UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999

                        Commission file number 000-26883

                                 MEDSCAPE, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                    7375                   13-3879679
(State or other jurisdiction of    Primary Standard         (I.R.S. Employer
incorporation or organization)  Industrial Classification   Identification No.)
                                      Code Number)


                              134 West 29th Street
                          New York, New York 10001-5399
                              (Address of principal
                               executive offices)

       Registrant's telephone number, including area code: (212) 760-3100

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                     Common Stock, par value $.01 per share
                                (Title of Class)

     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 at least the past 90 days. Yes X__  No__

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

     The  aggregate  market value of the common stock held by persons other than
affiliates  of  the  registrant,  as of  December  31,  1999  was  approximately
$254,229,040  (based on the last sale price of the registrant's  common stock on
the NASDAQ  National  Market System on that date and, for the limited purpose of
this  computation  only,  the  assumption  that all of the persons who had filed
reports of ownership  pursuant to Section 16(a) of the Securities Act of 1934 in
respect of the registrant's securities are affiliates).

     The number of shares of the registrant's common stock outstanding at
December 31, 1999 was 44,661,094.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain information in the registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission relating to the registrant's
1999 Annual Meeting of Shareholders is incorporated by reference into Part III.

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

         Medscape, Inc. (herein, together with its subsidiaries unless the
context otherwise requires, generally referred to as "Registrant" or "Company")
provides comprehensive, authoritative and timely medical information and
interactive programs to physicians, allied healthcare professionals and
consumers. Registrant operates two principal healthcare web sites, Medscape.com
and CBSHealthWatch.com. As of December 31, 1999, Registrant's sites had more
than 1,700,000 registered members worldwide, including over 280,000 registered
as physicians, 860,000 registered as allied health professionals and 630,000
registered as consumers.

         Medscape.com is currently organized by medical specialty area, such as
oncology and cardiology, to make it easier for its members to access the
information most relevant to them. Medscape.com's medical content and
interactive programs assist medical professionals in keeping abreast of medical
advances. Medscape.com's original, exclusive and proprietary content includes
such innovative features as next day summaries of major medical conferences and
online, peer-reviewed medical journals. Medscape.com also provides proprietary
interactive programs that test a medical professional's diagnostic skills and
understanding of recent medical developments. Medscape.com provides access to
extensive online medical databases and what it believes is one of the web's
largest collections of free, peer-reviewed, full-text medical articles. In
addition, Medscape.com offers physicians the opportunity to earn continuing
medical education credits that are required by most states' licensing boards.
Through its strategic relationship with National Data Corporation (NDC), a
provider of healthcare information services and electronic commerce solutions,
Medscape.com will integrate selected clinical data interchange and data
management services provided by NDC into Medscape.com. Medscape.com will also
serve as the principal content provider to NDC's physician practice management
system and be an online distributor of some of NDC's other online clinical
products.

         Registrant launched its consumer site, CBS.Medscape.com, in September
of 1999. On November 1, 1999 CBS.Medscape.com was relaunched as
CBSHealthWatch.com. CBSHealthWatch.com is designed to help families and
individuals make better-informed healthcare decisions and to simplify management
of their healthcare needs. The site provides personalized, authoritative medical
content written for the consumer, access to professional content on Medscape.com
and interactive personal health management tools, such as health diaries.
Registrant entered into a strategic relationship with CBS Corporation under
which CBSHealthWatch.com is the exclusive Internet healthcare site integrated
into CBS News programming and will be promoted on CBS media properties.

         Registrant also has strategic relationships with America Online, Inc.
and Women.com Networks, Inc. Under the agreement with America Online, Inc.,
Registrant has developed co-branded consumer sites that appear and are promoted
through contextual links and banners on AOL, AOL.com, CompuServe Service,
Netscape Netcenter and Digital City, all of which are AOL properties. The AOL
co-branded sites on the AOL properties were launched in the fourth quarter of
1999 and the first quarter of 2000. Under the agreement with Women.com,
Registrant is the preferred health content partner for Women.com and provides
Women.com's visitors with health news, feature articles, proprietary health
tools and other health information in a co-branded format.

         Registrant was incorporated in New York in March 1996 and commenced
operations in April 1996. Registrant was reincorporated in Delaware in December
1998. In October of 1998, Registrant acquired Healthcare Communications Group,
LLC, which operated a leading HIV web site. In the first quarter of 1999,
Registrant acquired Bonehome.com, a leading orthopedic site, and CompuRx, Inc.,
a healthcare market research company serving pharmaceutical and other healthcare
companies.

         Registrant's executive offices are located at 134 West 29th Street, New
York, New York, 10001-5399. The telephone number is (212) 760-3100.

                                        2
<PAGE>

PROPOSED MERGER WITH MEDICALOGIC

On February 21, 2000, Medscape entered into an agreement with MedicaLogic, Inc.,
an Oregon corporation that is a provider of online health records, providing for
the merger of a newly-formed subsidiary of MedicaLogic with and into Medscape,
with Medscape as the surviving corporation and, thus, becoming a wholly-owned
subsidiary of MedicaLogic. Under the terms of the agreement, each outstanding
share of common stock of Medscape will be converted into the right to receive
 .323 shares of common stock of MedicaLogic. Consummation of the merger is
subject to certain condition, including (i) approval of the merger by the
stockholders of Medscape, (ii) approval by the stockholders of MedicaLogic of
the issuance of MedicaLogic common stock in the Merger and (iii) the expiration
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. MedicaLogic has also agreed, subject to certain conditions, to
acquire Total eMed, Inc., a provider of electronic medical transcription
services, in a merger transaction for approximately eight million shares of
MedicaLogic's common stock.

THE MEDSCAPE.COM SITE

         PROPRIETARY EDITORIAL CONTENT AND FEATURES

         Medscape.com is currently organized into 23 medical specialty sites,
ranging from cardiology to oncology to women's health, making it easier for its
members to access the information most relevant to them. Medscape.com's
original, exclusive and proprietary content and programs, assisting medical
professionals and consumers to keep abreast of medical advances, include:

o        NEXT DAY SUMMARIES(SM) of selected presentations at major medical
         conferences;

o        MEDSCAPE GENERAL MEDICINE, believed to be the only online peer-reviewed
         general medical journal;

o        CLINICAL MANAGEMENT SERIES, offering interactive practice modules with
         state-of the art treatment information and clinical cases for
         particular cases, each of which is accredited for continuing medical
         education;

o        TREATMENT UPDATES, with authoritative evaluations of significant new
         changes in therapies; and

o        EMED JOURNALS, peer-reviewed, electronic medical journals written
         exclusively for medscape.com covering a number of important specialty
         areas.

         Medscape.com also offers an array of proprietary, challenging and
instructional interactive features to test a physician's medical knowledge.
Interactive self-assessment elements include:

o        PICTOURS(R), image-based case challenges testing the physician's
         diagnostic skills;

o        TODAY'S QUESTION, testing the physician's understanding of recent
         developments in the physician's medical specialty; and

o        ECG OF THE WEEK, images of cardiograms with case histories testing the
         physician's diagnostic skills, supplied by leading cardiologists.

         THIRD-PARTY EDITORIAL CONTENT

         Registrant believes that Medscape.com contains one of the web's largest
collections of free, peer-reviewed, full-text medical articles and one of the
web's most extensive libraries of continuing medical education accredited
programs. Medscape.com also provides third-party access to the NATIONAL DRUG
DATA FILE, a leading drug and disease database of Hearst Corporation's First
DataBank.

                                        3
<PAGE>

         Numerous prestigious medical publishers, universities, hospitals and
professional organizations are part of Medscape.com's strategic content partner
program known as Medscape Publishers' Circle(R). Through this program,
Medscape.com aggregates, organizes, and places in context content from over 100
medical journals, textbooks, news services and other publications, and offers
integrated, easy-to-use searching of vast medical databases, including over nine
million abstracts of medical journals available in the National Library of
Medicine's MEDLINE, AIDSLINE and TOXLINE databases. In addition, through an
agreement with Dow Jones & Company, Medscape.com provides free searching of more
than 500 leading medical publications, including the JOURNAL OF THE AMERICAN
MEDICAL ASSOCIATION, the BRITISH MEDICAL JOURNAL, THE LANCET, and abstracts from
the NEW ENGLAND JOURNAL OF MEDICINE. Members can immediately retrieve online a
full-text copy of the article or abstract for a fee.

         NON-MEDICAL CONTENT

         Registrant also provides an array of non-medical content on subjects of
particular interest to medical professionals and health-conscious consumers.
MEDSCAPE MONEY & MEDICINE offers personal finance features, including stock
quotes, portfolio tracking and business news, and valuable practice management
features that provide business information that is directly relevant to a
medical practice. Members can also learn about the developments in managed care
in a special MANAGED CARE topic area. The MEDSCAPE HUMOR & MEDICINE section
provides readers with medical jokes, cartoons, DEFUNITIONS, crossword puzzles
and other entertaining features that generate traffic to and increase usage of
Registrant's site.

         MEMBER SERVICES

         Registrant offers a number of services that complement its high-quality
content offerings and make Medscape.com a preferred professional destination
site, including:

         CONTINUING MEDICAL EDUCATION. Approximately half the states require
physicians and selected other medical professionals to certify annually that
they have accumulated a minimum number of continuing medical education hours to
maintain licensure. Medscape.com offers its professional members what it
believes is one of the web's largest libraries of continuing medical education
programs. Medscape.com's extensive continuing medical education programs are
produced in association with entities accredited by the Accreditation Council
for Continuing Medical Education. From the convenience of their home or office
computer, Medscape.com's professional members can obtain continuing medical
education credits by accessing a variety of accredited editorial resources and
programs including online journal articles, NEXT DAY SUMMARIES of medical
conferences, in-depth TREATMENT UPDATES and state-of-the-art CLINICAL MANAGEMENT
SERIES.

         MEDICAL OFFICE MANAGEMENT. Through its strategic relationship with
National Data Corporation, Registrant provides seamless web connectivity into
NDC's online clinical information products and EDI services, including claims
processing.

         PHYSICIAN WEB SITES. Medscape.com offers it members registered as
physicians the opportunity to create home pages for their medical practices that
can be accessed by their patients and the general public. In addition to details
about their practice, including office address, phone number, medical specialty,
types of insurance accepted, hospital affiliations and languages spoken,
Medscape.com's PHYSICIAN WEB SITES permit a physician to offer links to
disease-specific information from Medscape.com as well as the general searching
capability of Medscape.com. Registrant believes these PHYSICIAN WEB SITES will
keep Registrant's high-quality medical information at the center of the
communication between physician and patient, and keep the physician at the
center of the healthcare dialogue. As of December 31, 1999, over 8,500 PHYSICIAN
WEB SITES had been established.

         E-COMMERCE AND SERVICES. Through a series of strategic partners,
Registrant offers its audience the opportunity to purchase a variety of goods
and services. The MEDSCAPE MEDBOOKSTORE offers members the opportunity to
purchase discounted medical texts from a collection of over 90,000 titles
through its partner MedSite Publishing Inc. The MEDSCAPE JOB CENTER offers a
comprehensive job-listing/posting service for medical professionals through its
partner NetMed, Inc. The MEDSCAPE DRUGSTORE offers Medscape.com members the
ability to purchase online a wide range of health, beauty and wellness products
through drugstore.com.

                                        4
<PAGE>

         COMMUNITY FEATURES. MEDSCAPE MAIL, powered by CommTouch, is useful for
mobile professionals like physicians, who often require email access from
multiple locations, such as their homes, offices, clinics and hospitals or
during travel. Discussion areas on many medical articles and physician-only
discussion groups are also available. Medscape.com's ASK-THE-EXPERT feature
allows members registered as physicians to present interesting cases to leading
experts online for comments.

         MEDSCAPE'S HEALTHCARE COMPANY SERVICES

         Medscape.com offers healthcare companies many value-added online
services including:

         MEDSCAPE PROFILES. The Internet offers significant advantages over
traditional mail surveys and focus groups in terms of speed and cost savings.
U.S. pharmaceutical and other healthcare companies are estimated to spend as
much as $1 billion annually on custom and syndicated market research. MEDSCAPE
PROFILES, an online market research division, has already successfully piloted
several custom research projects and has recruited a physician panel of over
1,000 from Medscape.com's member base to conduct custom and syndicated online
research quickly and efficiently.

         MEDSCAPE MEDPYX. Medscape.com plans to introduce MEDSCAPE MEDPYX as an
educational research program that will assist pharmaceutical companies in better
understanding the physician's knowledge base and prescribing patterns. In 1998,
pharmaceutical company sales representatives conducted more than 59 million
details to office- and hospital-based physicians. Registrant believes that
MEDSCAPE MEDPYX will provide pharmaceutical companies with a cost-effective
method of evaluating and improving their existing detailing activities.

A PROFILE OF CBSHEALTHWATCH.COM

         Registrant designed its CBSHealthWatch.com and AOL co-branded consumer
sites to help consumers make better-informed healthcare decisions and to
simplify management of their healthcare needs. Registrant's consumer sites
provide personalized, authoritative medical content written for the consumer,
access to its professional content on Medscape.com and interactive personal
health management tools, such as health diaries.

         In addition to general health and wellness information,
CBSHealthWatch.com and the AOL co-branded sites offer information organized
around specific health conditions, such as diabetes or asthma. In an effort to
simplify the consumer experience, Registrant includes convenient links to health
sites operated by the consumer's physician, and plans to expand these linkages
to cover employers and health insurers.

         RELATIONSHIP WITH CBS CORPORATION

         On August 3, 1999, Registrant entered into an agreement with CBS
Corporation under which it will receive approximately $150 million in
advertising and promotion in the United States over a seven-year period.
Registrant also was granted a license to the "CBS" trademark and "Eye" design
and selected health-related news content that, together, were valued at $7
million.

         CBSHealthWatch.com is the exclusive healthcare Internet site integrated
into CBS News programming. This integration is being accomplished by CBS News,
when appropriate and at its discretion, directing viewers of CBS News programs
to CBSHealthWatch.com for more information regarding health-related news stories
and features, and by using Registrant's story ideas and sources in health
stories developed and broadcast by CBS News.

         ORIGINAL AND THIRD-PARTY CONTENT

         In addition to general health and wellness information, CBSHealthWatch
provides consumers with original and third party news, feature articles and
other information organized around specific health conditions, such as diabetes
or asthma, grouped into "health channels." The site contained 22 such channels
at launch and expanded that number to 39 in the first quarter of 2000. Members
may customize their home page by creating MY HEALTH CHANNELS, with tailored
information from up to three channels.

                                        5
<PAGE>

         Members also have access to three different levels of information not
usually found on consumer health sites: BASIC, ADVANCED and WHAT MY DOCTOR
READS. The third level offers consumers information from the Medscape.com
professional site that is used by their own physicians. It is also a gateway for
consumers to reach all of the extensive content and features Medscape.com
provides to health professionals.

         The extensive Library feature on CBSHealthWatch.com offers these
sources of information, including a number that are also found on Registrant's
professional site:

o        HEALTH TOPICS A-Z, allowing consumers to access the world of health by
         entering a word or phrase, or using the keyword list of common terms;

o        DRUG DIRECTORY, for facts on over 10,000 brand name and generic drugs;

o        MEDICAL DICTIONARY from Merriam-Webster;

o        MEDICAL TEST HANDBOOK from the Yale University School of Medicine;

o        MEDLINE, AIDSLINE and TOXLINE, three comprehensive medical databases
         from the National Library of Medicine;

o        SELF CARE & FIRST AID, providing a search by symptom or condition;

o        WHAT MY DOCTOR READS, offering direct access to information used by
         medical professionals;

o        COMMUNITY ORGANIZATIONS, with contact information on national
         organizations, government agencies, medical experts and key groups in
         healthcare;

o        AUDIO ARCHIVE, including recorded interviews with physicians and their
         patients on a wide variety of topics;

o        MANAGED CARE GUIDE, with information on this important subject;

o        MINI MEDICAL SCHOOL, with courses offered by Emory University; and

o        RELATED SITES, to take consumers to other health resources on the web.

         INTERACTIVE FEATURES AND TOOLS

         CBSHealthWatch's easy-to-use interactive HEALTH MANAGER allows
registered members to create and monitor a personal health calendar, log meals,
track appointments, set an exercise plan and track weight and medications. There
are also special features for certain health conditions. For example, diabetics
can track key information like blood sugar readings.

         The site also provides a number of "community" features allowing
registered members to communicate directly with medical experts and other
individuals with similar health interests. For example, the ASK AN EXPERT
section can be used to pose a health question or check answers to frequently
asked questions. HEALTH MATES permits members to communicate with one another
regularly on health conditions and interests. IN YOUR OWN WORDS encourages
members to share insights and views with others.

REGISTERED MEMBERS

         To utilize all of the features of Medscape.com and CBSHealthWatch.com,
users must register as members. This information enables Registrant to deliver
targeted medical content based on its members' registration profiles. As of
December 31, 1999, Medscape.com had over 1,700,000 registered members worldwide,
including over 280,000 members registered as physicians, 860,000 registered as
allied healthcare professionals and 630,000 registered as consumers.


                                        6
<PAGE>

         The registration process enables professional members to choose a home
page tailored to their medical specialty or interest. Accordingly, a
cardiologist accessing Medscape.com is automatically directed to MEDSCAPE
CARDIOLOGY, rather than a more generic home page. Every member, however,
regardless of medical specialty or professional status, has access to the full
suite of exclusive, original and licensed content through a uniform, easy-to-use
interface.

         To encourage initial use, CBSHealthWatch.com allows visitors to access
selected features without registering as members. Visitors, however, have to
register as members to have access to all the features of CBSHealthWatch.com,
including the interactive programs such as health diaries.

