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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q



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(Mark One)

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

For the quarterly period ended March 31, 2003

OR

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

For the transition period from          to          .

Commission file number: 0-26811

NexPrise, Inc.

(Exact name of Registrant as specified in its charter)


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

5950 La Place Court, Suite 200
Carlsbad, CA 92008
760-804-1333
(Address, including zip code, and telephone
number, including area code, of Registrants principal
executive offices)

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

On March 31, 2003, 3,226,471
shares of the registrants common stock,
$.0002 par value per share, were issued and outstanding.



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TABLE OF CONTENTS



|                           |                                                                                               |                                            |  |  |  |  |  | 
|-------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|                           |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                           |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                           |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                           |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                           | Item 3. Qualitative and Quantitative Disclosure about Market Risk                            
|                           | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION
|                           | Item 1. Legal Proceedings                                                                    
|                           | Item 2. Changes in Securities and Use of Proceeds                                            
|                           | Item 3. Defaults upon Senior Securities                                                      
|                           | Item 4. Submission of Matters to a Vote of Securities Holders                                
|                           | Item 5. Other Information                                                                    
|                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                 
|CERTIFICATIONS            
|EXHIBIT INDEX             
|EXHIBIT 99.1              
|EXHIBIT 99.2              



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NEXPRISE, INC.
FORM 10-Q

TABLE OF CONTENTS

|               |  |                                                                                       |  |      | 
|-------------- |  | ------------------------------------------------------------------------------------- |  | ---- | 
|               |  |                                                                                       |  | Page
|               |  |                                                                                       |  |     
|               |  | PART I FINANCIAL INFORMATION                                                          |  |      | 
|Item 1.        |  | Unaudited Consolidated Financial Statements:                                          |  |      | 
|               |  | Balance Sheets as of March 31, 2003 and December 31, 2002                             |  | 3    | 
|               |  | Statements of Operations for the Three Months Ended March 31, 2003 and 2002           |  | 4    | 
|               |  | Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002           |  | 5    | 
|               |  | Notes to Consolidated Financial Statements                                            |  | 6    | 
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15   | 
|Item 3.        |  | Qualitative and Quantitative Disclosure about Market Risk                             |  | 25   | 
|Item 4.        |  | Controls and Procedures                                                               |  | 25   | 
|               |  | PART II OTHER INFORMATION                                                             |  |      | 
|Item 1.        |  | Legal Proceedings                                                                     |  | 25   | 
|Item 2.        |  | Changes in Securities and Use of Proceeds                                             |  | 26   | 
|Item 3.        |  | Defaults Upon Senior Securities                                                       |  | 26   | 
|Item 4.        |  | Submission of Matters to a Vote of Securities Holders                                 |  | 26   | 
|Item 5.        |  | Other Information                                                                     |  | 26   | 
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |  | 27   | 
|SIGNATURE      |  | 28                                                                                    | 
|CERTIFICATIONS |  | 29                                                                                    | 
|EXHIBIT INDEX  |  | 31                                                                                    | 

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NEXPRISE, INC
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share value)

|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |   |        | 
|------------------------------------------ |  | ---------------------------------------------------------------------------------------------- | ------ | ------------------------------------------ | -------- | --------- | ------ | ------------ | -------- | - | ------ | 
|                                           |  |                                                                                                |        |                                            |          | March 31, |        | December 31,
|                                           |  |                                                                                                |        |                                            |          | 2003      |        | 2002        
|                                           |  |                                                                                                |        |                                            |          |           |        |             
|                                           |  |                                                                                                |        |                                            |          | unaudited |        | (1)         
|ASSETS                                     |  |                                                                                                |        |                                            |          |           |        |             
|Current
assets:                            |  |                                                                                                |        |                                            |          |           |        |             
|                                           |  | Cash and cash
equivalents                                                                      |        | $                                          | 2,515    |           |        | $            | 3,225    |  
|                                           |  | Short-term
investments                                                                         |        |                                            | 7,050    |           |        |              | 7,050    |  
|                                           |  | Accounts
receivable - net of reserves of $102 and $102                                         |        |                                            | 223      |           |        |              | 560      |  
|                                           |  | Prepaid
expenses                                                                               |        |                                            | 444      |           |        |              | 671      |  
|                                           |  | Other current
assets                                                                           |        |                                            | 332      |           |        |              | 841      |  
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|                                           |  |                                                                                                |        | Total current
assets                       |          |           | 10,564 |              |          |   | 12,347 | 
|Property and
equipment, net                |  |                                                                                                | 229    |                                            |          |           | 339    |             
|Intangible
assets, net                     |  |                                                                                                | 8,405  |                                            |          |           | 9,150  |             
|Other long-term
assets, net                |  |                                                                                                | 1,216  |                                            |          |           | 1,168  |             
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|                                           |  |                                                                                                |        | Total
assets                               |          | $         | 20,414 |              |          | $ | 23,004 | 
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|LIABILITIES
AND STOCKHOLDERS EQUITY       |  |                                                                                                |        |                                            |          |           |        |             
|Current
liabilities:                       |  |                                                                                                |        |                                            |          |           |        |             
|                                           |  | Accounts
payable                                                                               |        | $                                          | 137      |           |        | $            | 160      |  
|                                           |  | Accrued
compensation                                                                           |        |                                            | 674      |           |        |              | 646      |  
|                                           |  | Accrued
expenses                                                                               |        |                                            | 2,360    |           |        |              | 2,374    |  
|                                           |  | Deferred
revenue                                                                               |        |                                            | 714      |           |        |              | 711      |  
|                                           |  | Accrued
liabilities relating to discontinued operations                                        |        |                                            | 334      |           |        |              | 336      |  
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|                                           |  |                                                                                                |        | Total current
liabilities                  |          |           | 4,219  |              |          |   | 4,227  | 
|Notes
payable                              |  |                                                                                                | 11,843 |                                            |          |           | 11,843 |             
|Commitments and
contingencies (see Note 9) |  |                                                                                                |        |                                            |          |           |        |             
|Stockholders equity:                      |  |                                                                                                |        |                                            |          |           |        |             
|                                           |  | Preferred
stock, no par value: 2,500 shares
authorized: none issued or outstanding             |        |                                            |         |           |        |              |         |  
|                                           |  | Common stock,
$.0002 par value; 175,000 shares
authorized; 3,230 shares issued and outstanding |        |                                            | 10       |           |        |              | 10       |  
|                                           |  | Additional
paid-in capital                                                                     |        |                                            | 631,765  |           |        |              | 631,764  |  
|                                           |  | Deferred
compensation                                                                          |        |                                            | (332     | )         |        |              | (416     | )
|                                           |  | Accumulated
deficit                                                                            |        |                                            | (627,243 | )         |        |              | (624,576 | )
|                                           |  | Accumulated
other comprehensive income                                                         |        |                                            | 152      |           |        |              | 152      |  
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|                                           |  |                                                                                                |        | Total stockholders
equity                 |          |           | 4,352  |              |          |   | 6,934  | 
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  
|                                           |  |                                                                                                |        | Total liabilities and
stockholders equity |          | $         | 20,414 |              |          | $ | 23,004 | 
|                                           |  |                                                                                                |        |                                            |          |           |        |              |          |  



|(1) |  | Derived from December 31, 2002 audited consolidated
financial statements.
See accompanying notes to consolidated financial statements.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------

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NEXPRISE, INC.

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

|                                                                                                  |                                      |   |                 |       |      |   |        |       | 
|------------------------------------------------------------------------------------------------- | ------------------------------------ | - | --------------- | ----- | ---- | - | ------ | ----- | 
|                                                                                                  |                                      |   | Three Months   
|                                                                                                  |                                      |   | Ended March 31,
|                                                                                                  |                                      |   |                
|                                                                                                  |                                      |   | 2003            |       | 2002
|                                                                                                  |                                      |   |                 |       |     
|Net
revenues                                                                                      |                                      | $ | 721             |       |      | $ | 674    |      
|Cost of
revenues:                                                                                 |                                      |   |                 |       |      |   |        |      
|                                                                                                  | Product licenses and
services        |   |                 | 281   |      |   |        | 316   | 
|                                                                                                  | Amortization of purchased
technology |   |                 | 491   |      |   |        | 221   | 
|                                                                                                  |                                      |   |                 |       |      |   |        |      
|                                                                                                  | Total cost of
revenues               |   |                 | 772   |      |   |        | 537   | 
|Gross profit
(loss)                                                                               |                                      |   | (51             | )     |      |   | 137    |      
|Operating
expenses:                                                                               |                                      |   |                 |       |      |   |        |      
|                                                                                                  | Research and
development             |   |                 | 794   |      |   |        | 1,799 | 
|                                                                                                  | In process research and
development  |   |                 |      |      |   |        | 399   | 
|                                                                                                  | Sales and
marketing                  |   |                 | 967   |      |   |        | 1,671 | 
|                                                                                                  | General and
administrative           |   |                 | 699   |      |   |        | 1,723 | 
|                                                                                                  |                                      |   |                 |       |      |   |        |      
|                                                                                                  | Total operating
expenses             |   |                 | 2,460 |      |   |        | 5,592 | 
|                                                                                                  |                                      |   |                 |       |      |   |        |      
|Operating
loss                                                                                    |                                      |   | (2,511          | )     |      |   | (5,455 | )    
|Interest
expense                                                                                  |                                      |   | (189            | )     |      |   | (177   | )    
|Interest income
and other, net                                                                    |                                      |   | 33              |       |      |   | 20     |      
|Investment
loss                                                                                   |                                      |   |                |       |      |   | (1,349 | )    
|Net
loss                                                                                          |                                      | $ | (2,667          | )     |      | $ | (6,961 | )    
|                                                                                                  |                                      |   |                 |       |      |   |        |      
|Basic and
diluted loss per share                                                                  |                                      | $ | (0.83           | )     |      | $ | (2.22  | )    
|Weighted
average common shares outstanding used in
computing basic and diluted net loss per share |                                      |   | 3,218           |       |      |   | 3,131  |      

