BEYOND COM CORP, S-1, 1999-03-17

BEYOND COM CORP
S-1, 1999-03-17
PREPACKAGED SOFTWARE

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<PAGE> 1

FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1999
REGISTRATION NO. [ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BEYOND.COM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 7375 94-3212136
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>

1195 WEST FREMONT AVENUE
SUNNYVALE, CALIFORNIA 94087
(408) 616-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MARK L. BREIER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BEYOND.COM CORPORATION
1195 WEST FREMONT AVENUE
SUNNYVALE, CALIFORNIA 94087
(408) 616-4200

COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:

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<S> <C>
RICHARD SCUDELLARI GLEN R. VAN LIGTEN
JUSTIN L. BASTIAN VENTURE LAW GROUP
ROCHELLE A. KRAUSE A PROFESSIONAL CORPORATION
MORRISON & FOERSTER LLP 2800 SAND HILL ROAD
755 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (650) 854-4488
(650) 813-5600
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]

If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]

CALCULATION OF REGISTRATION FEE

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TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
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Common Stock, par value
$0.001 per share....... 4,000,000 $23.125 $92,500,000 $25,715
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</TABLE>

(1) Pursuant to Rule 457(c), such price based on the average high and low prices
of our common stock on March 12, 1999, as reported on Nasdaq National
Market.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 17, 1999

4,000,000 Shares
LOGO

Common Stock
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We are selling 3,000,000 shares of common stock and the selling stockholders are
selling 1,000,000 shares of common stock. We will not receive any of the
proceeds from shares sold by the selling stockholders.

The underwriters have an option to purchase a maximum of 600,000 additional
shares to cover over-
allotments of shares.

Our shares are listed for trading on the Nasdaq National Market under the symbol
"BYND." On March 12, 1999, the last reported sales price for our common stock on
the Nasdaq National Market was $22.75.

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 6.

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<CAPTION>
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS BEYOND.COM STOCKHOLDERS
--------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Per share............................................ $ $ $ $
Total................................................ $ $ $ $
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Delivery of the shares of common stock will be made on or about ,
1999, against payment in immediately available funds.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
BANCBOSTON ROBERTSON STEPHENS
C.E. UNTERBERG, TOWBIN

Prospectus dated March , 1999.
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TABLE OF CONTENTS

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Page
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SUMMARY............................... 3
RISK FACTORS.......................... 6
USE OF PROCEEDS....................... 22
DIVIDEND POLICY....................... 22
PRICE RANGE OF COMMON STOCK........... 22
CORPORATE INFORMATION................. 23
CAPITALIZATION........................ 24
DILUTION.............................. 25
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 28
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Page
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BUSINESS.............................. 39
MANAGEMENT............................ 57
CERTAIN TRANSACTIONS.................. 64
PRINCIPAL AND SELLING STOCKHOLDERS.... 67
DESCRIPTION OF CAPITAL STOCK.......... 69
SHARES ELIGIBLE FOR FUTURE SALES...... 75
UNDERWRITING.......................... 77
NOTICE TO CANADIAN RESIDENTS.......... 79
LEGAL MATTERS......................... 80
EXPERTS............................... 80
ADDITIONAL INFORMATION................ 80
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

INFORMATION CONTAINED IN BEYOND.COM'S WEB SITE DOES NOT CONSTITUTE PART OF
THIS DOCUMENT.
<PAGE> 4

SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our consolidated financial statements and related notes appearing
elsewhere in this prospectus. Because this is only a summary, you should read
the rest of this prospectus before you invest in our common stock. Read the
entire prospectus carefully, especially the risks described under "Risk
Factors." Certain statements in this prospectus assume that the BuyDirect.com
merger has been completed. The merger, however, is subject to a number of
closing conditions and, as a result, there can be no assurance that it will be
completed.
BEYOND.COM CORPORATION

- one of the largest selections of brand name, high quality software
available online; and

- the convenience of shopping from home or office, twenty-four-hours-a-day,
seven-days-a-week with technical support.
We believe the Internet is an ideal medium for the sale and delivery of
software for several reasons:

- the demographics of Internet users overlap one-to-one with the
demographics of potential software purchasers;

- we can provide instant gratification because we can deliver many software
titles and their related stock keeping units via digital download; and

- large enterprise customers can use digital download to achieve efficient
and cost effective distribution of software.
We have based our business on scaleable technology that permits the sale,
order processing and delivery of software with limited human intervention. With
our technology and our significant operational experience, we can address the
complex process of real time digital download. Approximately 350 leading
software publishers have granted us the right to distribute approximately 5,600
software stock keeping units via digital download.
We also have established strategic marketing alliances with America Online,
Inc., Excite, Inc., Netscape Communications Corporation, Network Associates,
Inc. and Yahoo! Inc. These alliances promote our Web site and services on the
Web sites of these strategic partners.
The software reselling industry is large and growing. According to
International Data Corporation, end-user spending on software through indirect
channels is expected to increase at a compounded annual rate of 17.2%, from
$23.9 billion in 1997 to $52.9 billion in 2002. Jupiter Communications, Inc.
estimates that online PC software sales revenue in 1998 were $259 million and
projects these revenues will grow to $2.4 billion in 2002.
We intend to extend our momentum as a "first mover" in online software
reselling to deliver outstanding value to our customers and to leverage our
online store model to achieve economies of scale. Since we launched our Web site
in November 1994, we have delivered software products to approximately 634,000
cumulative customers (including individual desktops for corporate and government
customers and users to whom we have distributed freeware and trial download
products). Our sales increased from approximately $5.9 million in 1996 to
approximately $36.7 million in 1998.

Recent Developments. On February 19, 1999, we entered into an agreement
pursuant to which one of our wholly-owned subsidiaries will merge with and into
BuyDirect.com, a leading online software retailer for consumers and business
customers. Upon the closing of this merger, BuyDirect.com will become our
wholly-owned subsidiary and we will issue approximately 5.1 million shares of
our common stock to BuyDirect.com's stockholders in exchange for their
outstanding shares of BuyDirect.com common and preferred stock, and reserve for
issuance upon the exercise of options we are assuming in connection with the
proposed merger approximately 300,000 shares of our common stock. We anticipate
that the BuyDirect.com merger will close by the end of March 1999. The
BuyDirect.com merger is subject to a number of contingencies including
stockholder approval of the merger by the BuyDirect.com stockholders and
customary closing conditions. As a result, there can be no assurance that the
BuyDirect.com merger will be completed.
Our address is 1195 West Fremont Avenue, Sunnyvale, California 94087 and
our telephone number is (408) 616-4200.

3
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THE OFFERING

Common Stock Offered.......... 4,000,000 shares (comprised of 3,000,000 shares
offered by Beyond.com and 1,000,000 shares
offered by selling stockholders)

Common Stock Outstanding after
this Offering................. 30,495,035 shares(1)

Use of Proceeds............... General corporate purposes including working
capital, principally sales and marketing for
brand development, potential acquisitions and
debt service payments

Nasdaq National Market
Symbol........................ BYND
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(1) Based on shares outstanding as of December 31, 1998. Excludes at December
31, 1998: (i) 4,495,299 shares of common stock issuable upon exercise of
options outstanding under our 1995 and 1998 Stock Option Plans at a weighted
average exercise price of $4.16 per share; (ii) 928,728 shares of common
stock issuable upon exercise of outstanding options granted outside of the
plans at a weighted average exercise price of $0.004 per share; (iii)
268,849 shares of common stock reserved for future issuance under the plans;
(iv) 358,423 shares of common stock reserved for issuance pursuant to the
exercise of a warrant issued by us to America Online at an exercise price of
$8.37 per share; (v) 3,448,745 shares of common stock issuable upon
conversion of our 7 1/4% Convertible Subordinated Notes; and (vi)
approximately 5,103,449 shares of our common stock, subject to adjustment,
to be issued in exchange for BuyDirect.com common stock and preferred stock
and approximately 296,551, subject to adjustment, shares of common stock to
be reserved for issuance upon the exercise of options we are assuming in
connection with the proposed BuyDirect.com merger. See "Description of
Capital Stock" and Notes 3, 5, 8 and 12 of Notes to Consolidated Financial
Statements.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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YEAR ENDED DECEMBER 31,
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PRO FORMA
1996 1997 1998 1998(2)
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<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Net revenues...................................... $ 5,858 $16,806 $ 36,650 $ 41,279
Gross profit...................................... 721 1,933 5,576 6,884
Operating expenses:
Research and development........................ 431 1,060 4,201 6,047
Sales and marketing............................. 704 1,696 27,568 32,748
General and administrative...................... 450 1,087 4,943 6,733
Goodwill and deferred compensation
amortization................................. -- -- -- 49,086
------- ------- -------- --------
Total operating expenses................ 1,585 3,843 36,712 94,614
Loss from continuing operations................... (779) (1,743) (31,073) (87,738)
Net loss.......................................... $(1,515) $(5,359) $(31,073) $(87,738)
======= ======= ======== ========
Basic and diluted net loss per share(1)........... $ (0.18) $ (0.61) $ (1.65) $ (3.66)
======= ======= ======== ========
Pro forma basic and diluted net loss per
share(2)........................................ $ (0.30) $ (1.28) $ (2.99)
======= ======== ========
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<CAPTION>
DECEMBER 31, 1998
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PRO FORMA
ACTUAL PRO FORMA(2) (AS ADJUSTED)(2)(3)
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents......................... $ 81,548 $ 81,889 $149,155
Working capital................................... 80,128 72,437 137,664
Total assets...................................... 109,904 252,124 321,429
Long-term obligations, net of current portion..... 63,250 69,042 69,042
Stockholders' equity.............................. 24,723 152,216 219,482
</TABLE>

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(1) For an explanation of the calculation of per share amounts, see Note 1 of
Notes to Consolidated Financial Statements and Note 8 of Notes to Unaudited
Pro Forma Condensed Combined Financial Information.

(2) The pro forma 1998 consolidated statement of operations data and
consolidated balance sheet data and the pro forma as adjusted 1998
consolidated balance sheet data give effect to the BuyDirect.com merger
expected to be completed by the end of March 1999. See the Unaudited
Consolidated Pro Forma Combined Condensed Financial Information and notes
thereto included elsewhere herein.

(3) The pro forma as adjusted data gives effect to the sale of the common stock
offered hereby as of December 31, 1998, after deduction of the estimated
offering expenses and the underwriters' discount.

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RISK FACTORS

You should carefully consider the risks described below before making a
decision to invest in Beyond.com. If any of the following risks actually occur,
our business, financial condition or results of future operations could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of many factors, including the
risks faced by us described below and elsewhere in this prospectus. Certain
statements in this prospectus assume that the BuyDirect.com merger has been
completed. The merger, however, is subject to a number of closing conditions
and, as a result, there can be no assurance that it will be completed.

WE HAVE A LIMITED OPERATING HISTORY AND HAVE INCURRED NET LOSSES SINCE INCEPTION
AND EXPECT FUTURE LOSSES.

We began selling software on our Web site in November 1994. As a result, we
have only a limited operating history upon which you may evaluate our business
and prospects. We incurred net losses of approximately $38.7 million from
inception through 1998. As of December 31, 1998, we had an accumulated deficit
of approximately $42.4 million. We expect to continue to incur significant net
operating losses for the foreseeable future.

WE ANTICIPATE SIGNIFICANT LOSSES AND NEGATIVE CASH FLOW.

We expect significant operating losses and negative cash flow to continue
for the foreseeable future. We anticipate our significant losses will increase
significantly from current levels because we expect to incur additional costs
and expenses related to:

- brand development, marketing and promotion;

- Web site content development;

- strategic relationship development and maintenance; and

- technology and operating infrastructure development, including improved
digital download capabilities.

In addition, if the BuyDirect.com acquisition is completed, we expect that
our losses will increase even more significantly due to additional costs and
expenses related to:

- increased headcount;

- additional facilities and infrastructure; and

- assimilation of operations and personnel.

In addition, if the BuyDirect.com merger closes we will record a
significant amount of goodwill, the amortization of which will adversely affect
our earnings and profitability for the foreseeable future. We expect to record
goodwill and other intangible assets of approximately $140 million, to be
amortized through 2002. We believe it is likely that we will not generate
additional earnings sufficient to recover the amount of goodwill and other
intangible assets recorded during the period in which they are amortized.

Because we have relatively low gross margins, our ability to become
profitable given our planned expenses depends on our ability to generate and
sustain substantially higher net revenues. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future.

We base our current and future expense levels, which are largely fixed, on
our operating plans and estimates of future revenues. We find sales and
operating results difficult to forecast, because they generally depend on the
volume and timing of the orders we receive. As a result, we may be unable to
adjust our spending in a timely manner to compensate for any unexpected revenue
shortfall. A shortfall in revenues will significantly harm our business and
operating results. In view of the rapidly evolving nature of our business,
currently proposed and possible future acquisitions and our limited operating
history in the business of selling software online, we have little experience
forecasting our revenues. Therefore, we believe that period-to-period
comparisons of our financial results are not necessarily meaningful and you
should not rely upon them as an indication of our future performance. If we
cannot achieve and sustain operating profitability or positive cash flow from
operations, we may be unable to meet our

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debt service obligations or working capital requirements, which would adversely
affect our business.

OUR FUTURE OPERATING RESULTS ARE UNPREDICTABLE.

Our revenues and operating results may fluctuate significantly from quarter
to quarter due to a number of factors, not all of which are in our control.
These factors include:

- our ability to attract and retain new customers and maintain customer
satisfaction;

- new Web sites, services and products introduced by us or by our
competitors;

- price competition;

- decreases in the level of growth, use of the Internet and online services
or consumer acceptance of the Internet and other online services for the
purchase of consumer products;

- our inability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner, and if the
BuyDirect.com merger is completed, our ability to integrate
BuyDirect.com's systems and personnel;

- traffic levels on our Web site and our ability to convert that traffic
into customers;

- if the BuyDirect.com merger is completed, the amount and timing of
operating costs and capital expenditures associated with integrating
BuyDirect.com's personnel and operations into our business or otherwise
associated with assuming BuyDirect.com's business and operations,
including but not limited to, BuyDirect.com's financial obligations under
strategic marketing alliance agreements;

- the termination of any strategic marketing alliances such as those we
have with America Online, Excite, Netscape, Network Associates or Yahoo!,
pursuant to which we receive exposure to traffic on third party Web
sites, and if the BuyDirect.com merger is completed, the termination of
similar alliances currently existing between BuyDirect.com and At Home
Corporation ("@Home"), CNET, Inc., Xoom.com and ZDNet, a division of ZD,
Inc.;

- the termination of contracts with major purchasers, particularly United
States government agencies;

- technical difficulties or system downtime affecting the Internet or
online services, generally, or the operation of our Web sites;

- the failure of Internet bandwidth to increase significantly over time
and/or an increase in the cost to consumers of obtaining or using
Internet bandwidth;

- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure;

- the number of popular software titles introduced during the quarter;

- government regulations related to use of the Internet for commerce or for
sales and distribution of software; and

- general economic conditions and economic conditions specific to the
Internet, online commerce and the software industry.

We must increase software sales through Web sites and online sites by
increasing the number of visitors to our online sites or by increasing the
percentage of visitors to our online sites who purchase software. We must also
increase the number of repeat purchasers of software through our online sites,
increase revenues from sales to consumer purchasers and digital download
software product sales in absolute dollars and as a percentage of our total net
revenues. In addition, we must successfully establish, maintain and enhance the
Beyond.com brand. We have implemented strategies we hope will achieve these
goals, such as entering into our strategic relationships with America Online,
Excite, Netscape, Network Associates and Yahoo!. We cannot be certain that we
can accomplish these objectives or that our business strategy will be
successful.

Seasonal fluctuations in the software industry, Internet and commercial
online service usage, and traditional retail, government and corporate seasonal
spending patterns and advertising expendi-

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tures may affect our business. In particular, Internet and online service usage
and its rate of growth may decline in the summer. These seasonal patterns may
cause quarterly fluctuations in our operating results and could adversely and
materially affect our financial performance.

Our gross margins are likely to fluctuate over time. A number of factors
may impact our gross margins, including:

- the mix of revenues from sales to government, corporate, consumer and
publisher channels;

- the mix of revenues from sales of shrink-wrap products and products
delivered through digital download;

- the mix of software products and computer peripheral products (such as
joysticks, personal organizers and related products) sold;

- the mix of revenues we derive from our relationships with strategic
partners such as America Online, Excite, Netscape, Network Associates and
Yahoo! and from our Web site; and

- the amount of advertising or promotional revenues we receive.

We realize higher gross margins from:

- advertising and promotional revenues than from software products sales;

- product sales through digital download than on sales of shrink-wrap
software products;

- sales of specialty software products than sales of widely available
commodity software products; and

- sales to consumer purchasers than on sales to government or corporate
purchasers.

We believe that the size of new software products will continue to increase
and that they will be suitable for digital download only if network bandwidth
increases significantly. This trend may limit our ability to distribute such
software products via digital download and limit our ability to realize the
higher gross margins associated with digital download software product sales.
Any change in one or more of these factors could adversely and materially affect
our gross margins and operating results in future periods.

Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarter our operating results may
fall below the expectations of securities analysts and investors. In this event,
the trading price of our common stock may fall significantly.

WE NEED ADDITIONAL CAPITAL TO PAY DEBT SERVICE ON THE 7 1/4% CONVERTIBLE
SUBORDINATED NOTES AND FOR OTHER PURPOSES.

We require substantial working capital to fund our business. We expect
operating losses and negative cash flow to continue for the foreseeable future.
We anticipate that the net proceeds we receive from this offering, together with
our existing capital resources, assuming the BuyDirect.com merger is completed,
will meet our capital requirements through at least the next 18 months. However,
we may have additional capital needs before this period ends. Thereafter, we
will likely have to raise additional funds, in part to make interest payments to
holders of our 7 1/4% Convertible Subordinated Notes, and in part to meet our
obligations to America Online, Excite, Netscape, Network Associates and Yahoo,
and if the BuyDirect.com merger is completed, to meet our future obligations to
@Home, CNET, Xoom and ZDNet. We may elect to seek additional funds at any time.

The actual amount and timing of our future capital requirements may differ
materially from our estimates. In particular, our estimates may be inaccurate as
a result of changes and fluctuations in our revenues, operating costs and
development expenses. Our revenues, operating costs and development expenses
will be negatively affected by any inability to:

- effectively and efficiently manage the expansion of our operations,
including, if the BuyDirect.com merger is completed, to integrate
BuyDirect.com's systems and personnel;

- obtain favorable co-branding or Internet marketing agreements with third
parties similar to those with America Online, Network Associates, Excite
or Yahoo!;

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- negotiate favorable contracts with suppliers, including large volume
discounts on purchases of software; and

- improve brand recognition, attract sufficient numbers of customers or
increase the volume of our software sales.

Our revenues and costs also depend upon factors that we cannot control.
These factors include changes in technology and regulations, increased
competition and factors such as Web integrity, seasonality, and performance by
third parties in connection with our operations. Because of these factors, our
actual revenues and costs are uncertain and may vary considerably. These
variations may significantly affect our future need for capital. Also, if we
accelerate the expansion of our operations or complete any acquisitions, we will
require more funding sooner than we currently expect. We may be unable to raise
financing sufficient for our needs, either on suitable terms or at all. This
will hinder our ability to satisfy our obligations to holders of our 7 1/4%
Convertible Subordinated Notes. This result would substantially harm the trading
price of our common stock and materially harm our business.

WE ARE SIGNIFICANTLY LEVERAGED; WE REQUIRE SUBSTANTIAL AMOUNTS OF CAPITAL FOR
DEBT SERVICE.

By selling the 7 1/4% Convertible Subordinated Notes in November and
December 1998, we incurred $63,250,000 principal amount of indebtedness. This
resulted in a ratio of long-term debt to total capitalization at December 31,
1998 of approximately .72 to 1 and approximately .41 to 1 as adjusted for this
offering. Our increased leverage could limit or reduce our ability to obtain
financing for working capital, acquisitions or other purposes and could make us
more vulnerable to industry downturns and competitive pressures.

We will likely require substantial amounts of cash to fund scheduled
payments of principal and interest on our 7 1/4% Convertible Subordinated Notes,
future capital expenditures and any increased working capital requirements. We
believe we may be unable to meet our cash requirements out of cash flow from
operations and available borrowings. We also may be unable to obtain alternative
financing. A lack of adequate financing may adversely affect our ability to:

- respond to changing business and economic conditions;

- make future acquisitions;

- absorb negative operating results; or

- fund capital expenditures or increased working capital requirements.

We could attempt to refinance our 7 1/4% Convertible Subordinated Notes if
our cash flow from operations is insufficient to repay them at maturity.
However, a refinancing might not be available on terms acceptable to us, or at
all. If we fail to make necessary payments on our 7 1/4% Convertible
Subordinated Notes, we will be in default under the terms of our 7 1/4%
Convertible Subordinated Notes, and may also be in default under agreements
controlling our other indebtedness, if any. Any default by us under our 7 1/4%
Convertible Subordinated Notes or on other indebtedness could adversely affect
our financial condition and operating results.

WE MUST ESTABLISH OUR NEW BRAND.

A growing number of Internet sites, many of which already have
well-established brands, offer products and services that compete with ours. As
a result, we believe we must establish, maintain and enhance our "Beyond.com"
brand. We have been operating under the "Beyond.com" name only since August
1998. Our success in promoting and maintaining our new brand or any other brand
that we may use in the future will depend largely on our ability to provide a
high quality online experience supported by dedicated customer service. We
cannot assure that we will be able to meet these goals. In addition, to attract
and retain online users and to promote and maintain our new brand or future
brands, we may need to substantially increase our marketing expenditures to
create and maintain strong brand loyalty among our customers. Our business could
be adversely affected if our marketing efforts are unproductive or if we cannot
increase our brand awareness.

OUR MARKETS ARE HIGHLY COMPETITIVE.

The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future because

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barriers to entry are minimal, and current and new competitors can launch new
Web sites at a relatively low cost. In addition, the software reselling industry
is intensely competitive. We currently compete primarily with traditional
software resellers, other online software resellers and other vendors.

In the online market, we compete with many online software resellers and
vendors that maintain similar commercial Web sites (including CompUSA,
Outpost.com, Egghead.com and Buy.com). We also compete with the growing number
of software publishers that sell their software products directly online. We
also anticipate that we may soon compete with other software publishers,
including Microsoft, that plan to sell their products directly to customers
online, and indirect competitors that specialize in online commerce or derive
significant revenues from online commerce, including America Online, Amazon.com,
Barnesandnoble.com, Netscape and Yahoo!.

We also compete with:

- mail order and/or direct marketers of computer products (including
cataloguers such as Micro Warehouse and CDW Computer Centers and
manufacturers such as Dell Computer, Compaq Computer Corporation and
Gateway 2000 Incorporated); and

- major store-based retailers of software and other related products, such
as CompUSA, OfficeMax, Staples, Office Depot and Wal-Mart.

Further, these traditional store-based retailers and mail order and/or
direct marketers of computer products have established or may soon establish,
commercial Web sites offering software and computer products.

Competitive pressures created by any one of these current or future
competitors, or by competitors collectively, could have a material adverse
affect on our business.

We believe that the principal competitive factors in our market are:

- brand recognition;

- selection;

- convenience;

- price;

- speed and accessibility;

- customer service;

- quality of site content; and

- reliability and speed of fulfillment.

In addition to those factors, the large enterprise market also focuses on:

- compatibility of products;

- administration and reporting;

- single source supply;

- security; and

- cost-effective deployment.

Many of our current and potential competitors have longer operating
histories and larger customer bases than we do. In addition, many of our current
and potential competitors have greater brand recognition and significantly
greater financial, marketing and other resources than we do.

In addition, as more people use the Internet and other online services,
larger, well established and well financed entities may:

- acquire online competitors or software publishers or suppliers;

- invest in online competitors or software publishers or suppliers; or

- form joint ventures with online competitors or software publishers or
suppliers.

Certain of our actual or potential competitors, such as Ingram Micro and
Tech Data, may be able to:

- secure merchandise from vendors on more favorable terms;

- devote greater resources to marketing and promotional campaigns;

- adopt more aggressive pricing or inventory availability policies; and

- devote substantially more resources to Web site and systems development
than we do.

Competitors such as Software Spectrum, Government Technology Services,
Inc., ASAP Software Express Inc. and Corporate Software & Technology have
greater experience in selling
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software to the large enterprise market than we do. In addition, new
technologies and expansion of existing technologies, such as price comparison
programs that select specific titles from a variety of Web sites, may direct
customers to online software resellers which compete with us and may increase
competition. Increased competition may reduce our operating margins, as well as
cause a loss to both our market share and brand recognition. Further, to
strategically respond to changes in the competitive environment, we may
sometimes make pricing, service or marketing decisions or acquisitions that
could materially hurt our business. In addition, companies controlling access to
Internet transactions through network access or Web browsers could promote our
competitors or charge us a substantial fee for inclusion in their product or
service offerings. We cannot assure that we can compete successfully against
current and future competitors. Failure to compete successfully against our
current and future competitors could materially hurt our business.

WE RELY ON SOFTWARE PUBLISHERS AND DISTRIBUTORS.

We are entirely dependent upon the software publishers and distributors
that supply us with software and computer products for resale, and the
availability of these software and computer products is unpredictable. In 1997
and 1998, sales of software provided by Microsoft and by a major software
distributor accounted for a substantial majority of our revenues. As is common
in the industry, we have no long term or exclusive arrangements with any
publishers or distributors that guarantee the availability of software for
resale. For example, our agreement with Microsoft automatically renews for
successive one year periods but is terminable for any reason by thirty (30) days
written notice prior to the expiration of the given term. Although we believe
that we can replace our relationship with the major software distributor without
much difficulty, if this relationship terminates then the publishers or
distributors that currently supply us with software might cease to continue to
supply us and we might be unable to establish new relationships with other
publishers and distributors.

We also rely on software distributors to ship shrink-wrap software to
customers that do not use digital download. We have limited control over the
shipping procedures of our distributors and shipments by these distributors have
in the past been, and may in the future be, subject to delays. Although most
software we sell carries a warranty from its publisher, publishers or
distributors occasionally fail to reimburse us for returns from customers.
Furthermore, our contract with Microsoft allows Microsoft to review and approve
our creditworthiness. If Microsoft determines that we are not creditworthy or
not in compliance with payment or reporting terms, it may require us to post
security acceptable to them which could negatively impact our financial
condition.

OUR CUSTOMERS ARE CONCENTRATED; WE ARE SUBJECT TO RISKS ASSOCIATED WITH RELIANCE
ON U.S. GOVERNMENT CONTRACTS.

We have three contracts with U.S. government agencies. Two of these
agreements accounted for approximately 33% of our revenues in 1997 and 29% of
our revenues in 1998. These agreements expired in June 1998 and July 1998. We
renewed the first of these contracts for an additional one year term that
expires in June 1999. We replaced the second contract with a new contract with
the same government agency on substantially similar terms. We signed the third
agreement in January 1999 and it will expire in January 2000. We expect that
these existing contracts will continue to account for a substantial portion of
our revenues for the foreseeable future. Each of these contracts is subject to
annual review and renewal by the government, and may be terminated at any time.
Each government contract, option and extension is only valid if the government
appropriates enough funds for expenditure on such contracts, options or
extensions. Accordingly, we might fail to derive any revenue from sales of
software to the U.S. government in any given future period. If the U.S.
government fails to renew or terminates any of these contracts it would
adversely affect our business and results of operations.

OUR COMMON STOCK PRICE IS VOLATILE.

The market price for our common stock is volatile and has fluctuated
significantly to date. The trading price of our common stock is likely to
continue to be highly volatile and subject to wide

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fluctuations in response to factors including the following:

- actual or anticipated variations in our quarterly operating results;

- announcements of technological innovations, new sales formats or new
products or services by us or our competitors;

- changes in financial estimates by securities analysts;

- conditions or trends in the Internet and online commerce industries;

- changes in the economic performance and/or market valuations of other
Internet, online service or retail companies;

- announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;

- additions or departures of key personnel; and

- sales of common stock.

In addition, the securities market has experienced extreme price and volume
fluctuations and the market prices of the securities of Internet-related and
technology companies have been especially volatile. These broad market and
industry factors may adversely affect the market price of our common stock,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of stock, many companies have been the object
of securities class action litigation. If we were to be sued in a securities
class action, it could result in substantial costs and a diversion of
management's attention and resources.

WE HAVE NO OBLIGATION TO SPEND THE OFFERING PROCEEDS IN A SPECIFIED MANNER.

Our management will be able to spend most of the proceeds we receive from
this offering in ways in which stockholders may not agree. We cannot predict
that the proceeds will be invested to yield a favorable return.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH DEPENDENCE ON THE INTERNET AND INTERNET
INFRASTRUCTURE DEVELOPMENT.

Our success will depend in large part on continued growth in, and the use
of, the Internet. There are critical issues concerning the commercial use of the
Internet which remain unresolved. The issues concerning the commercial use of
the Internet which we expect to affect the development of the market for our
services include:

- security;

- reliability;

- cost;

- ease of access;

- quality of service; and

- necessary increases in bandwidth availability.

The adoption of the Internet for information retrieval and exchange,
commerce and communications, particularly by those enterprises that have
historically relied upon traditional means of commerce and communications,
generally will require that these enterprises accept a new medium for conducting
business and exchanging information. These entities likely will accept this new
medium only if the Internet provides them with greater efficiency and an
improved area of commerce and communication.

Demand and market acceptance of the Internet are subject to a high level of
uncertainty and are dependent on a number of factors, including the growth in
consumer access to and acceptance of new interactive technologies, the
development of technologies that facilitate interactive communication between
organizations and targeted audiences and increases in user bandwidth. If the
Internet fails to develop or develops more slowly than we expect as a commercial
or business medium, it will adversely affect our business.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH ONLINE COMMERCE SECURITY AND CREDIT CARD
FRAUD.

A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. To securely
transmit confidential information, such as customer credit card numbers, we rely
on encryp-

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tion and authentication technology that we license from third parties.

To the extent that our activities or those of third party contractors
involve the storage and transmission of proprietary information (such as credit
card numbers), security breaches could damage our reputation and expose us to a
risk of loss or litigation and possible liability. Our business may be adversely
affected if our security measures do not prevent security breaches and we cannot
assure that we can prevent all security breaches. In addition, we have suffered
losses as a result of orders placed with fraudulent credit card data even though
the associated financial institution approved payment of the orders. Under
current credit card practices, a merchant is liable for fraudulent credit card
transactions where, as is the case with the transactions we process, that
merchant does not obtain a cardholder's signature. Fraudulent use of credit card
data in the future could adversely affect our business.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH DIGITAL DOWNLOAD.

Our success will depend in large part on our customers accepting digital
download as a method of buying software. We typically derive higher gross
margins from software sales via digital download than we do on shrink-wrap
software sales. Therefore, our success also depends on our ability to increase
the revenues we derive from product sales through digital download in absolute
dollars and as a percentage of our net revenues. Digital download is a
relatively new method of selling software products and its growth and market
acceptance is highly uncertain and subject to a number of factors, including:

- the availability of sufficient network bandwidth to enable purchasers to
rapidly download software;

- the impact of time-based Internet access fees;

- the number of software titles that are available for purchase through
digital download as compared to those available through traditional
methods;

- the level of consumer comfort with the process of downloading software;
and

- the relative ease of this process and transaction security concerns.

We believe there is a maximum size of a software product that most
consumers are willing to purchase via digital download. We also believe that the
size of new software products will continue to increase and that these software
products will be unsuitable for digital download without significant increases
in network bandwidth. It will adversely affect our business if digital download
fails to achieve widespread market acceptance. Even if digital download achieves
widespread acceptance, we might not overcome the substantial existing and future
technical challenges associated with electronically delivering software reliably
and consistently on a long-term basis. This would also adversely affect our
business.

WE RELY ON STRATEGIC MARKETING ALLIANCES.

Pursuant to our current strategic alliance agreements, we are obligated to
pay a total of $27.9 million from December 31, 1998 through December 31, 2001,
of which approximately $13.8 million must be paid during 1999. If the
BuyDirect.com merger is completed, total obligations to be paid by us pursuant
to BuyDirect.com agreements with @Home, CNet, Xoom and ZDNet over the next four
years would be approximately $20.2 million, approximately $7.4 million of which
would be paid in 1999.

Under the terms of our agreement with America Online, we are the exclusive
reseller of software on certain screens on the America Online service and
America Online's Web site, aol.com. We are a semi-exclusive reseller of software
on certain other screens on the America Online service. America Online also must
deliver to us minimum numbers of impressions (screen views with links to our Web
site). Pursuant to our agreement with America Online, we must make fixed
payments totaling approximately $21 million. In addition, we must pay America
Online a percentage of certain transactional advertising revenues we earn above
specified minimum amounts. Our agreement with America Online terminates in
August 2001, or earlier if there is a material breach.

Under the terms of our agreement with Excite, we may display banner
advertisements and links to our Web site on certain screens on Excite

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<PAGE> 15

Web sites, and Excite cannot display paid promotional links or banner
advertisements of any other software reseller on specified screens of the Excite
Web site related to software. Excite also must deliver minimum numbers of
impressions to us. We must make substantial payments to Excite during the three
year term of that agreement. Also, we must pay Excite a percentage of certain
transactional revenues we earn. Our agreement with Excite terminates when Excite
meets certain obligations relating to the delivery of impressions, but no
earlier than April 2001, unless there is a material breach. We are not aware of
how the proposed acquisition of Excite by @Home will impact our relationship
with Excite under this agreement or otherwise.

In June 1997, we entered into an agreement with Netscape for a term of 24
months. Under this agreement, we created and manage a Web site, the "Netscape
Software Depot by Beyond.com." This Web site is an online software store
accessible through Netscape's Internet site, created to market and distribute
software products which are compatible with the Netscape ONE platform. Under the
terms of this agreement, we and Netscape allocate sales and advertising revenues
generated from this online store in accordance with negotiated percentages. In
connection with this agreement, we made a substantial initial prepayment to
Netscape for a license to use certain Netscape trademarks. Our agreement with
Netscape terminates on July 31, 1999. However, either party may terminate this
agreement at any time if specific impression and net revenue milestones are not
met. Pursuant to the terms of the agreement, Netscape has notified us that it
does not intend to renew this contract after termination. We do not expect that
the non-renewal of this agreement will have a material effect on our business.

We also entered into three contracts with Network Associates. In September
1997, we were authorized to electronically distribute Network Associates'
products on our Web site. In September 1998, we agreed to co-host Web sites with
Network Associates and agreed to resell Network Associates' products on Network
Associates' Web site at www.mcafeestore.com. Under these agreements, we must
make substantial payments to Network Associates for exclusive positioning of
links to our Web site on certain screens on Network Associates' Web sites, and
rights to resell Network Associates products.

In February 1999, we entered into an agreement with Yahoo!, a global
Internet media company that offers a branded network of comprehensive
information, communication and shopping services. Under this agreement, Yahoo!
will promote and advertise Beyond.com as a premier software merchant by
delivering page views across Yahoo!'s branded network of sites, including the
Yahoo! home page, My Yahoo!, Yahoo! Shopping, Yahoo! Games and relevant
categories and search result pages in the Yahoo! directory. Over the 18 month
term of the agreement, we will make fixed payments, which may be augmented by
certain performance-based payments.

