================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                    FORM 10-Q

              [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
                                 ---------------

                        COMMISSION FILE NUMBER 000-26883

                                 MEDSCAPE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
         DELAWARE                       7375                     13-3879679
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)  CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
                                 ---------------
                              134 WEST 29TH STREET
                          NEW YORK, NEW YORK 10001-5399
                                 (212) 760-3100
                                 ---------------
   (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                    REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                                 ---------------
                                 MEDSCAPE, INC.
                              134 WEST 29TH STREET
                          NEW YORK, NEW YORK 10001-5399
                                 (212) 760-3100
            (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                    INCLUDING AREA CODE OF AGENT FOR SERVICE)
                                 ---------------

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


As of May 10, 2000, there were  45,885,444  shares  of the  Registrant's  common
stock outstanding.
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<PAGE>




                                TABLE OF CONTENTS

                                                                            PAGE
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
         Condensed Consolidated Balance Sheets - March 31, 2000
         and December 31, 1999                                                 3

         Condensed Consolidated Statements of Operations - three               4
         months ended March 31, 2000 and 1999
         Condensed Consolidated Statements of Cash Flows - three
         months ended March 31, 2000 and 1999                                  5
         Notes to Condensed Consolidated Financial Statements                  6
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                             7
Item 3.  Quantitative and Qualitative Disclosures About Market Risk           10

PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds                            12

Item 6.  Exhibits and Reports on Form 8-K                                     12

SIGNATURES                                                                    13

                                       2
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



                                 MEDSCAPE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                               MARCH 31,      DECEMBER 31,
                                                                                 2000             1999
                                                                              (UNAUDITED)       (AUDITED)
ASSETS
Current Assets:
<S>                                                                           <C>              <C>
  Cash and cash equivalents.............................................      $    5,803       $    4,456
  Investment securities, available for sale.............................          22,711           36,363
  Accounts receivable...................................................           6,320            5,946
  Prepaid marketing.....................................................           9,868           12,000
  Prepaid expenses and other assets.....................................           4,671            3,256
                                                                              ----------       ----------
          Total current assets..........................................          49,373           62,021

Fixed assets - net......................................................           7,962            7,568
Intangible assets and goodwill - net....................................          12,068           12,590
Investment in Softwatch.................................................           3,156            3,156
                                                                              ----------       ----------

          Total assets..................................................      $   72,559       $   85,335
                                                                              ==========       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable and accrued liabilities..............................      $   10,108       $    9,567
  Deferred revenue......................................................           1,016            1,580
                                                                              ----------       ----------
          Total current liabilities.....................................          11,124           11,147

Stockholders' Equity:
  Common  stock,  par  value  $.01;   100,000,000   shares   authorized,
     45,152,540 issued and 45,127,174 outstanding at March 31, 2000.....             453              447
  Additional paid-in-capital............................................         266,378          266,196
  Deferred stock compensation...........................................          (6,501)          (7,984)
  Treasury stock........................................................             (78)              (3)
  Contribution of services..............................................        (135,395)        (145,224)
  Warrants..............................................................           6,353            6,840
  Note receivable from stockholder......................................            (628)            (628)
  Accumulated other comprehensive loss..................................             (39)             (36)
  Accumulated deficit...................................................         (69,108)         (45,420)
                                                                              ----------       ----------
          Total stockholders' equity....................................          61,435           74,188

          Total liabilities and stockholders' equity....................      $   72,559       $   85,335
                                                                              ==========       ==========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                 MEDSCAPE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                          ---------------------------
                                                                          MARCH 31,         MARCH 31,
                                                                            2000              1999

<S>                                                                   <C>               <C>
Revenues.......................................................       $        6,009    $        1,644
                                                                      --------------    --------------
Operating expenses:
  Editorial, production, content and technology  (excludes
    stock-based compensation expense of $33 in the 2000
    period and $30 in the 1999 period, included below).........                5,555             1,268
  Sales and marketing  (excludes stock-based compensation
    expense of $498 in the 2000 period and $15 in the 1999
    period, included below)....................................               18,547             1,247
  General and administrative  (excludes stock-based
    compensation expense of $279 in the 2000 period and
    $253 in the 1999 period, included below)...................                2,167               562
  Merger costs  (excludes stock-based compensation
    expense of $186 in the 2000 period and $0 in the 1999
    period, included below)....................................                2,180                 0
  Stock-based compensation.....................................                  996               298
  Depreciation and amortization................................                  741                95
                                                                      --------------    --------------
          Total operating expenses.............................               30,186             3,470
                                                                      --------------    --------------
Loss from operations...........................................              (24,177)           (1,826)
  Interest income..............................................                  490                81
                                                                      --------------    --------------
Net loss.......................................................       $      (23,687)   $       (1,745)
                                                                      ==============    ==============

