        
|                                                                                     |  | Investment losses                                 |                                                     |   | 1,349           |        |          |   | 2,736    |        
|                                                                                     |  | Gain from retirement of convertible notes         |                                                     |   |                |        |          |   | (125,840 | )      
|                                                                                     |  | Non-cash charges related to stock-option grants   |                                                     |   | 3               |        |          |   | (263     | )      
|Changes in operating assets and liabilities:                                         |  |                                                   |                                                     |   |                 |        |          |  
|                                                                                     |  | Accounts receivable                               |                                                     |   | (27             | )      |          |   |         |        
|                                                                                     |  | Other current assets                              |                                                     |   | (49             | )      |          |   | 310      |        
|                                                                                     |  | Other assets                                      |                                                     |   | (90             | )      |          |   | 439      |        
|                                                                                     |  | Discontinued assets                               |                                                     |   | 33              |        |          |   | (2,986   | )      
|                                                                                     |  | Accounts payable                                  |                                                     |   | (15             | )      |          |   | 3,215    |        
|                                                                                     |  | Accrued compensation                              |                                                     |   | (116            | )      |          |   | 2,837    |        
|                                                                                     |  | Accrued expenses                                  |                                                     |   | (1,114          | )      |          |   | (9,257   | )      
|                                                                                     |  | Deferred revenue                                  |                                                     |   | 100             |        |          |   |         |        
|                                                                                     |  | Discontinued liabilities                          |                                                     |   | (229            | )      |          |   | (11,188  | )      
|                                                                                     |  |                                                   |                                                     |   |                 |        |          |  
|                                                                                     |  |                                                   | Net cash used by operating activities               |   |                 | (5,551 | )        |   |          | (40,443 | )
|                                                                                     |  |                                                   |                                                     |   |                 |        |          |  
|Investing Activities                                                                 |  |                                                   |                                                     |   |                 |        |          |  
|Purchase of property and equipment                                                   |  |                                                   |                                                    |   |                 |        | (461     | )
|Purchases of short-term investments                                                  |  |                                                   | (21,952                                             | ) |                 |        | (177,959 | )
|Maturities of short-term investments                                                 |  |                                                   | 16,302                                              |   |                 |        | 254,229  |  
|Investment in vertical operating companies                                           |  |                                                   |                                                    |   |                 |        | (6,000   | )
|Cash acquired on purchase of Infoprise                                               |  |                                                   | 1,053                                               |   |                 |        |         |  
|                                                                                     |  |                                                   |                                                     |   |                 |        |          |  
|                                                                                     |  |                                                   | Net cash (used in) provided by investing activities |   |                 | (4,597 | )        |   |          | 69,809  |  
|                                                                                     |  |                                                   |                                                     |   |                 |        |          |  
|Financing Activities                                                                 |  |                                                   |                                                     |   |                 |        |          |  
|Principal payments on capital lease obligations and notes payable                    |  |                                                   | (114                                                | ) |                 |        | (50,020  | )
|Issuance of common stock                                                             |  |                                                   | 14                                                  |   |                 |        | 273      |  
|                                                                                     |  |                                                   |                                                     |   |                 |        |          |  

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|                                                                                                                       |  |   |                                       |   |                 |      |         |   |  |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | - | ------------------------------------- | - | --------------- | ---- | ------- | - |  | ------- | -
|                                                                                                                       |  |   |                                       |   | Three Months   
|                                                                                                                       |  |   |                                       |   | Ended March 31,
|                                                                                                                       |  |   |                                       |   |                
|                                                                                                                       |  |   |                                       |   | 2002            |      | 2001   
|                                                                                                                       |  |   |                                       |   |                 |      |        
|                                                                                                                       |  |   | Net cash used by financing activities |   |                 | (100 | )       |   |  | (49,747 | )
|                                                                                                                       |  |   |                                       |   |                 |      |         |  
|Foreign currency translation                                                                                           |  |   | 73                                    |   |                 |      |        |  
|Net decrease in cash and cash equivalents                                                                              |  |   | (10,175                               | ) |                 |      | (20,381 | )
|Cash and cash equivalents at beginning of period                                                                       |  |   | 13,565                                |   |                 |      | 91,348  |  
|                                                                                                                       |  |   |                                       |   |                 |      |         |  
|Cash and cash equivalents at end of period                                                                             |  | $ | 3,390                                 |   |                 | $    | 70,967  |  
|                                                                                                                       |  |   |                                       |   |                 |      |         |  
|Supplemental disclosure of noncash activities:                                                                         |  |   |                                       |   |                 |      |         |  
|Issuance of shares in connection with the acquisition of Infoprise                                                     |  | $ | 794                                   |   |                 | $    |        |  
|Unrealized accounting loss on available-for-sale securities                                                            |  | $ |                                      |   |                 | $    | 760     |  
|Deferred stock based compensation related to the stock options
assumed in connection with the acquisition of Infoprise |  | $ | (316                                  | ) |                 | $    |        |  
|Issuance of convertible notes relating to Infoprise acquisition                                                        |  | $ | 3,040                                 |   |                 | $    |        |  

See accompanying notes to condensed consolidated financial statements.

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NEXPRISE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1. Description of Business

NexPrise, Inc. (the Company or NexPrise or we), formerly known as
Ventro Corporation and Chemdex Corporation, is a provider of collaborative
software solutions that enable companies to manage key processes with their
suppliers, partners and customers. NexPrises applications include solutions
for quote management and program management.

As of March 31, 2002, the Company had working capital of $12.6 million and
had stockholders equity of approximately $29.1 million. During the first three
months of 2002 the Company used cash and cash equivalents in operating
activities of approximately $5.6 million. The net decrease in cash, cash
equivalents and short term investments in the first three months of 2002 was
approximately $4.5 million. Management believes it has sufficient working
capital to support the Companys planned activities through 2002 and is
committed to the successful execution of the operating plan.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Intercompany accounts and transactions have
been eliminated. While the quarterly financial information is unaudited, the
financial statements included in this Form 10-Q reflect all adjustments
(consisting of normal recurring adjustments) that the Company considers
necessary for a fair presentation of the results of operations for the interim
periods covered and of the financial condition of the Company at the date of
the interim balance sheet. The results for the interim periods are not
necessarily indicative of the results for the entire year. The condensed
consolidated balance sheet as of December 31, 2001 has been derived from the
audited consolidated balance sheet as of that date. The information included in
this report should be read in conjunction with the Companys Annual Report on
Form 10-K for fiscal 2001.

Revenue.

NexPrise recognizes revenue for software subscriptions over the term of
the subscription period. Revenue for services is recognized as the services
are performed. Deferred revenue consists of that portion of customer contracts
invoiced in advance of when the revenue will be recognized under the
subscription method. Revenue is made up primarily of subscriptions of bundled
licenses and post contract support (PCS) and in some situations includes
hosting. The initial and renewal amounts are recognized as revenue ratably over
the period of the license during which the services are expected to be
provided. Our revenue recognition policy is in accordance with Statement of
Position No. 97-2, or SOP 97-2, Software Revenue Recognition, as amended and
Staff Accounting Bulletin No. 101. For each arrangement, we determine whether
evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collection is probable. If any of these criteria are not met,
revenue recognition is deferred until such time as all of the criteria are met.
Generally terms are net 30. No customer has the right of return. The Company
does not present elements of revenue separately as allocation methodologies
(i.e. allocation based on relative costs) would not provide a meaningful and
supportable allocation, principally because the Company has yet to establish
sufficient vendor specific objective evidence among various elements.

Net Income (Loss) Per Share

Net income (loss) per share is presented in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 Earnings
Per Share (FAS 128) which requires dual presentation of basic earnings per
share (EPS) and diluted EPS.

Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted net income per
share is computed using the weighted average number of common shares and
potentially dilutive shares outstanding during the period. The same number of
common shares has been used to calculate per share amounts before extraordinary
item and net income or loss in 2001 and 2002 in accordance with FAS 128
guidance based on the loss before

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extraordinary item. The financial data has been adjusted to reflect the
1-for-15 reverse stock split which became effective April 22, 2002.

