FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

                 For the quarterly period ended March 31, 2000

                                       OR

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

             For the transition period from ________ to ___________

                        Commission file number: 000-25689

                               Value America, Inc.
             (Exact name of Registrant as specified in its charter)

                               Virginia 330712568
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

               337 West Rio Road, Charlottesville, Virginia 22901
               (Address of principal executive offices) (Zip code)

                                  (804)817-7700
               (Registrant's telephone number including area code)

                                 Not applicable
              (Former name, former address, and former fiscal year,
                          if changed since last report)

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


         As of April 30,  2000,  there were  45,455,170  shares of common  stock
outstanding.



<PAGE>


                               Value America, Inc.

                                    FORM 10-Q
                      For the Quarter Ended March 31, 2000

                                      INDEX

                                                                            Page
Part I - Financial Information................................................2
      Item 1.  Consolidated Financial Statements..............................2
      Item 2.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations.....................................12
      Item 3.  Quantitative and Qualitative Disclosures About Market Risk....12
Part II - Other Information..................................................13
      Item 1.  Legal Proceedings.............................................13
      Item 2.  Changes in Securities and Use of Proceeds.....................14
      Item 3.  Defaults Upon Senior Securities...............................14
      Item 4.  Submission of Matters to a Vote of Security Holders...........14
      Item 5.  Other Information.............................................14
      Item 6.  Exhibits and Reports on Form 8-K..............................14






<PAGE>


Part I.  Financial Information
Item 1.  Consolidated Financial Statements
<TABLE>
<S>     <C>                                                                  <C>                <C>

                               VALUE AMERICA, INC.
                           CONSOLIDATED BALANCE SHEETS
                  (in thousands of dollars, except share data)
                                                                           March 31,          December
                                                                                                31,
                                                                             2000               1999
                                                                         --------------     -------------
                              ASSETS                                      (unaudited)
CURRENT ASSETS:
      Cash and cash equivalents..........................................$     21,453       $    52,182
      Restricted cash....................................................      12,816             6,016
      Short-term investments.............................................           -            15,363
      Accounts receivable, net of allowance of $2,770 and $1,021.........       7,709             8,971
      Inventory..........................................................       5,572             3,532
      Other current assets...............................................       1,436             3,453
                                                                         --------------     -------------
         TOTAL CURRENT ASSETS............................................      48,986            89,517
                                                                         --------------     -------------
Equipment, software, furniture and fixtures, net.........................      24,123            22,081
Restricted cash..........................................................           -             1,500
Long-term investments....................................................           -             1,332
Note receivable from officer.............................................         200               450
Goodwill.................................................................       1,278             1,311
Other assets.............................................................         196               128
                                                                         --------------     -------------
         TOTAL ASSETS....................................................$     74,783       $   116,319
                                                                         ==============     =============

                          LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
                                   AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
      Accounts payable...................................................$     17,488       $    15,753
      Accrued expenses...................................................       7,192            12,807
      Deferred revenue...................................................       2,261             8,441
      Accrued Value America Dollar liability.............................       2,910             3,175
      Accrued restructuring and other activities.........................       1,529             4,140
      Other current liabilities..........................................       3,561             4,502
                                                                         --------------     -------------
         TOTAL CURRENT LIABILITIES.......................................      34,941            48,818
                                                                         --------------     -------------
      Deferred revenue...................................................          26                26
      Other liabilities..................................................       2,878             2,820
                                                                         --------------     -------------
         TOTAL LIABILITIES...............................................      37,845            51,664
                                                                         --------------     -------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
      Preferred Stock, without par value; 25,000,000 and 0 shares
          authorized; 0 shares issued and outstanding....................           -                 -
      Common stock, without par value, 500,000,000 shares
          authorized; 45,425,170 and 45,311,459 shares issued and
          outstanding....................................................     294,693           293,996
      Warrants...........................................................      12,970            13,001
      Deferred stock-based compensation..................................      (2,172)           (2,055)
      Unrealized gain on securities available-for-sale...................           -               832
      Accumulated deficit................................................    (268,553)         (241,119)
                                                                         --------------     -------------
         TOTAL STOCKHOLDERS' EQUITY......................................      36,938            64,655
                                                                         --------------     -------------
         TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS'
             EQUITY......................................................$     74,783       $   116,319
                                                                         ==============     =============


                    The accompanying notes are an integral part of these financial statements.


<PAGE>


                               VALUE AMERICA, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands of dollars, except per share data)
                                   (unaudited)

                                                          Quarter Ended March 31,
                                                      --------------------------------

                                                          2000               1999
                                                      --------------     -------------

  TOTAL REVENUES......................................$     47,155       $    28,002
  TOTAL COST OF REVENUES..............................      43,092            25,693
                                                      --------------     -------------
  GROSS MARGIN........................................       4,063             2,309
                                                      --------------     -------------
  OPERATING EXPENSES:
       Sales, advertising and marketing...............      18,851            19,083
       General and administrative.....................       7,287             3,266
       Technical and system development...............       5,357             2,523
                                                      --------------     -------------
          Total operating expenses....................      31,495.           24,872
                                                      --------------     -------------
  OPERATING LOSS......................................     (27,432)          (22,563)
       Other (expense), net...........................          (2)          (11,896)
                                                      --------------     -------------
  NET LOSS............................................     (27,434)          (34,459)
       Accretion and dividends on Series A,
       Series B and Series C redeemable
       preferred stock................................           -           (19,800)
       Beneficial conversion feature on Series C
       redeemable preferred stock.....................           -           (10,556)
                                                      --------------     -------------
  NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS..........$    (27,434)      $   (64,815)
                                                      ==============     =============
  NET LOSS PER COMMON SHARE:
       Basic and diluted..............................$      (0.60)      $     (2.72)
                                                      ==============     =============
  WEIGHTED AVERAGE NUMBER OF SHARES:
       Basic and diluted..............................      45,373            23,796
                                                      ==============     =============



   The accompanying notes are an integral part of these financial statements.