Basic and diluted net loss per share...........................       $        (0.53)   $        (0.25)
Weighted average number of shares of common stock
    Outstanding................................................           44,827,358         6,871,000
</TABLE>

            See notes to condensed consolidated financial statements.

                                       4
<PAGE>



                                 MEDSCAPE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
                                                                           ---------------------------
                                                                           MARCH 31,         MARCH 31,
                                                                             2000              1999
OPERATING ACTIVITIES
<S>                                                                       <C>               <C>
  Net loss......................................................          $  (23,687)       $   (1,745)
  Adjustments to reconcile net loss to net cash used in
     Operating activities:
     Stock-based compensation expense...........................                 996               298
     Amortization of license fees...............................                 477                 0
     Non-cash advertising and promotion expense.................               9,989                 0
     Depreciation and amortization..............................                 741                95
  Changes in assets and liabilities:
     Increase in accounts receivable............................                (374)             (743)
     (Increase) decrease in prepaid marketing, expenses
        and other assets........................................                 557              (166)
     Increase (decrease) in accounts payable and
        accrued liabilities.....................................                 541              (170)
     Increase (decrease) in deferred revenue....................                (565)              998
                                                                        -------------     ------------
          Net cash used by operating activities.................             (11,325)           (1,433)
                                                                        -------------     -------------

INVESTING ACTIVITIES
     Purchases of fixed assets..................................              (1,090)              (79)
     Acquisition of intangible assets...........................                   0               (50)
     Unrealized loss on securities..............................                  (3)                0
     Purchase of investment securities..........................              (6,448)                0

     Proceeds from maturities and sales of
       investment securities....................................              20,100                 0
                                                                        -------------     -------------
          Net cash provided (used) by investing activities......              12,559              (129)
                                                                        ------------      -------------

 FINANCING ACTIVITIES
     Issuance of preferred stock, net proceeds..................                   0            19,415
     Issuance of preferred stock, professional fees to be paid..                   0             1,185
     Proceeds from exercise of stock options....................                 113                 0
                                                                        ------------      ------------
          Net cash provided by financing activities.............                 113            20,600
                                                                        ------------      ------------

Increase in cash and cash equivalents...........................               1,347            19,038
Cash and cash equivalents, beginning of period..................               4,456             1,595
                                                                        ------------      ------------

Cash and cash equivalents, end of period........................             $ 5,803          $ 20,633
                                                                             =======          ========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       5
<PAGE>



                                 MEDSCAPE, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000

1. ORGANIZATION AND NATURE OF BUSINESS

Medscape,  Inc.  ("Medscape") was formed and incorporated  under the laws of the
State  of New  York in March  1996,  and  commenced  operations  in April  1996.
Medscape was  reincorporated  in Delaware in December  1998.  Medscape  operates
Medscape.com, a Web site that supplies online clinical information,  interactive
services and goods to healthcare professionals,  and CBS.Healthwatch.com,  a Web
site that  offers  health  care  information  and tools  and  related  goods and
services to consumers. The Medscape Web sites are valuable resources that enable
users to make better informed healthcare  decisions by providing  comprehensive,
authoritative and timely medical  information,  including  original  proprietary
articles  written by renowned medical  experts.  Medscape sells  advertising and
sponsorship,  market  research  and other  services to  pharmaceutical,  medical
device and other  healthcare  companies.  Medscape also sells products,  such as
medical books, to physicians, allied healthcare professionals and consumers.