EDITORIAL, DESIGN AND PRODUCTION

         Registrant's editorial staff is headed by Dr. George D. Lundberg,
Registrant's Editor in Chief, who was formerly Editor of the JOURNAL OF THE
AMERICAN MEDICAL ASSOCIATION for 17 years. As of December 31, 1999, Registrant's
editorial, design and production staff consisted of 82 professionals who are all
experienced medical editors, writers and producers. Registrant intends to
significantly increase its number of medical specialty areas. Registrant has
assembled specialty-specific editorial boards for Medscape.com and has also
assembled a Medscape.com scientific advisory board consisting of 19 of the
world's leading physicians, academicians, clinicians and ethicists, and
healthcare experts, who also serve as the editorial board of MEDSCAPE GENERAL
MEDICINE.

         Registrant has an easy-to-use interface that incorporates original and
proprietary content written by medical experts with an extensive library of
licensed content and medical databases. Each medical specialty area is headed by
a program director responsible for building and continuously updating that
area's content. Registrant's goal is to be the premier online information
resource in each of its medical specialty areas. To support this effort,
Registrant covers major medical conferences in many specialties with its editors
and medical experts summarizing and reporting on the breaking medical research
and news delivered at these events.

SALES

         As of December 31, 1999, Registrant had a direct sales organization of
over 35 sales professionals and sales operations staff employees. Registrant
generally seeks to hire individuals with significant experience selling to
pharmaceutical, other healthcare and consumer companies and their advertising
agencies.

MARKETING AND PUBLIC RELATIONS

         Registrant employs a variety of methods to promote the Medscape brand
and to attract traffic and new members, including advertising on other Internet
sites and in medical journals, pharmaceutical and other healthcare publications,
and other targeted publications. Registrant is currently using the approximately
$150 million in advertising and promotion from CBS to promote Medscape on CBS
media properties, including television, radio and outdoor advertising.
Registrant also is extending the reach of CBSHealthWatch.com through its
agreements for co-branded sites and information with AOL and Women.com.

         Registrant also maintains a significant presence at major industry
conferences, trade shows and medical meetings, primarily through the operation
of large exhibits for both the professional and consumer sites. Registrant
supplements these efforts with direct mail campaigns targeted at medical
professionals.

         Registrant's professional distribution strategy is designed to have
Medscape.com's medical content be available within major Internet-accessible
healthcare information system platforms like hospital intranets, electronic
medical record systems and physician practice management company intranets. This
strategy integrates Medscape.com into the daily workflow of their medical
professionals with frequent reminders of and easy access to Registrant's
selection of medical content. Consistent with this strategy, in 1998, Registrant
signed a content distribution agreement with PhyCor, the largest physician
practice management organization in the United States. In August 1999,
Registrant entered into a License and Product Development Agreement with
National Data Corporation under which Registrant is the preferred content
supplier to NDC's LYTEC physician practice management product and an online
distributor of some of NDC's other clinical information products.

                                        7
<PAGE>

         Registrant's internal public relations staff oversees a comprehensive
public and investor relations program, which it believes is a key component of
its marketing and brand recognition strategy. Registrant targets key business,
medical and healthcare marketing publications, and encourages their reporters to
use Medscape.com and CBSHealthWatch.com for their medical news and research
needs, in an effort to build both brand awareness and loyalty among news
organizations.

INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY

         Registrant's business is supported by a reliable, expandable and secure
system platform. Using a combination of proprietary online solutions and
commercially available licensed technologies, Registrant has deployed systems
for online content dissemination, site analysis, and web- and email-based member
support.

         Registrant has developed a database management and online publication
system to index, retrieve and display information. This system allows for rapid
searching, viewing and distribution of content including text, photos, graphics
and other images. Registrant's hardware and software systems are based on a
distributed processing model that allows applications to be distributed among
multiple parallel servers. Registrant's hardware servers, storage systems,
Internet connections and networks allow its online systems to operate
continuously 24 hours a day and seven days a week.

         Registrant maintains offsite redundant systems and facilities.
Registrant has outsourced its web-hosting operations to a third party facility,
Exodus Communications. This outsourcing provides faster and more reliable
connections to the Internet and enhanced reliability and expandability.

COMPETITION

         Registrant faces competition both in attracting visitor traffic and in
generating revenue across all its business lines. Registrant competes with
numerous companies and organizations for the attention of medical professionals
and consumers including traditional off-line media such as print journals,
conferences, continuing medical education programs and symposia. Registrant also
faces significant competition from online information resources. There are
thousands of healthcare-related sites on the Internet. Also, several large
consumer sites offer specialized healthcare channels as part of their general
services. In addition, there are many companies that provide non-Internet based
marketing and advertising services to the healthcare industry. These competitors
include advertising agencies, consulting firms, marketing and communications
companies and contract sales and marketing organizations.

         Some of Registrant's current and potential competitors may have
competitive advantages compared to Registrant, including:

         o     greater resources to devote to the development, promotion and
               sale of their services;

         o     greater financial, technical and marketing resources;

         o     greater brand recognition and larger marketing budgets; and

         o     larger customer and user bases.

         Registrant believes that the principal competitive factors in
attracting and retaining members are the depth, breadth and timeliness of
services and brand recognition. Other important factors in attracting and
retaining members include ease of use, quality of service and cost. Registrant
believes that the principal competitive factors that will continue to attract
advertisers and sponsors to Medscape.com and its consumer sites include price,
the number of medical professionals and consumers who use Registrant's web
sites, the demographics of its member base and the creative implementation of
advertisement placements.

         Competition is likely to increase significantly as new companies enter
the market and current competitors expand their services. There can be no
assurance that Registrant will be able to compete successfully against current
and future competitors or that the competitive pressures Registrant faces will
not seriously harm its business.

                                        8
<PAGE>

SIGNIFICANT CUSTOMERS

         Registrant sells advertising and sponsorships, market research and
other services to pharmaceutical, medical device and other healthcare companies,
as well as advertising and sponsorships to consumer products and other
consumer-oriented companies. Registrant also sells products, such as medical
books, to physicians, allied healthcare professionals and consumers.

         During 1999, Registrant's client and revenue base broadened during the
year. In 1998, Registrant derived approximately 48% of its revenue from three
leading pharmaceutical advertisers and sponsors, of which two accounts were
individually greater than 10%.

In 1999 no individual client comprised more than 10% of Medscape's revenue.

INTELLECTUAL PROPERTY AND DOMAIN NAME

         Registrant protects its intellectual property through a combination of
license agreements, trademark, service mark, copyright and trade secret laws and
other methods. Registrant obtains the majority of its content under license
agreements with publishers, through assignments or work for hire arrangements
with third parties and from internal staff development. Generally, Registrant's
license agreements are for a period of one to three years and it considers the
materials obtained through these agreements as important to the continued
enhancement of the content on its web site. Registrant currently has no patents
or patents pending for its online services and does not anticipate that patents
will become a significant part of its intellectual property in the foreseeable
future. Registrant also enters into confidentiality agreements with its
employees, consultants, vendors and customers and license agreements with third
parties and it generally seeks to control access to and distribution of its
technology, documentation and other proprietary information.

         Registrant currently holds a number of domain names, including the
following: medscape.com, cbshealthwatch.com, cbsmedscape.com, medscape.co.uk,
medpulse.com, medicalogicmedscape.com, and medscapemedicalogic.com. Registrant
also has applications for numerous domain names pending. The legal status of
intellectual property on the Internet is currently subject to various
uncertainties. The current system for registering, allocating and managing
domain names has been the subject of litigation and proposed regulatory reform.
Additionally, legislative proposals have been made by the federal government
that would afford broader protection to owners of databases of information, such
as stock quotes. This protection of databases already exists in the European
Union.

EMPLOYEES

         As of December 31, 1999, Registrant had 203 full-time employees. None
of Registrant's employees is covered by a collective bargaining agreement.
Registrant considers its employee relations to be good.

ITEM 2.  PROPERTIES

         Registrant is headquartered in New York, New York, where it leases a
total of approximately 91,600 square feet of office space under numerous leases.
Currently, Registrant has approximately 20,000 square feet of office space at
134 West 29th Street, New York, New York, 10001 under three leases, that
expire on June 30, 2004. Registrant also currently occupies 12,200 square feet
at 224 West 30th Street, New York, New York 10001 under two leases for
approximately 71,600 square feet. The two leases terminate on January 31, 2005.
Registrant is in the process of renovating the space at 224 West 30th Street to
ensure that it is able to meet its business and technological needs as it grows.
Registrant will relocate its corporate headquarters to 224 West 30th Street, New
York, New York 10001 once the renovations are complete. Registrant expects to
spend approximately $4 million in 2000 on these renovations.

ITEM 3.  LEGAL PROCEEDINGS

         There are no pending legal proceedings to which Registrant is a party.

                                        9
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of Registrant's 1999 fiscal year.

ITEM 4(A).  EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
    Name                           Age               Position
    <S>>                           <C>               <C>
    Paul T. Sheils                 45                President, Chief Executive Officer and Director.
                                                     Mr. Sheils has been a member of the Board of Registrant and
                                                     Chief Executive Officer since February of 1998. Prior to
                                                     that, he was Vice President of Dow Jones Interactive
                                                     Publishing from 1994 to February of 1998 and was Executive
                                                     Director from 1993 to 1994.

    Peter M. Frishauf               50               Executive Committee Chairman, Founder and Director. Mr.
                                                     Frishauf has been a member of the Board of Registrant since
                                                     April of 1996 and Executive Committee Chairman since February
                                                     of 1998. From April 1996 through February 1998, Mr. Frishauf
                                                     served as the Chief Executive Officer of Medscape. Prior to
                                                     founding Registrant, Mr. Frishauf founded SCP Communications,
                                                     Inc., a medical publishing, education and clinical trial
                                                     company, and served as SCP's President and Chief Executive
                                                     Officer until April 1996. Mr. Frishauf continues to serve on
                                                     the board of directors of SCP Communications, Inc.

    Jeffrey L. Drezner M.D., Ph.D.  52               Executive Vice President.
                                                     Dr. Drezner has been a member of the Board of Registrant
                                                     until he resigned in March of 2000. Dr. Drezner has been the
                                                     Executive Vice President since Registrant acquired Healthcare
                                                     Communications Group LLC in October of 1998. Dr. Drezner
                                                     founded Healthcare Communications Group, LLC in 1995. From
                                                     1992 to 1995, Dr. Drezner was Vice President of Clinical
                                                     Programs at Homedco, Inc., a home and alternate-site
                                                     healthcare delivery company. In 1987, Dr. Drezner founded
                                                     Integrated Care Systems, Inc., an HIV-focused, alternate-site
                                                     healthcare delivery company. Prior to 1987, Dr. Drezner
                                                     practiced medicine for fourteen years.

    Steven R. Kalin                 35               Chief Operating Officer, Chief Financial Officer and
                                                     Treasurer. Mr. Kalin has been Chief Operating Officer and
                                                     Chief Financial Officer of Registrant since October of 1998.
                                                     From 1995 to October of 1998, Mr. Kalin was Vice President of
                                                     Business Development at ESPN Internet Ventures. Prior to
                                                     that, Mr. Kalin was a Senior Engagement Manager with McKinsey
                                                     & Co., specializing in the media industry, for five years.

    George D. Lundberg, M.D.        66               Editor in Chief.
                                                     Dr. Lundberg has been Editor in Chief of Registrant since
                                                     February of 1999. Prior to that, Dr. Lundberg served as
                                                     Editor of the JOURNAL OF THE AMERICAN MEDICAL ASSOCIATION and
                                                     also served as the Editor in Chief of SCIENTIFIC INFORMATION and
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
    <S>                             <C>              <C>
                                                     MULTIMEDIA, a publication of the American Medical
                                                     Association, for seventeen years.

    David Yakimischak               38               Chief Technology Officer.
                                                     Mr. Yakimischak has been the Chief Technology Officer of
                                                     Registrant since March of 1999. Prior to that, Mr.
                                                     Yakimischak was the Director of Product Development at Dow
                                                     Jones Interactive Publishing for five years.

    Mark E. Boulding                39               General Counsel and Vice President of Regulatory Affairs and
                                                     Secretary. Mr. Boulding has been the General Counsel and Vice
                                                     President of Regulatory Affairs and Secretary of Registrant
                                                     since June of 1999. From 1998 to June of 1999, Mr. Boulding
                                                     was a partner of Long Aldridge & Norman LLP. Prior to that,
                                                     Mr. Boulding was an associate and then a partner with the
                                                     firm of Fox, Bennett & Turner in Washington, D.C. for seven
                                                     years. Mr. Boulding is a co-founder and sits on the board of
                                                     directors of the Internet Healthcare Coalition and is the
                                                     co-chair of the Internet Law Subcommittee of the American Bar
                                                     Association's Cyberspace Law Committee.

    Anthony Plesner                 41               Vice President of Finance and Corporate Development and
                                                     Assistant Treasurer. Mr. Plesner has been the Vice President
                                                     of Finance and Corporate Development and Assistant Treasurer
                                                     of Registrant since March of 1999. From 1998 to March of
                                                     1999, Mr. Plesner was the Founder and President of Niche
                                                     Consulting. From 1997 to 1998, Mr. Plesner was Chief
                                                     Financial Officer of Confer Software, Inc. (f/k/a Araxsys,
                                                     Inc.). Prior to that, Mr. Plesner was for twelve years the
                                                     Chief Financial Officer and Vice President of Business
                                                     Development at Reuters Health Information Services, Inc., a
                                                     subsidiary of Reuters PLC.
</TABLE>










                                       11
<PAGE>



                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

         Registrant's common stock, par value $.01 per share, has been traded on
the NASDAQ National Market under the symbol "MSCP" since September 27, 1999.
Prior to that date, there was no public market for the Company's stock and,
therefore, no quoted market prices for the Company's common stock are available
prior to such date. The following table sets forth, for the period indicated,
the range of high and low per share closing prices for the common stock as
reported by NASDAQ. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions, and may not necessarily reflect actual
transactions.

                           IPO Price: $8.00 (9/27/99)

                              Q4 1999 High: $12 1/8
                               Q4 1999 Low: $8 1/2
                              Q4 1999 Close: $10.00

         As of February 24, 2000, the Company had 152 holders of record of its
common stock.

    DIVIDEND POLICY

         The Company has not paid any dividends to holders of its common stock.
The Company intends to retain any earnings to finance the development and
expansion of the Company's business and does not anticipate paying any cash
dividends in the foreseeable future. Any declaration and payment of dividends
would be subject to the discretion of the Company's board of directors. Any
future determination to pay dividends will depend on the Company's results of
operations, financial condition, capital requirements, contractual restrictions
and other factors deemed relevant at the time by the board of directors.












                                       12
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA OF REGISTRANT

         The following selected consolidated financial data should be read with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Registrant" and the consolidated financial statements and notes of
Registrant that are included in this document. The following information has
been derived from the audited consolidated financial statements of Registrant
beginning on page 21:

o        consolidated statements of operations data for each of the years in the
         three-year period ended December 31, 1999; and

o        consolidated balance sheet data as of December 31, 1998 and 1999.

The following information has been derived from the audited consolidated
financial statements of Registrant not included in this document:

o        consolidated statement of operations data for the nine months ended
         December 31, 1996; and

o        consolidated balance sheet data as of December 31, 1997.

         The reader is encouraged to read the consolidated financial statements
included in this document. Historical results of operations are not necessarily
indicative of future results.













                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                     NINE MONTHS
                                                        ENDED                      YEARS ENDED DECEMBER 31,
                                                     DECEMBER 31,     --------------------------------------------------
                                                         1996             1997               1998               1999
                                                     -------------    ------------       ------------       ------------
                                                                               (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                  <C>              <C>                <C>                <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
 DATA:
Revenues..........................................   $       1,015    $      1,522       $      3,069       $     11,156
                                                     -------------    ------------       ------------       ------------

Operating expenses:
         Editorial, production, content and
             technology (excludes stock-based
             compensation expense of $166 in .....           1,182           1,967              2,694             12,967
             1999 and $26 in 1998 included
             below)
         Sales and marketing
             (excludes stock-based
             compensation expense of $83 in ......             278           1,397              2,520             26,944
             1999 included below)
         General and administrative
             (excludes stock-based compensation
             expense of $1,852 in 1999 and .......             830           1,450              1,469              6,048
             $223 in 1998 included below)
         Depreciation and amortization ...........              41             160                287              1,010
         Stock-based compensation ................              --              --                249              2,101
                                                     -------------    ------------       ------------       ------------

Total operating expenses .........................           2,331           4,974              7,219             49,070
                                                     -------------    ------------       ------------       ------------
Loss from operations .............................          (1,316)         (3,452)            (4,150)           (37,914)
         Interest expense (income) ...............              28              12               (249)            (1,203)
                                                     -------------    ------------       ------------       ------------

         Net loss ................................   $      (1,344)   $     (3,464)      $     (3,901)      $    (36,711)
                                                     =============    ============       ============       ============

Basic loss per share(1)...........................   $       (0.66)   $      (1.26)      $      (1.07)      $      (1.89)

Weighted average number of shares of common
         stock outstanding .......................       2,026,233       2,750,552          3,636,558         19,400,443
</TABLE>



                                                         DECEMBER 31,
                                            ----------------------------------
                                              1997          1998        1999
CONSOLIDATED BALANCE SHEET DATA:            ---------    ---------   ---------
Current assets............................  $   4,294    $   3,038   $  62,021
Working capital...........................      2,350        1,368      50,874
Total assets..............................      4,633        5,874      85,335
Stockholders' equity......................      2,689        4,204      74,188


---------------
(1)      Registrant calculates loss per common share by dividing the loss
         attributable to common shares by the weighted average number of shares
         outstanding. It does not include outstanding common stock options and
         warrants in the loss per common share calculation as their effect is
         anti-dilutive.


