<PAGE>

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

                       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.

[_]  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 333-87985

                                  eBenX, Inc.
                           (Exact name of registrant
                          as specified in its charter)

               Minnesota                                 41-1758843
    (State or other jurisdiction of          (IRS Employer Identification No.)
     incorporation or organization)

                         605 North Highway 169 Suite LL
                          Minneapolis, Minnesota 55441
                    (Address of principal executive offices)

                        Telephone Number: (763) 614-2000
              (Registrant's telephone number, including area code)

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 [_]

As of May 1, 2002 there were 20,038,141 shares of the registrant's common stock
outstanding.

--------------------------------------------------------------------------------
<PAGE>

                                  EBENX, INC.
                         QUARTERLY REPORT ON FORM 10-Q
                      FOR THE PERIOD ENDED MARCH 31, 2002
                                     INDEX

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements
          Condensed Consolidated Balance Sheets at March 31, 2002 and December 31, 2001                1
          Condensed Consolidated Statements of Operations for the three-month periods
              ended March 31, 2002 and 2001                                                            2
          Condensed Consolidated Statements of Cash Flows for the three-month periods ended
              March 31, 2002 and 2001                                                                  3
          Notes to Condensed Consolidated Financial Statements                                         4

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations        8
Item 3.   Quantitative and Qualitative Disclosures about Market Risk                                  12

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                                                           13
Item 2.   Changes in Securities and Use of Proceeds                                                   13
Item 3.   Defaults Upon Senior Securities                                                             13
Item 4.   Submission of Matters to a Vote of Security Holders                                         13
Item 5.   Other Information                                                                           14
Item 6.   Exhibits and Reports on Form 8-K                                                            14
</TABLE>
<PAGE>

                                  EBENX, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
                            (Amounts in thousands)


<TABLE>
<CAPTION>
                                                        March 31,   December 31,
                                                          2002          2001
                                                        ---------   ------------
<S>                                                     <C>         <C>
               ASSETS
Current assets:
    Cash and cash equivalents                           $    5,032   $   3,324
    Short-term investments                                  39,679      46,211
    Accounts receivable, net of allowance
      of $1,101 and $957                                     6,428       7,868
    Unbilled revenue                                         2,591       2,272
    Prepaid expenses and other                               1,949       1,937
                                                        ----------   ---------
      Total current assets                                  55,679      61,612

Property and equipment, net                                 10,356      11,401
Loans receivable from employees                                514         540
Note receivable                                              1,100         800
Equity investment                                            2,044           -
Deposits                                                       122         113
Goodwill and other intangibles, net                         20,369      20,334
                                                        ----------   ---------
          Total assets                                  $   90,184   $  94,800
                                                        ==========   =========

     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                    $      534   $     204
    Accrued compensation                                       940       2,297
    Accrued expenses                                         5,727       3,684
    Restructuring reserve                                    4,590           -
    Client liability reserve                                   443         670
    Deferred revenue                                           155         109
                                                        ----------   ---------
      Total current liabilities                             12,389       6,964

Shareholders' equity:
    Common stock                                               200         199
    Additional paid-in capital                             182,322     182,130
    Deferred stock-based compensation                       (2,670)     (3,145)
    Accumulated other comprehensive income                      91         204
    Retained deficit                                      (102,148)    (91,552)
                                                        ----------   ---------
       Total shareholders' equity                           77,795      87,836
                                                        ----------   ---------
          Total liabilities and shareholders' equity    $   90,184   $  94,800
                                                        ==========   =========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>

                                  EBENX, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                 (Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                       -----------------------------
                                                                                           2002            2001
                                                                                       -------------   -------------
<S>                                                                                    <C>             <C>
Net revenue                                                                               $  11,432       $   7,316
Cost of services (exclusive of stock-based compensation
    expense of $130 and $249 for the three months ended
    March 31, 2002 and 2001, respectively)                                                    9,812           6,651
                                                                                          ---------       ---------
      Gross profit                                                                            1,620             665

Operating expenses:
    Selling, general and administrative (exclusive of stock-
      based compensation expense of $263 and $341 for the
      three months ended March 31, 2002 and 2001, respectively)                               3,879           3,894
    Research and development (exclusive of stock-based
      compensation expense of $71 and $122 for the three months
      ended March 31, 2002 and 2001, respectively)                                            2,015           2,206
    Amortization of stock-based compensation                                                    464             712
    Amortization of goodwill and other intangibles                                                -           5,663
    Restructuring charge                                                                      6,223               -
                                                                                           --------       ---------

      Total operating expenses                                                               12,581          12,475
                                                                                           --------       ---------
Loss from operations                                                                        (10,961)        (11,810)
Interest income and other, net                                                                  365           1,288
                                                                                          ---------       ---------
Net loss                                                                                  $ (10,596)      $ (10,522)
                                                                                          =========       =========
Net loss per share:
    Basic and diluted                                                                     $   (0.53)      $   (0.54)
                                                                                          =========       =========
Shares used in calculation of net loss per share:
    Basic and diluted                                                                        19,859          19,340
                                                                                          =========       =========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                      -2-
<PAGE>

                                        EBENX, INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                   (Amounts in thousands)


<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                            -------------------
                                                              2002       2001
                                                            --------   --------
<S>                                                         <C>        <C>
Operating activities:
     Net loss                                                $(10,596) $(10,522)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
          Depreciation of property and equipment                  670       520
          Amortization of stock-based compensation,
            goodwill and other intangibles                        464     6,375
          Changes in operating assets and liabilities:
            Accounts receivable                                 1,440      (851)
            Other current assets                                 (305)    2,075
            Accounts payable                                      330       144
            Accrued expenses                                    1,523        29
            Restructuring reserve                               4,577         -
            Client liability reserve                             (227)        -
            Deferred revenue                                       46        84
            Deposits                                               (9)        -
                                                            ---------  --------
               Net cash used in operating activities           (2,087)   (2,146)

Investing activities:
     Additions to property and equipment                         (438)   (1,482)
     Purchases of investments                                 (31,290)  (87,735)
     Sales of investments                                      37,709    91,418
     Advances on notes                                           (300)        -
     Cost of acquisition, net of cash acquired                 (2,079)        -
                                                            ---------  --------
               Net cash provided by investing activities        3,602     2,201

Financing activities:
     Stock options and warrants exercised                          31        81
     Proceeds from issuance of common stock, net of costs         162         -
                                                            ---------  --------
               Net cash provided by financing activities          193        81

Net increase in cash and cash equivalents                       1,708       136
Cash and cash equivalents at beginning of period                3,324       764
                                                            ---------  --------
Cash and cash equivalents at end of period                  $   5,032  $    900
                                                            =========  ========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                      -3-
<PAGE>

                                  EBENX, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)

1.  Business Description and Summary of Significant Accounting Policies

Business Description

     eBenX, Inc., a Minnesota corporation incorporated in September 1993 (the
"Company"), provides technology-based solutions for the purchase, administration
and payment of group health and welfare benefits.  The Company currently
operates in a single business segment providing services to employers, brokers
and other employee benefit advisors, and health plans and other carriers.  The
Company's customers are located throughout the United States.

Basis of Presentation

     The condensed consolidated financial statements included herein, except for
the December 31, 2001 balance sheet which was extracted from the audited
financial statements of December 31, 2001, have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (all of which are
normal and recurring in nature) that are necessary for a fair presentation of
the interim periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The results of operations for the three-month period
ended March 31, 2002 are not necessarily indicative of the results to be
expected for any subsequent quarter or for the entire year ended December 31,
2002. These unaudited consolidated financial statements and notes included
herein should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

Principles of Consolidation

     The consolidated financial statements include the Company and its wholly
owned subsidiaries, Arbor Associates, Inc. and Managed Care Buyer's Group, Inc.
All intercompany accounts and transactions have been eliminated in
consolidation.

Net Loss Per Share

     Basic net loss per share is based on the weighted-average shares
outstanding during the period. Diluted net loss per share increases the shares
used in the per share calculation by the dilutive effects of options, warrants,
and convertible securities. The Company's common stock equivalent shares
outstanding from stock options and warrants are excluded from the diluted net
loss per share computation for all periods because their effect would be
antidilutive.

Reclassification

     Certain prior year items have been reclassified to conform to the current
year presentation.

2.  Comprehensive Income

     Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for the reporting and display of
comprehensive income and its components. Adjustments to comprehensive loss for
the three months ended March 31, 2002 consisted of unrealized losses on
available-for-sale securities of $113,000, resulting in a total comprehensive
loss of $10,709,000.  The tax effects of these other comprehensive adjustments
were not considered to be material.

                                      -4-
<PAGE>

3.   Restructuring Charge

     In the first quarter of 2002, management approved plans to undertake
restructuring and cost saving actions which included workforce reductions,
vacating leased office space, asset disposals, and other costs related to re-
engineering and restructuring business processes and operations.  The Company
completed these actions in the first quarter, and as a result, the Company
recorded a restructuring expense of $6,223,000.

     The initial restructuring expenses described above and subsequent
reductions to the related liability accounts included the following:

<TABLE>
<CAPTION>
                                                Employee       Contractual
                                              Termination         Lease           Asset
     (thousands)                               Benefits        Obligations      Disposals     Other     Total
                                              -----------      -----------      ---------     -----    ------
     <S>                                      <C>              <C>              <C>           <C>      <C>
     Initial expense and accrual              $     1,004      $     3,492      $     813     $ 914    $6,223

     Cash payments                                   (293)            (272)            --      (255)     (820)

     Non-cash charges                                  --               --           (813)       --      (813)
                                              -----------      -----------      ---------     -----    ------
     Restructuring reserve, March 31, 2002    $       711      $     3,220      $      --     $ 659    $4,590
                                              ===========      ===========      =========     =====    ======
</TABLE>

     Employee termination benefits in the first quarter included expenses
related to the reduction of 34 personnel primarily through facility closures and
consolidation of corporate administrative functions.

