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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 September 30, 2001
 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

VENTRO CORPORATION

(Exact name of Registrant as specified in its charter)


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

1500 Plymouth Street
Mountain View, California, 94043
(650) 567-8900
(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 September 30, 2001, 46,364,960 shares of the registrants common stock,
$.0002 par value per share, were issued and outstanding.



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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             



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VENTRO CORPORATION
 FORM 10-Q
 For the Quarter Ended September 30, 2001
 INDEX

|                               |                                                                                          |    |    |  | 
|------------------------------ | ---------------------------------------------------------------------------------------- | -- | -- |  | 
|                               | Page                                                                                    
|                               |                                                                                         
|                              
|PART I   FINANCIAL INFORMATION
|                              
|Item 1.                        | Unaudited Condensed Consolidated Financial Statements:                                   |   
|                              
|                               | Balance Sheets as of September 30, 2001 and December 31, 2000                            |    | 3  | 
|                              
|                               | Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000 |    | 4  | 
|                              
|                               | Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000           |    | 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                                |    | 22 | 
|                              
|PART II   OTHER INFORMATION   
|                              
|Item 1.                        | Legal Proceedings                                                                        |    | 22 | 
|                              
|Item 2.                        | Changes in Securities and Use of Proceeds                                                |    | 22 | 
|                              
|Item 3.                        | Defaults Upon Senior Securities                                                          |    | 22 | 
|                              
|Item 4.                        | Submission of Matters to a Vote of Securities Holders                                    |    | 22 | 
|                              
|Item 5.                        | Other Information                                                                        |    | 22 | 
|                              
|Item 6.                        | Exhibits and Reports on Form 8-K                                                         |    | 23 | 
|                              
|SIGNATURE                      |                                                                                          | 24 |   



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VENTRO CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 
ASSETS

|                                                     |                                                                                                            |                                                      |        |               |        |              |         |          |         |  
|---------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------------- | ------ | ------------ | ------- | -------- | ------- | -
|                                                     |                                                                                                            |                                                      |        | September 30, |        | December 31,
|                                                     |                                                                                                            |                                                      |        | 2001          |        | 2000        
|                                                     |                                                                                                            |                                                      |        |               |        |             
|                                                     |                                                                                                            |                                                      |        | (Unaudited)   |        | (1)         
|Current assets:                                      |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     | Cash and cash equivalents                                                                                  |                                                      | $      | 23,057        |        |              | $       | 91,348   |        
|                                                     | Short-term investments                                                                                     |                                                      |        | 8             |        |              |         | 94,987   |        
|                                                     | Accounts Receivable, net                                                                                   |                                                      |        | 482           |        |              |         |         |        
|                                                     | Due from marketplace companies, net                                                                        |                                                      |        | 3,181         |        |              |         | 4,269    |        
|                                                     | Other current assets                                                                                       |                                                      |        | 2,664         |        |              |         | 6,303    |        
|                                                     | Current assets relating to discontinued operations                                                         |                                                      |        | 911           |        |              |         | 15,620   |        
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     |                                                                                                            | Total current assets                                 |        |               | 30,303 |              |         |          | 212,527 |  
|Restricted cash                                      |                                                                                                            |                                                      | 9,251  |               |        |              | 5,687   |         
|Property and equipment, net                          |                                                                                                            |                                                      | 6,157  |               |        |              | 21,797  |         
|Ownership interest in marketplace companies          |                                                                                                            |                                                      | 4,833  |               |        |              | 6,103   |         
|Other long-term assets, net                          |                                                                                                            |                                                      | 23,115 |               |        |              | 9,333   |         
|Long-term assets relating to discontinued operations |                                                                                                            |                                                      |       |               |        |              | 1,861   |         
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     |                                                                                                            | Total assets                                         |        | $             | 73,659 |              |         | $        | 257,308 |  
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)      
|                                                    
|                                                    
|                                                    
|                                                    
|Current liabilities:                                 |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     | Accounts payable                                                                                           |                                                      | $      | 2,389         |        |              | $       | 2,931    |        
|                                                     | Accrued compensation                                                                                       |                                                      |        | 1,882         |        |              |         | 3,699    |        
|                                                     | Accrued expenses                                                                                           |                                                      |        | 11,274        |        |              |         | 14,423   |        
|                                                     | Deferred Revenue and Customer advance                                                                      |                                                      |        | 5,369         |        |              |         | 5,000    |        
|                                                     | Other current liabilities                                                                                  |                                                      |        | 181           |        |              |         | 419      |        
|                                                     | Accrued liabilities relating to discontinued operations                                                    |                                                      |        | 1,156         |        |              |         | 27,703   |        
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     |                                                                                                            | Total current liabilities                            |        |               | 22,251 |              |         |          | 54,175  |  
|Notes payable, less current portion                  |                                                                                                            |                                                      | 8,803  |               |        |              | 250,000 |         
|Other long-term liabilities                          |                                                                                                            |                                                      | 2,835  |               |        |              | 206     |         
|Commitments and contingencies                        |                                                                                                            |                                                      |       |               |        |              |        |         
|                                                    
|Stockholders equity:                                |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     | Common stock, $.0002 par value; 175,000 shares authorized; 46,365 and 45,952
shares issued and outstanding |                                                      |        | 9             |        |              |         | 9        |        
|                                                     | Additional paid-in capital                                                                                 |                                                      |        | 631,239       |        |              |         | 630,140  |        
|                                                     | Deferred compensation                                                                                      |                                                      |        | (649          | )      |              |         | (1,051   | )      
|                                                     | Accumulated deficit                                                                                        |                                                      |        | (590,885      | )      |              |         | (675,562 | )      
|                                                     | Accumulated other comprehensive income (loss)                                                              |                                                      |        | 56            |        |              |         | (609     | )      
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     |                                                                                                            | Total stockholders equity (deficit)                 |        |               | 39,770 |              |         |          | (47,073 | )
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         
|                                                     |                                                                                                            | Total liabilities and stockholders equity (deficit) |        | $             | 73,659 |              |         | $        | 257,308 |  
|                                                     |                                                                                                            |                                                      |        |               |        |              |         |         



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

See accompanying notes to condensed consolidated financial statements.