Traffic levels on our Web site and sales we generate from that traffic
might be insufficient to justify our significant fixed financial obligations to
America Online, Excite, Netscape, Network Associates or Yahoo!, or to satisfy
our contractual obligations necessary to prevent termination of these
agreements. In addition, the America Online, Excite, Netscape, Network
Associates and Yahoo! agreements do not provide us with automatic renewal rights
upon expiration. Therefore, we may be unable to renew these agreements on
commercially acceptable terms, or at all. Furthermore, we based our significant
investment in the America Online, Excite, Netscape, Network Associates and
Yahoo! relationships on a number of factors, including:

- the continued positive market presence of these parties;

- the reputation and anticipated growth of these parties; and

- America Online's, Excite's and Yahoo!'s commitment to deliver specified
numbers of screen views with links to our Web site.

Although we expect our agreements with America Online, Excite, Network
Associates and Yahoo! to represent significant distribution channels for our
software, we cannot assume that these agreements will meet this expectation. In
addition, any termination of any or all of our agreements with these companies
would likely have a material adverse affect on our business.

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WE NEED TO MANAGE POTENTIAL GROWTH; OUR MANAGEMENT TEAM IS NEW.

We have rapidly and significantly expanded our operations, and anticipate
this trend will continue. At February 28, 1999 we had a total of 179 employees.
This expansion has placed, and we expect will continue to place, a significant
strain on our managerial, operational and financial resources. The majority of
our senior management, including our President and Chief Executive Officer and
our Chief Financial Officer, joined us within the last twelve months, and three
directors joined our board of directors in March 1999. The Chairman of our Board
of Directors, William S. McKiernan, serves as the President and Chief Executive
Officer of CyberSource Corporation and, accordingly, plays a limited role in our
management. Our new employees include a number of key managerial, technical and
operations personnel who we have not yet fully integrated into our operations,
and we expect to add additional key personnel in the near future. If the
BuyDirect.com merger is completed, we will add over 70 new employees, including
managerial, technical and operations personnel. To manage the expected growth of
our operations and personnel, we will need to improve existing and implement new
transaction processing, operational and financial systems, procedures and
controls.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS.

On February 19, 1999, we entered into an agreement pursuant to which one of
our wholly-owned subsidiaries will merge with and into BuyDirect.com, a leading
online software retailer for consumers and business customers. Upon the closing
of this merger, BuyDirect.com will become our wholly-owned subsidiary and we
will issue approximately 5.1 million shares of our common stock to
BuyDirect.com's stockholders in exchange for their outstanding shares of
BuyDirect.com common and preferred stock, and reserve for issuance upon the
exercise of options we are assuming in connection with the proposed merger
approximately 300,000 shares of our common stock. We anticipate that the
BuyDirect.com merger will close by the end of March 1999. The BuyDirect.com
merger is subject to a number of contingencies including stockholder approval of
the merger by the BuyDirect.com stockholders and customary closing conditions.
As a result, there can be no assurance that the BuyDirect.com merger will be
completed.

If the BuyDirect.com merger is completed, there can be no assurance that we
will successfully assimilate the additional personnel, operations, acquired
technology and products into our business, or retain key personnel. In
particular, if the BuyDirect.com merger is completed, we will have operations in
multiple facilities. We are not experienced in managing facilities in
geographically distant areas. Accordingly, this physical expansion may result in
disruptions that adversely affect our business. Further, there is no assurance
that the acquisition of BuyDirect.com will not have a negative impact on our
business and financial condition. We believe it is likely that we will not
generate additional earnings sufficient to recover the amount of goodwill and
other intangible assets recorded during the period in which they are amortized.

In addition, we intend to continue to make investments in complementary
companies, products or technologies. If we buy a company, we could have
difficulty in assimilating that company's personnel and operations. In addition,
the key personnel of the acquired company may decide not to work for us. If we
make other types of acquisitions, we could have difficulty in assimilating the
acquired technology or products into our operations. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses. In addition, future acquisitions could have a negative impact on
our business, financial condition and results of operations. Furthermore, we may
have to incur debt or issue equity securities to pay for any future acquisition,
the issuance of which would be dilutive to our existing stockholders.

WE ARE DEPENDENT ON KEY PERSONNEL AND NEED ADDITIONAL PERSONNEL.

Our future success depends on the continued service and performance of our
senior management and other key personnel, particularly William S. McKiernan,
Chairman of our Board of Directors, Mark L. Breier, our President and Chief
Executive Officer, and John P. Pettitt, our Executive Vice President and Chief
Technology Officer. If the BuyDirect.com merger is completed, we will add over
70 new employees including managerial, technical and operations
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<PAGE> 17

personnel. Our performance also depends on our ability to retain and motivate
our other officers and key employees. If we complete the BuyDirect.com merger,
our success will also depend on a successful transition of BuyDirect.com's
management responsibility to our senior management team. The loss of the
services of any of our executive officers or other key employees could adversely
affect our business. We do not have long term employment agreements with any of
our key personnel. Our future success also depends on our ability to identify,
attract, hire, train, retain and motivate other highly skilled technical,
managerial, editorial, merchandising, marketing and customer service personnel.
Competition for these individuals is intense, particularly in the Silicon Valley
area, and we may be unable to successfully attract, assimilate or retain
sufficiently qualified personnel in the future.

WE ARE SUBJECT TO CAPACITY CONSTRAINTS RISKS; RELIANCE ON INTERNALLY DEVELOPED
SYSTEMS AND SYSTEM DEVELOPMENT RISKS.

A key element of our strategy is to generate a high volume of traffic on,
and use of, our Web site. Our revenues depend on the number of customers who use
our Web site to purchase software. Accordingly, our Web site, transaction
processing systems and network infrastructure performance, reliability and
availability are critical to our operating results. These factors also are
critical to our reputation and our ability to attract and retain customers and
maintain adequate customer service levels. The volume of goods we sell and the
attractiveness of our product and service offerings will decrease if there are
any systems interruptions that affect the availability of our Web site or our
ability to fulfill orders. We have experienced these periodic systems
interruptions, which we believe will continue to occur. We are continually
enhancing and expanding our technology and transaction processing systems, and
network infrastructure and other technologies, to accommodate a substantial
increase in the volume of traffic on our Web site. We may be unsuccessful in
these efforts or we may be unable to accurately project the rate or timing of
increases in the use of our Web site. We may also fail to timely expand and
upgrade our systems and infrastructure to accommodate these increases. In
addition, we cannot predict whether additional network capacity will be
available from third party suppliers as we need it. Also, our network or our
suppliers' network might be unable to timely achieve or maintain a sufficiently
high capacity of data transmission to timely process orders or effectively
conduct digital download, especially if our Web site traffic increases. Our
failure to achieve or maintain high capacity data transmission could
significantly reduce consumer demand for our services.

WE MAY HAVE POTENTIAL CONFLICTS OF INTEREST WITH CYBERSOURCE.

In connection with the spin off of our Internet commerce services business
to CyberSource in December 1997, we entered into agreements with CyberSource to
define the ongoing relationship between the two companies. At the time these
agreements were negotiated, all of our directors were also directors of
CyberSource and other members of our management team joined CyberSource as
executive officers. As a result, these agreements may not be deemed the result
of arms' length negotiations. Further, although we and CyberSource are engaged
in different businesses, the managements of the two companies currently have no
policies to govern the pursuit or allocation of corporate opportunities between
us and CyberSource. Our business could be adversely affected if the overlapping
board members of the two companies, currently two members, pursue CyberSource's
interests over ours either in the course of intercompany transactions or where
the same corporate opportunities are available to both companies.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH DEPENDENCE ON CYBERSOURCE CORPORATION.

We depend upon CyberSource for certain services such as credit card
processing, fraud screening, export control, sales tax computation, electronic
licensing, hosting of electronic downloads and fulfillment messaging. In
addition, under the terms of an Inter-Company Cross License Agreement we have
with CyberSource, we license certain technology, including Sm@rtCert, from
CyberSource. CyberSource also provides these services and licenses this
technology to other customers, including our competitors.

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It would be disruptive to our business if any of the following occur:

- any discontinuation of these services;

- any termination of this license;

- any reduction in performance that requires us to replace these services;

- any reduction in performance that causes us to internally develop or
license these technologies from a third party; or

- any failure by CyberSource to ensure that this software complies with
"Year 2000" requirements.

Certain former and current members of our management have joined
CyberSource in executive management positions, including William S. McKiernan,
the Chairman of our Board of Directors, who serves as President and Chief
Executive Officer of CyberSource. Furthermore, currently two members of our
Board of Directors serve on the CyberSource Board of Directors. Nothing in our
agreements with CyberSource prohibits CyberSource from competing directly with
us or prevents a third party from acquiring CyberSource, either of which could
adversely affect our business.

WE ARE SUBJECT TO RISK OF SYSTEM FAILURE; OUR SYSTEMS ARE LOCATED IN SINGLE
SITE.

Our success, in particular our ability to successfully receive and fulfill
orders and provide high quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications
systems. Substantially all of our development and management systems are in a
single facility we lease in Sunnyvale, California. Both we and BuyDirect.com
contract with the same third party to host our computer and communications
hardware systems and to maintain our critical connection to the Internet. These
systems are in a single location in Santa Clara, California.

Our systems and operations are vulnerable to damage or interruption from
fire, flood, power loss, telecommunications failure, break-ins, earthquake and
similar events. We have no formal disaster recovery plan and carry insufficient
business interruption insurance to compensate us for losses that may occur.
Furthermore, our security mechanisms or those of our suppliers may not prevent
security breaches or service breakdowns. Despite our implementation of security
measures, our servers may be vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions. These events could cause
interruptions or delays in our business, loss of data or render us unable to
accept and fulfill customer orders.

RAPID TECHNOLOGICAL CHANGE MAY ADVERSELY AFFECT US.

To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online store. The Internet and
the online commerce industry are characterized by rapid technological change,
changes in user and customer requirements and preferences and frequent new
product and service introductions. If competitors introduce new products and
services embodying new technologies or if new industry standards and practices
emerge, then our existing Web site and proprietary technology and systems may
become obsolete. Our future success will depend on our ability to do the
following:

- both license and internally develop leading technologies useful in our
business;

- enhance our existing services;

- develop new services and technology that address the increasingly
sophisticated and varied needs of our prospective customers; and

- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.

To develop our Web site and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our Web site, proprietary technology and
transaction processing systems to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements then our customers may forego the use of our services and use those
of our competitors.

YEAR 2000 RISK MAY ADVERSELY AFFECT OUR COMPANY.

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or beyond the Year 2000. We have assessed our proprietary software and our
internally developed systems which permit the sale, order, processing and
delivery of off-the-shelf software to our customers to determine Year 2000
compliance. We have searched through software code for each of these
applications and believe that we have identified all instances where date
specific information is required. We have further investigated whether these
date fields contain two or four digits. Based on our review and the results of
limited testing, we believe our other proprietary software and internally
developed systems are Year 2000 compliant.

In addition to our proprietary software and internally developed systems,
we utilize software, computer technology and other services internally developed
and provided by third-party vendors that may fail due to the Year 2000
phenomenon. For example, we are dependent on the institutions involved in
processing our members' credit card payments for Internet services. We are also
dependent on telecommunications vendors and leased point-of-purchase vendors to
maintain network reliability.

Our software applications run on several hardware platforms and associated
operating systems, primarily those provided by Sun Microsystems. In addition,
our software operates in accordance with several external Internet protocols,
such as HTTP and NNTP. Our software is therefore dependent upon the correct
processing of dates by these systems and protocols. We have reviewed information
made publicly available by Sun Microsystems and our other hardware platform
providers regarding Year 2000 compliance and researched the date handling
capabilities of applicable Internet protocols. Based on this research, we do not
believe that the underlying systems and protocols that operate in conjunction
with our software applications contain material Year 2000 deficiencies. However,
we have not conducted our own tests to determine to what extent our software
running on any of our hardware platforms and in accordance with any of our
supported Internet protocols fails to properly recognize Year 2000 dates.

We use multiple software systems for our internal business purposes,
including accounting, e-mail, development, human resources, customer service and
support, and sales tracking systems. All of these applications have been
purchased within the preceding 12 months. We have made inquiries of vendors of
the systems that we believe are mission critical to our business regarding their
Year 2000 readiness. Each of these vendors has indicated to us that it believes
its applications are Year 2000 compliant. However, we have not received
affirmative documentation in this regard from any of these vendors, and we have
not performed any operational tests on its internal systems. We anticipate that
our systems, including components thereof provided by third-party vendors, will
be Year 2000 compliant by the Year 2000.

However, our software applications and the underlying hardware systems and
protocols running the software may contain undetected errors or defects
associated with Year 2000 date functions. Our software applications directly and
indirectly interact with a large number of other hardware and software systems.
We are unable to predict to what extent our business may be affected if our
software or the systems that operate in conjunction with our software experience
a material Year 2000 failure. Known or unknown errors or defects that affect the
operation of our software could result in delay or loss of revenue, interruption
of shopping services, cancellation of customer contracts, interference with
digital download, diversion of development resources, damage to our reputation,
costs, and litigation costs, any of which could adversely affect our business,
financial condition and results of operation. Further, the spending and
purchasing patterns of customers or potential customers may be affected by the
Year 2000 issue as individuals, corporation and government agencies expend
significant resources to correct or update their current system for Year 2000
compliance or delay purchases of new software until after the Year 2000. At this
time, the expenses associated with our assessment and potential remediation plan
cannot be determined. Further, at this time, we do not have enough information
to determine the most reasonably likely worst case scenario. Therefore, we do
not have in place a contingency plan to handle the most reasonably likely worst
case scenarios. We do not intend to create one.

18
<PAGE> 20

WE MAY NOT SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS.

We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success. To protect
our proprietary rights, we rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers, partners and others. We pursue the registration of our trademarks and
service marks in the U.S., and have applied for the registration of our
trademarks and service marks. We applied for Federal registration of the service
marks "BEYOND.COM" on July 10, 1998, and "BEYOND DOT COM" on July 14, 1998,
although we cannot assume that federal registration of these service marks or
any other service mark will issue. In addition, effective trademark, service
mark, copyright and trade secret protection may be unavailable in every country
in which our products and services are made available online.

We have licensed in the past, and expect to license in the future, certain
of our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that these licensees maintain the quality of
our brand, the licensees could take actions that materially harm the value of
our proprietary rights or reputation. Furthermore, the steps we take to protect
our proprietary rights may be inadequate or third parties might infringe or
misappropriate our trade secrets, copyrights, trademarks, trade dress and
similar proprietary rights. In addition, others could independently develop
substantially equivalent intellectual property. We may have to litigate in the
future to enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and the diversion of our management
and technical resources which could harm our business.

INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND RESULT IN THE LOSS OF
SIGNIFICANT RIGHTS.

Other parties may assert infringement or unfair competition claims against
us. In the past, other parties have sent us notice of claims of infringement of
proprietary rights, and we expect to receive other notices in the future. We
cannot predict whether others will assert claims of infringement against us, or
whether any past or future assertions or prosecutions will adversely affect our
business. If we are forced to defend against any such claims, whether they are
with or without merit or are determined in our favor, then we may face wasted
time, costly litigation, diversion of technical and management personnel, or
product shipment delays. As a result of such a dispute, we may have to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of product
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, it could
adversely affect our business.

WE MAY BECOME SUBJECT TO ADDITIONAL GOVERNMENT REGULATION.

Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The most recent session of the U.S.
Congress resulted in Internet laws regarding children's privacy, copyrights,
taxation and the transmission of sexually explicit material. The European Union
recently enacted its own privacy regulations. The law of the Internet, however,
remains largely unsettled, even in areas where there has been some legislative
action. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation apply to the
Internet. In addition, the growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, that may impose additional burdens on companies
conducting business online. The adoption or modification of laws or regulations
relating to the Internet could adversely affect our business.

WE MAY BE LIABLE FOR INTERNET CONTENT.

We believe that our future success will depend in part upon our ability to
deliver original and compelling descriptive content about the software products
we sell on the Internet. As a publisher of online content, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement, or other claims based on the nature and content of materials that
we publish or

19
<PAGE> 21

distribute. In the past, plaintiffs have brought such claims and sometimes
successfully litigated them against online services. In addition, in the event
that we implement a greater level of interconnectivity on our Web site, we will
not and cannot practically screen all of the content our users generate or
access, which could expose us to liability with respect to such content.
Although we carry general liability insurance, our insurance may not cover
claims of these types or may be inadequate to indemnify us for all liability
that may be imposed on us. If we face liability, particularly liability that is
not covered by our insurance or is in excess of our insurance coverage, then our
reputation and our business may suffer.

WE MAY BE SUBJECT TO SALES AND OTHER TAXES.

We do not currently collect sales or other similar taxes for physical
shipments of goods into states other than California, Virginia and the District
of Columbia. We do not currently collect sales or other similar taxes for
digital download of goods into states other than the District of Columbia.
However, one or more local, state or foreign jurisdictions may seek to impose
sales tax collection obligations on us and other out of state companies which
engage in online commerce. In addition, any new operations in states outside
California and the District of Columbia, including operations assumed in
connection with the proposed BuyDirect.com merger, could subject our shipments
into such states to state sales taxes under current or future laws. If one or
more states or any foreign country successfully asserts that we should collect
sales or other taxes on the sale of our merchandise, it could adversely affect
our business.

MANAGEMENT AND CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER
BEYOND.COM.

Based upon 27,423,763 shares outstanding as of December 31, 1998, our
current directors and executive officers and their respective affiliates
beneficially own in the aggregate approximately 46.3% of our outstanding common
stock immediately prior to this offering and 43.7% of our outstanding common
stock upon completion of this offering. In particular, William S. McKiernan, the
Chairman of our Board of Directors, beneficially holds approximately 32.8% of
our outstanding common stock, immediately prior to this offering and 27.8% of
our outstanding common stock upon completion of this offering. Therefore, if
these stockholders act together, they will be able to exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership also may have the effect of delaying, preventing or
deterring a change in our control which could adversely affect the market price
of our common stock.

FUTURE PUBLIC SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
MAY DEPRESS OUR STOCK PRICE.

If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Upon completion of this offering, we will have outstanding
30,495,035 shares of common stock, based upon shares outstanding as of December
31, 1998 (as described in "Summary -- The Offering").

Of these shares, 15,371,685 will be freely tradeable. This leaves
15,123,350 shares eligible for sale in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<S> <C>
14,018,396 90 days from the date
of this prospectus

1,104,954 At certain times
after March 18, 1999
</TABLE>

In addition, we filed a shelf-registration statement on January 21, 1999 to
register the 3,448,745 shares of our common stock issuable upon conversion of
our 7 1/4% Convertible Subordinated Notes. Upon the effective date of such
shelf-registration statement, all such 3,448,745 shares of our common stock
together with 8,582 shares of our common stock also registered on the
shelf-registrar statement will be freely tradeable without restriction.

Furthermore, if the BuyDirect.com merger is completed, we will be obligated
to file and have declared effective a registration statement covering
approximately 5.1 million shares of our common stock and approximately 300,000
shares of our common stock issuable pursuant to options to be issued by us in
such merger, all of which shares
20
<PAGE> 22

will be freely tradeable upon the effectiveness of such registration statement.

THE SELLING STOCKHOLDERS WILL BENEFIT FROM THE OFFERING.

Several of our stockholders are selling shares in this offering. The
average price per share paid by these selling stockholders is $2.41. Based upon
an assumed public offering price of $23.8875 per share, the average realized
gain per share to these stockholders will be approximately $21.4775.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH GLOBAL EXPANSION.

Although we sell software to customers outside the United States, we have
no overseas fulfillment or distribution facility or arrangement. We also have no
Web site content localized for foreign markets. Therefore, we may be unable to
expand our global presence effectively. In addition, international operations
are subject to inherent risks, including:

- regulatory requirements;

- export restrictions;

- tariffs and other trade barriers;

- difficulties in protecting intellectual property rights;

- longer payment cycles;

- problems in collecting accounts receivable;

- political instability; and

- fluctuations in currency exchange rates.

In addition, the United States imposes export restrictions on certain
software because of its encryption technology and we may face liability if we
violate these restrictions.

WE MAY BE SUBJECT TO RISKS RELATED TO THE INTRODUCTION OF THE EURO CURRENCY.

In January 1999, the new "Euro" currency was introduced in certain European
countries that are part of the European Monetary Union ("EMU"). During 2002, all
EMU countries are expected to completely replace their national currencies with
the Euro. A significant amount of uncertainty exists as to the effect the Euro
will have on the marketplace generally and, additionally, all of the final rules
and regulations have not yet been defined and finalized by the European
Commission with regard to the Euro currency. We list the prices for our
products, accounts, and invoices for sales and collect payments in U.S. dollars,
even for sales outside the U.S. We currently utilize third-party vendor
equipment and software products that may or may not be EMU compliant. Although
we are currently taking steps to address the impact, if any, of EMU compliance
for such third-party products, the failure of any critical component to operate
properly during and after the Euro conversion process may have an adverse effect
on our business or results of operations or require us to incur expenses to
remedy such problems.

OUR CHARTER DOCUMENTS AND OTHER AGREEMENTS MAY ADVERSELY AFFECT A POTENTIAL
TAKEOVER.

Provisions of our Amended and Restated Certificate of Incorporation,
Bylaws, option agreements and Delaware law could make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. See "Description of Capital Stock."

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS.

This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such
forward-looking statements. This prospectus also contains forward-looking
statements attributed to certain third parties relating to their estimates
regarding the growth of certain electronic-commerce, electronic software
delivery, software and related service markets and spending. You should not
place undue reliance on these forward-looking statements, which apply only as of
the date of this prospectus. Our actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including the risks faced by us described above and elsewhere in this
prospectus.

21
<PAGE> 23

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $67.3
million (approximately $77.4 million if the underwriters fully exercise their
over-allotment option) from our sale of the 3,000,000 shares of common stock
offered by us with this prospectus based on an assumed offering price of
$23.8875 per share. This estimate is after deducting estimated underwriting
discounts and commissions and other fees and expenses payable by us. We will not
receive any portion of the proceeds from the sale of shares of common stock by
the selling stockholders.

We intend to use a substantial portion of the net proceeds for sales and
marketing expenses, including to pay for a portion of our obligations to America
Online, Excite, Network Associates and Yahoo! pursuant to our agreements with
these parties, which total approximately $27.9 million from December 31, 1998
through December 31, 2001, of which approximately $13.8 million must be paid
during 1999. In addition, we intend to use a portion of the net proceeds for
debt service relating to our 7 1/4% Convertible Subordinated Notes, of which
approximately $4.6 million must be paid during 1999. We also anticipate
continuing to expend substantial resources on broadcast and other sales and
marketing campaigns in order to build our customer base and brand name. We have
no specific plan for use of the remaining proceeds and expect to use such
proceeds for general corporate purposes, including working capital and to fund
anticipated operating losses and capital expenditures, and potential
acquisitions. In this regard, we are currently evaluating certain acquisition
opportunities; however, we cannot assure you that we will identify suitable
acquisition candidates or that we will, in fact, complete any acquisition. Until
we use the net proceeds for a particular purpose, we will invest them in
short-term interest bearing securities. If the BuyDirect.com merger is
completed, total obligations to be paid by us pursuant to BuyDirect.com's
current agreements with @Home, CNET, Xoom and ZDNet over the next 4 years would
be approximately $20.2 million, $7.4 million of which would be paid in 1999. We
intend to use a portion of the net proceeds to pay a portion of such
obligations, if the BuyDirect.com merger is completed.

DIVIDEND POLICY

We have never declared or paid any cash dividends. We currently expect to
retain future earnings, if any, to finance the growth and development of our
business.

PRICE RANGE OF COMMON STOCK

Our common stock has been quoted on the Nasdaq National Market since our
initial public offering on June 17, 1998, and is traded under the symbol "BYND."
The following table sets forth, for the periods indicated, the high and low sale
prices per share of our common stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1998
Second Quarter (from June 17, 1998)...................... $19.938 $13.188
Third Quarter............................................ $19.938 $ 8.375
Fourth Quarter........................................... $29.063 $ 6.313
FISCAL YEAR 1999
First Quarter (through March 12, 1999)................... $41.313 $21.000
</TABLE>

On March 12, 1999, the reported last sale price of the common stock on the
Nasdaq National Market was $22.75 per share. As of March 12, 1999, there were
approximately 205 stockholders of record of the common stock.

22
<PAGE> 24

CORPORATE INFORMATION

We were incorporated in California in 1994 as CyberSource Corporation and
changed our name to software.net Corporation in April 1998. In June 1998, we
were reincorporated in Delaware as software.net Corporation. In December, 1998,
we changed our name from software.net Corporation to Beyond.com Corporation.
References in this prospectus to "Beyond.com", "we", "our" and "us" refer to
Beyond.com Corporation, a Delaware corporation and its predecessor, software.net
Corporation, a California corporation. Our principal executive offices are
located at 1195 West Fremont Avenue, Sunnyvale, California 94087 and our
telephone number is (408) 616-4200. We have applied for federal registration of
the service marks "BEYOND.COM" and "BEYOND DOT COM." Each trademark, trade name
or service mark of any other company appearing in this prospectus belongs to its
holder.

23
<PAGE> 25

CAPITALIZATION

The following table sets forth as of December 31, 1998, (i) our
consolidated capitalization, (ii) our pro forma consolidated capitalization
assuming the BuyDirect.com merger is completed and (iii) our pro forma
consolidated capitalization as adjusted to reflect the sale of the common stock
offered by this prospectus, after deduction of estimated offering expenses and
underwriting discounts, and assuming an offering price of $23.8875 per share.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long term debt:
7 1/4% Convertible Subordinated Notes Due
December 1, 2003.......................... $63,250 $ 63,250 $ 63,250
Other long-term debt......................... -- 5,792 5,792
------- -------- --------
Total long-term debt................. 63,250 69,042 69,042
Stockholders' equity:
Preferred stock, $0.001 par value; 15,000,000
shares authorized; no shares issued and
outstanding............................... -- -- --
Common stock, $0.001 par value; 50,000,000
shares authorized; 27,423,763 shares
issued and outstanding, actual;
[32,527,212] shares authorized and
outstanding pro forma; and [35,598,489]
shares authorized and outstanding, pro
forma as adjusted(1)...................... 69,311 201,394 268,660
Deferred compensation........................ (2,226) (6,816) (6,816)
Accumulated deficit.......................... (42,362) (42,362) (42,362)
------- -------- --------
Total stockholders' equity........... 24,723 152,214 219,482
------- -------- --------
Total capitalization................. $87,973 $221,256 $288,524
======= ======== ========
</TABLE>

- ---------------
(1) Based on shares outstanding as of December 31, 1998. Excludes at December
31, 1998; (i) 4,495,299 shares of common stock issuable upon exercise of
options outstanding under our 1995 and 1998 Stock Option Plans at a weighted
average exercise price of $4.16 per share; (ii) 928,728 shares of common
stock issuable upon exercise of outstanding options granted outside of the
plans at a weighted average exercise price of $0.004 per share; (iii)
268,849 shares of common stock reserved for future issuance under the plans;
(iv) 358,423 shares of common stock reserved for issuance pursuant to the
exercise of a warrant issued by us to America Online at an exercise price of
$8.37 per share; (v) 3,448,745 shares of common stock issuable upon
conversion of our 7 1/4% Convertible Subordinated Notes; and (vi) 5,103,449
shares of our common stock to be issued to the BuyDirect.com stockholders in
exchange for their outstanding shares of BuyDirect.com common and preferred
stock, and 296,551 shares of our common stock reserved for issuance upon
exercise of options that we are assuming in connection with the proposed
merger. See "Description of Capital Stock" and Notes 3, 5, 8 and 12 of Notes
to Consolidated Financial Statements.

24
<PAGE> 26

DILUTION

The net tangible book value of our common stock on December 31, 1998 was
$13.8 million, or approximately $0.50 per share. Net tangible book value per
share represents the amount of our tangible assets less the amount of total
liabilities divided by the number of shares of common stock outstanding.

After giving effect to our sale of 3,000,000 shares of common stock offered
by us with this prospectus at an assumed offering price of $23.8875 per share
and after deducting our estimated underwriting discounts and expenses related to
this offering, our net tangible book value on December 31, 1998 would have been
$81.1 million, or approximately $2.66 per share. This represents an immediate
increase in the net tangible book value of $2.21 per share to existing
stockholders and an immediate dilution of $21.23 per share to new investors.

<TABLE>
<S> <C> <C>
Assumed offering price per share............................ $ 23.89
--------
Net tangible book per share value as of December 31,
1998................................................... $ 0.45
--------
Increase per share attributable to the offering........... $ 2.21
--------
Adjusted net tangible book value after the offering......... $ 2.66
--------
Dilution per share to new investors......................... $ 21.23
--------
</TABLE>

The table excludes all options and warrants that will remain outstanding
upon completion of the offering and 3,448,745 shares of common stock issuable
upon conversion of the 7 1/4% Convertible Subordinated Notes and approximately
5.1 million shares of our common stock to be issued to BuyDirect.com's
stockholders in exchange for their outstanding shares of BuyDirect.com common
and preferred stock, and approximately 300,000 shares of our common stock
reserved for issuance upon the exercise of options we are assuming in connection
with the proposed merger. See Notes 3, 5, 8 and 12 of Notes to Consolidated
Financial Statements. The exercise of outstanding options and warrants having an
exercise price less than the offering price and the conversion of the 7 1/4%
Convertible Subordinated Notes would increase the dilutive effect to new
investors.

25
<PAGE> 27

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statement of
operations data for the years ended December 31, 1996, 1997 and 1998 and the
consolidated balance sheet data as of December 31, 1997 and 1998 are derived
from our Consolidated Financial Statements which have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere in this prospectus,
and are qualified by reference to such Consolidated Financial Statements and the
Notes thereto. The consolidated statement of operations data for the period from
August 12, 1994 (date of incorporation) to December 31, 1994 and for the year
ended December 31, 1995 and the consolidated balance sheet data as of December
31, 1995 and 1996 are derived from our consolidated financial statements not
included herein which have been audited by Ernst & Young LLP, independent
auditors. The consolidated balance sheet data as of December 31, 1994, are
derived from our unaudited financial statements not included herein. The
historical results are not necessarily indicative of future results. We have
paid no cash dividends on the common stock.

The unaudited selected consolidated pro forma financial data of Beyond.com
and BuyDirect.com is derived from the unaudited consolidated pro forma combined
condensed financial statements of Beyond.com and BuyDirect.com and should be
read in conjunction with such pro forma statements and notes thereto which are
included elsewhere in this prospectus. For pro forma purposes, Beyond.com's
historical consolidated statement of operations data for the year ended December
31, 1998 have been combined with BuyDirect.com's historical consolidated
statements of operations data for the period from March 31, 1998 (inception of
BuyDirect.com) to December 31, 1998 and the historical financial information of
E-Commerce, a division of CNET, Inc., (Predecessor Business of BuyDirect.com)
for the three months ended March 31, 1998, giving effect to the proposed
BuyDirect.com merger as if it had occurred as of January 1, 1998. The unaudited
consolidated pro forma condensed combined balance sheet data combines
Beyond.com's and BuyDirect's historical consolidated balance sheet data as of
December 31, 1998, giving effect to the BuyDirect.com merger as if it had
occurred as of December 31, 1998.

The consolidated pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the BuyDirect.com merger had been
in effect during the periods presented, nor is it necessarily indicative of
future operating results or financial position. In particular, the actual
adjustments to the valuation of BuyDirect's assets and liabilities in

26
<PAGE> 28

connection with the acquisition may vary significantly from the preliminary
estimates reflected in the pro forma financial information.

<TABLE>
<CAPTION>
PERIOD FOR
AUGUST 12, 1994 YEAR ENDED DECEMBER 31,
(DATE OF ----------------------------------------------------
INCORPORATION) TO PRO FORMA
DECEMBER 31, 1994 1995 1996 1997 1998 1998(2)
----------------- ------ ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA
Net revenues..................... $ 40 $1,003 $ 5,858 $16,806 $ 36,650 $ 41,279
Cost of revenues................. 3 623 5,137 14,873 31,074 34,395
------ ------ ------- ------- -------- --------
Gross profit..................... 37 380 721 1,933 5,576 6,884
Operating expenses:
Research and development....... 164 388 431 1,060 4,201 6,047
Sales and marketing............ 57 407 704 1,696 27,568 32,748
General and administrative..... 43 103 450 1,087 4,943 6,733
Goodwill and deferred
compensation amortization.... -- -- -- -- -- 49,086
------ ------ ------- ------- -------- --------
Total operating
expenses.............. 264 898 1,585 3,843 36,712 94,614
------ ------ ------- ------- -------- --------
Loss from operations............. (227) (518) (864) (1,910) (31,136) (87,730)
Interest income, net............. -- 7 85 167 63 (8)
------ ------ ------- ------- -------- --------
Loss from continuing
operations..................... (227) (511) (779) (1,743) (31,073) (87,738)
Loss from discontinued
operations..................... -- -- (736) (3,616) -- --
------ ------ ------- ------- -------- --------
Net loss......................... $ (227) $ (511) $(1,515) $(5,359) $(31,073) $(87,738)
====== ====== ======= ======= ======== ========
Basic and diluted net loss per
share from continuing
operations(1).................. $(0.03) $(0.07) $ (0.10) $ (0.21) $ (1.65) $ (3.66)
====== ====== ======= ======= ======== ========
Basic and diluted net loss per
share from discontinued
operations(1).................. -- -- (0.08) (0.40) -- --
------ ------ ------- ------- -------- --------
Basic and diluted net loss per
share(l)....................... $(0.03) $(0.07) $ (0.18) $ (0.61) $ (1.65) $ (3.66)
====== ====== ======= ======= ======== ========
Number of shares used in
computing basic and diluted net
loss per share(1).............. 9,000 9,000 9,000 9,000 18,900 24,003
====== ====== ======= ======= ======== ========
Pro forma basic and diluted net
loss per share from continuing
operations(1).................. $ (0.10) $ (1.28) $ (2.99)
Pro forma basic and diluted net
loss per share from
discontinued operations(1)..... (0.20) -- --
------- -------- --------
Pro forma basic and diluted net
loss per share(1).............. $ (0.30) $ (1.28) $ (2.99)
======= ======== ========
Number of shares used in
computing proforma basic and
diluted net loss per
share(l)....................... 17,828 24,276 29,379
======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
PRO FORMA
1994 1995 1996 1997 1998 1998(2)
----- ----- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents.................. $ 12 $ 255 $ 3,737 $ 2,571 $81,548 $ 81,889
Working capital (deficiency)............... (89) (106) 3,543 1,093 80,128 72,437
Total assets............................... 36 579 5,691 9,586 109,904 252,124
Long-term obligations, net of current
portion.................................. 105 105 105 99 63,250 69,042
Redeemable convertible preferred stock..... -- 651 6,395 12,565 -- --
Stockholders' equity (net capital
deficiency).............................. $(181) $(793) $(2,409) $(11,191) $24,723 $152,216
</TABLE>

- ---------------
(1) For explanation of the calculation of per share amounts, see Note 1 of Notes
to Consolidated Financial Statements.

(2) For an explanation of the calculation of pro forma amounts, see Notes to
Unaudited Pro Forma Condensed Combined Financial Statements.