<PAGE>


                               VALUE AMERICA, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
                                                                         Quarter Ended March 31,
                                                                     ---------------------------------
                                                                          2000              1999
                                                                     ---------------    --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss.......................................................$     (27,434)     $    (34,459)
      Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation and amortization...............................        2,559               416
         Stock-based compensation....................................          398               405
         Amortization of debt issuance costs.........................            -            12,869
         Provision for doubtful accounts.............................        2,493               532
         Loss on long-term investments...............................          400                  -
      Changes in assets and liabilities:
         Accounts receivable.........................................         (104)           (4,821)
         Inventory...................................................       (3,167)              223
         Note receivable from officer................................          250                 -
         Other assets................................................        1,949              (149)
         Accounts payable............................................        1,735              (244)
         Accrued expenses............................................       (5,615)              474
         Accrued Value America Dollar liability......................         (265)                -
         Accrued restructuring and other activities..................       (2,611)                -
         Deferred revenue............................................       (6,180)              (99)
         Other liabilities...........................................         (186)                -
                                                                     ---------------    --------------
NET CASH USED IN OPERATING ACTIVITIES................................      (35,778)          (24,853)
                                                                     ---------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Restricted cash................................................       (5,300)            1,500
      Sale of short-term investments.................................       15,463                 -
      Proceeds from sale of fixed assets.............................            5                 -
      Capital expenditures...........................................       (3,913)           (1,637)
                                                                     ---------------    --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES..................        6,255              (137)
                                                                     ---------------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Principal payments under capital lease obligations.............       (1,357)              (33)
      Proceeds from issuance of common stock.........................            -               200
      Proceeds from issuance of preferred stock and warrants.........            -            60,000
      Proceeds from exercise of common stock warrants................           13                 -
      Proceeds from exercise of common stock options.................          138                 -
      Payment of offering costs......................................            -            (1,723)
      Proceeds from issuance of debt and warrants....................            -             5,000
                                                                     ---------------    --------------
NET CASH  (USED IN) PROVIDED BY FINANCING ACTIVITIES.................       (1,206)           63,444
                                                                     ---------------    --------------
NET (DECREASE) INCREASE  IN CASH AND CASH EQUIVALENTS................      (30,729)           38,454
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................       52,182            20,127
                                                                     ---------------    --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................$      21,453      $     58,581
                                                                     ===============    ==============
Non-cash investing and financing transactions:
      Accretion and dividends on redeemable preferred stock..........$           -      $     10,556
                                                                     ===============    ==============
      Beneficial conversion feature on Series C redeemable
      preferred stock................................................$           -      $     19,800
                                                                     ===============    ==============
      Issuance of warrants with notes payable........................$           -      $      4,539
                                                                     ===============    ==============
      Issuance of common stock on exercise of warrants...............$          31      $          -
                                                                     ===============    ==============
      Acquisition of assets under capital lease......................$         660      $          -
                                                                     ===============    ==============
      Deferred stock-based compensation..............................$         515      $          -
                                                                     ===============    ==============




                 The accompanying  notes are an  integral  part of these financial statements.

</TABLE>

<PAGE>


                               VALUE AMERICA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2000
                                   (unaudited)
1    DESCRIPTION OF BUSINESS

     Value America, Inc. ("Value America" or the "Company") is an Internet-based
retailer that sells a large  selection of high quality,  brand name products and
services at competitive  prices to both consumers and businesses.  Value America
has two wholly owned subsidiaries,  ServeAmerica.com,  Inc. ("ServeAmerica") and
Value America  Automotive  Group, Inc.  ("VAAG").  On May 5, 1999, Value America
formed ServeAmerica, a Delaware corporation.  ServeAmerica has not conducted any
operations  from inception  through March 31, 2000. On September 2, 1999,  Value
America  formed  VAAG,  a Virginia  corporation.  On  September  3,  1999,  VAAG
purchased in a cash transaction all of the outstanding stock of Dealer Financial
Services,  Inc.  ("DFS") and Dealer  Development  Services,  Inc.  ("DDS").  The
acquisitions  resulted in $1.4 million of goodwill which is being amortized over
a period of ten years.

2.   BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles and, in the
opinion  of  management,  reflect  all  adjustments  (consisting  only of normal
recurring  adjustments)  considered  necessary to fairly present Value America's
financial  position,  results  of  operations  and cash  flows  for the  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's audited financial  statements for the year ended December 31, 1999 and
notes thereto  included in the Company's  Form 10-K, as amended,  filed with the
Securities and Exchange Commission (the "SEC"). The financial statements for the
year ended December 31, 1999 contained a going concern explanatory  paragraph to
the independent auditor's opinion. The results of operations for the three-month
period ended March 31, 2000 are not necessarily  indicative of the results to be
expected for any  subsequent  quarter or for the year ending  December 31, 2000.
Certain  prior  years'  information  has been  reclassified  to conform with the
current year's presentation.