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

|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |          |          |  
|--------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------- | ------- | ------------------ | ------- | ----------------- | ------- | ------- | ------- | ---- | ------- | ------ | ------ | - | ------- | -------- | -------- | -
|                                                                                                    |                                                      |                   |         | Three Months Ended |         | Nine Months Ended
|                                                                                                    |                                                      |                   |         | September 30,      |         | September 30,    
|                                                                                                    |                                                      |                   |         |                    |         |                  
|                                                                                                    |                                                      |                   |         | 2001               |         | 2000              |         | 2001    |         | 2000
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |     
|Net revenues                                                                                        |                                                      | $                 | 350     |                    |         | $                 |        |         |         | $    | 350     |        |        | $ |        |         
|Cost of revenues                                                                                    |                                                      |                   | 265     |                    |         |                   |        |         |         |      | 265     |        |        |   |        |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                    | Gross profit                                         |                   |         | 85                 |         |                   |         |        |         |      |         | 85     |        |   |         |         |         
|Operating Expenses:                                                                                 |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                    | Research and development                             |                   |         | 3,280              |         |                   |         | 9,897   |         |      |         | 22,072 |        |   |         | 19,933   |         
|                                                                                                    | Amortization of In Process Research and Development  |                   |         | 2,300              |         |                   |         |        |         |      |         | 2,300  |        |   |         |         |         
|                                                                                                    | Sales and marketing                                  |                   |         | 1,648              |         |                   |         | 6,022   |         |      |         | 8,962  |        |   |         | 17,673   |         
|                                                                                                    | General and administrative                           |                   |         | 2,468              |         |                   |         | 1,531   |         |      |         | 11,688 |        |   |         | 3,053    |         
|                                                                                                    | Restructuring and settlement charges                 |                   |         | 5,299              |         |                   |         |        |         |      |         | 19,949 |        |   |         |         |         
|                                                                                                    | Amortization of deferred stock-based compensation    |                   |         | 38                 |         |                   |         | 133     |         |      |         | 215    |        |   |         | 399      |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                    | Total operating expense                              |                   |         | 15,033             |         |                   |         | 17,583  |         |      |         | 65,186 |        |   |         | 41,058   |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Operating loss                                                                                      |                                                      |                   | (14,948 | )                  |         |                   | (17,583 | )       |         |      | (65,101 | )      |        |   | (41,058 | )       
|Interest expense                                                                                    |                                                      |                   | (190    | )                  |         |                   | (4,237  | )       |         |      | (5,421  | )      |        |   | (8,591  | )       
|Interest income and other, net                                                                      |                                                      |                   | 495     |                    |         |                   | 4,229   |         |         |      | 4,212   |        |        |   | 10,572  |         
|Gain on investment                                                                                  |                                                      |                   |        |                    |         |                   |        |         |         |      |        |        |        |   | 29,240  |         
|Equity and investment loss                                                                          |                                                      |                   | (1,948  | )                  |         |                   | (6,324  | )       |         |      | (8,174  | )      |        |   | (14,629 | )       
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Loss from continuing operations                                                                     |                                                      |                   | (16,591 | )                  |         |                   | (23,915 | )       |         |      | (74,484 | )      |        |   | (24,466 | )       
|Discontinued operations:                                                                            |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                    | Loss from discontinued operations, net of income tax |                   |         |                   |         |                   |         | (52,396 | )       |      |         |       |        |   |         | (142,054 | )       
|Extraordinary item  gain from retirement of bonds, net                                             |                                                      |                   |        |                    |         |                   |        |         |         |      | 159,162 |        |        |   |        |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                    |                                                      | Net income (loss) |         | $                  | (16,591 | )                 |         | $       | (76,311 | )    |         | $      | 84,678 |   |         | $        | (166,520 | )
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|                                                                                                   
|Basic and diluted loss per share from continuing operations                                         |                                                      | $                 | (0.36   | )                  |         | $                 | (0.53   | )       |         | $    | (1.61   | )      |        | $ | (0.57   | )       
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Basic and diluted loss per share from discontinued operations                                       |                                                      | $                 |        |                    |         | $                 | (1.16   | )       |         | $    |        |        |        | $ | (3.34   | )       
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Basic and diluted income per share from extraordinary item                                          |                                                      | $                 |        |                    |         | $                 |        |         |         | $    | 3.45    |        |        | $ |        |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Basic and diluted net income (loss) per share                                                       |                                                      | $                 | (0.36   | )                  |         | $                 | (1.69   | )       |         | $    | 1.83    |        |        | $ | (3.91   | )       
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         
|Weighted average common shares outstanding used in computing basic
and diluted net income per share |                                                      |                   | 46,292  |                    |         |                   | 45,064  |         |         |      | 46,180  |        |        |   | 42,574  |         
|                                                                                                    |                                                      |                   |         |                    |         |                   |         |         |         |      |         |        |        |   |         |         

See accompanying notes to condensed consolidated financial statements.



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

|                                                                                     |                                                           |                                                     |          |                   |         |      |          |         |         |  
|------------------------------------------------------------------------------------ | --------------------------------------------------------- | --------------------------------------------------- | -------- | ----------------- | ------- | ---- | -------- | ------- | ------- | -
|                                                                                     |                                                           |                                                     |          | Nine Months Ended
|                                                                                     |                                                           | September 30,                                      
|                                                                                     |                                                           |                                                    
|                                                                                     |                                                           |                                                     |          | 2001              |         | 2000
|                                                                                     |                                                           |                                                     |          |                   |         |     
|Operating Activities                                                                 |                                                           |                                                     |          |                   |         |      |          |        
|Income (loss) from continuing operations                                             |                                                           | $                                                   | (74,484  | )                 |         | $    | (24,466  | )      
|Loss from discontinued operations                                                    |                                                           |                                                     |         |                   |         |      | (142,054 | )      
|Extraordinary item                                                                   |                                                           |                                                     | 159,162  |                   |         |      |         |        
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |                                                           |                                                     |          |                   |         |      |          |        
|                                                                                     | - Depreciation and amortization                           |                                                     |          | 5,855             |         |      |          | 14,276  |        
|                                                                                     | - Amortization of deferred stock-based compensation       |                                                     |          | 215               |         |      |          | 1,641   |        
|                                                                                     | - Amortization of intangible assets                       |                                                     |          | 2,300             |         |      |          | 87,013  |        
|                                                                                     | - Equity loss & Write down of Investment                  |                                                     |          | 8,174             |         |      |          | 14,629  |        
|                                                                                     | - Restructuring and settlement charges                    |                                                     |          | 8,568             |         |      |          |        |        
|                                                                                     | - Gain on investment                                      |                                                     |          |                  |         |      |          | (29,240 | )      
|                                                                                     | - Gain from retirement of convertible notes               |                                                     |          | (159,162          | )       |      |          |        |        
|                                                                                     | - Non-cash charges related to stock-option grants         |                                                     |          | 41                |         |      |          | 120     |        
|Changes in operating assets and liabilities:                                         |                                                           |                                                     |          |                   |         |      |          |        
|                                                                                     | - Accounts receivable and due from Marketplace companies  |                                                     |          | 1,014             |         |      |          | (10,974 | )      
|                                                                                     | - Other current assets                                    |                                                     |          | 853               |         |      |          | (2,471  | )      
|                                                                                     | - Assets relating to discontinued operations              |                                                     |          | 16,570            |         |      |          |        |        
|                                                                                     | - Other long term assets                                  |                                                     |          | 346               |         |      |          | (40     | )      
|                                                                                     | - Accounts payable                                        |                                                     |          | (542              | )       |      |          | 5,590   |        
|                                                                                     | - Accrued compensation                                    |                                                     |          | (2,242            | )       |      |          | 2,697   |        
|                                                                                     | - Accrued expenses                                        |                                                     |          | (11,236           | )       |      |          | (1,017  | )      
|                                                                                     | - Deferred Revenue and Customer Advance                   |                                                     |          | (13               | )       |      |          |        |        
|                                                                                     | - Accrued liabilities relating to discontinued operations |                                                     |          | (26,547           | )       |      |          |        |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|                                                                                     |                                                           | Net cash used in operating activities               |          |                   | (71,128 | )    |          |         | (84,296 | )
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Investing Activities                                                                 |                                                           |                                                     |          |                   |         |      |          |        
|Purchase of property and equipment                                                   |                                                           |                                                     | (693     | )                 |         |      | (23,231  | )      
|Purchases of short-term investments                                                  |                                                           |                                                     | (264,387 | )                 |         |      | (346,153 | )      
|Sale and maturities of short-term investments                                        |                                                           |                                                     | 360,093  |                   |         |      | 359,291  |        
|Increase in Restricted Cash                                                          |                                                           |                                                     | (3,564   | )                 |         |      | (5,687   | )      
|Purchase of strategic investments                                                    |                                                           |                                                     |         |                   |         |      | (12,000  | )      
|Investment in vertical operating companies                                           |                                                           |                                                     | (6,000   | )                 |         |      | (29,800  | )      
|Purchase of NexPrise, net of cash                                                    |                                                           |                                                     | (21,331  | )                 |         |      |         |        
|Purchase of Promedix, net of cash                                                    |                                                           |                                                     |         |                   |         |      | 1,248    |        
|Purchase of SpecialtyMD, net of cash                                                 |                                                           |                                                     |         |                   |         |      | 1,372    |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|                                                                                     |                                                           | Net cash provided by (used in) investing activities |          |                   | 64,118  |      |          |         | (54,960 | )
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Financing Activities                                                                 |                                                           |                                                     |          |                   |         |      |          |        
|Principal payments on capital lease obligations and notes payable                    |                                                           |                                                     | (313     | )                 |         |      | (269     | )      
|Principal payments on notes payable                                                  |                                                           |                                                     | (60,931  | )                 |         |      | (103     | )      
|Net proceeds from issuance of convertible subordinated notes                         |                                                           |                                                     |         |                   |         |      | 242,400  |        
|Issuance of warrants                                                                 |                                                           |                                                     |         |                   |         |      | 375      |        
|Net proceeds from issuance of common stock                                           |                                                           |                                                     | 267      |                   |         |      | 4,590    |        
|Repurchase of common stock                                                           |                                                           |                                                     | (304     | )                 |         |      | (87      | )      
|Payments of stockholders notes receivable                                           |                                                           |                                                     |         |                   |         |      | 985      |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Net cash provided by (used in) financing activities                                  |                                                           |                                                     | (61,281  | )                 |         |      | 247,891  |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Net increase (decrease) in cash and cash equivalents                                 |                                                           |                                                     | (68,291  | )                 |         |      | 108,635  |        
|Cash and cash equivalents at beginning of period                                     |                                                           |                                                     | 91,348   |                   |         |      | 21,934   |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Cash and cash equivalents at end of period                                           |                                                           | $                                                   | 23,057   |                   |         | $    | 130,569  |        
|                                                                                     |                                                           |                                                     |          |                   |         |      |          |        
|Supplemental disclosure of noncash activities:                                       |                                                           |                                                     |          |                   |         |      |          |        
|Note received upon sale of Marketplace interest                                      |                                                           | $                                                   | 11,000   |                   |         | $    |         |        
|Note transferred upon retirement of convertible debt                                 |                                                           | $                                                   | (11,000  | )                 |         | $    |         |        
|Issuance of shares in connection with the acquisition of Promedix                    |                                                           | $                                                   |         |                   |         | $    | 314,770  |        
|Issuance of shares in connection with the acquisition of SpecialtyMD                 |                                                           | $                                                   |         |                   |         | $    | 103,708  |        
|Issuance of shares in connection with the investment in Amphire                      |                                                           | $                                                   |         |                   |         | $    | 19,199   |        
|Unrealized accounting loss on available-for-sale securities                          |                                                           | $                                                   | (70      | )                 |         | $    | 295      |        
|Other non-cash equity transactions                                                   |                                                           | $                                                   |         |                   |         | $    | 536      |        
|Deferred Stock Based Compensation related to the assumption of NexPrise Options      |                                                           | $                                                   | 687      |                   |         | $    |         |        
|Issuance of shares and options in connection with the acquisition of NexPrise        |                                                           | $                                                   | 1,286    |                   |         | $    |         |        