     Contractual lease obligations relate primarily to future contractual lease
costs associated with vacating two floors at the Minneapolis headquarters
location. The Company is actively seeking to sublease this space.

     Asset disposals relate to office equipment to be disposed of and leasehold
improvements written-off.  These assets were related to the two closed floors at
the Minneapolis headquarters location.

4.  Acquisitions and Investment

     On November 5, 2001, the Company completed the acquisition of the health
and welfare assets of Howard Johnson & Company, ("Howard Johnson"), a wholly
owned subsidiary of Merrill Lynch & Company, Inc., for a final purchase price of
approximately $12.6 million, including approximately $11.5 million paid in cash
at closing and approximately $1.1 million in assumed obligations to employees,
pursuant to the terms of an Asset Purchase Agreement between Howard Johnson and
the Company dated as of October 19, 2001 (the "Asset Purchase Agreement").  The
purchase price was funded from the Company's existing cash.

     In connection with the consummation of this acquisition, the Company
entered into a Shared Services Agreement with Howard Johnson pursuant to which
Howard Johnson will provide agreed upon services to the Company in connection
with the Company's health and welfare business for up to 24 months.  The Company
is obligated to pay Howard Johnson a monthly fee of $187,500, subject to
reduction as responsibility for providing these services to each client is
transferred to the Company.  The Company also entered into a Marketing Agreement
with Howard Johnson pursuant to which Howard Johnson may refer potential and
existing clients seeking health and welfare benefits services to the Company in
exchange for a percentage of revenues from such referrals.

     The above acquisition was accounted for using the purchase method of
accounting.  The excess of the consideration provided over the relative fair
value of the assets acquired was allocated to goodwill.  The allocation of
purchase price related to the acquisition of the health and welfare assets of
Howard Johnson is subject to change pending a final analysis of the value of the
assets acquired and the liabilities assumed.

     The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the three month periods
ended March 31, 2002 and 2001, assuming the health and welfare assets of Howard
Johnson had been acquired at the beginning of fiscal 2001 (in thousands, except
per share data):

                                      -5-
<PAGE>

                                                      Three months ended
                                                           March 31,
                                                --------------------------------
                                                    2002              2001
                                                --------------   ---------------
Revenue                                             $  11,432         $  11,639
Loss from operations, excluding amortization
  of stock-based compensation, goodwill and
  other intangibles and restructuring               $  (4,274)        $  (5,435)
Net loss                                            $ (10,596)        $ (10,392)
Basic and diluted net loss per share                $   (0.53)        $   (0.54)

         The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the three month period ended
March 31, 2001. They are not intended to be a projection of future results and
do not reflect any synergies that might be affected from combined operations.

          In February 2002, the Company entered into an agreement with Emerge
HealthCare, Inc.  ("Emerge"), a privately held Delaware corporation, to develop
and deliver new risk-adjusted pricing health and welfare benefit products.  The
Company will provide the technology and services to these new developing
products and will license its proprietary platform to Emerge.  Coincident with
entering into the agreement, the Company also participated in the series B
preferred share equity offering of Emerge and purchased shares representing less
than 20% of the outstanding shares of Emerge for $2,000,000.  This investment
will be carried at cost and recoverability of the carrying amount will be
evaluated on a periodic basis.

5.   Deferred stock-based compensation

          In connection with the granting of stock options to employees prior to
the Company's initial public offering, the Company recorded deferred stock-based
compensation of approximately $5.5 million in the year ended December 31, 1999.
This amount represents the difference between the exercise price and the deemed
fair value of the Company's common stock for accounting purposes on the date
these stock options were granted. In connection with the acquisition of Arbor in
September 2000, the Company recorded deferred stock-based compensation of $5.2
million. This amount represents the difference between the exercise price and
the deemed fair value of the Company's common stock for accounting purposes on
the date all outstanding unvested options and restricted stock of Arbor were
converted to Company options and restricted stock. The deferred stock-based
compensation is included as a component of stockholders' equity and is being
amortized over the vesting period of the options. Amortization expense of
approximately $464,000 and $712,000 was recognized in the three months ended
March 31, 2002 and 2001, respectively.

6.   Note Receivable

          In conjunction with the formation of a strategic alliance to develop,
promote, distribute and support an integrated Web-based benefits administration
and communications product for mid-sized employers, the Company entered into a
joint development agreement and a related loan agreement on August 31, 2001,
granting a line of credit of $1.5 million to Online Benefits, Inc. ("Online"), a
privately held Delaware corporation.  The outstanding principal balance under
the line of credit bears interest at a rate of 8% per annum.  Interest is due
annually on the anniversary date of the loan agreement.  On August 31, 2004, the
third anniversary date of the loan agreement, payment of the lesser of the
outstanding principal balance under the line of credit or the total gross
revenues received by the strategic alliance through such date is due.  If less
than the entire principal balance under the line of credit is paid on August 31,
2004, then the lesser of the remaining principal balance or the total gross
revenues of the strategic alliance for the preceding year is due on the next and
each succeeding anniversary date of the loan agreement.  Any remaining
outstanding principal balance under the line of credit is due on August 31,
2006.  At March 31, 2002, $1.1 million has been loaned to Online and is
outstanding under the line of credit.  This amount is recorded as a note
receivable.

          As a condition of the loan agreement, the Company received warrants to
purchase common stock of Online Benefits at an exercise price of $1.644 per
share.  The warrants entitle the Company to purchase shares equal to 15% of the
total advances on the line of credit, divided by the per share exercise price.
The warrants expire August 31, 2006.  Warrants for the purchase of 100,365
shares of common stock were outstanding at March 31, 2002.

                                      -6-
<PAGE>

7.   Letter of Credit

          On August 29, 2001, the Company secured an irrevocable letter of
credit for approximately $1.8 million. The letter was required under the
operating lease of the Company's corporate headquarters, and as such, the lessor
is assigned as the beneficiary of the funds in the event of default on the
lease. The letter of credit expires July 31, 2005, and is collateralized by
securities restricted for that purpose.


8.   Recent Accounting Pronouncements

     The Company has adopted Statement of Financial Accounting Standards No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
issued by the Financial Accounting Standards Board. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will be amortized over their useful lives.

     The effect of the change in accounting resulted in an increase to net
income of $2.2 million for the quarter ended March 31, 2002. During the first
six months of 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets as of
January 1, 2002. The Company has not yet determined what the effect of these
tests will be on the earnings and financial position of the Company, but we do
not expect the effect to be material.

     The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the three month periods
ended March 31, 2002 and 2001, assuming no amortization of goodwill and other
intangibles in 2001:

(in thousands except per share data)               Three Months Ended
                                                       March 31,
                                                 2002              2001
                                            ---------------   ---------------
Reported net loss                                $ (10,596)        $ (10,522)
  Add back: Goodwill amortization                        -             5,663
                                            ---------------   ---------------
  Adjusted net loss                              $ (10,596)         $ (4,859)
                                            ===============   ===============

Net loss per share:
  Reported net loss per share                      $ (0.53)          $ (0.54)
  Goodwill amortization per share                        -              0.29
                                            ---------------   ---------------
  Adjusted net loss per share                      $ (0.53)          $ (0.25)
                                            ===============   ===============

     In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and the
accounting and reporting provision of APB Opinion No. 30, "Reporting the Results
of Operations" for a disposal of a segment of a business.  SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, with earlier
application encouraged.

                                      -7-
<PAGE>

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

     Except for historical information, this document contains various "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.  These forward-looking statements involve risks and uncertainties,
including, among other things, statements regarding our revenue mix, anticipated
costs and expenses, service development, relationships with strategic partners
and pending acquisitions.  These forward-looking statements include declarations
regarding our belief or current expectations of management, such as statements
indicating that "we expect," "we anticipate," "we intend," "we believe," and
similar language.  We caution that any forward-looking statement made by us in
this Quarterly Report on Form 10-Q or in other announcements made by us are
further qualified by important factors that could cause actual results to differ
materially from those projected in the forward-looking statements, including
without limitation the risks discussed in our Annual Report on Form 10-K filed
on March 28, 2002.

     The following discussion and analysis of the financial condition and
results of operations of eBenX should be read in conjunction with the
consolidated financial statements and related notes for the year ended December
31, 2001, and included in our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.  For information regarding the Company's
Critical Accounting Policies, refer to the Company's Annual Report on Form 10-K
for the year ended December 31, 2001.

Overview

     We provide specialized technology-based solutions to employers, brokers,
employee benefit advisors, and health plans and other carriers for the purchase,
administration, and payment of group health and welfare benefits.  We apply the
Internet and other technology to simplify and automate the complex, ongoing and
multiple transactions associated with the exchange of health and welfare
benefits data and dollars.

     On November 5, 2001, we acquired the health and welfare assets of Howard
Johnson & Company, a wholly owned subsidiary of Merrill Lynch & Company, Inc.,
for a purchase price of $12.6 million, consisting of approximately $11.5 million
in cash and the assumption of $1.1 million of liabilities.  The acquisition was
accounted for under the purchase method of accounting.  Under this method, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their determined fair market values.  The assets acquired primarily consist
of customer contracts and arrangements for the provision of health and welfare
benefits administration services.

     Revenue is derived primarily from providing ongoing annual enrollment and
health and welfare eligibility administration and premium billing and payment
exchange services.  Administrative or exchange services revenue typically is
priced on a per employee per month basis with adjustments made to accommodate
the number of health plans and other carriers required by the customer.  We
typically enter into multi-year contracts with our large employer customers and
often provide fixed and variable fee structures to permit volume-adjusted
pricing. Customers may purchase some or all of our services, and the customer
relationship may evolve from utilizing procurement services to utilizing
implementation and enrollment services and per employee-based administrative
services.

     Cost of services consists primarily of personnel costs for account
management, operations, production and procurement and information technology
costs for both ongoing procurement and administrative services and for customer
implementation expense.  The information technology costs relate to personnel
costs for implementing and maintaining customer and health plan computer
interfaces and computer hardware and software expenses related to computer
processing.  A portion of cost of services consists of new customer
implementation expenses.  Therefore, as a short-term effect of growth,
increasing numbers of new customers will cause the cost of services as a
percentage of net revenue to increase.