3.   BUSINESS CONDITIONS AND FUNDING ACTIVITIES

     After an extensive  analysis,  the Company  restructured  its operations in
December,  1999. This restructuring  enabled the Company to reduce the number of
its  suppliers  in order  to focus on key  vendors  whose  products  provided  a
majority of the Company's  revenues.  The restructuring is expected to allow the
Company to streamline its operations,  improve fulfillment and customer service,
reduce  expenses and focus on selling  products with higher gross  margins.  The
Company  also   believes  the   investment   it  has  made  in  a  new  computer
infrastructure  will allow it to support  substantial  growth in the future. The
Company  will  continue  to pursue  opportunities  to make its  operations  more
efficient in the future in order to minimize its losses from operations.

     As shown in the  financial  statements  during the quarter  ended March 31,
2000 and the years ended December 31, 1999, 1998 and 1997, the Company  incurred
losses  of $27.4  million,  $143.5  million,  $53.6  million  and $1.9  million,
respectively.  The Company expects to incur  additional but declining losses for
at least  the next two years  that  will  result in  negative  cash  flows  from
operations.  In April 1999,  the Company  raised $114.4  million from an initial
public  offering  of its stock.  As of March 31,  2000,  the  Company  had $21.5
million of unrestricted cash and cash  equivalents.  The Company does not expect
these  resources  will be  sufficient to fund its  operations  through the first
quarter of 2001.

     In December  1999,  the Board of  Directors  formed a Special  Committee to
explore  strategic  opportunities  for Value America.  The Special Committee has
retained  Deutsche  Banc  Alex.  Brown,  as its  financial  advisors,  to review
financial opportunities available to the Company

     On May 10, 2000, the Company announced  financing  agreements that combined
will provide the Company with up to $90 million in additional  equity.  Existing
investors and others have  committed to investing an additional  $30 million and
Acqua  Wellington  North America  Equities Fund, Ltd ("Acqua  Wellington")  will
provide the Company with access to up to $60 million in equity financing through
periodic sales of its common stock to Acqua  Wellington over the next 14 months.
Actual  proceeds from Acqua  Wellington will vary based on Value America's stock
price and the number of shares the Company offers for sale to Acqua  Wellington.
Value America will issue shares of a new issue of  convertible  preferred  stock
and common stock warrants to the purchasers. The Company will continue to pursue
opportunities  for  additional  funding  and both  management  and the  Board of
Directors are confident  that these  opportunities  will generate cash resources
sufficient to fund operations in 2000. There can be, however,  no assurance that
such continuing efforts will be successful.


4.   RESTRUCTURING AND OTHER ACTIVITIES

     In the  fourth  quarter of 1999,  the Board of  Directors  appointed  a new
executive  management  team to the Company.  In December 1999, the new executive
management  team and the Board of  Directors  decided to refocus  the  Company's
operations  on its core lines of business.  On December  28, 1999,  the Board of
Directors  approved a plan,  prepared by the new executive  management  team, to
restructure  Value America's  operations.  As a result,  significant  brands and
product lines previously sold by the Company were discontinued,  and the Company
changed  the  direction  of its  resources  to focus  on  several  core  product
categories:  computers,  software, consumer electronics,  media, office supplies
and other complementary products. This change in focus has reduced the number of
vendors from over 450 to fewer than 75.

     The  restructuring  plan was  begun in the  fourth  quarter  of 1999 and is
expected to be completed by June 30, 2000. The plan required the  termination of
202 employees and cancellation of four office leases. The employee  terminations
represented  a 50%  reduction in  headcount.  The  restructuring  charge of $2.7
million is comprised of $2.2 million for employee terminations, $0.1 million for
lease  terminations and $0.4 million for  professional  fees. These amounts were
classified  in  "restructuring   and  other  activities"  on  the  statement  of
operations for the year ended December 31, 1999.

     All  employees  were notified of their  terminations  during the week ended
December 31, 1999. The employee groups terminated  included all functional areas
within the Company. The employees received two months of severance plus one week
of additional  severance  for each  completed  year of service.  The majority of
these  severance  costs were paid in the first  quarter of 2000 out of  existing
cash resources of the Company.

     Also in the fourth  quarter of 1999,  the Company  recorded $2.2 million of
expenses for other activities.  These charges related to contract settlements to
eliminate  product lines ($0.5 million),  executive  severance  unrelated to the
restructuring ($1.1 million),  settlement of certain purchase  commitments ($0.5
million) and other ($0.1 million).

     As of March 31, 2000, the  restructuring  liabilities are as follows:  $0.4
million for severance and personnel costs and $0.2 million for other exit costs.
In addition,  approximately  $0.9 million of other activities  remain to be paid
primarily related to contract settlements to eliminate product lines.

5.   COMMITMENTS AND CONTINGENCIES

     On March 24, 1999,  the Company was served with a complaint  that was filed
in the United  States  District  Court for the  Northern  District  of  Georgia,
Atlanta Division, by Coupons, Inc., a Georgia corporation ("Coupons").  On April
9, 1999, Coupons served an amended complaint,  joining Stephen S. Freedman as an
additional  plaintiff and alleging  several causes of action,  including  unfair
competition,  fraudulent  registration  of service  marks,  common law trademark
infringement, unfair competition,  deceptive trade practices, false advertising,
fraud,  fraudulent  misrepresentations,  and  rescission of contract and, in the
alternative, breach of contract. The complaint seeks rescission of a December 3,
1997 agreement between Stephen S. Freedman,  injunctive relief barring most uses
by the Company of the "VALUE AMERICA" mark,  treble damages and an accounting of
profits  under the Trademark  Act of 1946,  as amended,  punitive  damages of at
least $1.0 million and  cancellation of the Company's  "VALUE  AMERICA"  service
mark  registrations.  The  Company  believes  that the  claims  asserted  in the
foregoing action are without merit and intends to defend the action vigorously.