See accompanying notes to condensed consolidated financial statements.



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VENTRO CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1. Description of Business

Ventro Corporation (the Company or Ventro or We) is a provider of
collaborative solutions for program management and quote management.

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 10Q 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, 2000 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 2000.

Revenue Recognition

The company 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 would otherwise be recognized under the
subscription method.

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 from continuing
operations, discontinued operations and extraordinary items in 2000 and 2001 in
accordance with FAS 128 guidance.

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

Ventro announced on July 16, 2001 that it had signed a definitive
agreement to purchase privately held NexPrise, Inc., a provider of
collaborative commerce solutions located in Santa Clara, California. The
transaction was completed on August 8, 2001 and the operating results of
NexPrise are reflected in the Companys statement of operations from that date
forward. The purchase of NexPrise was undertaken to accelerate Ventros
product development cycle and enable the Company to offer a comprehensive,
proven collaborative commerce solution with the depth and breadth of
capabilities required to address the critical e-business needs of customers in
the aerospace, automotive, and process industries. The purchase price for
NexPrise results in goodwill of $12.1 million. Key elements of the purchase
that arent valued separately in purchase accounting, such as the members of
the NexPrise management



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team and workforce that joined Ventro upon completion of the acquisition
and NexPrises blue-chip customers in this large and growing market, contribute
to the generation of goodwill. The following is a summary of the purchase
transaction of NexPrise, Inc. (in thousands):

|                        |  |   |        | 
|----------------------- |  | - | ------ | 
|Tangible Assets         |  | $ | 1,229  | 
|Purchased Technology    |  |   | 9,900  | 
|Other Intangible Assets |  |   | 2,200  | 
|Goodwill                |  |   | 12,108 | 
|                        |  |   |        | 
|                        |  | $ | 25,437 | 
|                        |  |   |        | 

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

|                                          |  |   |        | 
|----------------------------------------- |  | - | ------ | 
|Cash                                      |  | $ | 10,092 | 
|Stock (200,000 shares)                    |  |   | 100    | 
|Employee Stock Options Assumed            |  |   | 1,186  | 
|Liabilities Assumed and Transaction Costs |  |   | 14,059 | 
|                                          |  |   |        | 
|Total Purchase Consideration              |  | $ | 25,437 | 
|                                          |  |   |        | 

The following unaudited, pro forma information shows the results of
operations of the Company for the nine months ended September 30, 2001 and 2000
as if the business combination had occurred at the beginning of each period.
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).

|                                                       |  |                                 |         |      |  |   |          |  
|------------------------------------------------------ |  | ------------------------------- | ------- | ---- |  | - | -------- | -
|                                                       |  | Nine
months ended September 30,
|                                                       |  |                                
|                                                       |  | 2001                            |         | 2000
|                                                       |  |                                 |         |     
|Revenue                                                |  | $                               | 2,083   |      |  | $ | 1,672    |  
|Net Income (Loss) before extraordinary items           |  | $                               | (88,166 | )    |  | $ | (179,797 | )
|Net Income (Loss)                                      |  | $                               | 70,976  |      |  | $ | (179,797 | )
|Per Share:                                             |  |                                 |         |      |  |   |          |  
|Basic and diluted net loss from continuing operations: |  | $                               | (1.91   | )    |  | $ | (4.22    | )
|Basic and diluted net income (loss):                   |  | $                               | 1.54    |      |  | $ | (4.22    | )

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) were as follows (in thousands):

|                                                           |  |                    |         |                   |  |      |         |      |  |   |        |   |  |   |          |  
|---------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | -------- | -
|                                                           |  | Three Months Ended |         | Nine Months Ended
|                                                           |  |                    |         |                  
|                                                           |  | September 30,      |         | September 30,    
|                                                           |  |                    |         |                  
|                                                           |  | 2001               |         | 2000              |  | 2001 |         | 2000
|                                                           |  |                    |         |                   |  |      |         |     
|Net Income (Loss)                                          |  | $                  | (16,591 | )                 |  | $    | (76,311 | )    |  | $ | 84,678 |   |  | $ | (166,520 | )
|Unrealized gains (losses) on
available for sale securities |  |                    | 70      |                   |  |      | 170     |      |  |   | (665   | ) |  |   | (295     | )
|                                                           |  |                    |         |                   |  |      |         |      |  |   |        |   |  |   |          |  
|Comprehensive Income (Loss)                                |  | $                  | (16,521 | )                 |  | $    | (76,141 | )    |  | $ | 84,013 |   |  | $ | (166,815 | )
|                                                           |  |                    |         |                   |  |      |         |      |  |   |        |   |  |   |          |  



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Note 5. Balance Sheet Details

Other Long-term Assets

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

|                                                                                                                            |                              |   |               |        |              |   |       |       | 
|--------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | - | ------------- | ------ | ------------ | - | ----- | ----- | 
|                                                                                                                            |                              |   | September 30, |        | December 31,
|                                                                                                                            |                              |   | 2001          |        | 2000        
|                                                                                                                            |                              |   |               |        |             
|Deposits and other                                                                                                          |                              | $ | 491           |        |              | $ | 395   |      
|Goodwill                                                                                                                    |                              |   | 12,108        |        |              |   |      |      
|Intangibles , net of accumulated amortization of $2,892                                                                     |                              |   | 9,208         |        |              |   |      |      
|Deferred debt offering costs, net of accumulated
amortization of $1,394 at September 30, 2001 and $991 at
December 31, 2000 |                              |   | 212           |        |              |   | 6,938 |      
|Long-term investments                                                                                                       |                              |   | 1,096         |        |              |   | 2,000 |      
|                                                                                                                            |                              |   |               |        |              |   |       |      
|                                                                                                                            | Total other long-term assets |   | $             | 23,115 |              |   | $     | 9,333 | 
|                                                                                                                            |                              |   |               |        |              |   |       |      

