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 September 30, 1999

                                       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.)

          1560 Insurance Lane, Charlottesville, Virginia 22911
          (Address of principal executive offices) (Zip code)

                                 1(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 November 8, 1999, there were  44,753,705 shares  of common stock
outstanding.

                                       1

<PAGE>
<TABLE>


                                                          Value America, Inc.

                                                               FORM 10-Q
                                               For the Quarter Ended September 30, 1999

                                                                 INDEX
<S>     <C>

                                                                                                     Page
Part I - Financial Information......................................................................   3
      Item 1.  Consolidated Financial Statements....................................................   3
      Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
               Operations...........................................................................   8
      Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........................  16
Part II - Other Information.........................................................................  17
      Item 1.  Legal Proceedings....................................................................  17
      Item 2.  Changes in Securities and Use of Proceeds............................................  17
      Item 3.  Defaults Upon Senior Securities......................................................  17
      Item 4.  Submission of Matters to a Vote of Security Holders..................................  17
      Item 5.  Other Information....................................................................  17
      Item 6.  Exhibits and Reports on Form 8-K.....................................................  17




                                                       2

<PAGE>


Part I.  Financial Information
Item 1.  Consolidated Financial Statements
                                                          VALUE AMERICA, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                             (in thousands of dollars, except share data)

                                                                             September 30,      December 31,
                                                                                 1999               1998
                                                                             --------------     -------------
                                                                              (unaudited)
                                 ASSETS
CURRENT ASSETS:
      Cash and cash equivalents............................................  $     85,714       $    20,127
      Restricted cash......................................................         5,250             5,000
      Short-term investments...............................................        30,221                --
      Accounts receivable, net of allowance of $1,131 and $1,021...........        10,830             3,011
      Debt issuance costs..................................................            --            26,095
      Inventory............................................................         1,805               639
      Other current assets.................................................         2,622                --
                                                                             -------------      ------------
         TOTAL CURRENT ASSETS..............................................       136,442            54,872
                                                                             -------------      ------------
Equipment, furniture and fixtures, net.....................................        16,393             2,061
Restricted cash............................................................            --             1,500
Long-term investments......................................................         1,486                --
Deferred offering costs....................................................            --             1,369
Notes receivable from officers.............................................         1,200               250
Goodwill...................................................................         1,344                --
Other assets...............................................................           428                45
                                                                             =============      ============
         TOTAL ASSETS......................................................  $    157,293       $    60,097
                                                                             =============      ============
                            LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
                                     AND STOCKHOLDERS'EQUITY (DEFICIT)
CURRENT LIABILITIES:
      Accounts payable.....................................................  $     27,649       $    15,568
      Accrued expenses.....................................................         7,433             4,515
      Deferred revenue.....................................................         5,385             2,204
      Accrued stock-based compensation.....................................         2,235             1,372
      Notes payable........................................................            --            29,024
      Other current liabilities............................................         3,863               143
                                                                             -------------      ------------
         TOTAL CURRENT LIABILITIES.........................................        46,565            52,826
                                                                             -------------      ------------
Deferred revenue...........................................................           106               930
Other liabilities..........................................................         2,768                83
                                                                             -------------      ------------
         TOTAL LIABILITIES.................................................        49,439            53,839
                                                                             -------------      ------------
Commitments and contingencies
MANDATORILY REDEEMABLE PREFERRED STOCK:
      Series  A,  without  par  value,  convertible,   5%  cumulative  dividend;
          5,000,000 shares authorized, 0 and 5,000,000 issued and outstanding at
          September 30, 1999 and December 31, 1998, respectively; redeemable for
          $4.00 per share..................................................            --            14,440
      Series B, without par value, convertible,  5% cumulative dividend; 617,979
          shares  authorized,  0 and 617,979 issued and outstanding at September
          30, 1999 and December 31, 1998,  respectively;  redeemable  for $60.94
          per share........................................................            --            23,382
     Series  C,  without  par  value,  convertible,   5%  cumulative  dividend;
          6,000,000  shares  authorized (0 at December 31,  1998),  0 issued and
          outstanding; redeemable for $20.00 per share.....................            --                --
STOCKHOLDERS'EQUITY (DEFICIT):
      Preferred Stock,  without par value;  25,000,000  shares  authorized (0 at
          December 31, 1998); 0 shares issued and outstanding..............            --                --
      Common  stock,  without  par  value,  500,000,000  shares  authorized  and
          44,686,559  shares  issued and  outstanding  at  September  30,  1999;
          100,000,000   shares  authorized  and  23,777,700  shares  issued  and
          outstanding at December 31, 1998.................................       289,656             7,482
      Warrants.............................................................        14,490            26,585
      Unrealized loss on securities available-for-sale.....................         1,033                --
      Accumulated deficit..................................................      (197,325)          (65,631)
                                                                             -------------      ------------
         TOTAL STOCKHOLDERS'EQUITY (DEFICIT)...............................       107,854           (31,564)
                                                                             -------------      ------------
          TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND
             STOCKHOLDERS'EQUITY (DEFICIT).................................  $    157,293       $    60,097
                                                                             =============      ============


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

                                                                3
<PAGE>

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

                                                Three Months Ended September 30,     Nine Months Ended September 30,
                                                --------------------------------     -------------------------------
                                                    1999              1998              1999             1998
                                               ---------------    -------------     -------------    --------------