Use of Estimates

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

Note 3. Business Combinations

In February 2002 NexPrise acquired privately held InfoPrise, Inc., a
provider of data management solutions located in Carlsbad, California. As
consideration for the acquisition, which was accounted for using the purchase
method, NexPrise agreed to issue unsecured convertible promissory notes with a
face value of $3,040,000 due 2007. The notes bear interest at a rate of 6% and
are convertible to the Companys common stock at $18.75 per share. The Company
also issued 139,783 shares of NexPrise common stock and assumed InfoPrises
outstanding stock options, which may result in the issuance of up to
approximately 64,666 shares of NexPrise common stock. An independent valuation
study was commissioned to value the intangible assets associated with the
InfoPrise purchase and facilitate the purchase accounting. A summary of the
InfoPrise purchase transaction is shown below (in thousands):

|                                    |  |   |       | 
|----------------------------------- |  | - | ----- | 
|Tangible assets                     |  | $ | 1,010 | 
|Developed technology                |  |   | 2,234 | 
|In
process research and development |  |   | 399   | 
|                                    |  |   |       | 
|                                    |  | $ | 3,643 | 
|                                    |  |   |       | 

The following table summarizes the forms of consideration and their fair
values (in thousands):

|                                          |  |   |       | 
|----------------------------------------- |  | - | ----- | 
|Convertible promissory note               |  | $ | 3,040 | 
|Restricted stock (92,565 shares)          |  |   | 361   | 
|Employee stock options assumed            |  |   | 117   | 
|Liabilities assumed and transaction costs |  |   | 125   | 
|                                          |  |   |       | 
|Total purchase consideration              |  | $ | 3,643 | 
|                                          |  |   |       | 

The following unaudited, pro forma information shows the results of
operations of the Company for the three months ended March 31, 2002 and 2001 as
if the business combination with NexPrise and InfoPrise had occurred at the
beginning of each period. In process research and development charges of
$399,000 are included for the 3 months ended March 31, 2002. No such charge has
been recorded for the 3 months ended March 31, 2001. This data is not
indicative of the results of operations that would have arisen if the business
combinations had occurred at the beginning of the respective periods and is not
intended to be indicative of future results of operations (in thousands except
per share data).

|                                                      |  |                             |        |      |  |   |         |  
|----------------------------------------------------- |  | --------------------------- | ------ | ---- |  | - | ------- | -
|                                                      |  | Three months ended March 31
|                                                      |  |                            
|                                                      |  | 2002                        |        | 2001
|                                                      |  |                             |        |     
|Revenue                                               |  | $                           | 674    |      |  | $ | 975     |  
|Net income (loss) before extraordinary items          |  | $                           | (7,061 | )    |  | $ | (33,015 | )
|Net income (loss)                                     |  | $                           | (7,061 | )    |  | $ | 92,825  |  
|Per Share:                                            |  |                             |        |      |  |   |         |  
|Basic and diluted net loss before extraordinary items |  | $                           | (2.26  | )    |  | $ | (10.75  | )
|Basic and diluted net income (loss):                  |  | $                           | (2.26  | )    |  | $ | 30.22   |  

The financial data has been adjusted to reflect the 1-for-15 reverse stock
split which became effective April 22, 2002.

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Note 4. Comprehensive Income (Loss)

Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), establishes standards of reporting and display
of comprehensive income and its components of net income (loss) and Other
Comprehensive Income. Other Comprehensive Income refers to revenues, expenses,
gains and losses that are not included in net income (loss) but rather are
recorded directly in stockholders equity. The components of comprehensive
income (loss) for the 3 months ended March 31, 2002 and 2001 were as follows
(in thousands):

|                                                           |  |                    |        |      |  |   |        | 
|---------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                                           |  | Three Months Ended
|                                                           |  | March 31,         
|                                                           |  |                   
|                                                           |  | 2002               |        | 2001
|                                                           |  |                    |        |     
|Net income (loss)                                          |  | $                  | (6,961 | )    |  | $ | 97,001 | 
|Unrealized gains (losses) on
available for sale securities |  |                    |       |      |  |   | 760    | 
|Foreign exchange translation                               |  |                    | 73     |      |  |   |       | 
|                                                           |  |                    |        |      |  |   |        | 
|Comprehensive income (loss)                                |  | $                  | (6,888 | )    |  | $ | 97,761 | 
|                                                           |  |                    |        |      |  |   |        | 

Note 5. Balance Sheet Details

Other Long-term Assets

Other long-term assets are comprised of the following (in thousands):

|                                                                                            |                              |   |           |        |              |   |       |        | 
|------------------------------------------------------------------------------------------- | ---------------------------- | - | --------- | ------ | ------------ | - | ----- | ------ | 
|                                                                                            |                              |   | March 31, |        | December 31,
|                                                                                            |                              |   | 2002      |        | 2001        
|                                                                                            |                              |   |           |        |             
|Deposits and other                                                                          |                              | $ | 853       |        |              | $ | 746   |       
|Purchased intangibles, net of accumulated
amortization of $1,845 and $971 respectively      |                              |   | 10,588    |        |              |   | 8,829 |       
|Deferred debt offering costs, net of accumulated
amortization of $426 and $415 respectively |                              |   | 189       |        |              |   | 200   |       
|Long-term investments, cost method                                                          |                              |   | 613       |        |              |   | 799   |       
|                                                                                            |                              |   |           |        |              |   |       |       
|                                                                                            | Total other long-term assets |   | $         | 12,243 |              |   | $     | 10,574 | 
|                                                                                            |                              |   |           |        |              |   |       |       

Note 6. Equity Investments

The following table outlines the Companys equity investment activity with
its marketplace companies for the three months ended March 31, 2001 and 2002 ($
in thousands):

|                 |  |                   |        |                |  |                   |       |                |  |  |       |  |  |            |    |  
|---------------- |  | ----------------- | ------ | -------------- |  | ----------------- | ----- | -------------- |  |  | ----- |  |  | ---------- | -- | -
|                 |  |                   |        |                |  |                   |       |                |  |  |       |  |  | Percentage
|                 |  | Carrying Value at |        | Equity Loss of |  | Carrying Value at |       | Ownership at  
|                 |  | December 31, 2000 |        | Investee       |  | March 31, 2001    |       | March 31, 2001
|Activity in 2001 |  |                   |        |                |  |                   |       |               
|Amphire          |  |                   | 2,000  |                |  |                   | 549   |                |  |  | 1,451 |  |  |            | 34 | %
|MarketMile       |  |                   | 10,103 |                |  |                   | 2,187 |                |  |  | 7,916 |  |  |            | 30 | %

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|                 |  |                   |       |                |  |                   |     |                |  |  |       |  |  |            |    |  
|---------------- |  | ----------------- | ----- | -------------- |  | ----------------- | --- | -------------- |  |  | ----- |  |  | ---------- | -- | -
|                 |  |                   |       |                |  |                   |     |                |  |  |       |  |  | Percentage
|                 |  | Carrying Value at |       | Equity Loss of |  | Carrying Value at |     | Ownership at  
|                 |  | December 31, 2001 |       | Investee       |  | March 31, 2002    |     | March 31, 2002
|Activity in 2002 |  |                   |       |                |  |                   |     |               
|Amphire          |  |                   | 412   |                |  |                   | 250 |                |  |  | 162   |  |  |            | 36 | %
|MarketMile       |  |                   | 2,621 |                |  |                   | 913 |                |  |  | 1,708 |  |  |            | 23 | %

In the three months ended March 31, 2001, the Company billed the
affiliated marketplace companies approximately $3.7 million, net of reserves
and there were no billings 2002. The billings were for charges incurred on
behalf of the marketplace companies, services the Company provided and facility
rent that we passed on to the marketplace companies.

Note 7. Convertible Notes

In February 2002 NexPrise issued unsecured, convertible promissory notes
with a face value of $3,040,000, a conversion price of $18.75 and interest rate
of 6% in connection with the acquisition of InfoPrise. The promissory notes
are due in 2007. As of March 31, 2002 no amount of the notes had been converted
to common stock. At March 31, 2002 and December 31, 2001 approximately $8.8
million of convertible subordinated notes issued April 2000 and due in 2007
remained outstanding. These convertible subordinated notes bear annual
interest at 6% and are convertible at the option of the holder into the
Companys common stock at a price of $1,361.70.

Note 8. Contingencies

A former stockholder of Promedix filed a complaint against us, Promedix
and certain other parties in the Superior Court of California, County of Los
Angeles alleging, among other things, that we had negligently failed to
exchange his shares of Promedix stock for shares of the Companys common stock
on a timely basis, causing him damages resulting from a decline in our stock
price in the intervening time between the submission of his Promedix shares for
exchange and his receipt of our shares. The complaint did not specify the
amount of damages sought by the plaintiff, but instead seeks general, special
and punitive damages. We filed a partially successful motion to dismiss the
plaintiffs claims on February 5, 2001. Plaintiff amended the complaint to
allege a conspiracy between all defendants to delay his sale of stock. We
believe we have meritorious defenses against all claims asserted. Trial is set
for May 2002. We are unable to predict the outcome of such litigation.

In 2001, several class action lawsuits, including one derivative suit,
were filed and served on the Company alleging that the Company and certain
individuals made false and misleading statements concerning our business model
and earnings for fiscal 2000. The Company is also a defendant in the IPO class
action suits filed against issuers and the investment banks alleging that the
offering documents were false and misleading. Although we believe that we have
meritorious defenses to the actions and intend to defend the suits vigorously,
we cannot predict with certainty the outcome of these lawsuits. Our defense
against such lawsuits will be costly and will require a significant commitment
of time and resources by our senior management. The Company has also been
served with a shareholder derivative action but is named solely as a nominal
defendant against whom no recovery is sought.