27
<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Read the following discussion together with the consolidated financial
statements and related notes included elsewhere in this prospectus. The results
discussed below are not necessarily indicative of the results to be expected in
any future periods. This discussion contains forward-looking statements based on
current expectations and which involve risks and uncertainties. Actual results
and the timing of certain events may differ significantly from those projected
in such forward-looking statements due to a number of factors, including those
set forth herein, in the section entitled "Risk Factors" and elsewhere in this
prospectus. Certain statements in this prospectus assume that the BuyDirect.com
merger has been completed. The merger, however, is subject to a number of
closing conditions and, as a result, there can be no assurance that it will be
completed.

OVERVIEW

We are a leading online reseller of commercial off-the-shelf computer
software to the consumer, small business and large enterprise markets. Through
our online store (www.beyond.com), we offer customers a comprehensive selection
of software as well as related computer peripheral products, helpful customer
service, a convenient shopping experience and competitive prices. We believe
that our Beyond.com Web site is one of the most widely known and used sites on
the World Wide Web for the purchase of software. We deliver software to
customers one of two ways: either we physically deliver the shrink-wrap software
package or we deliver the software over the Internet through digital download.
We launched our Web site in November 1994 under the name CyberSource Corporation
and maintained a Web site named software.net. In addition to selling software,
we initially charged software publishers a fee to list their products on our Web
site. We stopped charging publishers in 1996. In July 1996, we expanded our
business by entering into our first contract with a U.S. government agency. This
contract, and other later contracts require us to both sell software products
and to provide related services. In July 1997, we expanded our third party sales
channel by entering into an agreement with Netscape which terminates on July 31,
1999. Under this agreement, we created and continue to manage and maintain the
Netscape Software Depot Web site.

In March 1998, we expanded our third party sales channel by entering into
strategic relationships with America Online and Excite, and in February 1999, we
further expanded our third party sales channel by entering into a relationship
with Yahoo!. Under the America Online agreement, we are the exclusive reseller
of software on certain screens on the America Online service and America
Online's Web site, aol.com. On other America Online screens we are a
semi-exclusive reseller of software. Under the Excite and Yahoo! agreements, we
have the right to display banner advertisements and links to our Web site on
certain Excite and Yahoo! screens. In addition, Excite cannot display paid
promotional links or banner advertisements of any other software reseller on
specified Excite screens related to software.

Under these agreements, America Online, Excite and Yahoo! are obligated to
deliver minimum numbers of screen views with links to our Web site. We call
these screen views "Impressions." Under the America Online Agreement, we must
make fixed payments totaling approximately $21 million. In addition, under the
Excite and Yahoo! agreements, we must make certain fixed payments to Excite and
Yahoo!, respectively, over the three-year and 18-month terms of the respective
agreements. We also have agreed to pay America Online and Excite a percentage of
certain transactional revenues and, in the case of America Online, advertising
revenues we earn in excess of specified thresholds. In addition, we have agreed
to make certain performance-based payments to Yahoo!. The America Online
agreement terminates in August 2001, the Excite agreement terminates when Excite
has delivered a certain number of impressions, but no earlier than April 2001
and the Yahoo! agreement terminates 18 months after initial activation.

We expect these arrangements with America Online, Excite and Yahoo! to
represent significant distribution channels for our products. If we or the other
party to any of these agreements elect to terminate any of the agreements it
likely would have a material adverse effect on our business. We cannot assure
that we will achieve sufficient online traffic or generate sufficient revenue to
justify our payment obligations to

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<PAGE> 30

America Online, Excite and Yahoo!, nor can we assure that we will achieve
sufficient online traffic or generate sufficient revenue to satisfy our
contractual obligations necessary to prevent termination of the America Online,
Excite or Yahoo! agreements.

Pursuant to our agreement with America Online, Excite, Network Associates
and Yahoo! we are obligated to pay a total of approximately $27.9 million from
December 31, 1998 through December 31, 2001, of which approximately $13.8
million must be paid during 1999. If the BuyDirect.com merger is completed,
total obligations to be paid by us pursuant to BuyDirect.com's current
agreements with @Home, CNET, Xoom and ZDNet over the next 4 years would be
approximately $20.2 million, $7.4 million of which would be paid in 1999.

Over the past eighteen months we have entered into various agreements with
Network Associates concerning the online sale of software and the management of
Network Associates' Web sites. Network Associates is a developer of electronic
commerce locations and publisher of certain products marketed under the McAfee
and other names. Our agreements include a Co-Hosting Agreement and a Web Site
Services Agreement entered into in September 1998. Under these agreements, we
agreed to co-host Web sites with Network Associates and agreed to resell Network
Associates' products on Network Associates' Web site at www.mcafeestore.com. We
must make substantial payments to Network Associates for exclusive positioning
of links to our Web site on certain screens on Network Associates' Web sites,
and rights to resell Network Associates products. If we or they terminate one or
all of these agreements, it would likely have a material adverse effect on our
business. We cannot guarantee that the volume of online traffic, customers or
revenues we obtain as a result of this relationship will justify our significant
fixed financial obligations to Network Associates.

In April 1998, we changed our name to software.net Corporation. In June
1998, we completed the initial public offering of our common stock. In August
1998, we began doing business as "Beyond.com" and initiated an aggressive
regional radio and national print advertising campaign to promote the brand. In
November 1998, we completed the offering of $63.25 million aggregate principal
amount of our 7 1/4% Convertible Subordinated Notes. In December 1998, we
initiated a regional television advertising campaign and we changed our legal
corporate name to Beyond.com Corporation. We intend to continue an aggressive
advertising campaign to promote our brand in 1999.

In order to focus on our core business of selling software products online,
in December 1997 we spun-off our Internet commerce services business (which
included credit card processing, fraud screening, export control, territory
management, and electronic fulfillment) to CyberSource Corporation. As a result
of this spin-off, our results of operations reflect a loss from discontinued
operations in the amount of $736,000 during 1996 and $3.6 million during 1997.
Under the terms of our Internet commerce services agreement with CyberSource, we
use services supplied by CyberSource on a nonexclusive basis for credit card
processing, fraud screening, export control, sales tax computation, electronic
licensing, hosting of electronic downloads and fulfillment notification. This
agreement expires on December 31, 1999, and automatically renews for an
additional one year term, unless otherwise terminated by either party. Under
this agreement, we have agreed to indemnify CyberSource for an amount not to
exceed $100,000 against any third party claim that the software we distribute
infringes upon any third party's intellectual property rights. CyberSource has
agreed to indemnify us for an amount not to exceed $100,000 against any third
party claim that the services provided by CyberSource or the use of any software
provided by CyberSource in connection with the services, infringes any third
party's intellectual property rights.

On February 19, 1999, we entered into an agreement pursuant to which one of
our wholly-owned subsidiaries will merge with and into BuyDirect.com, a leading
online software retailer for consumers and business customers. Upon the closing
of this merger, BuyDirect.com will become our wholly-owned subsidiary and we
will issue approximately 5.1 million shares of our common stock to BuyDirect.com
stockholders in exchange for their outstanding shares of BuyDirect.com common
stock and preferred stock, and reserve approximately 300,000 shares of our
common stock for issuance upon the exercise of options that we are assuming in
connection with the BuyDirect.com merger. In addition, if the BuyDirect.com
merger is

29
<PAGE> 31

completed, we will record a significant amount of goodwill that will adversely
affect our earnings and profitability for the forseeable future. We expect to
record goodwill and other intangible assets of approximately $140 million, to be
amortized through 2002. We believe it is unlikely that we will generate
additional earnings sufficient to recover the amount of goodwill and other
intangible assets recorded during the period in which they are amortized. In
connection with the proposed BuyDirect.com merger, we will use the purchase
method of accounting for business combinations. We anticipate that the
BuyDirect.com merger will close by the end of March 1999. The BuyDirect.com
merger is subject to a number of contingencies including stockholder approval of
the merger by the BuyDirect.com stockholders and customary closing conditions.
As a result, there can be no assurance that the BuyDirect.com merger will be
completed.

Each year since inception, we have incurred increasingly larger net losses.
These annual net losses increased from $1.5 million in 1996 to $5.4 million in
1997 and $31.1 million in 1998. For the foreseeable future, we intend to expend
significant financial and management resources on the following components of
our business:

- brand development, marketing and promotion;

- site content development;

- strategic relationships development and maintenance (such as those with
America Online, Excite, Yahoo! and Network Associates); and

- technology and operating infrastructure development, including digital
download capabilities.

We expect to incur additional losses and continued negative cash flow from
operations for the foreseeable future. We anticipate these losses will increase
significantly from current levels as we spend more on marketing and promotion,
including new and increased spending for mass media advertising. If completed,
the BuyDirect.com merger will further increase our operating losses. To become
profitable given our planned investment levels, we must generate and sustain
substantial increases in net revenue. We cannot assure that our revenues will
increase or even continue at their current level or that we will achieve or
maintain profitability or generate cash from operations in future periods. Our
current and future sales and marketing expense levels are, to a large extent,
fixed at a significant level primarily due to marketing agreements. Further, we
expect our sales and marketing expenses to increase above the fixed minimum
amounts due under such marketing agreements (such as those with America Online,
Excite, Yahoo! and Network Associates), because we plan to increase our sales
and marketing infrastructure and technical support for advertising and
promotional activities. We have based these expense levels on our operating
plans and on our estimates of future revenues, which we cannot assume we will
meet. Our estimates of future revenues depend on sales that we anticipate
resulting from our marketing agreements and increased advertising and from
government sales. We cannot assure that we will meet our estimated revenue
targets. Our revenues and operating results generally depend on the volume and
timing of orders we receive, which are difficult to forecast. We may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would have an
immediate adverse effect on our business. In view of the rapidly evolving nature
of our business and our limited operating history and current and planned
acquisitions, including the proposed BuyDirect.com merger, we are unable to
accurately forecast our revenues. Further, we believe that period to period
comparisons of our operating results are not necessarily meaningful and you
should not rely upon these comparisons as an indication of future performance.

We derive our revenues primarily from four sources:

- sales of software to customers using credit cards;

- sales of software to corporate customers that are invoiced directly under
credit terms;

- sales of software to various government agencies pursuant to contractual
arrangements; and

- to a lesser extent, amounts received from software publishers for
advertising and promotion.

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<PAGE> 32

In addition, we also derive revenues from the sale of certain computer
peripherals and accessories. We recognize our revenues from the sale of
software, net of estimated returns, either upon shipment of the physical product
or delivery of the electronic product via digital download. We defer net
revenues associated with the sale of software pursuant to contracts with the
U.S. government that require us to provide continuing service, support, and
performance and recognize these revenues over the period that we provide
service, support, and performance. We recognize revenues derived from software
publishers for advertising and promotional activities as the services are
provided. Our U.S. government contracts are subject to annual review and renewal
by the applicable government agency. Although all such contracts presently
remain in full force and effect, the applicable U.S. government agency may
terminate such contracts without cause or prior notice. Because the government
contracts may be terminated without cause or prior notice, we cannot be certain
that we will generate any revenues from U.S. government contracts in any future
period. We recognize revenue on sales of computer peripherals and accessories
upon the shipment of the physical product, at which time, collectibility is
probable and we have no remaining obligations.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's consolidated statement of
operations to total net revenues.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Net revenues................................................ 100.0% 100.0% 100.0%
Cost of revenues............................................ 87.7 88.5 84.8
----- ----- -----
Gross profit................................................ 12.3 11.5 15.2
Operating expenses:
Research and development.................................. 7.3 6.3 11.5
Sales and marketing....................................... 12.0 10.1 75.2
General and administrative................................ 7.7 6.5 13.5
----- ----- -----
Total operating expense........................... 27.0 22.9 100.2
----- ----- -----
Loss from operations........................................ (14.7) (11.4) (85.0)
Interest income, net........................................ 1.4 1.0 0.2
----- ----- -----
Loss from continuing operations............................. (13.3) (10.4) (84.8)
Loss from discontinued operations........................... (12.6) (21.5) --
----- ----- -----
Net loss.................................................... (25.9)% (31.9)% (84.8)%
===== ===== =====
</TABLE>

YEARS ENDED DECEMBER 31, 1997 AND 1998

Net Revenues

Our net revenues increased from $16.8 million in 1997 to $36.7 million in
1998. This increase primarily resulted from increased sales to consumer and
corporate customers and as a result of renewed U.S. government contracts. Our
net revenues from digital download software sales increased from $10.3 million
in 1997 to $18 million in 1998.

Cost of Revenues

Our cost of revenues consists primarily of the costs of software and
software licenses sold to consumer and corporate customers, related credit card
processing fees, and the costs of software licenses and software updates
provided to the U.S. government. Our total cost of revenues increased from $14.9
million in 1997 to $31.1 million in 1998. This increase resulted from our
increased software sales.

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<PAGE> 33

Gross Margin

Our gross margin (gross profit as a percentage of net revenues) increased
from 11.5% in 1997 to 15.2% in 1998. This increase primarily resulted from a
shift in our revenue mix as we received an increased percentage of higher margin
consumer business, an increased percentage of higher margin digital download
revenues and an increased percentage of higher margin advertising and
promotional revenues from software publishers. In the future, we may expand or
increase the discounts we offer to customers or otherwise alter our pricing
structures and policies. If we take such an action, it may have an adverse
impact on gross margin in future periods. Further, although we intend to
increase the percentage of higher margin consumer business, higher margin
digital download revenues and higher margin advertising and promotional revenues
as a percentage of our total revenues in future periods, we do not expect our
gross margin to increase in future periods as rapidly as it increased between
1997 and 1998. In future periods our gross margin may decline if the revenues we
generate from sales to the U.S. government or sales to large enterprise
customers increase as a percentage of our total net revenues.

Research and Development Expenses

Our research and development expenses primarily consist of personnel and
other expenses associated with developing and enhancing our Web sites, as well
as associated facilities related expenses. Our research and development expenses
increased from $1.1 million in 1997 to $4.2 million in 1998. These expenses also
increased as a percentage of net revenues from 6.3% in 1997 to 11.5% 1998. This
increase both in absolute dollars and as a percentage of net revenues primarily
was the result of increases in our personnel and depreciation on computer
equipment. We anticipate that our research and development expenses will
continue to increase in absolute dollars in future periods.

Sales and Marketing Expenses

Our sales and marketing expenses consist primarily of promotional
expenditures and costs associated with operating our Web sites, including
personnel and related expenses. In addition, we include the expenditures
associated with our strategic marketing alliances under sales and marketing
expenses. Our sales and marketing expenses increased significantly from $1.7
million in 1997 to $27.6 million in 1998. These expenses also increased
significantly as a percentage of net revenues from 10.1% in 1997 to 75.2% in
1998. This increase both in absolute dollars and as a percentage of net revenues
was primarily the result of costs associated with:

- developing and maintaining our strategic marketing alliances;

- a branding and marketing campaign (including expenses associated with our
re-branding efforts); and

- an increase in personnel to support increased sales and marketing and
advertising expenditures.

We intend to continue to pursue aggressive branding, sales and marketing
campaigns. In addition, our current strategic marketing alliances with America
Online, Excite and Netscape require us to make payments totaling approximately
$26 million over the terms of those agreements. As of December 31, 1998,
approximately $20.3 million of this amount remained to be paid. We are expensing
the costs associated with the America Online and Netscape agreements ratably
over the terms of the respective agreements. We are expensing the costs
associated with the Excite agreement as costs are incurred and payments become
due. We are expensing the minimum payment amounts over the three-year term of
the Co-Hosting Agreement with Network Associates. We may enter into similar
strategic marketing alliances requiring significant minimum payments in the
future and, as a result, we may substantially increase our sales and marketing
expenditures. Due to our planned aggressive branding, sales and marketing
efforts and our current and potential financial commitments in connection with
our strategic marketing alliances, we expect sales and marketing expenses to
increase significantly in absolute dollars in future periods. In addition, if
the Beyond.com merger is completed, we will assume BuyDirect.com's obligations
under its current strategic alliance agreements with @Home,

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<PAGE> 34

CNet, Xoom and ZDNet, which will also cause our sales and marketing expense to
increase significantly in absolute dollars in future periods.

General and Administrative Expenses

Our general and administrative expenses primarily consist of personnel
expenses, legal and accounting expenses, and corporate facility-related
expenses. Our general and administrative expenses increased from $1.1 million in
1997 to $4.9 million in 1998. These expenses also increased, as a percentage of
net revenues, from 6.5% in 1997 to 13.5% in 1998. This increase in both absolute
dollars and as a percentage of net revenues was primarily the result of
increased personnel-related costs and facilities-related expenses associated
with the hiring of additional personnel as well as increased provisions for bad
debts. We anticipate that these expenses will continue to grow in absolute
dollars as we incur additional expenses associated with operating as a public
company and transition from a single site operation to multiple site operations.

Interest Income, Net

Interest income, net, consists of earnings on our cash investments, net of
interest costs related to our financing obligations. Interest income, net,
decreased from $167,000 in 1997 to $63,000 in 1998. This decrease was primarily
a result of increased interest expenses totaling approximately $1,293,000
associated with our credit facility and our 7 1/4% Convertible Subordinated
Notes offset by interest income totaling approximately $1,356,000 from higher
average cash balances.

Income Taxes

We incurred a net loss for 1997 and 1998. As a result, no provision for
income taxes has been recorded in these periods. As of December 31, 1998, we had
approximately $37 million of net operating loss carryforwards for federal income
tax purposes, which expire between 2009 and 2018. We anticipate that our total
net operating loss carryforwards will increase if the BuyDirect.com merger is
completed. Given our limited operating history, losses incurred to date and the
difficulty in accurately forecasting our future results, we do not believe that
we meet the criteria required by generally accepted accounting principles to
realize the related deferred income tax assets and, accordingly, we have
recorded a full 100% valuation allowance to reduce the deferred income tax
assets to $0. Furthermore, as a result of changes in ownership of our stock from
our preferred stock financings and our initial public offering, any attempt by
us to use the net operating losses and tax credits may be subject to substantial
annual limitations. These annual limitations may result in the expiration of net
operating losses and tax credits before utilization. See Note 11 of Notes to
Consolidated Financial Statements.

Write-Off Goodwill and Other Intangible Assets

If the BuyDirect.com merger is completed, we will record a significant
amount of goodwill that will adversely affect our earnings and profitability for
the forseeable future. We expect to record goodwill and other intangible assets
of approximately $140 million, to be amortized through 2002. We believe it is
unlikely that we will generate additional earnings sufficient to recover the
amount of goodwill and other intangible assets recorded during the period in
which they are amortized.

YEARS ENDED DECEMBER 31, 1996 AND 1997

Net Revenues

Our net revenues increased from $5.9 million in 1996 to $16.8 million in
1997. This increase was primarily a result of increased sales to consumer and
corporate customers and new U.S. government contracts. Our revenues from digital
download software sales were $10.3 million in 1997.

33
<PAGE> 35

Cost of Revenues

Our cost of revenues increased from $5.1 million in 1996 to $14.9 million
in 1997. This increase was primarily a result of our entering into additional
U.S. government contracts and achieving increased product sales to consumer and
corporate customers.

Gross Margin

Our gross margin decreased from 12.3% in 1996 to 11.5% in 1997. This
decrease was primarily a result of a shift in our revenue mix. U.S. government
contract revenues bring a lower margin than our other revenue sources. During
1997, our revenues from these lower margin U.S. government contracts increased
as a percentage of total net revenues. The decrease we realized in overall gross
margin was partially offset by an increase in higher margin advertising and
promotional revenues we received from software publishers.

Research and Development Expenses

Our research and development expenses increased from $431,000 in 1996 to
$1.1 million in 1997. Our research and development expenses as a percentage of
net revenues decreased from 7.3% in 1996 to 6.3% in 1997. Our increase in
research and development expenses in absolute dollars from 1996 to 1997
primarily was the result of an increase in personnel related costs. Our decrease
in research and development expenses as a percentage of net revenues was
primarily the result of our substantial increase in net revenues in 1997.

Sales and Marketing Expenses

Our sales and marketing expenses increased from $704,000 in 1996 to $1.7
million in 1997. Our sales and marketing expenses as a percentage of net
revenues decreased from 12.0% in 1996 to 10.1% in 1997. Our increase in sales
and marketing expenses in absolute dollars from 1996 to 1997 primarily was the
result of an increase in our personnel and advertising expenditures, as well as
costs associated with a strategic marketing alliance. The decrease in our sales
and marketing expenses as a percentage of our net revenues primarily was the
result of our substantial increase in net revenues in 1997.

General and Administrative Expenses

Our general and administrative expenses increased from $450,000 in 1996 to
$1.1 million in 1997. Our general and administrative expenses as a percentage of
net revenues decreased from 7.7% in 1996 and 6.5% in 1997. Our increase in
general and administrative spending in absolute dollars in 1997 primarily was
the result of increased salaries and facilities related expenses associated with
our hiring of additional personnel, increased legal expenses associated with our
settlement of a lawsuit, and increased bad debt reserves associated with our
increase in net revenues. Our decrease in general and administrative expenses as
a percentage of net revenues primarily was the result of our substantial
increase in net revenues in 1997.

Interest Income, Net

Interest income, net, increased from $85,000 in 1996 to $167,000 in 1997
due to earnings on higher average cash balances in 1997.

Income Taxes

We incurred a net loss in both 1996 and 1997. Accordingly, we did not
record any provision for income taxes in either of these years.

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<PAGE> 36

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our unaudited quarterly consolidated
statement of operations data for each of the four quarters during the years
ended December 31, 1997 and 1998. In the opinion of our management, this
information has been prepared substantially on the same basis as the audited
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this prospectus.

In addition, in the opinion of our management, all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the unaudited quarterly results. You
should read this quarterly data in conjunction with our audited Consolidated
Financial Statements and the Notes thereto appearing elsewhere in this
prospectus. Our operating results for any quarter are not necessarily indicative
of the operating results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ $3,158 $3,434 $ 4,825 $ 5,389 $ 6,192 $ 7,577 $ 9,742 $ 13,139
Cost of revenues........................ 2,783 2,892 4,295 4,903 5,254 6,408 8,281 11,131
------ ------ ------- ------- ------- ------- ------- --------
Gross profit............................ 375 542 530 486 938 1,169 1,461 2,008
Operating expenses:
Research and development................ 155 184 302 419 602 1,120 1,287 1,192
Sales and marketing..................... 265 332 442 657 1,953 4,268 8,048 13,299
General and administrative.............. 164 247 265 411 635 1,178 1,407 1,723
------ ------ ------- ------- ------- ------- ------- --------
Total operating expenses................ 584 763 1,009 1,487 3,190 6,566 10,742 16,214
------ ------ ------- ------- ------- ------- ------- --------
Loss from operations.................... (209) (221) (479) (1,001) (2,252) (5,397) (9,281) (14,206)
------ ------ ------- ------- ------- ------- ------- --------
Interest income, net.................... 40 32 24 71 25 (167) 383 (178)
------ ------ ------- ------- ------- ------- ------- --------
Loss from continuing operations......... (169) (189) (455) (930) (2,227) (5,564) (8,898) (14,384)
Loss from discontinued operations....... (583) (455) (1,036) (1,542) -- -- -- --
------ ------ ------- ------- ------- ------- ------- --------
Net loss................................ $ (752) $ (644) $(1,491) $(2,472) $(2,227) $(5,564) $(8,898) $(14,384)
====== ====== ======= ======= ======= ======= ======= ========
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
---------------------------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 88.1 84.2 89.0 91.0 84.9 84.6 85.0 84.7
----- ----- ----- ----- ----- ----- ----- ------
Gross profit............................ 11.9 15.8 11.0 9.0 15.1 15.4 15.0 15.3
Operating expenses:
Research and development................ 4.9 5.4 6.3 7.8 9.7 14.8 13.2 9.1
Sales and marketing..................... 8.4 9.7 9.2 12.2 31.5 56.3 82.6 101.2
General and administrative.............. 5.2 7.2 5.4 7.6 10.3 15.5 14.4 13.1
----- ----- ----- ----- ----- ----- ----- ------
Total operating expenses............ 18.5 22.3 20.9 27.6 51.5 86.6 110.2 123.4
----- ----- ----- ----- ----- ----- ----- ------
Loss from operations.................... (6.6) (6.5) (9.9) (18.6) (36.4) (71.2) (95.2) (108.1)
Interest income, net.................... 1.3 0.9 0.5 1.3 0.4 (2.2) 3.9 (1.4)
----- ----- ----- ----- ----- ----- ----- ------
Loss from continuing operations......... (5.3) (5.6) (9.4) (17.3) (36.0) (73.4) (91.3) (109.5)
Loss from discontinued operations....... (18.5) (13.2) (21.5) (28.6) -- -- -- --
----- ----- ----- ----- ----- ----- ----- ------
Net loss................................ (23.8)% (18.8)% (30.9)% (45.9)% (36.0)% (73.4)% (91.3)% (109.5)%
===== ===== ===== ===== ===== ===== ===== ======
</TABLE>

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<PAGE> 37

The net revenues we have realized have increased significantly in each
consecutive quarter presented due to increased sales to consumers, corporate
customers and the U.S. government. Our gross margins fluctuated on a quarterly
basis during these quarters primarily as a result of changes in our revenue mix.
During the last twelve months, gross margins have remained relatively stable.
Our gross margins increased in the second quarter of 1997 and in the first,
second and fourth quarters of 1998 primarily as a result of an increase in our
advertising and promotional revenues as a percentage of our net revenues and as
a result of a shift toward higher gross margin software products. Our gross
margins decreased in the third and fourth quarters of 1997 primarily due to two
factors: (1) our lower margin U.S. government contract revenues increased as a
percentage of our net revenues; and (2) our advertising and promotional revenues
decreased as a percentage of our net revenues. Our research and development and
general and administrative expenses increased in absolute dollars in each
quarter presented primarily as a result of increases in our personnel related
costs. We anticipate higher research and development expenses in absolute
dollars for the foreseeable future as a result of new hires and other personnel
related costs. Our sales and marketing expenses also increased on a quarterly
basis in each quarter presented as a result of increases in our personnel and
facility-related costs. Sales and marketing expenses and general and
administrative expenses each increased in absolute dollars in the third quarter
of 1997, but declined as a percentage of net revenues because our net revenues
increased more rapidly during such period. Sales and marketing expenses
increased significantly in the first quarter of 1998 because we made significant
payments under our strategic marketing alliances. These expenses also increased
significantly in absolute dollars and as a percentage of net revenues in the
second, third and fourth quarters of 1998 because we significantly increased our
spending on branding, advertising, strategic marketing alliances and personnel.
We anticipate higher sales and marketing expenses in absolute dollars for the
foreseeable future as a result of an increase in our sales and marketing
infrastructure, technical support for advertising, promotional activities and
strategic marketing alliances. We anticipate general and administrative expenses
will increase in absolute dollars due primarily to recruiting activities.

In the future our operating results may fall below the expectations of
securities analysts and investors. In such event, the trading price of our
common stock would likely be materially adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

From inception through December 31, 1998, we have financed our operations
primarily through private sales of preferred stock and our initial public
offering of 5,750,000 shares of our common stock. We raised cumulative net cash
proceeds totaling $14.8 million through private sales of preferred stock. In
June 1998, we received net proceeds of $46.8 million from our initial public
offering. We raised an additional $2.0 million at the closing of our initial
public offering through the sale of common stock to America Online pursuant to a
Common Stock and Warrant Subscription Agreement entered into in March 1998. In
May 1998, we received $4.8 million through a credit agreement that we entered
into with Deutsche Bank AG. We repaid all monies borrowed under our credit
agreement in November 1998. In November and December 1998, we raised net cash
proceeds totaling approximately $63.3 million through the sale of our 7 1/4%
Convertible Subordinated Notes.

As of December 31, 1998, we had approximately $81.5 million of cash
compared with $2.6 million at December 31, 1997. Our current strategic marketing
alliances provide for payments of approximately $13.8 million in 1999,
approximately $13.0 million in 2000 and approximately $1.2 million in the 2001.
Currently, we have no other material commitments other than those under our
operating leases and the U.S. government contracts.

We used net cash of $299,000 in operating activities in 1997, and we used
net cash of $29.4 million in operating activities in 1998. Our cash used in
operating activities in 1998 was primarily comprised of the net effect of:

- a net loss of $31.1 million;

- increases in accounts receivable and prepaid expenses totaling $19.1
million related to accounts receivable from government contracts and
prepaid partnership agreements;

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<PAGE> 38

- an increase in deferred revenue related to the execution of the new U.S.
government contract; and

- increases in accounts payable and accrued liabilities related to our
growth.

We used net cash in investing activities in 1998 of $3.6 million for
acquisitions of leasehold improvements and computer equipment.

We received net cash of $112.0 million in 1998 from financing activities,
primarily from our sale of Series D redeemable convertible preferred stock to
certain private investors in March and April 1998, from the credit agreement
with Deutsche Bank AG in May 1998, proceeds from our initial public offering in
June 1998 and from the sale of 7 1/4% Convertible Subordinated Notes in November
and December 1998.

We believe that our cash at March 15, 1999, including the net proceeds from
this offering, will be sufficient to meet our anticipated needs for working
capital and capital expenditures for at least the next eighteen months, if the
BuyDirect.com merger is completed. Thereafter, we expect that the cash we
generate from operations likely will not be sufficient to satisfy our cash
needs. We will need significant amounts of cash to make a variety of payments,
including:

- payment of the principal and interest on 7 1/4% Convertible Subordinated
Notes when due;

- payment of our financial obligations to America Online, Network
Associates, Excite and Yahoo!, and assuming the BuyDirect.com merger has
been completed, @Home, CNET, Xoom and ZDNet; and

- payment of increasing sales and marketing expenses.

We may need to sell additional equity or debt securities to raise cash to
meet these obligations. Such sales likely would result in additional dilution to
our stockholders. In addition, we cannot assure that financing will be available
in amounts or on terms acceptable to us, if at all.

RESULTS OF OPERATIONS -- BUYDIRECT.COM

Since inception, BuyDirect.com has incurred significant operating losses.
During the nine months ended December 31, 1998, Buy.Direct.com recorded net
revenue of $1.8 million, primarily from software sold on the Internet, and a net
loss of approximately $7.2 million. In addition, at December 31, 1998,
BuyDirect.com had a working capital deficit of approximately $6.2 million and a
total stockholder deficit of approximately $9.3 million. During the nine months
ended December 31, 1998, BuyDirect.com incurred total operating expenses of $8.1
million. Of the total operating expenses, approximately $5.1 million consisted
of sales and marketing expenses, $1.5 million consisted of research and
development expenses and $1.5 million consisted of general and administrative
expenses. BuyDirect.com sales and marketing expenses consisted primarily of
expenditures associated with its strategic marketing alliances with @Home, CNET,
Xoom and ZDNet. These agreements require BuyDirect.com to make payments totaling
approximately $20.2 million over the next four years, $7.4 million of which is
due and payable in 1999. If the BuyDirect.com merger is completed, we will
assume these payment obligations. If the BuyDirect.com merger is completed our
results of operations will be adversely affected for the foreseeable future.

YEAR 2000 RISK MAY ADVERSELY AFFECT OUR COMPANY

Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the Year
2000. We have assessed our proprietary software and our internally developed
systems which permit the sale, order, processing and delivery of off-the-shelf
software to our customers to determine Year 2000 compliance. We have searched
through software code for each of these applications and believe that we have
identified all instances where date specific information is required. We have
further investigated whether these date fields contain two or four digits. Based
on our review and the results of limited testing, we believe our other
proprietary software and internally developed systems are Year 2000 compliant.

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BUSINESS

INTRODUCTION

Beyond.com Corporation is a leading online reseller of commercial
off-the-shelf computer software. Through our online store (www.beyond.com), we
offer customers a comprehensive selection of software as well as related
computer peripheral products, helpful customer service, a convenient shopping
experience and competitive prices. We also offer our enterprise and government
customers the convenience of rapid software procurement and installation, and
continuous maintenance. We believe that the Beyond.com site is one of the most
widely known and used Web sites for the purchase of software. We deliver
software to customers one of two ways: either we physically deliver the
shrink-wrap software package, or we deliver the software over the Internet
through digital download. We believe we provide our customers with superior
value because we offer one of the largest selections of brand-name high quality
software available online as well as the convenience of shopping from home or
office, twenty-four-hours-a-day, seven-days-a-week.

We believe that the Internet is an ideal medium to sell and deliver
software for several reasons:

- the demographics of Internet users overlap one-to-one with the
demographics of potential software purchasers;

- delivery via digital download of many software titles provides the
customer with instant gratification; and

- digital download allows large enterprise customers, such as corporations,
government agencies and universities, to achieve efficient and
cost-effective distribution of software.

We have based our business on scaleable technology that permits the sale,
order processing and delivery of software with limited human intervention. With
our technology, and our significant operational experience, we can address the
complex process of reliable real time digital download. We have developed
relationships with approximately 350 leading software publishers. These
publishers have granted us the right to distribute approximately 5,600 software
stock keeping units to customers via digital download.

We also have entered into agreements with America Online, Excite, Netscape,
Network Associates and Yahoo!. In addition, if the BuyDirect.com merger is
completed, we will have similar relationships with @Home, CNET, Xoom and ZDNet.
Our agreements with these companies provide us with prominent display space on
certain screens on each of these companies' Web sites. We believe these
alliances have helped us to further consolidate our position as a leading online
software reseller. Since we launched our Web site in November 1994, we have
delivered software products to approximately 634,000 cumulative customers
(including individual desktops for corporate and government customers and users
to whom we have distributed freeware and trial download products). Our sales
increased from approximately $5.9 million in 1996 to approximately $16.8 million
in 1997 and have further increased to approximately $36.7 million in 1998.

INDUSTRY BACKGROUND

Growth of the Internet and Online Commerce

The Web and commercial online services such as America Online allow
millions of people to share information and conduct business electronically.
International Data Corporation estimates that the total value of goods and
services purchased over the Web will increase from approximately $32.4 billion
in 1998 to approximately $426 billion by 2002. A number of factors contribute to
the growth of the Internet and its increased commercial use, including:

- large and growing numbers of personal computers in the home and
workplace;

- improvements in network infrastructure and bandwidth;

- easier and cheaper access to the Internet;

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- increased awareness of the Internet among consumer and business users;
and

- the rapidly expanding availability of online content and commerce which
increases the value to users of being connected to the Internet.

According to International Data Corporation, the number of Web users
worldwide will increase from approximately 97.3 million at the end of 1998 to
approximately 320 million by the end of 2002. International Data Corporation
further estimates that the percentage of Web users buying goods and services on
the Internet will increase from approximately 28% at the end of 1998 to
approximately 40% by the end of 2002.

The Internet also is a popular medium for purchasing and distributing
software. Jupiter Communications, Inc. estimates that revenues from online sales
of PC software in 1998 were $259 million and projects that these sales will grow
to $2.4 billion in 2002.

Traditional Software Industry

According to International Data Corporation, end-user spending on software
through indirect channels is expected to increase at a compounded annual rate of
17.2%, from $23.9 billion in 1997 to $52.9 billion in 2002.

In addition, we believe that the software reselling industry is highly
fragmented. Industry participants include regional and national chains of
superstores, cataloguers, systems integrators, value-added resellers and small
single location stores. We believe this fragmentation provides us an opportunity
to increase our marketshare.

The two primary categories of software purchasers are consumers and small
businesses, and large enterprises such as corporations, government agencies and
universities. These two market segments have different requirements, and
software resellers use different channels to meet the differing needs of these
purchasers.