TOTAL REVENUES...............................  $      57,632      $    15,613       $   121,438      $     22,965
TOTAL COST OF REVENUES.......................         54,156           15,167           115,616            22,217
                                               ---------------    -------------     -------------    --------------
GROSS MARGIN (LOSS)..........................          3,476              446             5,822               748
                                               ---------------    -------------     -------------    --------------
OPERATING EXPENSES:
      Sales, advertising and marketing.......         27,480           12,257            66,900            21,392
      General and administrative.............          4,785            2,264            12,141             4,040
      Technical and system development.......          4,397            1,585            10,618             2,799
      Professional fee.......................             --               --                --             1,700
                                               ---------------    -------------     -------------    --------------
         Total operating expenses............         36,662           16,106            89,659            29,931
                                               ---------------    -------------     -------------    --------------
OPERATING LOSS...............................        (33,186)         (15,660)          (83,837)          (29,183)
OTHER INCOME AND EXPENSES:
      Interest (expense) income, net.........          1,599               81           (13,980)              229
                                               ---------------    -------------     -------------    --------------
NET LOSS.....................................        (31,587)         (15,579)          (97,817)          (28,954)
      Accretion and dividends on Series
      A, Series B and Series C redeemable
      preferred stock........................             --            4,156            12,162             6,570
      Beneficial conversion feature on
      Series C redeemable preferred stock....             --               --            19,800                --
                                               ---------------    -------------     -------------    --------------
NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS...  $     (31,587)     $   (19,735)      $  (129,779)     $    (35,524)
                                               ===============    =============     =============    ==============
NET LOSS PER COMMON SHARE:
      Basic..................................  $       (0.71)     $     (0.85)      $     (3.52)     $      (1.53)
                                               ===============    =============     =============    ==============
      Diluted................................  $       (0.71)     $     (0.85)      $     (3.52)     $      (1.53)
                                               ===============    =============     =============    ==============
WEIGHTED AVERAGE NUMBER OF SHARES:
      Basic..................................         44,487           23,153            36,866            23,153
                                               ===============    =============     =============    ==============
      Diluted................................         44,487           23,153            36,866            23,153
                                               ===============    =============     =============    ==============


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

                                                           4
<PAGE>


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

                                                                        Nine Months Ended September 30,
                                                                        ------------------------------
                                                                            1999             1998
                                                                        -------------    -------------
Cash Flows From Operating Activities:
      Net loss........................................................  $   (97,817)     $   (28,954)
      Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation and amortization................................        2,927              389
         Loss on sale of fixed assets.................................            6               --
         Stock-based compensation.....................................          863              607
         Professional fee.............................................           --            1,700
         Amortization of debt issuance costs..........................       19,454               --
      Changes in assets and liabilities:
         Accounts receivable..........................................       (7,733)          (2,629)
         Inventory....................................................       (1,166)          (1,145)
         Notes receivable from officers...............................         (950)            (250)
         Other assets.................................................       (3,004)             (78)
         Accounts payable.............................................       12,058           11,411
         Accrued expenses.............................................        2,897               --
         Deferred revenue.............................................        2,357              968
         Other liabilities............................................       (1,017)              --
                                                                        -------------    -------------
Net Cash Used In Operating Activities.................................      (71,125)         (17,981)
                                                                        -------------    -------------
Cash Flows From Investing Activities:
      Restricted cash.................................................        1,250           (5,250)
      Purchases of short-term investments.............................      (30,674)               --
      Acquisitions of businesses, net of cash acquired................       (1,353)               --
      Proceeds from sale of fixed assets..............................           23                --
      Capital expenditures............................................       (8,752)          (1,833)
                                                                        -------------    -------------
Net Cash Used In Investing Activities.................................      (39,506)          (7,083)
                                                                        -------------    -------------
Cash Flows From Financing Activities:
      Principal payments under capital lease obligations..............       (1,148)             (35)
      Proceeds from issuance of common stock..........................      126,700               --
      Proceeds from issuance of preferred stock and warrants..........       60,000           18,830
      Proceeds from exercise of common stock warrants.................           10               --
      Proceeds from exercise of common stock options..................          705               --
      Payment of offering costs.......................................      (13,134)          (2,946)
      Proceeds from issuance of debt and warrants.....................        5,000              700
      Dividends paid..................................................       (1,915)            (270)
                                                                        -------------    -------------
Net Cash Provided By Financing Activities.............................      176,218           16,279
                                                                        -------------    -------------
Net Increase  In Cash and Cash Equivalents............................       65,588           (8,785)
Cash and Cash Equivalents, Beginning of Period........................       20,127           10,341
                                                                        =============    =============
Cash and cash equivalents, end of period..............................  $    85,714      $     1,556
                                                                        =============    =============
Non-cash investing and financing transactions:
      Accretion and dividends on redeemable preferred stock...........  $    12,162      $     6,570
                                                                        =============    =============
      Beneficial conversion feature related to issuance of
      preferred stock.................................................  $    19,800      $        --
                                                                        =============    =============
      Issuance of warrants with notes payable.........................  $     4,539      $        --
                                                                        =============    =============
      Issuance of common stock on preferred stock conversion..........  $   117,388      $        --
                                                                        =============    =============
      Issuance of common stock on exercise of warrants................  $    49,509      $        --
                                                                        =============    =============
      Fair value adjustment to securities available-for-sale..........  $    (1,033)     $        --
                                                                        =============    =============
      Acquisition of assets under capital lease.......................  $     8,516      $        --
                                                                        =============    =============


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

                                                                  5
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<PAGE>

                               VALUE AMERICA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (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.
Additionally,   Value  America   develops  and  maintains   custom   multi-media
presentations  for the products  and  services  featured on its online store and
offers  opportunities  for  advertising on its online store. On May 5, 1999, the
Company formed ServeAmerica.com,  Inc. ("ServeAmerica"), a Delaware corporation.
ServeAmerica,  a wholly owned  subsidiary of the Company,  was capitalized  with
1,000 shares of $0.001 par value common  stock.  ServeAmerica  had 100 shares of
common stock issued and outstanding at September 30, 1999.  ServeAmerica has not
conducted any operations from inception through September 30, 1999. On September
2, 1999 the Company formed Value America  Automotive  Group,  Inc.  ("VAAG"),  a
Virginia  corporation.  VAAG, a wholly  owned  subsidiary  of the  Company,  was
capitalized  with 5,000  shares of no par common  stock.  VAAG had 100 shares of
common stock issued and outstanding at September 30, 1999. On September 3, 1999,
VAAG acquired all of the outstanding common 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
10 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, 1998 and
notes thereto included in the Company's Registration Statement on Form S-1 filed
with the  Securities  and  Exchange  Commission  (the  "SEC").  The  results  of
operations  for the three- and nine-month  periods ended  September 30, 1999 are
not  necessarily  indicative  of the results to be expected  for any  subsequent
quarter   or  for  the  year   ending   December   31,   1999.   Certain   prior
years'information  has been  reclassified  to conform  with the  current  year's
presentation.