One of our subtenants has ceased paying their monthly rent and is
attempting to renegotiate their sublease agreement with us. We have drawn upon
their security deposit to cover our expenses in this quarter and are working to
resolve the issue with these tenants or to find replacement tenants. If we are
unable to successfully resolve this situation our sublease income may not be
enough to pay what we may be liable for in ongoing lease payments. The Company
has accrued for expected additional costs as a result of the potential loss of
this sublease income.

The Company is a party to various claims in the ordinary course of
business. Although the results of litigation and claims cannot be predicted
with certainty, the Company believes the final outcome of such matters will not
have a material adverse effect on the Companys financial position, results of
operations or cash flows.

Discontinued Marketplaces Formerly Known as Promedix and Chemdex

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Contracts with Promedix and Chemdex customers and suppliers contained, in
some cases, cancellation notification periods longer than the Company provided.
In some cases, shorter notification periods caused inconvenience to customers
and suppliers, and the Company has been notified by several suppliers that
discontinuing the marketplace represents a breach of Promedix contractual
obligations. Additionally, two customers of Chemdex have informed the Company
that they did not receive notice of the termination of their contracts within
the contractually required time period. However, as of March 31, 2002, no
customer or supplier of Promedix or Chemdex had filed a formal complaint with
the Company.

Government Regulations

In addition to regulations applicable to businesses generally, the Company
is or may be subject to direct regulation by governmental agencies which
includes numerous laws and regulations generally applicable to the chemical,
pharmaceutical, controlled substances, human and biological reagents, medical
and in vitro devices, nuclear chemical businesses and environmental spills, as
well as U.S. import and export controls and import controls of other countries.
While the shutdown of Chemdex, Promedix and SpecialtyMD may limit future
regulatory and product liability risks, until all statutes of limitation have
expired, certain legal risks will remain.

The Company relied on their suppliers to comply with applicable local,
state and federal laws regarding the labeling and the dissemination of
information on any products sold that may be hazardous or present a health
threat to the user. If these suppliers have failed, or we have failed to
maintain the requisite records irrespective of the actions of the suppliers, or
if either of us had failed to adequately comply with labeling and information
dispensing requirements of local, state or federal laws, then the Company may
be held legally responsible, since Company held title to these products, and
could be subject to governmental penalties or fines, as well as private
lawsuits to enforce these laws.

Finally, the Company has relied upon their suppliers to obtain appropriate
approvals for products regulated by the FDA and to comply with the requirements
relating to those approvals and products. The failure of suppliers to obtain or
comply with those approvals, or the failure of the product advertising or
labeling to be consistent with the FDA approval for the products, or other
failures by the products themselves, or our failure to keep regulatory records
required by the FDA, such as complaint files, could result in costly product
recalls, significant fines and judgments, civil and criminal liabilities and
negative publicity.

Except as described in the next sentence, the Company is unaware of any
current investigations, inquiries, citations, fines or allegations of
violations or noncompliance relating to regulatory requirements pending by
government agencies or by third parties against us. In February, 2001 the
Company received a subpoena from the U.S. Department of Justice, Drug
Enforcement Administration, for certain billing, invoice, and shipping records
concerning sales to an unaffiliated purchaser. It is also possible that there
may be investigations or allegations that the Company is not aware of or future
investigations or allegations. The risk that any noncompliance may be
discovered in the future is currently unknown. Although any potential impact on
the Company for noncompliance cannot currently be established, it could result
in significant civil or criminal penalties, including monetary fines and
injunctions, for noncompliance and negative publicity, and seriously harm our
business, revenues, results of operations and financial condition.

Note 9. Deferred Stock-Based Compensation

In connection with the acquisition of InfoPrise completed in February,
2002 the Company assumed the InfoPrise stock option plans. The Company
recorded deferred compensation of $132,293 for the difference between the
exercise price of the unvested options assumed and the fair value of the common
stock underlying those options as of the date the acquisition was consummated.
That charge will be amortized over the remaining vesting period of the options.
Additionally, the Company recorded deferred compensation of $184,178 with
respect to the issuance of restricted common stock. That charge will be
amortized over the remaining vesting period of the stock.

The Company recognized $86,000 and $133,000 in stock compensation expense
for the three months ended March 31, 2002 and 2001, respectively.

Note 10. Settlement, Restructuring and Other Charges

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During the year ended December 31, 2001, the Company took many actions to
improve efficiencies and reduce operating costs. The specific actions include
employee and contractor terminations, consolidation of facilities, settlements
of various disputes and termination of leases. The net of these charges was
reported as a component of loss before extraordinary item.

At March 31, 2002 the Company had unliquidated accruals of approximately
$363,000. At December 31, 2001 the Company had unliquidated accruals of
$884,000.

Note 11. Recent Accounting Pronouncements

The Company adopted Statement 142 in 2002. Application of the
non-amortization provisions of Statement 142 did not result in a change to
results of operations in 2002 as there was no goodwill amortized in fiscal
2001. The Company will test goodwill generated by the NexPrise and InfoPrise
acquisitions using the two-step process prescribed in Statement 142. The first
step is a screen for potential impairment, while the second step measures the
amount of the impairment, if any. The Company performed the first of the
required impairment tests of NexPrise goodwill as of January 1, 2002. The
Company did not have an impairment of the goodwill balance. The Company
expects to perform its required annual impairment test in September, at which
time an impairment charge could be required depending on changes to the fair
value of the goodwill.

On October 3, 2001, the FASB issued Statement of Financial Accounting
Standards No. 144. Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144) which is applicable to financial statements issued for
fiscal years beginning after December 15, 2001. The FASBs new rules on asset
impairment supersede SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and portions of Accounting
Principles Board Opinion 30, Reporting the Results of Operations. This
Standard provides a single accounting model for long-lived assets to be
disposed of and significantly changes the criteria that would have to be met to
classify an asset as held-for-sale. Classification as held-for-sale is an
important distinction since such assets are not depreciated and are stated at
the lower of fair value and carrying amount. This Standard also requires
expected future operating losses from discontinued operations to be displayed
in the period(s) in which the losses are incurred, rather than as of the
measurement date as presently required. Our adoption of SFAS 144 on January
1, 2002 did not have a material effect on our operating results or financial
condition.

Note 12. Subsequent Events

Reverse Split of Common Stock

On April 18, 2002, the Companys shareholders approved an amendment to the
Companys certificate of incorporation to effect a reverse split of the
Companys common stock. As a result of the reverse stock split, every fifteen
shares of the Companys old common stock issued and outstanding were
automatically converted into one new share of common stock. No fractional
shares were issued and holders of less than one share after the split will
receive cash in lieu of fractional shares. The reverse split is intended to
bring the per share price of the Companys common stock into compliance with
the price per share listing requirements of the NASDAQ stock market. The
financial data has been adjusted to reflect the 1-for-15 reverse stock
split which became effective April 22, 2002.

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

The following Managements Discussion and Analysis of Results of
Operations and Financial Condition contains forward-looking statements. In some
cases, readers can identify forward-looking statements by terminology such as
may, will, should, could, expects, plans, anticipates,
believes, estimates, predicts, potential, or continue. These
statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially
different from those stated herein. Although management of NexPrise believes
that the expectations reflected in the forward-looking statements are
reasonable, the Company cannot guarantee future results, performance, or
achievements. For further information, refer to Managements Discussion and
Analysis and the Risk Factors section of NexPrises Registration Statement on
Form 10-K and the section entitled Investment Considerations in this Form
10-Q.

Presentation of Financial Information

In 2001 we significantly restructured our operations and focused on a new
business direction. We virtually completed our exit from the business of
building and servicing business-to-business marketplaces and entered the
business of providing collaborative software solutions. In August 2001 we
acquired privately-held NexPrise, Inc., a company with an advanced
collaborative software solution and an established customer base. We have
reorganized our management team and Board of Directors and also have taken
measures to reduce commitments and operating expenses and conserve cash.

During 2001 the Company incurred a net charge of $16.5 million in
connection with restructurings and settlements. All revenues presented are
derived from the operations of NexPrise, acquired in August 2001.

On April 18, 2002, the Companys shareholders approved an amendment to the
Companys certificate of incorporation to effect a reverse split of the
Companys common stock. As a result of the reverse stock split, every fifteen
shares of the Companys old common stock issued and outstanding were
automatically converted into one new share of common stock. No fractional
shares were issued and holders of less than one share after the split will
receive cash in lieu of fractional shares. The reverse split is intended to
bring the per share price of the Companys common stock into compliance with
the price per share listing requirements of the NASDAQ stock market. The
financial data has been adjusted to reflect the 1-for-15 reverse stock split
which became effective April 22, 2002.