See accompanying notes to consolidated financial statements

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NEXPRISE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |        |        |  
|---------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------- | ------ | -------------------------- | ---- | ---- | ------- | ------ | ------ | -
|                                                                                                                       |                                                           |                                       |        | For the Three Months
Ended
|                                                                                                                       |                                                           |                                       |        |                           
|                                                                                                                       |                                                           |                                       |        | 2003                       |      | 2002
|                                                                                                                       |                                                           |                                       |        |                            |      |     
|                                                                                                                       |                                                           |                                       |        | (In thousands)            
|Operating
Activities                                                                                                   |                                                           |                                       |        |                            |      |      |         |       
|Net
loss                                                                                                               |                                                           | $                                     | (2,667 | )                          |      | $    | (6,961  | )     
|Adjustments
to reconcile net loss to net cash used in operating activities:                                            |                                                           |                                       |        |                            |      |      |         |       
|                                                                                                                       | -
Depreciation                                            |                                       |        | 136                        |      |      |         | 605    |       
|                                                                                                                       | - Amortization
of other intangible assets                 |                                       |        | 745                        |      |      |         | 874    |       
|                                                                                                                       | - Amortization
of deferred stock-based compensation       |                                       |        | 84                         |      |      |         | 86     |       
|                                                                                                                       | - Investment
losses                                       |                                       |        |                           |      |      |         | 1,349  |       
|                                                                                                                       | - Non-cash
charges related to stock-option grants         |                                       |        |                           |      |      |         | 3      |       
|Changes in
operating assets and liabilities:                                                                           |                                                           |                                       |        |                            |      |      |         |       
|                                                                                                                       | - Accounts
receivable                                     |                                       |        | 337                        |      |      |         | (27    | )     
|                                                                                                                       | - Prepaid
expenses                                        |                                       |        | 227                        |      |      |         |       |       
|                                                                                                                       | - Other current
assets                                    |                                       |        | 509                        |      |      |         | (49    | )     
|                                                                                                                       | - Other long
term assets                                  |                                       |        | (48                        | )    |      |         | (57    | )     
|                                                                                                                       | - Accounts
payable                                        |                                       |        | (23                        | )    |      |         | (15    | )     
|                                                                                                                       | - Accrued
compensation                                    |                                       |        | 28                         |      |      |         | (116   | )     
|                                                                                                                       | - Accrued
expenses                                        |                                       |        | (14                        | )    |      |         | (1,114 | )     
|                                                                                                                       | - Deferred
revenue                                        |                                       |        | 3                          |      |      |         | 100    |       
|                                                                                                                       | - Accrued
liabilities relating to discontinued operations |                                       |        | (2                         | )    |      |         | (229   | )     
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|                                                                                                                       |                                                           | Net cash used in operating
activities |        |                            | (685 | )    |         |        | (5,551 | )
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|Investing
Activities                                                                                                   |                                                           |                                       |        |                            |      |      |         |       
|Purchase of
property and equipment                                                                                     |                                                           |                                       | (26    | )                          |      |      |        |       
|Purchases of
short-term investments                                                                                    |                                                           |                                       |       |                            |      |      | (21,952 | )     
|Sale and
maturities of short-term investments                                                                          |                                                           |                                       |       |                            |      |      | 16,302  |       
|Cash acquired
on purchase of Infoprise                                                                                 |                                                           |                                       |       |                            |      |      | 1,053   |       
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|                                                                                                                       |                                                           | Net cash used in investing
activities |        |                            | (26  | )    |         |        | (4,597 | )
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|Financing
Activities                                                                                                   |                                                           |                                       |        |                            |      |      |         |       
|Principal
payments on capital lease obligations                                                                        |                                                           |                                       |       |                            |      |      | (114    | )     
|Net proceeds
from issuance (repurchase) of ESPP, Stock Options and Common stock                                        |                                                           |                                       | 1      |                            |      |      | 14      |       
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|                                                                                                                       |                                                           | Net cash used in financing
activities |        |                            | 1    |      |         |        | (100   | )
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|Foreign
currency translation                                                                                           |                                                           |                                       |       |                            |      |      | 73      |       
|Net decrease in
cash and cash equivalents                                                                              |                                                           |                                       | (710   | )                          |      |      | (10,175 | )     
|Cash and cash
equivalents at beginning of period                                                                       |                                                           |                                       | 3,225  |                            |      |      | 13,565  |       
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|Cash and cash
equivalents at end of period                                                                             |                                                           |                                       | 2,515  |                            |      |      | 3,390   |       
|                                                                                                                       |                                                           |                                       |        |                            |      |      |         |       
|Supplemental
disclosure of noncash activities:                                                                         |                                                           |                                       |        |                            |      |      |         |       
|Issuance of
shares in connection with the acquisition of Infoprise                                                     |                                                           | $                                     |       |                            |      | $    | 794     |       
|Deferred stock
based compensation related to the stock options assumed in
connection with the acquisition of Infoprise |                                                           | $                                     |       |                            |      | $    | (316    | )     
|Issuance of
convertible notes relating to Infoprise acquisition                                                        |                                                           | $                                     |       |                            |      | $    | 3,040   |       

See accompanying notes to consolidated financial statements

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NEXPRISE, INC.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1. Description of Business

NexPrise, Inc. (the Company or NexPrise
or we), formerly known as
Ventro Corporation and Chemdex Corporation, is a seller of business process
applications and provides solutions and services that enable discrete
manufacturing companies to address their specific business challenges. These
solutions complement and expand on currently installed enterprise systems and
allow for the continuous process improvements required to meet customers
changing business demands.

As of March 31, 2003, the Company had working capital of
approximately
$6.3 million and stockholders equity of approximately $4.4 million. During the
three months ended March 31, 2003 the Company used cash and cash equivalents in
operating activities of approximately $700,000, which included the collection
of a non-trade receivable of approximately $500,000. Management believes it
has sufficient working capital to support the Companys planned activities
through 2003 and beyond.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of
the Company
and its wholly owned subsidiaries. Intercompany accounts and transactions have
been eliminated. While the quarterly financial information is unaudited, the
financial statements included in this Form 10-Q reflect all adjustments
(consisting of normal recurring adjustments) that the Company considers
necessary for a fair presentation of the results of operations for the interim
periods covered and of the financial condition of the Company at the date of
the interim balance sheet. The results for the interim periods are not
necessarily indicative of the results for the entire year. The consolidated
balance sheet as of December 31, 2002 has been derived from the audited
consolidated balance sheet as of that date. The information included in this
report should be read in conjunction with the Companys Annual Report on Form
10-K for the year ending December 31, 2002.

Use of Estimates

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

Reclassifications

Certain amounts in the prior years financial statements
have been
reclassified to conform to the current year presentation.

Revenue Recognition

Revenue is made up primarily of subscriptions of bundled term
license,
post contract support and, in most cases, hosting services. The Company
recognizes such revenue using the subscription method, whereby the initial
and renewal amounts are recognized ratably over the period of the license
during which the services are expected to be provided. Revenue for training or
consulting services that are not bundled with a subscription is recognized
based on achievement of billable milestones as written in the contract or upon
contract completion and currently makes up less than 10% of overall revenue.
Perpetual license revenue is recognized using the residual method described in
Statement of Position (SOP) No. 98-9 for arrangements in which licenses are
sold with multiple elements. We allocate revenues on these licenses based upon
the fair value of each undelivered element (for example, undelivered
maintenance and support, training and consulting). The determination of fair
value is based upon vendor specific objective evidence (VSOE). VSOE for
training or consulting is based upon separate sales of these services.
Assuming all other revenue recognition criteria are met, the difference between
the total arrangement fee and the amount deferred for each undelivered element
is recognized as license revenue. Our perpetual arrangements may include
initial maintenance extending over a period of time with no renewal rate, which
requires perpetual license revenue to be taken ratably over the contract
period. NexPrise has not yet established VSOE for maintenance and therefore
has recognized the revenue from license agreements entered into prior to March
31, 2003 ratably over the maintenance period.

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Our revenue recognition policy is in accordance with SOP
No. 97-2,
Software Revenue Recognition, as amended, and Staff Accounting Bulletin (SAB)
101. For all arrangements, we determine whether evidence of an arrangement
exists, delivery has
occurred, the fee is fixed or determinable and collection is probable. If
any of these criteria are not met, revenue recognition is deferred until such
time as all of the criteria are met.

Net Income (Loss) Per Share

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

Basic net income (loss) per share is computed using the
weighted average
number of common shares outstanding during the period. Diluted net income per
share is computed using the weighted average number of common shares and
potentially dilutive shares outstanding during the period.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board
(FASB) issued
SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosurean amendment of FASB Statement No. 123. SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent
disclosure in both annual and interim financial statements about the method of
accounting for stock-based compensation and the effect of the method used on
reported results. The transition guidance and disclosure provisions of SFAS 148
are effective for the Companys financials statements issued for 2003.