On February 21, 2000,  Medscape entered into an Agreement of Reorganization  and
Merger (the "Merger  Agreement") with MedicaLogic,  Inc., an Oregon  corporation
("MedicaLogic"),  providing  for the  merger  of a  newly-formed  subsidiary  of
MedicaLogic with and into Medscape,  with Medscape as the surviving  corporation
and, thus,  becoming a wholly-owned  subsidiary of MedicaLogic  (the  "Merger").
Under the terms of the Merger Agreement,  each outstanding share of common stock
of Medscape  will be  converted  into the right to receive .323 shares of common
stock of  MedicaLogic  (the  "Conversion  Rate"),  and each Medscape  option and
warrant will be assumed by MedicaLogic at the Conversion  Rate.  Consummation of
the Merger is  subject to certain  conditions,  including  (i)  approval  of the
Merger by the stockholders of Medscape, and (ii) approval by the stockholders of
MedicaLogic  of the  issuance  of  MedicaLogic  common  stock in the  Merger. In
connection with the Merger,  certain  stockholders of Medscape have entered into
voting agreements, dated as of February 21, 2000, under which those stockholders
agree to vote in favor of adopting the Merger Agreement.

In February 2000, Medscape signed a plan of merger and reorganization to acquire
all of the outstanding shares of Dialog Medical,  Inc., a Delaware  corporation,
in exchange for 275,000 shares of Medscape common stock. Dialog Medical provides
integrated  patient  education and informed consent materials for physicians and
consumers. Medscape expects to complete the acquisition in the second quarter of
2000.

2. BASIS OF PRESENTATION

The  condensed   consolidated  financial  statements  include  the  accounts  of
Medscape.  Such  financial  statements  have been  prepared in  accordance  with
generally  accepted   accounting   principles  ("GAAP")  for  interim  financial
reporting and with instructions to form 10-Q.  Accordingly,  they do not include
all of the  information  and footnotes as required by GAAP for annual  financial
statements.  Certain information and footnote  disclosures  normally included in
annual financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to these rules and regulations;  however,  in the opinion of
Medscape's  management,  the condensed consolidated financial statements include
all  adjustments,  consisting only of normal  recurring  accruals,  necessary to
present  fairly the financial  information  for the three months ended March 31,
2000.

Basic loss per common  share was  computed by dividing  net loss by the weighted
average  number of shares of common stock  outstanding.  Diluted loss per common
share has not been  presented  since the impact for options and  warrants  would
have been anti-dilutive.

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.


                                       6
<PAGE>


3. STOCKHOLDERS' EQUITY

In connection with the proposed transaction with MedicaLogic, Inc. (see Note 1),
Medscape  issued  warrants to  purchase  100,000  shares of its common  stock at
$9.3125 per share to its financial advisor.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

The following  discussion of our financial  condition and  operations  should be
read in conjunction with the consolidated  financial  statements and the related
notes included  elsewhere in this report.  This report contains  forward-looking
statements  based  on  our  current  expectations,  assumptions,  estimates  and
projections   about   Medscape  and  our   industry.   We   generally   identify
forward-looking  statements in this report using words like "believe," "intend,"
"expect,"   "may,"   "will,"   "should,"   "plan,"   "project,"   "contemplate,"
"anticipate"  or similar  statements.  The  cautionary  statements  made in this
document  should  be read as being  applicable  to all  related  forward-looking
statements wherever they appear in this document.  These statements are based on
our beliefs as well as assumptions we made using information currently available
to us.  Because these  statements  reflect our current views  concerning  future
events,  these  forward-looking  statements  involve  risks  and  uncertainties.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed  below,  as well as those  discussed in our Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 and Amendment No. 1 thereto, and the
Registration  Statement on Form S-4 filed by MedicaLogic,  Inc. on March 4, 2000
and Amendment No. 1 thereto.  Medscape's  actual results could differ materially
from those anticipated in these  forward-looking  statements as a result of many
factors.   Medscape   undertakes   no   obligation   to  update   publicly   any
forward-looking  statements  for any  reason,  even if new  information  becomes
available or other events occur in the future.

OVERVIEW

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

Medscape,  Inc. commenced operations in April 1996. In October 1998, we acquired
Healthcare  Communications Group, LLC, which operated a leading HIV Web site. In
the first quarter of 1999, we acquired the trademarks and hired key employees of
Bonehome.com,  a leading  orthopedic Web site,  and CompuRx,  Inc., a healthcare
market research company serving  pharmaceutical and other healthcare  companies.
These  transactions  are  consistent  with our strategy to be the leading online
information  source for selected medical  specialties and to broaden our revenue
streams.