Overview

NexPrise, Inc. (the Company, NexPrise, us, our or we) formerly
known as both Ventro Corporation and as Chemdex Corporation, is a provider of
collaborative solutions for program management and quote management. On August
8, 2001 the Company purchased privately-held NexPrise, Inc., a provider of
collaborative commerce solutions located in Santa Clara, California. On
February 4, 2002 NexPrise acquired privately-held InfoPrise, Inc., a provider
of data management solutions located in Carlsbad, California. As consideration
for the acquisition, NexPrise agreed to issue unsecured 6% convertible
promissory notes, due in 2007, with a face value of $3,040,000 and a per share
conversion price of $18.75, together with 139,783 shares of NexPrise common
stock and assumed InfoPrises outstanding stock options, which may result in
the issuance of up to approximately 64,666 shares of NexPrise common stock.

NexPrise expects to incur operating losses on a quarterly basis for at
least the next twelve months as we develop and enhance our technology and
service offerings.

Critical Accounting Policies

General.Managements discussion and analysis of its financial condition
and results of operations are based upon our condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Management bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

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Management believes the following critical accounting policies affect its
more significant estimates and assumptions used in the preparation of its
consolidated financial statements.

Revenue recognition.The Company recognizes license revenue using the
subscription method. While many software providers recognize significant
up-front license fees, the subscription method recognizes revenue ratably over
the duration of a contract.

Investments. The various interests that we have acquired in companies are
accounted for under three broad methods: consolidation, the equity method and
the cost method. The applicable accounting method is generally determined based
on our voting interest in a company.

Consolidation.Companies that NexPrise directly or indirectly controls are
accounted for under the consolidation method of accounting. Under this method,
a companys accounts are reflected within its Consolidated Financial
Statements. All significant inter-company accounts and transactions are
eliminated.

Equity Method.Entities where NexPrise can exercise significant
influence, but not control, are accounted for under the equity method of
accounting. Whether or not NexPrise exercises significant influence with
respect to a company depends on an evaluation of several factors including,
among others, representation on the companys board of directors and ownership
level, generally 20%  50% interest in the voting securities of the company
including voting rights associated with NexPrise holdings in common, preferred
and other convertible instruments in the company. Under the equity method of
accounting, our share of the earnings or losses of these companies are included
in the equity income (loss) section of the Consolidated Statements of
Operations.

Cost Method.Companies not consolidated or accounted for under the equity
method are accounted for under the cost method of accounting. Under this
method, NexPrises share of the earnings or losses of these companies is not
included in its Consolidated Statements of Operations. The Company periodically
evaluates the carrying value of its investments for impairment.

The fair value of the long-term investments is dependent on the
performance of the entities in which the Company has invested, as well as
volatility inherent in the external markets for these investments. In
assessing potential impairment for these investments the Company will consider
these factors as well as forecasted financial performance of its investees. If
these forecasts are not met the Company may have to record additional
impairment charges not previously recognized.

Long lived assets. The Companys long-lived assets include goodwill and
other intangible assets. At March 31, 2002, the Company had $22.2 million
goodwill and other intangible assets. In assessing the recoverability of the
Companys goodwill and other intangibles, the Company must make assumptions
regarding estimated future cash flows and other factors to determine the fair
value of the respective assets. If these estimates or their related
assumptions change in the future, the Company may be required to record
impairment charges for these assets not previously recorded.

Deferred tax assets. The Company has provided a full valuation reserve
related to its substantial deferred tax assets. In the future, if sufficient
evidence of the Companys ability to generate sufficient future taxable income
in certain tax jurisdictions becomes apparent, the Company may be required to
reduce its valuation allowances, resulting in income tax benefits in the
Companys consolidated statement of operations. Management evaluates the
realizability of the deferred tax assets quarterly and assesses the need for
valuation allowance quarterly

Results of Operations

Revenues.NexPrise reported $674,000 of revenue for the three months ended
March 31, 2002. This revenue is made up primarily of subscriptions of bundled
license and post contract support (PCS) and, in some cases, includes hosting
for the Companys collaborative commerce products. Subscription revenue
generally entails recognizing the value of the customer contract as revenue
ratably over the term of the contract. Our revenues are expected to increase
in the second quarter of 2002 and beyond as existing customers renew and expand
their user bases and as new customers are brought under contract.

Cost of revenues.Cost of revenues for the three months ended March 31,
2002 were approximately $537,000. Of that figure, approximately $221,000 is the
amortization of the developed technology intangible asset acquired in the
purchase of NexPrise in August 2001. The remainder consists of outsourced
hosting services for our customers, personnel and other expenses associated
with providing maintenance services, technical support services and royalties
payable to third parties whose software is incorporated into the NexPrise
solution. The Company expects cost of revenues to increase in the coming
quarters as we begin to amortize the

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developed technology intangible asset acquired in the InfoPrise purchase
in February 2002 and as we migrate the customers for whom we provide hosting
services to a more robust and secure hosting solution.

Research and development.Research and development expenses consist
primarily of personnel and other expenses associated with developing, updating,
and enhancing software. Research and development expenses from continuing
operations decreased from approximately $13.4 million for the three months
ended March 31, 2001 to $1.8 million for the three months ended March 31, 2002.
The decrease is primarily due to reductions in workforce that have occurred
over the past twelve months. The Company believes that continued investment in
research and development are required to remain competitive but does not expect
significant changes in research and development expenses in the coming quarter.

In process research & development.The Company expensed approximately
$399,000 of in-process research and development acquired as a result of the
InfoPrise purchase in February 2002.

Sales and marketing.Sales and marketing expenses consist primarily of
payroll and related expenses for personnel engaged in enterprise sales
activities and enterprise account management, as well as travel and promotional
expenses. Sales and marketing expenses decreased from approximately $5.0
million for the three months ended March 31, 2001 to $1.7 million for the three
months ended March 31, 2002. The decrease was primarily due to the reductions
in workforce that occurred over the past twelve months and decreased marketing
efforts. The Company expects sales and marketing expenses to increase in
coming quarters as the Company increases its sales and marketing efforts.

General and administrative.General and administrative expenses consist
primarily of salaries, fees for professional services and lease expenses.
General and administrative expenses decreased from $6.2 million for the three
months ended March 31, 2001 to $1.7 million for the three months ended March
31, 2002. The decrease was primarily due to the reductions in workforce that
have occurred over the past twelve months and lower payments to outside
professional services. The Company does not expect significant changes in
general and administrative expenses in the coming quarters.

Interest expense.Interest expense decreased to approximately $177,000
from approximately $4.0 million for the three months ended March 31, 2002 and
2001. Interest expense consists primarily of interest related to convertible
subordinated Notes which were issued in April 2000, and to a lesser extent,
financed equipment and other financing arrangements. Approximately $265,000 is
payable semi-annually in arrears on April 1 and October 1 of each year for
interest on the subordinated Notes remaining at March 31, 2002. In addition,
the deferred offering costs of the Notes are being amortized as interest
expense ratably over the term of the notes.

Interest income and other.Interest income and other, net, decreased to
approximately $20,000 from approximately $2.5 million for the three months
ended March 31, 2002 and 2001. Interest income and other, net has been derived
primarily from earnings on investments in cash equivalents and short-term
investments. Interest earned decreased from last year and is expected to
decrease in the next quarter as a result of lower invested balances as well as
lower interest rates.

Investment loss.The investment loss decreased to approximately $1.3
million from approximately $2.7 million for the three months ended March 31,
2002 and 2001. The loss in 2002 is made up of approximately $1.2 million of
equity losses in the marketplace companies in which we have a significant
ownership percentage and approximately $186,000 of write-downs of investments
accounted for using the cost method. The $2.7 million investment loss for the
three months ended March 31, 2001 is entirely made up of equity losses in
marketplace companies.

Loss before extraordinary item.As a result of the items described above
the loss before extraordinary item was approximately $7.0 million and $28.8
million for the three months ended March 31, 2002 and 2001. The loss before
extraordinary item is expected to decline modestly in the next quarter.

Extraordinary gain.In March 2001 the Company accepted for repurchase from
holders a principal amount of approximately $184.7 million of Convertible
Subordinated Notes, which represented approximately 74% of the outstanding
Notes at December 2000. The total amount paid by the Company for the tendered
notes was approximately $58.4 million, which was comprised of $270 per $1,000
of principal amount of notes, accrued interest and transaction costs. The
Company recognized a gain of approximately $125.8 million on the transaction,
which was recorded in the three months ended March 31, 2001. As most of the
Notes have been retired, any such future gains will be smaller.

Liquidity and Capital Resources

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As of March 31, 2002 NexPrise had approximately $17.7 million of cash,
cash equivalents, short-term investments and restricted cash; working capital
approximated $12.6 million. In April 2000, the Company completed an offering of
6% convertible subordinated Notes payable in 2007 and realized net proceeds of
$242.4 million. As a result of repurchases in March and June 2001, $8.8 million
of convertible Notes remain outstanding at March 31, 2002.

Net cash used by operating activities in the three months ending March 31,
2002 totaled $5.6 million. The net cash used in operating activities was
primarily due to losses from operations partially offset by non-cash charges of
depreciation and write-downs of assets. The actions taken in the past twelve
months to reduce expenditures are expected to decrease the ongoing use of cash
by operating activities to between $3.5 million and $4.5 million in the second
quarter of 2002. The use of cash is expected to decrease further in subsequent
quarters.