3.    Net Loss Available for Common Stockholders

         Net loss  available  for common  stockholders  is comprised of net loss
plus  accretion on Series A, B and C redeemable  preferred  stock,  dividends on
Series A, B and C preferred stock and the beneficial  conversion  feature on the
Series C redeemable  preferred  stock.  The  accretion and dividends on Series A
redeemable preferred stock were adjustments to net loss for the first and second
quarters of 1999 and all quarters of 1998. The accretion and dividends on Series
B  redeemable  preferred  stock were  adjustments  to net loss for the first and
second  quarters  of 1999  and the  third  and  fourth  quarters  of  1998.  The
accretion,   dividends  and  beneficial  conversion  feature  on  the  Series  C
redeemable preferred stock were adjustments to net loss for the first and second
quarters of 1999. Net loss available for common  shareholders for the three- and
nine-month  periods ended September 30, 1999 was $31.6 million ($0.71 per share)
and  $129.8  million  ($3.52  per  share),  respectively.   Net  loss  prior  to
consideration  of  accretion  and  dividends on the Series A, B and C redeemable
preferred stock and the beneficial conversion feature on the Series C redeemable
preferred stock was $31.6 million ($0.71 per share) and $97.8 million ($2.65 per
share), respectively,  for the three- and nine-month periods ended September 30,
1999 and $15.6 million  ($0.67 per share) and $29.0 million ($1.25 per share)for
the three- and  nine-month  periods ended  September 30, 1998. The accretion and
dividends  on  Series  A,  Series B and  Series  C  redeemable  preferred  stock
represent the recording of the periodic increases in the carrying value of these
securities to increase  their value to the  redemption  value by the  redemption
date. The recording of accretion  does not affect the Company's cash flows.  The
beneficial  conversion  feature on preferred  stock  represents  the  difference
between  the fair  market  value of the  common  stock  underlying  the Series C
redeemable  preferred stock issued on January 12, 1999 and the conversion  price
of the preferred stock. The recording of the beneficial  conversion feature does
not affect the Company's cash flows.

                                       6
<PAGE>

4.    Commitments and Contingencies

         On March 24, 1999, Coupons, Inc., a Georgia corporation allegedly doing
business as "Value  America,"  filed a complaint  against  Value  America in the
United  States  District  Court for the  Northern  District of Georgia,  Atlanta
Division.  This action  relates to the use of the mark "Value  America" by Value
America in  connection  with its  marketing  plan. A third party  granted  Value
America  an option  to  obtain an  assignment  of the  "Value  America"  mark in
December 1997. In March 1998,  Value America  exercised this option and obtained
an assignment of the mark. In connection with this  assignment,  the third party
retained the exclusive  right to use the "Value  America" mark for preparing and
disseminating  advertising matter, including direct mail advertising.  The third
party  subsequently  assigned  his  retained  rights  to  Coupons,  Inc.  In the
complaint, Coupons, Inc. alleges that Value America's use of the "Value America"
mark in its marketing activities is violative of Coupons, Inc.'s retained rights
to the mark.  The  complaint  alleges that Value  America's  actions  constitute
violations of federal  trademark  law, state law and common law.  Coupons,  Inc.
seeks all  profits  from Value  America's  use of the mark,  restitution  for an
unspecified  amount of  damages,  as well as  punitive  damages in the amount of
$1,000,000.  In  addition,  Coupons,  Inc.  requested  the  court  to  issue  an
injunction preventing use of the "Value America" mark and order the cancellation
of Value  America's  trademark  registration  for the "Value  America"  mark. On
November  4, 1999,  Value  America's  motion to dismiss  was  denied,  and Value
America  expects to file an answer to the complaint  asserting valid defenses to
each of the claims asserted by Coupons, Inc.

         From time to time, Value America may be involved in litigation relating
to claims arising out of its operations in the normal course of business.  Value
America  currently is not aware of any such legal  proceedings or claims that it
believes will have,  individually or in the aggregate, a material adverse effect
on its business, prospects, financial condition and operating results.

         The Company has an agreement to purchase certain information technology
services and licenses through January 1, 2000. The total  commitments  remaining
under the  agreement  approximated  $3.9  million as of September  30, 1999.  In
addition the company has  committed  approximately  $6.5 million  under  capital
lease arrangements for the purchase of equipment and maintenance agreements.

5.    Related Party Transactions

         During the three- and  nine-month  periods  ended  September  30, 1999,
Value  America  received  notes from its  officers in the amount of $500,000 and
$950,000, respectively. The notes bear interest between 5.50% and 6.75% annually
with interest and principal due over a two year period.


                                       7

<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,""Liquidity  and Capital Resources,"and  "Additional Factors
That May Affect Future  Results"included  in this  "Management's  Discussion and
Analysis  of  Financial  Condition  and Results of  Operations"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 three sources:  (a) sales of
products   through  Value  America's  online  store,  (b)  fees  collected  from
manufacturers  for the  preparation  and  hosting of product  presentations  and
listing of manufacturers'  products  available for purchase on the online store,
and (c) advertising on the online store.  Value America's  vendors ship products
directly  to the  customer  typically  within  one to two days  after a customer
places an order.  Revenues from product sales are recognized  upon shipment from
the vendor. Value America is responsible for selling the merchandise, collecting
payment from the customer,  ensuring that the shipment  reaches the customer and
processing  returns.  Value  America  generally  takes  title to  products  upon
shipment and bears the risk of loss for  collection,  delivery  and  merchandise
returns from customers.  Value America occasionally  purchases merchandise prior
to receiving  customer  orders and records such  merchandise as inventory  until
shipped to  customers.  Value America  accrues a reserve for  estimated  product
returns at the time of sale.