                                       14
<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         Registrant operates Medscape.com, a healthcare web site for physicians
and allied healthcare professionals, such as pharmacists and nurses. To enhance
and personalize the consumer experience, Registrant launched a separate consumer
site, CBS.Medscape.com, in the third quarter of 1999. On November 1, 1999,
CBS.Medscape.com was relaunched as CBSHealthWatch.com. Registrant developed and
launched several additional co-branded consumer sites in the fourth quarter of
1999 and the first quarter of 2000 under an agreement with America Online, Inc.

         Registrant commenced operations in April 1996. In October 1998,
Registrant acquired Healthcare Communications Group, LLC, which operated a
leading HIV web site. In the first quarter of 1999, Registrant acquired the
trademarks and hired key employees of Bonehome.com, a leading orthopedic web
site, and CompuRx, Inc., a healthcare market research company serving
pharmaceutical and other healthcare companies. The Bonehome.com and CompuRx
transactions were not material to Registrant's financial statements. These
transactions are consistent with Registrant's strategy to be the leading online
information source for selected medical specialties and to broaden its revenue
streams.

         Since its inception, Registrant has derived substantially all of its
revenues from advertising and sponsorships from pharmaceutical companies.
Registrant also generates revenues from its e-commerce partners who either
provide it with a placement fee or a commission on sales of their products
generated through Registrant's web sites. Registrant offers banner advertising
to third-party advertisers and generally guarantees delivery of a specified
number of advertising impressions. Registrant derives sponsorship revenues from
the development of client-sponsored content, including modules on disease topics
and editorial coverage of medical conferences. Registrant expects its revenues
to be seasonal due to the scheduling of major medical conferences.

         Registrant recognizes banner advertising revenues in the period that it
displays the advertisement, provided that no significant obligations remain and
collection of the resulting receivable is probable. Registrant recognizes
revenues from modules on a cost-of-completion basis and editorial coverage of
medical conferences in the period in which the conference was held. Registrant
recognizes revenues from e-commerce based on commissions when earned from its
third-party partners or, in cases where third-party partners pay placement fees
to it, over the life of the product placement. Registrant generally invoices for
its services at the inception of a project and records a receivable.
Accordingly, Registrant's receivables have increased in connection with its
increase in revenues and due to an increase in the number of large scale
sponsored programs which have become a more prominent part of its business
following its acquisition of Healthcare Communications Group.

         To date, Registrant has incurred substantial costs to create and
enhance its content, build brand awareness, develop its infrastructure and grow
its business, and has yet to achieve significant revenue. As a result,
Registrant has incurred operating losses in each fiscal quarter since it was
formed. Registrant expects operating losses and negative cash flow to continue
for the foreseeable future as it intends to significantly increase its operating
expenses to grow its business. These costs could have an adverse effect on its
future financial condition and operating results. Registrant believes that
period-to-period comparisons of its financial results are not necessarily
meaningful and you should not rely upon them as an indication of its future
performance.

RESULTS OF OPERATIONS

         REVENUE AND EXPENSE COMPONENTS

         The following descriptions of the components of revenues and expenses
apply to the comparisons of results of operations:

         REVENUES. Revenues consist primarily of sales of advertising banners
and sponsorships for developing content for modules and medical conferences.
Revenues also include commission revenues or placement fees from

                                       15
<PAGE>


product sales, such as medical books, and market research services to
pharmaceutical and other healthcare companies.

         EDITORIAL, PRODUCTION, CONTENT AND TECHNOLOGY. Product development
expenses consist primarily of salaries, third-party content acquisition costs,
the development of sponsored content and expenditures associated with
maintaining and enhancing its web sites.

         SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, advertising, promotions and related marketing costs.

         GENERAL AND ADMINISTRATION. General and administration expenses consist
primarily of salaries, facility costs and fees for professional services.

         DEPRECIATION AND AMORTIZATION. Depreciation expense reflects the charge
for depreciation of capitalized fixed assets, including computer equipment, web
site servers and related equipment, and the amortization of office leasehold
improvements. Additionally, this category includes goodwill amortization related
to corporate acquisitions.

         INTEREST EXPENSE/INCOME. Interest expense is related to loans that a
related party provided to Registrant, which were fully repaid by the end of
1998. Interest income consists primarily of interest earned on cash and cash
equivalents invested in money market funds.

         COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

         Revenues and operating expenses for the year ended December 31, 1999
include Healthcare Communications Group, which Registrant acquired in October
1998.

         REVENUES. Revenues increased 264% to $11.2 million for the year ended
December 31, 1999 from $3.1 million in 1998. The increase in revenues was driven
by an increased advertiser and sponsor base and an expansion of product lines
resulting from the acquisition of Healthcare Communications Group in October
1998.

         EDITORIAL, PRODUCTION, CONTENT AND TECHNOLOGY. Product development,
content and technology expenses increased 381% to $13.0 million for the year
ended December 31, 1999 from $2.7 million in 1998. The increase in costs was
primarily due to increased variable production costs related to the growth of
sponsored content revenues, costs associated with expanding and enhancing
editorial content, an increase in the number of employees in Registrant's
Editorial and Information Technology groups and associated recruitment costs,
and costs incurred in upgrading the functionality of Registrant's web sites and
its internal networks. A significant portion of the 1999 cost increase reflects
building-out core infrastructure across the different functions to support new
initiatives and the future growth of the business.

         SALES AND MARKETING. Sales and marketing expenses increased 969% to
$26.9 million for the year ended December 31, 1999 from $2.5 million in 1998.
The increase in costs was primarily due to increased costs related to the
continued development and implementation of Registrant's marketing and branding
campaigns, the commencement of marketing activities associated with its
agreements with CBS, NDC and AOL, as well as additional sales and marketing
personnel. Of the $26.9 million incurred in 1999, $8.4 million relates to
non-cash expenses for the utilization of advertising and other services
contributed by CBS and NDC in exchange for equity in Registrant. In 1998, there
were no such non-cash expenditures.

         GENERAL AND ADMINISTRATION. General and administration expenses
increased 312% to $6.0 million for the year ended December 31, 1999 from $1.5
million in 1998. The increase in costs was primarily a result of expenses
related to increased personnel and other employee compensation expenses,
professional service fees, and facility expenses necessary to support
Registrant's growth.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 252% to $1.0 million for the year ended December 31, 1999 from
$287,000 in 1998. The increase in costs was attributable to increased
depreciation expense resulting from increased purchases of fixed assets,
capitalized software development costs

                                       16
<PAGE>


associated with CBSHealthWatch.com and full-year impact of amortization of
goodwill related to the Healthcare Communications Group acquisition in October
1998.

         STOCK-BASED COMPENSATION. In connection with the issuance of stock
options during the second half of 1998 and the first half of 1999, an amount
equal to the excess of the fair market value of Registrant's common stock over
the option exercise prices is being amortized over four years, the vesting
period of the options. The amortization commenced in the fourth quarter of 1998.
Additionally, deferred stock compensation includes the amortization of the fair
value of the warrants issued to AOL.

         INTEREST EXPENSE / INCOME. Net interest income for the year ended
December 31, 1999 was $1.2 million compared to $249,000 in 1998. The higher
interest income was due to a higher average of net cash and cash equivalents
balance as a result of Registrant's financing activities in 1999.

         INCOME TAXES. As of December 31, 1999, Registrant had federal net
operating loss carryforwards of approximately $44.3 million that will be
available to reduce future taxable income. The federal net operating loss
carryforwards expire beginning in 2011 through 2019. A valuation allowance has
been recorded for the entire deferred tax asset as a result of uncertainties
regarding the realization of the asset due to Registrant's lack of earnings
history.

         COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

         Operating results for the year ended December 31, 1998 include the
results of Healthcare Communications Group, which Registrant acquired in October
1998.

         REVENUES. Revenues increased 102% from $1.5 million for the year ended
December 31, 1997 to $3.1 million for the year ended December 31, 1998. The
increase in revenues was driven by the inclusion of Healthcare Communications
Group revenues for November and December 1998 and an increase in the number of
advertisers and sponsors on Registrant's web sites. Advertising and sponsorship
revenues, for both comparison periods, comprise more than 98% of total revenues.

         EDITORIAL, PRODUCTION, CONTENT AND TECHNOLOGY. Product development
expenses increased 37% from $2.0 million for the year ended December 31, 1997 to
$2.7 million for the year ended December 31, 1998. The increase in costs was
primarily due to increased variable costs associated with the development of
sponsored content, as well as from additional editorial, production and
technology personnel.

         SALES AND MARKETING. Sales and marketing expenses increased 80% from
$1.4 million for the year ended December 31, 1997 to $2.5 million for the year
ended December 31, 1998. The increase in costs was primarily due to an expansion
of Registrant's sales force and client services staff and costs related to
marketing and branding campaigns.

         GENERAL AND ADMINISTRATION. General and administration expenses
remained flat at $1.5 million for the year ended December 31, 1998.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 79% from $160,000 for the year ended December 31, 1997 to $287,000 for
the year ended December 31, 1998. The increase in costs was largely attributable
to increased purchases of fixed assets and amortization of goodwill resulting
from the Healthcare Communications Group acquisition in October 1998.

         INTEREST EXPENSE/INCOME. Net interest expense for the year ended
December 31, 1997 was $12,000. Net interest income for the year ended December
31, 1998 was $249,000. The improvement was due to higher average net cash and
cash equivalents balances as a result of the issuance of preferred stock at the
end of 1997 and in 1998, as well as the payment in full of all outstanding loans
in 1998.

                                       17
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         Since its inception, Registrant has largely financed its operations
through the private placement of equity securities and, to a lesser extent, from
revenues generated from advertising and sponsorship sales and loans received
from a related party.

         On March 5, 1999, Registrant completed a private placement of 1,757,683
shares of Series D preferred stock to 15 accredited investors for which it
received net proceeds, after deducting offering costs, of approximately $19.4
million.

         On August 3, 1999, Registrant entered into agreements with CBS
Corporation under which, during the following seven years, CBS agreed to give
Registrant approximately $150 million in advertising and promotion in the United
States and a license to the "CBS" trademark and "Eye" design and selected
health-related news content in exchange for 13,938,368 shares of its common
stock, which represented approximately 32% of its outstanding capital stock upon
completion of the initial public offering in September 1999.

         On August 4, 1999, Registrant entered into a strategic development and
marketing agreement with National Data Corporation, an electronic data
interchange and data management company for medical practices. As part of this
transaction, NDC invested $10 million cash in Registrant, and agreed, over the
three year term of the agreement, to provide $10 million in licensing and
promotional value and credits against future commission and product purchase
amounts due by Registrant to NDC. Of this amount, $6,000,000 will be expensed as
used over the three-year life of the agreement, commencing August 4, 1999 and
terminating August 31, 2002. In addition, the license fee of $4,000,000 will be
amortized on a straight line basis over the life of the agreement. Under the
agreement, NDC received 1,000,000 shares of Registrant's common stock and
400,000 shares of Registrant's Series E preferred stock. The 400,000 shares of
Series E preferred stock converted into 1,250,000 shares of Registrant's common
stock upon completion of Registrant's initial public offering in September 1999.
In accordance with instructions by NDC, 25,000 of the 1,000,000 shares of common
stock and 10,000 of the 400,000 shares of Series E preferred stock were
delivered to NDC's financial advisor in the transaction, Lazard Freres & Co.,
LLC.

         On September 27, 1999, Registrant completed an initial public offering
that ultimately, after inclusion of the exercise on September 30, 1999 of the
900,000-share underwriters' over-allotment, resulted in the issuance of
7,650,000 shares of common stock. Net proceeds received, after deducting
offering costs, totaled approximately $54.4 million, including approximately
$6.7 million received on October 5, 1999 from the exercise of the
over-allotment.

         Net cash used in operating activities was $3.6 million, $4.2 million
and $32.6 million for the years ended December 31, 1997, 1998 and 1999,
respectively. Cash used in operating activities for all periods was attributable
to funding net operating losses and, for the 1999 period, also reflected
increases in accounts receivable and in prepaid expenses and other assets offset
by increases in accounts payable and accrued liabilities.

         On September 3, 1999, Registrant entered into an agreement with America
Online, Inc., under which AOL agreed, among other things, to deliver a
guaranteed number of impressions. In addition, Registrant developed separate
co-branded web sites on the following AOL properties: AOL.com, CompuServe
Service and Netscape Netcenter and Digital City. In exchange, Registrant paid
AOL $13 million and agreed to pay an additional $20 million over the next two
years. These amounts will be charged to earnings over the three-year life of the
contract. In addition, Registrant granted AOL two seven-year warrants, each to
purchase up to 1,352,158 shares of its common stock. One of the warrants fully
vested on signing and has an exercise price of $10 per share. The other warrant
will vest over a three-year period based on AOL meeting specified performance
requirements and will have exercise prices equal to the fair market value of
Registrant's common stock at the times the warrant becomes exercisable. At the
time of issuance, each warrant had a value of approximately $2,530,000 as
determined using the Black-Scholes option pricing model. The value of the fully
vested warrant is fixed and will be charged to earnings over the three-year AOL
contract period, whereas the warrant that vests over three years will be charged
to earnings adjusted variably over the vesting period.

         On June 15, 1999, Registrant entered into a License and Web Site
Development Agreement with Softwatch Ltd., an Israeli company, and its U.S.
subsidiary, Softwatch, Inc., under which Registrant licenses software from


                                       18
<PAGE>

Softwatch to support its consumer sites and to provide ongoing support services
for its consumer sites. At the same time, Registrant purchased 1,040,170 Series
A preferred shares of Softwatch Ltd. for $2,999,954. In 1998, the cash used in
investing activities was primarily for the purchase of Healthcare Communications
Group.

         Net cash used in investing activities was $0.2 million, $1.5 million
and $47.5 million for the years ended December 31, 1997, 1998 and 1999,
respectively. Cash used in investing activities in 1999 related primarily to the
investment of the proceeds of Registrant's initial public offering in short-term
investment securities combined with the reinvestment of matured short-term
investment securities in its portfolio. The other primary uses of funds include
its investment in Softwatch and investments in its technology infrastructure,
including the development of Registrant's consumer web site launched in
September 1999.

         Cash provided by financing activities was $7.3 million, $3.6 million
and $83.0 million for the years ended December 31, 1997, 1998 and 1999,
respectively.

         Cash provided by financing activities in 1999 reflects net proceeds
received from the initial public offering of common stock, as well as the
issuance of Series D and Series E preferred stock and common stock. Cash
provided by financing activities in 1998 reflects net proceeds received from the
issuance of Series C preferred stock, and in 1997 from the issuance of Series C
preferred stock.

         As of December 31, 1999, the primary source of liquidity for Registrant
was $40.8 million of cash and cash equivalents and marketable investment
securities. As of that date, it had no bank credit facilities.

         Registrant expects to continue to incur significant operating costs,
particularly content creation costs and sales and marketing costs to grow its
business and pursue its branding and marketing campaign. A large portion of its
promotional expenses for its consumer sites will result from approximately $150
million in advertising to be received from CBS.

         Registrant believes that its current cash, cash equivalents and
investment securities combined with any cash generated from operations will be
sufficient to meet anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, if during or following
that period Registrant is not successful in generating sufficient cash flow from
operations or in raising additional capital when required in sufficient amounts
and on terms acceptable to it, these failures could have a material adverse
effect on its business, results of operations and financial condition. If
Registrant raises additional funds through the issuance of equity securities,
the percentage ownership of its then current stockholders would be reduced.

YEAR 2000 COMPLIANCE

         Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field and cannot
reliably distinguish dates beginning on January 1, 2000 from dates prior to the
year 2000. Many software and computer systems used by companies and governmental
agencies may need to be upgraded or replaced in order to correctly process dates
beginning in 2000 and comply with Year 2000 requirements.

         In preparation for the year 2000, Registrant conducted a comprehensive
review of both information technology and non-information systems to ensure that
they were Year 2000 compliant. Significant information technology systems
include its production system, composed of the servers, networks and software
that comprise the underlying technical infrastructure that runs its business,
and various internal office systems. Its significant non-information technology
systems include the telephone systems, air conditioning and security system.
Because Registrant is a relatively new business, the majority of its own
hardware and software has been acquired or developed within the last two years,
during which time there was a high awareness of Year 2000 issues.

         To date, Registrant has not experienced any material difficulties
associated with the year 2000 that would have a negative effect on its ability
to conduct business. To its knowledge, no third party upon which Registrant
depends has experienced a material Year 2000 problem. However, it is still
possible that errors or defects may remain undetected or that dates other than
January 1 may trigger Year 2000 problems. If this occurs with respect to

                                       19
<PAGE>

Registrant's software systems, or those of third parties on which it relies, its
business, reputation, financial condition and results of operations may be
adversely impacted.

SUBSEQUENT EVENTS

         On February 9, 2000, the Board of Directors approved the creation of
Medscape Europe to accelerate its international expansion in the face of rising
global demand for Web-based health information and services. In addition to its
European venture, Registrant already operates a Japanese-language site, Medscape
Japan.

         On February 21, 2000, Registrant entered into an agreement to merge
with MedicaLogic Inc. Registrant shareholders will receive 0.323 shares of
MedicaLogic common stock for each share of Registrant's common stock. The
transaction will become effective upon approval by the shareholders of the two
companies and the satisfaction of other customary conditions. In connection with
the proposed transaction, Registrant issued warrants to purchase 100,000 shares
of its common stock at $9.3125 per share to its financial advisor. Simultaneous
with the announcement of the merger with MedicaLogic, MedicaLogic announced that
it had agreed to acquire Total eMed, Inc., a provider of electronic medical
transcription services, for approximately eight million shares of MedicaLogic's
common stock.