The Company has elected to follow Accounting Principles Board
Opinion No.
25 (APB 25), Accounting for Stock Issued to Employees, in accounting for its
employee stock options. No compensation expense is recognized for share
purchase rights granted under the Companys employee stock options and employee
stock purchase plan. Had compensation cost for the Companys employee stock
options and employee stock purchase plan been determined based on fair value at
the grant date consistent with SFAS 123, the Companys net loss and earnings
loss per share would have been reduced to the pro forma amounts indicated
below:

|                                                                                                                          |             |   |                    |       |      |   |         |       |  
|------------------------------------------------------------------------------------------------------------------------- | ----------- | - | ------------------ | ----- | ---- | - | ------- | ----- | -
|                                                                                                                          |             |   | Three Months Ended
|                                                                                                                          |             |   | March 31,         
|                                                                                                                          |             |   | 2003               |       | 2002
|                                                                                                                          |             |   |                    |       |     
|Net loss                                                                                                                  |             | $ | (2,667             | )     |      | $ | (6,961  | )    
|Add: Intrinsic Value compensation
expense                                                                                 |             |   | 84                 |       |      |   | 86      |      
|Less: Total stock based employee
compensation expense determined under
fair value based method for all awards,
net of tax |             |   | (2,226             | )     |      |   | (3,170  | )    
|                                                                                                                          |             |   |                    |       |      |   |         |      
|Pro-forma net loss                                                                                                        |             | $ | (4,809             | )     |      | $ | (10,045 | )    
|                                                                                                                          |             |   |                    |       |      |   |         |      
|Weighted-average shares used in computing
basic and diluted net loss per common
share                                     |             |   | 3,218              |       |      |   | 3,131   |      
|                                                                                                                          |             |   |                    |       |      |   |         |      
|Basic and diuted earnings loss per
share:                                                                                 |             |   |                    |       |      |   |         |      
|                                                                                                                          | As reported |   | $                  | (0.83 | )    |   | $       | (2.22 | )
|                                                                                                                          | Pro forma   |   | $                  | (1.49 | )    |   | $       | (3.21 | )

Concentration of Credit Risk and Significant Customers

The Companys customer base consists of businesses located
primarily in
North America. The Company maintains allowances for potential credit losses and
historically, such losses have been within managements expectations. Revenue
and accounts receivable by customers comprising more than 10% of total amounts
are as follows:

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|           |  |                    |    |                  |  |      |    |      |  |       |    |          |  |  |    |  
|---------- |  | ------------------ | -- | ---------------- |  | ---- | -- | ---- |  | ----- | -- | -------- |  |  | -- | -
|           |  | Three Months Ended |    | Receivable as of
|           |  |                    |    |                 
|           |  |                    |    |                  |  |      |    |      |  | March |    | December
|           |  | March 31,          |    | 31,              |  | 31, 
|           |  |                    |    |                  |  |     
|           |  | 2003               |    | 2002             |  | 2003 |    | 2002
|           |  |                    |    |                  |  |      |    |     
|Customer A |  |                    | 14 | %                |  |      | 15 | %    |  |       |    |          |  |  |    |  
|Customer B |  |                    | 14 | %                |  |      | 14 | %    |  |       |    |          |  |  | 30 | %
|Customer C |  |                    | 12 | %                |  |      | 12 | %    |  |       |    |          |  |  |    |  
|Customer D |  |                    |    |                  |  |      |    |      |  |       | 11 | %        |  |  | 21 | %
|Customer E |  |                    |    |                  |  |      |    |      |  |       | 14 | %        |  |  |    |  
|Customer F |  |                    |    |                  |  |      |    |      |  |       | 17 | %        |  |  |    |  
|Customer G |  |                    |    |                  |  |      |    |      |  |       | 14 | %        |  |  |    |  

Long Lived Assets

The Company reviews property, plant and equipment, goodwill and
purchased
intangible assets for impairment whenever events or changes in circumstances
indicate the carrying value of an asset may not be recoverable. Our asset
impairment review assesses the fair value of the assets based on the future
cash flows the assets are expected to generate. An impairment loss is
recognized when estimated undiscounted future cash flows expected to result
from the use of the asset, plus net proceeds expected from disposition of the
asset (if any), are less than the carrying value of the asset. This approach
uses our estimates of future market growth, forecasted revenue and costs,
expected periods the assets will be utilized and appropriate discount rates.
When an impairment is identified, the carrying amount of the asset is reduced
to its estimated fair value. Effective January 1, 2002, in conjunction with
the implementation of SFAS No. 142, goodwill is no longer amortized and
potential impairment of goodwill and purchased intangible assets with
indefinite useful lives is evaluated using the specific guidance provided by
SFAS No. 142. This impairment analysis is performed at least annually. Also
effective January 1, 2002, potential impairment of long-lived assets other than
goodwill and purchased intangible assets with indefinite useful lives is
evaluated using the guidance provided by SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.

Note 3. Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income,
establishes standards of
reporting and display of comprehensive income and its components of net income
(loss) and Other Comprehensive Income. Other Comprehensive Income refers to
revenues, expenses, gains and losses that are not included in net income (loss)
but rather are recorded directly in stockholders equity. The components of
comprehensive income (loss) for the 3 months ended March 31, 2003 and 2002 were
as follows (in thousands):

|                             |  |                    |        |      |  |   |        |  
|---------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                             |  | Three Months Ended
|                             |  | March 31,         
|                             |  | 2003               |        | 2002
|                             |  |                    |        |     
|Net loss                     |  | $                  | (2,667 | )    |  | $ | (6,961 | )
|Foreign exchange
translation |  |                    |       |      |  |   | 73     |  
|Comprehensive loss           |  | $                  | (2,667 | )    |  | $ | (6,888 | )
|                             |  |                    |        |      |  |   |        |  

Note 4. Goodwill and Purchased Intangibles

SFAS
142, Goodwill and Other Intangible Assets, requires
that we evaluate
on an annual basis (or whenever events occur which may indicate possible
impairment) whether any portion of our recorded goodwill is impaired. This
analysis requires management to make a series of critical assumptions to (1)
evaluate whether any impairment exists, and (2) measure the amount of
impairment.

Subsequent to the adoption of SFAS 142, identifiable intangible
assets
with definite lives will continue to be amortized over their useful lives and
will be reviewed for impairment in accordance with SFAS 144 when impairment
indicators exist. These assets are shown as intangible assets on the face of
the balance sheet and are as follows (in thousands):

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|                               |  |                |        |                   |  |             |        |        |  |              |       |             |  |   |        |  |  |   |        |   |  |   |       | 
|------------------------------ |  | -------------- | ------ | ----------------- |  | ----------- | ------ | ------ |  | ------------ | ----- | ----------- |  | - | ------ |  |  | - | ------ | - |  | - | ----- | 
|                               |  | March 31, 2003 |        | December 31, 2002
|                               |  |                |        |                  
|                               |  | Gross          |        |                   |  |             |        |        |  |              |       | Gross       |  |   |        |  |  |   |        |  
|                               |  | Carrying       |        | Accumulated       |  |             |        |        |  | Carrying     |       | Accumulated |  |   |        | 
|                               |  | Amount         |        | Amortization      |  | Net Balance |        | Amount |  | Amortization |       | Net Balance
|                               |  |                |        |                   |  |             |        |        |  |              |       |            
|NexPrise purchased
technology  |  | $              | 7,600  |                   |  | $           | (1,892 | )      |  | $            | 5,708 |             |  | $ | 7,600  |  |  | $ | (1,431 | ) |  | $ | 6,169 | 
|NexPrise in-process R&D        |  |                | 2,300  |                   |  |             | (2,300 | )      |  |              |      |             |  |   | 2,300  |  |  |   | (2,300 | ) |  |   |      | 
|NexPrise trade name            |  |                | 1,700  |                   |  |             | (1,416 | )      |  |              | 284   |             |  |   | 1,700  |  |  |   | (1,204 | ) |  |   | 496   | 
|NexPrise non-compete
agreement |  |                | 500    |                   |  |             | (278   | )      |  |              | 222   |             |  |   | 500    |  |  |   | (236   | ) |  |   | 264   | 
|                               |  |                |        |                   |  |             |        |        |  |              |       |             |  |   |        |  |  |   |        |   |  |   |       | 
|Total NexPrise intangibles     |  |                | 12,100 |                   |  |             | (5,886 | )      |  |              | 6,214 |             |  |   | 12,100 |  |  |   | (5,171 | ) |  |   | 6,929 | 
|InfoPrise purchased
technology |  |                | 2,234  |                   |  |             | (43    | )      |  |              | 2,191 |             |  |   | 2,234  |  |  |   | (13    | ) |  |   | 2,221 | 
|InfoPrise in-process R&D       |  |                | 399    |                   |  |             | (399   | )      |  |              |      |             |  |   | 399    |  |  |   | (399   | ) |  |   |      | 
|                               |  |                |        |                   |  |             |        |        |  |              |       |             |  |   |        |  |  |   |        |   |  |   |       | 
|Total InfoPrise intangibles    |  |                | 2,633  |                   |  |             | (442   | )      |  |              | 2,191 |             |  |   | 2,633  |  |  |   | (412   | ) |  |   | 2,221 | 
|                               |  |                |        |                   |  |             |        |        |  |              |       |             |  |   |        |  |  |   |        |   |  |   |       | 
|Total intangible assets        |  | $              | 14,733 |                   |  | $           | (6,328 | )      |  | $            | 8,405 |             |  | $ | 14,733 |  |  | $ | (5,583 | ) |  | $ | 9,150 | 
|                               |  |                |        |                   |  |             |        |        |  |              |       |             |  |   |        |  |  |   |        |   |  |   |       | 

NexPrise will continue to amortize the intangible asset balance
of
approximately $8.4 million over the remaining useful lives of the intangible
assets. NexPrise purchased technology is amortized based on forecasted revenue
over 5 years. InfoPrise purchased technology is amortized based on forecasted
revenue over 3 years. The NexPrise trade name and non-compete intangible
assets are amortized using a straight line method over 2 and 3 year periods,
respectively. The amortization of purchased intangible assets was approximately
$745,000 in the three months ended March 31, 2003 and $2.3 million in fiscal
2002, which included $399,000 of in-process research and development.
Estimated intangible amortization expense for the years ended December 31, 2003
and 2004 are $2.6 million and $2.9 million, respectively.