         Value  America has  contractual  agreements  with many of its suppliers
under  which  Value   America   develops  and  maintains   multi-media   product
presentations on Value America's online store.  These agreements provide for the
development  of the  presentations,  the  posting of the  presentations  and the
listing  of the  manufacturers'  products  on  Value  America's  Internet  site,
typically for a specified period.  For agreements  entered into prior to January
1, 1998, the listing  period  generally  extended for 36 months;  for agreements
entered into after that date,  the period  generally  has been 12 months.  Value
America recognizes the costs of developing presentations and listing products on
its  Internet  site as incurred  and  recognizes  the product  presentation  and
listing revenues ratably over the period of the related agreement.  Amounts that
are  billed  under  the  terms  of these  agreements,  but not yet  earned,  are
reflected  as  deferred  revenue.  Certain  of  these  agreements  provide  that
suppliers  pay a renewal fee to  continue  product  listings  beyond the initial
listing  periods.  Revenues from these renewal fees are recognized  ratably over
the renewal term.

                                       8
<PAGE>

         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. In the third quarter of fiscal 1998, Value America began to
extend 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.

         Value  America  expects  that  its  operating  expenses  will  increase
significantly  during  the  foreseeable  future  as the  result of its plans to:
increase expenditures on marketing,  advertising and promotion,  hire additional
personnel, enhance existing store operations and to support new strategic vendor
relationships.  Value America expects to incur substantial  operating losses for
the  foreseeable  future.  Although  Value America has  experienced  significant
growth in revenue,  there can be no assurance that Value America's  revenue will
continue at its current level or increase. 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.

RESULTS OF  OPERATIONS
Third  Quarter 1999 Compared with Third Quarter 1998

     Revenues

         Revenues  primarily consist of product sales including shipping through
Value America's online store, product presentation and listing fees, advertising
and shipping.  For the quarter ended September 30, 1999,  revenues totaled $57.6
million  representing  a 269%  increase from $15.6 million for the quarter ended
September  30,  1998.  Revenues  from product  sales were $56.3  million for the
quarter  ended  September  30, 1999,  compared to $15.3  million for the quarter
ended  September  30,  1998,  representing  an increase  of 268%.  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  expanding  array of
merchandise.

         Revenues from  advertising  and other were $1.3 million for the quarter
ended  September  30, 1999, an increase of 333% compared to $0.3 million for the
quarter ended September 30, 1998. The increase in advertising revenues is driven
by two new initiatives that commenced in the first quarter of 1999:  advertising
on Value  America's web site and direct  advertising  through EDM. Value America
recognized   approximately   $0.8  million  in  web  site  advertising  and  EDM
advertising  in the quarter  ended  September  30,  1999,  compared to $0 in the
quarter ended September 30, 1998. Product presentation listing fees increased to
approximately $0.5 million in the third quarter of 1999 compared to $0.3 million
in the third quarter of 1998. This increase in product presentation listing fees
reflects the increase in brand offerings on Value America's online store.

         Charges to customers for shipping,  which represent  approximately $1.6
million and $0.3 million of revenue for the quarters  ended  September  30, 1999
and 1998,  respectively,  are  classified in revenue.  Prior to January 1, 1999,
revenue  generated from shipping was recorded as a reduction of the related cost
of  shipping.  All 1998  amounts  presented  have been  adjusted to reflect this
classification  change.  For the quarters ended September 30, 1999 and 1998, 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 4.6% and 0.1%, respectively.

                                       9
<PAGE>

Cost of Revenues

         Cost  of  revenues  primarily  consists  of  payments  to  third  party
suppliers for merchandise and shipping.  Value America incurred $54.2 million of
cost of revenues for the quarter ended September 30, 1999. For the quarter ended
September 30, 1998,  cost of revenues  totaled $15.2  million.  Cost of revenues
represent  94.0% and 97.1% of revenues for the quarters ended September 30, 1999
and 1998, respectively.

         Value  America's  gross margin has increased  from $0.4 million for the
quarter ended September 30, 1998 to $3.5 million for the quarter ended September
30,  1999.  This  increase  is due to  the  strong  margins  earned  on  certain
technology  products and advertising  revenues.  Product sales resulted in gross
margins of $2.3 million (4.1% of sales) and $0.2 million (1.6% of sales) for the
quarters  ended  September  30,  1999  and  1998,  respectively.  Value  America
continues  to utilize a  short-term  strategy of  selectively  accepting  narrow
margins on selected  product  sales and losses on  shipping  charges to maximize
sales volumes and brand awareness.

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 and credit card fees. Sales, advertising
and  marketing  expenses  increased  from $12.3  million for the  quarter  ended
September 30, 1998 to $27.5  million for the quarter  ended  September 30, 1999.
The increase  primarily  reflected  an increase in the number of  merchandising,
advertising  and promotion  department  employees and a general  increase in the
level of Value America's promotional activities.  As a percent of revenues these
expenses have decreased  from 78.5% for the quarter ended  September 30, 1998 to
47.7% for the quarter ended  September  30, 1999.  Advertising  and  promotional
expenses  increased from $11.4 million for the quarter ended  September 30, 1998
to $19.8 million for the quarter ended  September 30, 1999,  net of  cooperative
advertising of  approximately  $1.8 for the quarter ended September 30, 1998 and
$1.7 million for the quarter ended September 30, 1999. Payroll expenses relating
to  merchandising,  advertising  and promotion  departments  increased from $1.1
million for the quarter ended September 30, 1998 to $5.0 million for the quarter
ended  September  30, 1999.  Value  America  intends to continue to increase its
sales,  advertising  and  marketing  expenses  as it  continues  to  expand  its
operations.

