<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

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

                                   FORM 10-Q

(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, 1999

                                      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

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

                              CHEMDEX CORPORATION
            (Exact name of Registrant as specified in its charter)

               Delaware                              77-0465469
            (State or other jurisdiction              (I.R.S. Employer
            of incorporation or organization)         Identification Number)

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

                                3950 Fabian Way
                          Palo Alto, California 94303
                                (650) 813-0300

                  (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 November 1, 1999, 32,787,840 shares of the registrant's common stock,
$.0002 par value per share, were issued and outstanding.
<PAGE>

                              CHEMDEX CORPORATION

                                   FORM 10-Q
                    For the Quarter Ended September 30, 1999

                                     INDEX

<TABLE>
 <C>     <S>                                                              <C>
 PART I  FINANCIAL INFORMATION                                            PAGE

 Item 1. Financial Statements (Unaudited)

         Condensed Balance Sheets as of September 30, 1999 and December
         31, 1998.......................................................     3

         Condensed Statements of Operations for the Three Months Ended
         September 30, 1999 and September 30, 1998; and the Nine Months
         Ended September 30, 1999 and September 30, 1998 ...............     4

         Condensed Statements of Cash Flows for the Nine Months Ended
         September 30, 1999 and 1998 ...................................     5

         Notes to Condensed Financial Statements........................     6

 Item 2. Management's Discussion and Analysis of Operations and
         Financial Condition............................................    12

 Item 3. Qualitative and Quantitative Disclosure about Market Risk......    32

 PART II OTHER INFORMATION

 Item 2. Changes in Securities and Use of Proceeds......................    32

 Item 5. Other Information..............................................    32

 Item 6. Exhibits and Reports on Form 8-K...............................    33

 SIGNATURE...............................................................   35
</TABLE>

                                       2
<PAGE>

                              CHEMDEX CORPORATION

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                     September 30,  December 31,
                                                         1999           1998
                                                     -------------  ------------
                                                      (Unaudited)       (1)
<S>                                                  <C>            <C>
                       ASSETS
Current assets:
  Cash and cash equivalents......................... $125,562,779   $ 5,990,188
  Accounts receivable, net of allowances of $664,000
   at September 30, 1999, and $2,000 at December 31,
   1998 ............................................    3,629,144        32,259
  Other current assets..............................    3,713,512       286,991
                                                     ------------   -----------
    Total current assets............................  132,905,435     6,309,438
Property and equipment, net.........................    7,212,190     1,558,245
Intangible and other assets.........................   14,677,676       300,472
                                                     ------------   -----------
    Total assets.................................... $154,795,301   $ 8,168,155
                                                     ============   ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable.................................. $  4,426,404   $   543,141
  Accrued compensation..............................    2,475,442       511,578
  Other accrued liabilities.........................    7,711,635       759,654
  Current obligations under capital lease...........          --          5,425
  Current portion of notes payable..................      379,059           --
                                                     ------------   -----------
    Total current liabilities.......................   14,992,540     1,819,798
Notes payable, less current portion.................      590,234           --
Stockholders' equity:
  Convertible preferred stock.......................          --          2,289
  Common stock......................................        6,565           784
  Additional paid-in capital........................  189,384,576    18,378,907
  Deferred compensation.............................   (6,926,489)   (2,992,099)
  Notes receivable from stockholders................   (1,047,047)     (149,717)
  Accumulated deficit...............................  (42,205,078)   (8,891,807)
                                                     ------------   -----------
    Total stockholders' equity......................  139,212,527     6,348,357
                                                     ------------   -----------
    Total liabilities and stockholders' equity...... $154,795,301   $ 8,168,155
                                                     ============   ===========
</TABLE>
--------
(1) Derived from audited financial statements

          See accompanying notes to the Condensed Financial Statements

                                       3
<PAGE>

                              CHEMDEX CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                             Three Months Ended         Nine Months Ended
                               September 30,              September 30,
                          -------------------------  -------------------------
                              1999         1998          1999         1998
                          ------------  -----------  ------------  -----------
<S>                       <C>           <C>          <C>           <C>
Net revenues............. $  8,490,175  $       --   $ 11,561,238  $     3,500
Cost of revenues.........    8,085,761          --     10,994,266          --
                          ------------  -----------  ------------  -----------
    Gross profit.........      404,414          --        566,972        3,500
Operating expenses:
  Research and
   development...........    5,642,968    1,025,426    11,397,939    1,804,793
  Sales and marketing....    6,903,236      710,127    15,315,708    1,226,075
  General and
   administrative........    2,571,806      489,107     7,198,047    1,101,093
  Amortization of
   deferred
   compensation..........      546,507      103,841     1,445,305      169,859
                          ------------  -----------  ------------  -----------
    Total operating
     expenses............   15,664,517    2,328,501    35,356,999    4,301,820
                          ------------  -----------  ------------  -----------
Operating loss...........  (15,260,103)  (2,328,501)  (34,790,027)  (4,298,320)
Interest expense.........      (60,361)         --       (107,995)      (1,247)
Interest income and
 other, net..............    1,320,902      135,834     1,584,751      209,110
                          ------------  -----------  ------------  -----------
Net loss................. $(13,999,562) $(2,192,667) $(33,313,271) $(4,090,457)
                          ============  ===========  ============  ===========
Basic and diluted net
 loss per share.......... $       (.59) $     (1.21) $      (3.33) $     (2.37)
                          ============  ===========  ============  ===========
Weighted average shares
 of common stock used in
 computing basic and
 diluted net loss per
 share...................   23,639,711    1,816,701    10,007,174    1,723,549
</TABLE>


          See accompanying notes to the Condensed Financial Statements


                                       4
<PAGE>

                              CHEMDEX CORPORATION

                       CONDENSED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                             Nine Months Ended September 30,
                                             ---------------------------------
                                                   1999             1998
                                             ----------------  ---------------
<S>                                          <C>               <C>
Operating Activities
Net loss...................................  $    (33,313,271) $    (4,090,457)
Adjustments to reconcile net loss to net
 cash used in operating activities:
  Depreciation and amortization............         1,149,337          150,861
  Amortization of deferred compensation....         1,445,305          169,859
  Amortization of intangible assets........         1,812,965              --
  Interest expense related to warrants.....            79,785              --
  Issuance of common stock for services....           262,641              --
  Loss on sale of equipment................               --            10,559
  Issuance of warrants for rent expense....           375,000              --
Changes in operating assets and
 liabilities:
  Accounts receivable......................        (3,596,885)         (27,150)
  Other current assets.....................        (3,528,315)        (222,812)
  Other assets.............................            84,349         (158,108)
  Accounts payable.........................         3,883,263         (112,594)
  Accrued compensation.....................         1,963,864          177,385
  Other accrued liabilities................         6,949,989           36,727
                                             ----------------  ---------------
Net cash used in operating activities......       (22,431,973)      (4,065,730)
                                             ----------------  ---------------
Investing Activities
Purchases of property and equipment........        (5,671,421)      (1,055,442)
Purchases of short-term investments........               --        (6,593,495)
Proceeds from sale of equipment............               --            36,991
                                             ----------------  ---------------
Net cash used in investing activities......        (5,671,421)      (7,611,946)
                                             ----------------  ---------------
Financing Activities
Principal payments on capital lease
 obligations...............................            (5,425)          (5,704)
Principal payments on notes payable........          (162,568)             --
Net proceeds from issuance of preferred
 stock.....................................        30,197,844       12,975,424
Net proceeds from issuance of common
 stock.....................................       117,639,451           10,258
Repurchase of common stock.................            (3,170)             --
Repurchase of fractional shares............              (870)             --
Payments of stockholders' notes
 receivable................................            10,723              (12)
                                             ----------------  ---------------
Net cash provided by financing activities..       147,675,985       12,979,966
                                             ----------------  ---------------
Net increase in cash and cash equivalents..       119,572,591        1,302,290
Cash and cash equivalents at beginning of
 period....................................         5,990,188        1,346,478
                                             ----------------  ---------------
Cash and cash equivalents at end of
 period....................................  $    125,562,779  $     2,648,768
                                             ================  ===============
Supplemental disclosure of noncash
 activities:
Issuance of shares in exchange for
 stockholders' notes receivable............  $        956,964  $        91,568
Repurchase of common stock issued in
 exchange for stockholders' notes
 receivable................................  $        (30,765) $           --
Equipment purchased under notes payable....  $      1,131,861  $           --
Issuance of common stock for intangible
 asset.....................................  $     13,910,459  $           --
Issuance of shares for services provided...  $      1,781,250  $           --
Issuance of warrants for services..........  $        526,427  $           --
Conversion of preferred to common shares...  $          3,349  $           --
Payments on notes receivable...............  $         18,146  $           --
</TABLE>

          See accompanying notes to the Condensed Financial Statements

                                       5
<PAGE>

                              CHEMDEX CORPORATION

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   Unaudited

Note 1. Description of Business

  Chemdex Corporation is a provider of e-commerce solutions to the life
sciences research products market. Chemdex enables life sciences enterprises,
researchers, and suppliers to efficiently buy and sell research products
through the Chemdex Marketplace, a secure, Internet-based purchasing solution.

  Chemdex was incorporated in Delaware on September 4, 1997. During the period
from inception through November 1998, Chemdex was a development stage company
and did not have significant sales. During this period, operating activities
related primarily to the design and development of the Chemdex on-line
Marketplace, building corporate infrastructure and the establishment of
relationships with suppliers and customers. In November 1998, the Company
released its on-line marketplace to certain customers and during the first
quarter of 1999, the Company entered into an agreement with VWR under which
Chemdex recognizes revenue related to certain sales from their joint web site.
These sales, combined with increased sales from the Chemdex online marketplace
have led to a significant increase in sales for the three and nine months
ended September 30, 1999. Chemdex has incurred operating losses to date and
had an accumulated deficit of approximately $42.2 million at September 30,
1999. Prior to the Company's initial public offering in July 1999, Chemdex's
activities had been primarily financed through sales of equity securities.

  On July 27, 1999, the Company completed an initial public offering in which
it sold 7,500,000 shares of Common Stock at $15.00 per share. On August 17,
1999, the underwriters' exercised their over-allotment option for an
additional 1,125,000 shares. The Company received $117.6 million in net
proceeds, net of underwriting discounts, commissions and other offering costs.
Upon the closing of the offering, all of the Company's preferred stock, par
value $.0002 per share, automatically converted into an aggregate of
16,745,593 shares of Common Stock.

Note 2. Summary of Significant Accounting Policies

 Use of Estimates

  The preparation of financial statements in conformity with general
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.

 Revenue Recognition

  Net revenues consist primarily of product sales to customers and charges to
customers for outbound freight. Under most supplier agreements, Chemdex acts
as a principal when purchasing products from suppliers and reselling them to
customers. Products are shipped directly to customers by suppliers based on
customer delivery date specifications. Under principal-based agreements,
Chemdex is responsible for selling products, collecting payment from
customers, ensuring that the shipment reaches the customers and processing
returns. In addition, Chemdex takes title to products upon shipment and bears
the risk of loss for collection, delivery, and product returns from customers.
Chemdex provides an allowance for sales returns, which has been insignificant
to date, at the time of sale. Chemdex recognizes revenues from product sales
when products are shipped to customers.

  To date, an insignificant amount of revenue is from agreements with
suppliers for which Chemdex is acting as an agent. Under agency-based supplier
agreements, Chemdex recognizes a percentage share of revenues generated by
suppliers when products are shipped to customers.

  Sales to four significant customers accounted for approximately 32%, 16%,
15%, and 11% respectively, of our revenues in the quarter ended September 30,
1999, and we currently expect to continue to derive a significant portion of
our revenues from these customers for the foreseeable future.