     The Company and four former  officers  have been named as  defendants  in a
securities  fraud  action  filed in the  United  States  District  Court for the
Western  District of Virginia,  Charlottesville  Division on January 10, 2000 by
Marvin E.  Sikes,  as  representative  of a  putative  class of  plaintiffs  who
purchased or otherwise  acquired  shares of the  Company's  common stock between
April 7, 1999 through  December 28, 1999 (the "Class  Period").  On February 11,
2000, three similar actions were filed against the Company. These actions allege
that the Company's public statements contained  misrepresentations  or omissions
of material adverse information regarding the Company's financial condition that
allegedly  caused  the  market  price  of  the  Company's  common  stock  to  be
artificially  inflated  during the Class Period.  Counsel to the Company filed a
motion to  consolidate  all actions  against the Company on February  17,  2000.
Based on its preliminary review of the complaint, Value America believes that it
has valid defenses to each of the claims asserted by the plaintiffs.

     The Company received a Pre-Filing Notice to Prospective Defendant, dated as
of October 22, 1999, from the Consumer  Protection Unit of the District Attorney
for Marin County,  California in connection with an  investigation  into alleged
advertising  and sale of  computer  components  designed  for use by an original
equipment manufacturer as retail computer components in California. The District
Attorney  informed  the  Company  that  the   investigation   into  the  alleged
advertising deficiencies has been terminated. Based on its preliminary review of
the  Notice,  the  Company  believes  that it has valid  defenses  to the claims
presented.

     The Federal  Trade  Commission  ("FTC") has  instituted an inquiry into the
advertisement of free or reduced-cost  personal computer systems,  the discounts
on which are contingent upon the customers'  subscription to an Internet service
provider's  services for a fixed period of time.  Specifically,  the FTC asserts
that the  disclosure of this  contingency  was not  sufficiently  clear from the
contents and layout of the  Company's  advertisements.  The Company has produced
documents to the FTC pursuant to its requests , and met with the FTC in April to
discuss the investigation. Based on its meetings with the FTC and ongoing review
of the investigation, the Company believes that it is close to a resolution with
the FTC.

     The Company has been named as a defendant  in an action filed in the United
States  District  Court for the Western  District of  Virginia,  Charlottesville
Division on March 30, 2000 by  shareholder  Gibralt US, Inc. This action alleges
that the  Company  wrongfully  refused to register  transfer of the  plaintiff's
shares,  wrongfully  deprived the plaintiff of its shares, and wrongfully denied
the plaintiff  permission to sell the shares. Based on its preliminary review of
the complaint,  Value America believes that it has valid defenses to each of the
claims asserted by the plaintiff.

     On March 24, 2000,  the Company  received a letter  regarding the potential
infringement  of  certain  Internet  security  patents  allegedly  held  by Leon
Stambler.  The Company is currently  reviewing the validity and applicability of
the patents to its business.

     The Company  believes that the foregoing  lawsuits will not have a material
adverse effect upon its business, financial condition or results of operations.

6.   RELATED PARTY TRANSACTIONS

     During the  three-month  period ended March 31, 2000, the Company forgave a
$0.3 million note receivable from one of its officers.


<PAGE>

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

     The following "Management's  Discussion and Analysis of Financial Condition
and  Results of  Operations"  of Value  America,  Inc.  ("Value  America" or the
"Company") contains  forward-looking  statements based on current  expectations,
estimates and projections about the Company's industry, management's beliefs and
certain  assumptions made by management.  All statements,  trends,  analyses and
other  information  contained  in this  report  relative to trends in net sales,
gross margin,  anticipated expense levels,  liquidity and capital resources,  as
well  as  other  statements,  including,  but  not  limited  to,  words  such as
"anticipate,"  "believe," "plan," "estimate," "expect," "seek" and "intend," and
other  similar  expressions,   constitute  forward-looking   statements.   These
forward-looking  statements involve risks and uncertainties,  and actual results
may differ  materially from those  anticipated or expressed in such  statements.
Potential  risks and  uncertainties  include,  among others,  those set forth in
"Overview" and "Liquidity and Capital Resources"  included in this "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations",  in
"Additional  Factors that May Affect Future Results"  included in  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations in the
Company's Form 10-K for the year ended December 31, 1999, as amended, and in the
"Risk Factors"  section of the Company's  prospectus filed with the SEC pursuant
to Rule 424(b)(1) on April 8, 1999.  Particular  attention should be paid to the
cautionary  statements  involving the Company's limited operating  history,  the
unpredictability  of its future revenues,  the unpredictable and evolving nature
of its business  model,  the intensely  competitive  online  commerce and retail
industries,  and  the  risks  associated  with  capacity  constraints,   systems
development,   management  of  growth,   acquisitions,   any  new  products  and
international  or domestic  business  expansion.  Except as required by law, the
Company  undertakes  no  obligation  to update  any  forward-looking  statement,
whether as a result of new  information,  future events or  otherwise.  Readers,
however,  should  carefully  review the  factors  set forth in other  reports or
documents that the Company files from time to time with the SEC.