         In February of 2000, Registrant signed a plan of merger and
reorganization to acquire all of the outstanding shares of Dialog Medical, Inc.,
a Delaware corporation, in exchange for 150,000 shares of Registrant's common
stock upon closing and an additional 125,000 shares subject to certain
performance criteria. Dialog Medical provides integrated patient education and
informed consent materials for physicians and consumers. Registrant expects to
complete the acquisition in the first quarter of 2000.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

         The primary objective of the Company's investment activities is to
preserve principal while at the same time maximizing the income received from
investments without significantly increasing risk. Accordingly, the Company does
not enter into financial instrument transactions for trading purposes. Some
investments may be subject to market risk, which means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. To minimize this risk, the Company invests its cash in money market
funds. In general, money market funds are not subject to market risk as the
interest paid on these funds fluctuates with the prevailing interest rate. As of
September 30, 1999, all of the Company's investments mature in less than one
year.

EXCHANGE RATE SENSITIVITY

         In Management's opinion, the Company's exposure to foreign currency
exchange rate fluctuations is minimal as no revenue is currently denominated in
a foreign currency and minimal expenses are paid in a foreign currency.











                                       20
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE

         MEDSCAPE, INC.
         Independent Auditors' Report......................................  22
         Consolidated Balance Sheets as of December 31, 1999 and
           December 31, 1998 (As Restated).................................  23
         Consolidated Statements of Operations for  the Years Ended
           December 31, 1999, 1998 (As Restated), and 1997.................  24
         Consolidated Statements of Changes in Stockholders'
           Equity (Deficiency) for the Years Ended December 31,
           1999, 1998 (As Restated), and 1997..............................  25
         Consolidated Statements of Cash Flows for the
           Years Ended December 31, 1999, 1998 (As Restated),
           and 1997........................................................  29
         Notes to Consolidated Financial Statements........................  30

         HEALTHCARE COMMUNICATIONS GROUP, LLC
         Independent Auditors' Report......................................  42
         Balance Sheets as of December 31, 1997 and
           October 27, 1998................................................  43
         Statements of Operations for the Year Ended December 31,
           1997 and the Ten Months Ended October 27, 1998..................  44
         Statements of Member's Capital for the Year Ended
         December 31, 1997 and the Ten Months Ended October 27, 1998.......  45
         Statements of Cash Flows for the Year Ended December 31,
           1997 and the Ten Months Ended October 27, 1998..................  46
         Notes to Financial Statements.....................................  47
















                                       21
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Medscape, Inc.
New York, New York

         We have audited the accompanying consolidated balance sheets of
Medscape, Inc. and its subsidiary ("Medscape") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, changes in stockholders'
(deficiency) equity, and cash flows for the years ended December 31, 1999, 1998
and 1997. These consolidated financial statements are the responsibility of
Medscape's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Medscape at
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

New York, New York
February 4, 2000

                                       22
<PAGE>

                                 MEDSCAPE, INC.

                           CONSOLIDATED BALANCE SHEETS

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                 --------------------------
                                                                     1999          1998
         <S>                                                     <C>            <C>
         ASSETS
         Current Assets:
           Cash and cash equivalents.............................$     4,456   $      1,595
           Investment securities, available for sale.............     36,363             --
           Accounts receivable...................................      5,946          1,350
           Prepaid marketing.....................................     12,000             --
           Prepaid expenses and other assets.....................      3,256             93
                                                                 -----------   ------------
                   Total current assets..........................     62,021          3,038
         Fixed assets-- net......................................      7,568            380
         Intangible assets-- net.................................     12,590          2,456
         Investment in Softwatch.................................      3,156             --
                                                                 -----------   ------------
                   Total assets..................................$    85,335   $      5,874
                                                                 ===========   ============

         LIABILITIES AND STOCKHOLDERS' EQUITY

         Current Liabilities:
           Accounts payable and accrued liabilities..............$     9,567   $        871
           Deferred revenue......................................      1,580            799
                                                                 -----------   ------------
                   Total current liabilities.....................     11,147          1,670
                                                                 -----------   ------------
         Stockholders' Equity:
           Common stock, par value $.01; 100,000,000
              shares authorized, 44,680,144 issued and
              44,661,094 outstanding at December 31, 1999........         447            --
           Common stock, Class A -- 0 shares authorized at
              December 31, 1999; par value $.01; 15,000,000
              shares authorized, 1,079,000 issued and                                    11
              outstanding at December 31, 1998.....................       --
           Common stock, Class B -- 0 shares authorized at,
              December 31 1999; par value $.01; 15,000,000
              shares authorized, 5,792,318 issued and                                    58
              outstanding at December 31, 1998.....................       --             --
           Preferred stock, Undesignated -- par value $.01;
              5,000,000 shares authorized, 0 shares issued and
              outstanding at December 31, 1999;  0 shares                 --             --
              authorized at December 31, 1998......................
           Preferred stock, Series A -- 0 shares authorized at
              December 31, 1999; par value $.01; 1,000,000 shares
              authorized, 788,200 issued and outstanding at
              December 31, 1998...................................        --              8
           Preferred stock, Series C -- 0 shares authorized at
              December 31, 1999; par value $.01; 4,000,000 shares
              authorized, 2,410,760 issued and outstanding at
              December 31, 1998                                           --             24
           Additional paid-in capital............................    266,196         14,158
           Warrants..............................................      6,840             --
           Deferred stock compensation...........................     (7,984)          (715)
           Contribution of services..............................   (145,224)            --
           Treasury stock........................................         (3)            (3)
           Notes receivable......................................       (628)          (628)
         Accumulated other comprehensive loss                            (36)            --
              Accumulated deficit................................    (45,420)        (8,709)
                                                                 -----------   ------------
                   Total stockholders' equity....................     74,188          4,204
                                                                 -----------   ------------
                   Total liabilities and stockholders' equity    $    85,335   $      5,874
                                                                 ===========   ============
</TABLE>

                 See notes to consolidated financial statements.

                                       23
<PAGE>


                                 MEDSCAPE, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                                  -----------------------
                                                             1999          1998            1997
     <S>                                                 <C>            <C>             <C>
     Revenue..........................................   $    11,156    $     3,069     $     1,522
                                                         -----------    -----------     -----------
     Operating expenses:
        Editorial, production, content and technology
        (excludes stock-based compensation expense of
        $166 in 1999 and $26 in 1998 included below)          12,967          2,694           1,967
        Sales and marketing (excludes stock-based
        compensation expense of $83 in 1999 included          26,944          2,520           1,397
        below)........................................
        General and administrative (excludes
        stock-based  compensation expense of $1,852
        in 1999 and $223 in 1998 included below)......         6,048          1,469           1,450
        Depreciation and amortization.................         1,010            287             160
        Stock-based compensation......................         2,101            249              --
                                                        ------------    -----------     -----------
               Total operating expenses...............        49,070          7,219           4,974
                                                         -----------    -----------     -----------
     Loss from operations.............................       (37,914)        (4,150)         (3,452)
        Interest expense (income).....................        (1,203)          (249)             12
     Net loss.........................................   $   (36,711)   $    (3,901)    $    (3,464)
                                                         ===========    ===========     ===========
     Basic net loss per share.........................   $     (1.89)   $     (1.07)    $     (1.26)
                                                         ===========    ===========     ===========
     Weighted average number of shares of common
         stock Outstanding............................    19,400,443      3,636,558       2,750,552
                                                         ===========    ===========     ===========
</TABLE>
                 See notes to consolidated financial statements.






















                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                            MEDSCAPE, INC.

                                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY
                                         FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                         CLASS A                  CLASS B                               UNDESIGNATED
                                         -------                  -------                               ------------
                                       COMMON STOCK             COMMON STOCK         COMMON STOCK      PREFERRED STOCK
                                   -------------------      -------------------    ----------------    ----------------
                                   SHARES       AMOUNT      SHARES       AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT
<S>                                <C>         <C>          <C>         <C>        <C>       <C>        <C>        <C>
  Balance, January 1, 1997         1,079,000   $10,790      1,627,000   $16,270        --        --        --        --
  Issuance of  Series B
    preferred stock                       --        --             --        --        --        --        --        --
  Conversion of preferred stock           --        --             --        --        --        --        --        --
  Issuance of series C preferred
    stock                                 --        --             --        --        --        --        --        --
  Exercise of stock options               --        --         99,645       995                  --        --        --
  Contributed capital                     --        --             --        --        --        --        --        --
  Net loss                                --        --             --        --        --        --        --        --
                                   ---------   -------      ---------   -------   -------   -------   -------   -------
Balance, December 31, 1997         1,079,000    10,790      1,726,645    17,265        --        --        --        --
  Purchase of treasury stock              --        --             --        --        --        --        --        --
  Options issued to nonemployees          --        --             --        --        --        --        --        --
  Deferred stock compensation
    related to issuance of                --        --             --        --        --        --        --        --
    options
  Issuance of series C preferred
    stock                                 --        --             --        --        --        --        --        --
  Issuance of class B common
    stock (acquisition)
                                          --        --      3,650,870    36,510        --        --        --        --
  Exercise of stock options
                                          --        --        414,803     4,148        --        --        --        --
  Amortization of deferred stock
    compensation                          --        --             --        --        --        --        --        --
  Net loss                                --        --             --        --        --        --        --        --
                                   ---------   -------      ---------   -------   -------   -------   -------   -------
   Balance, December 31, 1998      1,079,000   $10,790      5,792,318   $57,923        --      $ --        --      $ --
                                   =========   =======      =========   =======   =======   =======   =======   =======
</TABLE>


<TABLE>
<CAPTION>
                                          SERIES A              SERIES B               SERIES C
                                          --------              --------               --------
                                       PREFERRED STOCK       PREFERRED STOCK        PREFERRED STOCK
                                      -----------------    -------------------    -------------------
                                      SHARES     AMOUNT    SHARES       AMOUNT    SHARES       AMOUNT
<S>                                   <C>        <C>       <C>         <C>        <C>         <C>
  Balance, January 1, 1997 .....      788,200    $7,882        --         --           --        --
  Issuance of  Series B
    preferred stock ............         --        --       123,974      1,240         --        --
  Conversion of preferred stock          --        --      (123,974)    (1,240)     326,087     3,261
  Issuance of series C preferred
    stock ......................         --        --          --         --      1,152,272    11,523
  Exercise of stock options ....         --        --          --         --           --        --
  Contributed capital ..........         --        --          --         --           --        --
  Net loss .....................         --        --          --         --           --        --
                                      -------    ------    --------    -------    ---------   -------
Balance, December 31, 1997 .....      788,200     7,882        --         --      1,478,359    14,784
  Purchase of treasury stock ...         --        --          --         --           --        --
  Options issued to nonemployees         --        --          --         --           --        --
  Deferred stock compensation
    related to issuance of .....         --        --          --         --           --        --
    options
  Issuance of series C preferred
    stock ......................         --        --          --         --        932,401     9,324
  Issuance of class B common
    stock (acquisition)
                                      -------    ------    --------    -------    ---------   -------
  Exercise of stock options
                                      -------    ------    --------    -------    ---------   -------
  Amortization of deferred stock
    compensation ...............         --        --          --         --           --        --
  Net loss .....................         --        --          --         --           --        --
                                      -------    ------    --------    -------    ---------   -------
   Balance, December 31, 1998 ..      788,200    $7,882        --      $  --      2,410,760   $24,108
                                      =======    ======    ========    =======    =========   =======
</TABLE>

                 See notes to consolidated financial statements.

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                            MEDSCAPE, INC.

                                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY
                                         FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                  SERIES D                                                 DEFERRED
                              PREFERRED STOCK      ADDITIONAL                 CONTRIBU-      STOCK
                                                    PAID-IN                   TION OF      COMPENSA-     NOTES
                             SHARES     AMOUNT      CAPITAL      WARRANTS     SERVICES       TION      RECEIVABLE
                             ------     ------      -------      --------     --------       ----      ----------
<S>                               <C>        <C>   <C>                 <C>           <C>   <C>         <C>   <C>
Balance, January 1, 1997          --          --       $15,301           --           --          --           --
   Issuance of series B
    preferred stock.......        --          --     1,498,760           --           --          --           --
   Conversion of                  --          --        (2,021)          --           --          --           --
  preferred stock
   Issuance of series C
    preferred stock.......        --          --     5,288,924           --           --          --           --
   Exercise of stock              --          --         3,078           --           --          --           --
  options.................
   Contributed capital....        --          --       642,364           --           --          --           --
   Net loss...............
                             -------     -------   -----------      -------     --------  ----------      -------
                                  --          --            --           --           --          --           --
Balance, December 31, 1997        --          --     7,446,406           --           --          --           --
   Purchase of treasury           --          --            --           --           --          --           --
  stock
   Options issued to
    nonemployees                  --          --        65,000           --           --          --           --
   Deferred stock
    compensation related          --          --       497,445           --           --    (497,445)          --
    to issuance of options
   Issuance of series C
    preferred stock.......        --          --     3,990,675           --           --          --           --
   Issuance of class B
    common stock                  --          --     2,154,013           --           --    (467,311)    (627,950)
    (acquisition)
   Exercise of stock              --          --         4,770           --           --          --           --
  options.................
  Amortization of
    deferred  stock               --          --            --           --           --     249,320           --
    compensation
   Net loss...............        --          --            --           --           --          --           --
                                  --          --            --  --       --  --       --          --           --
Balance, December 31, 1998        --  $       --   $14,158,309  $        --           --  $ (715,436)   $(627,950)
                                  ==  ==      ==   ===========  ==       ==  ==       ==  ==========    =========
</TABLE>


<TABLE>
<CAPTION>
                                             ACCUMULATED
                                                OTHER
                               ACCUMULATED   COMPREHEN-       TREASURY
                                 DEFICIT      SIVE LOSS         STOCK       TOTAL
                                 -------      ---------         -----       -----
<S>                           <C>                  <C>       <C>      <C>
Balance, January 1, 1997      $(1,344,490)          --            --  $(1,294,247)
   Issuance of series B
    preferred stock.......             --           --            --    1,500,000
   Conversion of                       --           --            --           --
  preferred stock
   Issuance of series C
    preferred stock.......             --           --            --    5,300,447
   Exercise of stock                   --           --            --        4,073
  options.................
   Contributed capital....             --           --            --      642,364
   Net loss...............     (3,463,914)                             (3,463,914)
                              -----------    ---------      --------  -----------
Balance, December 31, 1997     (4,808,404)          --            --    2,688,723
   Purchase of treasury                --           --        (3,277)      (3,277)
  stock
   Options issued to
    nonemployees                       --           --            --       65,000
   Deferred stock
    compensation related               --           --            --           --
    to issuance of options
   Issuance of series C
    preferred stock.......             --           --            --    3,999,999
   Issuance of class B
    common stock                       --           --            --    1,095,262
    (acquisition)
   Exercise of stock                   --           --            --        8,918
  options.................
  Amortization of
    deferred  stock                    --           --            --      249,320
    compensation
   Net loss...............     (3,900,619)          --            --   (3,900,619)
                              -----------           --            --   ----------
Balance, December 31, 1998    $(8,709,023)         $--        (3,277)  $4,203,326
                              ===========          ===        ======   ==========
</TABLE>
                 See notes to consolidated financial statements.

                                       26
<PAGE>


<TABLE>
<CAPTION>
                                                            MEDSCAPE, INC.

                                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY
                                          FOR THE YEAR ENDED DECEMBER 31, 1999, 1998 AND 1997

                                         CLASS A                CLASS B                                   UNDESIGNATED
                                         -------                -------                                   ------------
                                      COMMON STOCK           COMMON STOCK           COMMON STOCK         PREFERRED STOCK
                                      ------------           ------------           ------------         ---------------
                                    SHARES      AMOUNT     SHARES      AMOUNT      SHARES     AMOUNT     SHARES    AMOUNT
                                    ------      ------     ------      ------      ------     ------     ------    ------
<S>                               <C>          <C>        <C>          <C>        <C>         <C>             <C>       <C>
Balance, January 1, 1999            1,079,000   $10,790    5,792,318     $57,923          --         --        --        --
  Issuance of  series D
    preferred stock                        --        --           --          --          --         --        --        --
  Warrants issued as                       --        --           --          --          --         --        --        --
    compensation
  Issuance of class A & B
    common stock to CBS Corp.       7,397,208    73,972    6,541,160      65,412          --         --        --        --
  Issuance of class A common
    stock and series E
    preferred stock to NDC Corp.    1,000,000    10,000           --          --          --         --        --        --
  Warrants issued as
    compensation for services              --        --           --          --          --         --        --        --
  Exercise of stock options                --        --    1,311,773      13,118          --         --        --        --
  Initial public offering of
    common stock                           --        --           --          --   7,650,000     76,500        --        --
  Conversion to common stock at
    initial public offering        (9,476,208)  (94,762) (13,645,251)   (136,453) 37,030,144    370,302        --        --
  Deferred stock compensation
    related to issuance of                 --        --           --          --          --         --        --        --
    options
  Advertising and promotion
    services received for stock            --        --           --          --          --         --        --        --
  Revaluation of warrants
    issued as compensation for             --        --           --          --          --         --        --        --
    services
  Amortization of deferred
    stock compensation                     --        --           --          --          --         --        --        --
  Net loss                                 --        --           --          --          --         --        --        --
  Net unrealized loss on
investments                                --        --           --          --          --         --        --        --
Balance, December 31, 1999                 --  $     --           $           --  44,680,144  $ 446,802        --      $ --
                                           ==  ==    ==           ==          ==  ==========  =========        ==      ====
</TABLE>

<TABLE>
<CAPTION>
                                       SERIES A             SERIES B             SERIES C
                                       --------             --------             --------
                                    PREFERRED STOCK     PREFERRED STOCK       PREFERRED STOCK
                                    ---------------     ---------------       ---------------
                                    SHARES     AMOUNT    SHARES    AMOUNT     SHARES      AMOUNT
                                    ------     ------    ------    ------     ------      ------
<S>                                 <C>        <C>         <C>        <C>   <C>          <C>
Balance, January 1, 1999             788,200    $7,882        --        --    2,410,760   $24,108
  Issuance of  series D
    preferred stock                       --        --        --        --           --        --
  Warrants issued as                      --        --        --        --           --        --
    compensation
  Issuance of class A & B
    common stock to CBS Corp.             --        --        --        --           --        --
  Issuance of class A common
    stock and series E
    preferred stock to NDC Corp.          --        --        --        --           --        --
  Warrants issued as
    compensation for services             --        --        --        --           --        --
  Exercise of stock options               --        --        --        --           --        --
  Initial public offering of
    common stock                          --        --        --        --           --        --
  Conversion to common stock at
    initial public offering        (788,200)   (7,882)        --        --  (2,410,760)  (24,108)
  Deferred stock compensation
    related to issuance of                --        --        --        --           --        --
    options
  Advertising and promotion
    services received for stock           --        --        --        --           --        --
  Revaluation of warrants
    issued as compensation for            --        --        --        --           --        --
    services
  Amortization of deferred
    stock compensation                    --        --        --        --           --        --
  Net loss                                --        --        --        --           --        --
  Net unrealized loss on
investments                               --        --        --        --           --        --
Balance, December 31, 1999                --       $--        --       $--           --       $--
                                          ==       ===        ==       ===           ==       ===
</TABLE>

                 See notes to consolidated financial statements.