     Selling, general and administrative expenses consist primarily of payroll
and payroll-related expenses associated with sales and marketing, executive
management and corporate administrative personnel, as well as professional fees
and expenditures for advertising, public relations and promotional efforts.

     Research and development expenses consist primarily of development
personnel and external contractor costs related to the development of new
products and services, enhancement of existing products and services, quality
assurance

                                      -8-
<PAGE>

and testing.  The Company follows AICPA Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", in accounting for internally developed software.  To date, we
have not capitalized any of our software development costs as a majority of our
in-house development efforts related to determining specific software
requirements and evaluating alternatives related to specific performance
criteria for our products.  As a result, all research and development costs have
been expensed as incurred.

     Since our inception, we have incurred losses.  As of March 31, 2002, we had
an accumulated deficit of $102.1 million.  These losses and this accumulated
deficit have resulted from the significant costs incurred in the development of
our technology platform, the establishment of relationships with our customers,
the development and maintenance of our customer and carrier interfaces,
amortization of stock-based compensation and goodwill and other intangibles and
a $30.4 million impairment charge to the carrying value of goodwill associated
with the September 2000 acquisition of Arbor.  Although we have experienced
significant revenue growth in recent periods, our operating results for future
periods are subject to numerous uncertainties.  In view of the rapidly evolving
nature of our business and our limited operating history, we believe that
period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.

Results of Operations

     The following table sets forth for the periods indicated selected statement
of operations data expressed as a percentage of net revenues.

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                            ------------------
                                                             2002        2001
                                                            ------      ------
     <S>                                                    <C>         <C>
     Net revenue                                            100.0%      100.0%
     Cost of services                                        85.8        90.9
                                                            -----      ------
               Gross profit                                  14.2         9.1
     Operating expenses:
          Selling, general and administrative                33.9        53.2
          Research and development                           17.6        30.2
          Amortization of stock-based compensation            4.1         9.7
          Amortization of goodwill and other intangibles        -        77.4
          Restructuring charge                               54.4           -
                                                            -----      ------
               Total operating expenses                     110.0       170.5
                                                            -----      ------
     Loss from operations                                   (95.8)     (161.4)
     Interest income and other, net                           3.2        17.6
                                                            -----      ------
     Net loss                                               (92.6%)    (143.8%)
                                                            =====      ======
</TABLE>

                                      -9-
<PAGE>

     In addition to our operating results, we also track and provide enrollment
statistics.  Enrollment is defined as the number of employees to which we
currently provide administration services.   Enrollment commitments include
employees currently in enrollment and new customer employee commitments that
will be implemented in the foreseeable future, and exclude enrolled employees
known to be terminating in the future.  The following table sets forth our
enrollment statistics for the periods indicated.

<TABLE>
<CAPTION>
                                                 March 31,
                                        ----------------------
                                           2002         2001
                                        ---------     --------
     <S>                              <C>             <C>
     Enrollment                         1,070,000      807,000
     Enrollment commitments             1,045,000      725,000
</TABLE>

Comparison of the three months ended March 31, 2002 and 2001

     Net revenue. Net revenue for the three months ended March 31, 2002
increased to $11.4 million from $7.3 million for the same period in 2001,
representing an increase of $4.1 million, or 56.3%. This increase was due
primarily to additional revenue derived from the acquisition of the health and
welfare clients of Howard Johnson in November 2001, and as a result of the new
sales made during calendar year 2001.  This increase was partially offset by the
discontinuance of the majority of services provided to Verizon Communications,
Inc. on December 31, 2001 and the termination of several unprofitable clients
during 2001.

     Cost of services. Cost of services for the three months ended March 31,
2002 increased to $9.8 million, from $6.6 million for the same period in 2001,
representing an increase of $3.2 million, or 47.5%. The primary reason for this
increase was additional service expense associated with the acquisition of the
health and welfare clients of Howard Johnson.  Cost of services, as a percentage
of net revenues, decreased to 85.8% for the three months ended March 31, 2002
from 90.9% for the same period in 2001, primarily as a result of the acquisition
of the health and welfare clients of Howard Johnson and actions taken during
first quarter 2002 to become more efficient, consistent with the Company's plan
to improve gross margins.

     Selling, general and administrative. Selling, general and administrative
expenses remained unchanged at $3.9 million for the three months ended March 31,
2002, as compared to the same period in 2001.  Selling, general and
administrative expenses, as a percentage of net revenues, decreased to 33.9% for
the three months ended March 31, 2002, from 53.2% for the same period in 2001,
primarily as a result of adding additional revenue from the acquisition of the
health and welfare clients of Howard Johnson and actions taken to hold firm or
reduce certain SG&A expenditures from 2001 levels.  These actions include first
quarter 2002 reductions to headquarters office space and reductions to the
general and administrative workforce which were offset by strengthening bad debt
reserves and additional expenses associated with the acquisition of the health
and welfare assets of Howard Johnson.

     Accounts receivable decreased from $7.9 million at December 31, 2001 to
$6.4 million at March 31, 2002, a decrease of $1.5 million or approximately
18.3%. This decrease in accounts receivable resulted from the payment during the
first quarter of 2002 of annual open enrollment fees which were billed to our
middle-market clients during the fourth quarter of 2001. Allowance for doubtful
accounts increased from $957,000 at December 31, 2001 to $1.1 million at March
31, 2002, an increase of $144,000 or approximately 15.0%, reflecting
management's decision to increase the allowance with respect to overdue
implementation fees due from certain of our middle-market clients.

     Research and development. Research and development expenses for the three
months ended March 31, 2002 decreased to $2 million, from $2.2 million for the
same period in 2001, representing a decrease of $191,000, or 8.7%. This decrease
was primarily due to a decrease in contractor expenses.  Research and
development expenses, as a percentage of net revenues, decreased to 17.6% for
the three months ended March 31, 2002, from 30.2% for the same period in 2001,
primarily as a result of adding additional revenue from the acquisition of the
health and welfare clients of Howard Johnson.

     Amortization of stock-based compensation. In connection with the granting
of stock options to employees prior to our initial public offering, we recorded
deferred stock-based compensation in 1999, with an additional amount recorded in
2000 related to our acquisition of Arbor.  We recorded $464,000 in amortization
expense related to the deferred stock-based compensation for the three months
ended March 31, 2002, a decrease of 34.8% from the $712,000 recorded for the
same period in 2001.  This decrease will continue through future quarters as the
calculation of the expense under SFAS 123 requires heavier weighting of the
expense in the early years of the option's life.  Amortization of deferred
stock-based compensation will result in an additional $2.7 million of charges to
operations through 2004.

     Amortization of goodwill and other intangibles. Under SFAS No. 142,
Goodwill and Other Intangible Assets, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests.  Other intangible assets will be amortized over their useful
lives.  During the first six months of 2002, the

                                      -10-
<PAGE>

Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. Management has not yet
determined what the effect of these tests will be on our earnings and financial
position. During the first quarter of 2001, the Company recorded $5.7 million of
amortization of goodwill and other intangibles.

     Restructuring charge.  In the first quarter of 2002, management approved
plans to undertake restructuring and cost saving actions which included
workforce reductions, vacating leased office space, asset disposals, and other
costs related to re-engineering and restructuring business processes and
operations. The Company completed these actions in the first quarter, and as a
result, the Company recorded a restructuring expense of $6,223,000.

     Interest income and other, net. Net interest income includes income earned
from our invested cash and short-term securities and income earned from
facilitating our customers' payments to their health plans.  Net interest income
decreased to $365,000 for the three months ended March 31, 2002, from $1.3
million for the same period in 2001.  The $923,000 decrease, or 71.7%, is
primarily a result of the decrease in our short-term investment portfolio from
the acquisition of the health and welfare assets of Howard Johnson, cash used in
operations, and capital expenditures, as well as a decrease in the return on
investment of the securities that are held in our short-term investment
portfolio due to a general decline in interest rates.

     Income taxes. As of December 31, 2001, we had unused federal and state
research and development tax credit carryforwards of approximately $250,000
which begin to expire in 2009. In addition, we had unused federal net operating
loss carryforwards at December 31, 2001 of approximately $23.1 million which
begin to expire in 2009. The utilization of these carryforwards is dependent
upon our ability to generate sufficient taxable income during carryforward
periods.

Liquidity and Capital Resources

     Our initial public offering on December 10, 1999 generated gross proceeds
of $100 million in cash. The January 2000 exercise of the underwriter's over-
allotment option to purchase 750,000 shares at $20.00 per share generated
additional gross proceeds of $15 million in cash.  After underwriting discounts
and commissions and other costs, the net proceeds from the offering totaled
$105.5 million.  Approximately $20.4 million of these proceeds were used in
connection with our acquisition of Arbor in September 2000.

     On November 5, 2001, we acquired the assets of the health and welfare
business unit of Howard Johnson & Company, a wholly owned subsidiary of Merrill
Lynch & Company, Inc., for a final purchase price of approximately $12.6
million, consisting of approximately $11.5 million in cash and the assumption of
approximately $1.1 million in assumed obligations to employees.

     We intend to use the remaining proceeds from the offering for general
corporate purposes, including working capital, sales and marketing expenditures,
development of new products and services, and investment in technology
infrastructure. In addition, a portion of the net proceeds may be used for other
acquisitions of businesses, products and technologies that are complementary to
ours. Pending use of the net proceeds for the above purposes, we intend to
invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities.

     As of March 31, 2002, we had $44.7 million in short-term investments and
cash and cash equivalents. Short-term investments and cash and cash equivalents
decreased by approximately $4.8 million during the first quarter 2002 due
primarily to the use of cash in operations and the investment in Emerge. Short-
term investments consisted primarily of commercial paper and corporate and
government bonds. Cash equivalents consisted primarily of money market funds.
Cash of $1.8 million has been restricted as collateral for a letter of credit.