Note 5. Business Combinations

In February 2002 NexPrise acquired privately held InfoPrise,
Inc.
(InfoPrise), a provider of data management solutions located in Carlsbad,
California. As consideration for the acquisition, which was accounted for
using the purchase method, NexPrise agreed to issue unsecured convertible
promissory notes with a face value of $3,040,000 due 2007. The notes bear
interest at a rate of 6% and are convertible into the Companys common stock at
$18.75 per share. The Company also issued 139,790 shares of NexPrise common
stock and assumed InfoPrises outstanding stock options, which may result in
the issuance of up to approximately 64,666 shares of NexPrise common stock. An
independent valuation study was commissioned to value the intangible assets
associated with the InfoPrise purchase and facilitate the purchase accounting.

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

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

A summary of the InfoPrise purchase transaction is shown below
(in
thousands):

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

The following unaudited pro forma information shows the results
of
operations of the Company for the three months ended March 31, 2002 as if the
business combinations with NexPrise and InfoPrise had occurred at the beginning
of the period. In process research and development charges of $399,000 are
included for the three months ended March 31, 2002. No such charges have been
included for the three months ended March 31, 2003. This data is not indicative
of the results of operations that would have arisen if the

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business
combinations had occurred at the beginning of the respective periods and is not
intended to be indicative of future results of operations (in thousands except
per share data).

|                           |  |                |        |  
|-------------------------- |  | -------------- | ------ | -
|                           |  | Quarter Ending
|                           |  | March 30, 2002
|                           |  |               
|Revenue                    |  | $              | 674    |  
|Net loss                   |  | $              | (7,061 | )
|Net loss                   |  | $              | (7,061 | )
|Per Share:                 |  |                |        |  
|Basic and diluted net loss |  | $              | (2.26  | )
|Basic and diluted net loss |  | $              | (2.26  | )

Note 6. Balance Sheet Details

Other Current Assets

Other current assets of $332,000 and $841,000 as of
March 31, 2003 and
December 31, 2002, respectively, are comprised primarily of prepaid royalties,
current deposits and other receivables.

Other Long-term Assets

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

|                                                                                            |                              |   |           |       |              |   |     |       | 
|------------------------------------------------------------------------------------------- | ---------------------------- | - | --------- | ----- | ------------ | - | --- | ----- | 
|                                                                                            |                              |   | March 31, |       | December 31,
|                                                                                            |                              |   | 2003      |       | 2002        
|                                                                                            |                              |   |           |       |             
|Deposits and other                                                                          |                              | $ | 382       |       |              | $ | 323 |      
|Deferred debt offering costs, net of
accumulated
amortization of $473 and $461 respectively |                              |   | 142       |       |              |   | 154 |      
|Employee notes receivable and accrued
interest                                              |                              |   | 79        |       |              |   | 78  |      
|Long-term investments, cost
method                                                          |                              |   | 613       |       |              |   | 613 |      
|                                                                                            |                              |   |           |       |              |   |     |      
|                                                                                            | Total other long-term assets |   | $         | 1,216 |              |   | $   | 1,168 | 
|                                                                                            |                              |   |           |       |              |   |     |      

Note 7. Equity Investments

The following table outlines the Companys equity
investment activity with
its marketplace companies for the three months ended March 31, 2002 and 2003
(in thousands, except percentage data):

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

|                        |  |                |   |                |  |  |     |  
|----------------------- |  | -------------- | - | -------------- |  |  | --- | -
|                        |  | Carrying Value |   | Percentage    
|                        |  | at March 31,   |   | Ownership at  
|Activity in 2003        |  | 2003           |   | March 31, 2003
|                        |  |                |   |               
|Amphire                 |  | $              | 0 |                |  |  | 0   | %
|Ketera (fka MarketMile) |  |                | 0 |                |  |  | 1.3 | %

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In March 2003, Ketera (fka MarketMile) secured an additional
round of
funding that NexPrise did not participate in. As a result, NexPrises
ownership percentage of Ketera has decreased to 1.3%. The 2002 investment loss
of approximately $1.4 million is made up of approximately $1.2 million of
equity losses in the marketplace companies in which we had a significant
ownership percentage and approximately $186,000 of write-downs for impairment
deemed to be other than temporary of an investment accounted for using the cost
method.

Note 8. Convertible Notes

In February 2002 NexPrise issued unsecured, convertible
promissory notes
due in 2007 with a face value of $3,040,000, a conversion price of $18.75 and
interest rate of 6% in connection with the acquisition of InfoPrise. As of
March 31, 2003, no amount of the notes had been converted into NexPrise common
stock. In April 2000, NexPrise issued $250 million of convertible subordinated
notes due in 2007, bearing annual interest at 6% and convertible at the option
of the holder into the Companys common stock at a price of $1,361.70 per
share. The Company subsequently repurchased $241.2 million of these notes
during 2001. Approximately $8.8 million of the convertible subordinated notes
remained outstanding as of March 31, 2003 and December 31, 2002.

Note 9. Contingencies

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

A subtenant has attempted to renegotiate its sublease agreement
with us.
We have drawn upon the subtenants security deposit to cover our expenses to
date. If we are unable to successfully resolve this situation our sublease
income may not be enough to pay what we may be liable for in ongoing lease
payments. The Company has accrued for expected additional costs as a result of
the potential loss of this sublease income.

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

Discontinued Marketplace Companies Formerly Known as Promedix and Chemdex

Contracts with Promedix and Chemdex customers and suppliers
contained, in
some cases, cancellation notification periods longer than the Company provided.
In some cases, shorter notification periods caused inconvenience to customers
and suppliers, and the Company has been notified by several suppliers that
discontinuing the marketplace represents a breach of Promedix contractual
obligations. Additionally, two customers of Chemdex have informed the Company
that they did not receive notice of the termination of their contracts within
the contractually required time period. However, as of March 31, 2003, no
customer or supplier of Promedix or Chemdex had filed a formal complaint with
the Company.

Government Regulations

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

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

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adequately comply with labeling and information dispensing
requirements of local, state or federal laws, then the Company may be
held legally responsible, since Company held title to these products, and
could be subject to governmental penalties or fines, as well as private
lawsuits to enforce these laws.

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

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

Indemnification

The Company sells software licenses and services to its
customers under
contracts which the Company refers to as Software License and Service
Agreements (each an SLSA). Each SLSA contains the relevant terms of the
contractual arrangement with the customer, and generally includes certain
provisions for indemnifying the customer against losses, expenses, and
liabilities from damages that may be incurred by or awarded against the
customer in the event the Companys software or services are found to infringe
upon a patent, copyright, trade secret, trademark, or other proprietary right
of a third party. The SLSA generally limits the scope of remedies for such
indemnification obligations in a variety of industry-standard respects,
including but not limited to certain product usage limitations and
geography-based scope limitations and a right to replace an infringing product
or modify it to make it non-infringing. If the Company cannot address the
infringement by replacing the product or services, or modifying the product or
services, the Company is allowed to cancel the license or services and return
the fees paid by the customer. The Company requires its employees to sign a
proprietary information and inventions assignment agreement, which assigns the
rights in its employees development work to the Company.

To date, the Company has not had to reimburse any of its
customers for any
losses related to these indemnification provisions and no material claims are
outstanding as of March 31, 2003. For several reasons, including the lack of
prior indemnification claims and the lack of a monetary liability limit for
certain infringement cases under the SLSA, the Company cannot determine the
maximum amount of potential future payments, if any, related to such
indemnification provisions. There can be no assurance that potential future
payments will not have a material adverse effect on the Companys business,
results of operations or financial condition.

Note 10. Accrued Expenses

Accrued expenses were comprised of the following as of
March 31, 2003 and
December 31, 2002 (in thousands):

|                            |  |      |       |      |  |   |       | 
|--------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                            |  | 2003 |       | 2002
|                            |  |      |       |     
|Accrued marketing expenses  |  | $    | 16    |      |  | $ | 16    | 
|Accrued consulting expenses |  |      | 83    |      |  |   | 93    | 
|Accrued interest payable    |  |      | 474   |      |  |   | 296   | 
|Accrued professional fees   |  |      | 184   |      |  |   | 253   | 
|Accrued restructuring costs |  |      | 493   |      |  |   | 505   | 
|Other accrued liabilities   |  |      | 1,110 |      |  |   | 1,211 | 
|                            |  |      |       |      |  |   |       | 
|                            |  | $    | 2,360 |      |  | $ | 2,374 | 
|                            |  |      |       |      |  |   |       | 

Note 11. Deferred Stock-Based Compensation

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

The Company recognized $84,000 and $86,000 in stock compensation
expense
for the three months ended March 31, 2003 and 2002, respectively.

Note 12. Settlement, Restructuring and Other Charges

During the year ended December 31, 2002, the Company took
actions to
improve efficiencies and reduce operating costs, including employee and
contractor terminations, consolidation of facilities, settlements of various
disputes and termination of leases. The net of these charges was reported as a
component of loss before extraordinary item.