Consumers and Small Businesses

Software publishers primarily sell their software to these purchasers
through a network of distributors and resellers and, to a lesser extent,
directly to consumers. There are many software resellers in the United States
which serve the consumer and small business market. These resellers vary in
size. Some resellers are large regional and national chains of superstores, such
as CompUSA, ComputerCity and Office Depot, which may carry hundreds of software
titles in a single store. Some resellers are cataloguers, such as Micro
Warehouse and CDW Computer Centers, offering several thousand software titles.
Other resellers are small, single location stores carrying only a limited number
of software titles.

Large Enterprise Consumers

Publishers typically sell software to large enterprise consumers directly
or through large corporate and value added resellers, including Software
Spectrum, GTSI, ASAP and Corporate Software and Technology. Large distributors,
such as Ingram Micro, Merisel and Tech Data, serve as the primary suppliers for
most resellers and carry a variety of software.

The traditional software reselling industry is inefficient. In the consumer
and small business market, physical store based resellers must make significant
investments in real estate, inventory (due to both space constraints and costs)
and personnel for each retail location.

Cataloguers are constrained by limits on the size of their catalogs (on
both the number of products and the information on those products that can be
included in the catalog), printing expenses, mailing costs and inherent delays
in reacting rapidly to price and product changes. In each case, these
constraints limit the software product selection available to consumers. The
traditional software reselling model also creates inefficiencies for
participants in the large enterprise market. Publishers, resellers and the
purchasing enterprises are all challenged by the logistical complexity,
financial costs, administrative burden and the

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difficulties of distributing and tracking software, titles and updates across a
large and dispersed user base. Under the traditional model, publishers also face
additional inefficiencies, including:

- the limited amount and type of software products sold in retail stores
and catalogs;

- the need to grant resellers and distributors generous rights of return to
cover costs of inventory and risks that the software would no longer be
used;

- the risk of predicting what software customers will demand in the future;
and

- the risk of significant revenue recognition and restatement issues
associated with any difference between projected and actual sales.

Finally, publishers, distributors and traditional software resellers all
face difficulty in obtaining demographic and behavioral information about
software customers, making it hard for software publishers to offer personalized
services and to directly market their products to certain consumer groups.

THE BEYOND.COM SOLUTION

Beyond.com is a leading online reseller of software to consumers, small
businesses and large enterprise customers. We offer a solution to many of the
inefficiencies inherent in the traditional software reselling model. Key
components of our solution include:

Customer Convenience

We offer convenient services to customers because we enable them to
purchase software online twenty-four-hours-a-day, seven-days-a-week, from home
or the office. Additionally, we are flexible on how we can distribute software:
in shrink-wrap packages or by using digital download. We are also developing
ways to simplify digital download for individual consumers to improve the
quality and ease-of-use of our on-line shopping service.

Selection

We have the capacity for unlimited online shelf space. We offer our
customers an extensive selection of software titles as well as related stock
keeping units and product information. However, we do not face the expense of
monitoring a physical store-based infrastructure. We carry approximately 41,000
software stock keeping units and approximately 5,600 stock keeping units that
can be delivered to customers via digital download.

Customized Service

We capture significant customer preference data during each customer
session on our Web site. With this information, we can customize a user's
shopping experience on subsequent visits. As an online reseller, we can better
educate the customer about software products through:

- online product reviews and customer rankings;

- product recommendations;

- trial downloads;

- additional product information; and

- online customer support.

Publisher Benefits

As an online reseller of software products, we are not constrained by the
inherent limitations of a physical store. Therefore, we can allow publishers to
offer all of their available titles to customers in our online store. In
addition, because we offer products for digital download, publishers reduce the
risk of customer demand

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forecasting. As a result, we reduce the administrative costs and mitigate the
significant revenue recognition and restatement concerns publishers face when
they forecast demand. Finally, publishers can work with us to obtain demographic
and behavioral data about end users. This data expands publishers' opportunities
for marketing and targeted services.

Digital Download

We are currently a leading provider of digitally downloaded software. This
technology enables us to offer our customers convenient delivery of software
products at a reduced purchase price, creating a significant competitive
advantage. Additionally, digital downloading offers us a more profitable method
of delivering software products to our customers. We also believe that digital
downloading enhances our ability to provide ongoing updates and upgrades to our
customers' software, thereby enabling us to derive additional revenues following
the initial software purchase. Using digital download, we are able to use the
Internet not just as a sales and marketing tool, but also as a product delivery
mechanism.

Enterprise Benefits

We provide our corporate and government customers with significant savings
in the purchase, delivery, installation and maintenance of their software
assets. Using digital download, our enterprise customers are able to deploy
their software purchases rapidly, efficiently and securely. In addition, they
are able to more effectively track and update their software assets following
purchase, in order to better ensure the consistent use of compatible software
across the enterprise.

STRATEGY

Our objective is to be the dominant reseller of software to consumers,
small businesses and large enterprises. We intend to capitalize on and extend
our market position as one of the first movers in online software reselling
through the following key strategies:

Enhance New Brand Recognition

We must build awareness of our Web site to attract and expand our Internet
customer base. In August 1998, we began doing business under the name
Beyond.com. Simultaneously, we also redesigned our Web site to improve our
offerings to consumers and make our online store easier to use. We intend to
promote, advertise and increase recognition of our brand through a variety of
marketing and promotional techniques, including:

- co-marketing agreements with major online sites and services;

- expanding online content and ease of use of our Web site;

- enhanced customer service and technical support (including issues unique
to software reselling);

- advertising on radio, television, leading web sites and other media;

- conducting an ongoing public relations campaign; and

- developing other business alliances and partnerships.

Promote Digital Download

We are currently a leader in digital download with approximately 5,600
software stock keeping units available for digital download from our online
store direct to the end user's personal computer. Digital download offers
convenience to customers and economic advantage to us and to software publishers
that we believe are superior to those offered by traditional methods of software
delivery. We intend to increase the

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number of software stock keeping units available for purchase by digital
download and the number of customers who use digital download by:

- simplifying the use of digital download for consumers by reducing the
number of consumer actions required to complete a transaction and by
clearly displaying the location of digitally downloaded software on the
consumer's computer desktop;

- working with software publishers on digital download initiatives;

- enhancing our own technology and systems; and

- implementing digital download promotional activities.

Leverage and Further Develop Strategic Relationships

We believe developing strategic relationships with a diverse set of
partners including on-line portals, broadband access providers, computer
hardware vendors, on-line content providers and software publishers is critical
to our success. We intend to continue to leverage our strategic marketing
alliances with America Online, Excite, Netscape, Network Associates and Yahoo!,
and if the BuyDirect.com merger has been completed, to leverage strategic
relationships with @Home, CNET, Xoom and ZDNet, to enhance our brand recognition
and to increase customer acquisitions and sales. We also intend to expand our
online visibility. As a result, we may enter into relationships with additional
leading software publishers, Internet access providers, search engines and other
high traffic Web sites. For example, in September 1998, we entered into
agreements with Network Associates, granting us, among other things, the right,
with several limitations, to be the exclusive reseller of certain retail
software products on certain Network Associates' Web sites.

Capitalize on Large Enterprise Opportunities

In addition to targeting consumer and small business customers, we also
will market our services to large enterprise customers, such as major
corporations, government agencies and universities. We believe that the speed,
convenience and cost advantages of digital download make digital download an
attractive alternative method of purchasing software for large enterprises. We
intend to become the online reseller of choice for large enterprise customers by
capitalizing on our success in meeting the needs of our government customers.

Maintain Technology Focus and Expertise

We intend to leverage our scaleable, state of the art, interactive commerce
platform to enhance the services we offer and to expand the benefits of online
software reselling. We also intend to use our technology platform to further
enhance our customer interaction and support systems which we believe offer us a
competitive advantage. Our internal development group will continue to expend
substantial efforts to develop, purchase, license and make technological
advancements to our Web site and our transaction processing systems to enhance
our availability, reliability and site up-time.

Leverage Superior Economic Model; Focus on Online Environment

We believe we have inherent economic advantages relative to software
resellers operating through stores or catalogs because we are not burdened with
the personnel costs or overhead of operating a physical store or the costs and
limitations of selling through printed catalogs. We can also effectively target
potential software customers because the demographics of Internet users overlap
one-to-one with the demographics of potential software purchasers. We intend to
leverage our online model and focus on delivering an increasing number of
software products through digital download. Leveraging our online model and
delivering products through digital download will allow us to achieve cost and
margin advantages compared to traditional software resellers.

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Strengthen First Mover Advantages

We believe significant barriers exist that make it increasingly difficult
to enter the online software marketplace in a cost effective manner. These
barriers include:

- the necessary up front investment in technology and technical
infrastructure, such as that required for real time processing of both
payment and order fulfillment;

- the time and expense required to develop an online store that effectively
draws customers to a Web site;

- the time, expense and expertise necessary to develop publisher and
distributor relationships; and

- the need to develop strategic alliances with high traffic, high profile
Web sites.

- the need to maintain and develop brand awareness.

We intend to extend our first mover advantage in each of these areas.

OUR ONLINE SOFTWARE STORE

In August 1998, we redesigned our Web site. We incorporated additional
features to enhance our Web site's search, recommendation, and customization
functionality. We believe these improvements, along with our new advertising and
promotional activities and enhancements to our digital download process, will
enhance the shopping experience for potential software purchasers.

Customers enter our online store through our simple, intuitive and easy to
use Web site. Our Web site instantly recognizes the customer's browser type and
tailors the format of our online store to that system with customized pages for
particular browsers. Our goal is to make the shopping process as easy as
possible for customers. Users accessing our online store generally fall into one
of two categories: individuals who know what product they want to buy and seek
to purchase it immediately in a highly convenient manner; or individuals who
browse the store, seeking an entertaining and informative shopping experience.
We designed our online store to satisfy both types of users in a simple,
intuitive fashion.

Presently, customers who use our online store can:

- conduct targeted searches through a catalog of approximately 41,000
software stock keeping units;

- browse among featured software titles and special offers;

- read customer reviews and customer productions ratings;

- participate in promotions;

- check the status of their orders;

- access our customer support representatives by telephone, fax and e-mail
twenty-four-hours-a-day, seven-days-a-week;

- read about a variety of highlighted subject areas and special features,
including current event features and features arranged by topic, such as
the Microsoft Showcase, the Macintosh Center and the Games Center; and

- preview new or upcoming releases.

We expect to further improve our online store to include specialty sections
within the site, product reviews, greater interactivity and product
presentations that we design based on customer preferences.

Shoppers purchase products by simply clicking on a button to add products
to their virtual shopping baskets. Just as in a physical store, customers can
add and subtract products from their shopping baskets as they browse prior to
making a final purchase decision. To execute orders, customers click on the buy
button. A message on the screen prompts customers to supply shipping and, in the
case of consumers, credit card details, either by e-mail or by telephone. Our
store design allows customers to buy several products at once rather than having
to repeat the same purchase process for each desired product. All customer
information is stored on our
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secure server. We furnish customized order forms for repeat customers. Our
system automatically confirms each physically shipped order by e-mail to the
customer within minutes after the customer places the order and advises
customers by e-mail shortly after our distributors ship the product. Our
representatives handle customer service and support, answer general questions
and provide product information by telephone, fax and e-mail.

We believe that our representatives provide valuable feedback regarding
customer satisfaction which we use to improve our services. We do not currently
charge our customers for service and support services.

PRODUCTS

We offer approximately 41,000 software stock keeping units from leading
software publishers for physical delivery. Because of the efficiencies related
to online inventory, we can offer a broad selection of hard to find and
specialty software titles which may not be available in traditional software
stores. A single software title often has multiple stock keeping units depending
upon:

- operating systems (i.e., Macintosh, Windows, Windows NT);

- media (i.e., CD Rom, floppy disk); or

- license type (i.e., single or multi-user licenses).

We also offer approximately 5,600 stock keeping units from approximately
350 publishers for immediate delivery via digital download. These stock keeping
units include popular titles by Adobe, Cybermedia, Electronic Arts, FileMaker
Pro Inc. (formerly Claris), IBM, JavaSoft, Lotus, Microsoft, Network Associates,
QUALCOMM, Sun Microsystems and Symantec.

We have focused on offering as many major software titles as practical
through digital download. Because of the limited bandwidth and relatively slow
modem speeds now available, the size of many popular software titles currently
prevents them from being delivered via digital download. We believe that ten
megabytes is the maximum size of a software stock keeping unit that most
consumers currently will purchase through digital download. A ten megabyte
software stock keeping unit, such as Norton Utilities for Windows NT, takes
approximately one hour for a complete digital download at 28.8 Kpbs. We believe
that the size of new software products will continue to increase. Unless there
is a significant increase in network bandwidth, customers may not want to
download new software products because they are too large. However, we believe
that as improvements in Internet infrastructure and bandwidth emerge, such as
cable modems and digital subscriber line technologies, customer demand for
products delivered through digital download and the speed at which we can
electronically deliver them will increase. However, if digital download is not
accepted by most customers, then our business will suffer. Our revenues from
software products sold through digital download amounted to $10.3 million in
1997 and $18 million in 1998 or approximately 61.3% and 49.1%, respectively, of
total revenues in each year. Even if most consumers use and accept digital
download, the substantial existing and future technical challenges of
electronically delivering software reliably and consistently in the long term
may persist. Failure to overcome these challenges would materially hurt our
business.

We use traditional distributors to distribute our products for physical
delivery. To distribute our products via digital download, we download the
substantive majority of the product directly from the software publishers. We do
not carry significant inventory and we primarily rely on distributors rapidly to
distribute physical products directly to customers. When a customer places an
order for shrink-wrap software, we promptly transmit the order information to
the distributor for processing and rapid distribution to customers. We have
developed customized information systems and automated ordering processes to
allow us to pursue our goals:

- to offer an extensive selection of products;

- to avoid the high costs and capital requirements associated with owning
and warehousing product inventory; and

- to escape the significant operational effort associated with same day
processing and shipment.

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A single major software distributor supplied us with software that
accounted for a substantial portion of our total software sales in 1997 and
1998. Although we believe that we can replace our relationship with this major
software distributor without much difficulty, if this relationship terminates
and publishers or distributors that currently supply us with software also cease
to supply us, we cannot be assured that we will be able to establish new
relationships with other publishers and distributors to replace such existing
relationships. We cannot assure that our current vendors will continue to supply
stock keeping units to us.

We have three contracts with departments of U.S. government agencies. The
first two of these agreements accounted for approximately 33% of our revenues in
1997 and approximately 29% in 1998. Microsoft supplies us with a substantial
majority of the software sold under these agreements. These agreements with the
U.S. government are renewable on an annual basis and may be terminated for any
reason at any time. Therefore, we may not receive any revenue from sales of
software to the U.S. government in the future. Our contract with Microsoft may
be terminated for any reason by providing written notice at least 30 days before
a given term expires. If the U.S. government terminates or fails to renew any
one of these agreements or if Microsoft fails to supply its software products to
us for resale, our business would suffer materially. Furthermore, our contract
with Microsoft permits Microsoft to approve our credit worthiness by evaluating
publicly available information. In addition, as long as the request is
reasonable, Microsoft may reasonably require us to provide sufficient additional
information to determine our credit worthiness. If Microsoft determines that we
are no longer creditworthy or that we failed to comply with the payment or
reporting terms of our agreement, then it may require us to post security that
it deems acceptable. We have also entered into an agreement with GTSI pursuant
to which we perform digital download of certain software resold by GTSI to the
U.S. government. We have no other customers who accounted for more than 10% of
our revenues in 1997 or in 1998.

MARKETING AND SALES

Strategic Relationships

We pursue strategic relationships to expand our online presence, increase
our access to online customers and build our brand recognition. In pursuing
these relationships, we seek to be the exclusive or semi-exclusive reseller of
software on key screens of major Web sites. To date, we have entered into the
following relationships:

Yahoo!. In February 1999, we entered into an agreement with Yahoo! Inc., a
global Internet media company that offers a branded network of comprehensive
information, communication and shopping services. Over the 18 month term of this
agreement, we will make fixed payments, which may be augmented by certain
performance-based payments. Under the agreement, Yahoo! will:

- promote and advertise Beyond.com as a premier software merchant by
delivering page views across Yahoo!'s branded network of sites;

- place promotions and advertisements, which will provide links to our Web
site, on the Yahoo! home page (the Web page currently located at
http://www.yahoo.com), My Yahoo! (Web pages personalized by Yahoo!
users), Yahoo! Shopping (Web pages that enable Yahoo! users to locate,
compare and buy products), Yahoo! Games (Web pages that enable Yahoo!
users to interact and play games) and relevant categories and search
result pages in the Yahoo! directory (Web pages that appear in response
to a user's particular search request).

America Online. In March 1998, we entered into an agreement with America
Online, the leading online service provider with approximately 14 million
members, for a term of 42 months. Under the agreement, America Online will:

- promote our Web site as the exclusive and semi-exclusive reseller of
software products on certain screens in the America Online service and
America Online's Web site;

- deliver a specified number of screen views with links to our Web site
over the term of our agreement;

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- advertise Beyond.com as the exclusive software reseller on certain
screens included in the Computing Channel, the America Online Personal
Finance Channel, and the Games Channel, subject to certain limitations or
payment adjustments required of us; and

- promote Beyond.com as a software reseller on a semi-exclusive basis on
certain screens on the Computing Channel, and the Entertainment Web
Channel, among others.

There are important exceptions to the exclusivity rights discussed above,
including software products sold by or on behalf of publishers and by America
Online through "pop up" advertisements.

Under the agreement with America Online, we must make minimum payments
totaling $21 million to America Online by March 1, 2000. In addition, we must
pay a percentage of revenues that we earn on software sales to America Online
members above specified minimum amounts. We can sell advertising on our
promotional screens on the America Online service and Web site as long as we pay
a percentage of certain advertising revenues above specified minimum amounts to
America Online.

Under the agreement, America Online in its sole discretion may reduce or
cease placements of our promotions. America Online also may restrict access from
its service to our Web site in certain circumstances if the functional integrity
of the America Online service is compromised or America Online's ability to
provide service to its users is adversely affected. America Online also may
change its business model so that a substantially larger number of America
Online members pay hourly charges for general access and use of the America
Online service, which may have a material adverse effect on the sale of the
Company's products. If America Online changes its business model in this way, we
will adjust the payments we make to America Online. Our agreement with America
Online expires in August 2001, or earlier in the event of a material breach, and
America Online has the right to renew this agreement for two successive one-year
terms, during which time America Online has no exclusivity obligations to us.

Excite. In March 1998, we entered into an agreement with Excite, a leading
search engine provider with over fifty million page views a day, for a term of
at least 36 months. Under the agreement, Excite agreed not to display paid
promotional links or advertisements of other specified types of software
resellers on certain screens within certain channels of Excite's "excite.com"
Web site. These screens include certain screens in Excite's Computers and
Internet Channel and the Computers and Software Department of its Shopping
Channel. In addition, we have the right to display links to our Web site on
certain other screens on Excite's Web site. Over the term of this agreement,
Excite must deliver a specified number of screen views with links to our Web
site. Over the first three years of this agreement we must make substantial
payments to Excite and pay a percentage of certain transactional revenues that
we earn above specified minimum amounts. Our agreement with Excite ends when
Excite satisfies its obligations to deliver screen views with links to our Web
site. However, the agreement will not terminate before April 2001, except if
either party materially breaches the contract.

Netscape. In June 1997, we entered into an agreement with Netscape, a
leading provider of open software for linking people and information over
intranets, extranets and the Internet, for a term of 24 months from August 1,
1997. Under the agreement, we created an online store -- the "Netscape Software
Depot by Beyond.com" -- to market and distribute software products which are
compatible with the Netscape ONE platform Internet site. Under the agreement, we
allocate sales and advertising revenues generated from this online store based
on specified percentages. Under the agreement, we paid Netscape for a license to
use certain Netscape trademarks. The agreement terminates on July 31, 1999, and
either party also can terminate this agreement if either the specified screen
views with links to our Web site or net revenue milestones have not been met.
Pursuant to the terms of the agreement, Netscape has notified us that it does
not intend to renew this contract after termination. We do not expect that the
non-renewal of this agreement will have a material adverse effect on our
business.

Network Associates. Since September 1997, we have entered into various
agreements with Network Associates, a developer of electronic commerce locations
and producer of certain products marketed under the McAfee name. These
agreements concern the online sale of software and the management of certain web

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sites. Under these agreements, we act as a reseller of Network Associates'
products on our Web site and co-host of certain Internet sites developed by
Network Associates.

We cannot assure that enough people will visit our online store or that we
will make enough sales to meet our financial obligations to America Online,
Excite, Network Associates or Yahoo!. We continue to maximize benefits derived
from each of these agreements. However, we are also uncertain whether we will
satisfy our obligations under our strategic contracts so that America Online,
Excite, Network Associates or Yahoo! will not terminate our agreements. Our
failure to do any of the above will likely materially hurt our business. In
addition, we may not automatically renew our agreements with America Online,
Excite, Network Associates and Yahoo! when they expire. We cannot assure that we
can renew any of the agreements at all or on terms that are acceptable to us.
Furthermore, we based our significant investment in our strategic relationships
on several factors, including:

- the continued positive market presence of Excite, Network Associates and
Yahoo!;

- the reputation and anticipated growth of America Online, Excite,
Netscape, Network Associates and Yahoo!; and

- the commitment by each of America Online, Excite and Yahoo! to deliver
specified numbers of screen views with links to our Web site.

If the significant market presence, business or reputation of our strategic
partners declines, or America Online, Excite or Yahoo! fail to deliver the
specified numbers of screen views with links to our Web site, then our
agreements with them will be less valuable. A significant decrease in the value
of these agreements will likely materially hurt our business. In addition, we,
along with America Online, may separately pursue and sell advertising in our
content areas distributed through America Online. We cannot assure that America
Online will not compete with us for limited software reseller advertising
revenues. We expect our agreements with America Online, Excite, Network
Associates and Yahoo! to represent significant distribution channels for our
software sales. If any of these agreements are terminated, then our business
will likely be materially hurt.

Traditional Advertising

In August 1998, we began to promote our online stores through a proactive
advertising program. This program initially targeted potential customers through
national media outlets such as magazines, newspapers and radio broadcasts. In
December 1998, we began advertising on television. We have continued our
expenditures for advertisements in traditional media during the first quarter of
fiscal 1999 and expect to do so in the future. We believe our ongoing
advertising program will facilitate the continued growth of our brand, increase
the reach of our name recognition and drive new customers to our online store.

Online Advertising

In addition to our strategic agreements and traditional advertising, we use
many online sales and marketing techniques to increase brand recognition and
drive traffic to our online stores. These include purchasing banner advertising
on search engine Web sites and Internet directories and direct links from
publisher home pages.

We can display banner advertisements for certain set periods of time or
when a user searches for information relating to certain keywords (such as
"software") and programs, as well as the names of publishers. We also have
established direct links with the Web sites for certain software publishers.
These links allow a potential customer visiting that publisher's Web site to
automatically link to our order form and purchase software.

Direct Marketing

We believe that the demographics of Internet users overlap one-to-one with
the demographics of potential software purchasers and that the Internet provides
additional opportunities for direct marketing to the Company's customers through
a variety of mechanisms. We are exploring such direct marketing

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opportunities as store customization to present each customer with a customized
merchandise assortment based on historic purchasing patterns and equipment type.
We use direct marketing techniques to target new and existing customers with
customized offers such as an e-mail newsletter that includes purchase
recommendations based on demonstrated customer preferences or prior purchases.
We intend to enhance such techniques in the future.

Affiliates Program

Our Affiliates Program increases our market presence by allowing affiliate
Web sites to offer software to their audience for which we provide fulfillment.
The affiliate embeds a hyperlink to our site, together with software recommended
for that affiliate's targeted customers base. This hyperlink automatically
connects the customer to our online store where the affiliate's customer may
place an order. The affiliate can offer enhanced services and recommendations,
while avoiding ordering and fulfillment costs. Under these short term
arrangements, we must pay the affiliate a small percentage of the sales they
generate. We can terminate these agreements with limited notice.

Customer Service and Support

We believe that we can establish and maintain long-term relationships with
our customers and encourage repeat visits and purchases if, among other things,
we have good customer support and service. We believe that the online resale and
digital download of software present complex customer service and support
challenges that we have the expertise to address. We further believe that our
ability to address these challenges for our large and growing customer base
represents a significant competitive advantage for us. Our customer support and
service personnel handle general customer inquiries and basic technical
questions, answer customer questions about the ordering process, and investigate
the status of orders, shipments and payments. They also work with customers
unfamiliar with the digital download process to ensure proper online delivery of
software directly to our customers' computers. We have automated certain of the
tools used by our customer support and service staff, such as tracking screens
that let our support staff track a transaction by any of a variety of
information sources. At any time in the purchasing process, a customer can
access our support staff by fax or e-mail by following prompts located
throughout our online store, or by calling our toll free telephone line.
Customers who do not wish to enter their credit card numbers through the Web
site also may use the toll free line for purchases. We currently employ a staff
of customer support and service personnel available twenty-four-hours-a-day,
seven-days-a-week. We outsource our first level of customer support and services
through a leading provider of customer support services.

The U.S. government and corporate consumers purchase a substantial portion
of our software sales. Therefore, we maintain specialized support staffs for
these departments. Also, our government and corporate support staffs provide
standard support services as well as targeting particular government and
corporate customers for specific new products and version enhancements. We
intend to increase our sales and marketing efforts with respect to both
government and corporate purchasers.

We Maintain a Structured Return Policy

A customer may return products for replacement or credit if we authorize
the credit. A customer may return shrink-wrap product with a return material
authorization number. We issue the customer a corresponding credit when we
receive a credit from the appropriate distributor indicating receipt of the
returned product. We issue the customer a credit for electronically distributed
products only when we receive by facsimile a signed "letter of destruction" from
the customer. Our credit card chargebacks during 1998 represented less than 2%
of our total revenue.

TECHNOLOGY

We use complex proprietary and commercially licensed technology to simplify
and enhance the customer experience by developing ways to simplify the use of
digital download by reducing the number of customer actions required to complete
a transaction and by clearly displaying the location of digitally downloaded
software on the consumer's desktop. We are also using our technology to make our
management reporting

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process as seamless and simple as possible. To this end, we developed
technologies and systems to support scaleable, flexible and simple online
reselling in a secure and easy to use manner. By using a combination of
proprietary solutions and commercially available licensed technologies, we have
developed systems for online content dissemination, online transaction
processing, customer service, market analysis and electronic data interchange.
We integrated these proprietary and commercially available systems into a
unified software sales and reporting system. Research and development costs in
1996, 1997 and 1998 were $431,000, $1.1 million and $4.2 million, respectively.
We expect these expenses to continue to increase during 1999.

Scalability and Flexibility

We built our hardware and software architecture on a transaction-processing
model which allows us to distribute the processing load among multiple parallel
servers. This architecture allows us to scale by either adding new servers or
increasing the capacity of existing servers. We designed our hardware and
software configuration to scale to support growth while maintaining user
performance and minimizing the cost per transaction. In the rapidly changing
Internet environment, it is important that we are able to update our system to
stay current with new technologies. Our system's template technology and modular
database design allow us to easily add or replace software components, page
layout templates and search and retrieval engines with minimal effort and
disruption. We designed our hardware and software architecture to allow us to
inexpensively and rapidly add co-branded Web sites that integrate with our
online store.

Seamlessness

Our multiple hardware and software systems are designed to integrate
seamlessly to manage real time transactions with limited human intervention. Our
systems are designed to automatically process orders for downloadable software
to completion, route electronically orders for products that we must ship to one
of our distributors as well as charge the customer's credit card after there is
confirmation that one of our distributors shipped the products and automatically
route orders requiring human intervention to our customer service
representatives.

Components of Our Technology

We use commercially available software as well as software we developed
internally. We have a policy of limiting the number of hardware and software
vendors whose products are used in our production systems. This policy
facilitates integration, maintenance, performance and upgrades.

Store Engine Architecture

We base our hardware and software systems on a distributed
transaction-processing model. This model allows us to distribute applications
and data among multiple parallel servers. We developed many of the software
components and the pages of our Web site in a manner that lets us separate the
page look and feel from the individual data elements and their associated
database lookups. This separation permits frequent changes to product pricing
information, reduces software updates for Web site changes and minimizes the
engineering required to maintain a growing amount of items and content. We use
proprietary technology that allows Web sites with different formats to integrate
our online store elements, such as search, vendor and product pages. This
technology allows us to maintain several Web storefronts over a single order
processing and customer service system.

Enterprise Download Manager

For the large enterprise environment, we developed technology to aid in the
distribution of large software products (in terms of number of bytes) and large
numbers of software products. This technology includes server software, which
maintains a cache of software downloaded to key locations behind a customer's
firewall and an enhanced version of the Sm@rtCert technology licensed on a
non-exclusive basis from CyberSource which we offer as an integrated service. We
call this integrated service the "Enterprise Download Manager." By distributing
caches of software (many of which may be too large to download) to key locations
within an

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enterprise, a large enterprise can ensure that the current release of software
is available to its staff with minimal supervision. We can overcome problems of
failed download and lost connections by providing a dedicated server with our
Enterprise Download Manager service to manage and receive the download. By using
a local cache, the Enterprise Download Manager satisfies most requests for
software updates internally. This significantly reduces the amount of network
traffic. We use this technology to deliver products electronically together with
marketing and promotional information. In addition, our Enterprise Download
Manager service tracks the transmission of software via digital download. If
there is a disruption of the transmission, Enterprise Download Manager restarts
the transmission and completes the interrupted download without the need to
restart the entire download.

Back Office Processing

The real time nature of fulfilling downloaded software orders adds
significant complexity to the design of our back office system. Typical
transaction processing systems assume that a physical process must take place to
deliver the product. The time required for physical delivery eliminates the need
to process orders in real time (as well as the customer's expectation of real
time processing). When a customer wants to download the software it purchases
via digital download, the customer expects to be able to start downloading
within seconds of confirming the transaction. This need for almost instant
initiation of delivery impacts the design and operation of our entire back
office system. We must automate every element of a sale because we do not have
the time needed for human intervention.

We believe that our sophisticated back office transaction processing
system, which successfully processes, manages and fulfills software orders for
digital download with limited human intervention in real time, is a significant
competitive advantage. Our transaction processing system incorporates
commercially available database components purchased from leading vendors,
proprietary software products we developed and Internet commerce services
supplied by CyberSource. This system accepts orders captured by the store engine
and processes them according to pre-coded rules, validates each order, screens
the order for possible fraud, authorizes the payment method and transmits an
electronic message to our distributors for physical delivery or allows the
customer to download the product through digital download following approval of
an order. Our customer service representatives can access the entire history of
any order or customer online through a Web-based interface. Representatives also
can manage an order entirely from within this interface. Our system logs all
actions by a customer service representative including the identity of the
representative, the actions taken and a time stamp of the action.

Data Warehouse

We use a database management system to index, retrieve and manipulate
product information, content, product catalogs, orders and transactions,
customer information and perform rapid searching, sorting, viewing and
distribution of a large volume of content. The data warehouse lets us access
detailed transaction and customer interaction data and perform proprietary
market analysis. Our data warehouse incorporates commercially available hardware
and software combined with our proprietary software in a configuration that we
developed. This data warehouse provides a unified platform for our store engine
and back office systems. Any reduction in performance, disruption in Internet
access or discontinuation of services provided to us by CyberSource might
materially hurt our business. We cannot assure that we will:

- accommodate increases in network traffic in the future;

- accurately project the rate or timing of such increases;

- upgrade our systems and infrastructure to accommodate future traffic
levels on our online sites;

- effectively upgrade and expand our transaction processing systems;

- successfully integrate any newly developed or purchased modules with our
existing systems;

- successfully use new technologies; or

- successfully adapt our online sites, proprietary technology and
transaction processing systems to meet customer requirements or emerging
industry standards.

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SECURITY

Customer Reassurance

To be a successful online retailer, we must maintain the integrity of
information, particularly the security of information such as credit card
numbers. We believe that our existing security systems are at least as secure as
those used for traditional transactions (i.e., in store or mail order
purchases). We also believe that we have a comprehensive security strategy. Our
system automatically monitors each purchase, confirms each order by e-mail to
the customer within minutes after the customer places the order and advises
customers by e-mail shortly after our distributors ship physical orders.

Fault Tolerance and Scaleable Internet Access

We designed our systems for automatic transfer to "hot" spare systems in
the event of a failure. We also equipped our systems with fully automated
reporting tools. These tools provide automated trouble notification and detailed
event logging. We maintain a minimum of two of each critical production system.
For distributed systems such as web servers, as many as 30 systems may be
active. A load distribution system monitors traffic to each server. Should a
system fail to respond to a request, the automated distribution system will
redistribute traffic among the remaining machines with no loss of user
functionality. Standby systems that monitor the health of the live machine
automatically take over in the event of a failure of our firewall and load
distribution system. After correcting the problem, these automated systems then
notify technical staff by pager so our staff can replace or repair the failed
system.

We contract with a Web site provider that specializes in providing
scaleable business solutions to high volume Internet sites for mission critical
Internet connectivity. We contracted with the provider to deliver a secure
platform for server hosting with uninterruptible power supply and back up
generators, fire suppression, raised floors, heating ventilation and
air-conditioning, separate cooling zones, seismically braced racks, operations
twenty-four-hours-a-day, seven-days-a-week and high levels of physical security.
We connected our systems to a high speed Internet connection with multiple,
redundant interconnects to key backbone locations.

Notwithstanding these precautions, we cannot assure that the security
mechanisms used by us, our suppliers or our Internet provider will prevent
security breaches or service breakdowns. Despite the network security measures
we have implemented, our servers may be vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions. Such a description could lead
to interruptions or delays in our service, loss of data, or our inability to
accept and fulfill customer orders. Any of these events would materially hurt
our business, results of operations and financial condition.

ACQUISITION OF BUYDIRECT.COM

On February 19, 1999, we entered into an agreement pursuant to which one of
our wholly-owned subsidiaries will merge with and into BuyDirect.com, a leading
online software retailer for consumers and business customers. Upon the closing
of this merger, BuyDirect.com will become our wholly-owned subsidiary and we
will issue approximately 5.1 million shares of our common stock to
BuyDirect.com's stockholders in exchange for their outstanding shares of
BuyDirect.com common and preferred stock, and reserve for issuance upon exercise
of options we are assuming in connection with the proposed merger approximately
300,000 shares of our common stock. We anticipate that the BuyDirect.com merger
will close by the end of March 1999. The BuyDirect.com merger is subject to a
number of contingencies, including approval of the merger by the BuyDirect.com
stockholders and customary closing conditions. As a result, there can be no
assurance that the BuyDirect.com merger will be completed.

BuyDirect.com is a privately held Company based in San Francisco,
California. Originally launched as a service of CNET, BuyDirect.com became a
separate company in March 1998. Like Beyond.com, BuyDirect.com sells software
over the Internet to the consumer market and specializes in digital download
technology.

We have agreed to register the shares of common stock we will issue in
connection with the proposed

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BuyDirect.com merger for resale to the public under the Securities Act in June
1999. We have the right to delay the filing of this registration statement until
thirty days after the completion of the sale of securities under this
prospectus, among other circumstances.