                                       6
<PAGE>

                              CHEMDEX CORPORATION

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)


Note 3. Basis of Presentation

  The accompanying unaudited condensed financial statements have been prepared
by the Company in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (all of which are normal and recurring in nature), considered
necessary for a fair presentation, have been included in the accompanying
unaudited financial statements. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 1999. For further information,
refer to the financial statements and notes thereto, included in the Company's
Registration Statement on Form S-1 (File Number 333-78505), as amended, and
the Company's final prospectus filed July 28, 1999.

Note 4. Net Loss Per Share

  Net 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 earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares and potentially
dilutive shares outstanding during the period. If Chemdex had reported net
income, diluted earnings per share would have included the shares used in the
computation of basic net loss per share as well as an additional 1.5 million
common equivalent shares related to the outstanding options and warrants
(determined using the treasury stock method) for the three months ended
September 30, 1999. These options and warrants could potentially dilute basic
earnings per share in the future but have not been included in the computation
of diluted net loss per share as the impact would have been antidilutive for
the periods presented.

  Pro forma net loss per share is computed using the weighted average number
of shares of common stock outstanding, including common equivalent shares from
the convertible preferred stock (using the if-converted method), which
automatically converted into common stock upon the completion of the initial
public offering as if converted at the original date of issuance, for both
basic and diluted net loss per share, even though inclusion is antidilutive.

  The following table presents the reconciliation between basic and diluted
weighted average shares outstanding and those used for the pro forma net loss
per share calculation:

<TABLE>
<CAPTION>
                                          Three Months          Nine Months
                                       Ended September 30,  Ended September 30,
                                      --------------------- --------------------
                                         1999       1998       1999      1998
                                      ---------- ---------- ---------- ---------
   <S>                                <C>        <C>        <C>        <C>
   Weighted-average shares outstand-
    ing, basic and diluted..........  23,639,711  1,816,701 10,007,174 1,723,549
   Weighted-average conversion of
    convertible preferred stock on
    an if-converted basis...........   4,732,466 11,445,649 11,057,677 6,989,202
                                      ---------- ---------- ---------- ---------
   Weighted-average shares used in
    pro forma calculation...........  28,372,177 13,262,350 21,064,851 8,712,751
                                      ========== ========== ========== =========
</TABLE>

                                       7
<PAGE>

                              CHEMDEX CORPORATION

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)


  The following table sets forth the computation of net loss per share:

<TABLE>
<CAPTION>
                                    Three Months               Nine Months
                                Ended September 30,        Ended September 30,
                              -------------------------  -------------------------
                                  1999         1998          1999         1998
                              ------------  -----------  ------------  -----------
   <S>                        <C>           <C>          <C>           <C>
   Basic and Diluted net
    loss per share
   Numerator: Net loss......  $(13,999,562) $(2,192,667) $(33,313,271) $(4,090,457)
   Denominator:
     Weighted-average shares
      outstanding basic and
      diluted...............    23,639,711    1,816,701    10,007,174    1,723,549
                              ------------  -----------  ------------  -----------
   Basic and diluted net
    loss per share..........  $       (.59) $     (1.21) $      (3.33) $     (2.37)
                              ============  ===========  ============  ===========
   Pro forma net loss per
    share
   Numerator: Net loss......  $(13,999,562) $(2,192,667) $(33,313,271) $(4,090,457)
   Denominator:
     Weighted-average shares
      outstanding basic and
      diluted...............    28,372,177   13,262,350    21,064,851    8,712,751
                              ------------  -----------  ------------  -----------
   Basic and diluted pro
    forma net loss per
    share...................  $       (.49) $      (.17) $      (1.58) $      (.47)
                              ============  ===========  ============  ===========
</TABLE>

Note 5. Agreement with VWR

  In March 1999, Chemdex entered into a strategic relationship agreement with
VWR, which was consummated in April 1999, pursuant to which Chemdex and VWR
agreed to market jointly VWR laboratory products using the Chemdex
Marketplace. The term of the agreement is four years.

  The agreement gives Chemdex the right to offer approximately 350,000 VWR-
distributed products to Chemdex customers and both parties agreed to jointly
develop an online purchasing solution for VWR's existing customers. In
connection with the strategic relationship agreement, VWR transferred to
Chemdex information concerning VWR customers who purchased products from third
party suppliers outside VWR's primary product offering and Chemdex issued
2,538,405 shares of common stock valued at $13.9 million to VWR. The Company
intends to use this information to expand sales of its purchasing solution to
these customers and facilitate adoption of the Chemdex Marketplace by these
customers and suppliers. The fair value of the common stock of $13.9 million
was allocated to the customer list and is being amortized into sales and
marketing expense over four years, the estimated useful life of the intangible
asset.

Note 6. Agreement with Biotechnology Industry Organization

  In May 1999, the Biotechnology Industry Organization (BIO) selected Chemdex
as its preferred supplier of e-commerce purchasing solutions. As a result, the
Company entered into a five-year, exclusive joint marketing agreement with
BIO. As part of the joint marketing agreement, Chemdex will discount the fees
it charges to BIO members for its solution and will contribute cash payments
to a joint marketing fund, to be used in conjunction with both parties'
obligations under the joint marketing agreement. In addition, the Company sold
187,500 shares of its common stock to BIO for a nominal amount in
consideration for BIO's participation in these joint marketing activities. BIO
has the right to use a portion of the cash payments and any proceeds it
receives from the sale of the common stock for the benefit of its members and
the biotechnology industry. The charge for BIO marketing activities will be
expensed to sales and marketing as incurred. The Company recorded the
difference between the nominal amount per share price paid by BIO for the
purchase of our common stock and the fair value as of May 11, 1999, which is
approximately $1.8 million as an intangible asset, which is being amortized
ratably over the five-year term of the joint agreement.

                                       8
<PAGE>

                              CHEMDEX CORPORATION

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)


Note 7. Intangible and Other Assets

  Intangible and other assets were comprised of the following:

<TABLE>
<CAPTION>
                                           September 30, 1999 December 31, 1998
                                           ------------------ -----------------
   <S>                                     <C>                <C>
   Deposits and other....................     $   613,099         $300,472
   VWR related intangible, net of amorti-
    zation...............................      12,461,453              --
   BIO related intangible, net of amorti-
    zation...............................       1,603,124              --
                                              -----------         --------
   Total intangible and other assets.....     $14,677,676         $300,472
                                              ===========         ========
</TABLE>

Note 8. Investments

  The Company considers all highly liquid investment securities with original
maturities of three months or less to be cash equivalents. Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. To date, all marketable securities have been classified as available-
for-sale and are carried at fair value with material unrealized gains and
losses, if any, included in stockholders' equity. Realized gains and losses on
available-for-sale securities are included in interest income.

Note 9. Deferred Stock-Based Compensation

  We have recorded deferred compensation for options granted in fiscal year
1998 and the nine months ended September 30, 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 Financial Accounting Standards
Board (FASB) Interpretation No. 28. As of September 30, 1999 we had recorded
aggregate deferred stock compensation of $8.7 million. The deferred stock
compensation is being amortized over the vesting periods of the stock options.
We recognized a total of $.4 million and $1.4 million in stock compensation
expense during 1998 and the nine months ended September 30, 1999,
respectively. The total charges to be recognized in future periods from
amortization of deferred stock compensation as of September 30, 1999 are
anticipated to be approximately $.6 million, $2.2 million, $2.2 million, $1.8
million and $.1 million for the remaining three months of 1999 and for 2000,
2001, 2002 and 2003, respectively.

Note 10. Segment Reporting

  During the year ended December 31, 1998 we adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" which establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial
statements. For all periods presented, we have viewed our operations as
principally one segment. All of the financial information presented represents
information for our principal operating segment.

Note 11. Commitments and Contingencies

  On August 14, 1999, we entered into two leases for our future headquarters
in Mountain View, California. The first lease is for 5.4 years, with aggregate
payments under the lease totaling $15.5 million. The second lease commences
February 1, 2000 and is for 5.1 years. The aggregate payments under the second
lease total $4.9 million. We plan to move to our new headquarters during the
fourth quarter. We have signed a sub-lease agreement for our existing offices
for the reminder of our original lease term. During the third quarter, we
entered into a 2.4 year financing arrangement for a portion of our insurance
expenses, payments under this arrangement total $1.0 million to be paid in 29
equal monthly installments. Future minimum lease payments under non-

                                       9
<PAGE>

                              CHEMDEX CORPORATION

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)

cancelable operating leases entered during the quarter ended September 30,
1999 are $.5 million in 1999, $3.9 million in 2000, $4.2 million in 2001, $3.9
million in 2002, $4.0 million in 2003, $4.1 million in 2004, and $.7 million
thereafter.

Note 12. Related Party Transactions

  VWR's President and Chief Executive Officer is a director of the Company. In
addition, VWR owns 2,538,405 shares of our common stock. VWR and Chemdex
jointly market VWR core products and Chemdex core products to VWR's existing
and new customers and jointly solicit several key existing VWR suppliers to
distribute, market and sell their products through the Chemdex Marketplace.
VWR currently performs some of the billing and cash collection functions for
the sale of jointly marketed products until these functions can be
transitioned to Chemdex. With respect to sales of VWR core products, we act as
an intermediary and forward orders received through the Chemdex Marketplace to
VWR for fulfillment and customer service. We receive no fee for orders for VWR
core products from VWR's 40 largest customers and we receive a minimal fee for
all other orders for VWR core products forwarded to VWR. We are responsible
for fulfillment and customer service for all Chemdex core product and orders
for third party products received from VWR customers through the Chemdex
Marketplace. Under the terms of the agreement, VWR provides support for the
purchase of third party products in return for a fee which approximates VWR's
costs incurred.

  On September 22, 1999 the Company entered into a definitive agreement to
acquire Promedix, a provider of e-commerce solutions for healthcare purchasing
professionals. CMGI and/or its affiliates beneficially own 2,728,357 shares of
Chemdex common stock, representing approximately 8.3% of the outstanding
Chemdex common stock, and 3,996,800 shares of Promedix preferred stock,
representing approximately 42.3% of the outstanding Promedix capital stock.
Following consummation of the merger, CMGI and/or its affiliates will
beneficially own approximately 18.9% of the outstanding Chemdex common stock.
Jonathan D. Callaghan is a general partner of CMGI@ventures, a CMGI affiliate,
and is a member of both the Chemdex board of directors and the Promedix board
of directors.

Note 13. Recent Accounting Pronouncements

  In June 1998, the FASB issued FAS 133, Accounting for Derivative Instruments
and Hedging Activities, which we will be required to adopt for the year ending
December 31, 2001. FAS 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. Because we currently hold no derivative
financial instruments and do not currently engage in hedging activities,
adoption of FAS 133 is not expected to have a material impact on our financial
condition or results of operations.

  In March 1998, the American Institute of Certified Public Accounts (AICPA)
issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1
requires entities to capitalize some of the costs related to internal-use
software once the applicable criteria have been met. We expect that the
adoption of SOP No. 98-1 will not have a material impact on our financial
position or results of operations. The Company will adopt this standard in
fiscal 2000.

Note 14. Proposed acquisition of Promedix, Inc.

  On September 22, 1999 the Company entered into a definitive agreement to
acquire Promedix, Inc., a provider of e-commerce solutions for healthcare
purchasing professionals. Promedix is a privately held Company based in Salt
Lake City, Utah. Promedix links buyers and suppliers of specialty medical
products, providing healthcare professionals with a one-stop shop for product
research, purchase and order fulfillment through

                                      10
<PAGE>

                              CHEMDEX CORPORATION

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)

relationships with distributors and manufacturers. Under the terms of the
merger agreement, the Company will issue approximately 12.1 million shares of
its common stock for all of the outstanding preferred and common stock of
Promedix based on an exchange ratio of the Company's common stock for each
share of Promedix preferred and common stock determined on the closing date of
the transaction. The transaction will be accounted for as a purchase. The
Company's preliminary unaudited estimate of the total purchase consideration
is approximately $315.8 million, based on the fair value at the time of the
announcement of the acquisition, of common stock to be issued. Under a
provision in the agreement, Chemdex or Promedix could be required to pay the
other party a $10 million cancellation fee if the merger is terminated for
specified reasons. Chemdex has agreed to lend Promedix $10 million, with an
interest rate of 9%. At September 30, 1999, no borrowings were outstanding.
The stock issuance by Chemdex has been approved by the Chemdex board of
directors, and the merger has been approved by the board of directors of
Promedix, but is subject to several conditions, including approval by both
companies' stockholders.