The Company paid approximately $12,000 in severance payments
during the
quarter ended March 31 ,2003. At March 31, 2003 and December 31, 2002 the
Company had accruals and reserves of $493,000 and $505,000, respectively. An
analysis of activity is as follows (in thousands):

|                              |  |   |     |  
|----------------------------- |  | - | --- | -
|Accruals at December 31, 2002 |  | $ | 505 |  
|Activity                      |  |   | (12 | )
|                              |  |   |     |  
|Accruals at March 31, 2003    |  | $ | 493 |  
|                              |  |   |     |  

Note 13. Recent Accounting Pronouncements

In July 2002 , the FASB issued SFAS 145, Rescission of FASB
Statements No.
4, 44 and 64 , Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS 4 and SFAS 64 related to classification of gains and
losses on debt extinguishment such that most debt extinguishment gains and
losses will no longer be classified as extraordinary. FASB 145 also amends SFAS
13 with respect to sale-leaseback transactions. We adopted SFAS 145 on January
1, 2003 and it will require the reclassification of the gain on the
extinguishment of debt from an extraordinary item in our results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting
for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses significant
issues relating to the recognition, measurement and reporting of costs
associated with exit and disposal activities, including restructuring
activities, and nullifies the guidance in Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).SFAS 146 requires that the initial liability for costs
associated with exit and disposal activities be measured at fair value and
prohibits the recognition of a liability based solely on an entitys commitment
to a plan. The provisions of SFAS 146 are effective for exit and disposal
activities initiated after December 31, 2002. Retroactive application of SFAS
146 is prohibited and, accordingly, liabilities recognized prior to the initial
application of SFAS 146 should continue to be accounted for in accordance with
EITF 94-3 or other applicable pre-existing guidance. The Company does not
believe that the adoption of SFAS 146 will have a material impact on its
financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation
No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others(FIN 45). FIN 45 requires that a
liability be recorded in the guarantors balance sheet upon issuance of a
guarantee. In addition, FIN 45 requires disclosures about the guarantees that
an entity has issued, including a rollforward of the entitys product warranty
liabilities. NexPrise will apply the recognition provisions of FIN 45
prospectively to guarantees issued after December 31, 2002. The disclosure
provisions of FIN 45 are effective for financial statements for the first
quarter of NexPrises fiscal year 2003. They did not have a material impact on
the consolidated financial position and results of operations.

In November 2002, the EITF reached a consensus on Issue
No. 00-21, Revenue
Arrangements with Multiple Deliverables.EITF Issue No. 00-21 provides guidance
on how to account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The provisions of EITF
Issue No. 00-21 will apply to revenue arrangements entered into in fiscal

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periods beginning after June 15, 2003. NexPrise is currently evaluating
the effect that the adoption of EITF Issue No. 00-21 will have on its results
of operations and financial condition.

In January 2003, the FASB issued FASB Interpretation No. 46
(FIN 46),
Consolidation of Variable Interest Entities. This interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, addresses
consolidation by business enterprises of variable interest entities that
possess certain characteristics. FIN 46 requires that if a business enterprise
has a controlling financial interest in a variable interest entity, the assets,
liabilities, and results of the activities of the variable interest entity must
be included in the consolidated financial statements with those of the business
enterprise. FIN 46 applies immediately to variable interest entities created
after January 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. The Company does not have any ownership in
any variable interest entities as of March 31, 2003. The Company will apply the
consolidation requirements of FIN 46 in future periods should interest in a
variable interest entity be acquired.

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

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

Overview

We are a seller of business process applications and
collaborative
solutions for program management and quote management. Our revenue primarily
consists of subscriptions of bundled license, post contract support and, in
most cases, hosting services.

In 2001, we significantly restructured our operations and
focused on a new
business direction. We exited the business of building and servicing
business-to-business marketplaces and entered the business of providing
collaborative and business process automation software solutions. In August
2001, while doing business under the name Ventro Corporation, we acquired
privately-held NexPrise, Inc., a company with an advanced collaborative
software solution and an established customer base located in Santa Clara,
California. Later in the year we reorganized our management team and Board of
Directors and took measures to reduce commitments and operating expenses and
conserve cash. In 2001, the Company incurred a net charge of $16.5 million in
connection with restructurings and settlements. In January 2002, we changed our
name to NexPrise, Inc.

On February 4, 2002, we acquired privately-held InfoPrise,
a provider of
data management solutions located in Carlsbad, California. As consideration
for the acquisition, we issued to InfoPrises stockholders an aggregate of
139,790 shares of NexPrise common stock together with unsecured 6% promissory
notes convertible into the Companys common stock, due in 2007, with a face
value of $3,040,000 and a per share conversion price of $18.75. We also
assumed InfoPrises outstanding stock options, which may result in the issuance
of up to approximately 64,000 shares of common stock if all of the assumed
options are exercised. As of March 31, 2003 1,820 of these options had been
exercised. All operating results presented for periods following the above date
are derived from the combined operations of NexPrise and InfoPrise. We expect
to incur operating losses on a quarterly basis for at least the next 12 months
as we develop and enhance our technology and service offerings.

Critical Accounting Policies

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

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

Revenue Recognition.Revenue is made up primarily of
subscriptions of
bundled license, post contract support and, in most cases, hosting services.
The Company recognizes such revenue using the subscription method, whereby
the initial and renewal amounts are recognized ratably over the period of the
license during which the services are expected to be provided. Revenue for
training or consulting services is recognized based on achievement of billable
milestones as written in the contract or upon contract completion and
currently makes up less than 10% of overall revenue. Perpetual license revenue
is recognized using the residual method described in SOP 98-9 for arrangements
in which licenses are sold with multiple elements. We allocate revenues on
these licenses based upon the fair value of each undelivered element (for
example, undelivered maintenance and support, training and consulting). The
determination of fair value is based upon vendor specific objective evidence
(VSOE). VSOE for training or consulting is based upon separate sales of
these services. Assuming all other revenue recognition criteria are met, the
difference between the total arrangement fee and the amount deferred for each
undelivered element is recognized as license revenue. Our perpetual
arrangements may include initial maintenance extending over a period of time
with no renewal rate, which requires perpetual license revenue to be taken
ratably over the contract period. Until VSOE has been established for
maintenance, perpetual license revenue will be taken

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ratably over the term of the maintenance period. Our revenue recognition
policy is in accordance with Statement of Position No. 97-2 (SOP 97-2),
Software Revenue Recognition,as amended, and Staff Accounting Bulletin 101.
For all arrangements, we determine whether evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable and collection is
probable. If any of these criteria are not met, revenue recognition is
deferred until such time as all of the criteria are met.

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

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

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

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

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

Long Lived Assets. The Company reviews property, plant
and equipment,
goodwill and purchased intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not
be recoverable. Our asset impairment review assesses the fair value of the
assets based on the future cash flows the assets are expected to generate. An
impairment loss is recognized when estimated undiscounted future cash flows
expected to result from the use of the asset, plus net proceeds expected from
disposition of the asset (if any) are less than the carrying value of the
asset. This approach uses our estimates of future market growth, forecasted
revenue and costs, expected periods the assets will be utilized and appropriate
discount rates. When an impairment is identified, the carrying amount of the
asset is reduced to its estimated fair value. During 2003 we will continue to
evaluate our intangible assets for impairment as events and circumstances
warrant. Among other circumstances, a material deterioration in the future
cash flows expected from these assets due to lower than planned revenue or a
decline in the Companys market capitalization could be indicators of
impairment and lead to write-offs.

Legal.The Company is involved in certain claims and
litigation related
to its operations, including ordinary, routine litigation incidental to its
business. Management reviews and determines which liabilities, if any, arising
from these claims and litigation could have a material adverse effect on the
Companys consolidated financial position, liquidity, results of operations or
properties. In reviewing these claims and litigation, management assesses the
likelihood of any adverse judgments or outcomes to these matters as well as
potential ranges of probable losses. A determination of the amount of accruals
required, if any, for these contingencies is made after analysis of each
matter, which includes discussion with counsel retained in such matter. The
required accruals may change in the future due to new developments in a matter
or changes in strategies to resolve that matter, including changes in
litigation defense and settlement strategies. If a change in circumstances
resulted in a materially adverse outcome or judgment against NexPrise, NexPrise
could be required to expend cash intended to fund operations in defense of the
Company and might then have an insufficient amount of cash to meet other
obligations.

Results of Operations

Revenues.NexPrise reported $721,000 of revenue for the
three months ended
March 31, 2003, an increase of 6.9% over the $674,000 reported for the three
months ended March 31, 2002. This revenue is made up primarily of subscriptions
and maintenance for the Companys collaborative commerce and business process
automation solutions generated subsequent to our August 8, 2001 acquisition of
privately-held NexPrise, Inc. and our February 2002 acquisition of
privately-held InfoPrise, Inc. Subscription revenue entails recognizing the
value of the customer contract as revenue ratably over the term of the
contract.

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Cost of Revenues.Cost of revenues were approximately
$772,000 in the
three months ended March 31, 2003, an increase of 43.7% from the approximately
$537,000 recorded in the three months ended March 31, 2002. The increase is
primarily due to higher amortization of the developed technology intangible
assets acquired in the purchases of NexPrise in August 2001 and InfoPrise in
February 2002. The remainder of cost of revenues consists primarily of
outsourced hosting services for our customers, personnel and other expenses
associated with providing maintenance and technical support services and
royalties payable to third parties whose software is incorporated in the
NexPrise solution.

Research and Development.Research and development
(R&D) expenses
consist primarily of personnel and other expenses associated with developing,
updating, and enhancing software. R&D expenses were approximately $794,000
during the three months ended March 31, 2003, a decrease of 55.9% from the $1.8
million reported for the three months ended March 31, 2002. The decrease was
largely driven by reductions in workforce. To date, all software development
costs have been expensed in the period incurred. We believe that continued
investments in research and development are required to remain competitive.