                                       27
<PAGE>


<TABLE>
<CAPTION>
                                                            MEDSCAPE, INC.

                                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY
                                          FOR THE YEAR ENDED DECEMBER 31, 1999, 1998 AND 1997

                                       SERIES D & E                                                DEFERRED
                                     PREFERRED STOCK      ADDITIONAL                CONTRIBU-       STOCK
                                                           PAID-IN                   TION OF       COMPENS       NOTES
                                     SHARES     AMOUNT     CAPITAL      WARRANTS     SERVICES       -ATION     RECEIVABLE
                                     ------     ------     -------      --------     --------       ------     ----------
<S>                                <C>          <C>       <C>          <C>         <C>             <C>         <C>
Balance, January 1, 1999                   --        --   $14,158,309         --             --     $(715,436) $(627,950)
  Issuance of series D
    preferred stock                 1,757,683    17,577    19,396,969         --             --            --         --
  Warrants issued as
    compensation                           --        --       (85,003)    85,003             --            --         --
  Issuance of class A & B
    common stock to CBS Corp.              --        --   156,317,070         --   (149,860,616)           --         --
  Issuance of class A common
    stock and series E
    preferred stock to NDC Corp.      400,000     4,000    19,422,040         --     (3,500,000)           --         --
  Warrants issued as
    compensation for services              --        --            --  5,060,000             --    (5,060,000)        --
  Exercise of stock options                --        --       252,324         --             --            --         --
  Initial public offering of
    common stock                           --        --    54,206,383         --             --            --         --
  Conversion to common stock at
    initial public offering        (2,157,683)  (21,577)      (85,520)        --             --            --         --
  Deferred stock compensation
    related to issuance of
    options                                --        --     2,614,225         --             --    (2,614,225)        --
  Advertising and promotion
    services received for stock            --        --            --         --      8,136,697            --         --
  Revaluation of warrants
    issued as compensation for
    services                               --        --            --  1,695,000             --    (1,695,000)        --
  Amortization of deferred
    stock compensation                     --        --            --         --             --     2,101,246         --
  Net loss                                 --        --            --         --             --            --         --
  Net unrealized loss on                   --        --            --         --             --            --         --
investments

Balance, December 31, 1999                 --  $     --  $266,196,797 $6,840,003  $(145,223,919) $(7,983,415)  $(627,950)
                                           ==  ==    ==  ============ ==========  ============= ============  =========
</TABLE>


<TABLE>
<CAPTION>
                                                  ACCUMULATED
                                                      OTHER
                                    ACCUMULATED  COMPREHENSIVE   TREASURY
                                       DEFICIT        LOSS         STOCK       TOTAL
                                       -------        ----         -----       -----
<S>                                  <C>                  <C>    <C>         <C>
Balance, January 1, 1999             $(8,709,023)            --    $(3,277)   $4,203,326
  Issuance of series D
    preferred stock                           --             --         --    19,414,546
  Warrants issued as
    compensation                              --             --         --            --
  Issuance of class A & B
    common stock to CBS Corp.                 --             --         --     6,595,838
  Issuance of class A common
    stock and series E
    preferred stock to NDC Corp.              --             --         --    15,936,040
  Warrants issued as
    compensation for services                 --             --         --            --
  Exercise of stock options                   --             --         --       265,442
  Initial public offering of
    common stock                              --             --         --    54,282,883
  Conversion to common stock at
    initial public offering                   --             --         --            --
  Deferred stock compensation
    related to issuance of
    options                                   --             --         --            --
  Advertising and promotion
    services received for stock               --             --         --     8,136,697
  Revaluation of warrants
    issued as compensation for
    services                                  --             --         --            --
  Amortization of deferred
    stock compensation                        --             --         --     2,101,246
  Net loss                           (36,711,716)            --         --   (36,711,716)
  Net unrealized loss on                      --        (36,201)        --       (36,201)
investments
Balance, December 31, 1999           $(45,420,739       (36,201)   $(3,277)  $74,188,101
                                     ============      ========   ========   ===========
</TABLE>
                 See notes to consolidated financial statements.

                                       28
<PAGE>

                                 MEDSCAPE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                     -----------------------
                                                                  1999          1998         1997
         <S>                                                  <C>           <C>          <C>
         OPERATING ACTIVITIES
           Net loss........................................   $   (36,711)   $   (3,901)  $    (3,464)
           Adjustments to reconcile net loss to net cash
              used in operating activities:
              Stock-based compensation expense.............         2,101           249            --
              Amortization of license fees.................           794            --            --
              Non-cash advertising and promotion...........         8,366            --            --
              Depreciation and amortization................         1,010           287           160
              Recruiting fees-- issuance of options........            --            65            --
           Changes in assets and liabilities:
              (Increase) decrease in accounts receivable           (4,596)          474          (284)
              Increase in prepaid marketing, expenses and
              other assets ................................       (12,891)           (6)          (21)
              Increase (decrease) in accounts payable and
              accrued liabilities..........................         8,696          (265)          (91)
              Increase (decrease) in deferred revenue......           781        (1,126)           92
                                                              -----------    -----------  -----------
                   Net cash used in operating activities          (32,450)       (4,223)       (3,608)
                                                              -----------    ----------   -----------
         INVESTING ACTIVITIES
           Purchase of fixed assets........................        (8,034)         (262)         (222)
           Acquisition of intangible assets................           (93)           --            --
           Investment in Softwatch.........................        (3,156)           --            --
           Purchase of investment securities...............      (136,561)           --            --
           Proceeds from maturities and sales of investment
              Securities...................................       100,162
           Payments for business acquired, net of cash
              Acquired (note 1)............................            --        (1,195)           --
                                                              -----------    -----------  -----------
                   Net cash used in investing activities          (47,682)       (1,457)         (222)
                                                              -----------    ----------   -----------
         FINANCING ACTIVITIES
           Proceeds from loan..............................            --            --           962
           Payment of loan.................................            --          (359)       (1,150)
           Proceeds from issuance of common stock..........        53,858            --            --
           Proceeds from issuance of preferred stock.......        28,870         4,000         6,801
           Proceeds from exercise of stock options.........           265             9             4
           Purchase of treasury stock......................            --            (3)           --
           Contributed capital.............................            --            --           642
                                                              -----------    ----------   -----------
                   Cash provided by financing activities           82,993         3,647         7,259
                                                              -----------    ----------   -----------
         Increase (decrease) in cash and cash equivalents..         2,861        (2,033)        3,429
         Cash and cash equivalents, beginning of period....         1,595         3,628           199
                                                              -----------    ----------   -----------
         Cash and cash equivalents, end of period..........   $     4,456    $    1,595   $     3,628
                                                              ===========    ==========   ===========
</TABLE>

                 See notes to consolidated financial statements.

                                       29
<PAGE>



                                 MEDSCAPE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1.  ORGANIZATION AND NATURE OF BUSINESS

         Medscape, Inc. was formed and incorporated under the laws of the State
of New York in March 1996, and commenced operations in April 1996. The Company
was reincorporated in Delaware in December 1998. The Company operates
Medscape.com, a healthcare web site for physicians and allied healthcare
professionals such as pharmacists and nurses, and CBS.Healthwatch.com, a
separate web site to enhance and personalize the consumer experience. The
Company's web sites are a valuable resource that enables members to make
better-informed healthcare decisions. The Company provides comprehensive,
authoritative and timely medical information, including original proprietary
articles written by renowned medical experts. The Company sells advertising and
sponsorship, market research and other services to pharmaceutical, medical
device and other healthcare companies. The Company also sells products, such as
medical books, to physicians, allied healthcare professionals and consumers. The
Company operates in one segment in the United States.

         Effective October 27, 1998, the Company consummated an acquisition in
accordance with a purchase agreement with Healthcare Communications Group, LLC,
("HCG") a Maryland corporation. HCG is a medical communications/education
company that develops, produces and distributes unique live, print, digital and
Internet-based programs for healthcare professionals funded by pharmaceutical
companies. The agreement provided for the purchase of the membership interests
of HCG.

         The purchase price of $2,304,671 was allocated principally to working
capital and assets, including accounts receivable and goodwill (see below).

         The acquisition of HCG has been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on their respective estimated fair
values at the date of acquisition. The excess of the purchase price over the
aggregated estimated fair values of the net tangible assets acquired has been
recorded as goodwill, which is being amortized over fifteen years.

         The purchase price was allocated in the following manner:

            Purchase price:
              Cash at closing........................               $ 1,075,000
              Legal and accounting fees..............                   134,409
              Common stock 1,825,435 shares at $0.60
              (Note8) ...............................                 1,095,262
                                                                    -----------
                                                                      2,304,671

            Liabilities assumed:
              Accounts payable.......................   $   74,777
              Demand note, Medscape..................      275,000
              Deferred revenue.......................    1,121,193
              Payroll tax liabilities................        5,182    1,476,152
                                                        ----------  -----------
            Assets purchased:
              Cash...................................       14,081
              Accounts receivable....................    1,190,359
              Prepaid expenses.......................       54,730
              Fixed assets...........................       76,777
              Intangibles............................        5,383   (1,341,330)
                                                        ----------  -----------
            Total goodwill...........................               $ 2,439,493
                                                                    ===========

         The following presents, on a pro forma basis, the Company's operations
as if Medscape and HCG were combined as of the beginning of the periods
presented.

                                                JANUARY 1,     JANUARY 1,
                                                   1998           1997
                                                       (UNAUDITED)

                            Total revenue      $ 5,653,660    $ 4,677,687
                                               ===========    ===========
                            Net loss.....      $(3,928,202)   $(3,086,341)
                                               ===========    ===========

                                       30
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of the
Company and its subsidiary, HCG. The results of the subsidiary acquired are
included from the date of acquisition. All significant intercompany accounts and
transactions have been eliminated in consolidation.

USE OF ESTIMATES

         The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.

Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid short-term cash investments
purchased with maturities of three months or less as cash and cash equivalents.

INVESTMENT SECURITIES

         The Company maintains a portfolio of short-term investment securities.
All such investments are classified as available for sale, which requires that
each security be carried at fair value with changes in fair value reflected as a
component of comprehensive income within stockholders' equity.

CONCENTRATION OF CREDIT RISK

         The Company's financial instruments that are exposed to concentration
of credit risks consist primarily of cash and cash equivalents, investment
securities, and trade accounts receivable. The Company maintains its cash and
cash equivalents in bank accounts which, at times, exceed federally insured
limits. The Company maintains its investment securities with an internationally
known financial institution. The Company has not experienced any losses in these
accounts. The Company believes it is not exposed to any significant credit risk
on cash and cash equivalents or its investment securities. Concentrations of
credit risks with respect to accounts receivable are limited because of the
Company's expanding customer base and the credit worthiness of its three major
customers (see Note 12), making up the majority of the accounts receivable
balance.

DEPRECIATION AND AMORTIZATION

         The Company provides for depreciation of property and equipment based
on the estimated useful lives of the applicable assets and the life of leases or
the life of the leasehold improvement if less, using the straight-line method.

         Expenditures for renewals and improvements which extend the useful
lives of assets are capitalized, while maintenance and repairs are charged to
operations as incurred.

SOFTWARE DEVELOPED FOR INTERNAL USE

The Company accounts for the costs of developing software for internal use under
the provisions of American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) No. 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE which was effective for the year
ended December 31, 1999. This SOP provides for the capitalization of both
internal costs, such as payroll and payroll related costs, and

                                       31
<PAGE>

                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

external costs that are directly related to the development of certain systems
and related software. Medscape amortizes these costs over the anticipated life
of the systems. Prior to January 1, 1999, the Company expensed all internal
costs related to software development.

GOODWILL, OTHER INTANGIBLE ASSETS AND RELATED AMORTIZATION

         Goodwill represents the excess of cost over the fair value of the net
assets acquired of HCG and is being amortized using the straight-line method
over fifteen years.

         Other intangible assets consist of licenses and trademarks which are
being amortized using the straight-line method over their estimated useful life.

         On June 15, 1999, the Company purchased 1,040,170 Series A Preferred
Shares of Softwatch Ltd. (Softwatch), an Israeli company, for $2,999,954. At the
same time, the Company and Softwatch entered into a License and Web Site
Development Agreement pursuant to which the Company licensed software from
Softwatch to support its consumer site and for Softwatch to provide ongoing
support services for the consumer site. On the date of the Agreement, the
Company paid $500,000 in cash of a total $1,500,000 licensing fee. $500,000 of
the remaining balance will be paid upon delivery of the software and $500,000
upon acceptance by the Company. The Company will also pay royalties under the
Agreement. The Company accounts for its investment of Softwatch on the cost
method.

IMPAIRMENT OF LONG LIVED ASSETS

         The Company's long-lived assets and identifiable intangibles are
reviewed for impairment whenever events or changes in circumstances indicate
that the net carrying amount may not be recoverable. When these events occur,
the Company measures impairment by comparing the carrying value of the
long-lived asset to the estimated undiscounted future cash flows expected to
result from use of the assets and their eventual disposition. If the sum of the
expected undiscounted future cash flows is less than the carrying amount of the
assets, the Company would recognize an impairment loss. The Company determined
that, as of December 31, 1999 and 1998, there had been no impairment in the
carrying value of the long-lived assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The value of cash and cash equivalents, accounts receivable and
accounts payable approximates their carrying value due to their short-term
maturities. The investment securities are carried at their fair market value.

REVENUE RECOGNITION

         Income is derived from a variety of sources including advertising,
sponsorship of on-line journals, medical conferences, market research and
e-commerce. Revenues from advertising are recognized in the period in which the
advertisement is displayed. Revenue from sponsored programs, such as medical
conferences, are recognized when the conference is completed and the next-day
conference summary is published on the Company's Web site. Revenues from
sponsored content, such as clinical modules, is recognized on a percentage of
completion basis. Revenues from market research are recognized upon completion
of the project.

DEFERRED REVENUE

         Deferred revenue represents amounts billed in excess of revenues
recognized. Included in accounts receivable are amounts due (under contract)
relating to deferred revenue.

                                       32
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INCOME TAXES

     The Company  accounts for income taxes under the provisions of Statement of
Financial  Accounting  Standards ("SFAS") No. 109,  ACCOUNTING FOR INCOME TAXES.
SFAS No. 109 establishes  financial  accounting and reporting  standards for the
effect of income  taxes that  result  from  activities  during the  current  and
preceding  years.  SFAS No. 109  requires an asset and  liability  approach  for
financial reporting for income taxes.

NET LOSS PER COMMON SHARE

         Basic loss per common share was computed by dividing net loss by the
weighted average number of shares of common stock outstanding. Diluted loss per
common share has not been presented since the impact for options, warrants and
conversion of preferred shares would have been anti-dilutive (see notes 8 and
9).

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which establishes accounting and reporting
standards for derivative instruments and hedging activities, and, as amended, is
required to be adopted during the Company's year ending December 31, 2001.
Generally, SFAS No. 133 requires that an entity recognize all derivatives as
either an asset or liability and measure those instruments at fair value, as
well as identify the conditions for which a derivative may be specifically
designated as a hedge. The Company currently does not have any derivative
instruments and is not engaged in hedging activities.

RECLASSIFICATIONS

         Certain prior years' amounts have been reclassified to conform to the
current year presentation.