     Our operating activities, which includes restructuring activities, used
cash of $2.1 million in both the three months ended March 31, 2002 and 2001. The
use of cash in operations in 2002 was due primarily to funding our net loss,
offset by establishment of a restructuring reserve, an increase in accrued
expenses and a decrease in accounts receivable. The use of cash in operations in
2001 was due primarily to funding our net loss and an increase in accounts
receivable, partially offset by a decrease in other current assets and noncash
charges for depreciation and intangibles.

     Our investing activities provided cash of $3.6 million and $2.2 million in
the three months ended March 31, 2002 and 2001, respectively.  In 2002, our
investing activities generated $6.4 million in cash through net sales of
investments,

                                      -11-
<PAGE>

while using $2.1 million for the investment in Emerge, $300,000 in additional
advances under a line of credit, and $438,000 for additions to equipment. In
2001, our investing activities provided cash of $3.7 million for net purchases
of investments and $1.5 million for additions to equipment.

     Our financing activities provided cash of $193,000 and $81,000 in the three
months ended March 31, 2002 and 2001, respectively.  In 2002, cash flows from
financing activities consisted of proceeds from the sale of stock through our
employee stock purchase plan and through exercise of stock options and warrants.
In 2001, our financing activities consisted of proceeds from the exercise of
stock options and warrants.

     Our equipment additions consist primarily of computer hardware and
software, office furniture and equipment and leasehold improvements. Since
inception, we have generally funded equipment additions either through the use
of working capital or with operating leases. We expect to continue to add
computer hardware and software and to fund these additions through working
capital or operating leases.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

     Our exposure to market risk for changes in interest rates relate primarily
to our short-term investments.  We do not use derivative financial instruments.
The primary objective of our investment activities is to preserve principal
while maximizing yields without significantly increasing risk. Due to the nature
of our investments, we believe that there is no material risk exposure.  All
investments are held at market value, with unrealized gains and losses included
in other comprehensive income.

     The table below represents principal (or notional) amounts and related
weighted-average interest rates by year of maturity for the Company's
investments at March 31, 2002 (in thousands):

                                      2002      2003       2004        Total
                                    -------   -------    -------      -------
     Cash equivalents               $ 5,032   $     -    $     -      $ 5,032
      Average interest rate             1.7%                              1.7%

     Short-term investments         $22,806   $15,592    $ 1,281      $39,679
      Average interest rate             3.3%      3.6%       3.9%         3.4%

Exchange Rate and Commodity Price Sensitivity

     We do not conduct business outside of the United States and do not invest
in foreign instruments or commodities and, therefore, have no direct exposure
related to either foreign currency exchange rate fluctuation or commodity price
fluctuation.

                                      -12-
<PAGE>

                                    PART II

Item 1.  Legal Proceedings

     A class action lawsuit was filed on October 25, 2001 on behalf of
purchasers of the securities of the Company between December 9, 1999 and
December 6, 2000, inclusive.   The lawsuit was filed in United States District
Court, Southern District of New York, against the Company, BancBoston Robertson
Stephens, Inc., Warburg Dillon Read LLC, Thomas Weisel Partners LLC, and eBenX
Chairman, Mark W. Tierney, Chief Executive Officer, John J. Davis, and Executive
Vice President & General Manager - Corporate Solutions, Scott P. Halstead.  The
complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities
Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder.  The complaint alleges that the Company's
prospectus, filed in connection with the Company's initial public offering, was
materially false and misleading because it failed to disclose certain
commissions and agreements between the aforementioned parties and certain
investors and customers.  The complaint seeks unspecified damages plus
attorneys' fees and rescission.  The Company intends to vigorously defend
against this lawsuit.

Item 2.  Changes in Securities and Use of Proceeds

Recent Sales of Unregistered Securities

     None.

Use of Proceeds from Initial Public Offering

     On December 15, 1999, we closed our initial public offering of 5,000,000
shares of common stock.  In January 2000, the underwriters exercised their over-
allotment option to purchase 750,000 shares at the initial offering price of
$20.00 per share.  The shares of the common stock sold in the offering were
registered under the Securities Act of 1933 on a registration statement on Form
S-1 (No. 333-87985), the effective date of which was December 9, 1999. With the
over-allotment option, the aggregate initial public offering proceeds totaled
$115 million.  After deducting underwriting discounts and commissions and other
offering expenses of $9.5 million, we received net proceeds of approximately
$105.5 million from the offering.

Through March 31 2002, we have used the net offering proceeds for the following
purposes in the approximate amounts set forth below (in millions):

     Short-term investments                                      $ 39.4
     Acquisition of Arbor                                          20.4
     Acquisition of health and welfare assets of Howard Johnson    11.5
     Purchase of furniture and equipment                           11.4
     Working capital                                               22.8
                                                                 ------
          Total                                                  $105.5

In connection with our acquisition of Arbor, the eBenX President of Mid-Market,
formerly President of Arbor, received approximately $11.4 million in his
capacity as the majority shareholder of Arbor.  Otherwise, none of the net
proceeds were paid, directly or indirectly to (i) officers or directors of eBenX
or its affiliates, (ii) persons owning 10% or more of our equity securities or
(iii) affiliates.

Item 3.  Defaults Upon Senior Securities

     Not applicable.

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

     None.

                                     -13-
<PAGE>

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     The following exhibits are submitted herewith:

     3.1    Fifth Amended and Restated Articles of Incorporation of the Company
            (incorporated by reference to Exhibit 3.1 of Registrant's
            Registration Statement on Form S-1, Registration Number 333- 87985).

     3.2    Amended and Restated Bylaws of the Company (incorporated by
            reference to Exhibit 3.2 of Registrant's Registration Statement on
            Form S-1, Registration Number 333-87985).

     4.1    Form of Certificate of Common Stock of the Company (incorporated by
            reference to Exhibit 4.1 of Registrant's Registration Statement on
            Form S-1, Registration Number 333-87985).

     10.1   1993 Stock Option Plan (incorporated by reference to Exhibit 4.4 of
            Registrant's Registration Statement on Form S-8, Registration Number
            333-94081).

     10.2   1999 Stock Incentive Plan (incorporated by reference to Exhibit 4.5
            of Registrant's Registration Statement on Form S-8, Registration
            Number 333-94081).

     10.3   1999 Employee Stock Purchase Plan (incorporated by reference to
            Exhibit 4.6 of Registrant's Registration Statement on Form S-8,
            Registration Number 333-94081).

     10.4   eBenX, Inc./Arbor Administrative Services, Inc. 2000 Equity
            Compensation Plan (incorporated by reference to Exhibit 10.4 of
            Registrant's Form 10-K, filed March 23, 2001).

     10.5   Amended Employment Agreement by and between the Company and John
            Davis, dated as of April 12, 1999 (incorporated by reference to
            Exhibit 10.10 of Registrant's Registration Statement on Form S-1,
            Registration Number 333-87985).

     10.6   Amended Employment Agreement by and between the Company and Scott
            Halstead, dated as of April 22, 1999 (incorporated by reference to
            Exhibit 10.11 of Registrant's Registration Statement on Form S-1,
            Registration Number 333-87985).

     10.7   Separation Agreement and Release by and between the Company and
            Michael C. Bingham, dated as of March 5, 2001 (incorporated by
            reference to Exhibit 10.9 of Registrant's Form 10-Q, filed May 14,
            2001).

     10.8   Registration Rights Agreement, dated September 6, 2000 (relating to
            the registration rights of the previous shareholders of Arbor
            Administrative Services, Inc.) (incorporated by reference to Exhibit
            10.15 of Registrant's Form 10-K, filed March 23, 2001).

     10.9   Separation Agreement and Release by and between the Company and
            Thomas E. Kelly, dated as of February 8, 2002.

     10.10  Agreement by and between the Company and Mark W. Tierney, dated as
            of January 1, 2002.

     10.11  Agreement and Plan of Merger by and among Arbor Administrative
            Services, Inc., a Delaware corporation, the principal stockholder of
            Arbor, eBenX, Inc., a Minnesota corporation, and Arbor

                                      -14-
<PAGE>

            Acquisition Corp., a Minnesota corporation, dated August 28, 2000
            (incorporated by reference to Exhibit 2.1 of Registrant's Form 8-K,
            filed on September 14, 2000).

     10.12  Employment Agreement by and between the Company and Jeff Rosenblum,
            dated as of September 6, 2000 (incorporated by reference to Exhibit
            10.11 of Registrant's Annual Report on Form 10-K, filed on March 23,
            2001).

     10.13  Multi-Tenant Office Lease Agreement by and between the Company and
            Utah State Retirement Investment Fund, dated January 21, 2000
            (incorporated by reference to Exhibit 10.5 of Registrant's Form
            10-Q, filed on August 11, 2000).

     10.14  Asset Purchase Agreement between Howard Johnson & Company and eBenX,
            Inc. dated as of October 19, 2001 (incorporated by reference to
            Exhibit 10.1 of Registrant's Current Report on Form 8-K, filed on
            November 20, 2001).

     10.15  Marketing Agreement by and between Howard Johnson & Company and
            eBenX, Inc. dated as of November 5, 2001 (incorporated by reference
            to Exhibit 10.4 of Registrant's Current Report on Form 8-K, filed on
            November 20, 2001).

     10.16  Shared Services Agreement by and between Howard Johnson & Company
            and eBenX, Inc. dated as of November 1, 2001 (incorporated by
            reference to Exhibit 10.2 of Registrant's Current Report on Form
            8-K, filed on November 20, 2001).

     10.17  Transaction Services Agreement by and between Howard Johnson &
            Company and eBenX, Inc. dated as of November 1, 2001 (incorporated
            by reference to Exhibit 10.3 of Registrant's Current Report on Form
            8-K, filed on November 20, 2001).

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the three-month period ended March
     31, 2002.

                                     -15-
<PAGE>

                                  SIGNATURES

     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.

                                    EBENX, INC.