Net cash used in investing activities totaled $4.6 million for the three
months ended March 31, 2002. During the three months ended March 31, 2002, the
Company had net sales and maturities of $5.6 million of short-term investments
and gained approximately $1 million in cash in the acquisition of InfoPrise.

Net cash used in financing activities was $100,000 for the three months
ended March 31, 2002 and resulted primarily from the principal payments on our
capital lease obligations. We do not expect future payments related to this
lease.

Management believes the Company has adequate cash to sustain operations
through 2002 and is managing its business to achieve positive cash flow
utilizing existing assets. During 2001 the Companys commitments and
liabilities were significantly reduced via restructuring events, settlements of
long-term contracts and the repurchase of convertible notes at a substantial
gain. In addition, the Company reduced ongoing operating expenses by
renegotiating its lease commitments, reducing purchases of other services and
making workforce reductions. It is the Companys belief that the adjustments
to spending that have been made, combined with receipts expected from customer
contracts already in place, will carry the Company through 2002. New customer
contracts expected to be signed in 2002 and thereafter should provide the
additional revenue required to achieve positive cash flow. We are committed to
the successful execution of our operating plan and will take further action as
necessary to align our operations and reduce expenses. However, given the
significant changes in our operations, the fluctuation in cash and cash
equivalents balances may be greater than presently anticipated and we may find
it necessary to obtain additional equity or debt financing. In the event
additional financing is required, we may not be able to raise it on acceptable
terms or at all.

Investment Considerations

An investment in our securities involves significant risks, including
those described below. These risks relate to our new business model, our
ability to generate revenues and gain operating efficiencies, our history of
losses, significant changes, our ability to hire and retain key personnel, our
reliance on the hosted environment and technology provided by others, the
possible delisting of our common stock, the need to respond to rapid
technological change and legal claims against us.

Our actual results may differ materially from those expressed in any
forward-looking statement as a result of certain factors, including but not
limited to those set forth below and included in other portions of this
document.

We Have Made Substantial Changes in Our Business Model and Shut Down the
Businesses That Had Provided All of Our Revenues Since Inception

In August 2001 we used approximately $23 million in cash to acquire
NexPrise, Inc. a provider of collaborative commerce software solutions. This
business now provides all of our revenue; thus, management focus and
operational efforts primarily support this business. Prior to this
acquisition, the Companys business model was substantially different. In
December 2000, we shut down our Chemdex and Promedix marketplaces, laid off 235
employees and restructured certain operations. On April 26, 2001, we
implemented another restructuring in which we terminated 170 employees,
representing two-thirds of our workforce, accrued future lease costs associated
with excess production equipment and facilities, and wrote off assets as well
as the value of certain investments to recognize their diminished future
utility to the company. During the first six months of 2001, we ceased to
provide technology and services to our remaining marketplaces, and, as part of
the combination with NexPrise, Inc. we terminated additional personnel.
Furthermore, in February 2002 we acquired InfoPrise, Inc., a provider of data
management solutions. As a result of these and similar actions, there has been
a fundamental change in our business. There can be no assurance that we will be
successful in developing viable technology or a complete service offering.

Restructurings May Not Sufficiently Reduce Operating Expenses

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Our restructurings were designed to lower the cash used for operating
expenses by reducing expenses for facilities, sales and marketing, hosting,
professional services and marketing arrangements and significantly reducing our
current employee and contractor staffing levels. While the company has executed
its restructuring plans and the restructurings have reduced cash operating
expenses, our ability to ultimately generate profitable results from
operations, is dependent upon successful execution of our business plan,
including obtaining new customers. As of March 31, 2002, we had working capital
of $12.6 million and had equity of $29.1 million. During the three months
ended March 31, 2002, we used cash in operating activities of $5.6 million.
There can be no assurance that we will be successful in implementing our new
business plan or sufficiently reducing our operating expenses in the future.
Our inability to reduce costs or to integrate our recent acquisition and
develop a successful product and services offering could have a material
adverse effect upon our ability to successfully transition to our new business
plan and to remain in business.

We Have a Limited Operating History and an Evolving Technology and Service
Offering, Which Makes it Difficult to Evaluate Our Future Prospects

The success of NexPrise is based on integrating and developing a viable
technology and services offering and securing new customers. Our business model
is not fully developed, not proven and depends upon our ability, among other
things, to:



| |  |  | develop and market technology and services solutions that achieve broad market acceptance by our customers                                        
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | acquire and deploy a sufficient number of customers to achieve profitability                                                                      
|
| |  |  | extend our technology to support a wide range of hardware and
software to meet the needs of a large range of customers with a variety
of needs;   
|
| |  |  | acquire or license third party technologies that we require to
deliver our technology and services                                                
|
| |  |  | overcome publicity related to our public announcements of
restructurings, shareholder litigation and the shutdown of our former
marketplaces, and,
|
| |  |  | acquire customers operating in industries where we have limited
experience and provide them quality technology and services.                      

We may not successfully address these risks. If we do successfully address
these risks, additional risks related to factors that are outside our control
may prevent us from realizing sufficient revenues or profit margins to reach or
sustain profitability. For example, electronic collaborative commerce solutions
may experience problems with users as a result of security and privacy
concerns, general reticence about technology or the Internet or the failure of
the market to develop the necessary infrastructure for Internet-based
communications, such as wide-spread Internet access, high-speed modems,
high-speed communication lines and computer availability.

NexPrise May Not Achieve the Benefits We Expect from both the August
Acquisition and the More Recently Announced Acquisition of InfoPrise and This
May Have a Material Adverse Effect on the Combined Companys Business,
Financial Condition and Operating Results

The combined company will need to overcome significant issues in order to
realize any benefits or synergies from the acquisitions, including the timely,
efficient and successful execution of a number of post-merger events. Key
events include:



| |  |  | integrating the operations of the companies;                                         
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | retaining and assimilating the key personnel of each company;                        
|
| |  |  | developing a product that will be attractive to existing and potential customers; and
|
| |  |  | retaining existing customers and strategic partners of each company.                 

The successful execution of these post-merger events will involve
considerable risk and may not be successful. These risks include:



| |  |  | the potential disruption of the combined companys ongoing business and distraction of its management;          
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | the difficulty of incorporating acquired technology and rights into the combined companys products and services

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| |  |  | unanticipated expenses related to technology integration;                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impairment of relationships with employees and customers as a
result of any integration of new management personnel; and
|
| |  |  | potential unknown liabilities associated with the merger.                                                                   

The combined company may not succeed in addressing these risks or other
problems encountered in connection with the merger.

We Are Dependent on a Small Number of Customers in a Limited Number of
Industries

To date, NexPrise has derived a significant portion of its revenues from a
small number of customers in two industries. Many of our customers do not have
contracts that extend beyond one year. A critical component of the business
plan of the combined company will be the acquisition of new customers in other
industries, increasing the number of users in our current customers and
renewing current contracts. There can be no assurance that we will be
successful in developing profitable relationships with new customers in new
industries or that we will retain existing customers. There also can be no
assurance that NexPrise will achieve its sales goals given the worsening
business environment that has followed the September 11, 2001 events and the
effect it may have on corporate spending for technology.

Security Risks and Concerns May Decrease the Demand for Our Services, and
Security Breaches May Disrupt Our Services or Make Them Inaccessible to Our
Customers.

Our services involve the storage and transmission of business-critical,
proprietary information. If the security measures we or our third party data
centers have implemented are breached, our customers could lose this
information and we could be exposed to litigation and possible liability.
Anyone who circumvents these security measures could misappropriate
business-critical proprietary information or cause interruptions in our
services or operations. In addition, computer hackers could introduce
computer viruses into our systems or those of our customers, which could
disrupt our services or make them inaccessible to customers. We may be required
to expend significant capital and other resources to protect against the threat
of security breaches or to alleviate problems caused by breaches. Our security
measures and those that our third-party data centers provide may be inadequate
to prevent security breaches, and our business and reputation will suffer if
these breaches occur.

We Are Dependent Upon Outsourcing Providers for Provision of the Hosted
Environment for our Customers; Connection and Performance Issues Have Occurred
and May Recur

We rely on third-party providers for our data center services, principal
Internet connections and data hosting. This hosted environment is critical to
the provision of our software to our customers and if the environment does not
work well, is cut-off or fails, our customers are unable to use our solution;
this causes great consternation among any hosted customer. We have experienced
and may continue to experience interruptions and delays in service and
availability for such services. The Company has signed an agreement with a new
vendor to provide the hosted environment, but there can be no assurance that
the transition to this environment will successfully occur to the full
satisfaction of our customers. Furthermore, we depend on these third party
providers for prompt delivery, installation and service of software, hardware
and telecommunications equipment used to deliver our products and services. Any
failures, interruptions, or delays experienced or caused by these third party
providers could negatively impact our relationship with users and adversely
affect our brand and our business and could expose us to liabilities to third
parties. In addition, because we are required in most circumstances to enter
into contracts for data center space in advance of customer commitments, if we
are unable to increase our customer base at the rate that we anticipate in the
geographic areas in which we have contracted for space, our operating results
will suffer.