3.  INVESTMENT SECURITIES

         At December 31, 1999, investment securities available for sale consist
of the following (in thousands):

<TABLE>
<CAPTION>
                                                   GROSS                                 FAIR
                                                 AMORTIZED   UNREALIZED   UNREALIZED    MARKET
                  CATEGORY                          COST        GAINS       LOSSES      VALUE
                  <S>                            <C>         <C>          <C>          <C>
                  Commercial paper...........    $    7,667  $        1           --   $  7,668
                  Corporate debt securities..        12,176          --          (10)    12,166
                  Asset backed securities....        16,556          --          (27)    16,529
                                                 ----------  ----------   ----------   --------
                                                 $   36,399  $        1   $      (37)  $ 36,363
                                                 ==========  ==========   ==========   ========
</TABLE>

         All of the commercial paper and corporate debt securities have
contractual maturity dates of less than one year. All of the asset-backed
securities have effective maturity dates of less than one year and have
contractual maturity dates ranging from less than one year to greater than ten
years. A summary of the contractual maturities is as follows (in thousands):

                                                   GROSS       FAIR
                                                 AMORTIZED    MARKET
                  MATURITY CATEGORY                 COST      VALUE

                  Due within 1 year..........    $   19,843  $  19,834
                  Due after 1 year though 5
                  years......................        14,174     14,150
                  Asset backed securities....         2,382      2,379
                                                 ----------  ---------
                                                 $   36,399  $  36,363
                                                 ==========  =========

                                       33
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  FIXED ASSETS

         Fixed Assets consist of the following (in thousands):

                                                  DECEMBER 31,
                                            ----------------------  USEFUL LIFE
             DESCRIPTION                       1999        1998      (IN YEARS)

             Computers and peripherals..    $    4,122  $      602        3
             Software...................         3,716          --        3
             Furniture and fixtures.....           205          66        5
             Leasehold improvements.....           798         139        2
                                            ----------  ----------
                                                 8,841         807

             Less accumulated depreciation      (1,273)       (427)
                                            ----------  ----------
             Fixed assets-- net.........    $    7,568  $      380
                                            ==========  ==========


5.  INTANGIBLE ASSETS

         Intangible Assets consist of the following (in thousands):

                                                  DECEMBER 31,
                                             --------------------   USEFUL LIFE
              DESCRIPTION                       1999        1998    (IN YEARS)
              Trademarks.................    $     147    $     55       15
              Licenses...................       11,000          --        *
              Goodwill...................        2,439       2,439       15
              Organization costs.........           --          23        5
                                             ---------    --------
                                                13,586       2,517

              Less accumulated amortization       (996)        (61)
                                            ----------    --------
              Intangible assets-- net....   $   12,590       2,456
                                            ==========    ========


         In 1997, the Company changed the useful life of intangible assets from
40 years for trademarks and 15 years for organization costs to 15 and 5 years,
respectively, to more properly reflect their expected useful lives in the
current business environment. The impact of the change was not material to the
Company's financial statements.

                  * This category is comprised of 2 licenses, the first license
is valued at $7,000,000 and is being amortized over 7 years and the second
license is valued at $4,000,000 and is being amortized over it's useful life of
3 years.

6.  INCOME TAXES

         No provision for income taxes has been made because the Company has
sustained cumulative losses since the commencement of its operations.

         At December 31, 1999, the Company had net operating loss carryforwards
("NOLs") of approximately $51.7 million. Utilization of a certain portion of
these losses against future income may be subject to limitations. The NOLs are
scheduled to expire in the following years:

                                 2011... $ 663,000
                                 2012... 3,306,000
                                 2018... 3,583,000
                                2019... 43,168,000

                                       34
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         In accordance with SFAS No. 109, the Company has computed the
components of deferred income taxes as follows (in thousands):

                                                      DECEMBER 31,
                                                      ------------
                                            1999          1998         1997
              Deferred tax assets...    $    23,756   $     3,420  $     1,961
              Less valuation allowance      (23,756)       (3,420)      (1,961)
                                        -----------   -----------  -----------
              Net deferred tax assets   $        --   $        --  $        --
                                        ===========   ===========  ===========

         The principal component of the Company's deferred tax asset is its
NOLs. At December 31, 1999 and 1998, a valuation allowance equal to the amount
of the deferred tax assets is provided as it has not been established that it is
more likely than not that the tax benefits will be realized.

7.  RETIREMENT PLAN

         The Company has a 401(k) Retirement/Savings Plan (the "Plan") for all
eligible employees. Employees are eligible to participate after they have
completed three months of service. The Company is not required to, but may match
employee contributions. In addition, the Company may make a discretionary
contribution to the Plan. The Company did not make any contributions to the Plan
for the years ended December 31, 1999, 1998 or 1997.

8.  STOCKHOLDERS' (DEFICIENCY) EQUITY

         The only authorized stock of the Company at December 31, 1999 is the
common stock and the Undesignated Preferred Stock. All other issues were either
redesignated or converted to common stock with the Company's initial public
offering on September 27, 1999.

         In January 1997, the Company issued 123,974 shares of Series B
preferred stock at $12.10 per share for $1,500,000. In October 1997, the Company
issued 1,152,272 shares of Series C preferred stock at $4.60 per share for
$5,300,447. As part of this offering, the Company converted all of the Series B
preferred stock outstanding for 326,087 shares of Series C Preferred stock at
$4.60 per share. The total capital raised in 1997 from these offerings was
$6,800,447, of which $800,000 was used to pay the principal and interest on the
loan payable to SCP Communications, Inc. ("SCP"), a related party, with the
remainder used to fund the Company's ongoing operations.

         During 1997, SCP contributed to capital $642,364 which the Company owed
to it under an administrative services agreement (note 13).

         In March 1998, the Company issued 932,401 shares of Series C preferred
stock at $4.29 per share for $3,999,999. In October 1998, the Company issued
1,825,435 shares of Class B common stock in connection with the acquisition of
Healthcare Communications Group. The Company also received a note for $627,950
from the majority shareholder in lieu of payment for an additional 1,825,435
shares of Class B common stock. The note is presented as a contra to
shareholders' equity. Such shares vest over 3 years. The fair value in excess of
$627,950 has been included in the charge to deferred stock compensation as an
offset in the equity section of the balance sheet and is being amortized over
three years.

         On May 17, 1999, the Company effected a 2.5-for-one stock split for
each outstanding share of each class of common shares. In connection with the
stock split, the number of authorized shares of Class A common stock was
increased to an aggregate of 1,079,000 shares, the number of authorized shares
of Class B common stock was increased to an aggregate of 6,701,363 shares and
the preferred stock became convertible into 2.5 times as many shares of the
Class A common stock and each outstanding warrant and option became exercisable
into 2.5 times as many shares of the Class B common stock. The 2.5-for-one stock
split described above has been applied retrospectively for all periods
presented.

                                       35
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         On September 27, 1999, the Company completed an initial public offering
that ultimately, after inclusion of the exercise on September 30, 1999 of the
900,000 share underwriter's over-allotment, resulted in the issuance of
7,650,000 shares of common stock. Net proceeds received, after deducting
offering costs, totaled approximately $54.4 million, including approximately
$6.7 million received on October 5, 1999 from the exercise of the
over-allotment. Simultaneous with the offering, each outstanding share of Class
B common stock was converted into Class A common stock on a one-for-one basis
and Class A common stock was concurrently redesignated as common stock.
Additionally, each outstanding share of Series A, Series C-1, and Series D
preferred stock was converted into 2.5 shares of common stock, Series C
preferred stock was converted into 2.68 shares of common stock, and Series E
preferred stock was converted into 3.125 shares of common stock. The conversions
of preferred stock resulted in the issuance of 13,908,685 shares of common
stock. An increase in the number of authorized shares of common stock to
100,000,000 was also effected simultaneous with this offering and a new class of
5,000,000 shares of undesignated preferred stock was also authorized.

         During September 1999, stock was issued to CBS corporation (CBS) and
National Data Corporation (NDC) as discussed in Note 10.

9.  STOCK OPTION PLAN

         During 1996, the Board of Directors adopted the Medscape, Inc. 1996
Stock Option Plan (the "Plan"). Pursuant to the Plan, the Board of Directors
granted incentive stock options to certain key employees and non-qualified stock
options to certain key non-employees all at fair value. Under the Plan approved
by the Board of Directors, the total number of shares of common stock that may
be granted is 8,250,000.

         The incentive stock options granted permit key employees the right and
option to purchase shares of common stock. Except for a change of control, as
defined, an option may not be exercised within one year from the date of the
grant and no option will be exercisable after 10 years from the date granted.
Stock options vest over a three or four-year period, with one-third or
one-quarter of the options becoming exercisable one year from date of grant. For
options issued with an exercise below fair market value, the excess of the fair
market value over the exercise price has been charged to stock based
compensation expense and is being amortized over four years, the vesting period
of the options.

         The non-qualified stock options also permit certain employees and
non-employees the right and option to purchase shares of common stock. Except
for a change of control, as defined, an option may not be exercised within one
year from the date of the grant and no option will be exercisable after 10 years
from the date granted. Stock options vest over a four-year period, with
one-quarter of the options becoming exercisable one year from date of grant. For
options issued with an exercise price below fair market value, the excess of the
fair market value over the exercise price has been charged to stock based
compensation expense and is being amortized over four years, the vesting period
of the options.

         In addition, the non-qualified stock options granted permit other
non-employees the option to purchase shares of common stock. One-quarter of the
options are exercisable one year from date of grant. For options issued with an
exercise price below fair market value, the excess of the fair market value over
the exercise price has been charged to stock based compensation expense and is
being amortized over four years, the vesting period of the options.

                                       36
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Transactions involving the incentive stock options granted to key
employees are summarized as follows:

                                                                   EXERCISE
                                                        OPTION       PRICE
                                                        SHARES     PER SHARE
               Options outstanding January 1, 1997      284,677   $          --
                 Granted............................    557,500     .144 & .172
                 Exercised..........................     (7,978)           .011
                 Canceled...........................   (109,977)             --
                                                      ---------   -------------
               Options outstanding December 31, 1997    724,222     .011 - .172
                 Granted............................  1,650,118     .172 & .344
                 Exercised..........................     (7,797)    .011 & .144
                 Canceled...........................    (48,125)   .144 & .0172
                                                      ---------   -------------
               Options outstanding December 31, 1998  2,318,418       .011-.344
                 Granted............................  3,316,038   8.625 - 10.00
                 Exercised..........................   (946,049)     011 - 3.40

                 Canceled...........................   (177,600)   .144 - 10.00
                                                      ---------   -------------
               Options outstanding December 31, 1999   4,510,807    .011-.10.00
                                                      ==========  =============


         Employee options exercisable at December 31, 1999, 1998 and 1997 were
1,343,091, 344,873 and 63,325 respectively.

         SFAS No. 123 provides for a fair value based method of accounting for
employee options and options granted to non-employees and measures compensation
expense using an option valuation model that takes into account, as of the grant
date, the exercise price and expected life of the option, the current price of
the underlying stock and its expected volatility, expected dividends on the
stock, and the risk-free interest rate for the expected term of the options. For
the years ended December 31, 1996 and 1997 the fair value of options granted to
non-employees were nominal as determined using the Black-Scholes option pricing
model.

         The Company has elected to follow Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options. The Company has
issued its options at fair value at the date of grant. Under APB 25, because the
exercise price of the Company's employee stock options equals the fair value of
the underlying stock on the date of grant, no compensation expense is
recognized.

         Pro forma disclosures as if the Company adopted the cost recognition
requirement under SFAS 123 is presented below.

                                    DECEMBER 31,    DECEMBER 31,   DECEMBER 31,
                                        1999           1998            1997

            Net loss as reported    $    36,712    $     3,901     $     3,464
            Net loss pro forma           46,126          3,976           3,482

         The fair value of options granted under the Plan for the years ended
December 31, 1999, 1998 and 1997 in complying with SFAS No. 123 was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used: no dividend yield, no expected
volatility in 1997 and 1998, 75.657% was used in 1999, risk free interest rate
of 5.66% as of December 31, 1997, 4.60% as of December 31, 1998 and 6.00% as of
December 31, 1999, and expected lives of 3.25 years.

                                       37
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Transactions involving non-qualified stock options granted to
non-employees are summarized as follows:

                                                                    EXERCISE
                                                        OPTION        PRICE
                                                        SHARES      PER SHARE
               Options outstanding January 1, 1997    1,952,418           .011
                 Granted............................    175,000           .144
                 Exercised..........................    (91,668)          .011
                 Canceled...........................     (6,018)          .011
                                                      ---------  -------------
               Options outstanding December 31, 1997  2,029,732    .011 & .144
                 Granted............................    340,000    .172 & .344
                 Exercised..........................   (407,005)   .011 & .144
                 Canceled...........................    (89,678)   .011 & .172
                                                      ---------  -------------
               Options outstanding December 31, 1998  1,873,049  $ .011 - .344
                 Granted............................          -              -
                 Exercised..........................   (365,725)   .011 & .172
                 Canceled...........................    (16,050)          .011
                                                      ---------  -------------
               Options outstanding December 31, 1999  1,491,274  $ .011 - .344
                                                      =========  =============

         Non-employee options exercisable at December 31, 1999, 1998 and 1997
were 873,693, 998,330 and 625,742.5 respectively.

         For options granted to non-employees in 1998, an amount equal to the
fair value of the services provided aggregating $65,000 is included as a charge
to general and administrative expenses in the 1998 statement of operations.

WARRANTS:  TRANSACTION WITH AMERICA ONLINE, INC.

         On September 3, 1999, the Company entered into an agreement with
America Online, Inc., under which AOL has agreed to promote the Company's
co-branded Web sites, through contextual links and banners, on the following AOL
properties: AOL, AOL.com, CompuServe Service, Netscape Netcenter and Digital
City. In addition, the Company has paid AOL $13 million and will pay an
additional $20 million over the next two years. These amounts will be charged to
earnings over the three-year life of the contract. In addition, the Company
granted AOL two seven-year warrants, each to purchase up to 1,352,158 shares of
the Company's common stock. One of the warrants fully vested on signing and has
an exercise price of $10 per share. The other warrant will vest over a
three-year period based on AOL meeting specified performance requirements and
will have exercise prices equal to the fair market value of the Company's common
stock at the time of vesting. At the time of issuance, each warrant had a value
of approximately $2,530,000, as determined using the Black-Scholes option
pricing model. The value of the performance warrant was approximately $4,225,000
as of December 31, 1999 as determined using the Black-Scholes option pricing
model. The value of the fully vested warrant is fixed and will be charged to
earnings over the three-year AOL contract, whereas the warrant that vests over
three years will be charged to earnings adjusted variably over the vesting
period.

WARRANTS:  CREDIT SUISSE FIRST BOSTON - RELATED TO PRIVATE FINANCING

         In March 1999, in connection with the placement of the Series D
preferred stock, the Company issued 14,887.5 warrants of Class B common stock to
its financial advisor. Each warrant entitles the warrant holder to purchase one
share of common stock for $0.004. The value of the warrants, determined using
the Black-Scholes pricing model, was $85,000.

10.  SIGNIFICANT TRANSACTIONS

TRANSACTIONS WITH CBS CORPORATION

             On July 7, 1999, the Company entered into a common stock Purchase
agreement, and on August 3, 1999, in

                                       38
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

related transactions, it entered into an Advertising and Promotional Agreement,
and a Trademark and Content Agreement with CBS Corporation (CBS). Under the
Stock Purchase Agreement, the Company sold 7,397,208 shares of Class A common
stock and 6,541,160 shares of Class B common stock to CBS for an aggregate
purchase price of $157,000,000, of which $139,384 was paid in cash, $149,860,616
is to be paid through the advertising services to be provided by CBS in
accordance with the Advertising and Promotion Agreement, and $7,000,000 is to be
paid through the grant of rights under the Trademark and Content Agreement.
Subsequent to the execution of the agreement, the Class B common stock was
converted on a one-for-one basis into Class A common stock that was concurrently
redesignated as common stock upon completion of the Company's initial public
offering (Note 8). Over the seven-year term of the Advertising and Promotion
Agreement, CBS will arrange for the placement of approximately $150 million of
advertising and promotion in the United States for the Company's consumer and
professional Web sites and their other products and services. Under the
Trademark and Content Agreement, CBS granted the Company a license to the "CBS"
trademark and "Eye" design and to health related news content for a seven-year
period. Under the agreement CBS retains significant control over the use and
presentation of the CBS health content and CBS trademarks.

         The $149,860,616 of advertising services to be provided by CBS will be
expensed as used over the life of the agreement. In addition, the trademark
license fee of $7,000,000 will be amortized on a straight-line basis over the
life of the agreement.

TRANSACTIONS WITH NATIONAL DATA CORPORATION

         On August 4, 1999, the Company sold 400,000 shares of Series E
preferred stock at a purchase price of $25 per share and 1,000,000 shares of
Class A common stock at a purchase price of $10 per share to National Data
Corporation (NDC), which included a $10,000,000 cash investment and an
additional $10,000,000 attributed to licensing and promotion to be provided by
NDC and credits against future commission amounts due by the Company to NDC. The
Series E preferred stock was subsequently converted into 1,250,000 shares of
common stock and the Class A common stock was redesignated as common stock upon
completion of the Company's initial public offering (Note 8). $6,000,000 will be
expensed as used over the three-year life of the agreement. In addition, the
license fee of $4,000,000 will be amortized on a straight-line basis over the
life of the agreement.

11.  EMPLOYMENT AGREEMENTS

         The Company has employment agreements with several employees ranging
from one to five years, with commitments aggregating in each of the years ending
December 31 (in thousands); $1,485 in 2000, $1,234 in 2001, $470 in 2002 and
$163 in 2003 and $0 in 2004.

12.  MAJOR CUSTOMERS

         For the year ended December 31, 1999, there were no sales to a single
customer in excess of 10% of revenues. For the year ended December 31, 1998,
sales to two major customers represent 27% and 14%. For the year ended December
31, 1997, sales to three major customers represented 15%, 14% and 13%.

13.  ADMINISTRATIVE SERVICES AGREEMENT

         On April 1, 1996, the Company and SCP, a company controlled by the same
stockholders, entered into a administrative services agreement under which SCP
provided the Company with administrative, support services, and sufficient space
for the Company to conduct its business. This agreement had been extended
through April 30, 1999.

                                       39
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         At December 31, 1999, the Company did not owe SCP any amounts under the
agreement compared to an aggregate due of $50,862 and $465,916 at December 31,
1998 and 1997, respectively. SCP provided services aggregating, $173,985,
$740,739 and $1,074,307 for the years ended December 31, 1999, 1998 and 1997,
respectively. In management's opinion, all of these services were provided and
paid for at a fair market value.