Date: May 15, 2002                 By /s/ Randall J. Schmidt
                                     ----------------------------
                                       Randall J. Schmidt
                                       Chief Financial Officer and Secretary
                                       (principal financial officer)


                                      -16-
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--------------------------------------------------------------------------------

                       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.

[_]  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 333-87985

                                  eBenX, Inc.
                           (Exact name of registrant
                          as specified in its charter)

               Minnesota                                 41-1758843
    (State or other jurisdiction of          (IRS Employer Identification No.)
     incorporation or organization)

                         605 North Highway 169 Suite LL
                          Minneapolis, Minnesota 55441
                    (Address of principal executive offices)

                        Telephone Number: (763) 614-2000
              (Registrant's telephone number, including area code)

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 [_]

As of May 1, 2002 there were 20,038,141 shares of the registrant's common stock
outstanding.

--------------------------------------------------------------------------------
EBENX, INC.
                         QUARTERLY REPORT ON FORM 10-Q
                      FOR THE PERIOD ENDED MARCH 31, 2002
                                     INDEX
Page
                                                                                                   ----
PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements
          Condensed Consolidated Balance Sheets at March 31, 2002 and December 31, 2001                1
          Condensed Consolidated Statements of Operations for the three-month periods
              ended March 31, 2002 and 2001                                                            2
          Condensed Consolidated Statements of Cash Flows for the three-month periods ended
              March 31, 2002 and 2001                                                                  3
          Notes to Condensed Consolidated Financial Statements                                         4

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations        8
Item 3.   Quantitative and Qualitative Disclosures about Market Risk                                  12

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                                                           13
Item 2.   Changes in Securities and Use of Proceeds                                                   13
Item 3.   Defaults Upon Senior Securities                                                             13
Item 4.   Submission of Matters to a Vote of Security Holders                                         13
Item 5.   Other Information                                                                           14
Item 6.   Exhibits and Reports on Form 8-K                                                            14
EBENX, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
                            (Amounts in thousands)
March 31,   December 31,
                                                          2002          2001
                                                        ---------   ------------
ASSETS
Current assets:
    Cash and cash equivalents                           $    5,032   $   3,324
    Short-term investments                                  39,679      46,211
    Accounts receivable, net of allowance
      of $1,101 and $957                                     6,428       7,868
    Unbilled revenue                                         2,591       2,272
    Prepaid expenses and other                               1,949       1,937
                                                        ----------   ---------
      Total current assets                                  55,679      61,612

Property and equipment, net                                 10,356      11,401
Loans receivable from employees                                514         540
Note receivable                                              1,100         800
Equity investment                                            2,044           -
Deposits                                                       122         113
Goodwill and other intangibles, net                         20,369      20,334
                                                        ----------   ---------
          Total assets                                  $   90,184   $  94,800
                                                        ==========   =========

     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                    $      534   $     204
    Accrued compensation                                       940       2,297
    Accrued expenses                                         5,727       3,684
    Restructuring reserve                                    4,590           -
    Client liability reserve                                   443         670
    Deferred revenue                                           155         109
                                                        ----------   ---------
      Total current liabilities                             12,389       6,964

Shareholders' equity:
    Common stock                                               200         199
    Additional paid-in capital                             182,322     182,130
    Deferred stock-based compensation                       (2,670)     (3,145)
    Accumulated other comprehensive income                      91         204
    Retained deficit                                      (102,148)    (91,552)
                                                        ----------   ---------
       Total shareholders' equity                           77,795      87,836
                                                        ----------   ---------
          Total liabilities and shareholders' equity    $   90,184   $  94,800
                                                        ==========   =========
See accompanying notes to condensed consolidated financial statements.

                                       1
EBENX, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                 (Amounts in thousands, except per share data)
Three Months Ended
                                                                                                 March 31,
                                                                                       -----------------------------
                                                                                           2002            2001
                                                                                       -------------   -------------
Net revenue                                                                               $  11,432       $   7,316
Cost of services (exclusive of stock-based compensation
    expense of $130 and $249 for the three months ended
    March 31, 2002 and 2001, respectively)                                                    9,812           6,651
                                                                                          ---------       ---------
      Gross profit                                                                            1,620             665

Operating expenses:
    Selling, general and administrative (exclusive of stock-
      based compensation expense of $263 and $341 for the
      three months ended March 31, 2002 and 2001, respectively)                               3,879           3,894
    Research and development (exclusive of stock-based
      compensation expense of $71 and $122 for the three months
      ended March 31, 2002 and 2001, respectively)                                            2,015           2,206
    Amortization of stock-based compensation                                                    464             712
    Amortization of goodwill and other intangibles                                                -           5,663
    Restructuring charge                                                                      6,223               -
                                                                                           --------       ---------

      Total operating expenses                                                               12,581          12,475
                                                                                           --------       ---------
Loss from operations                                                                        (10,961)        (11,810)
Interest income and other, net                                                                  365           1,288
                                                                                          ---------       ---------
Net loss                                                                                  $ (10,596)      $ (10,522)
                                                                                          =========       =========
Net loss per share:
    Basic and diluted                                                                     $   (0.53)      $   (0.54)
                                                                                          =========       =========
Shares used in calculation of net loss per share:
    Basic and diluted                                                                        19,859          19,340
                                                                                          =========       =========
See accompanying notes to condensed consolidated financial statements.

                                      -2-
EBENX, INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                   (Amounts in thousands)
Three Months Ended
                                                                 March 31,
                                                            -------------------
                                                              2002       2001
                                                            --------   --------
Operating activities:
     Net loss                                                $(10,596) $(10,522)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
          Depreciation of property and equipment                  670       520
          Amortization of stock-based compensation,
            goodwill and other intangibles                        464     6,375
          Changes in operating assets and liabilities:
            Accounts receivable                                 1,440      (851)
            Other current assets                                 (305)    2,075
            Accounts payable                                      330       144
            Accrued expenses                                    1,523        29
            Restructuring reserve                               4,577         -
            Client liability reserve                             (227)        -
            Deferred revenue                                       46        84
            Deposits                                               (9)        -
                                                            ---------  --------
               Net cash used in operating activities           (2,087)   (2,146)

Investing activities:
     Additions to property and equipment                         (438)   (1,482)
     Purchases of investments                                 (31,290)  (87,735)
     Sales of investments                                      37,709    91,418
     Advances on notes                                           (300)        -
     Cost of acquisition, net of cash acquired                 (2,079)        -
                                                            ---------  --------
               Net cash provided by investing activities        3,602     2,201

Financing activities:
     Stock options and warrants exercised                          31        81
     Proceeds from issuance of common stock, net of costs         162         -
                                                            ---------  --------
               Net cash provided by financing activities          193        81

Net increase in cash and cash equivalents                       1,708       136
Cash and cash equivalents at beginning of period                3,324       764
                                                            ---------  --------
Cash and cash equivalents at end of period                  $   5,032  $    900
                                                            =========  ========
See accompanying notes to condensed consolidated financial statements.

                                      -3-
EBENX, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)

1.  Business Description and Summary of Significant Accounting Policies

Business Description

     eBenX, Inc., a Minnesota corporation incorporated in September 1993 (the
"Company"), provides technology-based solutions for the purchase, administration
and payment of group health and welfare benefits.  The Company currently
operates in a single business segment providing services to employers, brokers
and other employee benefit advisors, and health plans and other carriers.  The
Company's customers are located throughout the United States.

Basis of Presentation

     The condensed consolidated financial statements included herein, except for
the December 31, 2001 balance sheet which was extracted from the audited
financial statements of December 31, 2001, have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (all of which are
normal and recurring in nature) that are necessary for a fair presentation of
the interim periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The results of operations for the three-month period
ended March 31, 2002 are not necessarily indicative of the results to be
expected for any subsequent quarter or for the entire year ended December 31,
2002. These unaudited consolidated financial statements and notes included
herein should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

Principles of Consolidation

     The consolidated financial statements include the Company and its wholly
owned subsidiaries, Arbor Associates, Inc. and Managed Care Buyer's Group, Inc.
All intercompany accounts and transactions have been eliminated in
consolidation.

Net Loss Per Share

     Basic net loss per share is based on the weighted-average shares
outstanding during the period. Diluted net loss per share increases the shares
used in the per share calculation by the dilutive effects of options, warrants,
and convertible securities. The Company's common stock equivalent shares
outstanding from stock options and warrants are excluded from the diluted net
loss per share computation for all periods because their effect would be
antidilutive.

Reclassification

     Certain prior year items have been reclassified to conform to the current
year presentation.

2.  Comprehensive Income

     Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for the reporting and display of
comprehensive income and its components. Adjustments to comprehensive loss for
the three months ended March 31, 2002 consisted of unrealized losses on
available-for-sale securities of $113,000, resulting in a total comprehensive
loss of $10,709,000.  The tax effects of these other comprehensive adjustments
were not considered to be material.

                                      -4-
3.   Restructuring Charge

     In the first quarter of 2002, management approved plans to undertake
restructuring and cost saving actions which included workforce reductions,
vacating leased office space, asset disposals, and other costs related to re-
engineering and restructuring business processes and operations.  The Company
completed these actions in the first quarter, and as a result, the Company
recorded a restructuring expense of $6,223,000.

     The initial restructuring expenses described above and subsequent
reductions to the related liability accounts included the following:
Employee       Contractual
                                              Termination         Lease           Asset
     (thousands)                               Benefits        Obligations      Disposals     Other     Total
                                              -----------      -----------      ---------     -----    ------
Initial expense and accrual              $     1,004      $     3,492      $     813     $ 914    $6,223

     Cash payments                                   (293)            (272)            --      (255)     (820)

     Non-cash charges                                  --               --           (813)       --      (813)
                                              -----------      -----------      ---------     -----    ------
     Restructuring reserve, March 31, 2002    $       711      $     3,220      $      --     $ 659    $4,590
                                              ===========      ===========      =========     =====    ======
Employee termination benefits in the first quarter included expenses
related to the reduction of 34 personnel primarily through facility closures and
consolidation of corporate administrative functions.