RELATIONSHIP WITH CYBERSOURCE CORPORATION

In December 1997, in order to focus on our core business of selling
software over the Internet, we spun off our Internet commerce services business
to a new Delaware corporation, now called CyberSource. In connection with this
spin off, we entered into certain agreements with CyberSource to define the
ongoing relationship between our two companies. At the time of the spin off, all
of our directors were directors of CyberSource and other members of our
management team joined CyberSource as executive officers. Accordingly, these
agreements may not be deemed the result of arm's length negotiations.

Under our conveyance agreement with CyberSource dated December 31, 1997, we
transferred to CyberSource:

- technology (including rights to patent applications, trademarks and other
of our intellectual property rights);

- contracts and licenses with third parties; and

- certain tangible assets that we use for credit card processing, fraud
screening, export control, territory management and electronic
fulfillment notification.

In addition, we transferred our employees who worked on our Internet
commerce services business to CyberSource.

Under the terms of our inter-company cross license agreement with
CyberSource, which we entered into in April 1998 and amended in May 1998, we
granted to CyberSource a non-exclusive, worldwide, perpetual, irrevocable,
royalty-free license to internally use our Cache Manager technology, and use and
sublicense our customer database for certain limited purposes relating to fraud
verification and detection. In exchange, CyberSource granted us a worldwide,
perpetual, irrevocable, royalty-free license to internally use CyberSource's
Sm@rtCert technology with the right to modify the technology so we may embed
such technology into our Cache Manager (either alone or in combination with
other software) for subsequent sublicense and for use by enterprises and
government agencies. This agreement also provides that we jointly own certain
utility tools. It allocates between us and CyberSource ownership of certain
inventions made by each party on or before June 30, 1998, and ownership of
certain improvements, enhancements and modifications by the parties to the
Sm@rtCert and Cache Manager technologies made through 1999. Each party agreed to
indemnify the other against any third party claim against the licensor resulting
from the licensee using the licensed technology, except to the extent such a
third-party claim is based upon a claim that the licensed technology infringes
upon its intellectual property rights.

We also entered into an Internet commerce services agreement with
CyberSource. Under this agreement, CyberSource agreed to provide certain
services to us including credit card processing, fraud screening, export
control, territory management and electronic fulfillment, in a "back office"
capacity. CyberSource agreed to indemnify us for an amount not to exceed
$100,000 if a third party claims that the services CyberSource provides to us,
or the use of any software that CyberSource provides in connection with the
services, infringes upon the third party's intellectual property rights. We
agreed to indemnify CyberSource for an amount not to exceed $100,000 if a third
party claims that the software we distribute infringes upon its intellectual
property rights. This services agreement expired on December 31, 1998, and
automatically renewed for an additional one-year term, unless either party
terminates it.

Based on our relationship with CyberSource, our business would be disrupted
if:

- CyberSource discontinues any of the services that it provides to us under
the services agreement;

- either party terminates the cross license agreement; or

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- CyberSource reduces its performance so we must replace such services or
internally develop or license such technology from a third party.

CyberSource provides to other customers, including our competitors, the
same services that it provides to us. Under our agreements with CyberSource,
CyberSource may compete directly with us, acquire a third party which competes
with us, or be acquired by a third party which competes with us. Any of those
actions could materially hurt our business.

COMPETITION

The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future because barriers
to entry are minimal, and current and new competitors can launch new Web sites
at relatively low cost. In addition, the software reselling industry is
intensely competitive. We currently compete primarily with traditional software
resellers, other online software resellers and other vendors.

In the online market, we compete with online software resellers and vendors
that maintain commercial Web sites (including CompUSA, Outpost.com, Egghead.com
and Buy.com). We also compete with the growing number of software publishers
that sell their software products directly online. Barnesandnoble.com and
Amazon.com also resell software online. We also anticipate that we may soon
compete with other software publishers, including Microsoft, that plan to sell
their products directly to customers online, and indirect competitors that
specialize in online commerce or derive significant revenues from online
commerce, including America Online, Netscape, Amazon.com and Yahoo!.

In addition, the following entities have established, or may soon
establish, commercial Web sites offering software products:

- major retailers of other related products, such as OfficeMax, Staples,
Office Depot and Wal-Mart.

Competitive pressures created by any one of these current or future
competitors, or by our competitors collectively, could materially hurt our
business.

We believe that the principal competitive factors in our market are:

- brand recognition;

- selection;

- convenience;

- price;

- speed and accessibility;

- customer service;

- quality of site content; and

- reliability and speed of fulfillment.

In addition to those factors, the large enterprise market also focuses on:

- compatibility of products;

- administration and reporting;

- single source supply;

- security; and

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- cost-effective deployment.

In addition, as more people use the Internet and other online services,
larger, well established and well financed entities may:

- acquire online competitors or software publishers or suppliers;

- invest in online competitors or software publishers or suppliers; or

- form joint ventures with online competitors or software publishers or
suppliers.

Certain of our actual or potential competitors, such as Ingram Micro and
Tech Data, may be able to:

- secure merchandise from vendors on more favorable terms;

- devote greater resources to marketing and promotional campaigns;

- adopt more aggressive pricing or inventory availability policies; and

- devote substantially more resources to Web site and systems development
than we do.

Competitors such as Software Spectrum, GTSI, ASAP and Corporate Software &
Technology have greater experience in selling software to the large enterprise
market than we do. In addition, new technologies and expansion of existing
technologies, such as price comparison programs that select specific titles from
a variety of Web sites, may direct customers to online software resellers which
compete with us and may increase competition. Increased competition may reduce
our operating margins, as well as cause a loss to both our market share and
brand recognition. Further, to strategically respond to changes in the
competitive environment, we may sometimes make pricing, service or marketing
decisions or acquisitions that could materially hurt our business. In addition,
companies controlling access to Internet transactions through network access or
Web browsers could promote our competitors or charge us a substantial fee for
inclusion in their product or service offerings. We cannot assure that we can
compete successfully against current and future competitors. Failure to compete
successfully against our current and future competitors could materially hurt
our business.

\LEGAL PROCEEDINGS

From time to time, we may litigate claims arising in the ordinary course of
our business. We are not presently subject to any material legal proceedings.

PROPRIETARY RIGHTS

We rely on a combination of copyright, trademark, patent and trade secret
laws and contractual restrictions to establish and protect our technology and
proprietary rights and information. We require employees and consultants to sign
confidentiality agreements. However, we cannot assure you that our steps will be
sufficient to prevent misappropriation of our technology and proprietary rights
and information or that our competitors will not independently develop
technologies that are substantially equivalent or superior to ours.

EMPLOYEES

As of February 28, 1999, we employed 179 employees. We also employ
independent contractors and other temporary employees. Labor unions do not
represent any of our employees. We consider our employee relations to be good.
Competition for qualified personnel in our industry is intense, particularly for
software development and other technical staff. We believe that we need to
continue to attract, hire and retain qualified personnel to be successful in the
future. If the BuyDirect.com merger is completed, we expect to gain over 70
employees.
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FACILITIES

Our principal administrative, engineering, marketing and customer service
facilities total approximately 75,197 square feet. We subleased facilities which
are located in Sunnyvale, California. Our sublease expires in September 2003,
unless sooner terminated. We made a security deposit payment of $892,000 cash.
We must make monthly payments of approximately $149,000 increasing to $174,000
over the term of the sublease. We do not have an option to renew or extend the
sublease. If the BuyDirect.com merger is completed, we will assume two
subleases, one for approximately 12,100 square feet in San Francisco, California
expiring in June 2000, and another one for approximately 3,233 square feet in
Portland, Oregon, expiring in October 2000, pursuant to each of which we will be
required to make monthly lease payments of $32,267 and $2,967, respectively.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information about our executive
officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
William S. McKiernan......... 42 Chairman of the Board of Directors
Mark L. Breier............... 39 President, Chief Executive Officer and Director
John P. Pettitt.............. 35 Executive Vice President and Chief Technology Officer
James R. Lussier............. 42 Vice President, Business Operations and Corporate
Strategy
Michael J. Praisner.......... 52 Vice President, Finance & Administration and Chief
Financial Officer
Alan C. DeClerck............. 44 Vice President, Worldwide Sales
Brian J. Sroub............... 39 Vice President, Marketing
Mala Anand................... 31 Vice President, Engineering
John D. Vigouroux............ 38 Vice President, Business Development
Douglas Carlston(1)(2)....... 51 Director
John S. Chen(1)(2)........... 44 Director
Bert Kolde(1)(2)............. 44 Director
Ronald S. Posner(1)(2)....... 56 Director
</TABLE>

- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee

WILLIAM S. MCKIERNAN is a co-founder of Beyond.com and has served as
Chairman of our Board of Directors since March 1998. From Beyond.com's inception
in 1994 to March 1998, Mr. McKiernan served as our President and Chief Executive
Officer. Mr. McKiernan also currently serves as a director, President and Chief
Executive Officer of CyberSource Corporation. From 1992 to 1994, Mr. McKiernan
held a number of positions at McAfee Associates, Inc. (now known as Network
Associates), including President and Chief Operating Officer, the positions he
held during its initial public offering in October 1992. Prior to joining McAfee
Associates in 1992, Mr. McKiernan was Vice President of Princeton Venture
Research, Inc., an investment banking and venture consulting firm from 1990 to
1992. Mr. McKiernan has also held management positions with IBM/ROLM and Price
Waterhouse. Mr. McKiernan holds an M.B.A. from the Harvard Business School.

MARK L. BREIER joined Beyond.com in March 1998, as a director and our
President and Chief Executive Officer. From January 1997 until he joined
Beyond.com, Mr. Breier served as Vice President of Marketing of Amazon.com, Inc.
From April 1995 to January 1997, Mr. Breier served as Vice President of
Marketing of Cinnabon World Famous Cinnamon Rolls. Mr. Breier was involved in
product management and introduction at Dreyer's Grand Ice Cream from 1990 to
April 1995, at Kraft Foods, Inc., a multinational consumer products company,
from April 1986 to October 1988, and at Parker Brothers, a worldwide
manufacturer of toys and games, from August 1985 to March 1986. Mr. Breier holds
a B.A. in Economics from Stanford University and an M.B.A. from the Stanford
University Graduate School of Business.

JOHN P. PETTITT is a co-founder of Beyond.com and has served as our
Executive Vice President and Chief Technology Officer since its inception in
1994. From 1992 to 1994, Mr. Pettitt consulted on a number of Internet and
intranet projects, including a national medical imaging network. From 1986 to
1992, Mr. Pettitt served as Group Vice President and Technical Director of
Specialix PLC, a leading supplier of communications controllers for UNIX
systems. While at Specialix, Mr. Pettitt received the 1992 British Design Award
for designing a new distributed, fault tolerant data switch. Mr. Pettitt also
co-founded the United Kingdom Internet Consortium.

MICHAEL J. PRAISNER joined Beyond.com as our Vice President, Finance and
Administration and Chief Financial Officer in April 1998. From 1995 to February
1998, Mr. Praisner served as Vice President, Finance

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and Administration, Chief Financial Officer and Secretary of Silicon Storage
Technology, Inc., a supplier of flash memory devices. From 1994 to 1995, he
served as Vice President, Finance and Chief Financial Officer of MicroModule
Systems, Inc., a manufacturer of multichip modules for computer and
telecommunications applications. From 1992 to 1993, he served as Vice President,
Finance and Chief Financial Officer of Electronics for Imaging, Inc., a
manufacturer of color desktop publishing computer systems. During part of 1991,
he served as Vice President, Finance and Chief Financial Officer of Digital Link
Corp., a computer communications equipment company. From 1989 to 1991, he served
as Corporate Controller of Applied Materials Inc., a manufacturer of
semiconductor wafer fabrication equipment. Mr. Praisner holds a B.A. in Liberal
Arts and an M.B.A. from Southern Methodist University and is a Certified Public
Accountant.

JAMES R. LUSSIER joined Beyond.com in April 1998 as our Vice President,
Business Operations and Corporate Strategy. From September 1992 to April 1998,
Mr. Lussier served as an Associate Partner of Andersen Consulting where he was
responsible for the Electronics and High Technology Strategy Practice Group and
was a member of the Commerce Core Team. Mr. Lussier holds a B.S. in Finance from
the Wharton School, University of Pennsylvania, an M.A. in Sociology, with an
emphasis in Statistics, from the University of California at Berkeley and an
M.B.A. from the Stanford University Graduate School of Business.

ALAN C. DECLERCK joined Beyond.com in April 1998 as our Vice President,
Sales. From August 1995 until he joined Beyond.com, Mr. DeClerck served as
International Director, ISVs & Integrators, for Sun Microsystems Computer
Corporation. From January 1989 until August 1995, Mr. DeClerck served in other
roles at Sun Microsystems, including Director, Corporate Business Development,
Director of Marketing and Business Development at FirstPerson, a Sun
Microsystems subsidiary that developed the initial Java technology, and various
sales and sales management roles. Mr. DeClerck was involved in marketing and
sales roles from 1980 until 1989 at Network Equipment Technologies, Industrial
Networking, Inc. and General Motors Corporation. Mr. DeClerck holds an A.B. in
International Relations from Brown University, a M. Phil. in International
Relations from Oxford University and an M.B.A. from the Stanford University
Graduate School of Business.

BRIAN J. SROUB joined Beyond.com in April 1998 as our Vice President,
Marketing. From June 1995 to April 1998, Mr. Sroub served as Vice President,
Marketing of Hearst New Media & Technology, a worldwide media company. From
November 1993 to May 1995, Mr. Sroub served as Vice President, Sales & Marketing
of Sony Electronics. Prior to October 1993, Mr. Sroub co-founded Home
Environmental Products, a start up horticultural corporation, and was a Brand
Manager at Procter & Gamble Company. Mr. Sroub holds a B.A. in Economics &
Communications from Boston College, an M.A. in Economics from Boston College and
an M.B.A. from the Stanford University Graduate School of Business.

MALA ANAND joined Beyond.com in June 1998 as our Vice President,
Engineering. From 1994 until she joined Beyond.com, Ms. Anand served as Director
of Product Development with the Internet application services division at Oracle
Corporation. From 1990 to 1994, Ms. Anand was a technical architect and a
principal engineer of Digital Equipment Corporation's software supply business.
Ms. Anand holds an M.S. in Computer Science from Brown University and a B.S. in
Computer Science from the University of Massachusetts.

JOHN D. VIGOUROUX joined Beyond.com in November 1998 as our Vice President,
Business Development. From June 1997 until he joined Beyond.com, Mr. Vigouroux
served as Vice President of Business Development of Net Objects, Inc. From
August 1996 to June 1997, Mr. Vigouroux served as a Director of Business
Development of Cisco Systems, Inc. From August 1993 to August 1996, Mr.
Vigouroux served as Manager of Strategic Opportunities of Adobe Systems, Inc.
Mr. Vigouroux holds an M.B.A. from New Hampshire College and a B.S. in
Organizational Behavior and Development from Averett College.

DOUGLAS CARLSTON, a director of Beyond.com since March 1999, was the
founder of Broderbund Software, Inc. and served as its Chairman of the Board and
Chief Executive Officer from 1989 through 1998, when Broderbund was sold to The
Learning Company, Inc. Mr. Carlston currently serves on the boards of directors
of Expert Software, Inc., ePit, class.com and Mpath Interactive, Inc. Mr.
Carlston holds a B.A. from Harvard College (magna cum laude) and a J.D. from
Harvard Law School.
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<PAGE> 60

JOHN S. CHEN, a director of Beyond.com since March 1999, has served as a
director and President, Chief Executive Officer and Chairman of Sybase, Inc.
since August 1997. Mr. Chen also serves as a board member for Niku Corporation.
In February 1998, Sybase formed the Office of the Chief Executive, and Mr. Chen
began to share the position of Chief Executive Officer with Mr. Kertzman.
Between August 1997 and February 1998, Mr. Chen also held the position of Chief
Operating Officer. Before joining Sybase, Mr. Chen served between March 1995 and
July 1997 as the President of the Open Enterprise Computing Division of Siemens
Nixdorf, a computer and electronics company, and as Chief Executive Officer and
Chairman of the Siemens Pyramid subsidiary of Siemens Nixdorf. Before its
acquisition by Siemens Nixdorf in March 1995, Mr. Chen served in various
executive capacities with Pyramid Technology Corporation, a computer company,
where he became Chief Operating Officer in October 1992 and President in June
1993. Mr. Chen holds a B.S. in electrical engineering from Brown University and
a M.S. in electrical engineering from California Institute of Technology.

BERT KOLDE, a director of Beyond.com since July 1996, serves as a director,
Vice President, Treasurer and Secretary of Vulcan Ventures Inc., Vice Chairman
of the Portland Trail Blazers, Seattle Seahawks, Oregon Arena Corporation and
First and Goal Corporation. In addition, Mr. Kolde serves as President of the
Paul G. Allen Virtual Education Foundation and the Paul G. Allen Forest
Protection Foundation. Mr. Kolde co-founded Asymetrix Learning Systems, Inc. in
1985, and serves as Chairman of its Board of Directors. Mr. Kolde also serves as
a director of MetaCreations Corporation, Precision Systems, Inc. and CyberSource
Corporation. Mr. Kolde holds a B.A. in Business Administration from Washington
State University and an M.B.A. from the University of Washington.

RONALD S. POSNER, a director of Beyond.com since March 1999, serves as
Chairman of PS Capital, a venture capitalist firm based in San Francisco, New
York and London. Mr. Posner has held or currently holds key advisory roles
within a number of startups and public companies. In addition, he was an active
board member and on the executive committee of CyberMedia Corporation, a systems
software company that was acquired by Network Associates.

Linda Fayne, Levinson, Steven P. Novak and Richard Scudellari resigned from
our board of directors as of March 9, 1999, March 11, 1999 and March 11, 1999,
respectively. Mr. Scudellari remains our Secretary.

BOARD OF DIRECTORS AND COMMITTEES

Beyond.com currently has authorized six directors. Our executive officers
are appointed by, and serve at the discretion of, our board of directors. Each
of our officers and directors, excluding non-employee directors and Mr.
McKiernan, who serves as Chief Executive Officer of CyberSource, devotes
substantially full time to our affairs. Our non-employee directors devote such
time to our affairs as is necessary to discharge their duties. There are no
family relationships among any of our directors, officers or key employees. Two
members of our board of directors also serve as directors of CyberSource.

Our audit committee reviews, acts on and reports to our board of directors
with respect to various auditing and accounting matters, including the selection
of our independent accountants, the scope of the annual audits, fees to be paid
to the independent accountants, the performance of our independent accountants
and our accounting practices.

Our compensation committee establishes salaries, incentives and other forms
of compensation for officers and other employees. This committee also
administers our incentive compensation and benefit plans.

DIRECTOR COMPENSATION

We have not historically paid directors cash compensation for their
services as directors or members of committees of the board of directors. We
have, however, reimbursed them for their reasonable expenses incurred in
attending meetings of our board of directors. In the future, non-employee
directors will receive an annual directors' fee in the amount of $10,000,
commencing with our 1999 annual meeting of our stockholders, which fees will be
paid in quarterly installments.

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<PAGE> 61

In January 1997, we granted Mr. Kolde an option to purchase 10,000 shares
of common stock at an exercise price of $0.1125 per share. In January 1998, we
granted Mr. Kolde an option to purchase 10,000 shares of common stock at an
exercise price of $0.50 per share. In March 1998, we granted Mr. Breier an
option to purchase 1,000,000 shares of common stock at an exercise price of
$2.60 per share. In January 1999, we granted Mr. Kolde an option to purchase
10,000 shares of common stock at an exercise price of $20.75 per share. Until
April 4, 1998, under the terms of our 1995 Stock Option Plan, we granted each
non-employee director options to purchase 10,000 shares of common stock upon
initial election or appointment to the board of directors and thereafter
annually on January 1 of each year. Following April 4, 1998, our 1998 Stock
Option Plan continues these grants. In March 1999, we granted each of Messrs.
Carlston, Chen and Posner nonqualified stock options to purchase 20,000 shares
of common stock at an exercise price of $23.75 per share under the 1998 Stock
Option Plan. These options vest over four years with 25% of the total shares
granted vesting in March 2000 and the remaining shares vesting monthly
thereafter through March 2003, contingent upon continuous service as a director.

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation
of and stock options granted to our Chief Executive Officer and each of our four
other most highly compensated executive officers (collectively, the "Named
Executive Officers"). In March 1998, Mr. McKiernan resigned as our President and
Chief Executive Officer and commenced service as the Chairman of our board of
directors, where he presently earns a salary of $100,000 per annum. In March
1998, Mr. Breier was hired as our President and Chief Executive Officer.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION
--------------------------- ---- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
William S. McKiernan.................. 1998 $100,000 -- -- --
Chairman of the Board 1997 165,000 -- -- --
Mark L. Breier(1)..................... 1998 160,000 $37,500 1,000,000 $70,000(2)
President and Chief Executive
Officer
John P. Pettitt....................... 1998 141,000 -- -- --
Executive Vice President and 1997 130,000 100 -- --
Chief Technical Officer
Michael J. Praisner(3)................ 1998 120,000 -- 200,000 --
Vice President, Finance and
Administration and Chief Financial
Officer
Brian Sroub(3)........................ 1998 127,000 -- 180,000 --
Vice President, Marketing
James Lussier(3)...................... 1998 126,000 -- 180,000 --
Vice President Business Operations
and Corporate Strategy
</TABLE>

- ---------------
(1) Mr. Breier was hired in March 1998.

(2) Represents a relocation allowance payment to Mr. Breier in 1998.

(3) Messrs. Praisner, Sroub and Lussier were each hired in April 1998.

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<PAGE> 62

STOCK OPTION INFORMATION

The following table sets forth certain information with respect to stock
options granted in fiscal 1998 to the Named Executive Officers.

OPTION GRANTS IN FISCAL 1998

<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1998
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(3)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(#) DURING PERIOD(1) ($/SHARE)(2) DATE 5% 10%
---- ---------- ---------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William S.
McKiernan.......... -- -- -- -- -- --
Mark L. Breier....... 1,000,000 25.8% $2.60 03/30/2008 $4,235,126 $6,743,730
Michael J.
Praisner........... 200,000 5.2% $4.36 04/07/2008 $1,420,396 $2,261,743
John P. Pettitt...... -- -- -- -- -- --
Brian Sroub.......... 180,000 4.7% $5.44 04/25/2008 $1,595,014 $2,539,793
James Lussier........ 180,000 4.7% $5.44 04/25/2008 $1,595,014 $2,539,793
</TABLE>

- ---------------
(1) Based on an aggregate of 3,868,946 options granted by Beyond.com during the
fiscal year ended 1998 to employees of and consultants to Beyond.com,
including the Named Executive Officers.

(2) The exercise price per share of each option was equal to the fair market
value of the common stock on the date of grant as determined by our board of
directors.

(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the common stock on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated stock price.

The following table sets forth certain information regarding stock options
held as of December 31, 1998 by the Named Executive Officers.

OPTION VALUES AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AS OF MONEY OPTIONS AS OF
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(1)
---------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXCERCISABLE UNEXERCISABLE
---- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
William S. McKiernan.................... -- -- -- --
Mark L. Breier.......................... -- 1,000,000 -- $18,150,000
Michael J. Praisner..................... -- 200,000 -- 3,278,000
John P. Pettitt......................... 1,250,000 -- $25,932,500 --
Brian Sroub............................. -- 180,000 -- 2,755,800
James Lussier........................... -- 180,000 -- 2,755,800
</TABLE>

- ---------------
(1) The value of unexercised "in-the-money" options represents the difference
between the exercise price of stock options and $20.75, the closing sales
price of the common stock on December 31, 1998.

STOCK OPTION PLANS

In January 1995, we adopted our 1995 Stock Option Plan. We reserved
3,000,000 shares of common stock for stock option grants under the plan. In
addition, in April 1998, we adopted our 1998 Stock Option Plan. We reserved
2,000,000 shares of common stock for stock option grants under the plan. The
purpose of each plan is to enhance our long-term stockholder value by offering
our employees, directors, officers, consultants, agents, advisors and
independent contractors the opportunity to promote and participate in our growth
and success, and to encourage these people to remain in our service and acquire
and maintain stock ownership in us.

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<PAGE> 63

As of December 31, 1998, options to purchase 4,495,299 shares of common
stock were outstanding under the 1995 and 1998 Stock Option Plans with exercise
prices ranging from $0.004 to $29.06 per share. As of December 31, 1998, options
to purchase 268,849 shares were available for grant under the 1995 and 1998
Stock Option Plans and options for 235,852 shares had been exercised.

Our board of directors or a committee appointed by the board may administer
the plans.

1998 Plan

The Administrator has the authority to select individuals who are to
receive options under the 1998 Stock Option Plan and to specify the terms and
conditions of options granted (including whether or not such options are
incentive or nonstatutory stock options), the vesting provisions, the option
term and the exercise price. The 1998 Plan provides that we may grant incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986 to employees, including our officers and employee directors, and we may
grant nonstatutory stock options to employees and consultants, including
non-employee directors.

The exercise price of incentive stock options granted under the 1998 Plan
shall equal the fair market value of our common stock on the date of grant
(except in the case of grants to any person holding more than 10% of the total
combined voting power of all classes of our, or any of our parent's or
subsidiary's, stock in which case the exercise price shall equal 110% of the
fair market value on the date of grant). The exercise price of nonqualified
stock options shall not be less than 85% of the fair market value on the date of
grant. Option holders may pay for an exercise in cash or other consideration,
including a promissory note, as approved by the administrator. The administrator
may not grant options under the 1998 Plan to an individual in any one fiscal
year which would permit that individual to purchase more than 1,000,000 shares
of common stock. However, the administrator may grant a newly-hired optionee a
one-time grant of an option to purchase up to an additional 500,000 shares of
common stock.

Generally, options granted under the 1998 Plan (other than those granted to
non-employee directors) vest at a rate of 25% of the shares underlying the
option after one year and the remaining shares vest in equal portions over the
following 36 months, such that all shares are vested after four years. Unless
otherwise provided by the administrator, an option granted under the 1998 Plan
generally expires 10 years from the date of grant (five years in the case of an
incentive stock option granted to any person holding more than 10% of the total
combined voting power of all classes of our, or any of our parent's or
subsidiary's, stock in which case the exercise price shall equal 110% of the
fair market value on the date of grant) or, if earlier, 30 days after the
optionee's termination of employment or service with us or any of our affiliates
for any reason other than termination for death or disability, or one year after
termination for death or total and permanent disability and six months in the
case of other types of disability. Options granted under our 1998 Plan are not
generally transferable by the optionee except by will or the laws of descent and
distribution and generally are exercisable during the lifetime of the optionee
only by such optionee.

In the event of (i) the merger or consolidation as a result of which the
holders of our voting securities prior to the transaction hold shares
representing less than 51% of our voting securities after giving effect to the
transaction (other than a merger or consolidation with a wholly-owned subsidiary
or where there is no substantial change in our stockholders and the options
granted under the 1998 Plan are assumed by the successor corporation), or (ii)
the sale of all or substantially all of our assets the successor corporation
will assume or substitute the options we have granted under the 1998 Plan or
shall provide substantially similar consideration to optionees as is provided to
the stockholders. In the event the successor corporation refuses to assume or
substitute outstanding options as provided above, or in the event of our
dissolution or liquidation, outstanding options shall expire on a date specified
in a written notice the Compensation Committee shall send to all optionees
(which date shall be at least 20 days after the date of such notice).

The 1998 Plan also provides for automatic grants to non-employee directors.
Each non-employee director, upon initial election or appointment to the Board of
Directors, is entitled to receive options to purchase 10,000 shares of common
stock, provided that such election or appointment does not occur within the last
quarter of a given year. Thereafter, each non-employee director is entitled to
receive options to purchase 10,000 shares of common stock annually on January 1
of each year, provided he or she is a non-
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<PAGE> 64

employee director on the date of grant and has continuously been an active
member of the Board of Directors for the year prior to the grant date. Options
granted to non-employee directors pursuant to the automatic grant provisions of
the 1998 Plan are nonqualified stock options with an exercise price equal to the
fair market value of our common stock as of the date of grant and fully vest
nine months after the date of grant. Grants to non-employee directors are
subject to the general requirements of the 1998 Plan.

1995 Plan

The terms of options which we may grant under the 1995 Plan are generally
the same as those we may grant under the 1998 Plan. However, the 1995 Plan
imposes a maximum number of shares subject to an option we grant to any
individual of 1,000,000 shares. In addition, under the 1995 Plan, in the event
of our merger or consolidation in which we are not the surviving corporation, or
a sale of all or substantially all of our assets, the successor corporation will
assume or substitute the options outstanding under the 1995 Plan. However, in
the event the successor corporation refuses to assume or substitute the options
or in the event of our dissolution or liquidation, outstanding options shall
expire on a date specified in a written notice sent by the Compensation
Committee to all optionees (which date shall be at least 20 days after the date
of such notice).

Stock options previously granted under the Plans to the executives and
directors are described above under "Executive Compensation." At this time we
cannot determine the number of shares of common stock that may be subject to
options we grant in the future to our executive officers and other officers, key
employees and directors.

BuyDirect.com Options

If the BuyDirect.com merger is completed, upon the effective date of the
merger, we will assume all options to purchase BuyDirect.com common stock
outstanding at that date, whether or not such options are exercisable or vested.
Each BuyDirect.com option assumed by us will continue to be subject to the terms
and conditions of the BuyDirect.com 1998 Stock Option Plan and individual option
agreements thereunder, but will be exercisable, each option in accordance with
the vesting schedule applicable thereto, for that number of shares of our common
stock equal to the number of shares of BuyDirect.com common stock issuable upon
exercise thereof multiplied by the "exchange ratio," as defined in the Agreement
and Plan of Merger between the parties, dated February 19, 1999, as amended and
restated. If the BuyDirect.com merger is completed we will reserve approximately
300,000 shares of our common stock for issuance upon exercise of options we will
assume in the proposed merger.

Retention Incentive Agreements

We have entered into Retention Incentive Agreements with certain of our key
officers, and intend to enter into such agreements with all employees. These
provide that, in the event of a change in our control and the termination
(including "constructive termination" as defined therein) of such officer or
employee, 50% of the then unvested shares subject to options held by such
terminated officer or employee will accelerate and become exercisable.

401(K) RETIREMENT PLAN

Effective January 1997, we established a 401(k) defined contribution
retirement plan covering all salaried/full-time employees with greater than one
months' service. The retirement plan provides for voluntary employee
contributions from 1% to 15% of annual compensation, subject to a maximum limit
allowed by Internal Revenue Service guidelines ($10,000 for 1998). We may
contribute such amounts to the accounts of participants' in the retirement plan
as our board of directors determines. To date, we have not contributed any
amounts to the 401(k) Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of our compensation committee is an officer or employee
of Beyond.com. Two members of our board of directors also serve as members of
the board of directors of CyberSource. Other than with respect to CyberSource,
no interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has such an interlocking relationship existed in the
past.

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<PAGE> 65

CERTAIN TRANSACTIONS

STOCK AND WARRANT ISSUANCES

Since January 1, 1996, we have issued shares of common stock to certain
insiders and shares of preferred stock in private placement transactions each as
set forth below.

In February 1996, we issued shares of Series A preferred stock in private
placements to certain investors including 253,131 shares to C.E. Unterberg
Towbin Capital Partners I, L.P. at a purchase price of $0.76 per share. In this
section of this prospectus, we refer to C.E. Unterberg Towbin Capital Partners
I, L.P. as "Unterberg Partners I." The shares of Series A preferred stock held
by Unterberg Partners I converted into 506,262 shares of common stock upon
consummation of our initial public offering.

In July 1996, we issued shares of Series B preferred stock in a private
placement to certain investors, including 925,926 shares to Vulcan Ventures
Inc., at a purchase price of $2.25 per share. In this section of this prospectus
we refer to Vulcan Ventures Incorporated as "Vulcan." Bert E. Kolde, one of our
directors, serves as a director, Vice President, Treasurer and Secretary of
Vulcan, as well as President of the Paul G. Allen Virtual Education Foundation
and the Paul G. Allen Forest Protection Foundation, and as a director of several
other companies controlled by Mr. Allen, who maintains a controlling interest of
Vulcan. Mr. Kolde disclaims beneficial ownership of the shares of common stock
issued to Vulcan, except for his proportional interest therein, if any. All of
the outstanding shares of Series B preferred stock converted on a two-for-one
basis into 4,074,076 shares of common stock upon the consummation of our initial
public offering.

In September and December 1997, we issued shares of Series C preferred
stock in private placements to certain investors at a purchase price of $1.70
per share. We issued Series C preferred stock to the following entities:

<TABLE>
<CAPTION>
NUMBER OF
PURCHASER SHARES
--------- ---------
<S> <C>
GRP......................................................... 1,470,588
UT Capital Partners International, LDC...................... 59,914
UT Technology Partners, LDC................................. 185,184
Unterberg Harris Private Equity Partners, LP................ 201,961
Unterberg Harris Private Equity Partners, CV................ 43,137
Vulcan...................................................... 716,666
</TABLE>

In this section of this prospectus we refer to UT Capital Partners
International, LDC, UT Technology Partners, LDC, and Unterberg Harris Private
Equity Partners, CV collectively as the "Unterberg Affiliates." In this section
of this prospectus we collectively refer to Global Retail Partners Funding, Inc.
and its affiliates (each an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation) that are stockholders of Beyond.com as "GRP." All shares of Series
C preferred stock converted into 3,000,000 shares of common stock upon
consummation of our initial public offering.

In March and April 1998, we issued shares of Series D preferred stock in
private placements to certain investors at a purchase price of $2.60 per share.
We issued Series D preferred stock to the following entities:

<TABLE>
<CAPTION>
NUMBER OF
PURCHASER SHARES
--------- ---------
<S> <C>
GRP......................................................... 458,106
Certain of the Unterberg Affiliates......................... 229,052
Vulcan...................................................... 458,106
</TABLE>

These shares converted into an aggregate of 1,145,264 shares of common
stock upon the consummation of our initial public offering.

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<PAGE> 66

In November and December 1998, we issued $63.25 million aggregate principal
amount of our 7 1/4% Convertible Subordinated Notes due December 1, 2003 to
certain parties, including C.E. Unterberg Towbin and Donaldson, Lufkin &
Jenrette Securities Corporation, as two of the initial purchasers of such notes.

OPTION GRANTS AND AGREEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS

Under the terms of an oral agreement between us and William S. McKiernan,
the Chairman of our board of directors, we repaid, in two installments in
December 1997 and January 1998, an aggregate of $105,000 for unpaid salary that
we had accrued on Mr. McKiernan's behalf for services Mr. McKiernan provided to
us from the date of our inception through December 1997.

In July 1998, we loaned Brian J. Sroub, our Vice President, Marketing,
$300,000 to assist Mr. Sroub's relocation to the Silicon Valley area. This loan
is memorialized in a promissory noted issued by Mr. Sroub to us, which provides
for repayment on or before January 31, 1999, and bears interest at a rate of
6.5% compounded annually. As of December 31, 1998, Mr. Sroub had repaid $270,000
of the principal amount and a balance of $30,000 remained outstanding. In
addition, in April 1998, we granted Brian J. Sroub, our Vice President,
Marketing, an option to purchase 180,000 shares of common stock under the 1998
Stock Option Plan. These options have an exercise price of $5.44 per share and
are governed generally by the terms of the 1998 Stock Option Plan.