         The Company and SCP have entered into a ten-year "Publishers' Circle
Agreement" whereby SCP grants the Company the right to distribute its content on
the Web and to provide the content for worldwide on-line search and retrieval.
Additionally, SCP agrees to promote the Company in its publications, and run
advertising in every issue of its journals. In return, SCP can sell all of the
Company's products including banner advertising for which SCP will receive a
commission.

14.  SUBSEQUENT EVENTS (UNAUDITED)

ACQUISITION OF DIALOG MEDICAL

         In February of 2000, the Company signed a plan of merger and
reorganization to acquire all of the outstanding shares of Dialog Medical, Inc.,
a Delaware corporation, in exchange for 150,000 shares of the Company's common
stock upon closing and an additional 125,000 shares subject to certain
performance criteria. Dialog Medical provides integrated patient education and
informed consent materials for physicians and consumers.

FORMATION OF MEDSCAPE EUROPE

         On February 9, 2000 the Board of Directors approved the creation of
Medscape Europe to accelerate the Company's international expansion in the face
of rising global demand for Web-based health information and services. In
addition to its European venture, the Company already operates a
Japanese-language site, Medscape Japan.

MERGER WITH MEDICALOGIC

         On February 21, 2000, the Company entered into an agreement to merge
with MedicaLogic, Inc. The Company's shareholders will receive 0.323 shares of
MedicaLogic common stock for each share of the Company's common stock. The
transaction will become effective upon approval by the shareholders of the two
companies and the satisfaction of other customary conditions. In connection with
the proposed transaction, the Company issued warrants to purchase 100,000 shares
of its common stock at $9.3125 per share to its financial advisor. Simultaneous
with the announcement of the merger with MedicaLogic, MedicaLogic announced that
it had agreed to acquire Total eMed, Inc., a provider of electronic medical
transcription services, for approximately eight million shares of MedicaLogic's
common stock.









                                       40
<PAGE>


                                 MEDSCAPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15.  QUARTERLY FINANCIAL DATA (UNAUDITED)

         The following table presents unaudited quarterly results of operations
for 1998 and 1999. This unaudited information has been prepared on the same
basis as the audited consolidated financial statements. In the opinion of
management, this table includes all adjustments, consisting only of normal
recurring adjustments, that are considered necessary for a fair presentation of
the Company's financial position and results of operations for the quarters
presented.

<TABLE>
<CAPTION>
                   1999                                     Quarter Ended (in thousands)
                                             March 31        June 30       September 30     December 31
     <S>                                     <C>             <C>             <C>              <C>
      Revenue                                $ 1,644         $ 3,285          $ 2,209         $ 4,018
                                             -------         -------          -------         -------
      Operating Expenses
        Editorial, production,
          content and technology               1,268           2,653            3,293           5,753
        Sales and Marketing                    1,247           2,682            4,866          18,149
        General and administrative               562             891            1,882           2,713
        Depreciation and amortization             95             130              193             592
       Stock-based compensation                  298             482              537             784
                                                 ---             ---              ---             ---
      Total Operating Expenses                 3,470           6,838           10,771          27,991
                                               -----           -----           ------          ------
      Loss from Operations                    (1,826)         (3,553)          (8,562)        (23,973)
        Interest expense (income)                (81)           (215)            (191)           (716)
                                                ----           -----            -----           -----
      Net Loss                               ($1,745)        ($3,338)         ($8,371)       ($23,257)
                                             =======         =======          =======        ========
      Basic net loss per share                ($0.25)         ($0.46)          ($0.46)         ($0.52)
                                             =======         =======          =======         =======
      Weighted average number of               6,871           7,291           18,356          44,680
                                               =====           =====           ======          ======
      shares of common stock
      outstanding
</TABLE>

<TABLE>
<CAPTION>
                   1998                                 Quarter Ended (in thousands)
                                         March 31        June 30       September 30     December 31
<S>                                         <C>             <C>            <C>             <C>
      Revenue                                $ 551           $ 526            $ 479         $ 1,513
                                             -----           -----            -----         -------
      Operating Expenses
        Editorial, production,
          Content and technology               404             509              565           1,216
        Sales and Marketing                    340             525              649           1,006
        General and administrative             311             369              357             432
        Depreciation and amortization           47              49               51             140
        Stock-based compensation              --             --              --                 249
                                              --             --              --                 ---
      Total Operating Expenses               1,102           1,452            1,622           3,043
                                             -----           -----            -----           -----
      Loss from Operations                   (551)           (926)          (1,143)         (1,530)
        Interest expense (income)             (49)           (100)             (72)            (28)
                                              ----           -----             ----            ----
      Net Loss                              ($502)          ($826)         ($1,071)        ($1,502)
                                            ======          ======         ========        ========
      Basic net loss per share              ($.18)          ($.29)           ($.35)         ($0.26)
                                            ======          ======           ======         =======
      Weighted average number of
      shares of common stock
       outstanding                           2,820           2,848            3,030           5,825
                                             =====           =====            =====           =====
</TABLE>

                                       41
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Healthcare Communications Group, LLC
Potomac, Maryland

         We have audited the accompanying balance sheets of Healthcare
Communications Group, LLC ("HCG") as of December 31, 1997 and October 27, 1998,
and the related statements of operations, members' capital, and cash flows for
the year ended December 31, 1997 and the ten months ended October 27, 1998.
These financial statements are the responsibility of HCG's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, such financial statements present fairly, in all
material respects, the financial position of HCG at December 31, 1997 and
October 27, 1998, and the results of its operations and its cash flows for the
year ended December 31, 1997 and the ten months ended October 27, 1998 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

New York, New York
April 9, 1999

                                       42
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                                 BALANCE SHEETS
                     DECEMBER 31, 1997 AND OCTOBER 27, 1998

<TABLE>
<CAPTION>
                                                           DECEMBER 31,   OCTOBER 27,
                                                               1997           1998
<S>                                                         <C>        <C>
   ASSETS
   Current assets:

     Cash and cash equivalents (Note 2)..............       $  54,286   $    14,081
     Accounts receivable.............................         520,388     1,190,359
     Prepaid expenses and other assets...............         116,063        54,730
                                                            ---------   -----------
             Total current assets....................         690,737     1,259,170
   Property and equipment-- net (Note 3).............          29,875        76,777
   Intangible assets-- net...........................           6,800         5,383
                                                            ---------   -----------
             Total assets............................       $ 727,412   $ 1,341,330
                                                            =========   ===========

   LIABILITIES AND MEMBERS' CAPITAL (DEFICIENCY IN
   CAPITAL)
   Liabilities:
     Accounts payable................................       $ 121,306   $    23,012
     Accrued expenses................................          47,243        56,946
     Demand note due to Medscape, Inc. (Note 4)......              --       275,000
     Deferred revenue (Note 2).......................         190,000     1,121,193
                                                            ---------   -----------
             Total liabilities.......................         358,549     1,476,151
   Commitments (Note 4)
   Members' capital (deficiency in capital)..........         368,863      (134,821)
                                                            ---------   -----------
             Total liabilities and members' capital..       $ 727,412   $ 1,341,330
                                                            =========   ===========
</TABLE>
                       See notes to financial statements.












                                       43
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                            STATEMENTS OF OPERATIONS
                  FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE

                        TEN MONTHS ENDED OCTOBER 27, 1998

                                                                        TEN
                                                          YEAR        MONTHS
                                                          ENDED        ENDED
                                                      DECEMBER 31,  OCTOBER 27,
                                                          1997         1998
        Revenues.................................      $3,155,504  $ 2,584,615
                                                       ----------  -----------
        Operating expenses:
          Editorial, production, content and            1,853,118    1,736,351
            technology...........................
          General and administration.............         923,547      867,970
          Depreciation and amortization..........           4,231        9,419
                                                       ----------  -----------
                  Total operating expenses.......       2,780,896    2,613,740
                                                       ----------  -----------
        Income (loss) from operations............         374,608      (29,125)
          Interest income........................          (2,965)      (1,542)
                                                       ----------  -----------
        Net income (loss)........................      $  377,573  $   (27,583)
                                                       ==========  ===========

                       See notes to financial statements.









                                       44
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

             STATEMENTS OF MEMBERS' CAPITAL (DEFICIENCY IN CAPITAL)
                  FOR THE TEN MONTHS ENDED OCTOBER 27, 1998 AND

                          YEAR ENDED DECEMBER 31, 1997

          Members' capital, January 1, 1997..............   $  148,636
            Net income for the year ended December 31,         377,573
          1997...........................................
            Distribution to members during 1997..........     (157,346)
                                                            ----------
          Members' capital, December 31, 1997............      368,863
            Net loss for the ten months ended October 27,      (27,583)
          1998...........................................
            Distribution to members during 1998..........     (476,101)
                                                            ----------
          Members' deficiency in capital, October 27, 1998  $ (134,821)
                                                            ==========

                       See notes to financial statements.












                                       45
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                            STATEMENTS OF CASH FLOWS

       YEAR ENDED DECEMBER 31, 1997 AND TEN MONTHS ENDED OCTOBER 27, 1998

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,   OCTOBER 27,
                                                                     1997           1998
             <S>                                                   <C>           <C>
             OPERATING ACTIVITIES
               Net income (loss)..............................     $   377,573   $ (27,583)
               Adjustments to reconcile net income (loss) to
                  net cash used in operating activities:
                  Depreciation and amortization...............           4,231       9,419
               Changes in assets and liabilities:
                  Decrease (increase) in accounts receivable..       1,148,237    (669,971)
                  Decrease in prepaid expenses................           2,873      61,333
                  Increase (decrease) in accounts payable and
                    accruals..................................         120,613     (88,591)
                  (Decrease) increase in deferred revenue.....      (1,474,979)    931,193
                                                                   -----------   ---------
                       Net cash provided by operating activities       178,548     215,800
                                                                   -----------   ---------
             INVESTING ACTIVITIES
               Purchase of property and equipment.............         (27,412)    (54,904)
                                                                   -----------   ---------
                       Net cash used in investing activities..         (27,412)    (54,904)
                                                                   -----------   ---------
             FINANCING ACTIVITIES
               Distributions to members.......................        (157,346)   (476,101)
               Demand note due to Medscape, Inc...............              --     275,000
                                                                   -----------   ---------
                       Net cash used in financing activities..        (157,346)   (201,101)
                                                                   -----------   ---------
             Decrease in cash and cash equivalents............          (6,210)    (40,205)
             Cash and cash equivalents, beginning of period...          60,496      54,286
                                                                   -----------   ---------
              Cash and cash equivalents, end of period........     $    54,286   $  14,081
                                                                   ===========   =========
</TABLE>

                       See notes to financial statements.



                                       46
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                          NOTES TO FINANCIAL STATEMENTS
       TEN MONTHS ENDED OCTOBER 27, 1998 AND YEAR ENDED DECEMBER 31, 1997

1.  ORGANIZATION AND NATURE OF BUSINESS

         Healthcare Communications Group, ("HCG") is a Maryland limited
liability company, founded on November 17, 1995. HCG is a medical
communications/education company that develops, produces and distributes unique
live, print, digital and Internet-based programs for healthcare professionals
that are funded by pharmaceutical companies.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

         The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.

Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

         For the purposes of the statements of cash flows, HCG considers all
highly liquid short-term cash investments purchased with maturities of three
months or less as cash and cash equivalents.

CONCENTRATION OF CREDIT RISK

         HCG's financial instruments that are exposed to concentration of credit
risks consist primarily of cash and cash equivalents and trade accounts
receivable. HCG maintains its cash and cash equivalents in bank accounts which,
at times, exceeds federally insured limits. HCG has not experienced any losses
in these accounts. HCG believes it is not exposed to any significant credit risk
on cash and cash equivalents. Concentrations of credit risks with respect to
accounts receivable are limited because of HCG's expanding customer base and
credit worthiness of its three major customers (see Note 5), making up the
majority of the accounts receivable balance.

DEPRECIATION AND AMORTIZATION

         HCG provides for depreciation of property and equipment based on the
estimated useful lives of the applicable assets and the life of leases, using
the straight-line method.

         Expenditures for renewals and improvements which extend the useful
lives of assets are capitalized, while maintenance and repairs are charged to
operations as incurred.

         Intangible assets consists of trademarks which are being amortized
using the straight-line method over their estimated useful life.

REVENUE RECOGNITION

         Revenue from custom programs, such as on-line conference summaries and
custom modules produced by HCG, are recognized on a percentage of completion
basis. Revenues from conferences and other events produced by HCG are recognized
upon completion of the conference or event. At December 31, 1997 and October 27,
1998, there were no uncompleted projects.

                                       47
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DEFERRED REVENUE

         Deferred revenue represents amounts billed in excess of revenues
recognized. Included in accounts receivable are amounts due (under contract)
relating to deferred revenue.

IMPAIRMENT OF ASSETS

         HCG's long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When these events occur, HCG measures
impairment by comparing the carrying value of the long-lived asset to the
estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows is less than the carrying amount of the assets, HCG would
recognize an impairment loss. HCG determined that, as of December 31, 1997 and
October 27, 1998, there had been no impairment in the carrying value of the
long-lived assets.

INCOME TAXES

         Under present income tax regulations, HCG pays no federal, state or
local income taxes. For tax purposes, any income or loss is included in the
income tax returns of the members.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, REPORTING
COMPREHENSIVE INCOME, and SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 130 establishes new rules for the
reporting and display of comprehensive income and its components. HCG has no
elements of comprehensive income. HCG operates in one segment in the United
States.

         In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which establishes accounting and reporting
standards for derivative instruments and hedging activities for HCG's year ended
December 31, 2000. Generally, it requires that an entity recognize all
derivatives as either an asset or liability and measure those instruments at
fair value, as well as identify the conditions for which a derivative may be
specifically designated as a hedge. Management is currently evaluating the
effect of this statement on HCG's financial statements.

         During 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued SOP No. 98-1,
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE. This statement is applicable to HCG's 1999 financial statements and will
require HCG to capitalize various payroll and payroll related costs and other
costs that are directly related to the development of some of the systems of
HCG. HCG will amortize these costs over the anticipated life of the systems.
Management is currently evaluating the effect of this statement on HCG's
financial statements.

3.  PROPERTY AND EQUIPMENT

         Property and equipment, consist of the following:

<TABLE>
<CAPTION>
                                            DECEMBER 31,   OCTOBER 27,  USEFUL LIFE
            DESCRIPTION                         1997          1998       (IN YEARS)
            <S>                               <C>           <C>               <C>
            Computers and equipment....       $26,441       $ 79,507          5
            Furniture and fixtures.....         6,959          8,797          7
                                              -------       --------
                                               33,400         88,304

            Less accumulated depreciation      (3,525)       (11,527)
            Property and equipment -- net     $29,875       $ 76,777
                                              =======       ========
</TABLE>

                                       48
<PAGE>


                      HEALTHCARE COMMUNICATIONS GROUP, LLC

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4.  DEMAND NOTE

         As of October 27, 1998, the demand note consists of $215,000 and
$60,000, borrowed on October 26 and October 23, 1998, respectively, from
Medscape, Inc. at an annual interest rate of 8% (Note 6). Under the terms of the
demand note, HCG was required to use the proceeds to pay amounts owed to vendors
prior to the acquisition by Medscape, Inc.

5.  MAJOR CUSTOMERS

         Sales to three major customers for the year ended December 31, 1997 and
the ten months ended October 27, 1998 represented 53% and 50% of total sales,
respectively. At December 31, 1997 and October 27, 1998, these three customers
represented 34% and 76% accounts receivable, respectively.

6.  SUBSEQUENT EVENT

         Effective October 27, 1998, the membership interests of HCG were
purchased by Medscape, Inc., a New York corporation.











                                       49
<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         There have been no such changes or disagreements.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information required by Items 10, 11, 12 and 13 is incorporated herein
by reference to the information under the captions "Election of Directors,"
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions," respectively,
to be set forth in the Company's definitive Proxy Statement or an Amendment to
this Form 10-K to be filed with the Securities and Exchange Commission within
120 days after December 31, 1999. Information concerning executive officers is
incorporated herein by reference to the information included in Part I, Item
4(a) of this report under the caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION

Information required by Items 10, 11, 12 and 13 is incorporated herein by
reference to the information under the captions "Election of Directors,"
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions," respectively,
to be set forth in the Company's definitive Proxy Statement or an Amendment to
this Form 10-K to be filed with the Securities and Exchange Commission within
120 days after December 31, 1999.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information required by Items 10, 11, 12 and 13 is incorporated herein
by reference to the information under the captions "Election of Directors,"
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions," respectively,
to be set forth in the Company's definitive Proxy Statement or an Amendment to
this Form 10-K to be filed with the Securities and Exchange Commission within
120 days after December 31, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information required by Items 10, 11, 12 and 13 is incorporated herein
by reference to the information under the captions "Election of Directors,"
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions," respectively,
to be set forth in the Company's definitive Proxy Statement or an Amendment to
this Form 10-K to be filed with the Securities and Exchange Commission within
120 days after December 31, 1999.
















                                       50
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      1.       Financial Statements

                  The financial statements listed in Item 14(a) are filed or
                  incorporated herein by reference as part of this annual
                  report. See Index to Financial Statements and Financial
                  Schedule as Item 8 on Page 21.

         2.       Financial Statement Schedule

                  Schedules have been omitted since they are either not required
                  or are not applicable or the required information is shown in
                  the financial statements or related notes.

         3.       Exhibits:
<TABLE>
<CAPTION>
<S>                       <C>     <C>
                          2.1     Purchase Agreement between Medscape, Inc. and
                                  the holders of all of the membership interests
                                  of Healthcare Communications Group, L.L.C.
                                  dated October 27, 1998.