Note 6. Affiliated Marketplace Companies

On January 24, 2000, Ventro, DuPont, IBM and @ Ventures, the venture capital
division of CMGI, Inc., announced the formation of Industria, a
business-to-business e-commerce company in the worldwide fluid processing
market. For a cash investment of $5.0 million, as well as the contribution of
technology, Ventro received an ownership interest in Industria of approximately
49%. The investment was accounted for using the equity method. As of December
31, 2000, the equity investment in Industria had been reduced to $0. In the
quarter ended June 30, 2001, Ventro acquired certain Industria assets and hired
certain former Industria employees. The Company also entered into a mutual and
general release in which Ventro and Industria terminated their technology and
service agreement. Receivable balances as of June 30, 2001 have been collected
or written down to $0 as a result of the agreement.

On April 11, 2000, Ventro and Entangible.com announced the formation of
Amphire, a business-to-business e-commerce company in the food service market.
Ventro acquired a minority interest in Amphire for cash and equity totaling $35
million. In January, 2001, Ventro contributed $2.0 million to Amphires Series
B Preferred Stock Financing. In connection with the financing, the Company
terminated its technology and service agreements with Amphire. Ventros
ownership interest in Amphire was approximately 35% at September 30, 2001. The
investment is accounted for using the equity method.

On August 3, 2000, Ventro and American Express Company announced the
formation of MarketMile, a new business-to-business e-commerce company in the
business products and services market. Ventro made cash investments of $13.0
million, $4.0 of which was made in January, 2001, and accounts for the
investment using the equity method. In April 2001, MarketMile decided not to
use Ventros technology and asserted that Ventro had breached its contract with
MarketMile. Ventro believes that it has not breached its contractual
obligations to MarketMile. The parties reached a settlement subsequent to
September 30, 2001 whereby Ventro will reduce its equity investment in
MarketMile to 23% and the bulk of the receivables due from MarketMile will be
written off. Correspondingly, MarketMile will release all claims on a $5
million customer advance. The settlement will not have a material impact on
Ventros future reported operating income or loss.

At March 31, 2001, Ventro had approximately a 19% interest in Broadlane, a
business-to-business e-commerce company in the healthcare industry that Ventro
formed with Tenet Healthcare in January 2000. The investment was accounted for
using the cost method. In April, 2001, Ventro and Broadlane settled several
disputes between the two companies and severed relationships with each other.
Under the terms of the agreement, Broadlane repurchased all of its shares owned
by Ventro and the parties resolved all disputes relating to amounts owed to
Ventro for an aggregate payment to Ventro of $11 million. The payment was made
in the form of a two year interest-bearing note from Broadlane which was
guaranteed by Tenet Healthcare Corporation. [See Note 7]



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The following table outlines the Companys equity investment activity with
its marketplace companies for the nine months ended September 30, 2001 (in
thousands):

|           |  |                   |       |            |  |                |       |                    |  |  |       |  |  |  |       | 
|---------- |  | ----------------- | ----- | ---------- |  | -------------- | ----- | ------------------ |  |  | ----- |  |  |  | ----- | 
|           |  | Carrying Value at |       | Additional |  | Equity Loss of |       | Carrying Value at 
|           |  | December 31, 2000 |       | Investment |  | Investee       |       | September 30, 2001
|           |  | $                 |       | $          |  | $              |       | $                 
|           |  |                   |       |            |  |                |       |                   
|Industria  |  |                   |      |            |  |                |      |                    |  |  |      |  |  |  |      | 
|Amphire    |  |                   |      |            |  |                | 2,000 |                    |  |  | 1,388 |  |  |  | 612   | 
|MarketMile |  |                   | 6,103 |            |  |                | 4,000 |                    |  |  | 5,882 |  |  |  | 4,221 | 
|Broadlane  |  |                   |      |            |  |                |      |                    |  |  | N/A   |  |  |  |      | 

Ventro did not have significant billings to the marketplace companies for
the three months ended September 30, 2001. In the nine months ended September
30, 2001 Ventro billed the affiliated marketplace companies approximately
$3.7 million, net of reserves. The billings were for charges incurred on behalf
of the marketplace companies, services Ventro provided and facility rent that
Ventro passed on.

Note 7. Convertible Subordinated Notes

In April 2000, Ventro incurred $250 million of indebtedness in connection
with the issuance of convertible subordinated notes. The notes are due in 2007,
bear annual interest at 6%, and are convertible at the option of the holder
into the Companys common stock at a price of $90.78 per share. Original
issuance costs were approximately $9.3 million and are being amortized to
interest expense over the life of the notes.

In March 2001, the Company repurchased $184.7 million of the convertible
subordinated notes for $270 in cash per $1,000 principal amount, plus accrued
and unpaid interest up to, but not including the date of payment. The
transaction resulted in an extraordinary gain of $125.8 million, consisting of
a gain of $135 million due to the discount, offset by the write-off of $6
million in issue costs associated with the original issuance of the notes in
April 2000 as well as $3.2 million of costs associated with the retirement of
the notes.

In June 2001, the Company repurchased in private transactions $56.5
million in principal of its remaining outstanding convertible subordinated
notes. Ventro paid approximately $11 million in cash and assigned an $11
million promissory note from Broadlane, Inc. as consideration for the Notes and
the accrued interest thereon. The transactions resulted in an extraordinary
gain of $33 million, consisting of a gain of $35 million due to the discount,
offset by the write-off of $1.7 million in issue costs associated with the
original issuance of the notes in April 2000 as well as $300,000 of costs
associated with the retirement of the notes. At September 30, 2001, $8.8
million of convertible notes remained outstanding and the remaining unamortized
issue costs were approximately $260,000.

Note 8. Contingencies

Promedix and Chemdex

Contracts with Promedix and Chemdex customers and suppliers provide, in
some cases, for cancellation notification periods longer than the Company
provided. In some cases, shorter notification periods have caused inconvenience
to customers and suppliers. However, as of September 30, 2001, no customer or
supplier of Promedix or Chemdex had filed a formal complaint against the
Company.

Shareholder and Bondholder Litigation

The Company has received notice that two shareholder class action lawsuits
have been filed. One alleges that the Company and certain individuals made
false and misleading statements concerning the Companys business model and
earnings for fiscal 2000, and the other alleges that certain investment banks,
the Company and individuals made false and misleading statements relating to
the Companys initial public offering. The Company also received notice in
April that a class action lawsuit was filed on behalf of debt instrument
holders alleging that the Company and certain individuals made false and
misleading statements concerning the Companys business model and earnings for
fiscal 2000. In August 2001, the Company received notice of a derivative class
action suit filed by shareholders in California on behalf of the Company.
Plaintiffs seek recovery from certain officers and Board members for their
alleged breach of fiduciary duty, waste of corporate assets, abuse of control
and gross mismanagement. The Company believes there are meritorious defenses
to the actions and the suits will be defended vigorously.



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Other

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.

Note 9. Deferred Stock-Based Compensation

The Company recorded deferred compensation for options granted in fiscal
years ended December 31, 1998 and 1999, for the difference at the option grant
date between the exercise price and the fair value of the common stock
underlying the options in accordance with FASB Interpretation No. 28. As of
June 30, 2001, the Company had recorded aggregate deferred stock compensation
of $8.7 million, $6.6 million of which was associated with discontinued
operations. The deferred stock compensation has been amortized over the vesting
periods of the stock options. Due to the workforce reduction in April 2001, the
deferred compensation balance associated with these option grants has been
eliminated.