                                      11
<PAGE>

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

  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
Chemdex's actual results, performance, or achievements to be materially
different from those stated herein. Although management of Chemdex 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 Chemdex's Registration Statement on
Form S-1 (File Number 333-78505), as amended.

Overview

  Chemdex is a leading provider of e-commerce solutions to the life sciences
research products market. The Chemdex Marketplace is a secure, Internet-based
purchasing solution that enables enterprises, researchers and suppliers to
efficiently buy and sell life sciences research products.

  We were formed in September 1997 and began offering products for sale on the
Chemdex Marketplace in November 1998. During the period from September 1997
through November 1998, we were a development stage enterprise and did not have
significant sales. Our operating activities during this period were related
primarily to the design and development of the Chemdex Marketplace, building
our corporate infrastructure, establishing relationships with suppliers and
customers and raising capital. To date, revenues have been derived from sales
of life sciences research products through the Chemdex Marketplace and through
our strategic relationship with VWR. We have grown our organization by hiring
personnel in key areas, particularly sales, research and development and
marketing.

  We have incurred significant losses since inception, including $14.0 million
in the third quarter of 1999, and, as of September 30, 1999, we had an
accumulated deficit of approximately $42.2 million. We believe our success
depends on establishing additional key strategic supplier and customer
relationships, enhancing the features and functionality of the Chemdex
Marketplace and enterprise purchasing solution, and accelerating market
awareness and demand for the Chemdex Marketplace. From inception, we have
increased our level of spending to build our infrastructure and to develop our
Chemdex Marketplace. We intend to continue to invest heavily in sales,
marketing and research and development and administrative activities and to
increase other operating expenses as required to integrate the operations and
technologies of any future acquisitions. We anticipate that these expenses
could significantly precede any revenues generated by this increased spending.
We have limited operating history upon which to base an evaluation of our
business and we cannot assure you that our revenues will increase in future
periods. Our business and prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in early stages
of development, particularly companies in new and rapidly evolving markets
such as internet based business-to-business commerce.

  Our gross margin for the three months ended September 30, 1999 was
approximately 4.8%. Distributors in general operate on very low margins. This
is especially true in the life sciences research products market. Our gross
margins on sales of life sciences research products are small relative to the
margins earned by traditional distributors of life sciences research products.
If we are unable to increase our revenues at a greater rate than our related
costs, our margins may be reduced further, or possibly eliminated, which would
have a significant negative impact on our financial results. We are dependent
on the discounts we receive from our suppliers, and thus we are vulnerable to
any potential decrease in these discount rates. Any such decrease would have a
significant negative impact on our financial results. If we do not increase
these discounts, and substantially increase our revenues and scale our
business in a manner that generates significant operating efficiencies,
including further automation of our purchasing solution, we may not be able to
achieve profitability.

  Sales to four significant customers accounted for approximately 32%, 16%,
15%, and 11% respectively, of our revenues in the quarter ended September 30,
1999, and we currently expect to continue to derive a significant

                                      12
<PAGE>

portion of our revenues from these customers for the foreseeable future. Our
agreement with one customer, in connection with its role as our initial test
location for our purchasing solution, provides that Chemdex will not receive
price discounts on products of some suppliers purchased by that customer if
that customer purchases specified minimum quantities of product through the
Chemdex Marketplace. As a result, we receive little or no gross margins on
sales of these supplier products to that customer. The loss of revenues from
any of our significant customers would have a significant negative effect on
our business, revenues, results of operations and financial condition.

  A key element of our strategy is to market our solution directly to life
sciences organizations, and to succeed we must satisfy the purchasing
departments, information technology groups and the individual researchers who
are the users of our Internet-based purchasing solution. The time it takes to
sell and implement our solution is long and we devote significant sales,
marketing and management resources to the sales process without any assurance
that the customer will use the Chemdex Marketplace. We are generally required
to provide a significant level of education regarding the use and benefits of
our Internet-based purchasing solution, due in part to the significant
departure from traditional means of commerce and communications entailed by
its adoption and use. Further, potential enterprise customers and a number of
their departments typically engage in extensive internal reviews and analyses
before making purchase decisions. The sale and implementation of our solution
are subject to delays due to our customers' internal budgets and procedures
for approving capital expenditures and deploying new technologies within their
networks. These delays also impair our ability to generate revenue and could
negatively affect our results of operations. Once an enterprise customer
adopts our Internet-based purchasing solution, it takes time for researchers
and other users within the enterprise to become aware of, learn to use and
begin using our Chemdex Marketplace. The long sales cycle and the time it
takes for researchers to begin using our Internet-based purchasing solution,
could negatively affect our revenue growth, and makes it difficult to predict
our results of operations.

  During the first quarter of 1999, we entered into an agreement with VWR
Scientific Products Corporation to jointly market VWR laboratory products
using the Chemdex e-commerce platform. The agreement gives us the right to
offer approximately 350,000 VWR-distributed products to our customers through
the Chemdex Marketplace. VWR and Chemdex are jointly developing an Internet
purchasing solution for VWR's existing and future customers that will provide
access to three categories of products:

  .  products distributed by VWR (VWR core products),

  .  products distributed by Chemdex (Chemdex core products), and

  .  products that are not distributed by either VWR or Chemdex but are
     purchased from third parties (third party products).

  We act as an intermediary under this agreement and forward orders for VWR
core products received through the Chemdex Marketplace to VWR for fulfillment
and customer service. We receive no fee for orders from VWR's 40 largest
customers and we receive a minimal fee for all other orders forwarded to VWR.
We are responsible for fulfillment and customer service for all Chemdex core
product orders and orders for third party products from VWR customers received
through the Chemdex Marketplace on similar terms and conditions as our other
enterprise customers. VWR provides services in connection with purchasing
third party products for a processing fee paid by Chemdex. VWR and Chemdex
jointly market the co-branded version of the Chemdex Marketplace to VWR's
existing and new customers, and jointly solicit several key existing VWR
suppliers to distribute, market and sell their products through the co-branded
purchasing solution.

  In connection with the strategic relationship with VWR, Chemdex issued
2,538,405 shares of common stock valued at $13.9 million. The fair value of
the stock is being amortized, on a straight-line basis, into sales and
marketing expense over four years, the estimated useful life of this
intangible asset.

  We also entered into a five-year, exclusive joint marketing agreement with
the Biotechnology Industry Organization (BIO), and sold 187,500 shares of our
common stock to BIO for a nominal amount of consideration. We recorded the
difference between the nominal amount per share price paid by BIO and the fair
value as of the

                                      13
<PAGE>

date of issuance, which is approximately $1.8 million as an intangible asset
which is being amortized over the five-year term of the joint marketing
agreement as a sales and marketing expense. Amortization related to the VWR
and BIO agreements for the three and nine months ended September 30, 1999 was
$1.0 million and $1.6 million respectively.

Results of Operations for the Three and Nine Months Ended September 30, 1999

 Net revenues

  Net revenues increased from zero in the third quarter of 1998 to $8.5
million in the third quarter of 1999. For the nine months ended September 30,
1999, net revenues increased by $11.6 million from the same period in the
prior year. The significant growth in product sales was due to the launch of
the Chemdex Marketplace in the fourth quarter of 1998, and sales generated as
a result of the VWR agreement. Further, revenues have increased significantly
due to the increase in customer base and increased market acceptance. Net
revenues consist primarily of product sales to customers and charges to
customers for outbound freight. Under most of our supplier agreements we are
acting as a principal in purchasing products from our suppliers and reselling
them to our customers so that we recognize revenues equal to the amount paid
by our customers and cost of revenues equal to the amount we pay to our
suppliers for these products. Under our principal-based agreements, we are
responsible for selling the products, collecting payment from customers,
ensuring that the shipment reaches customers and processing returns. In
addition, we take title to products upon shipment and bear the risk of loss
for collection, delivery and merchandise returns from customers. Some of our
agreements with our suppliers treat us as an agent of the supplier, in which
case we receive a percentage fee on product sales. We recognize revenue from
product sales, net of any discounts, and from fees under our agency-based
supplier agreements, when the products are shipped to customers. Products are
shipped directly to customers by suppliers based on customer delivery date
specifications.

 Cost of Revenues and Gross Profit

  Cost of revenues increased from zero in the third quarter of 1998 to $8.1
million in the third quarter of 1999. For the nine months ended September 30,
1999, cost of revenues increased by $11.0 million from the same period in the
prior year. Cost of revenues consists primarily of the costs of acquiring
products from our suppliers for sale to our customers. During the three and
nine months ended September 30, 1999, cost of revenues, in absolute dollars,
increased consistent with the significant increases in revenues. Our gross
margin for the quarter ended September 30, 1999 was approximately 4.8%. The
low gross margin on product sales, primarily all of which were recognized
under principal-based agreements, was due to our accepting low margins in
order to increase early sales volume, customer adoption, and awareness of the
Chemdex brand. Further, gross margins will fluctuate period to period based on
the product mix sold during the period. While margins on recently signed
supplier agreements continue to improve, we expect margins to remain low until
we are able to renegotiate higher discounts on earlier supplier agreements,
and increase volumes of revenues through more recently signed suppliers with
higher gross margins.

 Operating Expenses

  Research and Development. Research and development expenses increased from
$1.0 million in the third quarter of 1998 to $5.6 million in the third quarter
of 1999. For the nine month period ended September 30, 1999, research and
development costs increased by $9.6 million from the same period in the prior
year. Research and development expenses consist of personnel and other
expenses associated with developing, updating, and enhancing software in
support of the Chemdex Marketplace. Our research and development expenses have
increased each quarter since inception primarily due to increased staffing and
associated costs related to the design and development and maintenance of the
Chemdex Marketplace, and content and design expenses. We believe that our
success is dependent in large part on continued enhancement and development of
the Chemdex Marketplace. Accordingly, we expect research and development
expenses to continue to increase in future periods.

                                      14
<PAGE>

  Sales and Marketing. Sales and marketing costs increased from $.7 million in
the third quarter of 1998 to $6.9 million in the third quarter of 1999. For
the nine month period ended September 30, 1999, sales and marketing expenses
increased $14.1 million over the same period in the prior year. Sales and
marketing expenses consist primarily of advertising and promotion in support
of the development of our marketing strategy, payroll and related expenses for
personnel engaged in supplier relations, enterprise sales activities,
enterprise account management, and amortization expenses related to our VWR
and BIO agreements. Sales and marketing expenses have increased since
inception as we have continued to expand our sales and marketing efforts
primarily with relation to our corporate marketing and branding strategy. We
intend to continue to aggressively expand our supplier and customer
relationships and to expand our brand awareness. We expect sales and marketing
expenses to increase in future periods.

  General and Administrative. General and administrative costs increased from
$.5 million in the third quarter of 1998 to $2.6 million in the third quarter
of 1999. For the nine months ended September 30, 1999, general and
administrative costs increased by $6.1 million from the same period in the
prior year. General and administrative expenses consist primarily of salaries,
fees for professional services and lease expenses. General and administrative
expenses have increased primarily as a result of the addition of finance and
administrative personnel, costs of leasing additional office space to support
our growth, and expenses related to increased professional service fees. We
expect general and administrative expenses to increase in future periods to
support our expanded operations.