Our operations could be significantly hindered by the occurrence of a
natural disaster or other catastrophic event at our company or any third party
provider. Our and their operations are susceptible to outages due to fire,
floods, power loss, telecommunications failures, break-ins and similar events.
In addition, the majority of our and their network infrastructure is located in
Northern California, an area susceptible to earthquakes. In the recent past,
the western United States (and California in particular) has experienced
repeated episodes of diminished electrical power supply. As a result of these
episodes, certain of our and their operations or facilities may be subject to
rolling blackouts or other unscheduled interruptions of electrical power. The
prospect of such unscheduled interruptions may continue for the foreseeable
future and we are unable to predict either their occurrence, duration or
cessation. We do not have, and our third party providers may not have, multiple
site capacity for all of our services in the event of any such occurrence.
Despite implementation of network security measures, the servers are vulnerable
to computer viruses, physical and electronic break-ins, and similar disruptions
from unauthorized tampering with our computer systems. In addition, systems are

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vulnerable to coordinated attempts to overload them with data, which could
result in denial or reduction of service to some or all of our users for a
period of time. Furthermore, the failure by the third party providers to
provide our required data communications capacity could result in interruptions
in our service. Interruptions in our service will reduce our revenues and
profits, and our future revenues and profits will be harmed if our users
believe that our system is unreliable or insecure. We have experienced system
failures from time to time. If we experience frequent or persistent system
failures, our reputation and brand could be permanently harmed. We do not carry
sufficient business interruption insurance to compensate us for losses that may
occur as a result of any of these events. Any such event could have a material
adverse effect on our business, operating results, and financial condition.

Our Operating Results Will Be Highly Dependent on License and Service Revenues
from One Software Suite and Our Business Could Be Materially Harmed by Factors
That Adversely Affect the Pricing and Demand for This Software Suite

Substantially all of NexPrises license revenues have been, and the
license and services revenues of the combined company are expected to continue
to be, derived from the license of the ipTeam solution. Accordingly, our
future operating results will depend on the demand for ipTeam by future
customers, including new and enhanced releases that are subsequently
introduced. ipTeam was commercially launched in 1998. If our competitors
release new products that are superior to ipTeam in performance or price, or if
we fail to enhance ipTeam and introduce new products in a timely manner, demand
for our products may decline, and we may have to reduce the pricing of our
products. A decline in demand or pricing for ipTeam as a result of these or
other factors would significantly reduce the revenues we can expect in the
future.

In the past, many software companies have experienced delays in the
commencement of commercial release of their products. To date, such delays have
not had a material impact on NexPrises revenues. In the future, we may fail to
introduce or deliver new products on a timely basis. If new releases or
products are delayed or do not achieve market acceptance, we could experience
customer dissatisfaction or a delay or loss of revenues. In addition, customers
may delay purchases of our products in anticipation of future releases. If
customers defer material orders in anticipation of new releases or new product
introductions, our revenues may decline.

Moreover, as we release enhanced versions of our products, we may not be
successful in upgrading our customers who purchased previous versions of the
product to the current version. We also may not be successful in selling add-on
modules for our products to existing customers. Any failure to continue to
upgrade existing customers products or sell new modules, if and when they are
introduced, could negatively impact customer satisfaction and our revenues.

As with most software companies, developing and selling a product that
does not require significant customization in product features or sales process
for any particular customer or set of customers is critical to our success. If
we are unable to resist customer requests to individualize our product or
unable to develop a repeatable sales process our revenues will suffer and our
costs will increase.

The Company Has a History of Losses, No Significant Revenues and Expects to
Continue to Incur Significant Operating Losses and Negative Cash Flow; NexPrise
May Never Be Profitable

Prior to the NexPrise acquisition, the Company had derived revenues solely
from product sales through its Chemdex and Promedix marketplaces: their
operations have been discontinued. In addition, it is unlikely that we will
recognize any revenue in the future related to our affiliated marketplaces.
Since its inception, NexPrise has recorded revenues from a small number of
customers, not all of which are committed to purchase long-term licenses. There
can be no assurance that the combined company will be successful in identifying
new customers or negotiating commercially acceptable contractual provisions
that will allow recording of revenues. The Company has spent significant funds
for the acquisition, and is subject to commitments to lease third party
facilities and will likely spend a significant amount of money to further
develop our operations, research and development and sales and marketing
operations. We have incurred significant operating and net losses and negative
cash flow and have not achieved profitability. There can be no assurance that
we will ever be profitable.

We Operate in a New, Highly Competitive Market and Our Inability to Compete
Successfully Against New Entrants and Established Companies Would Limit Our
Ability to Gain Significant Market Share

Our target market is rapidly evolving and highly competitive. It may be
characterized by an increasing number of market entrants, as many companies may
find a technological path around existing barriers to entry.

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We already have competition from a diverse group of companies, including
companies such as MatrixOne and PTC. In addition, providers of various software
products such as Ariba, Commerce One, Oracle and SAP may expand their product
offerings to be competitive with us in the future.

Our current and potential competitors may develop superior platforms that
achieve greater market acceptance than our solution. Many of our existing and
potential competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. Such competitors can undertake
more extensive marketing campaigns for their brands, products and services,
adopt more aggressive pricing policies and make more attractive offers to
customers, potential employees, distribution partners, commerce companies and
third-party suppliers.

In addition, substantially all of our prospective customers have
established and long-standing relationships with some of our competitors.
Accordingly, we cannot be certain that we will be able to expand NexPrises
customer and user base, or retain its current customers. We may not be able to
compete successfully against our current or future competitors, which could
have a material adverse effect on our business, results of operations and
financial condition.

Our Financial Performance, Workforce Reduction and Acquisitions of NexPrise and
InfoPrise May Adversely Affect the Morale and Performance of Our Personnel and
Our Ability to Hire New Personnel

In connection with the evolution of our business model and in order to
reduce our cash expenses, we have enacted a number of changes in personnel.
This includes changes to virtually all executive management, resignation of
most of the original board of directors and significant workforce reductions.
The significant changes in personnel may adversely affect morale and the
companys ability to attract and retain key personnel. In addition, recent
trading levels of our common stock have decreased the value of the stock
options granted to employees pursuant to our stock option plan. As a result of
these factors, our remaining personnel may seek employment with larger, more
established companies or companies they perceive to have better prospects.

If We Fail to Comply with Nasdaq Rules, Our Common Stock May Be Delisted from
the Nasdaq National Market, Which Could Eliminate the Trading Market for Our
Common Stock

If the market price for our common stock does not trade above $1.00 per
share for 10 consecutive days prior to May 15, 2002 or we otherwise fail to
meet the criteria for continued listing on the Nasdaq National Market, our
common stock may be delisted from the Nasdaq National Market. If the stock is
delisted, it would significantly decrease the liquidity of an investment in
NexPrise common stock. In addition, the stock may be deemed to be penny stock.
If our common stock is considered penny stock, it would be subject to rules
that impose additional sales practices in broker-dealers who sell our
securities. For example, broker-dealers must make a special suitability
determination for the purchaser and have received the purchasers written
consent to the transaction prior to sale. Also, a disclosure schedule must be
prepared prior to any transaction involving a penny stock and disclosure is
required about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Monthly
statements are also required to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in
penny stock. Because of these additional obligations, some brokers may be
unwilling to effect transactions in penny stocks. This could have an adverse
effect on the liquidity of our common stock and the ability of investors to
sell the common stock.

The Market Price Per Share of NexPrise Common Stock Following the Reverse Stock
Split May Drop and Not Remain in Excess of the $1.00 Minimum Bid Price as
Required by Nasdaq, as Downward Pressure May be Created by Such Split or Other
Factors May Arise.

We cannot predict whether the recently completed reverse stock split will
increase the market price for our common stock. The history of similar stock
split combinations for companies in like circumstances is varied. There is no
assurance that the market price per share of our common stock following the
reverse stock split will remain in excess of the $1.00 minimum bid price as
required by Nasdaq or that we will otherwise meet the requirements of Nasdaq
for continued inclusion for trading on Nasdaq. A reverse stock split could
negatively impact the value of our stock by allowing additional downward
pressure on the stock price as its relative value becomes greater following the
reverse split. In other words, the stock, at its new, higher price, has farther
to fall and therefore more room for investors to short or otherwise trade the
value of the stock downward. Similarly, a delisting may negatively impact the
value of the stock as stocks trading on the over-the-counter market are
typically less liquid and trade with larger variations between the bid and ask
price. The market price of our common stock will also be based on our
performance and other factors, some of which are unrelated to the number of
shares outstanding. If the market price of our common stock declines, the
percentage decline as an absolute number and as a percentage of our overall
market capitalization may be greater than would occur in the absence of a
reverse stock

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split. Furthermore, liquidity of our common stock could be adversely
affected by the reduced number of shares that would be outstanding after the
reverse stock split.