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 $2.3 million for the quarter  ended  September  30, 1998 to $4.8
million for the quarter ended  September 30, 1999.  This increase  reflected the
hiring of additional  executive  management and increased  facilities charges to
support rapidly expanding  operations.  Payroll expenses relating to general and
administrative  personnel  increased  from $0.5  million for the  quarter  ended
September  30, 1998 to $2.1  million in the quarter  ended  September  30, 1999.
Value America expects that general and administrative  expenses will continue to
increase as it continues to expand its operations and enters new markets.

Technical and System Development

         Technical and system development expenses consist primarily of expenses
incurred for the development and maintenance of the software required to support
Value America's online store,  including  employee  compensation and the cost of
designing,  developing  and  improving  store  content,  Internet  connectivity,
operations  and  reporting.  Due to the  rapid  rate of  changes  in  associated
technology  and Value  America's  business,  these  expenses have generally been
expensed as incurred.  During the second and third quarters of 1999, the Company
devoted significant  resources to the implementation of SAP and Siebel software.
Since this  Enterprise  Resource  Planning  ("ERP") system will provide a strong
foundation  to  support  the  Company's   continued  growth,   the  Company  has
capitalized  $1.4  million  during  the  quarter  ended  September  30,  1999 in
connection  with the  purchase  price of software,  consultant  fees and certain
employee payroll costs related to this project. Technical and system development
expenses increased from $1.6 million for the quarter ended September 30, 1998 to
$4.4 million,  net of $0.3 million of salaries  capitalized as development costs
in the Company's ERP implementation project, for the quarter ended September 30,
1999. This increase  principally  reflected higher payroll,  consulting expenses

                                       10
<PAGE>

and increased  depreciation  charges in connection with the increase in computer
hardware  and  software  needed to support  the  Company's  operations.  Payroll
expenses related to technical and system development increased from $0.6 million
for the quarter  ended  September 30, 1998 to $1.1 million for the quarter ended
September 30, 1999.  Payments to outside  consultants to support general systems
maintenance  totaled $1.2 million for the quarter  ended  September 30, 1998 and
$1.3 million for the quarter  ended  September  30, 1999.  Depreciation  charges
increase  from $0.2  million for the quarter  ended  September  30, 1998 to $1.4
million for the  quarter  ended  September  30,  1999  primarily  due to capital
expenditures  made and leases  entered into during the quarter of  approximately
$10.0  million.  Value America  expects that  technical and systems  development
expenses will continue to increase for the foreseeable future.

Interest Income (Expense), Net

         Interest  income of $1.6 million for the quarter  ended  September  30,
1999,  which  consisted  primarily  of income  earned on the  proceeds  from the
Company's  IPO in the second  quarter of 1999,  was offset by  interest  expense
incurred in connection with assets held under capital leases.

Income Taxes

         Value  America  provided  $0  for  income  taxes  for  the  three-  and
nine-month  periods ended  September 30, 1999 and 1998,  since it incurred a net
loss for those periods.

RESULTS OF OPERATIONS
Nine Months 1999 Compared with Nine Months 1998

Revenues

         For the first nine months of 1999,  revenues  totaled $121.4 million up
from $23.0  million  for the first nine  months of 1998,  an  increase  of 429%.
Revenues  from  product  sales were $117.1  million  for the nine  months  ended
September  30,  1999,  compared  to  $22.1  million  for the nine  months  ended
September  30, 1998, an increase of 429%.  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 expanding array of merchandise.

         Revenues  from  advertising  and other were $4.3  million  for the nine
months ended  September  30, 1999,  compared to $0.9 million for the nine months
ended September 30, 1998. The increase in advertising  revenues is driven by two
new  initiatives  in 1999:  advertising  on Value  America's web site and direct
advertising through EDM. Value America recognized  approximately $2.9 million in
web site  advertising and EDM advertising in the nine months ended September 30,
1999,  compared to $0 in the nine  months  ended  September  30,  1998.  Product
presentation  listing  fees,  which are also included in  advertising  and other
revenue,  increased  to  approximately  $1.5 million in the first nine months of
1999,  compared to $0.9 million in the first nine months of 1998.  This increase
in product presentation listing fees reflects the increase in brand offerings on
Value America's online store.

         Charges to customers for shipping,  which represent  approximately $4.2
million and $0.4 million of revenue for the nine months ended September 30, 1999
and 1998,  respectively,  are  reported  as  revenue.  Prior to January 1, 1999,
revenue  generated from shipping was recorded as a reduction of the related cost
of  shipping.  All 1998  amounts  presented  have been  adjusted to reflect this
classification  change.  For the nine months ended  September 30, 1999 and 1998,
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 4.8% and 0.1%, respectively.

Cost of Revenues

         Value America  incurred $115.6 million of cost of revenues for the nine
months ended  September 30, 1999. For the nine months ended  September 30, 1998,
cost of revenues  totaled $22.2 million.  Cost of revenues  represent  95.2% and
96.7% of  revenues  for the nine  months  ended  September  30,  1999 and  1998,
respectively.

                                       11
<PAGE>

         Value  America's  gross margin has increased  from $0.7 million for the
nine months ended  September  30, 1998 to $5.8 million for the nine months ended
September  30,  1999.  This  increase  is due to the  strong  margins  earned on
advertising  revenues and certain technology  products.  Gross margin on product
sales  increased  to $2.0  million  from $0.5  million for the nine months ended
September 30, 1999 and 1998,  respectively.  The increase  relates to the mix of
products being sold.