In connection with the acquisition of NexPrise completed in August, 2001
the Company assumed the NexPrise stock option plan. The Company recorded
deferred compensation of $687,000 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.

Note 10. Discontinued Operations

In December 2000, the Companys Board of Directors adopted a formal plan
and announced the shut down of all business operations associated with the
Companys life sciences and specialty medical products marketplaces. The shut
down of Chemdex, Promedix and SpecialtyMD was completed in March 2001.

In the first quarter of 2000, the Company acquired the businesses
represented by Promedix and SpecialtyMD. These transactions were effected in
accordance with the purchase method of accounting. For Promedix, the purchase
consideration was 12.1 million shares of the Companys common stock valued at
$325.3 million. The entire Promedix purchase price was allocated to intangible
assets. For SpecialtyMD, the purchase consideration was 1.1 million shares of
the Companys common stock valued at $107.7 million. Of the SpecialtyMD
purchase price, $0.8 million was allocated to net tangible liabilities and the
remainder to intangible assets. The Company wrote off as part of the loss on
disposal of discontinued operations $326.7 million of intangible assets.

No interest expense has been allocated to discontinued operations. In
addition, general corporate overhead has been allocated to continuing
operations for all periods presented.

Revenues from discontinued operations were $0 and $24.2 million for the
three months and nine months ended September 30, 2001, respectively. The
Company paid approximately $0.2 million and $6.9 million during the three
months and nine months ended September 30, 2001, respectively, for severance,
lease obligations and other liabilities incurred to shut down Chemdex and
Promedix. At September 30, 2001, accrued liabilities relating to discontinued
operations amounted to $1.2 million. The amount is comprised of accruals for
estimated costs to settle lease and other contractual obligations. Cash
expenditures related to the liability balance of $1.2 million may extend
through 2005.

Note 11. Restructuring and Settlement Charges

On April 26, 2001, the Company announced a restructuring plan in connection
with its efforts to improve efficiencies and to cut operating costs. The
restructuring included a workforce reduction, consolidation of excess
facilities, write-offs and accruals with respect to certain assets and
commitments, as well as termination of services with Broadlane, MarketMile and
Industria. As a result, the Company recorded a net charge of $14.7 million
during the three months ended June 30, 2001. This charge is reported as a
component of net loss from continuing operations.

The workforce reduction charge of $3.6 million was primarily related to
the cost of severance and related benefits for the termination of approximately
170 employees, or two thirds of the Companys workforce. The estimated costs
of the leased facilities and equipment were $7.5 million. The accrual
represents the difference between the remaining lease payments and the cost
recoveries anticipated from subleases. The write-off of assets of $9.5 million
was primarily related to property and equipment that was disposed of or is no
longer used in operations. The assets consisted primarily of computer
equipment, production equipment and related



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software. The write-off of assets of $9.5 million represents the
difference between the net book value of the assets and the anticipated salvage
values.

The Company recorded a gain of $6 million in the quarter ended June 30,
2001 for the settlements and write-downs associated with its marketplace
companies: Broadlane, Industria and MarketMile. The gain primarily consisted of
receipt of an $11 million two year interest-bearing promissory note from
Broadlance and cash and certain assets from Industria, offset by accruals and
write-downs of receivables from the marketplace companies.

In the three months ended September 30, 2001 the Company recorded $5.3
million of restructuring charges. These charges consisted of $1.4 million of
severance and other related costs associated with the Ventro employees
terminated in connection with the acquisition of NexPrise. In addition, $3.9
million of expense was accrued for changes in anticipated cost recoveries
related to disposal of excess facilities and equipment.

The following table summarizes the restructuring and settlement activity
in 2001 (in thousands):

|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  
|------------------------------ |  | ------------------- | ------ | ----------- |  | ------------------- | ------ | ----------- |  | ----- | ------ | - |  | ----------- | ------ | - |  | - | ------ | -
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  | Marketplace |        |   |  |  
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  | companies   |        |   |  |  
|                               |  | Workforce Reduction |        | Lease Costs |  | Write-off of assets |        | settlements |  | Total
|                               |  |                     |        |             |  |                     |        |             |  |      
|April 26, 2001 Restructuring   |  | $                   | 3,649  |             |  | $                   | 7,476  |             |  | $     | 9,539  |   |  | $           | (6,014 | ) |  | $ | 14,650 |  
|July 2001 NexPrise Acquisition |  |                     | 1,399  |             |  |                     |       |             |  |       |       |   |  |             |       |   |  |   | 1,399  |  
|Other Adjustments              |  |                     |       |             |  |                     | 3,900  |             |  |       |       |   |  |             |       |   |  |   | 3,900  |  
|Cash Expenditures              |  |                     | (4,532 | )           |  |                     | (2,739 | )           |  |       | (519   | ) |  |             |        |   |  |   | (7,790 | )
|Non-cash Expenditures          |  |                     |       |             |  |                     |       |             |  |       | (9,020 | ) |  |             | 6,014  |   |  |   | (3,006 | )
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  
|Balance at September 30, 2001  |  | $                   | 516    |             |  | $                   | 8,637  |             |  | $     |       |   |  | $           |       |   |  | $ | 9,153  |  
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  

Note 12. Recent Accounting Pronouncements

The FASB has recently issued FAS 141, Business Combinations, and FAS 142,
Goodwill and Other Intangible Assets. The company has adopted the provisions of
the statements for its acquisition of NexPrise, Inc. Under the new rules,
goodwill which results from the acquisition will not subject to amortization;
rather, goodwill will be subject to annual impairment tests beginning in 2002.
Intangible assets with determinable lives will be amortized over those lives.

Note 13. Subsequent Events

Settlement with former marketplace

Ventro has formally settled all outstanding disputes with MarketMile whereby
Ventro will reduce its equity investment in MarketMile to 23% and the bulk of
the receivables due from MarketMile will be written off. Correspondingly,
MarketMile will release all claims on a $5 million customer advance. The
settlement will not have a material impact on Ventros future reported
operating income or loss.

Share Repurchases

The Companys Board of Directors approved a stock repurchase program of up to
$2 million over the next 18 months. As of November 11, 2001, a total of
271,000 shares have been repurchased at an average price of $0.62 per share.



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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 Ventro 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 Ventros Registration Statement on Form 10-K and the
section entitled Investment Considerations in this Form 10-Q.

Presentation of Financial Information

In the quarter ended December 31, 2000, Ventro decided to restructure and
shut down its two wholly owned marketplaces, Chemdex and Promedix. Accordingly,
results of continuing operations for Ventro for the three and nine month
periods ending September 30, 2000 and 2001 exclude the results of operations of
Chemdex and Promedix. The results of operations for Chemdex and Promedix have
been accounted for as discontinued operations. Aggregate charges of
approximately $386.1 million were recorded for the year ended December 31, 2000
and $19.9 million for the nine months ended September 30, 2001 in connection
with restructuring, settlements and discontinued operations.

Overview

Ventro Corporation (the Company or Ventro or We) is a provider of
collaborative solutions for program management and quote management. In the
nine months ended September 30, 2001, technology and services provided to
minority owned marketplaces did not result in revenues being recorded. Amounts
related to billed costs of services provided were recorded by Ventro as offsets
to related operating expenses incurred.

On August 8, 2001 Ventro purchased NexPrise Inc., a provider of
collaborative commerce solutions located in Santa Clara, California. Under the
terms of the stock purchase agreement, the cost of the transaction was
approximately $25 million, inclusive of liabilities assumed and transaction
costs. As part of the transaction, Ventro assumed NexPrises obligations under
existing employee option plans, which resulted in the issuance of up to 3.5
million Ventro shares, the value of which is included in the $25 million cost.
Operations have been consolidated in Ventros Mountain View headquarters.