  Amortization of Deferred Compensation. We have recorded aggregate deferred
compensation charges of $8.7 million in connection with some of the stock
options we granted through September 30, 1999. For the quarter ended September
30, 1998 and 1999, we expensed $.1 million and $.5 million, respectively,
related to the amortization of deferred compensation. Further, for the nine
months ended September 30, 1998 and 1999, we expensed $.2 million, and $1.4
million respectively, related to the amortization of deferred compensation.
The deferred compensation amounts are being amortized over the vesting period
of the stock options which is generally four years.

 Interest Expense

  Interest expense increased from zero in the third quarter of 1998 to $60,000
in the third quarter of 1999. For the nine month period ended September 30,
1999, interest expense increased $107,000 from the same period in the prior
year. Interest expense consists primarily of interest related to financed
equipment and other financing arrangements.

 Interest and other Income, Net

  Interest and other income, net increased from $.1 million in the third
quarter of 1998 to $1.3 million in the third quarter of 1999. Further, for the
nine month period ended September 30, 1999, interest and other income, net
increased $1.4 million from the same period in the prior year. Interest and
other income, net has been derived primarily from earnings on investments in
cash equivalent securities. Interest during the third quarter of 1999
increased significantly due to increased cash and cash equivalents resulting
from our initial public offering on July 27, 1999.

 Income Taxes

  We incurred operating losses and accordingly did not record a provision for
income taxes for any of the periods presented. At December 31, 1998, we had
net operating loss carryforwards and federal tax credits for federal income
tax purposes of $7.5 million and $100,000, respectively. In addition, we had
state net operating loss and research and development credit carryforwards of
approximately $7.4 million and $100,000, respectively. These net operating
losses and credits will expire in the years 2002 through 2018 if not utilized.
Certain future changes in our share ownership, as defined in the Tax Reform
Act of 1986 and similar state provisions, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the assets
due to our lack of earnings history.

                                      15
<PAGE>

Liquidity and Capital Resources for the Nine Months Ended September 30, 1999

  In July 1999, we completed the initial public offering of our common stock
and realized net proceeds from the offering of approximately $117.6 million.
As of September 30, 1999, our principal sources of liquidity included
approximately $125.6 million of cash and cash equivalents, $4.1 million in
equipment financing arrangements, and $1.0 million in other financing
arrangements. The equipment arrangements include an agreement for $1.1 million
that provides for 12 equal quarterly payments of the financed amount
commencing May 1, 1999, with interest of approximately 13% per year, and a
$3.0 million equipment lease line agreement with a financial institution for a
term of 48 months, with interest of approximately 13% per year. The other
lease arrangements include an agreement for $1.0 million that provides for 29
equal monthly payments commencing August 27, 1999, with interest of
approximately 7% per year. At September 30, 1999 there was $1.0 million in
borrowings outstanding under the equipment financing arrangements, and $.9
million under other financing arrangements.

  Net cash used in operating activities totaled $22.4 million and $4.1 million
in the first nine months of 1999 and 1998, respectively. The net cash used in
operating activities in the first nine months of 1999 was primarily due to our
net losses, which were partially offset by non-cash charges of depreciation
and amortization of deferred compensation, amortization of intangible assets,
and increases in accounts payable, accrued liabilities, and accrued
compensation.

  Net cash used in investing activities totaled $5.7 million in the first nine
months of 1999. We have made substantial investments in computer equipment,
computer software, office furniture and leasehold improvements during the
current year. Net cash used in investing activities in the first nine months
of 1998 was $7.6 million and primarily related to purchases of short term
investments, computer equipment, and office furniture.

  Net cash provided by financing activities was $147.7 million in the first
nine months of 1999 and $13.0 million for the first nine months of 1998. Net
cash from financing activities during 1998 resulted primarily from the sale of
preferred stock. Net cash provided by financing activities in the first nine
months of 1999, resulted primarily from the sale of preferred and common stock
partially offset by payments made on notes payable.

  We currently anticipate that cash and cash equivalents at September 30,
1999, together with our equipment lease line, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at
least the next 12 months. However, we may need to raise additional funds in
future periods through public or private financing, or other arrangements to
fund our operations and potential acquisitions, if any, over a long-term basis
until we achieve profitability, if ever. Any additional financing, if needed,
might not be available on reasonable terms or at all. Failure to raise capital
when needed could seriously harm our business and results of operations. If
additional funds are raised through the issuance of equity securities, the
percentage of ownership of our stockholders would be reduced. Furthermore,
these equity securities might have rights, preferences or privileges senior to
our common stock.

Year 2000 Compliance

  Many currently installed computer systems and software products are unable
to distinguish year 2000 dates. This situation could result in system failures
or miscalculations causing disruptions in the operations of any business. As a
result, many companies' software and computer systems may need to be upgraded
or replaced to comply with year 2000 requirements. Our ability to operate is
dependent upon delivery of accurate, electronic information via the Internet.
To the extent year 2000 issues result in the long-term inoperability of the
Internet or the Chemdex Marketplace, our business, results of operations and
financial condition could be seriously harmed.

  We completed an assessment of our information technology systems for year
2000 problems in April 1999. We have not replaced any of our systems based on
the results of our assessment. However, we have made modifications to some
systems based on our assessment of year 2000 problems.

                                      16
<PAGE>

 Representations and Warranties to Our Customers

  We generally represent and warrant to our customers that the occurrence of
the date January 1, 2000 and any related leap-year issues will not cause the
Chemdex Marketplace application software to fail to operate properly. Our
warranty generally applies only to our software and excludes failures
resulting from the combination of our software and other software or hardware,
unauthorized changes to the software or network connectivity problems,
including, without limitation, problems connecting to the Internet or problems
relating to Internet service providers. If we breach this warranty, the
recourse that our customers may seek is limited to the prompt correction by us
at our own expense of any failure of our software to the reasonable
satisfaction of the customer.

 Our Testing of Our Online Marketplace Application Software

  We have internally reviewed the Chemdex Marketplace application software. We
have performed industry-standard procedures to test our internally developed
applications for year 2000 compliance. Based on our testing, we believe that
our internally developed applications and systems are designed to be year 2000
compliant. In addition, we hired a consultant to perform additional testing,
including a year 2000 readiness audit of our internally developed on-line
application software. The consultant's audit report concluded that our on-line
application software is year 2000 compliant.

  Assessment of Third-Party Equipment and Software.  We utilize third-party
equipment and software that may not be year 2000 compliant. Failure of third-
party equipment or software, or the interface of our applications with this
equipment or software, could result in a material adverse effect on our
business, results of operations and financial condition. We have finished
assessing the year 2000 risks of our third-party desktop systems that are
unrelated to the Chemdex Marketplace. We have contacted the vendors of most of
our third-party software and equipment to assess the year 2000 risks of our
third-party systems that are unrelated to the Chemdex Marketplace. We have
received year 2000 compliance letters from some of these vendors. We are also
in the process of contacting the few remaining vendors with whom we have not
yet spoken in order to assess their year 2000 compliance. Based on these
vendors' representations, we have put a plan in place to upgrade our third-
party systems in order to be year 2000 compliant. The failure of these vendors
to address Year 2000 issues may require us to seek alternative vendors or, if
possible, to develop our own solutions. The time and resources required to
find alternative vendors and to transition our systems could increase our
costs of doing business, require to find alternative vendors and to transition
our systems could increase our costs of doing business, require us to allocate
our own resources away from our core business, and delay development of our
own technology and operations.

  Interaction of Our Marketplace with Supplier and Customer Systems. The
success of our efforts may depend on the success of our suppliers, customers
and strategic partners in dealing with their year 2000 issues. Many of these
organizations' systems may not yet be year 2000 compliant and the impact of
failure of these systems on the Chemdex Marketplace is difficult to determine.
The availability of products from our suppliers and the purchasing patterns of
our customers or potential customers may be affected by year 2000 issues.

  In addition, until some of the billing and cash collection functions for the
sale of third-party products are transitioned to us, we are dependent upon
VWR's systems, which may not be year 2000 compliant, for receiving payment for
third-party products. If the systems of any of our suppliers or customers, and
particularly, if VWR's billing and cash collection systems, are not year 2000
compliant, our business, revenues, results of operations and financial
condition could be severely harmed.

  According to its public filings, VWR is in the process of implementing
enhancements to its computer systems to satisfy its future requirements.
During 1998, VWR purchased an enterprise-wide computer system package that is
replacing many of VWR's systems, including order entry, purchasing, and
financial systems. VWR completed the initial rollout of the new systems during
the fourth quarter of 1998. VWR had an external review conducted by an
independent information technology-consulting firm to identify legacy computer
systems

                                      17
<PAGE>

that could be affected by the year 2000 issue, when they would be affected,
and how the year 2000 issues may be remedied. The extent of year 2000
remediation performed by VWR was coordinated with the new systems
implementation timetable. VWR is still transitioning to its new system as of
September 30, 1999. VWR's new system, together with other planned system
changes, was intended to address its year 2000 issues.

 Our Contingency Planning Effort

  We are engaged in an ongoing year 2000 assessment and are gathering
information for the development of contingency plans. We are in the process of
contacting our strategic partners and major customers to gauge their year 2000
compliance and request year 2000 compliance information and letters. The
nature and extent of our contingency plans will depend on the responses
received from our critical suppliers, strategic partners and major customers.
We have identified our worst-case scenario resulting from a year 2000 failure.
We have a contingency plan in place that will be continually updated and
implemented as we get closer to year end.

 Costs of Addressing Year 2000 Compliance

  To date, our costs to address year 2000 compliance have been approximately
$700,000 and are included in operating expenses funded from working capital.
We anticipate the additional costs to address year 2000 compliance will be
approximately $300,000. We currently have not deferred other information
technology projects due to our year 2000 efforts. Any year 2000 compliance
problem experienced by us, our customers, suppliers or strategic partners
could decrease the demand for or availability of our products.

Factors Affecting our Business Condition

  In addition to the other information included in this document, the
following factors should be considered in evaluating our business and future
prospects:

Our limited operating history makes it difficult for you to evaluate our
business and our prospects

  We were founded in September 1997 and have a limited operating history. You
should consider the risks and difficulties that we face as an early stage
company in a new and rapidly evolving market. Some of these specific risks and
difficulties include:

  .  we may be unable to significantly increase and maintain customer
     adoption and use of our Internet-based purchasing solution;

  .  we depend substantially on a purchasing solution that has been present
     in the market for a limited time and may not be successful;

  .  we may be unable to develop and enhance the Chemdex brand;

  .  we may be unable to maintain existing or establish new relationships
     with suppliers of life sciences research products;

  .  we depend substantially on revenues from product sales and we may be
     unable to significantly increase revenues from product sales or generate
     revenues from other sources;

  .  we may be unable to adapt to rapidly changing technologies and
     developing markets;

  .  we may be unable to effectively manage our rapidly expanding operations
     and the increasing use of our services;

  .  we may be unable to attract, retain and motivate qualified personnel,
     particularly people who understand specialized life sciences research
     products or the life sciences industry in general;

  .  we may be unable to compete in a highly competitive market dominated by
     larger, more established companies with substantial financial resources
     and significant customer relationships; and

  .  we may be unable to comply with applicable laws and regulations to
     economically compete in a highly competitive market.

                                      18
<PAGE>

  In 1998, we generated revenues of $29,000 and in the nine months ended
September 30, 1999 we generated revenues of $11.6 million. Due to our limited
operating history, we believe that period-to-period comparisons of our
revenues and results of operation are not meaningful. As a result, you should
not rely on our revenues or results of operations for any prior period as an
indication of future performance or prospects.

We have a history of losses and anticipate continued losses for the
foreseeable future

  We have had substantial losses since our inception. We currently expect our
losses to increase in the future and we cannot assure you that we will ever
achieve or sustain profitability. As of September 30, 1999, we had an
accumulated deficit of approximately $42.2 million. The extent of these losses
will be contingent, in part, on the amount of growth in our revenue. The
extent of these losses will also be contingent, in part, on the amount of
growth in our operating expenses, which we plan to increase. If our revenues
fail to grow at anticipated rates or our operating expenses increase without a
commensurate increase in our revenues, or we fail to adjust operating expense
levels accordingly, the imbalance between revenues and operating expenses will
negatively affect our business, revenues, results of operations and financial
condition.