In Process Research and Development.The Company expensed
$399,000 of
acquired in-process research and development for the three months ended March
31, 2002. The in-process research and development was acquired as a result of
the purchase of InfoPrise in February 2002. The Company determined the amount
of in process research and development through an independent valuation
performed in connection with the allocation of the InfoPrise purchase price.

Sales and Marketing.Sales and marketing expenses consist
primarily of
payroll and related expenses for personnel engaged in enterprise sales
activities and enterprise account management, as well as travel and promotional
expenses. Sales and marketing expenses were approximately $967,000 during the
three months ended March 31, 2003, a decrease of 42.1% from the $1.7 million
reported for the three months ended March 31, 2002. The decrease was driven by
reductions in workforce and reduced spending on marketing programs. The
Company expects sales and marketing expenses in future quarters to increase as
investments are made in the personnel and programs needed to acquire new
customers.

General and Administrative.General and administrative
expenses consist
primarily of salaries, fees for professional services and facilities expenses.
General and administrative expenses were approximately $700,000, a decrease of
59.4% from the $1.7 million reported for the three months ended March 31, 2002.
The decrease was driven by reductions in infrastructure costs and reductions
in workforce.

Interest Expense.Interest expense in the three months
ended March 31,
2003 was approximately $189,000, an increase of 6.8% from the $177,000 reported
for the three months ended March 31, 2002. Interest expense consists primarily
of interest related to convertible subordinated notes issued in April 2000, the
convertible promissory note issued in association with the purchase of
InfoPrise in February 2002 and, to a lesser extent, financed equipment and
other financing arrangements. With respect to the subordinated notes,
approximately $265,000 is payable semi-annually in arrears on April 1 and
October 1 of each year for interest on the notes that remain outstanding at
March 31, 2003. In addition, the remaining deferred offering costs of
approximately $187,000 related to the subordinated notes are being amortized as
interest expense ratably over the term of the subordinated notes. With respect
to the InfoPrise convertible promissory note, approximately $73,000 is payable
annually on each anniversary of the issuance of the promissory note, with the
balance of interest owed due at maturity. See Note 8 for further details on
the outstanding notes.

Interest Income and Other, Net.Interest income and
other, net, in the
three months ended March 31, 2003 was approximately $33,000, an increase of
approximately $13,000 from the $20,000 reported for the three months ended
March 31, 2002. Interest income and other, net, has been derived primarily
from earnings on investments in cash equivalents and short-term investments.
The increase in interest income and other, net is primarily attributable to
$73,000 of foreign exchange losses incurred in 2002 that were not incurred in
2003. This decrease was partially offset by a decline in interest income in
the three months ended March 31, 2002 due to lower interest rates and a
decrease in the cash balance earning interest.

Investment Losses.The 2002 investment loss of
approximately $1.4 million
is made up of approximately $1.2 million of equity losses in the marketplace
companies in which we had a significant ownership percentage and approximately
$186,000 of write-downs for impairment deemed to be other than temporary of an
investment accounted for using the cost method. The book value of these
investments was approximately $613,000 as of March 31, 2003. The remaining
investment is accounted for using the cost method.

Net Loss.As a result of the changes described above, the
net loss was
approximately $2.7 million in 2003, a decrease of 61.7% from the approximately
$7.0 million net loss reported for the three months ended March 31, 2002.

Liquidity and Capital Resources

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As of March 31, 2003 NexPrise had approximately
$9.5 million of cash, cash
equivalents, short-term investments and restricted cash; working capital was
approximately $6.3 million.

Net cash used in operating activities was approximately $684,000
for the
three months ended March 31, 2003 compared to $5.6 million of net cash used in
operating activities for the three months ended March 31, 2002. Net cash used
in operating activities for the three months ended March 31, 2003 is primarily
attributable to the net loss for the period less non-cash expenses. Non-cash
items primarily consisted of depreciation and amortization of $881,000. The
cash flows used in operating activities were partially offset by decreases in
accounts receivable, prepaid expenses and other current assets.

Net cash used in investing activities totaled $26,000 for the
three months
ended March 31, 2003, compared to net cash used in investing activities of $4.6
million for the three months ended March 31, 2002. During the three months
ended March 31, 2002, the Company had net sales and maturities of approximately
$5.6 million of short-term investments and received cash of approximately $1.0
million as part of the acquisition of InfoPrise.

Net cash used in financing activities was $100,000 for the three
months
ended March 31, 2002 and resulted primarily from the principal payments on our
capital lease obligations. This lease was paid in full as of March 31, 2002.

Management believes the Company has adequate cash to sustain
operations at
least through 2003 and is managing its business to achieve positive cash flow
utilizing existing assets. During 2002 the Company continued to reduce ongoing
operating expenses by renegotiating its lease commitments, reducing purchases
of other services and making workforce reductions. It is managements belief
that the adjustments to spending that have been made, combined with receipts
expected from customer contracts already in place and new customer contracts
expected to be signed in 2003 and thereafter will provide the additional
resources required to achieve positive cash flow. We are committed to the
successful execution of our operating plan and will take further action as
necessary to align our operations and reduce expenses.

Although we expect our existing cash, cash equivalent and
investment
balances together with our anticipated cash flows from operations to be
sufficient to meet our working capital and operating resource expenditure
requirements for at least the next 12 months, higher than anticipated expenses
or lower than anticipated receipts may result in lower cash, cash equivalents
and investments balances than presently anticipated and we may find it
necessary to obtain additional equity or debt financing. In the event
additional financing is required, we may not be able to raise it on acceptable
terms or at all.

Contractual Obligations

The following table summarizes the companys contractual
obligations and
commercial commitments as of March 31, 2003 (in thousands):

|                              |  |                        |        |         |  |           |       |           |  |               |     |  |  |   |        |  |  |   |   | 
|----------------------------- |  | ---------------------- | ------ | ------- |  | --------- | ----- | --------- |  | ------------- | --- |  |  | - | ------ |  |  | - | - | 
|                              |  | Payments Due by Period
|                              |  |                       
|                              |  |                        |        |         |  | Remainder |       |           |  |               |     |  |  |   |        |  |  |  
|Contractual Obligations       |  | Total                  |        | of 2003 |  | 1-3 Years |       | 3-5 Years |  | After 5 Years
|                              |  |                        |        |         |  |           |       |           |  |              
|Long-term debt                |  | $                      | 11,843 |         |  | $         |      |           |  | $             |    |  |  | $ | 11,843 |  |  | $ |  | 
|Hosting agreement             |  |                        | 312    |         |  |           | 312   |           |  |               |    |  |  |   |       |  |  |   |  | 
|Operating leases (a)          |  |                        | 1,731  |         |  |           | 1,089 |           |  |               | 422 |  |  |   | 220    |  |  |   |  | 
|                              |  |                        |        |         |  |           |       |           |  |               |     |  |  |   |        |  |  |   |   | 
|Total contractual
obligations |  | $                      | 13,886 |         |  | $         | 1,401 |           |  | $             | 422 |  |  | $ | 12,063 |  |  | $ |  | 
|                              |  |                        |        |         |  |           |       |           |  |               |     |  |  |   |        |  |  |   |   | 

(a)          Operating lease has not been offset by expected sublease income of
approximately $924,000

Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking
statements
within the meaning of the Securities Litigation Reform Act of 1995 that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following cautionary statements and elsewhere
in this Quarterly Report on Form 10-Q. If any of the following risks were to
occur, our business, financial condition or results or operations would likely
suffer. In addition to other information in this Form 10-Q, the following risk
factors should be carefully considered in evaluating NexPrise and its business
because such factors currently may have significant impact on NexPrises
business, operating results and financial condition.

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

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

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

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



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

We may not successfully address these risks. If we do
successfully address
these risks, additional risks related to factors that are outside our control
may prevent us from realizing sufficient revenues or profit margins to reach or
sustain profitability. For example, collaborative business process solutions
may experience problems with users as a result of security and privacy concerns
or general reticence about technology.

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

To date, we have derived a significant portion of our revenues
from a
small number of customers in two industries. Many of our customers do not have
contracts that extend beyond one year. Critical to the success of the Companys
business plan will be the acquisition of new customers in other industries,
increasing the number of users in our current customers and renewing current
contracts. There can be no assurance that we will be successful in developing
profitable relationships with new customers in new industries or that we will
retain existing customers.

Legislative Actions, Higher Insurance Costs and Potential New Accounting
Pronouncements May Cause our General and Administrative Expenses to Increase
and Impact our Future Financial Position and Results of Operations

In order to comply with the newly adopted Sarbanes-Oxley Act of
2002, as
well as proposed changes to listing standards by Nasdaq and proposed accounting
changes by the Securities and Exchange Commission, we may be required to hire
additional personnel and utilize additional outside legal, accounting and
advisory services, all of which will cause our general and administrative costs
to increase beyond what we currently have planned. Insurers are also likely to
increase premiums as a result of the high claims rates incurred over the past
year, and so our premiums for our various insurance policies, including our
directors and officers insurance policies, are likely to increase. Proposed
changes to accounting rules, including proposals to account for employee stock
options as a compensation expense, could, if mandated, materially increase the
expenses we report under generally accepted accounting principles and adversely
affect our operating results.