Ventro 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.

Results of Operations

Revenues.Ventro reported $350,000 of revenue for the three months ended
September 30, 2001. This revenue is made up primarily of subscription and
maintenance revenue associated with the product acquired in the purchase of
NexPrise Inc. for the period beginning August 8, 2001 and ending September 30,
2001. Subscription revenue generally entails recognizing the value of the
customer contract as revenue evenly over the term of the contract. No other
revenue has been generated by Ventros continuing operations to date; in prior
periods revenues were derived primarily from product sales through the Chemdex
and Promedix marketplaces and their operations have been discontinued. We
expect revenue for the three months ending December 31, 2001 to increase from
the level reported for the three months ended September 30, 2001 as the fourth
quarter will reflect a complete quarter of revenue and expected additional
sales.

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 $9.9 million for the three months ended September 30,
2000 to $3.3 million for the three months ended September 30, 2001 and
increased from $19.9 million for the nine months ended September 30, 2000 to
$22.1 million for the nine months ended September 30, 2001. The increase for
the nine months ended September 30, 2001 was primarily due to increased
staffing and associated costs related to the design and development of our
marketplace provider solution as well as lower cost recoveries from marketplace
customers. The



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decrease in the three months ended September 30, 2001 was due to
reductions in workforce that occurred in April 2001 and July 2001. The company
does not expect significant changes in research and development expenses in the
near future.

In Process R&D.The company expensed $2.3 million of acquired in-process
research and development acquired as a result of the NexPrise acquisition in
the three months ended September 30, 2001.

Sales and Marketing.Sales and marketing expenses consist primarily of
advertising and promotional expenses, as well as, payroll and related expenses
for personnel engaged in enterprise sales activities and enterprise account
management. Sales and marketing expenses from continuing operations decreased
from $6.0 million for the three months ended September 30, 2000 to $1.6 million
for the three months ended September 30, 2001 and decreased from $17.7 million
for the nine months ended September 30, 2000 to $9.0 million for the nine
months ended September 30, 2001. The decreases were primary due to the
reductions in workforce that occurred in April 2001 and July 2001 and decreased
marketing efforts. The Company expects sales and marketing expenses to
increase in coming quarters as a full quarter of expenses associated with the
sales force acquired in the NexPrise purchase are incurred and as the Company
increases its sales and marketing efforts.

General and Administrative.General and administrative expenses consist
primarily of salaries, incentive payments, fees for professional services and
lease expenses. General and administrative expenses increased from $1.5 million
for the three months ended September 30, 2000 to $2.5 million for the three
months ended September 30, 2001 and increased from $3.1 million for the nine
months ended September 30, 2000 to $11.7 million for the nine months ended
September 30, 2001. The increases were primary due to increased incentive
payments and lower cost recoveries from subsidiaries and marketplace
investments. The Company does not expect significant changes in general and
administrative expenses in the coming quarters.

Restructuring and Settlement Charges.On April 26, 2001, the Company
announced a restructuring plan in connection with its efforts to improve
efficiencies and to cut operating costs. The restructuring included a workforce
reduction, consolidation of excess facilities, write-offs and accruals with
respect to certain assets and commitments, as well as termination of services
with Broadlane, MarketMile and Industria. As a result, the Company recorded a
net charge of $14.7 million during the three months ended June 30, 2001. This
charge is reported as a component of net loss from continuing operations.

The workforce reduction charge of $3.6 million was primarily related to
the cost of severance and related benefits for the termination of approximately
170 employees, or two thirds of the Companys workforce. The estimated costs
of the leased facilities and equipment were $7.5 million. The accrual
represents the difference between the remaining lease payments and the cost
recoveries anticipated from subleases. The write-off of assets of $9.5 million
was primarily related to property and equipment that was disposed of or is no
longer used in operations. The assets consisted primarily of computer
equipment, production equipment and related software. The write-off of assets
of $9.5 million represents the difference between the net book value of the
assets and the anticipated salvage values.

The Company recorded a gain of $6 million in the quarter ended June 30,
2001 for the settlements and write-downs associated with its marketplace
companies: Broadlane, Industria and MarketMile. The gain primarily consisted of
receipt of an $11 million two year interest-bearing promissory note from
Broadlance and cash and certain assets from Industria, offset by accruals and
write-downs of receivables from the marketplace companies.

In the three months ended September 30, 2001 the Company recorded $5.3
million of restructuring charges. These charges consisted of $1.4 million of
severance and other related costs associated with the Ventro employees
terminated in connection with the acquisition of NexPrise. In addition, $3.9
million of expense was accrued for changes in anticipated cost recoveries
related to disposal of excess facilities and equipment.



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The following table summarizes the restructuring and settlement activity
in 2001 (in thousands):

|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  
|------------------------------ |  | ------------------- | ------ | ----------- |  | ------------------- | ------ | ----------- |  | ----- | ------ | - |  | ----------- | ------ | - |  | - | ------ | -
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  | Marketplace |        |   |  |  
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  | companies   |        |   |  |  
|                               |  | Workforce Reduction |        | Lease Costs |  | Write-off of assets |        | settlements |  | Total
|                               |  |                     |        |             |  |                     |        |             |  |      
|April 26, 2001 Restructuring   |  | $                   | 3,649  |             |  | $                   | 7,476  |             |  | $     | 9,539  |   |  | $           | (6,014 | ) |  | $ | 14,650 |  
|July 2001 NexPrise Acquisition |  |                     | 1,399  |             |  |                     |       |             |  |       |       |   |  |             |       |   |  |   | 1,399  |  
|Other Adjustments              |  |                     |       |             |  |                     | 3,900  |             |  |       |       |   |  |             |       |   |  |   | 3,900  |  
|Cash Expenditures              |  |                     | (4,532 | )           |  |                     | (2,739 | )           |  |       | (519   | ) |  |             |        |   |  |   | (7,790 | )
|Non-cash Expenditures          |  |                     |       |             |  |                     |       |             |  |       | (9,020 | ) |  |             | 6,014  |   |  |   | (3,006 | )
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  
|Balance at September 30, 2001  |  | $                   | 516    |             |  | $                   | 8,637  |             |  | $     |       |   |  | $           |       |   |  | $ | 9,153  |  
|                               |  |                     |        |             |  |                     |        |             |  |       |        |   |  |             |        |   |  |   |        |  

Amortization of Deferred Stock-Based Compensation.Deferred stock
compensation has been amortized over the vesting periods of the stock options.
The company recognized $38,000 and $133,000 in stock compensation expense for
the three months ended September 30, 2001 and 2000, respectively, and $215,000
and $399,000 for the nine months ended September 30, 2001 and 2000,
respectively.

Interest Expense.Interest expense decreased to $190,000 from $4.2 million
for the three months ended September 30, 2001 and 2000, respectively and
decreased from $8.6 million to $5.4 million for the nine months ended September
30, 2000 and 2001, respectively. 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 September 30, 2001. 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
$495,000 from $4.2 million for the three months ended September 30, 2001 and
2000, respectively and decreased to $4.2 million from $10.6 million for the
nine months ended September 30, 2001 and 2000, respectively. Interest income
and other, net has been derived primarily from earnings on investments in cash
equivalents and short-term investments. Interest increased during the second
half of 2000 due to increased cash, cash equivalents and short-term investments
resulting from the net proceeds of the Companys offering of 6% convertible
subordinated notes in April 2000. Interest income for the next quarter is
expected to be less than that recognized in the three months ended September
30, 2001 as a result of lower invested balances as well as lower interest
rates.

Equity and Investment Loss.The equity and investment loss decreased to
$1.9 million from $6.3 million for the three months ended September 30, 2001
and 2000, respectively and decreased to $8.2 million from $14.6 million for the
nine months ended September 30, 2001 and 2000, respectively. The equity and
investment losses reflect the Companys share of the losses of the marketplace
companies in which it has a significant ownership position and write-downs of
investments accounted for using the cost method.