OVERVIEW

     Value America's  revenues are derived from sales of products  through Value
America's  online store and  advertising  on the online store.  Value  America's
vendors ship products directly to the customer after a customer places an order.
Revenues from product sales are recognized upon delivery to the customer.  Value
America is responsible for establishing  product pricing,  advertising,  selling
the merchandise,  providing customer service, arranging shipping, insuring goods
during shipment,  collecting payment from the customer,  and processing returns.
Value  America  takes title to products upon shipment and bears the risk of loss
for  collection,  delivery and merchandise  returns from customers.  Many of the
Company's   vendors  grant   merchandise   return   privileges.   Value  America
occasionally  purchases  merchandise  prior to  receiving  customer  orders  and
records such merchandise as inventory until shipped to customers.  Value America
accrues a returns  reserve to reduce revenues and cost of revenues for estimated
product returns at the time of sale.

     Value  America  sells  advertising  space to vendors  on its online  store.
Innovative  multimedia  advertisements  highlight  products and their  features,
functions,  benefits  and  applications.   Additionally,   Value  America  sends
Electronic  Direct  Mail  ("EDM")  to its  members to keep them  informed  about
special  promotions.  Advertising revenue is recognized over the period in which
the  related  advertisement  is offered  on the online  store or when the EDM is
sent. Value America recognizes the costs of developing these  advertisements and
EDMs as incurred.

     To date,  payments for products  purchased  through Value America's  online
store have been  primarily  made with  credit  cards.  Value  America  generally
receives payment from a customer's  credit card within one to four business days
from customer  order.  Value America also extends trade credit terms,  typically
net 30 days,  to certain  large  customers  that Value America has evaluated for
creditworthiness.  Value America  typically pays its vendors for goods within 30
to 60 days of shipment by the vendor to the customer.

     Value  America  has a  limited  operating  history  upon  which  to base an
evaluation  of Value  America and its  business.  Value  America's  business and
prospects  must be considered in light of the risks,  expenses and  difficulties
frequently encountered by companies in early stages of development, particularly
companies in new and rapidly evolving markets such as electronic commerce.

<PAGE>

RESULTS OF OPERATIONS
First Quarter 2000 Compared with First Quarter 1999

Revenues

     Revenues  primarily consist of product sales through Value America's online
store,  advertising  and shipping  charged to  customers.  For the quarter ended
March 31, 2000, total revenues were $47.2 million  representing a 68.4% increase
from $28.0 million for the quarter  ended March 31, 1999.  Revenues from product
sales were $46.7 million for the quarter ended March 31, 2000, compared to $26.5
million for the quarter ended March 31, 1999, representing an increase of 76.5%.
The growth in product  sales  reflects  the growth of Value  America's  customer
base,  repeat  purchases  from  existing  customers,  increases in the volume of
merchandise  sold  and  an  overall  increase  in  demand  for  Value  America's
merchandise.

     Revenues from advertising and other were $0.4 million for the quarter ended
March 31,  2000,  a decrease of 72.2%  compared to $1.5  million for the quarter
ended March 31, 1999. Value America recognized approximately $0.1 million in web
site  advertising  and EDM  advertising  in the  quarter  ended  March 31,  2000
compared  to  $1.1  in the  quarter  ended  March  31,  1999.  The  decrease  in
advertising  revenues  was  driven  by  the  drastic  reduction  of  advertising
performed by the Company while management focused its attention on the Company's
strategic   restructuring.   Product  presentation  listing  fees  decreased  to
approximately $0.3 million in the first quarter of 2000 compared to $0.4 million
in the first quarter of 1999. This decrease in product presentation listing fees
reflects  the  Company's  decision  to  discontinue  the  practice  of  charging
customers for the preparation of future multimedia presentations.

     Charges to customers  for  shipping,  which  represent  approximately  $1.0
million and $0.9  million of revenue for the  quarters  ended March 31, 2000 and
1999, respectively,  are classified in revenue. The Company records a reserve to
reduce  revenues  and cost of  revenues  for an  amount  equal to the  estimated
product returns.  For the quarters ended March 31, 2000 and 1999, the charge for
product  returns,  including  returns  resulting from  malfunctioning  products,
erroneous shipments and other quality-related  issues, as a percentage of sales,
was approximately 11.9% and 4.1%, respectively.

Cost of Revenues

     Cost of revenues  primarily  consists of payments to third party  suppliers
for  merchandise.  Value America  incurred $43.1 million of cost of revenues for
the quarter  ended  March 31,  2000  representing  a 40.4%  increase  from $25.7
million for the quarter ended March 31, 1999.  Cost of revenues  represent 91.4%
and  91.8%  of  revenues  for the  quarters  ended  March  31,  2000  and  1999,
respectively.

     Value  America's  gross  margin has  increased  from $2.3  million  for the
quarter  ended March 31, 1999,  to $4.1 million for the quarter  ended March 31,
2000.  This increase is due to the strong margins  earned on certain  technology
products  partially  offset by a decrease  advertising  revenues.  Product sales
resulted in gross margins of $3.6 million (7.8% of sales) and $0.9 million (3.4%
of sales) for the quarters  ended March 31, 2000 and 1999,  respectively.  Value
America  continues to utilize a  short-term  strategy of  selectively  accepting
narrow  margins on selected  product  sales to  maximize  sales  volumes,  brand
awareness and product selection.