RELATIONSHIP WITH CYBERSOURCE CORPORATION

In December 1997, in order to focus on our core business of selling
software over the Internet, we spun-off our Internet commerce services business
to a new Delaware corporation, now called CyberSource Corporation. In connection
with the spin-off, CyberSource issued its capital stock to our stockholders such
that, following consummation of the spin-off, each of our stockholders held
shares of capital stock of CyberSource in equal number and ownership proportion
and with the same rights as such stockholder had as our stockholder. On the date
of the spin-off, our employees maintained their outstanding options to purchase
our common stock and were granted additional stock options in CyberSource based
on the extent to which the employees' original options were vested. Employees of
CyberSource immediately following the spin-off maintained their outstanding
vested stock options to purchase our common stock and were granted additional
stock options in CyberSource. The exercise prices of the original and additional
option grants were adjusted to reflect the allocation of the current fair market
per share price between our and CyberSource's common stock, respectively, at the
time of the spin-off. Options held by the CyberSource employees that had not
vested as of the date of the spin-off were canceled.

We have entered into certain agreements with CyberSource for the purpose of
defining the ongoing relationship between the two companies. At the time of the
spin-off of CyberSource, all of our directors were also directors of CyberSource
and other members of our management team joined CyberSource as executive
officers. As a result, our agreements with CyberSource may not be deemed the
result of arm's length negotiations. We qualify the following description of
these agreements in their entirety by reference to the agreements, which have
been filed as exhibits hereto.

Under our Conveyance Agreement dated December 31, 1997, we transferred to
CyberSource:

- technology (including rights to all patent applications, trademarks and
other of our intellectual property rights) relating to the Internet
commerce services business;

- contracts and licenses with third parties relating to the Internet
commerce services business; and

- certain tangible assets in connection with credit card processing, fraud
screening, export control, territory management and electronic
fulfillment services.

In addition, our employees engaged in the Internet commerce services
business were transferred to CyberSource.

In connection with such transfer, we entered into an InterCompany
Cross-License Agreement with CyberSource in April 1998, which was amended in May
1998, pursuant to which we granted CyberSource a
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<PAGE> 67

non-exclusive, worldwide, perpetual, irrevocable, royalty-free license to (1)
internally use our Cache Manager technology, and (2) use and sublicense our
customer database for certain limited purposes in connection with fraud
detection and verification. Under this agreement, CyberSource granted us a
worldwide, perpetual, irrevocable, royalty-free license to internally use
CyberSource's Sm@rtCert technology. We also received the right to modify such
technology for purposes of embedding it into our Cache Manager technology
(either alone or in combination with other software) for subsequent sublicense
to enterprises and governmental agencies. The Cross License Agreement further
provides that the parties shall have joint ownership of certain utility tools
made by the parties and allocates between us and CyberSource the ownership of
improvements, enhancements and modifications made by the parties to the
Sm@rtCert and Cache Manager Technology during 1999. The Cross License Agreement
also allocates between us and CyberSource the ownership of certain inventions
each party made on or before June 30, 1998. Each party has agreed to indemnify
the other against any third party claims regarding such licensee's use of the
licensed technology that results in a claim against the licensor, except to the
extent that such claim is based upon a claim that the licensed technology
infringes upon any third party's intellectual property rights.

We also entered into an Internet Commerce Services Agreement with
CyberSource, pursuant to which CyberSource has agreed to provide certain
services including credit card processing, fraud screening, export control,
territory management and electronic fulfillment, in a "back office" capacity.
This Agreement expired on December 31, 1998, and automatically renewed for an
additional one-year term, unless otherwise terminated by either party. Pursuant
to the terms of this agreement, we have agreed to indemnify CyberSource for an
amount not to exceed $100,000 against any claim based upon an allegation that
the software we distributed infringes upon any third party's intellectual
property rights. CyberSource has agreed to indemnify us for an amount not to
exceed $100,000 against any claim based upon an allegation that CyberSource's
services, or the use of any software it provided in connection with its
services, infringes any third party's intellectual property rights.

In connection with the spin-off, we approved loans in amounts equal to the
adverse incremental income tax any stockholder incurred as a result of the
spin-off and the transactions contemplated thereby. In April 1998, we loaned
$270,000 to William S. McKiernan, the sole stockholder incurring such adverse
tax consequences, so as to offset Mr. McKiernan's incremental 1997 income tax.
The loan to Mr. McKiernan is secured by 129,808 shares of common stock held by
Mr. McKiernan and will be due and payable no later than December 17, 1999.
Interest accrues on the loan to Mr. McKiernan at the rate of six and two
hundredths percent (6.02%), compounded annually, and shall be payable only at
such time the principal is due and payable.

We have entered into indemnification agreements with each of our executive
officers and directors.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table contains information concerning (i) those persons whom
we know own beneficially more than 5% of our outstanding common stock, (ii) our
directors, (iii) the Named Executive Officers, (iv) all of our directors and
officers as a group, and (v) the selling stockholders. The share information in
the following table is provided as of December 31, 1998.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING OWNED AFTER
THIS OFFERING(1) SOLD** THIS OFFERING(1)
--------------------- ------------ --------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
---------------- ---------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
William S. McKiernan(2)........................ 8,996,154 32.8% 530,887 8,465,267 27.8%
Bert Kolde(3).................................. 3,051,624 11.1 -- 2,871,862 10.0
Vulcan Ventures Inc............................ 3,026,624 11.0 179,762 2,846,862 9.3
110 110th Avenue NE, Suite 550
Bellevue, WA 98004
Entities affiliated with C.E. Unterberg,
Towbin(4).................................... 2,225,510 8.1 103,527 2,121,983 7.0
Swiss Bank Tower
10 East 50th Street, 22nd Floor
New York, New York 10002
Global Retail Partners, L.P. and its
affiliates(5)................................ 1,928,694 7.0 114,552 1,814,142 5.9
2121 Avenue of the Stars, Suite 1630
Los Angeles, CA 90067
John P. Pettitt(6)............................. 1,250,000 4.4 71,272 1,178,728 3.9
Mark L. Breier................................. -- * -- -- *
Douglas Carlston............................... -- * -- -- *
John S. Chen................................... -- * -- -- *
James R. Lussier............................... -- * -- -- *
Ronald S. Posner............................... -- * -- -- *
Michael J. Praisner............................ -- * -- -- *
Brian J. Sroub................................. -- * -- -- *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(13 persons)(6).............................. 13,297,778 46.3 602,159 12,515,857 43.7
</TABLE>

- ---------------
* Represents beneficial ownership of less than 1% of our common stock.

** Of the 1,000,000 shares being sold by the selling stockholders, the
underwriters will permit up to 928,728 shares to be sold pursuant to certain
registration rights agreements.

(1) Number of shares beneficially owned is determined based on 27,423,763 shares
outstanding as of December 31, 1998. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. The
number of shares beneficially owned by a person includes shares of common
stock subject to options held by that person that are currently exercisable
or exercisable within 60 days of December 31, 1998. Such shares issuable
pursuant to such options are deemed outstanding for computing the percentage
ownership of the person holding such options but not deemed outstanding for
the purposes of computing the percentage ownership of each other person. To
the our knowledge, the persons named in this table have sole voting and
investment power with respect to all shares of common stock shown as owned
by them, subject to community property laws where applicable and except as
indicated in the other footnotes to this table. Unless otherwise indicated,
the address of each of the individuals named above is: c/o Beyond.com
Corporation, 1195 West Fremont Avenue, Sunnyvale, California 94087.

(2) Includes 8,938,464 shares held by William S. McKiernan and 57,690 shares
held by members of Mr. McKiernan's immediate family. Mr. McKiernan disclaims
beneficial ownership of the shares held by his immediate family.

(3) Represents 5,000 shares of common stock and options to purchase 30,000
shares of common stock, of which 20,000 are exercisable immediately, held by
Bert Kolde, one of our directors and a director, the Vice President,
Secretary and Treasurer of Vulcan Ventures, Inc., and 3,026,624 shares held
by Vulcan

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<PAGE> 69

Ventures, Inc. Mr. Kolde disclaims beneficial ownership of the shares owned
by Vulcan Ventures, Inc., except for his proportional interest therein, if
any.

(4) Includes 59,914 shares of common stock held by UT Capital Partners
International, LDC (formerly UH Capital Partners International, LDC),
368,426 shares held by UT Technology Partners, LDC (formerly UH Technology
Partners, LDC); 1,506,262 shares held by C. E. Unterberg Towbin Capital
Partners I, L.P. (formerly Unterberg Harris Capital Partners I, L.P.);
239,708 shares held by Unterberg Harris Private Equity Partners, L.P. and
51,200 shares held by Unterberg Harris Private Equity Partners, CV
(collectively, the "Unterberg Affiliates").

(5) Represents 1,928,694 shares of common stock held by Global Retail Partners,
Inc. and its affiliates (each an affiliate of Donaldson, Lufkin & Jenrette
Securities Corporation).

(6) Represents options to purchase 1,250,000 shares of common stock, exercisable
immediately.

(7) Includes options to purchase 20,000 shares of common stock that vest within
60 days of December 31, 1998, held by all directors and officers as a group.
Excludes shares held by Ms. Levinson, Messrs. Novak and Scudellari, who
resigned from our board of directors as of March 9, 1999, March 11, 1999 and
March 11, 1999, respectively.

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<PAGE> 70

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

We are authorized to issue up to 50,000,000 shares of common stock and
15,000,000 shares of preferred stock. The following description of our capital
stock is not complete and is qualified in its entirety by our certificate of
incorporation and bylaws, both of which are included as exhibits to the
registration statement of which this prospectus forms a part, and by applicable
Delaware laws.

COMMON STOCK

As of December 31, 1998, there were 27,423,763 shares of common stock
outstanding held of record by approximately 107 stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
our board of directors may declare a dividend out of funds legally available and
the holders of common stock are entitled to receive ratably any such dividends.
In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to share ratably in all of our assets remaining after
we pay our liabilities and liquidation preferences of any outstanding shares of
preferred stock. Holders of our common stock have no preemptive rights or other
subscription rights to convert their shares into any other securities. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock and the shares of common stock to be issued
upon conversion of our 7 1/4% Convertible Subordinated Notes will be fully paid
and nonassessable.

PREFERRED STOCK

Our board of directors has the authority, without further action by our
stockholders, to issue up to 15,000,000 shares of preferred stock in one or more
series and to fix the privileges and rights of each series. These privileges and
rights may be greater than those of the common stock. Our board of directors,
without further stockholder approval, can issue preferred stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of common stock. This type of "blank check preferred
stock" makes it possible for us to issue preferred stock quickly with terms
calculated to delay or prevent a change in our control or make removal of our
management more difficult. Additionally, if we issue this preferred stock, then
the market price of common stock may decrease, and voting and other rights may
decrease. We currently have no plans to issue any of this preferred stock.

WARRANTS

Concurrent with the purchase of 238,949 shares of our common stock at a
price per share equal to the initial public offering price (less underwriters'
discounts) by America Online in June 1998, we issued to America Online a
non-forfeitable warrant for 358,423 shares of common stock at a per share
exercise price of $8.37, which vests in increments of 1/36 per month commencing
March 1, 1998.

CONVERTIBLE NOTES

In November and December 1998, we issued $63.25 million aggregate principal
amount of 7 1/4% Convertible Subordinated Notes. Our 7 1/4% Convertible
Subordinated Notes:

- are general unsecured obligations;

- mature on December 1, 2003;

- bear interest at a rate of 7 1/4% per year commencing November 23, 1998;

- are convertible, at any time prior to the close of business on December
1, 2003, into shares of our common stock at the conversion price of
$18.34 per share, subject to certain adjustments;

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<PAGE> 71

- may be redeemed at our option on or after December 6, 2001, in whole or,
from time to time, in part, upon not less than 30 nor more than 60 days
notice by mail at the following prices (expressed as a percentage of
principal amount) during the periods set forth below:

<TABLE>
<S> <C>
December 6, 2001 through November 30, 2002.................. 101.813%
December 1, 2002 through December 1, 2003................... 100.000%
</TABLE>

- rank behind all existing and future senior indebtedness of ours and any
of our subsidiaries in right of payment;

- were issued in denominations of $1,000 principal amount and integral
multiples thereof; and

- were issued only in fully registered book entry form, without coupons,
and are represented by a permanent global 7 1/4% Convertible Subordinated
Note.

Upon the occurrence of certain events which constitute a "change of
control" (as defined in the 7 1/4% Convertible Subordinated Note), we may, at
the election of a holder of our 7 1/4% Convertible Subordinated Notes, be
required to purchase all or any part of such holder's notes.

LaSalle National Bank has agreed to serve as the Trustee under the
Indenture. LaSalle National Bank will be permitted to deal with us and any of
our affiliates with the same rights as if it were not Trustee; provided,
however, that under the Trust Indenture Act, if LaSalle National Bank acquires
any conflicting interest (as defined in the Trust Indenture Act) and there
exists a default with respect to our 7 1/4% Convertible Subordinated Notes, it
must eliminate such conflict or resign.

We, together with LaSalle National Bank, may amend or supplement the terms
of our 7 1/4% Convertible Subordinated Notes with the written consent of the
holders of at least a majority in principal amount of the then outstanding
notes. However, we may not, without the consent of the holder of each 7 1/4%
Convertible Subordinated Note affected thereby, amend the notes to alter the
rights of such holders in a materially adverse manner.

The occurrence of any of the following events would constitute a default
(such events are referred to as "Events of Default") under our Indenture with
LaSalle National Bank and our 7 1/4% Convertible Subordinated Notes:

- our failure to pay any interest on our 7 1/4% Convertible Subordinated
Notes for 30 days after the same is due or our failure to pay any
principal of or premium, if any, on our 7 1/4% Convertible Subordinated
Notes when due;

- our failure to comply with any of our other agreements contained in our
7 1/4% Convertible Subordinated Notes or our Indenture with LaSalle
National Bank for 60 days after receipt of notice of such failure from
LaSalle National Bank or the holders of not less than 25% in aggregate
principal amount of our 7 1/4% Convertible Subordinated Notes then
outstanding;

- our default under any bond, debenture, note or other evidence of
indebtedness for money borrowed or that of any subsidiary of ours having
an aggregate outstanding principal amount in excess of $10 million, which
default shall have resulted in such indebtedness being accelerated,
without such indebtedness being discharged, or such acceleration having
been rescinded or annulled, within ten days from the date of such
acceleration; and

- certain events of bankruptcy, insolvency or reorganization with respect
to us or any subsidiary of ours.

If an event of default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization with respect to us or any subsidiary of
ours) occurs and is continuing, LaSalle National Bank may, by notice to us,
declare all unpaid principal of and accrued interest to the date of acceleration
on our 7 1/4% Convertible Subordinated Notes then outstanding to be due and
payable immediately. Also, in such event, the holders of at least 25% in
principal amount of our 7 1/4% Convertible Subordinated Notes then outstanding
may, by notice to us and LaSalle National Bank, declare all unpaid principal of
and accrued interest to the date of acceleration on our 7 1/4% Convertible
Subordinated Notes then outstanding to be due

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<PAGE> 72

and payable immediately. If an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to us or subsidiary of
ours occurs, all unpaid principal of and accrued interest on our 7 1/4%
Convertible Subordinated Notes then outstanding shall become and be immediately
due and payable without any declaration or other act on the part of LaSalle
National Bank or any holder.

Our Indenture with LaSalle National Bank provides that the holders of a
majority in principal amount of our outstanding 7 1/4% Convertible Subordinated
Notes may on behalf of all holders waive any existing default or Event of
Default and its consequences except a default or Event of Default in the payment
of principal of or accrued interest on our 7 1/4% Convertible Subordinated Notes
or any default in respect of any provision of the Indenture that cannot be
modified or amended without the consent of the holder of each 7 1/4% Convertible
Subordinated Note affected.

LaSalle National Bank shall, within 90 days after the occurrence of any
default known to it, give to the holders of our 7 1/4% Convertible Subordinated
Notes notice of such default; provided that, except in the case of a default in
the payment of principal of or interest on any of our 7 1/4% Convertible
Subordinated Notes, LaSalle National Bank may withhold such notice if it in good
faith determines that the withholding of such notice is in the interests of such
holders.

No holder of our 7 1/4% Convertible Subordinated Notes may pursue any
remedy under our Indenture with LaSalle National Bank or our 7 1/4% Convertible
Subordinated Notes against us (except actions for payment of overdue principal
or interest or for the conversion of our 7 1/4% Convertible Subordinated Notes),
unless:

- the holder gives to LaSalle National Bank written notice of a continuing
Event of Default;

- the holders of at least 25% in principal amount of our outstanding 7 1/4%
Convertible Subordinated Notes make a written request to LaSalle National
Bank to pursue the remedy;

- such holder or holders offer satisfactory indemnity to LaSalle National
Bank against any loss, liability or expense;

- LaSalle National Bank does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and

- LaSalle National Bank shall not have received during such 60 day period a
contrary direction from the holders of at least a majority in principal
amount of our outstanding 7 1/4% Convertible Subordinated Notes.

We must deliver an officers' certificate to LaSalle National Bank within 90
days after the end of each fiscal year as to the signers' knowledge of our
compliance with all conditions and covenants contained in our Indenture with
LaSalle National Bank, and stating whether or not the signers know of any
default or Event of Default. If any such signer knows of such a default or Event
of Default, the officers' certificate shall describe the default or Event of
Default and the efforts to remedy the same.

The holders of a majority in principal amount of all our outstanding 7 1/4%
Convertible Subordinated Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy or power
available to LaSalle National Bank, provided that such direction does not
conflict with any law or the Indenture, is not unduly prejudicial to the rights
of another holder or LaSalle National Bank and does not involve liability for
LaSalle National Bank.

CERTAIN CHARTER AND BYLAW PROVISIONS

We are subject to the "business combination" statute of the Delaware
General Corporation Law. This statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner, such as the approval of a
majority of certain members of the board of directors. The term "business
combination" includes mergers and stock and asset sales. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock.

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<PAGE> 73

The effect of this statute could, among other things, make it more difficult for
a third party to gain control of us, discourage bids for the common stock at a
premium or otherwise adversely affect the market price of the common stock.

LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY; INDEMNIFICATION

Our certificate of incorporation includes provisions that limit the
personal liability of our officers and directors for monetary damages for breach
of their fiduciary duties as directors, except for liability that cannot be
eliminated under the Delaware General Corporation Law. Our certificate of
incorporation provides that, to the fullest extent provided by the Delaware
General Corporation Law, our directors will not be personally liable for
monetary damages for breach of their fiduciary duty as directors. The Delaware
General Corporation Law does not permit a provision in a corporation's
certificate of incorporation that would eliminate such liability (i) for any
breach of their duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for any unlawful payment of a dividend or
unlawful stock repurchase or redemption, as provided in Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.

While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of a corporation only if he or she is a director of such corporation and
is acting in his or her capacity as director, and do not apply to the officers
of the corporation who are not directors.

Our bylaws provide that, to the fullest extent permitted by the Delaware
General Corporation Law, we may indemnify our directors, officers and employees.
Our bylaws further provide that we may similarly indemnify our agents. In
addition, we anticipate that each director will enter into an indemnification
agreement pursuant to which we will indemnify such director to the fullest
extent permitted by the Delaware General Corporation Law. At present, there is
no pending litigation or proceeding involving any of our directors or officers
in which indemnification is required or permitted, and we are not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.

REGISTRATION RIGHTS

The holders of an aggregate of approximately 15,267,230 shares of common
stock, have rights with respect to the registration of such shares under the
Securities Act. These registration rights have been waived in connection with
this offering in exchange for the inclusion of an aggregate of 928,728 of
certain holders' shares of common stock in the registration statement of which
this prospectus is a part. Additionally, previously, in connection with our
shelf registration statement (as discussed below) a stockholder exercised its
rights and elected to include 8,582 shares of common stock in such registration
statement. All of the holders of our 7 1/4% Convertible Subordinated Notes had
the right to have their 7 1/4% Convertible Subordinates Notes and the common
stock issuable upon conversion of such 7 1/4% Convertible Subordinated Notes
registered, pursuant to which obligation we filed a shelf-registration statement
on January 21, 1999. If the SEC declares the shelf-registration and this
registration statement effective, and assuming we comply with various other
requirements, the holders of approximately 14,338,502 shares of common stock
issued upon conversion of our preferred stock previously held by such holders
and 597,372 shares of common stock issued, or issuable upon exercise of a
warrant, to America Online (as further described below) will continue to hold
registration rights. These rights are held under the terms of several agreements
between us and various stockholders. Under the terms of these agreements, if we
propose to register any of our securities under the Securities Act, either for
our own account or for other security holders, we must give the holders of
registration rights notice of such registration and include a portion of their
shares of common stock in such registration at our expense. In addition, certain
holders of registration rights may require us to file a registration statement
under the Securities Act at our expense with respect to their shares of common
stock. We are required to use our commercially reasonable efforts to effect such
registration. All of these registration rights are subject to certain
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<PAGE> 74

conditions and limitations, among them the right of the underwriters of any
offering to limit the number of shares included in such registration and our
right not to effect a registration in certain specific situations. Under these
agreements, we have agreed to bear all registration expenses (other than
underwriting discounts and commissions and fees, and certain fees and
disbursements of counsel of the holders of registration rights subject to
certain limitations). We have agreed to indemnify the holders of registration
rights against certain liabilities under the Securities Act. We are bearing all
such costs related to the registration statement of which this prospectus is a
part.

Pursuant to a registration rights agreement with America Online, we granted
America Online certain registration rights with respect to the 238,949 shares of
common stock held by America Online as well as the 358,423 shares of common
stock issuable upon exercise of the warrant we issued to it in June 1998. We are
required to bear registration expenses (other than underwriting discounts and
commissions and fees) up to a specified limit and thereafter to bear our pro
rata share of such costs to the extent that we are selling shares in such
offering. We have also agreed to indemnify America Online against, and provide
contribution with respect to, certain liabilities under the Securities Act in
connection with incidental and demand registrations, and America Online has
agreed that it shall not sell or otherwise dispose or transfer any of our
securities for a period of 90 days from November 23, 1998, the date of our
initial sale of the 7 1/4% Convertible Subordinated Notes.

Pursuant to a registration rights agreement with the purchasers of our
7 1/4% Convertible Subordinated Notes, we must register for resale within 60
days after November 23, 1998, under the Securities Act, our 7 1/4% Convertible
Subordinated Notes and the shares of common stock into which our 7 1/4%
Convertible Subordinated Notes are convertible. In January 1999 we filed such
shelf registration and we will use our reasonable efforts to have such
registration statement declared effective as soon as practicable after it is
filed and, in any event, within 120 days after November 23, 1998. We will use
our reasonable efforts to keep it effective until the earliest of:

- two years after the filing date;

- the date when all the applicable securities have been registered under
the Securities Act and disposed of; and

- the date on which all the applicable securities have been sold to the
public pursuant to Rule 144 under the Securities Act.

The holders of our 7 1/4% Convertible Subordinated Notes wishing to sell
under this shelf registration statement will be required to provide certain
information with respect to the seller and the specifics of the sale. The
selling holders will be subject to certain of the civil liability provisions
under the Securities Act of 1933 in connection with such sales and be bound by
the provisions of the registration rights agreement which are applicable to such
selling holder (including certain indemnification obligations). At least five
business days prior to any intended resale, the selling holders must notify us
of such intention and provide us with such information with respect to such
holder and the intended distribution as may be reasonably required to amend the
shelf registration statement or supplement the prospectus.

We may suspend the use of the shelf registration statement for limited
periods under certain circumstances relating to pending corporate developments,
public filings with the Securities and Exchange Commission and similar events.
Subject to certain limitations, we have agreed to pay liquidated damages to all
holders of our 7 1/4% Convertible Subordinated Notes or common stock into which
our 7 1/4% Convertible Subordinated Notes may convert that have requested to
sell pursuant to the shelf registration statement if such registration statement
is not timely filed or declared effective, or if a stop order suspending such
registration statement or proceedings therefor have been initiated under the
Securities Act of 1933, or if the related prospectus is unavailable for periods
in excess of those set forth in the registration rights agreement. We have
further agreed, if such failure to file or unavailability continues for an
additional 30 day period, to pay liquidated damages to all such holders, whether
or not such holder has requested to sell pursuant to the shelf registration
statement. Liquidated damages will accrue until such time as there are no
triggering events which have occurred and are continuing at a rate equal to one
half of one percent (0.50%) per annum of the principal amount of our 7 1/4%
Convertible Subordinated Notes and will be payable on

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the interest payment dates for our 7 1/4% Convertible Subordinated Notes to the
persons in whose names the relevant securities were registered at the close of
business on the immediately preceding regular record dates for our 7 1/4%
Convertible Subordinated Notes.

With respect to each holder, our obligations to pay liquidated damages
remains in effect only so long as our 7 1/4% Convertible Subordinated Notes and
the common stock issuable upon the conversion of our 7 1/4% Convertible
Subordinated Notes held by such holder are "Registrable Securities" within the
meaning of the registration rights agreement. We will pay all expenses of this
registration statement and provide each holder that is selling hereunder copies
of this prospectus and take certain other actions as are required to permit,
subject to the foregoing, unrestricted resales of the applicable securities.

In connection with the proposed BuyDirect.com merger, the holders of our
common stock issued in connection with such merger, if completed, will have the
right to require us to file a registration statement with respect to such shares
15 days after the date on which we become eligible to file on form S-3. We have
the right to delay the filing of this registration statement until 30 days after
the completion of this offer, among other circumstances. Following effectiveness
of such registration statement, 5,103,449 shares of our common stock will be
eligible for immediate resale.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is BankBoston, N.A.
The transfer agent's address is 150 Royall Street, Canton, Massachusetts 02021
and telephone number is (781) 575-2000.

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SHARES ELIGIBLE FOR FUTURE SALES

Sales of a substantial number of shares of common stock in the public
market following the offering made by this prospectus could adversely affect
market prices prevailing from time to time. Furthermore, sales of substantial
amounts of common stock in the public market after various resale restrictions
lapse could adversely affect the prevailing market price and our ability to
raise equity capital in the future.

Upon the completion of this offering, 30,495,035 shares of common stock
will be outstanding (based on shares outstanding on December 31, 1998, and
assuming no exercise of the Underwriters' over-allotment option, no conversion
of our 7 1/4% Convertible Subordinated Notes into common stock, no exercise of
options or warrants after December 31, 1998 (except for 71,272 shares exercised
by John Pettitt for the purpose of selling such shares in the offering) and
excluding approximately 5,103,449 shares of our common stock that we will issue
to BuyDirect.com stockholders in exchange for their outstanding shares of
BuyDirect.com common stock or preferred stock and approximately 296,551 shares
of our common stock reserved for issuance upon exercise of options we are
assuming in connection with the proposed BuyDirect.com merger). Of these shares,
15,371,685 are freely tradable without restriction, including: 5,750,000 shares
previously registered and sold in public offerings; 4,000,000 shares registered
and sold in this offering; 5,621,685 shares sold or available to be sold in the
market in reliance on Rule 144(k) of the Securities Act. The remaining
15,123,350 shares were issued and sold by us in private transactions, and of
these shares, 14,018,396 are immediately available for sale pursuant to Rule 144
(subject, in certain cases, to the volume and other limitations of Rule 144) and
1,104,954 shares are available for sale at certain times after March 18, 1999
subject in some cases to restrictions under Rule 144. However, in connection
with this offering, certain holders of 14,708,129 shares of common stock
(including all of our directors and officers and all selling stockholders) have
entered into lock-up agreements under which they have agreed not to offer, sell
or otherwise dispose of any such shares of common stock, any such options or
warrants to acquire shares of common stock or any such securities convertible
into shares of common stock (or any shares of common stock issuable upon
exercise or conversion of such securities) owned by them for a period of 90 days
after the date of this prospectus. Credit Suisse First Boston may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to such lock-up agreements. Other than pursuant to an
agreement with John P. Pettitt, Credit Suisse First Boston currently has no
plans to release any portion of the securities subject to such lock-up
agreements. We have agreed that we will not, directly or indirectly, without the
prior written consent of Credit Suisse First Boston, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option right or warrant to purchase, or otherwise transfer or dispose of any
shares of common stock, or any securities convertible into or exchangeable for
common stock, for a period of 90 days from the date of this prospectus, except
that we may grant additional options under our 1995 Stock Option Plan or 1998
Stock Option Plan or issue shares of common stock upon exercise of our
outstanding options and warrants or upon conversion of our 7 1/4% Convertible
Subordinated Notes.

Pursuant to the Agreement and Plan of Merger between us and BuyDirect.com,
dated February 19, 1999, as amended and restated, the holders of our common
stock issued in connection with the merger, if completed, will have the right to
require us to file a registration statement with respect to such shares 15 days
after the date on which we become eligible to file on Form S-3. Following
effectiveness of such registration statement, 5,103,449 shares of our common
stock will be eligible for immediate resale.

In addition, in connection with the offering of our 7 1/4% Convertible
Subordinated Notes in November 1998, we agreed to register an additional
3,448,745 shares of our common stock issuable upon conversion of such notes on a
shelf registration statement within 60 days of November 23, 1998. We filed a
shelf-registration statement on January 21, 1999. When resold under the shelf
registration statement, all 3,448,745 shares of our common stock together with
8,582 shares of common stock also registered on the shelf registration statement
will be freely tradeable without restriction. As of the date hereof such
shelf-registration statement has not been declared effective.

In August 1998 the Company registered a total of 6,000,000 shares of common
stock issuable pursuant to outstanding stock options granted by the Company. As
of December 31, 1998, options for a total of 4,495,299 of these shares remained
outstanding and exercisable in accordance with the vesting schedules respective
to

75
<PAGE> 77

each. The shares issued upon exercise of such options shall be eligible for
immediate sale upon exercise. Additionally, John P. Pettitt holds immediately
exercisable options for 928,728 shares of our common stock, which shares may be
eligible for resale under Rule 701 of the Securities Act upon exercise.

The holders of substantially all of the shares of preferred stock issued
prior to our initial public offering and America Online have certain
registration rights that provide incidental or "piggyback" registration rights
that allow such holders, under certain circumstances, to include shares of
common stock in registration statements we or other stockholders initiate. Such
registration rights agreements also permit demand registrations on Form S-3
registration statements, provided we are eligible to register securities on such
form. The number of shares sold in the public market could increase if such
rights are exercised.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted shares" (as
defined in Rule 144) for at least one year (including the holding period of any
prior owner, except an affiliate) is entitled to sell, within any three month
period, a number of shares that does not exceed the greater of (i) one percent
of the number of shares of common stock then outstanding or (ii) the average
weekly trading volume of the common stock on the Nasdaq National Market during
the four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
an affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume and other limitation or notice provisions of Rule 144. In
general, under Rule 701 of the Securities Act as currently in effect, any
employee, consultant or advisor of ours who purchases shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell such shares 90 days after the effective date of our
initial public offering (which was completed in June 1998) in reliance on Rule
144, but without compliance with certain restrictions, including the holding
period, contained in Rule 144.

76
<PAGE> 78

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated March , 1999, we and the selling stockholders have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston
Robertson Stephens Inc. and C.E. Unterberg, Towbin are acting as representatives
the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
BancBoston Robertson Stephens Inc. .........................
C.E. Unterberg, Towbin......................................
--------
Total..................................................
========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering, if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an underwriter
defaults the purchase commitments of non-defaulting underwriters may be
increased or the offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase up to
600,000 additional shares of common stock at the offering price, less
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and, to certain
selling group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the offering, the public offering price
and concession and discount to dealers may be changed by the representatives.

The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.

<TABLE>
<CAPTION>
TOTAL
-------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by
Beyond.com...................................... $ $ $
Expenses payable by Beyond.com.................... $ $ $
Underwriting Discounts and Commissions paid by
Selling Stockholders............................ $ $ $
</TABLE>

We and certain of our directors, officers and stockholders have agreed that
we and they will not offer, sell, contract to sell, announce their intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act of 1933 relating to any additional shares of the common stock or securities
convertible into or exchangeable or exercisable for any shares of the common
stock, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 90 days after the date of this prospectus.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments that the
underwriters may be required to make in that respect.

Affiliates of C. E. Unterberg, Towbin are stockholders of Beyond.com, and
Steven P. Novak, formerly a Director and stockholder of Beyond.com, is a
Managing Director of C. E. Unterberg, Towbin ("Unterberg"). Global Retail
Partners, Inc. and its affiliates, each an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") are stockholders of Beyond.com, and
Linda Fayne Levinson, formerly a Director, is a

77
<PAGE> 79

principal of Global Retail Partners, Inc., an affiliate of DLJ and a stockholder
of Beyond.com. In March and April of 1998, certain entities affiliated with
Global Retail Partners acquired an aggregate of 458,106 shares of our common
stock. Certain affiliates of Donaldson, Lufkin & Jenrette, Inc. ("DLJ, Inc."),
the corporate parent of DLJ, and DLJ have an aggregate economic interest in
approximately 43,987 of such shares (the "Affiliated Shares"). The Affiliated
Shares are subject to an agreement with the National Association of Securities
Dealers that restricts the sale, transfer or hypothecation of such shares until
June 17, 1999. In March and April of 1998, certain entities affiliated with
Unterberg acquired an aggregate of 264,116 shares of our common stock.
Individuals who are affiliates of Unterberg have an aggregate economic interest
in approximately 35,064 of such shares (the "Affiliated Stock"). The Affiliated
Stock is subject to an agreement with the National Association of Securities
Dealers that restricts the sale, transfer or hypothecation of such shares until
June 19, 1999.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
shares of common stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of common stock originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. In
"passive" market making, market makers in the securities who are underwriters or
prospective underwriters may, subject to certain limitations, make bids for or
purchases of the securities until the time, if any, at which a stabilizing bid
is made. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

78
<PAGE> 80

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of the common stock in Canada must be made in accordance
with applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and the
dealer from whom such purchase confirmation is received that (i) such purchaser
is entitled under applicable provincial securities laws to purchase such common
stock without the benefit of a prospectus qualified under such securities laws,
(ii) where required by law, that such purchaser is purchasing as principal and
not as agent and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts and the
selling stockholders named in this prospectus may be located outside of Canada
and, as a result, it may not be possible for Canadian purchasers to effect
service of process within Canada upon the issuer or such persons. All or a
substantial portion of the assets of the issuer and such persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a judgment
against the issuer or such persons in Canada or to enforce a judgment obtained
in Canadian courts against such issuer or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17 a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

79
<PAGE> 81

LEGAL MATTERS

Certain legal matters will be passed on for us by our counsel, Morrison &
Foerster LLP, Palo Alto, California. As of the date of this prospectus, Richard
Scudellari, a partner in that firm, owns 70,000 shares of our common stock and
holds options to purchase 10,000 shares of our common stock. Certain legal
matters will be passed on for the underwriters by Venture Law Group, A
Professional Corporation, Menlo Park, California.

EXPERTS

The consolidated financial statements and financial statement schedule of
Beyond.com Corporation as of December 31, 1997 and 1998, and for each of the
three years in the period ended December 31, 1998, appearing in this prospectus
and registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

The consolidated financial statements of BuyDirect.com, Inc. at December
31, 1998 and for the period from March 31, 1998 (inception) to December 31, 1998
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

The financial statements of E-Commerce, a division of CNET, Inc., as of
December 31, 1997 and March 31, 1998 and for the year ended December 31, 1997
and the three months ended March 31, 1998 included in this prospectus have been
so included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

ADDITIONAL INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, in accordance therewith, file
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and Seven World Trade Center, 13th Floor, New York, NY 10048. Copies of
such material can be obtained from the Public Reference Section of the SEC upon
payment of certain fees prescribed by the SEC. The SEC's Web site contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of that site is
http://www.sec.gov. Our common stock is quoted on the Nasdaq National Market and
our reports, proxy statements and other information may also be inspected at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.