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

Our services include the storage and transmission of
business-critical,
proprietary information. If the security measures we or our third party data
centers have implemented are breached, our customers could lose this
information and we could be exposed to

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

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

We rely on third-party providers for our data center services,
principal
Internet connections and data hosting. This hosted environment is critical to
the provision of our software to many of our customers and if the environment
does not work well, is cut-off or fails, our customers would be unable to use
our solution. We have experienced and may continue to experience interruptions
and delays in service and availability for such services. We have signed an
agreement with a new vendor to provide the hosted environment, but there can be
no assurance that the transition to a new provider will successfully occur to
the full satisfaction of our customers. Furthermore, we rely on these third
party providers to respond promptly to requests we make for changes to our
hardware, networking and telecommunications configuration in order to deliver
our products and services to our customers. Any failures, security breaches,
interruptions, or delays experienced or caused by these third party providers
could negatively impact our relationship with users and adversely affect our
brand and our business and could expose us to liabilities to third parties.

Our operations could be significantly hindered by the occurrence
of a
natural disaster or other catastrophic event at our company or any third party
provider. Our and their operations are susceptible to outages due to fire,
floods, power loss, telecommunications failures, break-ins and similar events.
In addition, the majority of our and their network infrastructure is located in
California, an area susceptible to earthquakes. In the recent past, the western
United States (and California in particular) has experienced repeated episodes
of diminished electrical power supply. As a result of these episodes, certain
of our and their operations or facilities may be subject to rolling blackouts
or other unscheduled interruptions of electrical power. The prospect of such
unscheduled interruptions may continue for the foreseeable future and we are
unable to predict either their occurrence, duration or cessation. We do not
have, and our third party providers may not have, multiple site capacity for
all of our services in the event of any such occurrence. Despite implementation
of network security measures, the servers are vulnerable to computer viruses,
physical and electronic break-ins, and similar disruptions from unauthorized
tampering with our computer systems. In addition, systems are vulnerable to
coordinated attempts to overload them with data, which could result in denial
or reduction of service to some or all of our users for a period of time.
Furthermore, the failure by the third party providers to provide our required
data communications capacity could result in interruptions in our service.
Interruptions in our service will reduce our revenues and profits, and our
future revenues and profits will be harmed if our users believe that our system
is unreliable or insecure. We have experienced system failures from time to
time. If we experience frequent or persistent system failures, our reputation
and brand could be permanently harmed. We do not carry sufficient business
interruption insurance to compensate us for losses that may occur as a result
of any of these events. Any such event could have a material adverse effect on
our business, operating results, and financial condition.

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

Substantially all of our revenues to date have been derived from
the sale
of licenses and services associated with the ipTeam solution. Our future
operating results will depend on continued demand for ipTeam and the recently
introduced nProcessPlatform. ipTeam was commercially launched in 1998. If our
competitors release new products that are superior to ipTeam or nProcess
Platform in performance or price, or if we fail to enhance ipTeam and nProcess
Platform in a timely manner, demand for our products may decline, and we may
have to reduce the pricing of our products. A decline in demand or pricing as a
result of these or other factors would significantly reduce the revenues we can
expect in the future.

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

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

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

The Company Has a History of Losses, No Significant Revenues and Expects to
Continue to Incur Significant Operating Losses and Negative Cash Flow; We May
Never Achieve or Maintain Profitability

We have incurred substantial net losses in the past and we
expect to incur
net losses in future periods. We incurred a net loss of approximately $2.7
million during the three months ended March 31, 2003. As of March 31, 2003 we
had an accumulated deficit of approximately $627 million. We will need to
generate significant increases in revenues to achieve and maintain
profitability, and we may not be able to do so. If our revenues grow more
slowly than we anticipate or if our operating expenses cannot be reduced in the
event of lower than expected revenues, we may find it necessary to obtain
additional equity or debt financing or, in the alternative, significantly
curtail our operations. Such financing may not be available on acceptable
terms or at all. Even if we achieve profitability in the future on a quarterly
or annual basis, we may not be able to sustain or increase profitability.
Failure to achieve profitability or achieve and sustain the level of
profitability expected by investors and securities analysts may adversely
affect the market price of our common stock.

We Operate in a Highly Competitive Market and Our Inability to Compete
Successfully Against New Entrants and Established Companies Could Adversely
Affect Our Market Share

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

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

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

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

Our Financial Performance and Workforce Reductions May Adversely Affect the
Morale and Performance of Our Personnel and Our Ability to Hire New Personnel

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

General Economic and Political Conditions May Impact Our Results

Our revenue growth and future profitability depend on the
overall demand
for software and related services. This demand can be adversely affected by
unfavorable economic conditions, as customers reduce or defer spending on
information technology improvements. We may be especially prone to this as a
result of the relatively small installed base and operating history of our
products. A softening demand for software caused by a prolonged slowdown of
the economy would result in decreased revenue or lower revenue growth rates and
would adversely affect our operating results.

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Recent political events, including the U.S. military action in
the Middle
East, have put further pressure on economic conditions. The potential turmoil
that may result from such events contributes to the uncertainty of the economic
climate, further reducing predictability and our ability to develop and
implement long-term strategic plans. The impact of these or future similar
events may have a material adverse impact on our operating results and
financial position

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

If we fail to meet the criteria for continued listing on Nasdaq,
our
common stock may be delisted from Nasdaq. The Nasdaq National and SmallCap
Markets have a number of criteria companies are required to meet in order to
stay listed on Nasdaq. Those criteria include maintaining a minimum bid price
of at least $1 per share and maintaining stockholders equity of at least $10
million for the Nasdaq National Market or $2.5 million for the Nasdaq SmallCap
Market. If NexPrise is unable to maintain the $1 per share minimum bid price
or if ongoing reported losses drive stockholders equity below the $2.5 million
threshold, the Company may be delisted from Nasdaq. If the stock is delisted,
it would significantly decrease the liquidity of an investment in NexPrise
common stock. In addition, following delisting, the stock could be deemed to be
penny stock. If our common stock is considered penny stock, it would be subject
to rules that impose additional sales practices on broker-dealers who sell our
securities. For example, broker-dealers would have to make a special
suitability determination for the purchaser and have received the purchasers
written consent to the transaction prior to sale. Also, a disclosure schedule
must be prepared prior to any transaction involving a penny stock and
disclosure is required about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Monthly statements are also required to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stock. Because of these additional obligations,
some brokers may be unwilling to effect transactions in penny stocks. This
could have an adverse effect on the liquidity of our common stock and the
ability of investors to sell the common stock.

Our Business Involves a Lengthy and Unpredictable Sales Cycle

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

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

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

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

Adopting a Business Model That Includes the Sale of Perpetual Licenses to our
Software Products May Not Result in Immediate Recognition of License Revenue

We expect to sell a greater proportion of perpetual software
licenses and
fewer subscriptions to term licenses in coming quarters. When certain criteria
are met, including the establishment of vendor specific objective evidence
(VSOE) for the prices of the elements sold in an arrangement that includes
perpetual licenses, the sale of a perpetual software licenses can result in the
recognition of the revenue for the perpetual license in the period in which it
is delivered. If NexPrise is able to meet these criteria, revenue for
arrangements that include a perpetual license would be recognized sooner than
it would be under a subscription method of accounting and, therefore, revenue
growth in the period in which the licenses are sold would be greater than it
would have been under the subscription method. There can be no assurance that
NexPrise will be able to establish VSOE or meet all the other criteria required
to

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transition to a perpetual license model. If the criteria are not met the
revenue for the perpetual license portion of the arrangement will likely be
recognized over the term of the maintenance period and will not be recognized
upon delivery of the perpetual license. If that is the case, revenue growth
will not accelerate due to the inclusion of perpetual licenses in our sales
mix.

Our Products May Contain Defects That Could Harm Our Reputation, Be Costly to
Correct, Delay Revenue and Expose Us to Litigation

Despite testing by us, our partners and our customers, errors
may be found
in our products after commencement of commercial delivery. Errors have arisen
in our software products from time to time, and they could arise again in the
future. If errors are discovered, we may not be able to successfully correct
them in a timely manner or at all. Errors and failures in our products could
result in loss of or delay in market acceptance of our products and damage to
our reputation and our ability to convince commercial users of the benefits of
our products. In addition, we may need to make significant expenditures of
capital resources in order to eliminate errors and failures. Since our products
are used by customers for mission-critical applications, errors, defects or
other performance problems could also result in financial or other damages to
our customers, which could assert warranty and other claims for substantial
damages against us. Although our license agreements with our customers
typically contain provisions designed to limit our exposure to potential
product liability claims, it is possible that such provisions may not be
effective or enforceable under the laws of certain jurisdictions. In addition,
our insurance policies may not adequately limit our exposure with respect to
such claims. A product liability claim, even if unsuccessful, would be costly
and time-consuming to defend and could harm our business.

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

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



| |  |  | the timing of obtaining new customers (length of sales cycle);                                                                                          
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the timing of deploying services for new customers;                                                                                                     
|
| |  |  | the timing and magnitude of operating expenses and capital expenditures;                                                                                
|
| |  |  | costs related to the various third-party technologies we incorporate into our
products;                                                                 
|
| |  |  | utilization of third party data center services and technology infrastructure;                                                                          
|
| |  |  | changes in our pricing policies or those of our competitors; and                                                                                        
|
| |  |  | the amount of credits that we may be required to issue to our current
customers if we fail to deliver our services pursuant to contractual
arrangements.

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

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

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

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

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

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

As part of our normal operations, we purchase or license
software products
from third party commercial vendors. These products may not continue to be
available on commercially reasonable terms, or at all. The loss of these
products could result in delays in the sale of our services until equivalent
technology, if available, is identified, procured and integrated, and these
delays could result in lost revenues. Some of the key components of our
services are available only from sole or limited sources. Further, to the
extent that the vendors from whom we purchase these products increase their
prices, our gross margins could be negatively affected.