Sales, Advertising and Marketing

     Sales,  advertising and marketing expenses consist of costs associated with
promoting Value America's  online store to potential  customers and vendors,  as
well as payroll and related  expenses,  credit card fees and  outbound  shipping
costs.  Value America Dollars  offered under  promotional  programs  directed at
attracting  new  customers  or as bonuses  to  encourage  sales of a  particular
product are also recorded in sales,  advertising and marketing  expenses.  Value
America  Dollars  that are not used for  promotional  purposes are recorded as a
reduction of revenues if they are issued for customer  relationship purposes and
in cost of  revenues  if they are  earned on a current  sale for use on a future
sale. Sales, advertising and marketing expenses decreased from $19.1 million for
the quarter  ended March 31, 1999 to $18.9  million for the quarter  ended March
31,  2000.  The  decrease  primarily  reflected  an  decrease  in the  number of
merchandising,  advertising  and  promotion  department  employees and a general
decrease in the level of Value America's promotional activities. These decreases
were partially  offset by an increase in contract labor,  professional  fees and
outbound  shipping  charges.  As a  percent  of  revenues  these  expenses  have
decreased  from  68.1% for the  quarter  ended  March 31,  1999 to 40.0% for the
quarter ended March 31, 2000.  Advertising  and promotional  expenses  decreased
from $14.4 million  (including $0.6 million of Value America Dollar  promotions)
for the quarter ended March 31, 1999 to $6.0 million  (including $0.5 million of
Value America  Dollar  promotions)  for the quarter ended March 31, 2000, net of
cooperative  advertising of  approximately  $2.6 for the quarter ended March 31,
1999 and $1.3 million for the quarter ended March 31, 2000.  Contract  labor and
professional   fees  relating  to   merchandising,   advertising  and  promotion
departments  increased from $0.2 million for the quarter ended March 31, 1999 to
$4.2 million for the quarter  ended March 31,  2000.  Value  America  intends to
continue to increase  its market share  through  advertising  by  improving  the
overall sales to ad ratio.  Value  America has not entered into any  advertising
for advertising barter arrangements.

     Charges  for  outbound  shipping  of  approximately  $2.8  million and $1.3
million are  classified in sales,  advertising  and  marketing  expenses for the
quarters ended March 31, 2000 and 1999, respectively.

General and Administrative

     General and  administrative  expenses  consist of management  and executive
compensation,  professional  services, bad debts and general corporate expenses,
such as facilities and telephone expenses.  General and administrative  expenses
increased from $3.3 million for the quarter ended March 31, 1999 to $7.3 million
for the quarter ended March 31, 2000.  This increase  reflected  charges for bad
debts,  credit card  chargebacks by customers and increased  professional  fees.
Payroll expenses relating to general and administrative personnel increased from
$1.0 million for the quarter ended March 31, 1999 to $1.7 million in the quarter
ended March 31, 2000.  Credit card  chargebacks from customers for goods shipped
to customers  but not returned  increased to  approximately  $1.1 million in the
first quarter of 2000 and bad debt expense was $1.1 million in the first quarter
of 2000 compared to $0.5 million in the first quarter of 1999. Professional fees
increased  from $0.3 million to $1.0 for the  quarters  ended March 31, 1999 and
2000,  respectively.  Value  America  expects  that  general and  administrative
expenses  will  decrease as a percentage  of revenues as it continues to broaden
its customer base,  increase its market share and revenues and decrease costs as
a result of the strategic restructure that began in the fourth quarter of 1999.

Technical and System Development

     Technical and system  development  expenses  consist  primarily of expenses
incurred for the maintenance of the software required to support Value America's
online  store,  including  employee  compensation  and the cost of designing and
maintaining store content, Internet connectivity, operations and reporting.

     Technical and system  development  expenses increased from $2.5 million for
the  quarter  ended  March 31,  1999 to $5.4  million,  net of $0.2  million  of
salaries  capitalized as development costs in the Company's  Enterprise Resource
Planning ("ERP") implementation project and website development, for the quarter
ended March 31, 2000.  This increase  principally  reflected  higher payroll and
increased  depreciation  charges in  connection  with the  increase  in computer
hardware  and  software  needed to support  the  Company's  operations.  Payroll
related  expenses  totaled $0.7 million for the quarter ended March 31, 1999 and
$1.6 million for the quarter ended March 31, 2000. Depreciation charges increase
from $0.2  million for the quarter  ended March 31, 1999 to $2.4 million for the
quarter  ended March 31, 2000  primarily  due to capital  expenditures  made and
leases  entered  into  during the  quarter and during the second half of 1999 of
approximately $24.2 million.

     During the first quarter of 2000, the Company devoted significant resources
to the second phase of its implementation of SAP and Siebel software. Since this
ERP system will provide a strong  foundation to support the Company's  continued
growth,  the Company has capitalized $2.4 million during the quarter ended March
31, 2000 in connection  with the consultant  fees and certain  employee  payroll
costs related to this project.

     Value America expects that it will continue to incur substantial  technical
and systems development expenses.

Other (Expense), Net

     Interest  income of $2,000 for the  quarter  ended  March 31,  2000,  which
consisted  primarily of income earned on the proceeds from the Company's initial
public  offering in the second quarter of 1999,  was offset by interest  expense
incurred in connection with assets held under capital leases and realized losses
on long-term investments.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31,  2000,  the  Company's  cash and cash  equivalents  were $21.5
million  compared to $52.2  million at December  31,  1999.  In April 1999,  the
Company  consummated  its initial  public  offering by selling an  aggregate  of
5,500,000  shares of common  stock and  raising net  proceeds  of  approximately
$114.4  million.  Prior  to  April  1999  the  Company  primarily  financed  its
operations through private capital investments.