Loss from Continuing Operations.As a result of the items described above
the loss from continuing operations was $16.6 million and $23.9 million for the
three months ended September 30, 2001 and 2000, respectively, and $74.5 million
and $24.5 million for the nine months ended September 30, 2001 and 2000,
respectively. We expect the loss from operations to decline significantly in
the next quarter.

Discontinued Operations.In December 2000, the Companys Board of
Directors adopted a formal plan and announced the shut down of all business
operations associated with the Companys life sciences and specialty medical
products marketplaces. The shut down of Chemdex, Promedix and SpecialtyMD was
completed in March 2001.

In the first quarter of 2000, the Company acquired the businesses
represented by Promedix and SpecialtyMD. These transactions were effected in
accordance with the purchase method of accounting. For Promedix, the purchase
consideration was 12.1 million shares of the Companys common stock valued at
$325.3 million. The entire Promedix purchase price was allocated to intangible
assets. For SpecialtyMD, the purchase consideration was 1.1 million shares of
the Companys common stock valued at $107.7 million. Of the SpecialtyMD
purchase price, $0.8 million was allocated to net tangible liabilities and the
remainder to intangible assets. The Company wrote off as part of the loss on
disposal of discontinued operations $326.7 million of intangible assets.

No interest expense has been allocated to discontinued operations. In
addition, general corporate overhead has been allocated to continuing
operations for all periods presented.

Revenue from discontinued operations were $0 and $24.2 million for the
three months and nine months ended September 30, 2001, respectively. The
Company paid approximately $.2 million and $6.9 million during the three months
and nine months ended



14



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September 30, 2001, respectively, for severance, lease obligations and
other liabilities incurred to shut down Chemdex and Promedix. At September 30,
2001, accrued liabilities relating to discontinued operations amounted to $1.2
million. The amount is comprised of accruals for estimated costs to settle
lease and other contractual obligations. Cash expenditures related to the
liability balance of $1.2 million are expected to extend through February 2002.

Extraordinary gain.During the nine months ended September 30, 2001, the
Company repurchased approximately $241.2 million of Convertible Subordinated
Notes, which represented approximately 96.5% of the outstanding Notes at
December 2000. The total consideration provided by the Company for the tendered
notes, including accrued interest, transactions and other costs, was
approximately $82 million. The Company recognized a gain of approximately
$159.2 million on the transaction. As most of the Notes have been retired,
future such gains, if any, will be smaller than that which occurred in the
first and second quarters of 2001.

Liquidity and Capital Resources

In April 2000, Ventro completed an offering of 6% convertible subordinated
notes payable in 2007 and realized net proceeds of $242.4 million. As a result
of the repurchases in March and June 2001, $8.8 million of convertible notes
remained outstanding at September 30, 2001. Our principal source of liquidity
is approximately $32.3 million of cash, cash equivalents, short-term
investments and restricted cash.

For the nine months ended September 30, 2001, net cash used in operating
activities totaled $71.1 million, which includes approximately $16 million
related to restructuring and discontinued operations. The net cash used in
operating activities during this period was primarily due to net losses, which
were partially offset by non-cash charges of depreciation and amortization of
deferred compensation, amortization and write-offs of intangible assets.

Net cash provided by investing activities totaled $64.1 million for the
nine months ended September 30, 2001. During this period, the Company invested
$6 million in affiliated marketplace companies and increased restricted cash
balance by $3.6 million that primarily consisted of collateral for leases. The
company plans to significantly reduce the restrictions on cash in the coming
months. In addition, during the nine months ended September 30, 2001, the
Company had net sales and maturities of $95.7 million of short-term
investments. During the nine months ended September 30, 2001, the Company
acquired Nexprise Corporation and used approximately $21.3 million in cash.

Net cash used in financing activities was $61.3 million for the nine
months ended September 30, 2001. Net cash used in financing activities resulted
primarily from retiring $241.2 million of the outstanding $250 million of our
6% convertible subordinated notes in March and June 2001.

Management believes the Company has adequate cash to sustain operations
for at least the next 12 months. If revenues and cash collections do not meet
current expectations or if expenses exceed current expectations, the Company
will reduce its spending in order to ensure operations can be sustained until
profitability without raising additional cash.

Investment Considerations

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 in other portions of this document.

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

In December 2000, we shut down our Chemdex and Promedix marketplaces, laid
off 235 employees and restructured certain Ventro 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. During the first six months
of 2001, we ceased to provide technology and services to our remaining
marketplaces. In July 2001, we announced the acquisition for cash of NexPrise,
Inc., a provider of collaborative commerce solutions and, as part of a
consolidation of the companies operations, Ventro terminated additional
personnel. Prior to the merger, NexPrise terminated 27 employees. As
a result of these and similar actions, there has been a fundamental change
in Ventros business. There can be no assurance that we will be successful in
developing viable technology or a complete service offerings.



15



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Our Restructurings May Not Sufficiently Reduce Operating Expenses

Our restructurings were designed to lower our cash used for operating
expenses by reducing our marketing efforts, terminating or restructuring
existing hosting, professional services and marketing arrangements and
significantly reducing our current employee and contractor staffing levels.
While the restructurings will reduce cash operating expenses, our ability to
adequately reduce cash used in operations, and ultimately generate profitable
results from operations, is dependent upon successful execution of our business
plan, including obtaining new customers. As of September 30, 2001, we had
working capital of $8.1 million and had an accumulated deficit of $590.9
million. During the nine months ended September 30, 2001, we used cash in
operating activities of $71.1 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 Ventro 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 Chemdex
and Promedix marketplaces, and,
|
| |  |  | acquire customers operating in industries we have not served to date
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 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.

Ventro and NexPrise May Not Achieve the Benefits They Expect from the Merger
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 merger, including the timely,
efficient and successful execution of a number of post-merger events. Key
events include:



| |  |  | integrating the operations of the two companies;                                   
| | - |  | -----------------------------------------------------------------------------------
|
| |  |  | retaining and assimilating the key personnel of each company;                      
|
| |  |  | developing a product that will be attractive to existing and potential customers;  
|
| |  |  | retaining existing customers and strategic partners of each company; and           
|
| |  |  | creating uniform standards, controls, procedures, policies and information systems.



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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;       
|
| |  |  | Unanticipated expenses related to technology integration;                                                               
|
| |  |  | The impairment of relationships with employees and customers as a
result of any integration of new management personnel;
|
| |  |  | Potential unknown liabilities associated with the merger; and                                                           

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 NexPrises existing customers. There also
can be no assurance that Ventro will achieve its sales goals given the
worsening business environment that follows the September 11, 2001 events and
the effect it may have on corporate spending for technology.

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.

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



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Prior to the NexPrise acquisition, Ventro had derived revenues solely from
product sales through its Chemdex and Promedix marketplaces, and 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. Accordingly, we have little basis upon
which to anticipate significant revenues. Ventro has spent significant funds,
and is subject to commitments to lease third-party facilities and equipment,
procure hardware, software and networking products and develop our operations,
research and development and sales and marketing organizations and to acquire
NexPrise. 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 Plan to 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 will
likely be characterized by an increasing number of market entrants, as there
are few barriers to entry.

We have competition from a diverse group of companies. Competition may
come from companies such as MatrixOne and PTL. 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 e-commerce
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 Acquisition of NexPrise 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, in both December 2000 and April 2001 we announced
significant workforce reductions. We announced the acquisition of NexPrise in
July 2001 and in connection with the acquisition the company terminated
additional 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 Our Common Stock Price Remains Under $1.00, or if We Otherwise 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 we 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 Ventro 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



18



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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.

Several Key Members of Our Management Team Have Only Recently Joined Us and if
They Are Not Successfully Integrated into Our Business or Fail to Work Together
as a Management Team, Our Business Will Suffer

Several key members of our management team have joined us recently,
including Ted Drysdale, our President, Varma Kunaparaju, our Vice President,
Engineering, John Lynch, our Senior Vice President of Sales and Services and
David Zechnich, our Chief Financial Officer. If we do not effectively integrate
these executives and key personnel 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 Will Involve 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 or Introduce New Services and
Upgrades 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                                                                                        
|
| |  |  | 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.