Changes to Our Management Team and Board of Directors May Create an Environment
which is Ineffective and/or Inefficient; If We are Unsuccessful in Developing
An Integrated Management Team, Our Business and Results of Operations could
Suffer

Most of the members of our management team and Board of Directors have
only recently joined us. In August 2001, Ted Drysdale joined us as President,
Varma Kunaparaju as Vice President, Product Development, and John Lynch as
Senior Vice President of Sales and Services. In November 2001, we promoted Ted
Drysdale to President, Chief Executive Officer and Chairman of the Board,
replacing David Perry, former Chief Executive Officer, who became Vice
Chairman. Also in November 2001, Brook Byers, Jan Leschly, Naomi Seligman and
L. John Wilkerson, resigned from our board and John Glancy was elected. In
January 2002 and February 2002, Gary Lenz and Thomas Insley were elected to our
Board. In addition, in February 2002, Raj Tolani joined us as Vice President,
Engineering, and in March 2002, Jerry Natoli replaced David Zechnich as Chief
Financial Officer. If we do not effectively integrate these executives and
board members into our business, or if they do not work together with existing
personnel as a management team to enable us to implement our business strategy,
our business will suffer.

Our Business Involves a Lengthy and Unpredictable Sales Cycle

The sales cycle for the target customers of the software and services we
provide tends to be lengthy; our sales cycle may be somewhat longer than those
of our more established competitors. The unpredictability of the length of our
sales cycle could make it difficult to forecast revenue and plan expenditures.
Additionally, any delays in deployment of our software related to our
inexperience with a type of business or the size or complexity of the account
would delay our ability to recognize revenue from that account. Such delays
could adversely affect our financial results.

Our Business Will Suffer if We Do Not Enhance our Product or Introduce New
Features to Meet Changing Customer Requirements

The market for collaborative software and services is characterized by
rapid technological change, frequent new hardware, software and networking
product introductions and Internet-related technology enhancements, uncertain
product life cycles, changes in customer demands and evolving industry
standards. If we do not develop technology that can respond to these changes
the probability of us obtaining new customers will be remote. In particular, we
are designing our technology to support a variety of hardware, software and
networking products that we believe to be proven and among the most widely
used. We can make no assurances, however, that future customers will continue
to use these products. Even if they do, new versions of these products are
likely to be released and we will need to adapt our technology to keep pace
with changes made to hardware and software configurations and network
infrastructures.

If we do not develop, license or acquire new technology, or deliver
enhancements to existing products on a timely and cost-effective basis, we may
be unable to meet the growing demands of potential customers. In addition, as
we introduce new services or technologies into existing customer architectures,
we may experience performance problems associated with incompatibility among
different versions of hardware, software and networking products. To the extent
that such problems occur, we may face adverse publicity, delay in market
acceptance of our services or customer claims against us, any of which could
harm our business.

We Anticipate Our Operating Results Will Fluctuate Significantly from Quarter
to Quarter

Important factors that could cause our quarterly results to fluctuate materially include:



| |  |  | the timing of obtaining new customers (length of sales cycle);                         
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | the timing of deploying services for new customers;                                    
|
| |  |  | the timing and magnitude of operating expenses and capital expenditures;               
|
| |  |  | costs related to the various third-party technologies we incorporate into our products;
|
| |  |  | utilization of our leased third-party data center space and technology infrastructure; 
|
| |  |  | changes in our pricing policies or those of our competitors; and                       

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| |  |  | the amount of credits that we may be required to issue to our current
customers if we fail to deliver our services pursuant to contractual
arrangements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

Due to these and other factors, quarter-to-quarter comparisons of our
operating results may not be meaningful. You should not rely on our results for
any one quarter as an indication of our future performance. In future quarters,
our operating results may fall below the expectations of public market analysts
or investors. If this occurs, the market price of our common stock would likely
decline.

Our current and future levels of operating expenses and capital
expenditures are based largely on our operating plans and estimates of future
billings and revenues. These expenditure levels are, to a large extent, fixed
in the short term. We may not be able to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall, and any significant shortfall
in revenue relative to planned expenditures could negatively impact our
business and results of operations.

We Are Dependent on Intellectual Property and on Products Licensed or Purchased
from Third Parties and are Exposed to Legal Liability for Infringement

Our success and ability to compete depends on our ability to develop and
maintain the proprietary aspects of our technology. We rely on a combination
of copyright, trademark and trade secret laws and contractual restrictions to
establish and product the proprietary aspects of our technology. We seek to
protect the source code for our software, documentation and other written
materials under trade secret copyright laws. Finally, we seek to avoid
disclosure of our intellectual property by requiring employees and consultants
with access to our proprietary information to execute confidentiality
agreements with us and by restricting access to our source code.

Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Litigation may be necessary in the
future to enforce our intellectual property rights, to protect our trade
secrets, and to determine the validity and scope of the proprietary rights of
others. Any resulting litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business
operating results.

Our business has involved the licensing of our technology to our
customers. Pursuant to our existing licenses, we have made certain
representations and warranties and agreed to indemnify our licensees against
claims of infringement by third parties. Thus, we may be exposed to a
significant risk of liability for intellectual property infringement claims by
others. Our success and ability to compete also depend on our ability to
operate without infringing upon the proprietary rights of others. In the event
of a successful claim of infringement against us and our failure or inability
to license the infringed technology, our business and operating results would
be significantly harmed.

As part of our normal operations, we purchase, license or lease software,
hardware and networking products from third party commercial vendors. We obtain
most of our components from third parties on a purchase order basis. These
products may not continue to be available on commercially reasonable terms, or
at all. The loss of these products could result in delays in the sale of our
services until equivalent technology, if available, is identified, procured and
integrated, and these delays could result in lost revenues. Some of the key
components of our services are available only from sole or limited sources. For
example, only hardware manufactured by two vendors is compatible with the
Solaris operating system, which is a key component of our infrastructure.
Further, to the extent that the vendors from whom we purchase these products
increase their prices, our gross margins could be negatively affected.

Non-Compliance with Government Regulations May Subject Us to Liability

In addition to regulations applicable to businesses generally, in
connection with our former business of servicing business-to-business
marketplaces, we were subject to direct regulation by governmental agencies
which includes numerous laws and regulations generally applicable to the
chemical, pharmaceutical, controlled substances, human and biological reagents,
medical and invitro devices, nuclear chemical businesses and environmental
spills, as well as U.S. import and export controls and import controls of other
countries. While the shutdown of Chemdex, Promedix and SpecialtyMD may limit
future regulatory and product liability risks, until all statutes of limitation
have expired, certain legal risks will remain.

We relied on our suppliers to comply with applicable local, state and
federal laws regarding the labeling and the dissemination of information on any
products sold that may be hazardous or present a health threat to the user. If
these suppliers have failed, or we have failed to maintain the requisite
records irrespective of the actions of the suppliers, or if either of us have
failed to adequately comply

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with labeling and information dispensing requirements of local, state or
federal laws, then we may be held legally responsible, since we held title to
these products, and could be subject to governmental penalties or fines, as
well as private lawsuits to enforce these laws. We have also relied upon our
suppliers to obtain appropriate approvals for products regulated by the FDA and
to comply with the requirements relating to those approvals and products. The
failure of suppliers to obtain or comply with those approvals, or the failure
of the product advertising or labeling to be consistent with the FDA approval
for the products, or other failures by the products themselves, or our failure
to keep regulatory records required by the FDA, such as complaint files, could
result in costly product recalls, significant fines and judgments, civil and
criminal liabilities and negative publicity. In addition, we may discover that
we inadvertently sold other regulated products without a requisite license or
permit or failed to fully comply with other local, state or federal laws
governing these sales.

Except as described in the next sentence, we are unaware of any current
investigations, inquiries, citations, fines or allegations of violations or
noncompliance relating to regulatory requirements pending by government
agencies or by third parties against us. In February, 2001 the Company received
a subpoena from the U.S. Department of Justice, Drug Enforcement
Administration, for certain billing, invoice, and shipping records concerning
sales to an unaffiliated purchaser. It is also possible that there may be
investigations or allegations that we are not aware of or future investigations
or allegations. The risk that any noncompliance may be discovered in the future
is currently unknown. Although any potential impact on us for noncompliance
cannot currently be established, it could result in significant civil or
criminal penalties, including monetary fines and injunctions, for noncompliance
and negative publicity, and seriously harm our business, revenues, results of
operations and financial condition.

Government Contracts and Compliance With Government Regulations May Subject Us
to Increased Administrative Burdens and Risks That May Increase the Cost of
Doing Business

As a result of increased contracting with Federal, state and local
agencies, we may become subject to additional laws and regulations not
currently applicable to us thereby increasing our administrative burdens.
Furthermore, we must comply with any new regulations in both Europe and the
United States, as well as any other regulations adopted by other countries
where we may do business. Compliance with any newly adopted laws may prove
difficult and may harm our business, operating results and financial condition.