Non-Compliance with Government Regulations May Subject Us to Liability

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

We relied on our suppliers to comply with applicable local,
state and
federal laws regarding the labeling and the dissemination of information on any
products sold that may be hazardous or present a health threat to the user. If
these suppliers have failed, or we have failed to maintain the requisite
records irrespective of the actions of the suppliers, or if either of us have
failed to adequately comply with labeling and information dispensing
requirements of local, state or federal laws, then we may be held legally
responsible, since we held title to these products, and could be subject to
governmental penalties or fines, as well as private lawsuits to enforce these
laws. We have also relied upon our suppliers to obtain appropriate approvals
for products regulated by the Food and Drug Administration (FDA) and to
comply with the requirements relating to those approvals and products. The
failure of suppliers to obtain or comply with those approvals, or the failure
of the product advertising or labeling to be consistent with the FDA approval
for the products, or other failures by the products themselves, or our failure
to keep regulatory records required by the FDA, such as complaint files, could
result in costly product recalls, significant fines and judgments, civil and
criminal liabilities and negative publicity. In addition, we may discover that
we inadvertently sold other regulated products without a requisite license or
permit or failed to fully comply with other local, state or federal laws
governing these sales.

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

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

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

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

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We Face Risks Associated With Stockholder and Bondholder Litigation

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

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

The stock market and specifically the stock prices of technology related
companies have been very volatile. This broad market volatility and industry
volatility may reduce the price of our common stock, because our business is
Internet-based without regard to our operating performance. On a post reverse
split basis, our common stock reached a high of $3,652.50 and traded as low as
$8.85 during 2000, and had a high of $64.65 and low of $1.80 during 2001. Our
stock reached a high of $7.25 and a low of $1.34 during fiscal 2002. On March
31, 2003 the last reported sales price on Nasdaq was $4.00.




Item 3.Qualitative and Quantitative Disclosure about Market Risk

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

Interest Rate Sensitivity

We are also exposed to interest rate risk related to our
investment
portfolios. We have performed a sensitivity analysis as of March 31, 2003,
using a modeling technique that measures the change in the fair values arising
from a hypothetical 10% adverse movement in the levels of interest rates across
the entire yield curve with all other variables constant. The discount rates
used were based on the market interest rates in effect at March 31, 2003. The
sensitivity analysis at March 31, 2003 indicated that a potential loss in the
fair values of our interest rate sensitive investment instruments was not
material.

Our convertible and promissory notes are not exposed to interest
rate risk
as our interest rate is fixed at 6%.

Foreign Currency Risk

Our sales to-date have primarily 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. If our
sales outside of the U.S. increase and are made in U.S. dollars, a
strengthening of the U.S. dollar could make our products less competitive in
foreign markets.




Item 4.Controls and Procedures

(a)  Under the supervision and with the participation of
our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act
of 1934, as amended (the Exchange Act), within 90 days prior to the filing
date of this report. Based on their evaluation, our principal executive officer
and principal accounting officer concluded that our disclosure controls and
procedures are effective in ensuring that we are able to gather, analyze and
disclose on a timely basis all information that is required to be disclosed in
our Exchange Act reports.

(b)  There have been no significant changes (including
corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.




PART II. OTHER INFORMATION




Item 1.Legal Proceedings

Starting in March 2001, several lawsuits were filed in United
States
District Court for the Northern District of California against the Company and
certain of its officers and directors on behalf of putative classes of persons
who purchased the Companys securities

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during time periods from December 1999 through December 6, 2000. One of
the lawsuits also names as a defendant the lead underwriter for the Companys
offering of convertible notes. The lawsuits generally allege that the Company
and certain individuals violated the federal securities laws by making false
and misleading statements during 2000, including in the Companys registration
statement for its convertible notes offering. These lawsuits have been
consolidated as In re Ventro Corp. Sec. Litigation, Master File No. Civ.
01-1287 SBA, and a consolidated complaint was filed. On July 30, 2002, the
Company and other defendants named in the action filed motions to dismiss. On
March 31, 2003, the Court granted in part and denied in part the motions to
dismiss. The Court ordered the plaintiffs to file an amended complaint by no
later than May 15, 2003. No discovery has taken place, and the Court has not
set a trial date. The Company believes that the claims are without merit and
intends to defend the case vigorously.

In August 2001, Chadwell v. Byers, Case
No. CV800814, a putative
shareholder derivative suit was filed in California Superior Court, Santa Clara
County against certain of the Companys present and former officers and
directors, alleging breaches of fiduciary duty and insider trading. The
Company is named solely as a nominal defendant against whom no recovery is
sought. After a demurrer was sustained with leave to amend, the parties
stipulated to a stay of proceedings pending a determination of the sufficiency
of the complaint in the In re Ventro Corp. Sec. Litigationfederal consolidated
action.

In March 2001, Kassin v. Ventro Corp. et al., Index
No. 01-CV-3450 (SAS),
a stockholder class action complaint, was filed in the United States District
Court for the Southern District of New York against the Company, several of its
officers and directors, and the underwriters of its initial public offering.
The class action has been consolidated for pre-trial purposes with more than
one thousand other actions, filed against more than 300 other issuers of
securities, affiliated individuals and dozens of underwriters of the securities
offerings in In Re Initial Public Offering Securities Litigation, 21 MC 92
(SAS). The plaintiffs allege that the prospectus for the initial public
offering of the Companys common stock, incorporated in the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, was
materially false and misleading because it failed to disclose, among other
things, that the underwriters had made secret arrangements for aftermarket
purchases of the securities and made arrangements for excessive and improper
underwriters compensation in the form of increased brokerage commissions.
Plaintiffs are claiming damages of an unspecified amount based on the
subsequent decline in the market price of the Companys shares below their
original offering price. The litigation is in an early phase, and no date has
yet been set by the court for completion of pretrial discovery or trial.
Although we believe that we have meritorious defenses to the action and intend
to defend the suit vigorously, we cannot predict with certainty the outcome of
this lawsuit. Our defense against such lawsuits will be costly and may require
a significant commitment of time and resources by our senior management.

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




Item 2.Changes in Securities and Use of Proceeds

None




Item 3.Defaults upon Senior Securities

None




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

None




Item 5.Other Information

None

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Item 6.Exhibits and Reports on Form 8-K

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

|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description                                                                                                                                      
|        |  |                                                                                                                                                  
|99.1    |  | Certification by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|        |  |                                                                                                                                                  
|99.2    |  | Certification by Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

(b)    Reports on Form 8-K: None

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of
1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on May 02, 2003.

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

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CERTIFICATIONS

I, Ted Drysdale, certify that:

1.          I have reviewed this quarterly
report on Form 10-Q of NexPrise, Inc. (the
Registrant);

2.          Based on my knowledge, this
quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

3.          Based on my knowledge, the
financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.          I:



| |  |  | (A) am responsible for establishing and maintaining internal
controls;                                                                                                                                                            
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (B) have designed such internal controls to ensure that material
relating to the Registrant and its consolidated subsidiaries is made
known to me by others within those entities for the period in which
the Report was prepared;
|
| |  |  | (C) have evaluated the effectiveness of the Registrants internal
controls as of May 02, 2003 and                                                                                                                                 
|
| |  |  | (D) have presented in the Report my conclusions about the
effectiveness of the Registrants internal controls based upon my
evaluation as of May 02, 2003.                                                                        

5.          I have disclosed to the
Registrants auditors and the audit committee of the
Registrants board of directors the following:



| |  |  | (A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data and
have identified for the Registrants auditors any material weaknesses
in internal controls; and
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants
internal controls.                                                                                                                                            

6.          I have indicated in the Report
whether or not there were significant changes
in internal controls or in other factors that could significantly affect the
internal controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

|                   |  |                                                  
|------------------ |  | -------------------------------------------------
|Date: May 02, 2003 |  | /s/ Ted Drysdale                                 
|                   |  | Ted DrysdalePresident and Chief Executive Officer

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I, Jerome E. Natoli, certify that:

1.          I have reviewed this quarterly
report on Form 10-Q of NexPrise, Inc. (the
Registrant);

2.          Based on my knowledge, this
quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

3.          Based on my knowledge, the
financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.          I:



| |  |  | (A) am responsible for establishing and maintaining internal
controls;                                                                                                                                                            
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (B) have designed such internal controls to ensure that material
relating to the Registrant and its consolidated subsidiaries is made
known to me by others within those entities for the period in which
the Report was prepared;
|
| |  |  | (C) have evaluated the effectiveness of the Registrants internal
controls as of May 02, 2003, and                                                                                                                                
|
| |  |  | (D) have presented in the Report my conclusions about the
effectiveness of the Registrants internal controls based upon my
evaluation as of May 02, 2003.                                                                        

5.          I have disclosed to the
Registrants auditors and the audit committee of the
Registrants board of directors the following:



| |  |  | (A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data and
have identified for the Registrants auditors any material weaknesses
in internal controls; and
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants
internal controls.                                                                                                                                            

6.          I have indicated in the Report
whether or not there were significant changes
in internal controls or in other factors that could significantly affect the
internal controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

|                   |  |                                        
|------------------ |  | ---------------------------------------
|Date: May 02, 2003 |  | /s/ Jerome E. Natoli                   
|                  
|                   |  | Jerome E. NatoliChief Financial Officer

30



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##### Table of Contents



EXHIBIT INDEX




|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description                                                                                                                                      
|        |  |                                                                                                                                                  
|99.1    |  | Certification by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|        |  |                                                                                                                                                  
|99.2    |  | Certification by Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

31