  To date we have derived our revenues primarily from product sales. In order
to increase our revenues, we must, among other things:

  .  attract new enterprise customers and retain existing enterprise
     customers;

  .  encourage researchers employed by our enterprise customers to adopt our
     Internet-based purchasing solution and to use it frequently;

  .  increase our product offering by adding and maintaining supplier
     relationships; and

  .  develop new sources of revenues beyond our existing revenue sources.

  If we are unable to accomplish one or more of these objectives, our revenues
may not grow as we anticipate, if at all, and our business, revenues,
financial condition and results of operations will be negatively affected. We
may not be able to build on our current sources of revenues by adding
additional products or services. Even if we do add additional products or
services, there are economic, legal, regulatory and other risks associated
with adding these new revenue sources. For example, we may post advertisements
on our web site to generate advertising revenue. However, our supplier
relationships may be harmed if our suppliers associate advertisements posted
on our web site with a bias in our offering of life sciences research
products.

Our business model is not proven and may not be successful

  Our business-to-business e-commerce model is based on the development of the
Chemdex Marketplace for the purchase and sale of life sciences research
products. This business model is new and not proven and depends upon our
ability to, among other things:

  .  sell our purchasing solution to pharmaceutical and biotechnology
     companies and academic and research institutions;

  .  achieve high rates of adoption by researchers within enterprise
     customers;

  .  maintain our current suppliers and enter into agreements with additional
     suppliers;

  .  generate significant revenues from the use of our Internet-based
     purchasing solution; and

  .  obtain higher transaction volumes and increase productivity.

  We cannot be certain that our business model will be successful or that we
can achieve or sustain revenue growth or generate any profits. The success of
this business model will require, among other things, that we develop and
market solutions with broad market acceptance by our customers, suppliers,
users and strategic partners. We cannot be certain that business-to-business
commerce on the Internet generally, or our purchasing solution, services and
brand in particular, will achieve broad market acceptance. For example,
purchasers may

                                      19
<PAGE>

continue purchasing products through their existing methods and may not adopt
an Internet-based purchasing solution because of their comfort with existing
purchasing habits and direct supplier relationships, the costs and resources
required to switch purchasing methods, the need for products not offered
through the Chemdex Marketplace, security and privacy concerns, or general
reticence about technology or the Internet.

Our gross margins are low and we will have to increase productivity in our
business to be profitable

  Our gross margin for the nine months ended September 30, 1999 was
approximately 4.9%. We are dependent on the price discounts we receive from
our suppliers, and thus we are vulnerable to any decrease in these discount
rates. Any decrease would have a significant negative impact on our financial
results. Our gross margins on sales of life sciences research products are
small relative to the margins earned by traditional distributors of life
sciences research products. If we do not increase these discounts,
substantially increase our revenues, and scale our business in a manner that
generates increased productivity, including further automation of our
purchasing solution, we may never achieve profitability. Distributors, in
general, operate with low margins. This is especially true in the life
sciences research products market.

  In addition, due to our low gross margins, unexpected costs or expenses we
incur would substantially affect our ability to achieve or maintain operating
profits. For example, we generally bear the risks of the loss of products upon
shipment by our suppliers to our customers, of product returns and refunds to
our customers, and of non-collection of accounts receivable. Although we
maintain insurance for claims for damages to our customers or others caused by
our products we do not have insurance coverage for the costs of products lost
during shipment, product returns or uncollectable accounts receivable.

We are subject to government regulation that exposes us to potential liability
and negative publicity

  We currently rely upon our suppliers to meet all packaging, distribution,
labeling, hazard and health information notices to purchasers, record keeping
and licensing requirements applicable to our business during the entire
transaction. Our reliance on suppliers' regulatory due diligence assessment of
purchasers and the compliance by suppliers and purchasers with applicable
governmental regulations may not be sufficient if we are held to need our own
licenses. For example, if we are held to be seller or a distributor of
regulated products because we did take legal title, we may have inadvertently
violated some governmental regulations by not having the appropriate license
or permit and may be subject to potentially severe civil or criminal penalties
and fines for each offense. We are aware that some of our prior sales may have
been made in the absence of us having the requisite local, state, or federal
license or permit. We may be subject to potentially severe civil and criminal
penalties and fines for each of these sales, which could have a material
adverse impact on our business, revenues, results of operations and financial
condition. In addition to these prior sales, we are unable to verify that our
suppliers have in the past complied, or will in the future comply, with the
applicable governmental regulatory requirements, or that their actions are
adequate or sufficient to satisfy all governmental or other legal requirements
that may be applicable to our sales. We could be fined or exposed to civil or
criminal liability, including monetary fines and injunctions, and we could
receive potential negative publicity, if the applicable governmental
regulatory requirements have not been, or are not being, fully met by our
suppliers or by us directly. Negative publicity, fines and liabilities could
also occur if an unqualified person, or even a qualified customer, lacks the
appropriate license or permits to sell, use or ship, or improperly receives a
dangerous or unlicensed product through the Chemdex Marketplace. We do not
maintain any reserve for potential liabilities resulting from government
regulation. It is also possible that a number of laws and regulations may be
adopted or interpreted in the United States and abroad with particular
applicability to the Internet.

We rely on a limited number of enterprise customers, and any loss of an
enterprise customer could have a negative effect on us

  We expect that for the foreseeable future we will generate a significant
portion of our revenues from a limited number of enterprise customers.
Further, our enterprise customers are not obligated to use our purchasing
solution exclusively or for any minimum number of transactions or dollar
amounts. We currently do not offer all

                                      20
<PAGE>

of the life science research products required by our customers, and we expect
that our customers will continue to use multiple sources to meet their needs.
In addition, our contracts with our customers are for limited terms and our
customers may discontinue use of our Chemdex Marketplace at any time upon
short notice and without penalty. If we lose any of our enterprise customers,
or if we are unable to add new enterprise customers, our revenues will not
increase as expected, we will lose access to the researchers employed by these
enterprises, we could lose a number of our product suppliers, and our brand
name and customer and supplier perceptions of our purchasing solution would be
harmed.

We will be very dependent on our strategic relationship with VWR for the
foreseeable future

  We have entered into a strategic relationship agreement with VWR Scientific
Products Corporation to jointly market VWR laboratory products using the
Chemdex Marketplace. The agreement gives us the right to offer approximately
350,000 VWR-distributed products to our customers through the Chemdex
Marketplace. VWR and Chemdex have jointly developed an Internet purchasing
solution for VWR's existing and future customers that provides access to three
categories of products:

  .  products distributed by VWR (VWR core products),

  .  products distributed by Chemdex (Chemdex core products), and

  .  products that are not distributed by either VWR or Chemdex but are
     purchased from third parties (third party products).

  The extent to which our operations are integrated with VWR and the potential
financial impact on us of this strategic relationship makes us very dependent
on VWR for the foreseeable future. We may experience technical or logistical
difficulties in integrating VWR's suppliers, products and services with the
Chemdex Marketplace. If we are unable to do so in a timely manner, our
business, revenues, financial condition and results of operations could be
negatively affected. In addition, our agreement with VWR is nonexclusive
except as to the purchase of third party products by VWR and some other
provisions and has a limited term. We cannot be certain that VWR will not
enter into a similar relationship with one of our competitors, or that VWR
will renew our agreement at the end of its term.

  We receive no fee for orders for VWR core products through the Chemdex
Marketplace from VWR's 40 largest customers and we receive a minimal fee for
all other orders for VWR core products forwarded to VWR. Under the terms of
the agreement, VWR provides some support services for purchasing third party
products in exchange for a fee which approximates VWR's costs incurred.

  Since we receive minimal gross margins for sales of third party products,
our gross profit margins on these sales are lower than our margins on sales of
Chemdex core products. To the extent sales of VWR core products or third party
products increase relative to, or displace our sales of Chemdex core products,
our revenues and gross margins will likely decline, which would make it more
difficult for us to achieve profitability.

Our strategic relationship with VWR may lead to conflicts that could be
detrimental to us

  Our strategic relationship with VWR may lead to conflicts that could be
detrimental to us. For example, we plan to provide the greatest number and
variety of products from the greatest number of suppliers possible; however,
our strategic relationship with VWR may deter other suppliers, particularly
those that compete directly with VWR products, from entering into agreements
with us. In addition, as noted above, our agreement with VWR is nonexclusive,
and it is possible that VWR could enter into similar relationships with one or
more of our competitors, or develop its own purchasing solution that would
compete with ours.

The Chief Executive Officer of VWR is a member of our Board of Directors,
which may lead to conflicts of interest that could be detrimental to us

  Paul Nowak, the President and Chief Executive Officer of VWR, is a member of
our board of directors. This may lead to conflicts of interest, as VWR is one
of the laboratory supply industry's largest distributors and

                                      21
<PAGE>

is a potential competitor of ours. In addition, VWR has entered into and may
in the future enter into relationships with our competitors, other suppliers
or our customers. Although we intend to have Mr. Nowak excuse himself from
Board discussions that involve potential conflicts of interest, we cannot be
sure that this will minimize these conflicts of interests or that Mr. Nowak's
position as a member of our Board of Directors will not operate to our
detriment.

If we cannot build a critical mass of suppliers and customers, we will not be
able to increase our product offering and draw more customers

  Our business model depends in large part on our ability to build a critical
mass of products and suppliers. To attract and maintain suppliers, we must
build a critical mass of customers. However, customers must perceive value in
our purchasing solution which, in part, depends upon the breadth of our
product offerings from our suppliers. If we are unable to increase the number
of suppliers and draw more customers to the Chemdex Marketplace, we will not
be able to benefit from any network effect, where the value to each
participant in the Chemdex Marketplace increases with the addition of each new
participant. As a result, the overall value of the Chemdex Marketplace and our
purchasing solution would be harmed, which would negatively affect our
business, revenues, financial condition and results of operations.

The time it takes to sell and implement our solution is long, which could
negatively affect our revenue growth, if any, and make it difficult to predict
our revenues and results of operations

  A key element of our strategy is to market our solution directly to life
sciences organizations, and to succeed we must satisfy the enterprise
purchasing departments, the information technology groups and the individual
researchers who are the users of our Internet-based purchasing solution. The
time it takes to sell and implement our solution is long and we devote
significant sales, marketing and management resources to the sales process
without any assurance that the customer will use the Chemdex Marketplace. We
are generally required to provide a significant level of education to our
customers and potential customers regarding the use and benefits of our
Internet-based purchasing solution. Furthermore, potential enterprise
customers and a number of their departments typically engage in extensive
internal reviews and analyses before making purchase decisions. The sale and
implementation of our solution are subject to delays due to our customers'
internal budgeting and procedures for approving capital expenditures and
deploying new technologies within their networks. These delays also could
impair our ability to generate revenue.

Even if enterprise customers adopt our purchasing solution, we may not
increase our revenues if researchers within these enterprises do not use the
Chemdex Marketplace

  Our revenues are primarily derived from purchases of life sciences research
products by researchers, research assistants and other users within our
enterprise customers. These persons may or may not use our Chemdex Marketplace
to purchase their research products. Even if we successfully maintain existing
enterprise customers and add new enterprise customers, we may not be able to
increase revenues if researchers within our enterprise customers do not adopt
and use the Chemdex Marketplace. Once an enterprise customer adopts our
Internet-based purchasing solution, it takes time for researchers and other
users within the enterprise to become aware of, learn to use and begin using
our Chemdex Marketplace. The long sales cycle and the time it takes for
researchers to begin using our Internet-based purchasing solution could
negatively affect our revenue growth, if any, and makes it difficult to
predict our results of operations. Also, our efforts to attract researchers to
adopt and to increase their use of our solution may not be successful, which
would limit our ability to generate revenues from these customers.