We have filed a Registration Statement on Form S-1 with the SEC under the
Securities Act in respect of the common stock offered hereby. This prospectus,
which is a part of the registration statement, omits certain information
contained in the registration statement as permitted by the SEC's rules and
regulations. For further information with respect to Beyond.com and the common
stock offered hereby, please reference the registration statement, including its
exhibits. Statements herein concerning the contents of any contract or other
document filed with the SEC as an exhibit to the registration statement are not
necessarily complete and are qualified in all respects by such reference. Copies
of the registration statement, including all exhibits and schedules thereto, may
be inspected without charge at the public reference facilities maintained by the
SEC, or obtained at prescribed rates from the Public Reference Section of the
SEC at the address set forth above.

80
<PAGE> 82

INDEX TO FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro forma Condensed Combined Statement of
Operations for the Year Ended December 31, 1998........... F-3
Unaudited Pro forma Condensed Combined Balance Sheet as of
December 31, 1998......................................... F-4
Notes to Unaudited Pro forma Condensed Combined Financial
Statements................................................ F-5

BEYOND.COM CORPORATION

Report of Ernst & Young LLP, Independent Auditors........... F-6
Consolidated Balance Sheets................................. F-7
Consolidated Statements of Operations and Comprehensive
Loss...................................................... F-8
Consolidated Statements of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Net Capital Deficiency)... F-9
Consolidated Statements of Cash Flows....................... F-10
Notes to Consolidated Financial Statements.................. F-11

BUYDIRECT.COM, INC.

Report of Independent Accountants........................... F-23
Consolidated Balance Sheet.................................. F-24
Consolidated Statement of Operations........................ F-25
Consolidated Statement of Stockholders' Deficit............. F-26
Consolidated Statement of Cash Flows........................ F-27
Notes to Consolidated Financial Statements.................. F-28

E-COMMERCE, A DIVISION OF CNET, INC.

Report of Independent Accountants........................... F-38
Balance Sheet............................................... F-39
Statement of Operations..................................... F-40
Statement of Division Equity................................ F-41
Statement of Cash Flows..................................... F-42
Notes to Financial Statements............................... F-43
</TABLE>

F-1
<PAGE> 83

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information for
Beyond.com set forth below gives effect to the acquisition of BuyDirect.com. The
historical financial information set forth below has been derived from, and is
qualified by reference to, the consolidated financial statements of Beyond.com
and BuyDirect.com, and should be read in conjunction with those financial
statements and the notes thereto included elsewhere herein.

On February 19, 1999, Beyond.com entered into an agreement to acquire
BuyDirect.com, whereby it will issue approximately 5,103,449 shares of its
common stock to BuyDirect.com stockholders in exchange for BuyDirect.com
outstanding common and preferred stock, and reserve for issuance upon exercise
of options we are assuming in connection with the BuyDirect.com merger
approximately 297,000 shares of our common stock. The transaction is subject to
customary closing conditions, including shareholder approval by BuyDirect.com's
stockholders, and is expected to be completed by the end of March 1999. The
unaudited pro forma condensed combined statement of operations data for the year
ended December 31, 1998 set forth below give effect to the acquisition as if it
occurred on January 1, 1998. The unaudited pro forma condensed combined balance
sheet as of December 31, 1998 set forth below gives effect to the acquisition of
BuyDirect.com as if it occurred on December 31, 1998.

The BuyDirect.com acquisition will be accounted for using the purchase
method of accounting. The Pro Forma Financial Statements have been prepared on
the basis of assumptions described herein.

Beyond.com expects to incur integration costs estimated at $3.5 million,
subsequent to the consummation of the acquisition. The Pro Forma Condensed
Combined Statements of Operations does not include the costs of integration, as
these costs will affect future operations and do not qualify as liabilities in
connection with a purchase business combination under EITF 95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination."

The unaudited pro forma condensed combined financial information set forth
herein combines the statement of operations of Beyond.com for the year ended
December 31, 1998, the E-Commerce, a division of CNET, Inc. (Predecessor
Business) ("E-Commerce Division") statement of operations for the three months
ended March 31, 1998 and the BuyDirect.com statement of operations for the
period from March 31, 1998 (Inception) through December 31, 1998 and reflects
certain adjustments, including among others, adjustments to reflect
BuyDirect.com product sales and cost of sales as if the amended reseller
agreements had been in place for the entire year and the amortization of
intangible assets and goodwill acquired and deferred compensation related to
assumed options. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes to the financial statements
of Beyond.com and BuyDirect.com which are included elsewhere herein. The
unaudited pro forma condensed combined financial information set forth below
does not purport to represent what the consolidated results of operations or
financial condition of Beyond.com would actually have been if the BuyDirect.com
acquisition and related transaction had in fact occurred on such date or to
project the future consolidated results of operations or financial condition of
Beyond.com.

F-2
<PAGE> 84

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
E-COMMERCE
DIVISION
FOR THE BUYDIRECT.COM
BEYOND.COM THREE FOR THE NINE
FOR THE YEAR MONTHS MONTHS
ENDED ENDED ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, PRO FORMA
1998 1998 1998 COMBINED ADJUSTMENTS TOTAL
------------ ---------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................ $ 36,650 $ 356 $ 1,829 $38,835 $ 2,444(7) $ 41,279
Cost of revenues........................ 31,074 -- 877 31,951 2,444(7) 34,395
-------- ----- ------- -------- -------- ------------
Gross profit............................ 5,576 356 952 6,884 -- 6,884
Operating expenses
Research and development.............. 4,201 390 1,456 6,047 -- 6,047
Sales and marketing................... 27,568 54 5,126 32,748 -- 32,748
General and administrative............ 4,943 245 1,545 6,733 -- 6,733
Goodwill and deferred compensation
amortization........................ -- -- -- -- 49,086(6) 49,086
-------- ----- ------- -------- -------- ------------
Total operating expenses................ 36,712 689 8,127 45,528 49,086 94,614
-------- ----- ------- -------- -------- ------------
Loss from operations.................... (31,136) (333) (7,175) (38,644) (49,086) (87,730)
Interest and other income............... 1,356 -- 6 1,362 -- 1,362
Interest expense........................ (1,293) -- (77) (1,370) -- (1,370)
-------- ----- ------- -------- -------- ------------
Net loss................................ (31,073) (333) (7,246) (38,652) (49,086) (87,738)
-------- ----- ------- -------- -------- ------------
Accretion of premium on redemption of
redeemable convertible preferred stock
in excess of purchase price........... (51) -- -- (51) -- --
-------- ----- ------- -------- -------- ------------
Net loss applicable to common
stockholders.......................... $(31,124) $(333) $(7,246) $(38,703) $(49,086) $ (87,738)
======== ===== ======= ======== ======== ============
Basic and diluted net loss per share.... $ (1.65) $ (3.66)(8)
======== ============
Weighted average shares of common stock
outstanding used in computing basic
and diluted net loss per share........ 18,900 5,103 24,003(8)
======== ======== ============
Pro forma basic and diluted net loss per
share................................. $ (1.28) $ (2.99)(8)
======== ============
Shares used in computing pro forma basic
and diluted net loss per share........ 24,276 5,103 29,379(8)
======== ======== ============
</TABLE>

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
F-3
<PAGE> 85

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
BEYOND.COM BUYDIRECT.COM COMBINED ADJUSTMENTS TOTAL
---------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 81,548 $ 341 $81,889 $ -- $ 81,889
Accounts receivable, net............................ 8,785 131 8,916 -- 8,916
Note receivable from a director..................... 270 -- 270 -- 270
Prepaid expenses and other current assets........... 6,201 772 6,973 -- 6,973
Cost of deferred revenue............................ 5,255 -- 5,255 -- 5,255
-------- ------ -------- -------- --------
Total current assets......................... 102,059 1,244 103,303 -- 103,303
Property and equipment, net........................... 3,150 1,049 4,199 -- 4,199
Goodwill and other intangible assets.................. 4,695 1,675 6,370 136,791(3) 144,622
3,500(2)
(2,039)(10)
-------- ------ -------- -------- --------
Total assets................................. $109,904 $3,968 $113,872 $138,252 $252,124
======== ====== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 14,443 $ 960 $15,403 $ -- $ 15,403
Payable to related parties.......................... -- 3,804 3,804 -- 3,804
Other accrued liabilities........................... 1,744 462 2,206 3,500(2) 5,706
Convertible promissory notes and accrued interest... -- 2,039 2,039 (2,039)(10)
Current obligations under capital leases............ -- 209 209 -- 209
Deferred revenue.................................... 5,744 -- 5,744 -- 5,744
-------- ------ -------- -------- --------
Total current liabilities.................... 21,931 7,474 29,405 1,461 30,866
Non current obligation under capital leases........... -- 106 106 -- 106
Promissory note and accrued interest payable to
related party....................................... -- 5,686 5,686 -- 5,686
Convertible notes payable............................. 63,250 -- 63,250 -- 63,250
Stockholders' equity (net capital deficiency)
Preferred stock..................................... 1 1 (1)(9)
Common stock........................................ 69,311 0 69,311 124,768(1) 201,394
4,590(5)
2,725(4)
Deferred compensation............................... (2,226) (557) (2,783) (4,590)(5) (6,816)
557(9)
Accumulated deficit................................. (42,362) (8,742) (51,104) 8,742(9) (42,362)
-------- ------ -------- -------- --------
Total stockholders' equity (net capital
deficiency)................................ 24,723 (9,298) 15,425 136,791 152,216
-------- ------ -------- -------- --------
Total liabilities and stockholders' equity
(net capital deficiency)................... $109,904 $3,968 $113,872 $138,252 $252,124
======== ====== ======== ======== ========
</TABLE>

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
F-4
<PAGE> 86

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

Pro forma adjustments for the unaudited pro forma condensed combined
balance sheet as of December 31, 1998 and statements of operations for the year
ended December 31, 1998 are as follows:

(1) Represents the issuance of one share of Beyond.com in exchange
for the equivalent number of outstanding shares of BuyDirect.com pursuant
to the merger agreement, excluding common shares reserved for issuance upon
exercise of options assumed, at a per share value of $25.74 (based upon the
average of Beyond.com common stock closing prices for the five trading days
immediately preceding and following the February 19, 1999 announcement of
the merger).

(2) Represents acquisition costs incurred in conjunction with the
merger.

(3) Reflects the preliminary allocation of the purchase price and
the amortization of the cost of intangible assets and goodwill acquired in
the BuyDirect.com acquisition. The preliminary allocation has resulted in
intangible assets, including marketing agreements, customer base, assembled
workforce, technology and covenants not to compete, estimated at
approximately $13 million and estimated goodwill of approximately $127
million, which is being amortized over periods of one to three and one half
years.

The total estimated purchase price for the BuyDirect.com acquisition
has been allocated on a preliminary basis to assets and liabilities based
on management's best estimates of their fair value with the excess costs
over the net assets acquired allocated to intangible assets and goodwill.
This allocation is subject to change pending a final analysis of the value
of the assets acquired and, liabilities assumed, upon closure of the
acquisition. The impact of such changes could be material.

(4) Represents the fair value assigned to assumed vested stock
options of BuyDirect.com as part of the total purchase price.

(5) Represents the deferred compensation assigned to assumed unvested
options of BuyDirect.com, which is being amortized over the vesting period
of the related options.

(6) Reflects the amortization of the intangible assets and goodwill
and deferred compensation referred to in notes 3 and 5 above.

(7) Reflects BuyDirect.com and E-Commerce Division product sales and
cost of sales on a gross basis as if the amended reseller agreements had
been in place for the entire fiscal year. Prior to November 1998, product
sales consisted of electronic copies of software sold pursuant to agency
agreements. Accordingly, revenues prior to November 1998 include only
commissions earned by BuyDirect.com and E-Commerce Division. In November
1998, BuyDirect.com amended its reseller agreements and began recognizing
product sales and cost of sales on a gross basis.

(8) Pro forma net loss reflects the impact of the adjustments above.
Basic and diluted net loss per share (pro forma) is computed using the
weighted-average number of shares of common stock outstanding after the
issuance of Beyond.com Common Stock to acquire the outstanding shares of
BuyDirect.com Common Stock. Pro forma basic and diluted net loss per share
(pro forma) includes the weighted average shares described above plus it
gives effect to the assumed conversion of redeemable convertible preferred
stock from the date of issuance through the date of the initial public
offering of Beyond.com in 1998. Dilutive options and warrants, and shares
related to the convertible notes payable are excluded from the computation
during loss periods as their effect is antidilutive.

(9) Reflects elimination of BuyDirect.com stockholders' equity.

(10) Reflects the elimination of convertible promissory notes payable
which were converted prior to the acquisition and are included in shares
issued to BuyDirect.com.

F-5
<PAGE> 87

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Beyond.com Corporation

We have audited the accompanying consolidated balance sheets of Beyond.com
Corporation as of December 31, 1997 and 1998, and the related consolidated
statements of operation and comprehensive loss, redeemable convertible preferred
stock and stockholders' equity (net capital deficiency), and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Beyond.com
Corporation at December 31, 1997 and 1998, and the consolidated results of its
operation and comprehensive loss and its cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.

/s/ ERNST & YOUNG LLP

San Jose, California
January 11, 1999

F-6
<PAGE> 88

BEYOND.COM CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 2,571 $ 81,548
Accounts receivable, net of allowances of $275 and $878 at
December 31, 1997 and 1998................................ 1,181 8,785
Note receivable from a director............................. -- 270
Prepaid expenses and other current assets................... 516 6,201
Cost of deferred revenue.................................... 4,938 5,255
-------- --------
Total current assets.............................. 9,206 102,059
Property and equipment, net................................. 380 3,150
Other noncurrent assets..................................... -- 4,695
-------- --------
Total assets...................................... $ 9,586 $109,904
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 2,256 $ 14,443
Other accrued liabilities................................. 270 1,744
Current obligations under capital leases.................. 18 --
Deferred revenue.......................................... 5,569 5,744
-------- --------
Total current liabilities......................... 8,113 21,931
Note payable to a shareholder and director.................. 60 --
Noncurrent obligations under capital leases................. 39 --
Convertible notes payable................................... -- 63,250
Commitments and contingencies
Redeemable convertible preferred stock, no par value,
issuable in series:
Authorized shares -- 10,000,000 in 1997
Issued and outstanding shares -- 7,022,558 in 1997........ 12,565 --
Stockholders' equity (net capital deficiency)
Preferred stock, no par value: Authorized
shares -- 15,000,000 in 1998........................... -- --
Common stock, no par value:
Authorized shares -- 30,000,000 in 1997 and 50,000,000 in
1998
Issued and outstanding shares -- 9,070,000 in 1997 and
27,423,763 in 1998..................................... 47 69,311
Deferred compensation....................................... -- (2,226)
Accumulated deficit......................................... (11,238) (42,362)
-------- --------
Total stockholders' equity (net capital
deficiency)...................................... (11,191) 24,723
-------- --------
Total liabilities and stockholders' equity (net
capital deficiency).............................. $ 9,586 $109,904
======== ========
</TABLE>

See accompanying notes.
F-7
<PAGE> 89

BEYOND.COM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Net revenues................................................ $5,858 $16,806 $36,650
Cost of revenues............................................ 5,137 14,873 31,074
------ ------- -------
Gross profit................................................ 721 1,933 5,576
Operating expenses:
Research and development.................................. 431 1,060 4,201
Sales and marketing....................................... 704 1,696 27,568
General and administrative................................ 450 1,087 4,943
------ ------- -------
Total operating expenses.......................... 1,585 3,843 36,712
------ ------- -------
Loss from operations........................................ (864) (1,910) (31,136)
Interest and other income................................... 96 173 1,356
Interest expense............................................ (11) (6) (1,293)
------ ------- -------
Loss from continuing operations............................. (779) (1,743) (31,073)
Loss from discontinued operations........................... (736) (3,616) --
------ ------- -------
Net loss and comprehensive net loss......................... (1,515) (5,359) (31,073)
Accretion of premium on redemption of redeemable convertible
preferred stock in excess of purchase price............... (101) (101) (51)
------ ------- -------
Net loss applicable to common stockholders.................. $(1,616) $(5,460) $(31,124)
====== ======= =======
Basic and diluted net loss per share from continuing
operations................................................ $(0.10) $ (0.21) $ (1.65)
Basic and diluted net loss per share from discontinued
operations................................................ (0.08) (0.40) --
------ ------- -------
Basic and diluted net loss per share........................ $(0.18) $ (0.61) $ (1.65)
====== ======= =======
Weighted average shares of common stock outstanding used in
computing basic and diluted net loss per share............ 9,000 9,000 18,900
====== ======= =======
Pro forma basic and diluted net loss per share from
continuing operations..................................... $ (0.10) $ (1.28)
Pro forma basic and diluted net loss per share from
discontinued operations................................... (0.20) --
------- -------
Pro forma basic and diluted net loss per share.............. $ (0.30) $ (1.28)
======= =======
Shares used in computing pro forma basic and diluted net
loss per share............................................ 17,828 24,276
======= =======
</TABLE>

See accompanying notes.
F-8
<PAGE> 90

BEYOND.COM CORPORATION

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
REDEEMABLE -----------------------------------------------------------------------
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK STOCKHOLDERS EQUITY
--------------------- -------------------- DEFERRED ACCUMULATED (NET CAPITAL
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT DEFICIENCY)
---------- -------- ---------- ------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995.... 1,437,500 $ 651 9,000,000 $ 45 $ $(838) $ (793)
Issuance of Series A redeemable
convertible preferred stock at
$0.91 per share............... 164,835 150 -- -- -- -- --
Issuance of Series A redeemable
convertible preferred stock at
$0.91 per share for the
conversion of notes payable
and accrued interest and for
services received............. 383,185 349 -- -- -- -- --
Issuance of Series B redeemable
convertible preferred stock at
$2.70 per share, net.......... 2,037,038 5,144 -- -- -- -- --
Accretion of premium on
redemption of redeemable
convertible preferred stock in
excess of purchase price...... -- 101 -- -- -- (101) (101)
Net loss........................ -- -- -- -- -- (1,515) (1,515)
---------- -------- ---------- ------- ------- -------- --------
Balance at December 31, 1996.... 4,022,558 6,395 9,000,000 45 (2,454) (2,409)
Issuance of Series C redeemable
convertible preferred stock at
$2.04 per share, net.......... 3,000,000 6,069 -- -- -- -- --
Issuance of common stock upon
exercise of options under
employee stock option plan.... -- -- 70,000 2 -- -- 2
Accretion of premium on
redemption of redeemable
convertible preferred stock in
excess of purchase price...... -- 101 -- -- -- (101) (101)
Spin-off of CyberSource to
stockholders on December 31,
1997.......................... -- -- -- -- -- (3,324) (3,324)
Net loss........................ -- -- -- -- -- (5,359) (5,359)
---------- -------- ---------- ------- ------- -------- --------
Balance at December 31, 1997.... 7,022,558 12,565 9,070,000 47 -- (11,238) (11,191)
Issuance of common stock upon
exercise of options under
employee stock option plan.... -- -- 165,852 28 -- -- 28
Issuance of Series D redeemable
convertible preferred stock at
$2.60 per share, net.......... 1,153,846 2,924 -- -- -- -- --
Accretion of premium on
redemption of redeemable
convertible preferred stock in
excess of purchase price...... -- 51 -- -- -- (51) (51)
Conversion of redeemable
convertible preferred stock to
common stock upon the initial
public offering............... (8,176,404) (15,540) 12,198,962 15,540 -- -- 15,540
Issuance of warrant to AOL...... -- -- -- 1,075 -- -- 1,075
Shares issued upon the initial
public offering, net.......... -- -- 5,750,000 46,830 -- -- 46,830
Shares issued in a private
placement..................... -- -- 238,949 2,000 -- 2,000
Deferred compensation resulting
from the grant of options..... -- -- -- 3,791 (3,791) -- --
Amortization of deferred
compensation.................. -- -- -- -- 1,565 -- 1,565
Net loss and comprehensive net
loss.......................... -- -- -- -- -- (31,073) (31,073)
---------- -------- ---------- ------- ------- -------- --------
Balance at December 31, 1998.... -- $ -- 27,423,763 $69,311 $(2,226) $(42,362) $ 24,723
========== ======== ========== ======= ======= ======== ========
</TABLE>

See accompanying notes.
F-9
<PAGE> 91

BEYOND.COM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(1,515) $(5,359) $(31,073)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 19 79 6,613
Amortization of deferred compensation and other........... 49 -- 1,565
Amortization of debt issuance costs....................... -- -- 113
Net loss of discontinued operations....................... 736 3,616 --
Changes in assets and liabilities:
Accounts receivable....................................... (202) (750) (7,604)
Prepaid expenses and other current assets................. (50) (440) (11,490)
Cost of deferred revenue.................................. (819) (4,120) (317)
Other noncurrent assets................................... -- -- (1,068)
Accounts payable.......................................... 345 1,720 12,187
Other accrued liabilities................................. (28) 172 1,474
Deferred revenue.......................................... 967 4,602 175
Cash provided by (used for) discontinued operations....... (6) 181 --
------- ------- --------
Net cash used in operating activities....................... (504) (299) (29,425)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (16) (333) (3,280)
Issuance of note receivable to director..................... -- -- (270)
Cash used for discontinued operations....................... (1,292) (4,611) --
Net cash used in investing activities....................... (1,308) (4,944) (3,550)
FINANCING ACTIVITIES
Proceeds from issuance of convertible notes payable......... -- -- 63,250
Payments for debt issuance costs............................ -- -- (2,963)
Repayment of note payable to related party.................. -- (45) (60)
Repayment of capital leases obligations..................... -- (3) (57)
Proceeds from sale of redeemable convertible preferred
stock, net................................................ 5,294 6,069 2,924
Proceeds from sale of common stock, net..................... -- -- 48,830
Proceeds from exercise of stock options..................... -- 2 28
Cash used for discontinued operations....................... -- (1,946) --
------- ------- --------
Net cash provided by financing activities................... 5,294 4,077 111,952
------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 3,482 (1,166) 78,977
Cash and cash equivalents at beginning of period............ 255 3,737 2,571
------- ------- --------
Cash and cash equivalents at end of period.................. $ 3,737 $ 2,571 $ 81,548
======= ======= ========
SUPPLEMENTAL SCHEDULES OF CASH FLOW INFORMATION
Interest paid............................................... $ -- $ 6 $
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Issuance of Series A redeemable convertible preferred stock
upon conversion of notes payable.......................... $ 300 $ -- $ --
Issuance of Warrant to AOL.................................. $ -- $ -- $ 1,075
Deferred compensation related to stock option grants........ $ -- $ -- $ 3,791
Issuance of common stock upon conversion of preferred
stock..................................................... $ -- $ -- $ 15,540
</TABLE>

See accompanying notes.
F-10
<PAGE> 92

BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Beyond.com Corporation (the "Company") was incorporated in the state of
California as CyberSource Corporation on August 12, 1994. In April 1998, the
Company changed its name to software.net Corporation. In June 1998, the Company
reincorporated in Delaware as software.net Corporation. In December 1998, the
Company changed its name to Beyond.com. The Company is engaged in the resale of
commercial off-the-shelf software ("Software") via the Internet. On December 31,
1997, the Company distributed capital stock of its wholly owned subsidiary,
CyberSource Corporation ("CyberSource"), in the form of a dividend to all
existing stockholders of the Company. The accompanying consolidated financial
statements have been prepared to reflect CyberSource as a discontinued operation
(see Note 2).

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company's revenues are primarily derived from sales of Software to
customers using credit cards, to corporate customers that are invoiced directly
under credit terms, to various U.S. government agencies pursuant to contractual
arrangements and, to a lesser extent, amounts received from Software publishers
for advertising and promotion. Revenue from the sale of Software, net of
estimated returns, is recognized upon either shipment of the physical product or
delivery of electronic product, at which time, collectibility is probable and
the Company has no remaining obligations. Revenue from the sale of Software
under contracts with the U.S. government require continuing service, support and
performance by the Company, and accordingly, the related revenues and costs are
deferred and recognized over the period the service, support and performance are
provided. Revenues derived from Software publishers for advertising and
promotion are recognized as the services are provided. Costs of deferred revenue
relate to Software licenses purchased from Software publishers for sales to U.S.
government agencies.

In May 1997, the Financial Accounting Standards Board approved the American
Institute of Certified Public Accountants Statement of Position, "Software
Revenue Recognition" (SOP 97-2). SOP 97-2 provides revised and expanded guidance
on software revenue recognition and applies to all entities that earn revenue
from licensing, selling, or otherwise marketing computer software. SOP 97-2 is
effective for transactions entered into in fiscal years beginning after December
15, 1997. The application of SOP 97-2 has not had a material impact on the
Company's results of operations.

During fiscal 1998, the Financial Accounting Standard Board approved the
American Institute of Certified Public Accountants Statements of Position,
"Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
Recognition" (SOP 98-4) and "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions" (SOP 98-9) which provide
revised and expanded guidance with respect to vendor specific objective evidence
as defined by SOP 97-2. SOP 98-4 and SOP 98-9 are effective for transactions
entered into after March 31, 1998 and fiscal years beginning after March 15,
1999, respectively. The application of SOP 98-4 and SOP 98-9 has not had a
material impact on the Company's results of operations.

F-11
<PAGE> 93
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Research and Development

Research and development expenditures are generally charged to operations
as incurred. Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility. In the Company's case,
capitalization would begin upon completion of a working model as the Company
does not prepare detailed program designs as part of the development process.
Through December 31, 1998, there were no significant capitalizable software
development costs incurred and, as a result, all such costs have been expensed
as incurred.

Advertising Expense

The costs of advertising are recorded as an expense when incurred or upon
the first showing of the advertisement. Advertising costs for the years ended
December 31, 1996, 1997, and 1998 were approximately $98,000, $178,000, and
$8,500,000, respectively. Amounts capitalized for future advertising were none
and $515,000, at December 31, 1997 and 1998, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity from the date of purchase of three months or less to be cash
equivalents. As of December 31, 1997 and 1998, cash equivalents consist
primarily of investments in money market accounts and cost approximates fair
market value. The Company places its cash and cash equivalents in high-quality
U.S. financial institutions and, to date, has not experienced losses on any of
its investments.

Concentration of Credit Risk and Other Risks

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents and accounts
receivables. The Company operates in one business segment and sells Software and
advertising primarily in the United States to consumers, various companies
across several industries and certain U.S. government agencies. The Company
generally does not require collateral. The Company maintains allowances for
credit losses and customer returns, and such losses have been within
management's expectations. For each of the years ended December 31, 1997 and
1998, U.S. government agencies, principally the Defense Logistics Agency,
accounted for 33% and 29% of revenues, respectively. There were no government
customers accounting for greater than 10% of revenues in 1996. As of December
31, 1998, 65% and 12% of accounts receivable was comprised of sales to U.S.
government agencies and one corporate customer, respectively.

The Company's contracts with the U.S. government are subject to annual
review and renewal by the applicable government entity, and may be terminated,
without cause, at any time.

The Company's success depends in large part on digital downloading as a
method of selling Software over the Internet. If digital downloading does not
achieve widespread market acceptance, the Company's results of operations will
be materially adversely affected. In addition, there can be no assurance that
the Company will overcome the substantial existing and future technical
challenges associated with digital downloading reliably and consistently on a
long-term basis.

F-12
<PAGE> 94
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Property and Equipment

Property and equipment are stated at cost and are depreciated on a
straight-line basis over estimated useful lives of three years. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term or the estimated useful lives. Property and equipment consist of the
following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1998
---- ------
<S> <C> <C>
Computer equipment and software............................. $257 $2,450
Furniture and fixtures...................................... 122 1,010
Office equipment............................................ 70 77
Leasehold improvements...................................... 29 221
---- ------
478 3,758
Less accumulated depreciation and amortization.............. (98) (608)
---- ------
$380 $3,150
==== ======
</TABLE>

Accounting for Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB Opinion No. 25), and related
interpretations in accounting for its employee stock options because, as
discussed in Note 8, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB Opinion No. 25,
when the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized. See pro forma disclosures of applying FAS 123 included in
Note 8.

Net Loss Per Share and Pro forma Net Loss Per Share

Net loss per share is presented under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (FAS 128). FAS 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Earnings per share amounts for all
periods have been presented to conform to FAS 128 requirements. Potentially
dilutive securities have been excluded from the computation as their effect is
antidilutive.

Pro forma net loss per share has been computed as described above and also
gives effect, under Securities and Exchange Commission guidance, to the
conversion of redeemable convertible preferred shares not included above that
automatically converted upon completion of the Company's initial offering (using
the if-converted method).

F-13
<PAGE> 95
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pro forma basic and diluted net loss per share is as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-------------------
1997 1998
------- --------
<S> <C> <C>
Net loss.................................................... $(5,359) $(31,073)
======= ========
Shares used in computing basic and diluted net loss per
share..................................................... 9,000 18,900
Adjustments to reflect the effect of the assumed conversion
of redeemable convertible preferred stock from the date of
issuance through the date of the initial public offering
in 1998................................................... 8,828 5,376
Weighted average shares used in computing pro forma basic
and diluted net loss per share............................ 17,828 24,276
======= ========
Pro forma basic and diluted net loss per share.............. $ (0.30) $ (1.28)
======= ========
</TABLE>

If the Company had reported net income, diluted earnings per share would
have included the shares used in the computation of pro forma net loss per share
as well as an additional approximately 1,577,000, 1,879,000, and 2,965,000
common equivalent shares related to the outstanding options and warrants
(determined using the treasury stock method) for the years ended December 31,
1996, 1997 and 1998, respectively, and an additional 3,449,000 shares in 1998
related to the convertible notes payable not included above (using the "if
converted" method).

Income Taxes

Income taxes are calculated under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under FAS
109, the liability method is used in accounting for income taxes, which includes
the effects of temporary differences between financial and taxable amounts of
assets and liabilities.

Segment Information

The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS 131)
in the fiscal year ended December 31, 1998. FAS 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. FAS 131 also establishes
standards for related disclosures about products and services, and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision making group, in making decisions
how to allocate resources and assess performance. The Company's chief decision
maker, as defined under FAS 131, is the Chief Executive Officer. To date, the
Company has viewed the Company's operations as principally one segment, Software
sales. Additionally, the Company derives an immaterial amount of revenue from
non-domestic sources. As a result, the financial information disclosed herein,
materially represents all of the financial information related to the Company's
principal operating segment.

Internally Used Software

In March 1998, the Financial Accounting Standards Board approved American
Institute of Certified Public Accountants Statement of Position, "Accounting for
Computer Software Developed For or Obtained For Internal-Use" (SOP 98-1). SOP
98-1 provides revised guidance for the accounting treatment for software which
is internally developed, acquired, or modified solely to meet the entity's
internal needs. SOP 98-1 applies to all non-governmental entities and is
effective for all activities in fiscal years beginning after

F-14
<PAGE> 96
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 15, 1998. The Company does not expect SOP 98-1 to have a material
effect on its financial statements or results of operations.

2. DISCONTINUED OPERATIONS

On December 31, 1997, the Company and its stockholders approved a transfer
of assets and liabilities to its wholly owned subsidiary, CyberSource, and the
distribution of CyberSource capital stock, (the "Spin-off"), in the form of a
dividend to the Company's existing stockholders, on a pro rata basis such that
the stockholders of CyberSource were the same as the stockholders of the Company
at the time of the distribution. Revenues of CyberSource were $170,000 and
$1,128,000 for the years ended December 31, 1996 and 1997, respectively. The
results of operation of the discontinued business have been presented as a loss
from discontinued operations.

The components of net assets at the time of the Spin-off on December 31,
1997 are summarized as follows (in thousands):

<TABLE>
<S> <C>
Assets:
Cash and cash equivalents................................. $2,000
Accounts receivable....................................... 606
Prepaid expenses and other assets......................... 118
Property and equipment.................................... 1,152
Less liabilities:
Accounts payable and accrued liabilities.................. 397
Deferred revenue and other................................ 155
------
Net assets.................................................. $3,324
======
</TABLE>

3. MARKETING AGREEMENTS

During 1997 and 1998, the Company entered into marketing agreements with
America Online, Inc. ("AOL"), Excite, Inc. ("Excite"), Netscape Communications
Corporation ("Netscape") and Network Associates, Inc. ("Network Associates").

The AOL Agreement is for a term of 42 months beginning March 1998, unless
earlier terminated, and provides for a marketing relationship between AOL and
the Company. Pursuant to this agreement, the Company will be the exclusive
provider of electronically delivered Software on certain screens on the AOL
Service and aol.com to AOL customers through links to the Company's Web site
from various AOL Web pages. During the term, AOL is obligated to deliver a
cumulative number of Impressions (as defined in the agreement), with various
cumulative targets throughout the duration of the agreement term. If AOL does
not provide certain cumulative targeted Impressions, AOL will be required to
refund a portion of the fees paid by the Company under this agreement (or under
some circumstances, as outlined in this agreement, AOL will have the option to
extend the term and deliver the Impressions by the end of that extended term).
Upon conclusion of the initial 42 month term, AOL will have the right to renew
the agreement for two successive one-year terms.

The Excite agreement is for a term of 36 months beginning April 1998
pursuant to which the Company will be the exclusive Software reseller on certain
screens within certain channels of Excite's Web site.

The Netscape agreement is for a term of 24 months beginning August 1997,
pursuant to which the Company created and manages an online Software store
accessible through Netscape's Internet site.

The Company has entered into various contracts with Network Associates in
1997 and 1998. In September 1997, the Company and Network Associates entered
into an agreement whereby the Company

F-15
<PAGE> 97
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

agreed to electronically distribute Network Associates products. In September
1998, the Company and Network Associates entered into agreements whereby the
Company agreed to co-host certain websites with Network Associates and whereby
the Company agreed to operate and manage certain aspects of Network Associates'
website. Pursuant to these agreements, the Company and Network Associates have
developed an interdependent relationship whereby the Company resells Network
Associates' products. Furthermore, the Company has significant fixed financial
obligations to Network Associates under the Co-Hosting Agreement based on
certain exclusivity rights.

These marketing agreements provide for payments totaling $8,963,000 in
1999, $10,213,000 in 2000 and $1,163,000 in 2001. During 1998, the Company made
payments totaling $10,613,000 under these agreements.

Under these agreements, once the Company has generated a certain cumulative
net gross margin from Software sales, the Company will pay specified percentages
of the gross transaction margins from all subsequent software sales transactions
and a percentage of certain advertising revenues. As of December 31, 1998, none
of these net gross margin targets have been achieved.

The amounts paid under the AOL, Netscape and Network Associates agreements
are being amortized to sales and marketing expenses on a straight-line basis
over the period from the launch dates to the termination dates of the services.
The periods of amortization are March 1998 to August 2001; August 1997 to July
1999; and September 1998 to August 2001 for AOL, Netscape and Network
Associates, respectively. The amounts paid under the Excite agreement are being
expensed to sales and marketing expenses as the payments become due over the
contract term beginning from the launch date of the services. The period of
amortization for this agreement is April 1998 to March 2001. The Company has
expensed $104,000 and $6,700,000 related to these agreements in 1997 and 1998,
respectively. Total amounts capitalized under these agreements at December 31,
1997 and 1998 were none and $4,100,000, respectively.