     Net cash  used in  operating  activities  was $24.9  million  for the three
months ended March 31, 1999,  and $35.8 million for the three months ended March
31, 2000. Net cash used in operating  activities in the three months ended March
31, 2000 was due  primarily  to the net loss of $27.4  million,  a $6.2  million
decrease  in  deferred  revenue and $5.6  million  decrease in accrued  expenses
associated  with the growth in  revenues  and  increased  cash  required to fund
operating activities,  an increase in inventory of $3.2 million as the result of
holiday  season  returns,  and a $3.3  million  reduction in the  liability  for
restructuring and other activities

     Net cash  provided by investing  activities of $6.3 million for the quarter
ended  March 31, 2000  primarily  related to the sale of  short-term  investment
offset in part by increased restricted cash reserves to support increased credit
lines to support the increased volume of business with the Company's vendors and
capital investments made in the Company's ERP implementation.

     Value  America has an unsecured  $5.0 million line of credit from  Wachovia
Bank,  N.A.  This line bears  interest on advanced  funds at Prime less 0.5% and
expires on June 1, 2000.  The terms of the  agreement  prohibit the Company from
having a significant change in control,  ownership,  or legal structure,  except
for primary and secondary offerings of equity securities to the public,  without
Wachovia's consent. In addition, during the agreement the Company is required to
maintain unencumbered liquidity of $25 million. As of March 31, 2000, we had not
drawn any amounts under this line of credit. As of March 2000, the Company is in
default of the unencumbered liquidity covenant, and, therefore, has no borrowing
capacity available under the line of credit

     Value America has obtained  stand-by  letters of credit in favor of vendors
totaling  $7.8  million.  Each letter of credit is secured by a  certificate  of
deposit.  These standby  letters of credit expire through  November 2000 and are
callable  if Value  America  defaults in the  payments of trade  payables to the
secured vendors.

     Additionally,  Value  America has a two-year  agreement  with a credit card
processor  in which the credit  card  processor  has a first  priority  lien and
security  interest in a $5.0 million cash deposit  account,  to cover  potential
chargebacks. The agreement, which expired in April 2000, permits the credit card
processor to require Value  America to maintain the cash deposit  account for up
to 10 months  following  termination.  This  agreement  has been extended by the
credit  card  processor  and the  Company  while the  Company  enters into a new
agreement for these services.

     Value America  incurred  capital  expenditures of $3.9 million in the three
months  ended March 31, 2000  compared to $1.6 million in the three months ended
March 31, 1999.

     After an extensive  analysis,  the Company  restructured  its operations in
December 1999 (see Note 4 to the unaudited  Consolidated  Financial Statements).
This restructuring  enabled the Company to reduce the number of its suppliers in
order to  focus  on key  vendors  whose  products  provided  a  majority  of the
Company's  revenues.  The  restructuring  is  expected  to allow the  Company to
streamline its  operations,  improve  fulfillment and customer  service,  reduce
expenses and focus on selling  products with higher gross  margins.  The Company
also  believes  that  the  investment  that  it  has  made  in  a  new  computer
infrastructure  will allow it to support  substantial  growth in the future. The
Company  will  continue  to pursue  opportunities  to make its  operations  more
efficient in the future in order to minimize its losses from operations.

     As of March 31, 2000, the  restructuring  liabilities are as follows:  $0.4
million for severance and personnel costs and $0.2 million for other exit costs.
In addition,  approximately  $0.9 million of other activities  remain to be paid
primarily related to contract settlements to eliminate product lines.

     As shown in the  financial  statements  during the quarter  ended March 31,
2000 and the years ended December 31, 1999, 1998 and 1997, the Company  incurred
losses  of $27.4  million,  $143.5  million,  $53.6  million  and $1.9  million,
respectively.  The Company expects to incur  additional but declining losses for
at least  the next two years  that  will  result in  negative  cash  flows  from
operations.  In April 1999,  the Company  raised $114.4  million from an initial
public  offering  of its stock.  As of March 31,  2000,  the  Company  had $21.5
million of unrestricted  cash and short-term  investments.  The Company does not
expect these  resources  will be sufficient to fund its  operations  through the
first quarter of 2001.

     In December  1999,  the Board of  Directors  formed a Special  Committee to
explore  strategic  opportunities  for Value America.  The Special Committee has
retained  Deutsche  Banc  Alex.  Brown,  as its  financial  advisors,  to review
financial opportunities available to the Company.

     On May 10, 2000, the Company announced  financing  agreements that combined
will provide the Company with up to $90 million in additional  equity.  Existing
investors and others have  committed to investing an additional  $30 million and
Acqua  Wellington  North America  Equities Fund, Ltd ("Acqua  Wellington")  will
provide the Company with access to up to $60 million in equity financing through
periodic sales of its common stock to Acqua  Wellington over the next 14 months.
Actual  proceeds from Acqua  Wellington will vary based on Value America's stock
price and the number of shares the Company offers for sale to Acqua  Wellington.
Value America will issue shares of a new issue of  convertible  preferred  stock
and common stock warrants to the purchasers. The Company will continue to pursue
opportunities  for  additional  funding  and both  management  and the  Board of
Directors are confident  that these  opportunities  will generate cash resources
sufficient to fund operations in 2000. There can be, however,  no assurance that
such continuing efforts will be successful.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     The Company is subject to interest rate risk on its  investment  portfolio.
If market rates were to increase immediately and uniformly by 10% from the level
at March 31, 2000, the change to the Company's  interest  sensitive  investments
would have an immaterial effect on the Company's financial position,  results of
operations and cash flows over the next fiscal year.