Reductions in the research and development budgets and government research
funding of our customers will negatively affect our revenues

  Our purchasing solution is used by researchers and their assistants and
staff at pharmaceutical and biotechnology companies, and academic and research
institutions. Changes in the research and development

                                      22
<PAGE>

budgets of these companies and institutions and the timing of spending under
these budgets can have a significant effect on the demand for life sciences
research products. These budgets are based on a wide variety of factors
including the resources available to make these expenditures, the spending
priorities among various types of research, and the policies regarding these
expenditures during recessionary periods. Any decrease in life sciences
research and development expenditures by these companies and institutions
could have a negative effect on our revenues.

  A significant portion of our sales are expected to be to research scientists
and entities whose funding is dependent on grants from government agencies
such as the U.S. National Institutes of Health (NIH) and similar domestic and
international agencies. The funding associated with approved NIH grants
generally becomes available at particular times of the year, as determined by
the federal government, and may result in fluctuations in our revenues and
results of operations. Although NIH research funding has increased during the
past several years, grants have, in the past, been frozen for extended periods
or have otherwise become unavailable to various institutions, sometimes
without advance notice. Furthermore, recent government proposals designed to
reduce or eliminate budgetary deficits have included reduced allocations to
the NIH and other government agencies that fund research and development
activities. If government funding, especially NIH grants, were to become
unavailable to researchers for any extended period of time, or if overall
research funding were to decrease, there could be a negative effect on our
business, revenues, results of operations and financial condition.

The success of our business depends on maintaining and expanding our supplier
base

  Our future success depends in large part upon our ability to offer and
deliver a broad and deep life sciences research product offering to our
customers. We rely on independent suppliers and manufacturers for products
offered through our Chemdex Marketplace. To increase the breadth of our
product offering, including related products that we do not currently offer
such as laboratory equipment and supplies, we must establish relationships
with additional suppliers. Some potential suppliers may view us as detrimental
to their business, since suppliers compete with one another and with us for
sales and customers. Our agreements with suppliers are typically for one-year
terms and we cannot assure you that these agreements will be renewed beyond
the initial term. In addition, these suppliers are not required to accept
purchase orders from us. If we fail to secure products from our suppliers or
if a significant number of suppliers do not renew their agreements with us,
the breadth and depth of products that we can offer users would be decreased.
In addition, there are significant costs, difficulties and risks associated
with adding new products in related markets, such as the difficulty of signing
up new suppliers, obtaining necessary permits, complying with governmental
regulation, pressures on margins, new competition and integration of these new
products into the Chemdex Marketplace. These events could result in decreased
adoption and use of our purchasing solution and decreased revenues, which
could have a negative effect on our business, results of operations and
financial condition.

  Our cost of revenues includes cost of goods payable to suppliers. We cannot
assure you that our suppliers will enter into or renew agreements with us on
the same or similar terms as those currently in effect or that the cost of
goods payable to our suppliers will remain the same. Less favorable terms will
make it difficult for us to achieve profitable operations. Any decreases in
our already low gross margins will have a significant negative effect on our
results of operations and financial condition.

  Our supplier agreements are nonexclusive and many of our suppliers sell
their products directly to our customers. In addition, the growing reach and
use of the Internet has further intensified competition in this industry. Some
suppliers provide customers with direct access to products, and if suppliers,
including our current suppliers, provide products to enterprise customers and
their researchers at a cost lower than ours, our revenues, results of
operations and financial condition could be negatively affected.

If we cannot timely and accurately add supplier product data to our purchasing
solution database we may lose sales and customers, which would adversely
affect our revenues

  Currently, we are responsible for loading supplier product information into
our database and categorizing the information for search purposes. This
process entails a number of risks, including dependence on our

                                      23
<PAGE>

suppliers to provide us in a timely manner with accurate, complete and current
information about their products, and to promptly update this information when
it changes. We will not derive revenue from these products until these data
are loaded in our system. The time period in which we estimate loading these
supplier product data is a forward-looking statement that is subject to risks
and uncertainties and actual results may differ materially from those
described in these forward-looking statements. Timely loading of these
products in our database depends upon a number of factors, including the file
formats of the data provided to us by suppliers and our ability to further
automate and expand our operations to accurately load these data in our
product database, any of which could delay the actual loading of these
products beyond the dates estimated by us.

  In addition, we are generally obligated under our supplier agreements to
load updated product data onto our database for access through the Chemdex
Marketplace within a specified period of time following their delivery from
the supplier. Our current supplier data backlog could make it difficult for us
to meet these data update obligations to our suppliers. While we intend to
further automate the loading and updating of supplier data on our system, we
cannot assure you that we will be able to do so in a timely manner, in part
because achieving the highest level of this automation is dependent upon our
suppliers' automating their delivery of product data to us. If our suppliers
do not provide us in a timely manner with accurate, complete and current
information about the products we offer, our database may be less useful to
our customers and users and may expose us to liability. Although we screen our
suppliers' information before we make it available to our customers and users,
we cannot guarantee that the product information available in our Chemdex
Marketplace will always be accurate, complete and current, or comply with
governmental regulations. This could expose us to liability or result in
decreased adoption and use of our Internet-based purchasing solution, which
could reduce our revenues and therefore have a negative effect on our results
of operations and financial condition.

If our suppliers do not provide timely and professional delivery of products
to our customers our business will be harmed

  We also rely on our suppliers and manufacturers to deliver life sciences
research products to our customers in a professional, safe and timely manner.
If our suppliers do not deliver the products to our customers in a
professional, safe and timely manner, then our service will not meet customer
expectations and our reputation and brand will be damaged. In addition,
deliveries that are nonconforming, late or are not accompanied by information
required by applicable law or regulations, could expose us to liability or
result in decreased adoption and use of our Internet-based purchasing
solution, which could have a negative effect on our business, results of
operations and financial condition. Further we, and not our suppliers,
typically bear the responsibility for product refunds and returns and the risk
of non-collectibility of accounts receivable from our customers.

To attract customers and suppliers to our Chemdex Marketplace, we must not
favor one supplier over another

  The life sciences research products market consists of a complex set of
relationships among manufacturers, suppliers, distributors and customers.
Adoption of our solution by suppliers and customers is dependent on their
perception that we provide a neutral, unbiased marketplace to purchase and
sell life sciences research products. To the extent that we are perceived by
our customers or suppliers as favoring one supplier over another, customers
and suppliers may lose confidence in the Chemdex Marketplace as a fair and
neutral marketplace and choose alternative solutions. Our relationship with
VWR, including the fact that VWR is a stockholder and is represented on our
Board of Directors, may compromise the perception that we provide a neutral
and unbiased marketplace for life sciences research products. Any bias,
whether perceived or actual, could have a negative impact on our ability to
maintain or increase our supplier base, which in turn may limit our ability to
maintain or increase our customer base. This would reduce revenues and
therefore have a negative impact on our business, results of operations and
financial condition.

We face intense competition that could limit our ability to expand our base of
customers and users

  The market for business-to-business e-commerce and Internet ordering and
purchasing is new and rapidly evolving, and competition is intense and is
expected to increase significantly in the future. We face competition

                                      24
<PAGE>

from four main areas: other companies with e-commerce offerings, traditional
suppliers and distributors of life sciences research products, life sciences
companies that have developed their own purchasing solutions and enterprise
software companies that offer, or may develop, alternative purchasing
solutions. We may not be able to compete successfully against our current or
future competitors and competition could have a material adverse effect on our
business, results of operations and financial condition. Our competitors and
potential competitors may develop superior Internet purchasing solutions that
achieve greater market acceptance than our solution. In addition,
substantially all of our prospective customers have established long-standing
relationships with some of our competitors or potential competitors, including
most of our suppliers. Accordingly, we cannot be certain that we will be able
to expand our customer list and user base, or retain our current customers or
suppliers.

Our solution and services are new and face rapid technological changes and if
we do not respond appropriately, we may lose customers

  The market for our solution is characterized by rapid technological
advances, evolving standards in the Internet and software markets, changes in
customer requirements and frequent new product and service introductions and
enhancements. As a result, our future success depends upon our ability to
enhance our current Internet-based purchasing solution and services, to
develop and introduce new solutions and services that will achieve market
acceptance, and where necessary to integrate our Internet-based purchasing
solution with our customers' enterprise resource planning systems. If we do
not adequately respond to the need to develop and introduce new solutions or
services, or to integrate with our customers' enterprise resource planning
systems, then our business, revenues, results of operations and financial
condition will be negatively affected. For example, we may lose market share
and ultimately revenue as our customers switch to our competitors' offerings
if:

  .  we are unable to develop technology that is a success in the
     marketplace;

  .  our technology does not integrate with our customers' systems; and

  .  our technology is surpassed by the superior technology of a competitor.

  Further, we may incur significant expense to integrate our purchasing
solution with our customers' enterprise resource planning systems and business
rules, and to maintain this integration as our customers' enterprise resource
planning systems evolve. Failure to provide this integration may delay or
altogether dissuade the market or a particular customer from adopting our
Internet-based purchasing solution, which could negatively affect our revenues
and therefore have a material adverse effect on our business, results of
operations and financial condition.

If we do not successfully develop and timely introduce new versions of our
purchasing solution in the next several months our business will be harmed

  New releases are planned to include significant enhancements to the user
interfaces, database management and search technology, and security controls.
The planned timing of introduction of new releases of our purchasing solution
is a forward-looking statement that is subject to risks and uncertainties, and
actual timing may differ materially from that set forth in these forward-
looking statements as a result of a number of factors. Enhancing and
introducing new technology into our purchasing solution involves numerous
technical challenges and substantial personnel resources, and often takes many
months to complete. We cannot be certain that we will be successful at
enhancing or integrating this technology into our Internet-based purchasing
solution on a timely basis, or in accordance with our milestones or our
product release objectives. In addition, we cannot be certain that, once
integrated, this technology or our Internet-based purchasing solution will
function as expected. If we are unable to enhance and integrate this new
technology into our purchasing solution on a timely basis, we may lose
customers or experience difficulty obtaining new customers, which could
adversely affect our business, revenues,

                                      25
<PAGE>

financial condition and results of operations. Major enhancements and new
solutions and services often require long development and testing periods. In
addition, our Internet-based purchasing solution is complex and, despite
vigorous testing and quality control procedures, may contain undetected errors
or "bugs" when first introduced or updated. Any inability to timely deliver a
quality solution and services could have a negative effect on our business,
revenues, financial condition and results of operations.

We may not be able to determine or design the features and functionality that
our enterprise customers and researchers require or prefer

  Our success depends upon our ability to accurately determine the features
and functionality that our enterprise and research customers require or prefer
in an e-commerce solution, and our ability to successfully design and
implement purchasing solutions that include these features and functionality.
If we are unable to determine or design in the features and functionality that
enterprise and research customers require or prefer in an e-commerce solution,
our business will be negatively affected. We have designed the Chemdex
Marketplace based upon internal development efforts and feedback from a
relatively limited number of enterprise and research customers. We cannot be
certain, however, that the features and functionality that we currently offer
in the Chemdex Marketplace, or those that we may offer in future releases of
our solution, will satisfy the requirements or preferences of our current or
potential enterprise and research customers.

We will need to manage our expanding business effectively in order to meet
customer and investor expectations

  We have rapidly and significantly expanded our operations and expect to
continue to do so. This growth has placed, and is expected to continue to
place, a significant demand on our sales, marketing, managerial, operational,
financial and other resources. If we cannot manage our growth effectively, it
is likely that our revenues and results of operations will not meet customer
and investor expectations. As of September 30, 1999, we had grown to
approximately 175 employees. We expect to hire a significant number of new
employees to support our business.