19



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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. Although we do not have any
registered trademarks, 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 our 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. Although we have patent applications pending, no
patents have been issued to us, which may significantly limit our ability to
protect the proprietary aspects of some of our technology.

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
and joint venture partners. Most licenses to our partners are exclusive within
such partners industry or business, thus limiting to some extent our ability
to use and license our technology in the future. 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.

We Face Risks Associated With Shareholder and Bondholder Litigation

Several class action lawsuits have been filed and served on Ventro
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.



20



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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 from inception to date that are included in discontinued
operations 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

Shareholder and Bondholder Litigation

In April 2001, the Company received notice that two types of shareholder
class action lawsuits had been filed. One alleges that the Company and certain
individuals made false and misleading statements concerning the Companys
business model and earnings for fiscal 2000, and the other alleges that certain
investment banks, the Company and individuals made false and misleading
statements relating to the Companys Initial Public Offering. The Company also
received notice in April that another type of class action lawsuit was filed on
behalf of debt instrument holders alleging that the Company and certain
individuals made false and misleading statements concerning the Companys
business model and earnings for fiscal 2000. In August 2001, the Company
received notice of a derivative class action suit filed by shareholders in
California on behalf of the Company. Plaintiffs seek recovery from certain
officers and Board members for their alleged breach of fiduciary duty, waste of
corporate assets, abuse of control and gross mismanagement. While the outcomes
can not be predicted, the Company believes there are meritorious defenses to
the actions and the suits will be defended vigorously.




Item 2.Changes in Securities and Use of Proceeds

None




Item 3.Defaults upon Senior Securities

None




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

None




Item 5.Other Information

None



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##### Table of Contents






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                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                             
|2.9     |  | Agreement and Plan of Merger and Reorganization, dated July 13, 2001, by and among Registrant,
NexPrise, Inc., a Delaware corporation, Neptune Merger Corp., a Delaware Corporation, Ram Sriram
as Stockholder Representative, and U.S. Bank Trust, National Association as Escrow Agent (4)
|       
|       
|       
|       
|3.1     |  | Amended and Restated Certificate of Incorporation of Ventro (1)                                                                                                                                                                                                                             
|       
|       
|       
|       
|3.2     |  | Amended and Restated Bylaws of Ventro (2)                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.1    |  | Form of Indemnification Agreement between Ventro and each of its officers and directors (2)                                                                                                                                                                                                 
|       
|       
|       
|       
|**10.2  |  | Form of Change of Control Agreement between Ventro, each of its officers and certain employees (1)                                                                                                                                                                                          
|       
|       
|       
|       
|**10.4  |  | 1998 Stock Plan, as amended, and form of option agreement(3)                                                                                                                                                                                                                                
|       
|       
|       
|       
|**10.6  |  | 1999 Directors Stock Plan(1)                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.22   |  | NexPrise, Inc. 1997 Stock Plan (which is incorporated herein by reference to Exhibit 4.1 to the
Registrants S-8 filed with the Commission August 9, 2001) (4)                                                                                                                              
|       
|       
|       
|       
|10.23   |  | Form of NexPrise, Inc. Nonstatutory Stock Option Agreement (which is incorporated herein by
reference to Exhibit 4.2 to the Registrants S-8 filed with the Commission on August 9, 2001) (4)                                                                                               
|       
|       
|       
|       
|21.1    |  | Subsidiaries of Ventro (4)                                                                                                                                                                                                                                                                  



---

|(1) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an Exhibit to Registrants Registration Statement on Form S-1 (File No.
333-78505) filed with the Commission on May 14, 1999, as amended, which
Registration Statement was declared effective July 26, 1999.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(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, 2001.                                                                                                                        
|   
|   
|   
|   
|(3) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an Exhibit to Registrants Registration Statement on Form S-1 filed
with the Commission on March 6, 2000. (file 333-31774)                                                                                  
|   
|   
|   
|   
|(4) |  | Incorporated by reference to the corresponding Exhibit previously filed
as an Exhibit to the Registrants Form 10-Q filed with the Commission on
August 14, 2001.                                                                                                                      
|   
|   
|   
|   
|*   |  | Filed herewith                                                                                                                                                                                                                                                                         
|   
|   
|   
|   
|**  |  | Indicates management contract or compensatory plan or arrangement                                                                                                                                                                                                                      

Reports on Form 8-K:



|(1) |  | On July 30, 2001, Ventro filed a report on form 8-K announcing its
intent to acquire NexPrise.                                                             
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | On August 21, 2001, Ventro filed a report on form 8-K providing
details of a presentation made to analysts in August 2001 and from time
to time thereafter.



22



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##### Table of Contents






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 November 13, 2001.

| |                                       |                      
| | ------------------------------------- | ---------------------
| | VENTRO CORPORATION                   
|
| | By:                                   | /s/    DAVID P. PERRY
| |                                      
| | David P. PerryChief Executive Officer



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                             
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                             
|2.9     |  | Agreement and Plan of Merger and Reorganization, dated July 13, 2001, by and among Registrant,
NexPrise, Inc., a Delaware corporation, Neptune Merger Corp., a Delaware Corporation, Ram Sriram
as Stockholder Representative, and U.S. Bank Trust, National Association as Escrow Agent (4)
|       
|       
|       
|       
|3.1     |  | Amended and Restated Certificate of Incorporation of Ventro (1)                                                                                                                                                                                                                             
|       
|       
|       
|       
|3.2     |  | Amended and Restated Bylaws of Ventro (2)                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.1    |  | Form of Indemnification Agreement between Ventro and each of its officers and directors (2)                                                                                                                                                                                                 
|       
|       
|       
|       
|**10.2  |  | Form of Change of Control Agreement between Ventro, each of its officers and certain employees (1)                                                                                                                                                                                          
|       
|       
|       
|       
|**10.4  |  | 1998 Stock Plan, as amended, and form of option agreement(3)                                                                                                                                                                                                                                
|       
|       
|       
|       
|**10.6  |  | 1999 Directors Stock Plan(1)                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.22   |  | NexPrise, Inc. 1997 Stock Plan (which is incorporated herein by reference to Exhibit 4.1 to the
Registrants S-8 filed with the Commission August 9, 2001) (4)                                                                                                                              
|       
|       
|       
|       
|10.23   |  | Form of NexPrise, Inc. Nonstatutory Stock Option Agreement (which is incorporated herein by
reference to Exhibit 4.2 to the Registrants S-8 filed with the Commission on August 9, 2001) (4)                                                                                               
|       
|       
|       
|       
|21.1    |  | Subsidiaries of Ventro (4)                                                                                                                                                                                                                                                                  



---

|(1) |  | Incorporated by reference to the corresponding Exhibit previously
filed as an Exhibit to Registrants Registration Statement on Form S-1
(File No. 333-78505) filed with the Commission on May 14, 1999, as
amended, which Registration Statement was declared effective July 26,
1999.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(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, 2001.                                                                                                                        
|   
|   
|   
|   
|(3) |  | Incorporated by reference to the corresponding Exhibit previously
filed as an Exhibit to Registrants Registration Statement on Form S-1
filed with the Commission on March 6, 2000. (file 333-31774)                                                                                  
|   
|   
|   
|   
|(4) |  | Incorporated by reference to the corresponding Exhibit previously
filed as an Exhibit to the Registrants Form 10-Q filed with the
Commission on August 14, 2001.                                                                                                                      
|   
|   
|   
|   
|*   |  | Filed herewith                                                                                                                                                                                                                                                                         
|   
|   
|   
|   
|**  |  | Indicates management contract or compensatory plan or arrangemenD                                                                                                                                                                                                                      



24