Sales, Advertising and Marketing

         Sales,  advertising and marketing expenses increased from $21.4 million
for the nine  months  ended  September  30,  1998 to $66.9  million for the nine
months ended September 30, 1999. The increase primarily reflected an increase in
the number of merchandising,  advertising and promotion department employees and
a general  increase  in the  level of Value  America's  promotional  activities.
Advertising and promotional  expenses  increased from $18.4 million for the nine
months  ended  September  30, 1998 to $51.1  million  for the nine months  ended
September 30, 1999, net of cooperative advertising of approximately $1.8 million
for the nine  months  ended  September  30,  1998 and $5.6  million for the nine
months ended September 30, 1999.  Payroll  expenses  relating to  merchandising,
advertising and promotion  departments  increased from $2.1 million for the nine
months  ended  September  30, 1998 to $9.7  million  for the nine  months  ended
September  30, 1999.  Value  America  intends to continue to increase its sales,
advertising and marketing  expenses as it continues to expand its operations and
enters new markets.

General and Administrative

         General and administrative expenses increased from $4.0 million for the
nine months ended  September 30, 1998 to $12.1 million for the nine months ended
September 30, 1999. This increase reflected the hiring of additional  management
and customer service personnel,  the incurrence of increased  facilities charges
and  substantially  increased  activity levels to support the expansion of Value
America's  operation,  all of which were  undertaken  in late 1997 and continued
into 1998 and 1999.  Payroll  expenses  relating to general  and  administrative
personnel  increased  from $1.2 million for the nine months ended  September 30,
1998 to $4.8 million in the nine months ended September 30, 1999.  Value America
expects that general and administrative expenses will continue to increase as it
continues to expand its operations.

Technical and System Development

         Technical and system  development  expenses increased from $2.8 million
for the nine  months  ended  September  30,  1998 to $10.6  million for the nine
months ended  September 30, 1999.  This increase  principally  reflected  higher
payroll and  consulting  expenses.  Payroll  expenses  related to technical  and
system  development  increased  from  $1.1  million  for the nine  months  ended
September 30, 1998 to $3.8 million,  net of $0.5 million of salaries capitalized
as development costs for the Company's ERP implementation  project, for the nine
months ended September 30, 1999.  Payments to outside  consultants  totaled $1.2
million for the nine months  ended  September  30, 1998 and $3.1 million for the
nine months ended September 30, 1999.  Depreciation  charges increased from $0.2
million for the nine months  ended  September  30, 1998 to $2.0  million for the
nine months ended September 30, 1999 primarily due to capital  expenditures made
and leases  entered  into  during 1999 of  approximately  $17.3  million.  Value
America expects that technical and systems development expenses will continue to
increase for the foreseeable future.

Interest Income (Expense), Net

         Interest  expense of $14.0 million for the nine months ended  September
30,  1999  consisted  primarily  of the  amortization  of $17.1  million in debt
issuance  costs  related to a $34.0  million note payable that was  converted to
common stock upon the IPO. This interest  expense was offset by interest  income
earned on the proceeds from the debt and equity  issuances in the fourth quarter
of 1998 and the first and second quarters of 1999. This amortization  charge has
no effect on the Company's cash flows.

                                       12
<PAGE>

Net Loss Available for Common Stockholders

         Net loss  available  for common  stockholders  is comprised of net loss
plus  accretion on Series A, B and C redeemable  preferred  stock,  dividends on
Series A, B and C preferred stock and the beneficial  conversion  feature on the
Series C redeemable  preferred  stock.  The  accretion and dividends on Series A
redeemable preferred stock were adjustments to net loss for the first and second
quarters of 1999 and all quarters of 1998. The accretion and dividends on Series
B  redeemable  preferred  stock were  adjustments  to net loss for the first and
second  quarters  of 1999  and the  third  and  fourth  quarters  of  1998.  The
accretion,   dividends  and  beneficial  conversion  feature  on  the  Series  C
redeemable preferred stock were adjustments to net loss for the first and second
quarters of 1999. Net loss available for common shareholders for the nine months
ended September 30, 1999, was $129.8 million or $3.52 per share.  Net loss prior
to consideration  of accretion  anddividends on the Series A, B and C redeemable
preferred stock and the beneficial conversion feature on the Series C redeemable
preferred  stock was  $97.8  million  or $2.65  per  share.  The  accretion  and
dividends  on  Series  A,  Series B and  Series  C  redeemable  preferred  stock
represents  the  recording  of the periodic  increases in the carrying  value of
these  securities  to  increase  their  value  to the  redemption  value  by the
redemption  date.  The recording of accretion does not affect the Company's cash
flows.  The  beneficial  conversion  feature on preferred  stock  represents the
difference  between the fair market  value of the common  stock  underlying  the
Series C  redeemable  preferred  stock  issued  on  January  12,  1999,  and the
conversion  price  of the  preferred  stock.  The  recording  of the  beneficial
conversion  feature  does not affect  the  Company's  cash  flows.  Because  the
preferred  stock was  converted  to common stock in April 1999 there will not be
any future  accretion  or  dividend  charges in  connection  with 1998 and first
quarter 1999 issuances of preferred stock.

LIQUIDITY AND CAPITAL RESOURCES


         In the nine months ended September 30, 1999, Value America issued:

         o $60.0  million of Series C  redeemable  preferred  stock and  related
           warrants to purchase 2,311,567 shares of common stock;
         o $5.0  million of notes  payable  and  related  warrants  to  purchase
           560,000 shares of common stock;
         o 20,000 shares of common stock for $200,000; and
         o 5,500,000  shares of  common  share at $23 per  share  resulting  in
           proceeds of $113.4 million, net of underwriting discounts and
           expenses.

         Upon the closing of the IPO, the Series A, B and C redeemable preferred
stock  were  converted  into  10,737,162  shares of  common  stock and the $34.0
million of notes payable were cancelled with the exercise of warrants  resulting
in the issuance of 3,400,000 shares of common stock.

         In connection  with the 1998 and 1999  issuance of notes  payable,Value
America allocated $31.1 million to  warrants,which  represents their fair value.
The  resulting  debt  issuance  costs were  amortized as interest  expense until
conversion on April 13, 1999.