Since our  inception,  we have derived  substantially  all of our revenues  from
advertising and sponsorships  from  pharmaceutical  companies.  We also generate
revenues from our e-commerce partners who either provide us with a placement fee
or a commission on sales of their  products  generated  through our Web site. We
offer banner  advertising to  third-party  advertisers  and generally  guarantee
delivery of a specified number of advertising impressions. We derive sponsorship
revenues from the development of client-sponsored content,  including modules on
disease  topics and  editorial  coverage of medical  conferences.  We expect our
revenues to be seasonal due to the scheduling of major medical conferences.

We  recognize  banner  advertising  revenues  in the period  that we display the
advertisement, provided that no significant obligations remain and collection of
the resulting  receivable is probable.  We recognize  revenues from modules on a
cost of completion  basis and editorial  coverage of medical  conferences in the
period in which the conference was held. We recognize  revenues from  e-commerce
based on  commissions  when earned from our  third-


                                       7
<PAGE>


party partners or, in cases where third-party partners pay placement fees to us,
over the life of the product placement. We generally invoice for our services at
the inception of a project and record a receivable. Accordingly, our receivables
have  increased  in  connection  with our  increase  in  revenues  and due to an
increase in the number of large  scale  sponsored  programs  which have become a
more  prominent  part of our business  following our  acquisition  of Healthcare
Communications Group, LLC.

To date, we have incurred  substantial  costs to create and enhance our content,
build brand awareness,  develop our  infrastructure  and grow our business,  and
have yet to achieve significant revenue. As a result, we have incurred operating
losses in each fiscal quarter since we were formed.  We expect  operating losses
and negative  cash flow to continue for the  foreseeable  future as we intend to
significantly increase our operating expenses to grow our business.  These costs
could have an adverse  effect on our future  financial  condition  or  operating
results. We believe that period-to-period comparison of our financial results is
not necessarily meaningful and you should not rely upon them as an indication of
our future performance.

On February 21, 2000,  Medscape entered into an Agreement of Reorganization  and
Merger (the "Merger  Agreement") with MedicaLogic,  Inc., an Oregon  corporation
("MedicaLogic"),  providing  for the  merger  of a  newly-formed  subsidiary  of
MedicaLogic with and into Medscape,  with Medscape as the surviving  corporation
and, thus,  becoming a wholly-owned  subsidiary of MedicaLogic  (the  "Merger").
Under the terms of the Merger Agreement,  each outstanding share of common stock
of Medscape  will be  converted  into the right to receive .323 shares of common
stock of  MedicaLogic  (the  "Conversion  Rate"),  and each Medscape  option and
warrant will be assumed by MedicaLogic at the Conversion  Rate.  Consummation of
the Merger is  subject to certain  conditions,  including  (i)  approval  of the
Merger by the stockholders of Medscape, and (ii) approval by the stockholders of
MedicaLogic  of the  issuance  of  MedicaLogic  common  stock in the  Merger. In
connection with the Merger,  certain  stockholders of Medscape have entered into
voting agreements, dated as of February 21, 2000, under which those stockholders
agree to vote in favor of adopting the Merger Agreement.

RESULTS OF OPERATIONS

REVENUE AND EXPENSE COMPONENTS

The following  descriptions  of the components of revenues and expenses apply to
the Comparison of Results of Operations:

     REVENUES.  Revenues consist of sales of advertising  banners,  sponsorships
for developing content for modules and medical conferences,  commission revenues
or placement fees from product sales such as medical books,  and market research
services to pharmaceutical and other healthcare companies.

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

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

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

     MERGER COSTS. Merger costs consist of merger transaction costs such as fees
for investment bankers,  attorneys,  accountants,  and other costs to effectuate
the merger.

     STOCK-BASED COMPENSATION.  In connection with the issuance of stock options
during the second  half of fiscal  1998 and the first half of fiscal  1999,  our
management determined that the valuation of such issuances should be revised. As
a result,  an amount  equal to the excess of the fair market value of our common
stock over the option exercise  prices is being  amortized over four years,  the
vesting  period of the options.  The  amortization  commenced in the fiscal 1998
fourth quarter. Additionally, stock-based compensation includes the amortization
of the fair  value of the  warrants  issued to AOL and the  amortization  of the
warrants issued to our financial  advisor in connection with the proposed merger
with MedicaLogic, Inc.