     Contractual lease obligations relate primarily to future contractual lease
costs associated with vacating two floors at the Minneapolis headquarters
location. The Company is actively seeking to sublease this space.

     Asset disposals relate to office equipment to be disposed of and leasehold
improvements written-off.  These assets were related to the two closed floors at
the Minneapolis headquarters location.

4.  Acquisitions and Investment

     On November 5, 2001, the Company completed the acquisition of the health
and welfare assets of Howard Johnson & Company, ("Howard Johnson"), a wholly
owned subsidiary of Merrill Lynch & Company, Inc., for a final purchase price of
approximately $12.6 million, including approximately $11.5 million paid in cash
at closing and approximately $1.1 million in assumed obligations to employees,
pursuant to the terms of an Asset Purchase Agreement between Howard Johnson and
the Company dated as of October 19, 2001 (the "Asset Purchase Agreement").  The
purchase price was funded from the Company's existing cash.

     In connection with the consummation of this acquisition, the Company
entered into a Shared Services Agreement with Howard Johnson pursuant to which
Howard Johnson will provide agreed upon services to the Company in connection
with the Company's health and welfare business for up to 24 months.  The Company
is obligated to pay Howard Johnson a monthly fee of $187,500, subject to
reduction as responsibility for providing these services to each client is
transferred to the Company.  The Company also entered into a Marketing Agreement
with Howard Johnson pursuant to which Howard Johnson may refer potential and
existing clients seeking health and welfare benefits services to the Company in
exchange for a percentage of revenues from such referrals.

     The above acquisition was accounted for using the purchase method of
accounting.  The excess of the consideration provided over the relative fair
value of the assets acquired was allocated to goodwill.  The allocation of
purchase price related to the acquisition of the health and welfare assets of
Howard Johnson is subject to change pending a final analysis of the value of the
assets acquired and the liabilities assumed.

     The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the three month periods
ended March 31, 2002 and 2001, assuming the health and welfare assets of Howard
Johnson had been acquired at the beginning of fiscal 2001 (in thousands, except
per share data):

                                      -5-
Three months ended
                                                           March 31,
                                                --------------------------------
                                                    2002              2001
                                                --------------   ---------------
Revenue                                             $  11,432         $  11,639
Loss from operations, excluding amortization
  of stock-based compensation, goodwill and
  other intangibles and restructuring               $  (4,274)        $  (5,435)
Net loss                                            $ (10,596)        $ (10,392)
Basic and diluted net loss per share                $   (0.53)        $   (0.54)

         The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the three month period ended
March 31, 2001. They are not intended to be a projection of future results and
do not reflect any synergies that might be affected from combined operations.

          In February 2002, the Company entered into an agreement with Emerge
HealthCare, Inc.  ("Emerge"), a privately held Delaware corporation, to develop
and deliver new risk-adjusted pricing health and welfare benefit products.  The
Company will provide the technology and services to these new developing
products and will license its proprietary platform to Emerge.  Coincident with
entering into the agreement, the Company also participated in the series B
preferred share equity offering of Emerge and purchased shares representing less
than 20% of the outstanding shares of Emerge for $2,000,000.  This investment
will be carried at cost and recoverability of the carrying amount will be
evaluated on a periodic basis.

5.   Deferred stock-based compensation

          In connection with the granting of stock options to employees prior to
the Company's initial public offering, the Company recorded deferred stock-based
compensation of approximately $5.5 million in the year ended December 31, 1999.
This amount represents the difference between the exercise price and the deemed
fair value of the Company's common stock for accounting purposes on the date
these stock options were granted. In connection with the acquisition of Arbor in
September 2000, the Company recorded deferred stock-based compensation of $5.2
million. This amount represents the difference between the exercise price and
the deemed fair value of the Company's common stock for accounting purposes on
the date all outstanding unvested options and restricted stock of Arbor were
converted to Company options and restricted stock. The deferred stock-based
compensation is included as a component of stockholders' equity and is being
amortized over the vesting period of the options. Amortization expense of
approximately $464,000 and $712,000 was recognized in the three months ended
March 31, 2002 and 2001, respectively.

6.   Note Receivable

          In conjunction with the formation of a strategic alliance to develop,
promote, distribute and support an integrated Web-based benefits administration
and communications product for mid-sized employers, the Company entered into a
joint development agreement and a related loan agreement on August 31, 2001,
granting a line of credit of $1.5 million to Online Benefits, Inc. ("Online"), a
privately held Delaware corporation.  The outstanding principal balance under
the line of credit bears interest at a rate of 8% per annum.  Interest is due
annually on the anniversary date of the loan agreement.  On August 31, 2004, the
third anniversary date of the loan agreement, payment of the lesser of the
outstanding principal balance under the line of credit or the total gross
revenues received by the strategic alliance through such date is due.  If less
than the entire principal balance under the line of credit is paid on August 31,
2004, then the lesser of the remaining principal balance or the total gross
revenues of the strategic alliance for the preceding year is due on the next and
each succeeding anniversary date of the loan agreement.  Any remaining
outstanding principal balance under the line of credit is due on August 31,
2006.  At March 31, 2002, $1.1 million has been loaned to Online and is
outstanding under the line of credit.  This amount is recorded as a note
receivable.

          As a condition of the loan agreement, the Company received warrants to
purchase common stock of Online Benefits at an exercise price of $1.644 per
share.  The warrants entitle the Company to purchase shares equal to 15% of the
total advances on the line of credit, divided by the per share exercise price.
The warrants expire August 31, 2006.  Warrants for the purchase of 100,365
shares of common stock were outstanding at March 31, 2002.

                                      -6-
7.   Letter of Credit

          On August 29, 2001, the Company secured an irrevocable letter of
credit for approximately $1.8 million. The letter was required under the
operating lease of the Company's corporate headquarters, and as such, the lessor
is assigned as the beneficiary of the funds in the event of default on the
lease. The letter of credit expires July 31, 2005, and is collateralized by
securities restricted for that purpose.

8.   Recent Accounting Pronouncements

     The Company has adopted Statement of Financial Accounting Standards No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
issued by the Financial Accounting Standards Board. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will be amortized over their useful lives.

     The effect of the change in accounting resulted in an increase to net
income of $2.2 million for the quarter ended March 31, 2002. During the first
six months of 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets as of
January 1, 2002. The Company has not yet determined what the effect of these
tests will be on the earnings and financial position of the Company, but we do
not expect the effect to be material.

     The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the three month periods
ended March 31, 2002 and 2001, assuming no amortization of goodwill and other
intangibles in 2001:

(in thousands except per share data)               Three Months Ended
                                                       March 31,
                                                 2002              2001
                                            ---------------   ---------------
Reported net loss                                $ (10,596)        $ (10,522)
  Add back: Goodwill amortization                        -             5,663
                                            ---------------   ---------------
  Adjusted net loss                              $ (10,596)         $ (4,859)
                                            ===============   ===============

Net loss per share:
  Reported net loss per share                      $ (0.53)          $ (0.54)
  Goodwill amortization per share                        -              0.29
                                            ---------------   ---------------
  Adjusted net loss per share                      $ (0.53)          $ (0.25)
                                            ===============   ===============

     In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and the
accounting and reporting provision of APB Opinion No. 30, "Reporting the Results
of Operations" for a disposal of a segment of a business.  SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, with earlier
application encouraged.

                                      -7-
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

     Except for historical information, this document contains various "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.  These forward-looking statements involve risks and uncertainties,
including, among other things, statements regarding our revenue mix, anticipated
costs and expenses, service development, relationships with strategic partners
and pending acquisitions.  These forward-looking statements include declarations
regarding our belief or current expectations of management, such as statements
indicating that "we expect," "we anticipate," "we intend," "we believe," and
similar language.  We caution that any forward-looking statement made by us in
this Quarterly Report on Form 10-Q or in other announcements made by us are
further qualified by important factors that could cause actual results to differ
materially from those projected in the forward-looking statements, including
without limitation the risks discussed in our Annual Report on Form 10-K filed
on March 28, 2002.

     The following discussion and analysis of the financial condition and
results of operations of eBenX should be read in conjunction with the
consolidated financial statements and related notes for the year ended December
31, 2001, and included in our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.  For information regarding the Company's
Critical Accounting Policies, refer to the Company's Annual Report on Form 10-K
for the year ended December 31, 2001.

Overview

     We provide specialized technology-based solutions to employers, brokers,
employee benefit advisors, and health plans and other carriers for the purchase,
administration, and payment of group health and welfare benefits.  We apply the
Internet and other technology to simplify and automate the complex, ongoing and
multiple transactions associated with the exchange of health and welfare
benefits data and dollars.

     On November 5, 2001, we acquired the health and welfare assets of Howard
Johnson & Company, a wholly owned subsidiary of Merrill Lynch & Company, Inc.,
for a purchase price of $12.6 million, consisting of approximately $11.5 million
in cash and the assumption of $1.1 million of liabilities.  The acquisition was
accounted for under the purchase method of accounting.  Under this method, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their determined fair market values.  The assets acquired primarily consist
of customer contracts and arrangements for the provision of health and welfare
benefits administration services.

     Revenue is derived primarily from providing ongoing annual enrollment and
health and welfare eligibility administration and premium billing and payment
exchange services.  Administrative or exchange services revenue typically is
priced on a per employee per month basis with adjustments made to accommodate
the number of health plans and other carriers required by the customer.  We
typically enter into multi-year contracts with our large employer customers and
often provide fixed and variable fee structures to permit volume-adjusted
pricing. Customers may purchase some or all of our services, and the customer
relationship may evolve from utilizing procurement services to utilizing
implementation and enrollment services and per employee-based administrative
services.