         As of April 13,  1999,  the  outstanding  principal  amount of the note
payable was converted  into common stock.  Interest  expense of $3.7 million was
recorded  in the  second  quarter  of  1999  representing  amortization  of debt
issuance   costs.   Value  America  also  recorded   $12.6  million  to  equity,
representing  the unamortized  issuance costs on Type B warrants.  The charge to
interest expense does not affect Value America's cash flows.

         In connection  with the January 1999 issuance of the Series C preferred
stock and warrants,  Value America  allocated  $11.4 million for the warrants to
stockholders'  equity and $48.6 million to the Series C preferred  stock,  based
upon  their  relative  fair  values.   Value  America   recorded   accretion  to
periodically  increase  the  carrying  value  of  the  preferred  stock  to  its
redemption  value of  $120.0  million  by the  redemption  date.  Value  America
recorded  accretion of $1.3 million in the second  quarter of 1999 on the Series
A, Series B and Series C preferred  stock.  The recording of accretion  does not
affect the Company's cash flows.

                                       13
<PAGE>

         Net cash used in operating  activities  was $18.0  million for the nine
months ended  September  30, 1998,  and $71.1  million for the nine months ended
September  30, 1999.  Net cash used in operating  activities  in the nine months
ended  September 30, 1999 was due primarily to (a) the net loss of $97.8 million
and (b) a $7.7 million increase in accounts receivable, both associated with the
growth in revenues and increased cash required to fund operating activities. The
increase in accounts  receivable  was offset by an increase in  amortization  of
debt issuance  costs of $19.5  million and a $12.1 million  increase in accounts
payable.  Value  America has  historically  financed  its  operating  activities
primarily through the aforementioned  capital  contributions by stockholders and
other parties.

         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
September 30, 1999, we had not drawn any amounts under this line of credit.

         Value  America  has  obtained  stand-by  letters  of credit in favor of
vendors totaling $3.8 million. Each letter of credit is secured by a certificate
of deposit.  These standby  letters of credit expire through August 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 $1.5 million cash deposit  account,  to cover  potential
charge backs.  The agreement,  which expires in April 2000, may be terminated by
either party and the credit card processor can require Value America to maintain
the cash deposit account for up to 10 months following termination.

         Value America incurred capital expenditures of $8.8 million in the nine
months  ended  September  30, 1999  compared to $1.8  million in the nine months
ended September 30, 1998.  Additionally,  the Company entered into approximately
$8.5 million of financing leases.  The increase in expenditures is primarily for
computer  equipment and furniture and fixtures  associated  with Value America's
continued new employee  growth,  move to new  facilities  and continued  systems
development and procurement.

         Value America plans to increase its operating expenses significantly in
order to:

         o increase the size of its staff;
         o expand its marketing and advertising efforts;
         o increase its technical and systems development efforts;
         o improve and maintain its controls, systems and procedures; and
         o support its growing infrastructure.

         As a result,  Value America may  experience  substantial  quarterly net
losses for the foreseeable future.

         The Company has an agreement to purchase certain information technology
services and licenses through January 1, 2000. The total  commitments  remaining
under the  agreement  approximated  $3.9  million as of September  30, 1999.  In
addition the Company has  committed  approximately  $6.5 million  under  capital
lease arrangements for the purchase of equipment and maintenance agreements.

         Value America believes that its existing capital  resources,  including
the net proceeds from its IPO will be sufficient to fund its  operations  for at
least the next 12 months.  However,  this  period may be shorter if the  Company
finds and  decides to take  advantage  of  business  opportunities  that  exceed
current   expectations  but  that  we  determine  are  desirable  and  feasible.
Thereafter,  if cash generated from  operations is insufficient to satisfy Value
America's  liquidity  requirements,  Value  America may seek to sell  additional
equity or convertible debt securities or obtain a larger credit facility.  There
can be no assurance,  however, that such efforts will be successful or the terms
acceptable to the Company.

                                       14
<PAGE>

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

         In addition to the factors discussed in the  "Overview"section  of this
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations",  including among others,  the Company's limited operating  history,
the  unpredictability  of its future revenues and the unpredictable and evolving
nature of its business model,  the following  additional  factors may affect the
Company's future results.

         The Company  may be unable to attract  customers  and process  sales if
management does not maintain and build relationships with manufacturers, vendors
and other third parties.  The Company is entirely  dependent upon  manufacturers
and  distributors  to provide  merchandise  for sale in our online store. In the
nine months of 1999, goods manufactured by IBM represented  approximately 35% of
our net sales and goods manufactured by Proteva and Hewlett-Packard  represented
approximately 18% and 7% of net sales,  respectively.  If we do not maintain our
existing relationships with product vendors on acceptable commercial terms or if
we do not establish  similar  relationships  with vendors of other products that
our  customers  want,  we may not be able to  offer  a  desirable  selection  of
merchandise  and  customers  may  choose  not to shop at our  online  store.  In
addition,  vendors may decide,  for reasons  outside our  control,  not to offer
particular  products for sale on the  Internet.  For example,  from February 19,
1999 to May 4, 1999 Compaq Computer temporarily  suspended sales of its Presario
line of computers  through  companies that sell  exclusively  over the Internet,
including Value America.  We believe Compaq took this action in order to give it
time to address pricing concerns of traditional resellers.

YEAR 2000 COMPLIANCE

         Many currently  installed  computer  systems and software  products are
programmed to assume that the century  portion of a date is "19" to conserve the
use of storage  and  memory.  This  assumption  results in the use of two digits
rather than four to define an applicable  year.  Accordingly,  computer  systems
that rely on two digits to define an applicable  year may recognize a date using
"00" as the year 1900, rather than the year 2000.

