UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     (Mark One)

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

For the quarterly period ended March 31, 2002

OR

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

For the transition period from ____________ to ____________ .

Commission file number: 0-26811

NexPrise, Inc.

(Exact name of Registrant as specified in its charter)

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

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

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

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

TABLE OF CONTENTS

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

NEXPRISE, INC.

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

INDEX

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

2

NEXPRISE, INC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

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

(1) Derived from audited financial statements

See accompanying notes to condensed consolidated financial statements.

3

NEXPRISE, INC.

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

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

See accompanying notes to condensed consolidated financial statements.

4

NEXPRISE, INC.

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

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

5

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

See accompanying notes to condensed consolidated financial statements.

6

NEXPRISE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1. Description of Business

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

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

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

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

Revenue.

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

Net Income (Loss) Per Share

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

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

7

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

Use of Estimates

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

Note 3. Business Combinations

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

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

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

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

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

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

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

8

Note 4. Comprehensive Income (Loss)

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

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

Note 5. Balance Sheet Details

Other Long-term Assets

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

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

Note 6. Equity Investments

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

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

9

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

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

Note 7. Convertible Notes

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

Note 8. Contingencies

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

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

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

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

Discontinued Marketplaces Formerly Known as Promedix and Chemdex

10

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

Government Regulations

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

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

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

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

Note 9. Deferred Stock-Based Compensation

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

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

Note 10. Settlement, Restructuring and Other Charges

11

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

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

Note 11. Recent Accounting Pronouncements

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

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

Note 12. Subsequent Events

Reverse Split of Common Stock

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

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

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

Presentation of Financial Information

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

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

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

Overview

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

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

Critical Accounting Policies

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

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

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

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

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

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

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

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

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

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

Results of Operations

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

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

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

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources

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

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

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

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

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

Investment Considerations

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

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

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

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

Restructurings May Not Sufficiently Reduce Operating Expenses

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

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

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

• develop and market technology and services solutions that achieve broad market acceptance by our customers

• acquire and deploy a sufficient number of customers to achieve profitability

• extend our technology to support a wide range of hardware and software to meet the needs of a large range of customers with a variety of needs;

• acquire or license third party technologies that we require to deliver our technology and services

• overcome publicity related to our public announcements of restructurings, shareholder litigation and the shutdown of our former marketplaces, and,

• acquire customers operating in industries where we have limited experience and provide them quality technology and services.

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

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

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

• integrating the operations of the companies;

• retaining and assimilating the key personnel of each company;

• developing a product that will be attractive to existing and potential customers; and

• retaining existing customers and strategic partners of each company.

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

• the potential disruption of the combined company’s ongoing business and distraction of its management;

• the difficulty of incorporating acquired technology and rights into the combined company’s products and services

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• unanticipated expenses related to technology integration;

• the impairment of relationships with employees and customers as a result of any integration of new management personnel; and

• potential unknown liabilities associated with the merger.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our Business Involves a Lengthy and Unpredictable Sales Cycle

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

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

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

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

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

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

• the timing of obtaining new customers (length of sales cycle);

• the timing of deploying services for new customers;

• the timing and magnitude of operating expenses and capital expenditures;

• costs related to the various third-party technologies we incorporate into our products;

• utilization of our leased third-party data center space and technology infrastructure;

• changes in our pricing policies or those of our competitors; and

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

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

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

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

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

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

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

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

Non-Compliance with Government Regulations May Subject Us to Liability

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

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

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

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

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

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

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

We Face Risks Associated With Shareholder and Bondholder Litigation

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

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

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

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Item 3. Qualitative and Quantitative Disclosure about Market Risk

Market Risk Disclosure

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

Interest Rate Sensitivity

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

Foreign Currency Risk

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

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

Item 2. Changes in Securities and Use of Proceeds

     None

Item 3. Defaults upon Senior Securities

     None

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

     None

Item 5. Other Information

     None

Item 6. Exhibits and Reports on Form 8-K

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

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

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

     Reports on Form 8-K:

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

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

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SIGNATURE

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

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

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EXHIBIT INDEX

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

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

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