     Cost of services consists primarily of personnel costs for account
management, operations, production and procurement and information technology
costs for both ongoing procurement and administrative services and for customer
implementation expense.  The information technology costs relate to personnel
costs for implementing and maintaining customer and health plan computer
interfaces and computer hardware and software expenses related to computer
processing.  A portion of cost of services consists of new customer
implementation expenses.  Therefore, as a short-term effect of growth,
increasing numbers of new customers will cause the cost of services as a
percentage of net revenue to increase.

     Selling, general and administrative expenses consist primarily of payroll
and payroll-related expenses associated with sales and marketing, executive
management and corporate administrative personnel, as well as professional fees
and expenditures for advertising, public relations and promotional efforts.

     Research and development expenses consist primarily of development
personnel and external contractor costs related to the development of new
products and services, enhancement of existing products and services, quality
assurance

                                      -8-
and testing.  The Company follows AICPA Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", in accounting for internally developed software.  To date, we
have not capitalized any of our software development costs as a majority of our
in-house development efforts related to determining specific software
requirements and evaluating alternatives related to specific performance
criteria for our products.  As a result, all research and development costs have
been expensed as incurred.

     Since our inception, we have incurred losses.  As of March 31, 2002, we had
an accumulated deficit of $102.1 million.  These losses and this accumulated
deficit have resulted from the significant costs incurred in the development of
our technology platform, the establishment of relationships with our customers,
the development and maintenance of our customer and carrier interfaces,
amortization of stock-based compensation and goodwill and other intangibles and
a $30.4 million impairment charge to the carrying value of goodwill associated
with the September 2000 acquisition of Arbor.  Although we have experienced
significant revenue growth in recent periods, our operating results for future
periods are subject to numerous uncertainties.  In view of the rapidly evolving
nature of our business and our limited operating history, we believe that
period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.

Results of Operations

     The following table sets forth for the periods indicated selected statement
of operations data expressed as a percentage of net revenues.
Three Months Ended
                                                                 March 31,
                                                            ------------------
                                                             2002        2001
                                                            ------      ------
Net revenue                                            100.0%      100.0%
     Cost of services                                        85.8        90.9
                                                            -----      ------
               Gross profit                                  14.2         9.1
     Operating expenses:
          Selling, general and administrative                33.9        53.2
          Research and development                           17.6        30.2
          Amortization of stock-based compensation            4.1         9.7
          Amortization of goodwill and other intangibles        -        77.4
          Restructuring charge                               54.4           -
                                                            -----      ------
               Total operating expenses                     110.0       170.5
                                                            -----      ------
     Loss from operations                                   (95.8)     (161.4)
     Interest income and other, net                           3.2        17.6
                                                            -----      ------
     Net loss                                               (92.6%)    (143.8%)
                                                            =====      ======
-9-
In addition to our operating results, we also track and provide enrollment
statistics.  Enrollment is defined as the number of employees to which we
currently provide administration services.   Enrollment commitments include
employees currently in enrollment and new customer employee commitments that
will be implemented in the foreseeable future, and exclude enrolled employees
known to be terminating in the future.  The following table sets forth our
enrollment statistics for the periods indicated.
March 31,
                                        ----------------------
                                           2002         2001
                                        ---------     --------
Enrollment                         1,070,000      807,000
     Enrollment commitments             1,045,000      725,000
Comparison of the three months ended March 31, 2002 and 2001

     Net revenue. Net revenue for the three months ended March 31, 2002
increased to $11.4 million from $7.3 million for the same period in 2001,
representing an increase of $4.1 million, or 56.3%. This increase was due
primarily to additional revenue derived from the acquisition of the health and
welfare clients of Howard Johnson in November 2001, and as a result of the new
sales made during calendar year 2001.  This increase was partially offset by the
discontinuance of the majority of services provided to Verizon Communications,
Inc. on December 31, 2001 and the termination of several unprofitable clients
during 2001.

     Cost of services. Cost of services for the three months ended March 31,
2002 increased to $9.8 million, from $6.6 million for the same period in 2001,
representing an increase of $3.2 million, or 47.5%. The primary reason for this
increase was additional service expense associated with the acquisition of the
health and welfare clients of Howard Johnson.  Cost of services, as a percentage
of net revenues, decreased to 85.8% for the three months ended March 31, 2002
from 90.9% for the same period in 2001, primarily as a result of the acquisition
of the health and welfare clients of Howard Johnson and actions taken during
first quarter 2002 to become more efficient, consistent with the Company's plan
to improve gross margins.

     Selling, general and administrative. Selling, general and administrative
expenses remained unchanged at $3.9 million for the three months ended March 31,
2002, as compared to the same period in 2001.  Selling, general and
administrative expenses, as a percentage of net revenues, decreased to 33.9% for
the three months ended March 31, 2002, from 53.2% for the same period in 2001,
primarily as a result of adding additional revenue from the acquisition of the
health and welfare clients of Howard Johnson and actions taken to hold firm or
reduce certain SG&A expenditures from 2001 levels.  These actions include first
quarter 2002 reductions to headquarters office space and reductions to the
general and administrative workforce which were offset by strengthening bad debt
reserves and additional expenses associated with the acquisition of the health
and welfare assets of Howard Johnson.

     Accounts receivable decreased from $7.9 million at December 31, 2001 to
$6.4 million at March 31, 2002, a decrease of $1.5 million or approximately
18.3%. This decrease in accounts receivable resulted from the payment during the
first quarter of 2002 of annual open enrollment fees which were billed to our
middle-market clients during the fourth quarter of 2001. Allowance for doubtful
accounts increased from $957,000 at December 31, 2001 to $1.1 million at March
31, 2002, an increase of $144,000 or approximately 15.0%, reflecting
management's decision to increase the allowance with respect to overdue
implementation fees due from certain of our middle-market clients.

     Research and development. Research and development expenses for the three
months ended March 31, 2002 decreased to $2 million, from $2.2 million for the
same period in 2001, representing a decrease of $191,000, or 8.7%. This decrease
was primarily due to a decrease in contractor expenses.  Research and
development expenses, as a percentage of net revenues, decreased to 17.6% for
the three months ended March 31, 2002, from 30.2% for the same period in 2001,
primarily as a result of adding additional revenue from the acquisition of the
health and welfare clients of Howard Johnson.

     Amortization of stock-based compensation. In connection with the granting
of stock options to employees prior to our initial public offering, we recorded
deferred stock-based compensation in 1999, with an additional amount recorded in
2000 related to our acquisition of Arbor.  We recorded $464,000 in amortization
expense related to the deferred stock-based compensation for the three months
ended March 31, 2002, a decrease of 34.8% from the $712,000 recorded for the
same period in 2001.  This decrease will continue through future quarters as the
calculation of the expense under SFAS 123 requires heavier weighting of the
expense in the early years of the option's life.  Amortization of deferred
stock-based compensation will result in an additional $2.7 million of charges to
operations through 2004.

     Amortization of goodwill and other intangibles. Under SFAS No. 142,
Goodwill and Other Intangible Assets, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests.  Other intangible assets will be amortized over their useful
lives.  During the first six months of 2002, the

                                      -10-
Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. Management has not yet
determined what the effect of these tests will be on our earnings and financial
position. During the first quarter of 2001, the Company recorded $5.7 million of
amortization of goodwill and other intangibles.

     Restructuring charge.  In the first quarter of 2002, management approved
plans to undertake restructuring and cost saving actions which included
workforce reductions, vacating leased office space, asset disposals, and other
costs related to re-engineering and restructuring business processes and
operations. The Company completed these actions in the first quarter, and as a
result, the Company recorded a restructuring expense of $6,223,000.

     Interest income and other, net. Net interest income includes income earned
from our invested cash and short-term securities and income earned from
facilitating our customers' payments to their health plans.  Net interest income
decreased to $365,000 for the three months ended March 31, 2002, from $1.3
million for the same period in 2001.  The $923,000 decrease, or 71.7%, is
primarily a result of the decrease in our short-term investment portfolio from
the acquisition of the health and welfare assets of Howard Johnson, cash used in
operations, and capital expenditures, as well as a decrease in the return on
investment of the securities that are held in our short-term investment
portfolio due to a general decline in interest rates.

     Income taxes. As of December 31, 2001, we had unused federal and state
research and development tax credit carryforwards of approximately $250,000
which begin to expire in 2009. In addition, we had unused federal net operating
loss carryforwards at December 31, 2001 of approximately $23.1 million which
begin to expire in 2009. The utilization of these carryforwards is dependent
upon our ability to generate sufficient taxable income during carryforward
periods.

Liquidity and Capital Resources

     Our initial public offering on December 10, 1999 generated gross proceeds
of $100 million in cash. The January 2000 exercise of the underwriter's over-
allotment option to purchase 750,000 shares at $20.00 per share generated
additional gross proceeds of $15 million in cash.  After underwriting discounts
and commissions and other costs, the net proceeds from the offering totaled
$105.5 million.  Approximately $20.4 million of these proceeds were used in
connection with our acquisition of Arbor in September 2000.

     On November 5, 2001, we acquired the assets of the health and welfare
business unit of Howard Johnson & Company, a wholly owned subsidiary of Merrill
Lynch & Company, Inc., for a final purchase price of approximately $12.6
million, consisting of approximately $11.5 million in cash and the assumption of
approximately $1.1 million in assumed obligations to employees.

     We intend to use the remaining proceeds from the offering for general
corporate purposes, including working capital, sales and marketing expenditures,
development of new products and services, and investment in technology
infrastructure. In addition, a portion of the net proceeds may be used for other
acquisitions of businesses, products and technologies that are complementary to
ours. Pending use of the net proceeds for the above purposes, we intend to
invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities.

     As of March 31, 2002, we had $44.7 million in short-term investments and
cash and cash equivalents. Short-term investments and cash and cash equivalents
decreased by approximately $4.8 million during the first quarter 2002 due
primarily to the use of cash in operations and the investment in Emerge. Short-
term investments consisted primarily of commercial paper and corporate and
government bonds. Cash equivalents consisted primarily of money market funds.
Cash of $1.8 million has been restricted as collateral for a letter of credit.