         Value  America has  completed  its initial  assessment of its Year 2000
readiness,  and it will  continue to assess its  readiness  as it  develops  and
expands its infrastructure and operations.  This assessment included a review of
Value  America's  internal  information   technology  systems,   non-information
technology systems and the systems of third parties upon which Value America may
rely.  Value  America  is  conducting  Year  2000  compliance  verification  and
validation,  primarily  using  internal  resources.  Although  Value America has
developed its proprietary  computer  systems to  specifically  address Year 2000
issues,  there can be no assurance that Value America's systems, as a whole, are
Year  2000  compliant.  This  is  because  Value  America  utilizes  third-party
equipment and software that may or may not be Year 2000 compliant. Consequently,
Value  America's  ability to  address  Year 2000  issues is, to a large  extent,
dependent upon the  remediation  activities of third parties.  Value America has
obtained  statements  of  Year  2000  compliance  from  third  party  technology
providers   associated   with   Value   America's   core   information   systems
infrastructure,   and  Value   America  is  in  the   process  of  testing   its
infrastructure  systems.  Value  America has  confirmed  that all of its desktop
hardware  and  software  are  Year  2000  compliant..  No  internal  information
technology  projects  have  been  deferred  due to  Value  America's  Year  2000
remediation  program.  Value America believes that the remediation  program will
have no material adverse effect on current or anticipated  internal  information
technology projects.

         Value  America  has  initiated  formal  communications  with all of the
suppliers  presented in Value America's  online store to determine the extent to
which Value America is vulnerable to those third parties'  failures to remediate
their own Year 2000 issues. For suppliers with which Value America  communicates
order,  invoice,  and inventory  information  via  electronic  data  interchange
("EDI"),  Value America has switched to a Year  2000-compliant  standard format.
Since January 1999,  Value America has encouraged its suppliers that are not Y2K
compliant  to migrate  to the Year  2000-compliant  EDI  format.  Value  America
contracted  with GE  Information  Systems to test and validate  Value  America's
primary EDI trading partners for Year 2000 readiness. The results of the testing
showed that all of the tested trading partners were using a Year  2000-compliant

                                       15
<PAGE>

EDI format.  Value  America has received  confirmation  from at least 80% of its
critical  suppliers  that they will be able to process orders from Value America
after December 31, 1999. The remaining critical suppliers are being assessed. If
some  suppliers  do not achieve Year 2000  compliance,  these  suppliers  may be
unable to effectively operate.  Consequently,  Value America may seek additional
suppliers  of  quality  products  to  replace  those  burdened  with  Year  2000
remediation  difficulties.  If it  becomes  necessary  to  identify  alternative
suppliers,  Value America's order processing  systems are capable of maintaining
multiple  suppliers  of  products,  allowing  Value  America  to  switch to such
alternative suppliers with only minor administrative and EDI setup costs.

         In addition, Value America has evaluated Year 2000 compliance by credit
card processors and other financial  intermediaries  through which  transactions
are processed when Value America's customers purchase goods from Value America's
online store.  Value  America's  current  credit card processor has certified to
Value America that it is Year 2000 compliant.

         Value America funds  remediation costs internally from existing working
capital. To date, the incremental costs of Value America's Year 2000 remediation
program  have been  approximately  $83,000.  Value  America's  contract  with GE
Information  Systems to test the Year 2000  compliance  of its trading  partners
cost approximately  $35,000.  There are currently no identified Year 2000 issues
that will require  equipment to be replaced.  The desktop  upgrades were covered
under current  licensing  agreements  at no cost,  and  administrative  costs of
compliance  verification were less than $5,000. Value America estimates that the
additional  incremental costs related to its Year 2000 remediation  program will
not  exceed  $250,000  and will not  represent  more than 2% of Value  America's
operating  and capital  information  technology  budget for 1999.  In any event,
Value America  believes that such costs will not have a material  adverse effect
upon its results of operation or financial condition.

Item 3. Changes in Information 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  September  30,  1999,  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.

                                       16

<PAGE>


                           Part II. Other Information

Item 1. Legal Proceedings

         On March 24, 1999, Coupons, Inc., a Georgia corporation allegedly doing
business as "Value  America,"  filed a complaint  against  Value  America in the
United  States  District  Court for the  Northern  District of Georgia,  Atlanta
Division.  This action  relates to the use of the mark "Value  America" by Value
America in  connection  with its  marketing  plan. A third party  granted  Value
America  an option  to  obtain an  assignment  of the  "Value  America"  mark in
December 1997. In March 1998,  Value America  exercised this option and obtained
an assignment of the mark. In connection with this  assignment,  the third party
retained the exclusive  right to use the "Value  America" mark for preparing and
disseminating  advertising matter, including direct mail advertising.  The third
party  subsequently  assigned  his  retained  rights  to  Coupons,  Inc.  In the
complaint, Coupons, Inc. alleges that Value America's use of the "Value America"
mark in its marketing activities is violative of Coupons, Inc.'s retained rights
to the mark.  The  complaint  alleges that Value  America's  actions  constitute
violations of federal  trademark  law, state law and common law.  Coupons,  Inc.
seeks all  profits  from Value  America's  use of the mark,  restitution  for an
unspecified  amount of  damages,  as well as  punitive  damages in the amount of
$1,000,000.  In  addition,  Coupons,  Inc.  requested  the  court  to  issue  an
injunction preventing use of the "Value America" mark and order the cancellation
of Value  America's  trademark  registration  for the "Value  America"  mark. On
November  4, 1999,  Value  America's  motion to dismiss  was  denied,  and Value
America  expects to file an answer to the complaint  asserting valid defenses to
each of the claims asserted by Coupons, Inc.

         From time to time, Value America may be involved in litigation relating
to claims arising out of its operations in the normal course of business.  Value
America  currently is not aware of any such legal  proceedings or claims that it
believes will have,  individually or in the aggregate, a material adverse effect
on its business, prospects, financial condition and operating results.


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  September  30, 1999
          Exhibit 27.2  Restated  Financial  Data  Schedule September 30, 1998

                                       17


<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.

-----                              By: /s/ Dean M. Johnson
Date                               Dean M. Johnson, Executive Vice President
                                   and Chief Financial Officer

                                       18