                          2.2     Letter Agreement between Medscape, Inc. and
                                  Ira Kirshenbaum, M.D., dated February 2, 1999
                                  regarding the sale of assets of bonehome.com.

                          2.3     Bill of Sale between Medscape, Inc. and
                                  CompuRx Inc., dated March 25, 1999.

                          2.4     Form of Agreement and Plan of Merger dated
                                  February 18, 2000 among Medscape, Inc., Dialog
                                  Medical, Inc. and Medlog Acquisition Inc.

                          2.5     Agreement of Reorganization and Merger dated
                                  February 21, 2000 among MedicaLogic, Inc.,
                                  Medscape, Inc. and Moneypenny Merger Corp.

                          3.1     Amended and Restated Certificate of
                                  Incorporation.

                          3.2     Bylaws.

                          4.1     Form of Specimen Common Stock Certificate.

                          4.2     Form of Warrant, dated as of March 5, 1999,
                                  entitling Credit Suisse First Boston
                                  Corporation to purchase up to 14,667.5 shares
                                  of Registrant's Common Stock.

                          4.3     Warrant, dated September 3, 1999, entitling
                                  America Online, Inc. to purchase 1,352,158
                                  shares of Registrant's Class A Common Stock.

                          4.4     Performance Warrant, dated September 3, 1999,
                                  entitling America Online, Inc. to purchase
                                  1,352,158 shares of Registrant's Class A
                                  Common Stock.

                          4.5     Form of Warrant, dated as of February 15,
                                  2000, entitling Lazard Freres & Co. LLC to
                                  purchase 100,000 shares of Registrant's Common
                                  Stock
</TABLE>


                                       51
<PAGE>

<TABLE>
<CAPTION>
                         <S>      <C>
                          10.1    Agreement of Lease between Medscape, Inc. and
                                  R.A.A. Realty Company LP dated February 1999.

                          10.2    Lease Assignment made by SCP Communications,
                                  Inc. made in favor of Medscape, Inc.

                          10.3    Agreement of Lease between Surgical Care
                                  Publishing, Inc. and Satyanman, Inc., dated
                                  October 7, 1996.

                          10.4    Agreement of Lease between Surgical Care
                                  Publishing, Inc. and Satyanman, Inc., dated
                                  August 29, 1995.

                          10.5    Agreement of Lease between Surgical Care
                                  Publishing, Inc., and Satyanman, Inc., dated
                                  March 17, 1994.

                          10.6    Agreement of Lease between Surgical Care
                                  Publishing, Inc. and Satyanman, Inc., dated
                                  August 18, 1993.

                          10.7*   Employment Agreement between Medscape, Inc.
                                  and Paul T. Sheils, dated January 26, 1998.

                          10.8*   Employment Agreement between Medscape, Inc.
                                  and Steven Kalin, dated September 30, 1998.

                          10.9*   Employment and Restricted Stock Purchase
                                  Agreement between Medscape, Inc. and Jeffrey
                                  L. Drezner, M.D., Ph.D., dated October 27,
                                  1998.

                         10.10*   Promissory Note dated October 27, 1998, in the
                                  principal amount of $627,949.64 made by
                                  Jeffrey L. Drezner, M.D., Ph.D. in favor of
                                  Medscape, Inc.

                         10.11*   Employment Agreement between Medscape, Inc.
                                  and Peter M. Frishauf, dated February 16,
                                  1998.

                         10.12*   Employment Agreement between Medscape, Inc.
                                  and George D. Lundberg, M.D., dated February
                                  15, 1999.

                         10.13*   Employment Agreement between Medscape, Inc.
                                  and David Yakimischak, dated March 15, 1999.

                         10.14*   Employment Agreement between Medscape, Inc.
                                  and Meg Walsh, dated March 4, 1999.

                         10.15*   1996 Stock Option Plan.

                         10.16*   Form of Incentive Stock Option Agreement.

                         10.17*   Form of Non-Qualified Stock Option Agreement.

                         10.18*   Nonemployee Director Option Agreement.

                         10.19    Series D Preferred Stock Purchase Agreement
                                  between Medscape, Inc. and investors, dated
                                  March 5, 1999.

* Management contract or compensatory plan or arrangement.
</TABLE>


                                       52
<PAGE>

<TABLE>
<CAPTION>
                         <S>      <C>
                         10.20    Amendment and Restated Stockholder's
                                  Agreement, dated 10.20 August 4, 1999. Form
                                  of Amendment, dated September 8, to the
                                  Amended and Restated Stockholders' Agreement
                                  dated August 4, 1999 and Consent to Conversion
                                  of Preferred Stock.

                          10.21   Form of Letter to Authors.

                          10.22   Preferred Share Purchase Agreement among
                                  Softwatch Ltd., Medscape, Inc. (as a
                                  purchaser) and certain other purchasers, dated
                                  June 15, 1999.

                          10.23   License and Web Site Development Agreement
                                  between Medscape, Inc. and Softwatch, Inc.,
                                  dated June 15, 1999.

                          10.24*  Employment Agreement between Medscape, Inc.
                                  and Mark Boulding, dated June 28, 1999.

                          10.25   Common Stock Purchase Agreement between
                                  Medscape, Inc. and CBS Corporation, dated as
                                  of July 4, 1999.

                          10.26   Form of Stockholders Agreement between
                                  Medscape, Inc. and CBS Corporation, dated July
                                  of 1999.

                          10.27   Form of Joinder Agreement among certain
                                  Medscape, Inc. shareholders, dated July
                                  of1999, in connection with the Stockholder
                                  Agreement dated July of 1999.

                          10.28   Form of Advertising and Promotion Agreement
                                  between Medscape, Inc. and CBS Corporation,
                                  dated July of 1999.

                          10.29   Form of Trademark and Content Agreement
                                  between Medscape, Inc. and CBS Corporation,
                                  dated July of 1999.

                          10.30   Form of Registration Rights Agreement between
                                  Medscape, Inc. and CBS Corporation, dated July
                                  of 1999.

                          10.31   Stock Purchase Agreement between Medscape,
                                  Inc. and National Data Corporation, dated July
                                  7, 1999.

                          10.32   Form of License and Product Development
                                  Agreement between Medscape, Inc. and National
                                  Data Corporation, dated July of 1999.

                          10.33   Agreement of Lease between Medscape, Inc. and
                                  224 W 30 LLC, dated May 26, 1999.

                          10.34   License Agreement between First Databank, Inc.
                                  and Medscape, Inc., dated April 1, 1997.

                          10.35   Form of Subscription Agreement with CBS
                                  Corporation.

                          10.36   Interactive Services Agreement between America
                                  Online, Inc. and Medscape, Inc. dated
                                  September 3, 1999.

                          10.37   Side letter between America Online, Inc. and
                                  Medscape, Inc. dated September 22, 1999 in
                                  connection with the
</TABLE>

* Management contract or compensatory plan or arrangement.

                                       53
<PAGE>

<TABLE>
<CAPTION>
                        <S>      <C>
                                  Interactive Services Agreement.

                          10.38   Agreement among America Online, Inc., CBS
                                  Corporation and Medscape, Inc. in regard to
                                  registration rights, dated September 3, 1999.


                          21      Subsidiaries of Registrant

                          23      Independent Auditors' Consent
</TABLE>

(b)      Reports on Form 8-K

         Registrant filed a report on form 8-K under Item 5 on March 2, 2000
         reporting that on February 21, 2000, Registrant entered into an
         agreement with MedicaLogic, Inc. providing for the merger of a
         newly-formed subsidiary of MedicaLogic with and into Registrant subject
         to certain conditions.

















                                       54
<PAGE>



                                   SIGNATURES
                                   ----------

                  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
                                 MEDSCAPE, INC.

       Date:    March 10, 2000     By: /s/ PAUL T. SHEILS
                                       -----------------------------------------
                                           Paul T. Sheils
                                           President and Chief Executive Officer

                  Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

       Date:    March 10, 2000     By: /s/ PAUL T. SHEILS
                                       -----------------------------------------
                                           Paul T. Sheils
                                           Director, President and Chief
                                           Executive Officer
                                           (Principal  Executive Officer)

       Date:    March 10, 2000     By: /s/ STEVE R. KALIN
                                       -----------------------------------------
                                           Steve R. Kalin
                                           Chief Operating Officer and Chief
                                           Financial Officer and Treasurer
                                           (Principal Financial and Accounting
                                           Officer)

       Date:    March 10, 2000     By: /s/ MARC BUTLEIN
                                       -----------------------------------------
                                           Marc Butlein
                                           Director

       Date:    March 10, 2000     By: /s/ ESTHER DYSON
                                       -----------------------------------------
                                           Esther Dyson
                                           Director

       Date:    March 10, 2000     By: /s/ ANDREW HEYWARD
                                       -----------------------------------------
                                           Andrew Heyward
                                           Director

       Date:    March 10, 2000     By: /s/ ALAN J. PATRICOF
                                       -----------------------------------------
                                           Alan J. Patricof
                                           Chairman of the Board

       Date:    March 10, 2000     By: /s/ FREDRIC G. REYNOLDS
                                       -----------------------------------------
                                           Fredric G. Reynolds
                                           Director

       Date:    March 10, 2000     By: /s/ CARLO A. VON SCHROETER
                                       -----------------------------------------
                                           Carlo A. von Schroeter
                                           Director

       Date:    March 10, 2000     By: /s/ OAKLEIGH THORNE
                                       -----------------------------------------
                                           Oakleigh Thorne
                                           Director

       Date:    March 10, 2000     By: /s/ PETER FRISHAUF
                                       -----------------------------------------
                                           Peter Frishauf
                                           Director


                                       55
<PAGE>



                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
         EXHIBIT       DESCRIPTION                                                        HOW FILED
         NUMBER        -----------                                                        ---------
          <S>          <C>                                                                     <C>
           2.1         Purchase Agreement between Medscape, Inc. and the holders of            (1)
                       all of the membership interests of Healthcare Communications
                       Group, L.L.C. dated October 27, 1998.

           2.2         Letter Agreement between Medscape, Inc. and Ira Kirshenbaum,            (1)
                       M.D., dated February 2, 1999 regarding the sale of assets of
                       bonehome.com.

           2.3         Bill of Sale between Medscape, Inc. and CompuRx, Inc.                   (1)
                       dated March 25, 1999.

           2.4         Form of Agreement and Plan of Merger dated February 18, 2000 among      (3)
                       Medscape, Inc., Dialog Medical, Inc. and Medlog Acquisition Inc.

           2.5         Agreement of Reorganization and Merger dated February 21, 2000          (2)
                       among MedicaLogic, Inc., Medscape, Inc. and Moneypenny Merger
                       Corp.

           3.1         Amended and Restated Certificate of Incorporation.                      (1)

           3.2         Bylaws.                                                                 (1)

           4.1         Form of Specimen Common Stock Certificate.                              (1)

           4.2         Form of Warrant, dated as of March 5, 1999, entitling Credit            (1)
                       Suisse First Boston Corporation to purchase up to 14,667.5
                       shares of Registrant's Common Stock.

           4.3         Warrant, dated September 3, 1999, entitling America Online,             (1)
                       Inc. to purchase 1,352,158 shares of Registrant's Class A
                       Common Stock.

           4.4         Performance Warrant, dated September 3, 1999, entitling America         (1)
                       Online, Inc. to purchase 1,352,158 shares of Registrant's Class
                       A Common Stock.

           4.5         Form of Warrant, dated as of February 15, 2000, entitling               (3)
                       Lazard Freres & Co. LLC to purchase 100,000 shares of

                       Registrant's Common Stock

           10.1        Agreement of Lease between Medscape, Inc. and R.A.A. Realty             (1)
                       Company LP dated February 1999.
</TABLE>



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


(1)  Previously filed together with Registrant's Registration Statement on Form
     S-1 which went effective September 27, 1999.
(2)  Previously filed together with Registrant's Current Report on Form 8-K on
     March 2, 2000.
(3)  Filed herewith.



                                       56
<PAGE>


<TABLE>
<CAPTION>
           <S>         <C>                                                                     <C>
           10.2        Lease Assignment made by SCP Communications, Inc. made in favor         (1)
                       of Medscape, Inc.

           10.3        Agreement of Lease between Surgical Care Publishing, Inc. and           (1)
                       Satyanman, Inc., dated October 7, 1996.

           10.4        Agreement of Lease between Surgical Care Publishing, Inc. and           (1)
                       Satyanman, Inc., dated August 29, 1995.

           10.5        Agreement of Lease between Surgical Care Publishing, Inc., and          (1)
                       Satyanman, Inc., dated March 17, 1994.

           10.6        Agreement of Lease between Surgical Care Publishing, Inc. and           (1)
                       Satyanman, Inc., dated August 18, 1993.

           10.7*       Employment Agreement between Medscape, Inc. and Paul T. Sheils,         (1)
                       dated January 26, 1998.

           10.8*       Employment Agreement between Medscape, Inc. and Steven Kalin,           (1)
                       dated September 30, 1998.

           10.9*       Employment and Restricted Stock Purchase Agreement between              (1)
                       Medscape, Inc. and Jeffrey L. Drezner, M.D., Ph.D., dated
                       October 27, 1998.

          10.10*       Promissory Note dated October 27, 1998, in the principal amount         (1)
                       of $627,949.64 made by Jeffrey L. Drezner, M.D., Ph.D. in favor
                       of Medscape, Inc.

          10.11*       Employment Agreement between Medscape, Inc. and Peter M. Frishauf,      (1)
                       dated February 16, 1998.

          10.12*       Employment Agreement between Medscape, Inc. and George D.               (1)
                       Lundberg, M.D., dated February 15, 1999.

          10.13*       Employment Agreement between Medscape, Inc. and David                   (1)
                       Yakimischak, dated March 15, 1999.

          10.14*       Employment Agreement between Medscape, Inc. and Meg Walsh,              (1)
                       dated March 4, 1999.

          10.15*       1996 Stock Option Plan.                                                 (1)

          10.16*       Form of Incentive Stock Option Agreement.                               (1)

          10.17*       Form of Non-Qualified Stock Option Agreement.                           (1)

          10.18*       Nonemployee Director Option Agreement.                                  (1)

          10.19        Series D Preferred Stock Purchase Agreement between Medscape,           (1)
                       Inc. and investors, dated March 5, 1999.
</TABLE>


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

*    Management contract or compensatory plan or arrangement.

(1)  Previously filed together with Registrant's Registration Statement on Form
     S-1 which went effective September 27, 1999.


                                       57
<PAGE>

<TABLE>
<CAPTION>
            <S>        <C>                                                                    <C>
            10.20      Amendment and Restated Stockholder's Agreement, dated August 4,         (1)
                       1999.

            10.20      Form of Amendment, dated September 8, to the Amended and                (1)
                       Restated Stockholders' Agreement dated August 4, 1999 and
                       Consent to Conversion of Preferred Stock.

            10.21      Form of Letter to Authors.                                              (1)

            10.22      Preferred Share Purchase Agreement among Softwatch Ltd.,                (1)
                       Medscape, Inc. (as a purchaser) and certain other purchasers,
                       dated June 15, 1999.

            10.23      License and Web Site Development Agreement between Medscape,            (1)
                       Inc. and Softwatch, Inc., dated June 15, 1999.

            10.24*     Employment Agreement between Medscape, Inc. and Mark Boulding,          (1)
                       dated June 28, 1999.

            10.25      Common Stock Purchase Agreement between Medscape, Inc. and CBS          (1)
                       Corporation, dated as of July 4, 1999.

            10.26      Form of Stockholders Agreement between Medscape, Inc. and CBS           (1)
                       Corporation, dated July of1999.

            10.27      Form of Joinder Agreement among certain Medscape, Inc.                  (1)
                       shareholders, dated July of1999, in connection with the
                       Stockholder Agreement dated July of 1999.

            10.28      Form of Advertising and Promotion Agreement between Medscape,           (1)
                       Inc. and CBS Corporation, dated July of 1999.

            10.29      Form of Trademark and Content Agreement between Medscape, Inc.          (1)
                       and CBS Corporation, dated July of 1999.

            10.30      Form of Registration Rights Agreement between Medscape, Inc.            (1)
                       and CBS Corporation, dated July of 1999.

            10.31      Stock Purchase Agreement between Medscape, Inc. and National            (1)
                       Data Corporation, dated July 7, 1999.

            10.32      Form of License and Product Development Agreement between               (1)
                       Medscape, Inc. and National Data Corporation, dated July of
                       1999.

            10.33      Agreement of Lease between Medscape, Inc. and 224 W 30 LLC,             (1)
                       dated May 26, 1999.

            10.34      License Agreement between First Databank, Inc. and Medscape,            (1)
                       Inc., dated April 1, 1997.
</TABLE>


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

*    Management contract or compensatory plan or arrangement.

(1)  Previously filed together with Registrant's Registration Statement on Form
     S-1 which went effective September 27, 1999.


                                       58
<PAGE>

<TABLE>
<CAPTION>
           <S>         <C>                                                                    <C>

           10.35       Form of Subscription Agreement with CBS Corporation.                    (1)

           10.36       Interactive Services Agreement between America Online, Inc. and         (1)
                       Medscape, Inc. dated September 3, 1999.

           10.37       Side letter between America Online, Inc. and Medscape, Inc.             (1)
                       dated September 22, 1999 in connection with the Interactive
                       Services Agreement.

           10.38       Agreement among America Online, Inc., CBS Corporation and               (1)
                       Medscape, Inc. in regard to registration rights, dated
                       September 3, 1999.

           21          Subsidiaries of Registrant                                              (3)

           23          Independent Auditors' Consent
</TABLE>



























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

(1)  Previously filed together with Registrant's Registration Statement on Form
     S-1 which went effective September 27, 1999.
(3)  Filed herewith.

                                       59