  Our current information systems, procedures and controls may not continue to
support our operations and may hinder our ability to exploit the market for
selling products to the life sciences industry. We are in the process of
implementing a new enterprise resource planning system that will replace our
existing accounting and management information systems and allow for future
scalability and enhancements. In addition, we anticipate requiring additional
space to accommodate our growth in the next six months. We could experience
interruptions to our business when we transition to the new enterprise
resource planning system and when we relocate to new facilities. Even after we
implement our new system and relocate to new facilities, our personnel,
systems, procedures, controls and facilities may be inadequate to support our
future operations.

We depend on our key personnel to manage our business effectively in a rapidly
changing market

  Our performance is substantially dependent on the performance of our
executive officers and other key employees. We do not have any employment
agreements with our executive officers and key employees, although some of
them have severance arrangements. Our failure to successfully manage our
personnel requirements would have a negative effect on our business, revenues,
financial condition and results of operations. We have experienced difficulty
from time to time in hiring the personnel necessary to support the growth of
our business, and we may experience similar difficulty in hiring and retaining
personnel in the future. Competition for senior management, experienced sales
and marketing personnel, software developers, qualified engineers and other
employees is intense, and we cannot be certain that we will be successful in
attracting and retaining our personnel. The loss of the services of any of our
executive officers or other key employees could have a negative effect on our
business. In particular, the loss of services of David Perry, our President
and Chief Executive Officer, and Pierre Samec, our Chief Information Officer,
would have a detrimental effect on our business. Mr. Perry is one of the co-
founders and is primarily responsible for our vision and future direction, and
Mr. Samec is responsible for all of our technology systems and software.

                                      26
<PAGE>

  The unpredictability of our quarterly results may negatively affect the
trading price of our common stock

  Our revenues and results of operations may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control. As a result, you should not rely on period-to-period comparisons of
revenues and results of operations as an indication of our future performance.
Some of the factors that may affect our revenues and results of operations
include:

  .  demand for and market acceptance of our Internet-based purchasing
     solution and services;

  .  introduction of new and enhanced purchasing solutions and services by us
     or our competitors;

  .  budgeting cycles of customers and users;

  .  loss of one or more of our key suppliers, customers or strategic
     relationships;

  .  changes in our pricing policy or those of our competitors or suppliers;

  .  amount and timing of capital expenditures and other costs relating to
     the expansion of our operations;

  .  timing and number of new hires;

  .  ability to comply with applicable laws and regulations or obtain
     necessary permits and licenses to sell or ship products to customers;

  .  technical difficulties with our web site or Internet-based purchasing
     solution;

  .  level of activity and funding in the life sciences industry; and

  .  general economic conditions.

  We may from time to time make pricing, service or marketing decisions or
enter into strategic business combinations that could have a negative effect
on our business, revenues, financial condition or results of operations for
any number of quarterly periods. For example, we intend to significantly
expand our development and engineering expenses to improve our Internet-based
purchasing solution. In addition, in order to accelerate the promotion of the
Chemdex brand, we intend to increase our marketing budget significantly. These
increases in expenses may negatively affect our results of operations for a
number of quarterly periods and we cannot assure that these measures will
increase our revenues.

  Due to our relatively short operating history we have limited meaningful
historical financial data upon which to base our planned operating expenses.
Accordingly, our expense levels are based in part on our expectations as to
future revenues from new customers and are relatively fixed in the short term.
We cannot be certain that we will be able to accurately predict our revenues,
particularly in light of our limited operating history, the intense
competition in the life sciences industry, and the resulting uncertainty as to
the success of our business model. If we fail to accurately predict revenues
in relation to fixed expense levels and we are unable to adjust our operating
expenses in a timely manner in response to lower-than-expected revenues, our
results of operations and financial condition could be negatively affected.

We expect the price of our common stock to be volatile

  An active public market for our common stock may not develop or be
sustained.

                                      27
<PAGE>

  The market price of the common stock may fluctuate significantly in response
to a number of factors, some which are beyond our control, including:

  .  quarterly variations in our operating results;

  .  changes in estimates of our financial performance by securities
     analysts;

  .  changes in market valuation of Internet commerce companies generally;

  .  announcements by us of significant contracts, acquisitions, strategic
     partnerships, joint ventures or capital commitments;

  .  loss of a major customer, supplier or strategic partner, or failure to
     complete a sale of our purchasing solution to a significant customer;

  .  additions or departures of any of our key personnel;

  .  future sales of our common stock; and

  .  stock market price and volume fluctuations, which are particularly
     common among highly volatile securities of Internet companies.

  In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert
management's attention and resources, which could have a negative effect on
our business, results of operations and financial condition.

Our business will suffer if the life sciences industry does not accept
Internet solutions

  Business-to-business e-commerce is a new and emerging business practice that
remains largely untested in the marketplace. Growth in the demand for our
Internet-based purchasing solution and services depends on the adoption of e-
commerce and Internet solutions by life sciences industry participants, which
requires the acceptance of a new way of conducting business and purchasing
supplies. Our business could suffer dramatically if e-commerce and Internet
solutions are not accepted or not perceived to be effective.

  The Internet may not prove to be a viable commercial marketplace for the
life sciences industry for a number of reasons, including:

  .  inadequate development of the necessary infrastructure for Internet-
     based communications within life sciences organizations;

  .  security and confidentiality concerns of customers and suppliers;

  .  lack of development of complementary products, such as high-speed modems
     and high-speed communication lines;

  .  implementation of competing purchasing solutions;

  .  lack of human contact that current, traditional suppliers provide; and

  .  governmental regulation.

The accelerated growth and increasing volume of Internet traffic may cause
performance problems that may slow adoption of our Internet-based purchasing
solution and the Chemdex Marketplace

  The growth of Internet traffic to very high volumes of use over a relatively
short period of time has caused frequent periods of decreased Internet
performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. If
Internet usage continues to grow rapidly, the infrastructure of the Internet
and its users may be unable to support the demands of growing e-commerce
usage, and the Internet's

                                      28
<PAGE>

performance and reliability may decline. If our existing or potential
enterprise and research customers experience frequent outages or delays on the
Internet, the adoption or use of our Internet-based, e-commerce purchasing
solution may grow more slowly than we expect or even decline. Our ability to
increase the speed and reliability of our Internet-based purchasing solution
is limited by and depends upon the reliability of both the Internet and the
internal networks of our existing and potential customers. As a result, if
improvements in the infrastructure supporting both the Internet and the
internal networks of our enterprise customers and their researchers are not
made in a timely fashion, we may have difficulty obtaining new customers, or
maintaining our existing customers, either of which could reduce our potential
revenues and have a negative impact on our business, results of operations and
financial condition.

Security and disruption problems with the Internet or transacting business
over the Internet may inhibit the growth of our Internet-based purchasing
solution

  The secure transmission of confidential information over the Internet is
essential to maintaining customer and supplier confidence in our Chemdex
Marketplace. Customers generally are concerned with security and privacy on
the Internet and any publicized security problems could inhibit the growth of
the Internet, and therefore our purchasing solution, as a means of conducting
transactions. Substantial security breaches on our system could significantly
harm our business. A party that is able to circumvent our security systems
could misappropriate proprietary information or cause interruptions in our
operations. We incur substantial expense to protect against and remedy
security breaches and their consequences. Despite the implementation of
security measures, our networks may be vulnerable to unauthorized and illegal
access, computer viruses and other disruptive problems. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or cessation of service to users accessing our solution.

  Internet service providers and on-line service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. We may be required to expend significant capital
or other resources to protect against the threat of security breaches or to
alleviate problems caused by these breaches. Although we intend to continue to
implement industry-standard security measures, we cannot be certain that
measures implemented by us will not be circumvented in the future.

  If we experience a security breach that results in the misappropriation of
proprietary information maintained in our systems or if we experience
interruptions in our service, our reputation and brand may be damaged and we
may be exposed to a risk of loss or litigation and possible liability. Damage
to our reputation and brand could cause us to lose suppliers and customers and
negatively affect our business, results of operations and financial condition.
Our insurance policies may not be adequate to reimburse us for losses caused
by security breaches or service disruption.

System failure may cause interruption of our services

  The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
process transactions, provide high quality customer service, and attract and
retain customers, suppliers, users and strategic partners. Currently our
infrastructure and systems are located at one site at Exodus Communications in
Sunnyvale, California. We anticipate adding a mirror site at a different,
distant location. Until then, we depend on our single-site infrastructure and
any disruption to this infrastructure resulting from a natural disaster or
other event could result in an interruption in our service, fewer transactions
and, if sustained or repeated, could impair our reputation and the
attractiveness of our services.

  Our systems and operations are vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and
similar events. We do not have a formal disaster recovery plan or alternative
provider of hosting services. In addition, we do not carry sufficient business
interruption insurance to compensate us for losses that could occur. Any
failure on our part to expand our system or Internet infrastructure to keep up
with the demands of our

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<PAGE>

customers and users, or any system failure that causes an interruption in
service or a decrease in responsiveness of our Internet-based purchasing
solution or web site, could result in fewer transactions and, if sustained or
repeated, could impair our reputation and the attractiveness of our brand
name, which would adversely affect our business, revenues, financial condition
and results of operations.

We face year 2000 risks associated with our own systems and those of our
customers, suppliers and the Internet

  Significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance problems. Any year 2000 compliance
problems faced by us, our customers, suppliers and strategic partners could
have a negative effect on our business, revenues, and results of operations
and financial condition. In addition, our ability to operate is dependent upon
delivery of accurate, electronic information via the Internet. To the extent
year 2000 issues result in the long-term inoperability of the Internet, the
Chemdex Marketplace or the systems of VWR, our business, revenues, financial
condition and results of operations could be seriously harmed.

  Although we believe that our internally developed applications and systems
are designed to be year 2000 compliant, we use third party equipment and
software that may not be year 2000 compliant. In addition, until some of the
billing and cash collection functions for spot buying services are
transitioned to Chemdex, we are dependent upon VWR's systems for receiving
payment for products purchased using the spot buying services. Failure of our
applications and services, VWR's billing and collection system, or third party
equipment and software that we use, to be year 2000 compliant could result in
the Chemdex Marketplace not being used for purchasing life sciences research
products, the termination of our customer agreements or in liability for
damages, any of which could have a material adverse effect on our business,
results of operations and financial condition. Many of our customers' systems
with which the Chemdex Marketplace integrates may not yet be year 2000
compliant. In addition, our suppliers' systems may not be year 2000 compliant.
Any negative effects on our customers' or suppliers' systems as a result of
the year 2000 problem, or unknown, non-compliance of our own systems, could
have a negative effect on our business, results of operations and financial
condition and we do not have a formal contingency plan to address year 2000
issues. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Compliance."

We may require additional capital for our operations that could have a
negative effect on your investment

  We currently anticipate that cash and cash equivalents at September 30,
1999, together with our existing borrowing arrangements and available funds
will be sufficient to meet our anticipated needs for working capital and
capital expenditures for at least the next 12 months. This is a forward-
looking statement that is subject to risks and uncertainties and actual
results may differ materially from those described in this forward-looking
statement. We may need to raise additional funds in the future in order to
fund rapid expansion, to pursue customer sales and implementation, to develop
new or enhanced solutions and services, to respond to competitive pressures or
to acquire complementary businesses, technologies or services.

  If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution and these securities may have
powers, preferences and rights that are senior to those of the rights of our
common stock. We cannot be certain that additional financing will be available
on terms favorable to us, if at all. If adequate funds are not available or
not available on acceptable terms, we may be unable to fund our expansion,
promote our brand identity, take advantage of unanticipated acquisition
opportunities, develop or enhance services or respond to competitive
pressures. Any inability to do so could have a negative effect on our
business, revenues, financial condition and results of operations.