     Our operating activities, which includes restructuring activities, used
cash of $2.1 million in both the three months ended March 31, 2002 and 2001. The
use of cash in operations in 2002 was due primarily to funding our net loss,
offset by establishment of a restructuring reserve, an increase in accrued
expenses and a decrease in accounts receivable. The use of cash in operations in
2001 was due primarily to funding our net loss and an increase in accounts
receivable, partially offset by a decrease in other current assets and noncash
charges for depreciation and intangibles.

     Our investing activities provided cash of $3.6 million and $2.2 million in
the three months ended March 31, 2002 and 2001, respectively.  In 2002, our
investing activities generated $6.4 million in cash through net sales of
investments,

                                      -11-
while using $2.1 million for the investment in Emerge, $300,000 in additional
advances under a line of credit, and $438,000 for additions to equipment. In
2001, our investing activities provided cash of $3.7 million for net purchases
of investments and $1.5 million for additions to equipment.

     Our financing activities provided cash of $193,000 and $81,000 in the three
months ended March 31, 2002 and 2001, respectively.  In 2002, cash flows from
financing activities consisted of proceeds from the sale of stock through our
employee stock purchase plan and through exercise of stock options and warrants.
In 2001, our financing activities consisted of proceeds from the exercise of
stock options and warrants.

     Our equipment additions consist primarily of computer hardware and
software, office furniture and equipment and leasehold improvements. Since
inception, we have generally funded equipment additions either through the use
of working capital or with operating leases. We expect to continue to add
computer hardware and software and to fund these additions through working
capital or operating leases.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

     Our exposure to market risk for changes in interest rates relate primarily
to our short-term investments.  We do not use derivative financial instruments.
The primary objective of our investment activities is to preserve principal
while maximizing yields without significantly increasing risk. Due to the nature
of our investments, we believe that there is no material risk exposure.  All
investments are held at market value, with unrealized gains and losses included
in other comprehensive income.

     The table below represents principal (or notional) amounts and related
weighted-average interest rates by year of maturity for the Company's
investments at March 31, 2002 (in thousands):

                                      2002      2003       2004        Total
                                    -------   -------    -------      -------
     Cash equivalents               $ 5,032   $     -    $     -      $ 5,032
      Average interest rate             1.7%                              1.7%

     Short-term investments         $22,806   $15,592    $ 1,281      $39,679
      Average interest rate             3.3%      3.6%       3.9%         3.4%

Exchange Rate and Commodity Price Sensitivity

     We do not conduct business outside of the United States and do not invest
in foreign instruments or commodities and, therefore, have no direct exposure
related to either foreign currency exchange rate fluctuation or commodity price
fluctuation.

                                      -12-
PART II

Item 1.  Legal Proceedings

     A class action lawsuit was filed on October 25, 2001 on behalf of
purchasers of the securities of the Company between December 9, 1999 and
December 6, 2000, inclusive.   The lawsuit was filed in United States District
Court, Southern District of New York, against the Company, BancBoston Robertson
Stephens, Inc., Warburg Dillon Read LLC, Thomas Weisel Partners LLC, and eBenX
Chairman, Mark W. Tierney, Chief Executive Officer, John J. Davis, and Executive
Vice President & General Manager - Corporate Solutions, Scott P. Halstead.  The
complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities
Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder.  The complaint alleges that the Company's
prospectus, filed in connection with the Company's initial public offering, was
materially false and misleading because it failed to disclose certain
commissions and agreements between the aforementioned parties and certain
investors and customers.  The complaint seeks unspecified damages plus
attorneys' fees and rescission.  The Company intends to vigorously defend
against this lawsuit.

Item 2.  Changes in Securities and Use of Proceeds

Recent Sales of Unregistered Securities

     None.

Use of Proceeds from Initial Public Offering

     On December 15, 1999, we closed our initial public offering of 5,000,000
shares of common stock.  In January 2000, the underwriters exercised their over-
allotment option to purchase 750,000 shares at the initial offering price of
$20.00 per share.  The shares of the common stock sold in the offering were
registered under the Securities Act of 1933 on a registration statement on Form
S-1 (No. 333-87985), the effective date of which was December 9, 1999. With the
over-allotment option, the aggregate initial public offering proceeds totaled
$115 million.  After deducting underwriting discounts and commissions and other
offering expenses of $9.5 million, we received net proceeds of approximately
$105.5 million from the offering.

Through March 31 2002, we have used the net offering proceeds for the following
purposes in the approximate amounts set forth below (in millions):

     Short-term investments                                      $ 39.4
     Acquisition of Arbor                                          20.4
     Acquisition of health and welfare assets of Howard Johnson    11.5
     Purchase of furniture and equipment                           11.4
     Working capital                                               22.8
                                                                 ------
          Total                                                  $105.5

In connection with our acquisition of Arbor, the eBenX President of Mid-Market,
formerly President of Arbor, received approximately $11.4 million in his
capacity as the majority shareholder of Arbor.  Otherwise, none of the net
proceeds were paid, directly or indirectly to (i) officers or directors of eBenX
or its affiliates, (ii) persons owning 10% or more of our equity securities or
(iii) affiliates.

Item 3.  Defaults Upon Senior Securities

     Not applicable.

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

     None.

                                     -13-
Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     The following exhibits are submitted herewith:

     3.1    Fifth Amended and Restated Articles of Incorporation of the Company
            (incorporated by reference to Exhibit 3.1 of Registrant's
            Registration Statement on Form S-1, Registration Number 333- 87985).

     3.2    Amended and Restated Bylaws of the Company (incorporated by
            reference to Exhibit 3.2 of Registrant's Registration Statement on
            Form S-1, Registration Number 333-87985).

     4.1    Form of Certificate of Common Stock of the Company (incorporated by
            reference to Exhibit 4.1 of Registrant's Registration Statement on
            Form S-1, Registration Number 333-87985).

     10.1   1993 Stock Option Plan (incorporated by reference to Exhibit 4.4 of
            Registrant's Registration Statement on Form S-8, Registration Number
            333-94081).

     10.2   1999 Stock Incentive Plan (incorporated by reference to Exhibit 4.5
            of Registrant's Registration Statement on Form S-8, Registration
            Number 333-94081).

     10.3   1999 Employee Stock Purchase Plan (incorporated by reference to
            Exhibit 4.6 of Registrant's Registration Statement on Form S-8,
            Registration Number 333-94081).

     10.4   eBenX, Inc./Arbor Administrative Services, Inc. 2000 Equity
            Compensation Plan (incorporated by reference to Exhibit 10.4 of
            Registrant's Form 10-K, filed March 23, 2001).

     10.5   Amended Employment Agreement by and between the Company and John
            Davis, dated as of April 12, 1999 (incorporated by reference to
            Exhibit 10.10 of Registrant's Registration Statement on Form S-1,
            Registration Number 333-87985).

     10.6   Amended Employment Agreement by and between the Company and Scott
            Halstead, dated as of April 22, 1999 (incorporated by reference to
            Exhibit 10.11 of Registrant's Registration Statement on Form S-1,
            Registration Number 333-87985).

     10.7   Separation Agreement and Release by and between the Company and
            Michael C. Bingham, dated as of March 5, 2001 (incorporated by
            reference to Exhibit 10.9 of Registrant's Form 10-Q, filed May 14,
            2001).

     10.8   Registration Rights Agreement, dated September 6, 2000 (relating to
            the registration rights of the previous shareholders of Arbor
            Administrative Services, Inc.) (incorporated by reference to Exhibit
            10.15 of Registrant's Form 10-K, filed March 23, 2001).

     10.9   Separation Agreement and Release by and between the Company and
            Thomas E. Kelly, dated as of February 8, 2002.

     10.10  Agreement by and between the Company and Mark W. Tierney, dated as
            of January 1, 2002.

     10.11  Agreement and Plan of Merger by and among Arbor Administrative
            Services, Inc., a Delaware corporation, the principal stockholder of
            Arbor, eBenX, Inc., a Minnesota corporation, and Arbor

                                      -14-
Acquisition Corp., a Minnesota corporation, dated August 28, 2000
            (incorporated by reference to Exhibit 2.1 of Registrant's Form 8-K,
            filed on September 14, 2000).

     10.12  Employment Agreement by and between the Company and Jeff Rosenblum,
            dated as of September 6, 2000 (incorporated by reference to Exhibit
            10.11 of Registrant's Annual Report on Form 10-K, filed on March 23,
            2001).

     10.13  Multi-Tenant Office Lease Agreement by and between the Company and
            Utah State Retirement Investment Fund, dated January 21, 2000
            (incorporated by reference to Exhibit 10.5 of Registrant's Form
            10-Q, filed on August 11, 2000).

     10.14  Asset Purchase Agreement between Howard Johnson & Company and eBenX,
            Inc. dated as of October 19, 2001 (incorporated by reference to
            Exhibit 10.1 of Registrant's Current Report on Form 8-K, filed on
            November 20, 2001).

     10.15  Marketing Agreement by and between Howard Johnson & Company and
            eBenX, Inc. dated as of November 5, 2001 (incorporated by reference
            to Exhibit 10.4 of Registrant's Current Report on Form 8-K, filed on
            November 20, 2001).

     10.16  Shared Services Agreement by and between Howard Johnson & Company
            and eBenX, Inc. dated as of November 1, 2001 (incorporated by
            reference to Exhibit 10.2 of Registrant's Current Report on Form
            8-K, filed on November 20, 2001).

     10.17  Transaction Services Agreement by and between Howard Johnson &
            Company and eBenX, Inc. dated as of November 1, 2001 (incorporated
            by reference to Exhibit 10.3 of Registrant's Current Report on Form
            8-K, filed on November 20, 2001).

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the three-month period ended March
     31, 2002.

                                     -15-
SIGNATURES

     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.

                                    EBENX, INC.

Date: May 15, 2002                 By /s/ Randall J. Schmidt
                                     ----------------------------
                                       Randall J. Schmidt
                                       Chief Financial Officer and Secretary
                                       (principal financial officer)

                                      -16-