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

     INTEREST  EXPENSE/INCOME.  Interest income  consists  primarily of interest
earned on cash and cash equivalents invested in money market funds.


                                       8
<PAGE>


COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 AND 1999

REVENUES.  Revenues  increased  266% to $6.0  million for the three months ended
March 31, 2000 from $1.6 million for the comparable period in 1999. The increase
in revenues was due primarily to increased advertising and sponsorship sales.

     EDITORIAL,  PRODUCTION,  CONTENT AND  TECHNOLOGY.  Product  development and
content expenses increased 338% to $5.6 million for the three months ended March
31, 2000 from $1.3 million for the  comparable  period in 1999.  The increase in
costs was primarily due to increased  variable costs related to the  development
of sponsored content and costs associated with expanding and enhancing editorial
content, an increase in the number of employees in our Editorial and Information
Technology  groups and the associated  recruitment  costs, and costs incurred in
upgrading the functionality of our Web site and our internal networks.

     SALES AND MARKETING. Sales and marketing expenses increased 1,387% to $18.5
million for the three  months  ended  March 31,  2000 from $1.2  million for the
comparable  period  in 1999.  The  increase  in costs was  primarily  due to the
continued development and implementation of our marketing and branding campaigns
with CBS,  AOL, NDC and others  along with the  addition of sales and  marketing
personnel.  Approximately  $10.0 million of the March 31, 2000 period expense is
non-cash in nature and results from the use of services  granted in exchange for
Medscape equity in our relationship with CBS.

     GENERAL AND ADMINISTRATION.  General and administration  expenses increased
286% to $2.2 million for the three months ended March 31, 2000 from $0.6 million
for the comparable  period in 1999. The increase in costs was primarily a result
of expenses  related to  increased  personnel  and other  employee  compensation
expenses,  professional service fees, and facility expenses necessary to support
our growth.

     MERGER COSTS. In connection with the contemplated  merger with MedicaLogic,
Inc.,  we have  incurred  $2.4 million in merger  costs in the first  quarter of
2000.  Of this total,  $2.2 million is recorded in the Merger Cost category with
the balance in Stock-Based  Compensation  in relation to the warrants  issued to
our financial advisor.

     STOCK-BASED  COMPENSATION.  Stock-based compensation expense increased 234%
to $1.0  million for the three months ended March 31, 2000 from $0.3 million for
the comparable period in 1999. The increase in costs was primarily  attributable
to  amortization  of the AOL warrants and  amortization of the warrant issued to
our financial advisor.

     DEPRECIATION  AND  AMORTIZATION.  Depreciation  and  amortization  expenses
increased  680% to $0.7  million for the three  months ended March 31, 2000 from
$0.1  million  for the  comparable  period in 1999.  The  increase  in costs was
attributable to increased  purchases of fixed assets and  amortization of office
leasehold improvements.

     INTEREST  EXPENSE/INCOME.  Net  interest  income for the three months ended
March 31, 2000 was $0.5 million  compared to $0.1 million for the same period in
1999.  The higher  interest  income was due to a higher  average of net cash and
cash equivalents balance as a result of our financing activities in 1999.


LIQUIDITY AND CAPITAL RESOURCES

Since our  inception,  we have  largely  financed  our  operations  through  the
placement of equity securities in the public and private market and, to a lesser
extent, from revenues generated from advertising and sponsorship sales and loans
received from a related party.

Net cash used in  operating  activities  was $11.3  million for the three months
ended March 31, 2000,  compared to $1.4 million for the same three-month  period
in 1999. Cash used in operating  activities for all periods was  attributable to
funding net operating losses.


                                       9
<PAGE>


Net cash provided by investing activities was $12.6 million for the three months
ended March 31, 2000 compared to $(0.1)  million for the same three month period
in 1999. Cash provided by investing activities reflected maturities and sales of
short-term  investment  securities.  Cash used by investing  activities  for the
three  months  ended March 31, 2000 related  primarily  to the  reinvestment  of
matured short-term investment securities in our portfolio. The other primary use
of funds includes investments in our technology infrastructure.