<PAGE>
Part II. Other Information

Item 1.  Legal Proceedings

     On March 24, 1999,  the Company was served with a complaint  that was filed
in the United  States  District  Court for the  Northern  District  of  Georgia,
Atlanta Division, by Coupons, Inc., a Georgia corporation ("Coupons").  On April
9, 1999, Coupons served an amended complaint,  joining Stephen S. Freedman as an
additional  plaintiff and alleging  several causes of action,  including  unfair
competition,  fraudulent  registration  of service  marks,  common law trademark
infringement, unfair competition,  deceptive trade practices, false advertising,
fraud,  fraudulent  misrepresentations,  and  rescission of contract and, in the
alternative, breach of contract. The complaint seeks rescission of a December 3,
1997 agreement between Stephen S. Freedman,  injunctive relief barring most uses
by the Company of the "VALUE AMERICA" mark,  treble damages and an accounting of
profits  under the Trademark  Act of 1946,  as amended,  punitive  damages of at
least $1.0 million and  cancellation of the Company's  "VALUE  AMERICA"  service
mark  registrations.  The  Company  believes  that the  claims  asserted  in the
foregoing action are without merit and intends to defend the action vigorously.

     The Company and four former  officers  have been named as  defendants  in a
securities  fraud  action  filed in the  United  States  District  Court for the
Western  District of Virginia,  Charlottesville  Division on January 10, 2000 by
Marvin E.  Sikes,  as  representative  of a  putative  class of  plaintiffs  who
purchased or otherwise  acquired  shares of the  Company's  common stock between
April 7, 1999 through  December 28, 1999 (the "Class  Period").  On February 11,
2000, three similar actions were filed against the Company. These actions allege
that the Company's public statements contained  misrepresentations  or omissions
of material adverse information regarding the Company's financial condition that
allegedly  caused  the  market  price  of  the  Company's  common  stock  to  be
artificially  inflated  during the Class Period.  Counsel to the Company filed a
motion to  consolidate  all actions  against the Company on February  17,  2000.
Based on its preliminary review of the complaint, Value America believes that it
has valid defenses to each of the claims asserted by the plaintiffs.

     The Company received a Pre-Filing Notice to Prospective Defendant, dated as
of October 22, 1999, from the Consumer  Protection Unit of the District Attorney
for Marin County,  California in connection with an  investigation  into alleged
advertising  and sale of  computer  components  designed  for use by an original
equipment manufacturer as retail computer components in California. The District
Attorney  informed  the  Company  that  the   investigation   into  the  alleged
advertising deficiencies has been terminated. Based on its preliminary review of
the  Notice,  the  Company  believes  that it has valid  defenses  to the claims
presented.

     The Federal  Trade  Commission  ("FTC") has  instituted an inquiry into the
advertisement of free or reduced-cost  personal computer systems,  the discounts
on which are contingent upon the customers'  subscription to an Internet service
provider's  services for a fixed period of time.  Specifically,  the FTC asserts
that the  disclosure of this  contingency  was not  sufficiently  clear from the
contents and layout of the  Company's  advertisements.  The Company has produced
documents to the FTC pursuant to its requests , and met with the FTC in April to
discuss the investigation. Based on its meetings with the FTC and ongoing review
of the investigation, the Company believes that it is close to a resolution with
the FTC.

     The Company has been named as a defendant  in an action filed in the United
States  District  Court for the Western  District of  Virginia,  Charlottesville
Division on March 30, 2000 by  shareholder  Gibralt US, Inc. This action alleges
that the  Company  wrongfully  refused to register  transfer of the  plaintiff's
shares,  wrongfully  deprived the plaintiff of its shares, and wrongfully denied
the plaintiff  permission to sell the shares. Based on its preliminary review of
the complaint,  Value America believes that it has valid defenses to each of the
claims asserted by the plaintiff.

     On March 24, 2000,  the Company  received a letter  regarding the potential
infringement  of  certain  Internet  security  patents  allegedly  held  by Leon
Stambler.  The Company is currently  reviewing the validity and applicability of
the patents to its business.

     The Company  believes that the foregoing  lawsuits will not have a material
adverse effect upon its business, financial condition or results of operations.

Item 2.  Changes in Securities and Use of Proceeds

         Not applicable.

Item 3.  Defaults Upon Senior Securities

         Not applicable

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

         Not applicable

Item 5.  Other Information

         Not applicable

Item 6.  Exhibits and Reports on Form 8-K

         Exhibit  27.1  Financial  Data  Schedule  March 31, 2000  Exhibit  27.2
         Restated  Financial  Data Schedule March 31, 1999 Exhibit 27.3 Restated
         Financial  Data Schedule June 30, 1999 Exhibit 27.4 Restated  Financial
         Data Schedule September 30, 1999



<PAGE>


                                   SIGNATURES

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

                               Value America, Inc.

May 15, 2000                             By:   /s/ Michael Waide
Date                                     Michael Waide, Executive Vice President
                                           and Chief Financial Officer