Government entities may also terminate their contracts with us earlier
than we expect which could result in revenue shortfalls. Government entities
may also investigate and audit our contracts and, if any improprieties are
found, we may be required to refund revenues we have received, to forego
anticipated revenues and may be subject to penalties. In addition, if we fail
to establish and maintain important relationships with government entities and
agencies, our ability to successfully bid for future contracts may be adversely
affected.

We Face Risks Associated With Shareholder and Bondholder Litigation

Several class action lawsuits have been filed and served on the Company
alleging that the Company and certain individuals made false and misleading
statements concerning our business model and earnings for fiscal 2000 and
concerning the Companys initial public offering. Although we believe that we
have meritorious defenses to the actions and intend to defend the suits
vigorously, we cannot predict with certainty the outcome of these lawsuits. Our
defense against such lawsuits will be costly and will require a significant
commitment of time and resources by our senior management.

Our Common Stock Price is Especially Volatile Which Could Result in Substantial
Losses to Investors.

The stock market and specifically the stock of Internet related companies
have been very volatile. This broad market volatility and industry volatility
may reduce the price of our common stock, because our business is
Internet-based without regard to our operating performance. On a pre-reverse
split basis, our common stock reached a high of $243.50 and traded as low as
$0.59 during 2000, and had a high of $4.31 and low of $.12 during 2001. On
April 19, 2002 the last reported sales price on Nasdaq was $0.48 (prior to
1-for-15 reverse stock split).

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Item 3.Qualitative and Quantitative Disclosure about Market Risk

Market Risk Disclosure

The following discussion about the Companys market risk disclosures
involves forward-looking statements. Actual results could differ materially
from those projected in the forward-looking statements. We are exposed to
market risk related primarily to changes in interest rates. However, we do not
hold derivative financial instruments for speculative or trading purposes.

Interest Rate Sensitivity

We maintain a short-term investment portfolio consisting of mainly income
securities with maturities of less than one year. These available-for-sale
securities are subject to interest rate risk and will fall in value if market
interest rates increase. We place our investments in instruments that meet high
credit quality standards, as specified in our investment policy. We do not
expect any material loss with respect to our investment portfolio. Our notes
payable are at a fixed interest rate.

Foreign Currency Risk

Our sales to-date have been made to U.S. customers and, as a result, we
have not had any exposure to factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. However, we are
now selling and, in future periods, we expect to sell more in foreign markets.
If our sales will be made in U.S. dollars, a strengthening of the U.S. dollar
could make our products less competitive in foreign markets.




PART II. OTHER INFORMATION




Item 1.Legal Proceedings

A former stockholder of Promedix filed a complaint against us, Promedix
and certain other parties in the Superior Court of California, County of Los
Angeles alleging, among other things, that we had negligently failed to
exchange his shares of Promedix stock for shares of our common stock on a
timely basis, causing him damages resulting from a decline in our stock price
in the intervening time between the submission of his Promedix shares for
exchange and his receipt of our shares. The complaint did not specify the
amount of damages sought by the plaintiff, but instead seeks general, special
and punitive damages. We filed a partially successful motion to dismiss the
plaintiffs claims on February 5, 2001. Plaintiff amended the complaint to
allege a conspiracy between all defendants to delay his sale of stock. We
believe we have meritorious defenses against all claims asserted. Trial is set
for May 2002. It is impossible for us to predict the outcome of such
litigation.

In 2001, several class action lawsuits, including one derivative suit,
were filed and served on us alleging that the Company and certain individuals
made false and misleading statements concerning our business model and earnings
for fiscal 2000. The Company is also a defendant in the IPO class action suits
filed against issuers and the investment banks alleging that the offering
documents were false and misleading. Although we believe that we have
meritorious defenses to the actions and intend to defend the suits vigorously,
we cannot predict with certainty the outcome of these lawsuits. Our defense
against such lawsuits will be costly and may require a significant commitment
of time and resources by our senior management.

The Company is a party to various claims in the ordinary course of
business. Although the results of litigation and claims cannot be predicted
with certainty, the Company believes the final outcome of such matters will not
have a material adverse effect on the Companys financial position, results of
operations or cash flows.




Item 2.Changes in Securities and Use of Proceeds

None




Item 3.Defaults upon Senior Securities

None

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Item 4.Submission of Matters to a Vote of Securities Holders

None




Item 5.Other Information

None




Item 6.Exhibits and Reports on Form 8-K

(a)  Exhibits. The following is a list of exhibits filed as part of this Report
on Form 10-Q. Where indicated by footnote, exhibits that were previously filed
are incorporated by reference.

|        |  |                                                                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                               
|2.10    |  | Agreement and Plan of Merger and Reorganization, dated February 4, 2002, by and among Registrant,
InfoPrise, Inc., a Delaware corporation, Indigo Acquisition Corporation, a Delaware corporation, Raj
Tolani, Can Nguyen, and Timeline Venture Investors I, LP, as Principal Stockholders and Timeline
Venture Management, LLC, as Securityholders Agent (1)
|2.11    |  | Form of Certificate of Ownership and Merger between Ventro Corporation and Ventro Merger Subsidiary (2)                                                                                                                                                                                                                                                       
|3.3     |  | Certificate of Amendment to Registrants Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                                                    
|4.6     |  | Form of convertible promissory notes (1)                                                                                                                                                                                                                                                                                                                      
|**10.26 |  | Addendum to Letter Agreement between NexPrise and David Zechnich dated January 24, 2002 (2)                                                                                                                                                                                                                                                                   
|**10.29 |  | InfoPrise, Inc. 2000 Non-Equity Incentive Plan (3)                                                                                                                                                                                                                                                                                                            
|**10.30 |  | InfoPrise, Inc., 2000 Equity Incentive Plan (4)                                                                                                                                                                                                                                                                                                               



---

|(1) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an Exhibit to Registrants Current Report on Form 8-K filed with the
Commission on February 8, 2002.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an exhibit to Registrants Form 10-K filed with the Commission on
February 26, 2002.                
|   
|   
|   
|   
|(3) |  | Incorporated by reference to Exhibit 99.1 to Registrants Registration
Statement on Form S-8 filed with the Commission on March 30, 2002.                                      
|   
|   
|   
|   
|(4) |  | Incorporated by reference to Exhibit 99.2 to Registrants Registration
Statement on Form S-8 filed with the Commission on March 30, 2002.                                      
|   
|   
|   
|   
|**  |  | Indicates management contract or compensatory plan or arrangement                                                                                                              

Reports on Form 8-K:

(1)  On January 15, 2002, NexPrise filed a report on form 8-K announcing its name change from Ventro Corporation.

(2)  On February 8, 2002, NexPrise filed a report on form 8-K announcing its acquisition of InfoPrise, Inc.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on May 01, 2002.

| |                |                                                                       
| | -------------- | ----------------------------------------------------------------------
| | NEXPRISE, INC.
|
| | By:            | /s/ JEROME E. NATOLI
        
Jerome E. Natoli
Chief Financial Officer

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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                               
|2.10    |  | Agreement and Plan of Merger and Reorganization, dated February 4, 2002, by and among Registrant,
InfoPrise, Inc., a Delaware corporation, Indigo Acquisition Corporation, a Delaware corporation, Raj
Tolani, Can Nguyen, and Timeline Venture Investors I, LP, as Principal Stockholders and Timeline
Venture Management, LLC, as Securityholders Agent (1)
|2.11    |  | Form of Certificate of Ownership and Merger between Ventro Corporation and Ventro Merger Subsidiary (2)                                                                                                                                                                                                                                                       
|3.3     |  | Certificate of Amendment to Registrants Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                                                    
|4.6     |  | Form of convertible promissory notes (1)                                                                                                                                                                                                                                                                                                                      
|**10.26 |  | Addendum to Letter Agreement between NexPrise and David Zechnich dated January 24, 2002 (2)                                                                                                                                                                                                                                                                   
|**10.29 |  | InfoPrise, Inc. 2000 Non-Equity Incentive Plan (3)                                                                                                                                                                                                                                                                                                            
|**10.30 |  | InfoPrise, Inc., 2000 Equity Incentive Plan (4)                                                                                                                                                                                                                                                                                                               



---

|(1) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an Exhibit to Registrants Current Report on Form 8-K filed with the
Commission on February 8, 2002.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an exhibit to Registrants Form 10-K filed with the Commission on
February 26, 2002.                
|   
|   
|   
|   
|(3) |  | Incorporated by reference to Exhibit 99.1 to Registrants Registration
Statement on Form S-8 filed with the Commission on March 30, 2002.                                      
|   
|   
|   
|   
|(4) |  | Incorporated by reference to Exhibit 99.2 to Registrants Registration
Statement on Form S-8 filed with the Commission on March 30, 2002.                                      
|   
|   
|   
|   
|**  |  | Indicates management contract or compensatory plan or arrangement                                                                                                              

27