Cash  provided by  financing  activities  was $0.1  million for the three months
ended March 31, 2000 compared to $20.6 million for the same  three-month  period
in 1999. Cash provided by financing  activities for the three-months ended March
31, 2000  reflects  proceeds from the exercise of stock options and the purchase
of treasury shares.  Cash provided by financing  activities for the three months
ended March 31, 1999  reflects the proceeds  from the sale of Series D preferred
stock.

As of March 31, 2000,  the primary  source of our liquidity was $28.5 million of
cash and cash equivalents and investment securities. As of this date, we have no
bank credit facilities.

We expect to continue to incur significant operating costs, particularly content
creation costs and sales and marketing costs to grow our business and pursue our
branding and  marketing  campaign.  We launched  CBS.Medscape.com  (subsequently
relaunched as  CBS.Healthwatch.com),  our separate  consumer  site, in the third
quarter of 1999, and we launched our AOL co-branded consumer sites in the fourth
quarter  of 1999 and  first  quarter  of 2000.  CBS.Healthwatch.com  and the AOL
co-branded sites will provide consumer-oriented  information organized by health
topic  and offer  community  features  and  interactive  healthcare  information
programs. A large portion of our promotional expenditures for our consumer sites
will be funded  through  the  approximately  $150  million  in  advertising  and
promotion  to be provided by CBS over the 7 year term of the  agreement  and the
$33 million  contract with AOL of which $3 million was paid at contract  closing
in September  1999,  $10 million was paid in October 1999, and an additional $20
million will be paid over the next two years.


YEAR 2000

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

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

To date, we have not experienced any material  difficulties  associated with the
Year 2000 that would have a negative effect on our ability to conduct  business.
To our knowledge, no third party upon which we depend has experienced a material
Year 2000  problem.  However,  it is still  possible  that errors or defects may
remain  undetected  or that dates  other than  January 1 may  trigger  Year 2000
problems. If this occurs with respect to our software systems, or those of third
parties upon which we rely, our business,  reputation,  financial  condition and
results of operations could be adversely impacted.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY. The primary objective of our investment activities is
to preserve  principal  while at the same time  maximizing the income we receive
from our investments without significantly  increasing risk.


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<PAGE>


Accordingly,  we do not enter into financial instrument transactions for trading
purposes. Some of our investments may be subject to market risk which means that
a change in  prevailing  interest  rates may cause the  principal  amount of the
investment  to  fluctuate.  To minimize  this risk,  we invest our cash in money
market funds.  In general,  money market funds are not subject to market risk as
the interest paid on these funds  fluctuates with the prevailing  interest rate.
As of March 31, 2000, all of our investments mature in less than one year.

EXCHANGE RATE SENSITIVITY. We consider our exposure to foreign currency exchange
rate  fluctuations  to be minimal  as we  currently  do not  derive any  revenue
denominated  in a foreign  currency and have minimal  expenses paid in a foreign
currency.


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<PAGE>


PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     The effective date of our registration  statement,  filed on Form S-1 under
the Securities Act of 1933 (File No.  333-77665)  relating to our initial public
offering of 7,650,000  shares of common  stock,  was  September  27,  1999.  Net
proceeds from the offering  were $54.4  million which  reflects $3.9 million for
the  underwriting  discount and $2.6 million of offering  costs applied to gross
proceeds  of $60.9  million.  These  funds  have  been the  principal  source of
liquidity  for us during the quarter  ended March 31, 2000 and were used to fund
operating losses and to make capital  expenditures as described in the financial
statements included with this report.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit 27 - Financial Data Schedule

(b)  Reports on Form 8-K

     On March 2,  2000,  Medscape,  Inc.  filed a  current  report  on Form 8-K,
reporting  that on February 21, 2000, it had entered into an agreement  pursuant
to Item 5 of that report of reorganization and merger with MedicaLogic, Inc.



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<PAGE>




                                   SIGNATURES

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

                                  MEDSCAPE, INC.

Date: May 12, 2000                By: /S/ PAUL T. SHEILS
                                      ---------------------------------------
                                  Name: Paul T. Sheils
                                  Title: President  and Chief Executive  Officer
                                        (Principal Executive Officer)


Date: May 12, 2000                By: /S/ STEVEN R. KALIN
                                      ---------------------------------------
                                  Name: Steven R. Kalin
                                  Title:  Chief  Operating   Officer  and  Chief
                                        Financial Officer  (Principal  Financial
                                        and Accounting Officer)


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