Our planned international expansion may make it more difficult to manage our
business

  We expect to enter the international market. To do so, we plan to establish
international operations, hire additional personnel and establish
relationships with additional suppliers and partners. This expansion will

                                      30
<PAGE>

require significant management attention and financial resources and could
have a negative effect on our business, revenues, financial condition and
results of operations. We cannot assure you that we will be able to create or
sustain international demand for our Internet-based purchasing solution and
services. In addition, our international business may be subject to a variety
of risks, including applicable government regulation, difficulties in
collecting international accounts receivable, longer payment cycles, increased
costs associated with maintaining international marketing efforts, the
introduction of non-tariff barriers and higher duty rates and difficulties in
enforcement of contractual obligations and intellectual property rights. We
cannot assure you that these factors will not have a negative effect on any
future international sales and, consequently, on our business, results of
operations and financial condition.

We may be exposed to product liability claims

  We face potential liability for claims based on the type and adequacy of the
information and data that we obtain from suppliers and make available, and the
nature of the products that we sell and distribute utilizing the Internet,
including claims for breach of warranty, product liability, misrepresentation,
violation of governmental regulations and other commercial claims. In
particular, we bear the risk of liability for product loss, spill, or release,
and resulting damages to persons and property during delivery by the supplier
to the customer and return by the customer to the supplier. We do not pass
through the manufacturers' warranties on the products we distribute. However,
we bear the risk of loss of revenue from the product sale if a purchaser does
not pay for a defective product. Although we maintain general liability
insurance, our insurance may not cover some claims, penalties, or spills, is
subject to policy limits and exclusions, and may not be adequate to fully
indemnify us or our employees for any civil, governmental or criminal
liability that may be imposed. Furthermore, this insurance may not be
available at commercially reasonable rates in the future. Any liability not
covered by our insurance or in excess of our insurance coverage could have a
negative effect on our business, results of operations and financial
condition. Our liability is potentially greater with respect to sales to
researchers and others that are not affiliated with an enterprise customer.

  We also seek to obtain indemnification from our suppliers against some of
these claims. However, the scope of the indemnification is limited, a few of
our suppliers have not agreed to indemnify us and some suppliers may be unable
or unwilling to indemnify us in the future. In addition, we are not in a
position to monitor our suppliers' activities. Therefore, we are exposed to
liability and risk for these claims.

We depend on our intellectual property rights and are subject to the risk of
infringement

  Our intellectual property is important to our business, and we seek to
protect our intellectual property through copyrights, trademarks, trade
secrets, confidentiality provisions in our customer, supplier and strategic
relationship agreements, nondisclosure agreements with third parties, and
invention assignment agreements with our employees and contractors. We cannot
assure that measures we take to protect our intellectual property will be
successful or that third parties will not develop alternative purchasing
solutions that do not infringe upon our intellectual property. In addition, we
could be subject to intellectual property infringement claims by others. Our
failure to protect against misappropriation of our intellectual property, or
claims that we are infringing the intellectual property of third parties could
have a negative effect on our business, revenues, financial condition and
results of operations.

Regulation or taxation of the Internet or transacting business over the
Internet may inhibit the growth of our Internet-based purchasing solution

  Due to the increasing popularity and use of the Internet and of e-commerce,
it is possible that a number of taxes, laws and regulations may be adopted in
the U.S. and abroad with particular applicability to the Internet and e-
commerce transactions. It is possible that governments will adopt taxes and
enact legislation that may be applicable to us in areas such as content,
product distribution, network security, encryption and the use of key escrow,
data and privacy protection, electronic authentication or "digital"
signatures, illegal and harmful content, access charges and re-transmission
activities. Moreover, the applicability to the Internet of existing laws

                                      31
<PAGE>

governing issues such as property ownership, content, taxation, defamation and
personal privacy is uncertain. Taxes, laws or regulations may limit the growth
of the Internet, dampen e-commerce and reduce the number of transactions,
increase our cost of doing business or increase our legal exposure. Any of
these factors could have a negative effect on our business, revenues, and
results of operations and financial condition.

Item 3. Qualitative and Quantitative Disclosure about Market Risk

  Our sales from inception to date have been made to U.S. Customers and, as a
result, we have not had any exposure to factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets.
However, in future periods, we expect to sell in foreign markets. As our sales
are made in U.S. dollars, a strengthening of the U.S. dollar could make our
products less competitive in foreign markets. At September 30, 1999, our cash
and cash equivalents consisted primarily of money market funds and commercial
paper held by large institutions in the U.S.

                          Part II. Other Information

Item 2. Changes in Securities and Use of Proceeds

  On July 27, 1999, Chemdex issued 8,625,000 shares of Common Stock, including
the underwriters' overallotment, with net proceeds to the Company of $117.6
million. Morgan Stanley Dean Witter, BancBoston Roberston Stephens, and Volpe
Brown Whelan & Company were the managing underwriters in the offering. The
shares of common stock sold in the offering were registered under the
Securities Act of 1933, as amended, on a Registration Statement on Form S-1
(No. 333-78505).

  On July 27, 1999, all outstanding preferred shares were automatically
converted to common shares in a 1:1 ratio. The Company plans to use the
proceeds from the offering to fund continuing operations.

  We paid a total of $9.1 million in underwriting discounts and commissions
associated with our initial public offering. We incurred approximately $2.7
million in additional offering related costs. After deducting the underwriting
discounts and commissions and other offering expenses, net proceeds to the
Company were approximately $117.6 million.

Item 5. Other Information

  On September 22, 1999 the Company entered into a definitive agreement to
acquire Promedix, Inc., a provider of e-commerce solutions for healthcare
purchasing professionals. Promedix is a privately held Company based in Salt
Lake City, Utah. Promedix links buyers and suppliers of specialty medical
products, providing healthcare professionals with a one-stop shop for product
research, purchase and order fulfillment through relationships with
distributors and manufacturers. Under the terms of the merger agreement, the
Company will issue approximately 12.1 million shares of its common stock for
all of the outstanding preferred and common stock of Promedix based on an
exchange ratio of the Company's common stock for each share of Promedix
preferred and common stock determined on the closing date of the transaction.
The transaction will be accounted for as a purchase. The Company's preliminary
unaudited estimate of the total purchase consideration is approximately $315.8
million, based on the fair value at the time of the announcement of the
acquisition, of common stock to be issued. Under a provision in the agreement,
Chemdex or Promedix could be required to pay the other party a $10 million
cancellation fee if the merger is terminated for specified reasons. As part of
the agreement, Chemdex agreed to lend Promedix $10.0 million at an interest
rate of 9%. At September 30, 1999, no borrowings were outstanding. The stock
issuance has been approved by the Chemdex board of directors and the merger
has been approved by the board of directors of Promedix, but is subject to
several conditions, including approval by both companies' stockholders. The
Company continues to consider agreements to acquire additional companies in
new verticals in order to expand its market presence.

                                      32
<PAGE>

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.

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
   3.2   Amended and Restated Certificate of Incorporation of Chemdex (1)

   3.4   Amended and Restated Bylaws of Chemdex (1)

   4.1   Specimen Stock Certificate (1)

   4.2   Third Amended and Restated Investors' Rights Agreement dated March 24,
         1999 (1)

   4.3   Amendment dated May 12, 1999 to Third Amended and Restated Investors'
         Rights Agreement (1)

   4.4   Common Stock Purchase Warrant dated July 27, 1999 to purchase 25,000
         shares of Chemdex common stock issued to Alza Corporation (3)

  10.1   Form of Indemnification Agreement between Chemdex and each of its
         officers and directors (1)

  10.2   Form of Change of Control Agreement between Chemdex, each of its
         officers and certain employees (1)

  10.3   Change of Control Agreement between Chemdex and Robert A. Swanson (1)

  10.4   Change of Control Agreement between Chemdex and Charles R. Burke (1)

  10.5   1998 Stock Plan, as amended, and form of option agreement (1)

  10.6   1999 Employee Stock Purchase Plan and form of subscription agreement
         (1)

  10.7   1999 Directors' Stock Plan (1)

  10.8   Standard Office Lease dated June 11, 1998 between Chemdex and Fabian
         Partners II, a California General Partnership, as amended (1)

  10.9   Master Lease Agreement dated January 20, 1999, as amended, between
         Chemdex and Comdisco, Inc. (1)

  10.10  Starter Kit Loan and Security Agreement dated February 18, 1998
         between Chemdex and Imperial Bank (1)

  10.11  Warrant Agreement to Purchase Shares of Series B Preferred Stock of
         Chemdex dated January 20, 1999 between Chemdex and Comdisco, Inc. (1)

  10.12  Common Stock Purchase Warrant to Purchase Shares of Common Stock of
         Chemdex dated March 24, 1999 between Chemdex and Galen Partners III,
         L.P. (1)

  10.13  Common Stock Purchase Warrant to Purchase Shares of Common Stock of
         Chemdex dated March 24, 1999 between Chemdex and Galen Partners
         International III, L.P. (1)

  10.14  Common Stock Purchase Warrant to Purchase Shares of Common Stock of
         Chemdex dated March 24, 1999 between Chemdex and Galen Employee Fund
         III, L.P. (1)

  10.15  Electronic Commerce Agreement dated January 5, 1998 between Chemdex
         and Genentech, Inc. (1) (2)

  10.16  Standstill Agreement dated April 23, 1999 between Chemdex and VWR
         Scientific Products Corporation (1) (2)

  10.17  Strategic Relationship Agreement dated April 30, 1999 between Chemdex
         and VWR Scientific Products Corporation (1) (2)
</TABLE>

                                       33
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                               Description
 -------                              -----------
 <C>     <S>
  10.18  Joint Marketing Agreement dated May 11, 1999 between Chemdex and
         Biotechnology Industry Organization. (1) (2)

  10.19  Payment Plan Agreement dated February 22, 1999 and related agreements
         between Chemdex and Oracle Credit Corporation. (1)

  10.20  Warrant Purchase Agreement dated July 27, 1999 between Chemdex and
         Alza Corporation. (3)

  10.21  Office lease dated August 13, 1999 between Chemdex and Alza
         Corporation for space located at 1000 Joaquin Road, Mountain View,
         California. *

  10.22  Office lease dated August 13, 1999 between Chemdex and Alza
         Corporation for space located at 1500 and 1550 Plymouth Street,
         Mountain View, California. *

  10.23  Voting Agreement dated September 21, 1999 between Chemdex and certain
         stockholders of Promedix.com, Inc.(4)

  10.24  Employment Agreement dated September 21, 1999 between Chemdex and
         William Klintworth. (4)

  10.25  Change of Control Agreement dated September 21, 1999 between Chemdex
         and William Klintworth.(4)

  10.26  Affiliates Agreement dated September 21, 1999 between Chemdex and
         certain stockholders of Promedix.com, Inc.(4)

  10.27  Secured Promissory Note and Agreement dated September 21, 1999 from
         Promedix.com, Inc. to Chemdex and related Security agreement.(4)

  10.28  Noncompetition Agreement dated September 21, 1999 between Chemdex and
         William Klintworth. (4)
  27.1   Financial Data Schedule *
</TABLE>
--------
*  Filed herewith.
(1) Filed as an exhibit to the Registrant's Registration Statement of Form S-1
    (Registration No. 333- 78505) filed with the Commission on May 14, 1999,
    as amended, and incorporated herein by reference.
(2) Portions of this Exhibit have been omitted and filed separately with the
    Secretary of the Commission pursuant to the Registrant's Application
    Requesting Confidential Treatment under Rule 406 under the Act.
(3) Filed as an exhibit to the Company's 10-Q for the period ended June 30,
    1999, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's S-4 filed on November 10, 1999, and
    incorporated herein by reference.

  b) Reports on Form 8-K

    None.

                                      34
<PAGE>

                                   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 12, 1999.

                                          Chemdex Corporation

                                                   /s/ James G. Stewart
                                          By __________________________________
                                                     James G. Stewart
                                                  Chief Financial Officer
                                               (Principal Financial Officer)

                                       35