The Company also entered into a Common Stock and Warrants Subscription
Agreement which provided for the sale of $2,000,000 of common stock to AOL
immediately prior to the closing of an initial public offering ("IPO") at the
price paid by the Underwriters in the IPO. At the completion of the IPO and the
purchase by AOL of the $2,000,000 of common stock, the Company issued a common
stock warrant (the "IPO Warrant"). The IPO Warrant vests in increments of 1/36
per month commencing March 1, 1998. The IPO Warrant was issued for the purchase
of 358,423 shares of common stock at an exercise price per share of $8.37 and
such shares are non-forfeitable.

The Company has determined the fair value of the IPO Warrant at the time of
issuance to be approximately $1,075,000 in total and recorded this amount as
additional purchase price for the marketing rights under the marketing
agreement. The value of the warrant is being amortized on a consistent basis
with the marketing rights as described above. The Company amortized $298,000 of
the IPO Warrant value to sales and marketing expense in 1998.

4. BORROWINGS

In September 1995, the Company issued notes payable of $300,000. In
February 1996, the $300,000 of principal and $11,000 of accrued interest were
converted into 341,426 shares of Series A preferred stock at a price of $0.91
per share.

The Company entered into a credit agreement (the "Credit Agreement") with
Deutsche Bank AG ("Deutsche Bank") in May 1998. Pursuant to the Credit
Agreement, on May 21, 1998, Deutsche Bank issued a standby letter of credit to
the Company in the amount of approximately $600,000 (the "Credit Facility") and
loaned the Company approximately an additional $4,200,000 (the "Loan"). The Loan
bore interest at a rate equal to the higher of (i) the daily Federal Funds Rate
plus 0.5% per annum or (ii) Deutsche Bank daily prime lending rate ("Base
Rate"), plus 3.0%, per annum. The Company was also required to pay a standby
letter of credit fee equal to a percentage of the face amount of the Credit
Facility equal to the Base Rate plus
F-16
<PAGE> 98
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3% less the LIBOR rate for a three-month loan. In conjunction with the Credit
Agreement, the Company also paid Deutsche Bank an upfront fee of $120,000 and
credit line fees equal to 7.5% totaling $18,000. All amounts borrowed under this
agreement were paid by the Company on November 16, 1998.

5. CONVERTIBLE NOTES PAYABLE

In November and December 1998, the Company issued unsecured convertible
subordinated notes payable with an aggregate principal amount of $63,250,000.
The notes bear an annual interest rate of 7.25% and mature on December 1, 2003.
Interest on the notes is payable semi-annually commencing on June 1, 1999. The
notes are convertible into common stock at the option of the holder at any time
prior to December 2, 2003 at the conversion price of $18.34 per share. As of
December 31, 1998, the difference between the carrying value and the fair value
of the notes payable was immaterial based upon the minimal change in interest
rates from the dates of issuance to fiscal year end. There are no financial
covenants associated with the notes payable.

At any time on or after December 6, 2001 the notes will be redeemable at
the option of the Company at the specified redemption price equal to a
percentage of the principal amount, plus accrued interest. The Company shall
redeem such notes at a price equal to 101.813% of the principal on or before
November 30, 2002. Subsequent to this date the notes shall be redeemed at a
price equal to 100% of the principal amount of the notes.

6. OPERATING LEASE COMMITMENTS

The Company leases or subleases facilities and certain equipment under
noncancelable operating leases expiring at various dates through 2003. The
Company does not have an option to renew or extend the term of the sublease
related to the Company's principal administrative, engineering, marketing and
customer service facility which expires in 2003. Rental expense was
approximately $101,000, $266,000, and $1,228,000 for the years ended December
31, 1996, 1997, and 1998, respectively.

Future minimum lease payments under noncancelable operating leases are as
follows as of December 31, 1998 (in thousands):

<TABLE>
<S> <C>
1999....................................................... $ 2,461
2000....................................................... 2,484
2001....................................................... 2,277
2002....................................................... 2,285
2003....................................................... 1,043
-------
Total minimum lease payments..................... $10,550
=======
</TABLE>

7. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Redeemable convertible preferred stock at December 31, 1997 is as follows
by series:

<TABLE>
<CAPTION>
DESIGNATED SHARES ISSUED
SHARES AND OUTSTANDING
---------- ---------------
<S> <C> <C>
A......................................... 1,985,520 1,985,520
B......................................... 2,500,000 2,037,038
C......................................... 3,000,000 3,000,000
D......................................... 1,523,424 --
--------- ---------
Total preferred stock........... 9,008,944 7,022,558
========= =========
</TABLE>

F-17
<PAGE> 99
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In March and April 1998, the Company sold 1,153,846 shares of Series D
redeemable convertible preferred stock at $2.60 per share.

Each share of preferred stock was convertible at any time at the option of
the holder into shares of common stock at the then effective conversion price.
Each outstanding share of Series A, B, C, and D redeemable convertible preferred
stock was convertible into 2.00, 2.00, 1.00, and 1.00 shares of common stock,
respectively, and was subject to adjustment as specified in the Articles of
Incorporation. Upon the Company's initial public offering, all outstanding
shares of preferred stock converted into 12,198,962 shares of common stock.
There have been no dividends declared or payable by the Company.

8. STOCKHOLDERS' EQUITY

Common Shares

The Company is authorized to issue 50,000,000 shares of common stock.
Holders of common stock are entitled to one vote per share on all matters to be
voted upon by the stockholders of the Company. Subject to the preferences that
may be applicable to any outstanding shares of preferred stock, the holders of
common stock are entitled to receive ratably such dividends, if any, that may be
declared by the Board of Directors.

The Company has reserved shares of common stock for future issuance at
December 31, 1998 as follows:

<TABLE>
<S> <C>
1995 and 1998 Stock Option Plans:
Options outstanding....................................... 4,495,299
Options available for future grant........................ 268,849
Options granted outside of the Plan....................... 1,000,000
Outstanding warrants...................................... 358,422
---------
6,122,570
=========
</TABLE>

Stock Option Plans

The Company's 1995 Stock Option Plan was adopted by the Company on January
5, 1995. There are 3,000,000 shares of common stock authorized for issuance
under such plan. On April 4, 1998, the Company's Board of Directors and
stockholders adopted the 1998 Stock Option Plan and reserved an aggregate of
2,000,000 shares of Common Stock for grants of stock options under such plan.
These plans (collectively "the Plans") provide for the issuance of common stock
and granting of options to employees, officers, directors, consultants,
independent contractors, and advisors of the Company. The exercise price of a
nonqualifying stock option and an incentive stock option shall not be less than
85% and 100%, respectively, of the fair value of the underlying shares on the
date of grant. Options granted under the Plans generally vest over four years at
the rate of 25% one year from the grant date and ratably every month thereafter.

In conjunction with the Spin-off of CyberSource on December 31, 1997,
employees of the Company maintained their outstanding options to purchase common
shares of the Company and were granted additional stock options in CyberSource
based on the extent that the employees original options were vested. Employees
of CyberSource immediately following the Spin-off maintained their outstanding
vested stock options in the Company (although these stock options will now be
treated as nonqualified stock options subsequent to the Spin-off) and were
granted additional incentive stock options in CyberSource. The exercise prices
of the original and additional option grants were adjusted to reflect the
allocation of the current fair market value per share price between the
Company's and CyberSource's common stock based on an independent valuation of
the respective fair market value of such shares of common stock. Options to
purchase common shares of the Company held by the CyberSource employees that had
not vested as of the date of the Spin-off were canceled. The following table
summarizes option activity for the years ended December 31, 1996 and 1997, and
1998, and has been adjusted to retroactively reflect the change in exercise
prices of options to purchase common

F-18
<PAGE> 100
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

shares of the Company. The adjustments and Spin-off of options resulted in
nonstapled options to the employees of each entity and were accounted for and in
compliance with the guidelines in Emerging Issues Task Force Issue No. 90-9 and,
therefore, no compensation expense has been recorded.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
WEIGHTED
AVERAGE
NUMBER EXERCISE PRICE
SHARES AVAILABLE OF SHARES PER SHARE
---------------- --------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995........................ 770,000 530,000 $0.010
Additional shares reserved........................ 700,000 -- --
Options granted................................... (618,500) 618,500 $0.052
---------- ---------
Balance at December 31, 1996........................ 851,500 1,148,500 $0.033
Options granted................................... (750,700) 750,700 $0.156
Options exercised................................. -- (70,000) $0.031
Options canceled.................................. 110,000 (110,000) $0.135
Cancellation of unvested options held by
CyberSource employees.......................... 702,745 (702,745) $0.097
---------- ---------
Balance at December 31, 1997........................ 913,545 1,016,455 $0.068
Additional shares reserved........................ 3,000,000 -- --
Options granted................................... (3,868,946) 3,868,946 $5.162
Options exercised................................. -- (165,852) $0.168
Options canceled.................................. 224,250 (224,250) $5.775
---------- ---------
Balance at December 31, 1998........................ 268,849 4,495,299 $4.163
========== =========
</TABLE>

In connection with certain stock options granted in March and April 1998,
the Company recorded deferred compensation for the estimated difference between
the exercise price of the options and the deemed fair value of approximately
$3,800,000 which is being amortized over the four year vesting period of the
options.

The following table summarizes information about options outstanding as of
December 31, 1998:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED NUMBER OF
OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED
OUTSTANDING AS OF AVERAGE REMAINING EXERCISABLE AS OF AVERAGE
DECEMBER 31, EXERCISE CONTRACTUAL DECEMBER 31, EXERCISE
EXERCISE PRICE 1998 PRICE LIFE (YEARS) 1998 PRICE
-------------- ----------------- -------- ------------ ----------------- --------
<S> <C> <C> <C> <C> <C>
$0.004 - $ 1.90................... 1,285,499 $ 0.46 8.05 642,341 $0.04
$ 2.60 - $ 4.00................... 1,241,600 $ 2.61 9.24 5,000 $4.00
$ 4.36 - $ 8.63................... 1,246,800 $ 5.52 9.38 -- $ --
$ 9.00 - $29.06................... 721,400 $11.09 9.56 1,000 $9.00
--------- -------
$ 0.0042 - $29.06................... 4,495,299 $4.163 648,341 $0.09
========= =======
</TABLE>

As of December 31, 1996, and 1997, 573,498 and 666,448 options were
exercisable at a weighted average exercise price of $0.03 and $0.03,
respectively.

Options Granted Outside of the Stock Option Plans

On January 5, 1995, the Company granted options outside of the Plans to its
Chief Technical Officer to purchase 1,000,000 shares of common stock of the
Company at an exercise price of $0.004 per share. None of the options have been
exercised as of December 31, 1998. As of December 31, 1998, the remaining life
of the options is approximately three years, and all options are exercisable.

F-19
<PAGE> 101
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-Based Compensation

Pro forma information regarding net loss is required by FAS 123, which also
requires that the information be determined as if the Company has accounted for
its employee stock options granted during the period from January 5, 1995 (date
of adoption of the Plan) through December 31, 1995 (1995) and the years ended
December 31, 1996, 1997, and 1998 under the fair value method of FAS 123. The
fair value for options granted prior to the IPO were estimated at the date of
grant using the minimum value method. Options granted subsequent to the IPO were
valued using the Black-Scholes model based on the actual stock closing price on
the day previous to the date of grant. The following weighted average
assumptions were used to calculate the value of the options granted: risk-free
interest rate of 5.6%, 6.1% and 5.2% for 1996, 1997, and 1998, respectively, no
dividend yield, no volatility factor for 1996 and 1997 and a volatility factor
of 1.35 for 1998, of the expected market price of the Company's common stock,
and a weighted average expected life of the option of four years for 1996 and
1997 and 5.43 years for 1998.

The option valuation models were developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected life of the option. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value at the grant dates for awards under those Plans
calculated using the minimum value method and the Black-Scholes model described
above, the Company's net loss and pro forma basic and diluted net loss per share
would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Pro forma net loss (in thousands).................... $(1,515) $(5,364) $(32,924)
Pro forma basic and diluted net loss per share....... $ (0.30) $ (1.36)
</TABLE>

The weighted average fair value of options granted, which is the value
assigned to the options under FAS 123, was $0.04, $0.04 and $6.48 for options
granted during 1996, 1997, and 1998 respectively.

The pro forma impact of options on the net loss for the years ended
December 31, 1996, 1997, and 1998 is not representative of the effects on net
income (loss) for future years, as future years will include the effects of
options vesting as well as the impact of multiple years of stock option grants.
The effect of FAS 123 will not be fully reflected until 1999.

9. RELATED PARTY TRANSACTIONS

Pursuant to the terms of an agreement entered into in connection with the
Spin-off of CyberSource, the Company uses services supplied to the Company by
CyberSource on a non-exclusive basis. These services relate to credit card
processing, fraud screening, export control, sales tax computation, electronic
licensing, hosting of electronic downloads and fulfillment notification. Any
discontinuation of such services, or any reduction in performance that requires
the Company to replace such services, would be disruptive to the Company's
business. The Company also received a non-exclusive license to certain
CyberSource Technology. Under the services agreement, the Company is obligated
to compensate CyberSource on a basis of services used per order or transaction.
The Company recorded expenses of approximately $746,500 related to such services
in 1998. As of December 31, 1998, amounts owed to CyberSource were approximately
$100,000.

F-20
<PAGE> 102
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the years ended December 31, 1996, 1997, and 1998, legal fees
incurred were approximately, $112,000, $304,000, and $1,300,000, respectively,
relating to a law firm in which a current director of the Company is a partner.
As of December 31, 1997 and 1998, amounts owed to the law firm were
approximately $89,000, and $147,000, respectively.

On March 18, 1998, the Company borrowed $400,000 from CyberSource. The note
was repaid in June 1998.

On April 15, 1998, the Company issued a promissory note to a director and
stockholder to whom it loaned an aggregate of $270,000. Interest shall accrue on
the outstanding principal at a rate of 6.02% per annum. The note and related
accrued interest are due December 17, 1999. This note remains outstanding as of
December 31, 1998.

10. LITIGATION AND CONTINGENCIES

From time to time, the Company may be involved in litigation relating to
claims arising out of its ordinary course of business. The Company believes that
there are no claims or actions pending or threatened against the Company, the
ultimate disposition of which would have a material impact on the Company's
financial position or results of operations.

In November 1998, a third party that appears to hold a registered United
States trademark for "A Better Way to Buy Software" sent the Company a letter
asserting that its use of that phrase up to such time infringed its trademark
rights. The Company disputes the validity of this assertion. However, this third
party might file a lawsuit against the Company, which could subject the Company
to injunctive relief or money damages, or both. In November 1998, another third
party, based in Australia, sent the Company a letter asserting that the
Company's use of the name "Beyond.com" infringes the trademark and domain name
rights of this third party. The Company disputes the validity of this assertion.
However, if the asserting party were to be successful with certain of its
claims, the Company's ability to use the "Beyond.com" mark, name or domain name
could be materially and adversely affected.

11. INCOME TAXES

No provision for income taxes has been recorded due to operating losses
with no current tax benefit.

As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $37,000,000 and $31,000,000, respectively.
The Company also had federal and state research credit carryforwards of
approximately $314,000 and $268,000, respectively. The net operating losses and
credit carryforwards will expire at various dates beginning in 2002 through
2018, if not utilized. The net operating loss carryforwards differ from the
accumulated deficit primarily as a result of the accounting for the Spin-off of
CyberSource to the Company's preferred and common stockholders on December 31,
1997.

Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state provisions.
The annual limitation may result in the expiration of net operating losses and
credits before utilization.

F-21
<PAGE> 103
BEYOND.COM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......... $2,952,000 $14,507,000
Research credit carryforwards............ 43,000 491,000
Reserves and accruals.................... 151,000 807,000
---------- -----------
Total deferred tax assets........ 3,146,000 15,805,000
Valuation allowance........................ (3,146,000) (15,805,000)
---------- -----------
Net deferred tax assets.................... $ -- $ --
========== ===========
</TABLE>

Under Statement of Financial Accounting Standards No. 109, (FAS 109),
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Based upon the weight of available evidence, which
includes the Company's historical operating performance, the reported net losses
in 1996, 1997, and 1998, and the uncertainties regarding future results of
operations of the Company, the Company has provided a full valuation allowance
against its net deferred tax assets as it is not more likely than not that the
deferred tax assets will be realized. The valuation allowance increased by
$2,204,000 during 1997 and increased by $12,659,000 during 1998.

12. EVENT SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)

On February 19, 1999, the Company entered into an agreement pursuant to
which one of its wholly-owned subsidiaries will merge with and into
BuyDirect.com. Upon the closing of the merger, BuyDirect.com will become a
wholly-owned subsidiary and the Company will issue or reserve for issuance upon
the exercise of options assumed in the acquisition up to 5.4 million shares of
Common Stock to BuyDirect.com stockholders in exchange for the outstanding
shares of BuyDirect.com common and/or preferred stock. The transaction will be
accounted for using the purchase method of accounting. The BuyDirect.com merger
is subject to a number of contingencies including approval of the merger by the
BuyDirect.com stockholders and customary closing conditions. As a result, there
can be no assurance that the BuyDirect.com merger will be completed.

F-22
<PAGE> 104

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of BuyDirect.com, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' deficit and of cash flows
present fairly, in all material respects, the financial position of
BuyDirect.com, Inc. and its subsidiary at December 31, 1998 and the results of
their operations and their cash flows for the period from March 31, 1998
(Inception) to December 31, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company has incurred recurring
losses from operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. The Company has recently
entered into a definitive merger agreement to exchange all of its outstanding
capital stock, options and warrants to acquire capital stock of the Company for
shares of the acquiring company. These matters are further described in Note 1.
The consolidated financial statements do not include any adjustments that might
result from the outcome of these matters.

/s/ PRICEWATERHOUSECOOPERS LLP

San Francisco, California
March 5, 1999

F-23
<PAGE> 105

BUYDIRECT.COM, INC.

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998

<TABLE>
<S> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 341,242
Accounts receivable, net.................................. 130,450
Prepaid expenses and other current assets................. 772,324
----------
Total current assets.............................. 1,244,016
Property and equipment, net................................. 1,048,549
Goodwill, net............................................... 473,439
Other assets................................................ 1,201,901
----------
Total assets...................................... $3,967,905
==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable.......................................... $ 960,936
Payable to related parties................................ 3,804,274
Accrued liabilities....................................... 460,396
Convertible promissory notes and accrued interest
payable................................................ 2,039,008
Current obligations under capital leases.................. 208,962
----------
Total current liabilities......................... 7,473,576
Promissory note and accrued interest payable to related
party..................................................... 5,686,103
Capital lease obligations, long-term........................ 105,302
----------
Total liabilities................................. 13,264,981
----------

Commitments (Notes 4 and 7)

Stockholders' deficit:
Convertible preferred stock: $0.0001 par value,
liquidation preference of $2,957,875:
Series A: 8,100,001 shares authorized, issued and
outstanding........................................... 810
Series B: 10,000,000 shares authorized, 2,621,356
issued and outstanding................................ 262
Series C: 3,000,000 shares authorized, 2,129,631 issued
and outstanding....................................... 213
Common Stock: $0.0001 par value; 60,000,000 shares
authorized; 316,000 shares issued and outstanding...... 32
Additional paid-in capital................................ --
Accumulated deficit....................................... (8,741,666)
Deferred stock compensation............................... (556,727)
----------
Total stockholders' deficit....................... (9,297,076)
----------
Total liabilities and stockholders' deficit....... $3,967,905
==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 106

BUYDIRECT.COM, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM MARCH 31, 1998 (INCEPTION) TO DECEMBER 31, 1998

<TABLE>
<S> <C>
NET REVENUES (NOTE 2)
Product................................................... $ 1,669,084
Advertising............................................... 159,758
-----------
Total net revenues................................ 1,828,842
Cost of net revenues........................................ 876,973
-----------
Gross profit................................................ 951,869
-----------

OPERATING EXPENSES

Sales and marketing....................................... 5,126,221
Research and development.................................. 1,456,283
General and administrative................................ 1,544,948
-----------
Total operating expenses.......................... 8,127,452
-----------
Loss from operations........................................ (7,175,583)
Interest expense............................................ (76,927)
Interest and other income................................... 6,213
-----------
Net loss.................................................... $(7,246,297)
===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE> 107

BUYDIRECT.COM, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM MARCH 31, 1998 (INCEPTION) TO DECEMBER 31, 1998

<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED TOTAL
------------------- ---------------- PAID-IN STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIT
---------- ------ ------- ------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
Convertible
Preferred Stock at $0.073926
per share to the BD
Group..................... 8,100,001 $ 810 -- $-- $ 597,990 $ -- $ -- $ 598,800
Contribution by CNET Inc. of
the CNET E Commerce Division
in exchange for issuance of
Series B Convertible
Preferred Stock and the CNET
Option (Note 1)............. 1,900,000 190 -- -- 1,049,730 -- -- 1,049,920
Issuance of Series C
Convertible Preferred Stock
at $0.826 per share, net for
cash and conversion of
convertible promissory notes
payable..................... 2,129,631 213 -- -- 1,750,287 -- -- 1,750,500
Series B Convertible Preferred
anti-dilution adjustment.... 721,356 72 -- -- (72) -- -- --
Exercise of the CNET Option
Call Provision for
Promissory Note Payable
(Note 1).................... -- -- -- -- (4,129,631) -- (1,495,369) (5,625,000)
Exercise of Common Stock
options..................... -- -- 316,000 32 66,328 -- -- 66,360
Deferred stock compensation... -- -- -- -- 665,368 (665,368) -- --
Stock compensation expense.... -- -- -- -- -- 108,641 -- 108,641
Net loss...................... -- -- -- -- -- -- (7,246,297) (7,246,297)
---------- ------ ------- --- ----------- --------- ----------- -----------
Balance at December 31,
1998........................ 12,850,988 $1,285 316,000 $32 $ -- $(556,727) $(8,741,666) $(9,297,076)
========== ====== ======= === =========== ========= =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-26
<PAGE> 108

BUYDIRECT.COM, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 31, 1998 (INCEPTION) TO DECEMBER 31, 1998

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(7,246,297)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 539,445
Stock compensation expense............................. 108,641
Accrued interest on the promissory note payable to
related party......................................... 61,103
Changes in assets and liabilities:
Accounts receivable.................................. 49,162
Prepaid expenses and other assets.................... (1,917,837)
Accounts payable..................................... 945,135
Payable to related parties........................... 4,126,910
Accrued liabilities.................................. (160,200)
-----------
Net cash used in operating activities............. (3,493,938)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (502,531)
-----------
Net cash used in investing activities............. (502,531)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock.................... 66,360
Proceeds from issuance of Preferred Stock................. 1,198,800
Proceeds from issuance of convertible promissory notes.... 3,182,303
Principal payments on capital lease obligations........... (109,752)
-----------
Net cash provided by financing activities......... 4,337,711
-----------
Net increase in cash and cash equivalents................... 341,242
Cash and cash equivalents at inception...................... --
-----------
Cash and cash equivalents at end of year.................... $ 341,242
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 4,000
===========
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITY:
Property and equipment acquired under capital leases...... $ 424,000
===========
Exchange of the CNET option for promissory note payable... $ 5,625,000
===========
Conversion of convertible promissory note into Series C
Preferred Stock........................................ $ 1,150,500
===========
Series B Convertible Preferred Stock anti-dilution
adjustment............................................. $ 72
===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-27
<PAGE> 109

BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

1. THE COMPANY

The Company

BuyDirect.com, Inc., (the "Company") is a web-based reseller of software
and computer peripherals. On March 31, 1998, certain employees, management and
investors (collectively the "BD Group") and CNET, Inc. ("CNET") agreed to form a
limited liability company, BuyDirect.com LLC, into which CNET contributed the E
Commerce Division of CNET ("E Commerce Division") in exchange for an ownership
interest in the Company. On August 12, 1998, the Company was reorganized into a
Delaware corporation. All share and per share data have been retroactively
adjusted to reflect the reorganization.

In connection with the formation of the Company, the BD Group and CNET
executed the CNET Equity Agreement, under which the BD Group was required to
contribute $598,800 initially and an aggregate of $2 million (the "BD Group
Commitment") prior to March 31, 1999 in exchange for an 81% ownership interest.
CNET contributed the E Commerce Division in exchange for a 19% ownership
interest and an option to purchase an additional 26% ownership interest for
$750,000 (the "CNET Option"). The CNET Option included a call provision ("CNET
Option Call Provision") whereby the BD Group could acquire up to 22.5% of the
26% ownership interests purchasable under the CNET Option for $5,625,000 from
CNET. The CNET Option Call Provision was exercisable through March 31, 2000. The
CNET Option Call Provision was exercised by the Company (see below). Under the
CNET Equity Agreement, the BD Group Commitment could be met by a qualified
private placement of ownership interests in the Company; however, ownership
interests issued to satisfy the BD Group Commitment would not decrease CNET's
ownership interests (including the CNET Option).

In connection with the reorganization on August 12, 1998, the BD Group's
ownership interests were converted into 8,100,001 shares of Series A Convertible
Preferred Stock, CNET's ownership interest was converted into 1,900,000 shares
of Series B Convertible Preferred Stock and up to 2,600,000 shares of Series B
Convertible Preferred Stock were issuable under the CNET Option. In August 1998,
the Company completed the Series C Preferred Stock Offering which, in
conjunction with the initial capital contribution by the BD Group, resulted in
the satisfaction of the BD Group Commitment. In accordance with the antidilution
provisions of the CNET Equity Agreement, which provided that CNET would maintain
its 19% ownership interest after completion of the BD Group commitment, CNET
received an anti-dilution adjustment (treated as a stock dividend) to increase
its Series B Convertible Preferred Stock holdings to 2,621,356 shares and the
Company executed the Amended and Restated CNET Option Agreement to increase the
number of Series B Convertible Preferred Shares purchasable thereunder to
3,587,402 and the number of shares subject to the CNET Option Call Provision to
3,104,422.

In October 1998, the Company, with the concurrence of both the BD Group and
CNET, exercised the CNET Option Call Provision in exchange for a promissory note
payable to CNET for $5,625,000. Following the exercise, there were 482,980
remaining shares of Series B Convertible Preferred Stock purchasable under the
CNET Option at December 31, 1998. The exercise has been accounted for as a
treasury stock transaction.

Accounting for the Initial Capitalization of the Company

The Company has recorded the contribution of the CNET E Commerce Division
as a purchase. Accordingly, the fair value of the equity interests issued to
CNET, including the CNET Option, which aggregated approximately $1,050,000, was
allocated to the fair value of the net assets contribution of approximately
$292,000, with the residual amount of $758,000 recorded as goodwill. The E
Commerce Division net assets consisted of current assets of (principally
accounts receivable) $602,000, computer and other equipment of $334,000 and
current liabilities (principally trade accounts payable) of $644,000.

F-28
<PAGE> 110
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Need for Additional Capital and Sale of the Company

Since inception, the Company has incurred significant operating losses. In
addition, the Company has a working capital deficit of approximately $6.2
million and has a total stockholder deficit of approximately $9.3 million at
December 31, 1998. On February 19, 1999, the Company executed the Agreement and
Plan of Merger ("Merger Agreement") with Beyond.com, Inc. ("Beyond.com"), a
publicly traded U.S. company engaged in the resale of commercial off-the-shelf
software via the Internet. Under the Merger Agreement, Beyond.com will issue up
to approximately 5.4 million shares of its Common Stock, for all of the
outstanding stock, stock options and warrants of the Company. The closing of the
merger is contingent on a number of conditions. If the merger with Beyond.com is
not consummated, the Company will be required to raise additional capital in
order to satisfy its obligations and continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

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

Basis of presentation

The financial statements include the accounts of the Company and its
wholly-owned subsidiary. All significant intercompany balances and transactions
have been eliminated in consolidation.

Revenue recognition

The Company's revenues are primarily derived from sales of third party
software and computer peripherals to customers using credit cards and, to a
lesser extent, amounts received for advertising and promotion. Prior to November
1998, the Company's product sales consisted only of electronic copies of
software sold pursuant to agency agreements between the Company and independent
software developers. Accordingly, revenues for product sales prior to November
1998 include only the commissions earned by the Company on such sales and are
net of the wholesale cost charged by the software developers. In November 1998,
the Company amended its reseller agreements and began recognizing revenues for
product sales on a gross basis, including wholesale cost. Had the Company
recognized all of its product sales on a gross basis, revenues and cost of sales
for the period from March 31, 1998 (Inception) to December 31, 1998 would have
been as follows:

<TABLE>
<S> <C>
Net revenues
Product................................................... $4,113,250
Advertising............................................... 159,758
----------
Total net revenues................................ 4,273,008
Cost of net revenues...................................... 3,321,139
----------
Gross profit.............................................. $ 951,869
==========
</TABLE>

Revenue from product sales, net of estimated returns, is recognized either
upon shipment of the physical product or delivery of the electronic product, at
which time collectibility is probable and the Company has no remaining
obligations. Revenues for advertising and promotion are recognized as the
services are provided.

F-29
<PAGE> 111
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of deposits in money market funds. The Company deposits cash
and cash equivalents with high credit quality financial institutions.

Concentration of credit risk

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. The Company generally requires no collateral from its customers. The
Company maintains an allowance for doubtful accounts receivable based upon the
expected collectibility of accounts receivable.

Property and equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to five years, or the lease term of the respective assets.
Maintenance and repairs are charged to expense as incurred, and improvements and
betterments are capitalized. When assets are retired or otherwise disposed of,
the cost and related accumulated depreciation is removed from the accounts and
any resulting gain or loss is reflected in operations in the period realized.

Goodwill

The excess of the fair value of the equity interests received by CNET over
the fair value of the net assets contributed at the formation of the Company, of
$758,000, was recorded as goodwill and is being amortized over the estimated
useful life of two years. Accumulated goodwill amortization at December 31, 1998
totaled approximately $285,000.

Long-lived assets

The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of ("SFAS 121"). SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets.

Income Taxes

The Company accounts for income taxes under the liability method, which
requires, among other things, that deferred income taxes be provided for
temporary differences between the tax basis of the Company's assets and
liabilities and their financial statement reported amounts. In addition,
deferred tax assets are recorded for the future benefit of utilizing net
operating losses and research and development carryforwards. A valuation
allowance is provided against deferred tax assets unless it is more likely than
not they will be realized.

Stock-based compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation ("SFAS No. 123").

F-30
<PAGE> 112
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Segment information

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This statement establishes standards for the way companies report information
about operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. In accordance with the provision of SFAS No. 131, the
Company has determined that it does not have separately reportable operating
segments.

Recent accounting pronouncements

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The Company does not expect
that the adoption of SOP No. 98-1 will have a material impact on its
consolidated financial statements.

On April 3, 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-Up Activities," which requires the costs of start-up activities and
organization costs to be expensed as incurred. SOP No. 98-5 is effective for
financial statements for fiscal years beginning after December 15, 1998. As the
Company has not capitalized such costs to date, the Company does not expect the
adoption of SOP No. 98-5 to have a material impact on its consolidated financial
statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivation
Instruments and Hedging Activities." The Company is required to adopt SFAS 133
in fiscal 2000. SFAS 133 established methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. To date, the Company has not entered into any
derivative financial statements or hedging activities.

3. BALANCE SHEET COMPONENTS

<TABLE>
<S> <C>
ACCOUNTS RECEIVABLE, NET:
Accounts receivable....................................... $ 197,129
Less: Allowance for doubtful accounts..................... (66,679)
----------
$ 130,450
==========
PROPERTY AND EQUIPMENT, NET:
Computer equipment and software........................... $1,230,769
Furniture and fixtures.................................... 46,351
Leasehold improvements.................................... 14,640
Other assets.............................................. 12,171
----------
1,303,931
Less: Accumulated depreciation and amortization........... (255,382)
----------
$1,048,549
==========
</TABLE>

F-31
<PAGE> 113
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Property and equipment includes $424,000 of computer equipment and
internal-use software under capital leases at December 31, 1998. Accumulated
amortization of assets under capital leases totaled $35,000 at December 31,
1998. Depreciation expense for the period ended December 31, 1998 was $255,382.

<TABLE>
<S> <C>
ACCRUED LIABILITIES:
Payroll and benefits...................................... $368,198
Other..................................................... 92,198
--------
$460,396
========
</TABLE>

4. AGREEMENTS WITH RELATED PARTIES

Agreements with CNET

The Company entered into the CNET Marketing Agreement on March 31, 1998,
pursuant to which CNET was to provide content rights and various online and
television promotions in return for guaranteed payments aggregating $5.4 million
over the two year term of the agreement. In October 1998, the Company and CNET
terminated the agreement and entered into the CNET Promotion Agreement. Pursuant
to the termination agreement, the Company is required to pay CNET $1.5 million
for unpaid promotion and other services received by the Company prior to
termination of the CNET Marketing Agreement. The Company recognized an aggregate
of $1.9 million as a sales and marketing expense in connection with the CNET
Marketing Agreement during 1998, of which approximately $900,000 was payable at
December 31, 1998 and is recorded in the amounts payable to related parties.

Under the CNET Promotion Agreement, the Company is required to pay up to
$6.0 million over the two year term for internet and television promotions and
exclusivity rights. Additionally, during the first year the Company is required
to pay the greater of $1.25 million or actual per click fees owed for customers
delivered to the Company's sites directly from the CNET sites. Per click fees
payable after the first year will be based on the actual amount owed. The
Company recognized approximately $1.0 million as a sales and marketing expense
in 1998 related to the CNET Promotion Agreement, and approximately $1.0 million
was payable to CNET at December 31, 1998 and is recorded in the amounts payable
to related parties.

@Home Co-Branded Site Agreement

In November 1998, the Company and @Home, Inc ("@Home"), a provider of
broadband internet subscription services, entered into the @Home Co-Branded Site
Agreement (the "@Home Agreement") pursuant to which the Company became the
exclusive software store promoted on the @Home Network. Under the @Home
Agreement, the Company is required to make aggregate minimum payments of $4.0
million over the three year term, including a non-refundable prepayment of $1.9
million. The minimum payments may be reduced pursuant to an adjustment factor
based on the average annual number of @Home subscribers and may be increased if
gross profits earned by the Company on sales to @Home subscribers exceed certain
levels. The Company has accrued the prepayment and is amortizing it to marketing
expenses over the three-year term of the agreement, of which approximately
$100,000 was amortized in 1998. The $1.9 million prepayment is included in
amounts payable to related parties.

@Home Equity Agreement

The Company has entered into the Series D Convertible Preferred Stock
Purchase Agreement (Note 8) with @Home governing the sale of 2,424,242 shares of
Series D Convertible Preferred Stock.

F-32
<PAGE> 114
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

5. INCOME TAXES

No provision for income taxes was recorded due to the net losses for the
period from March 31, 1998 (Inception) to December 31, 1998.

At December 31, 1998, the Company had deferred tax assets of approximately
$2.8 million. Management believes that, based on a number of factors, it is more
likely than not that the deferred tax assets will not be realized, such that a
full valuation allowance has been recorded. Deferred tax assets relate primarily
to net operating loss carryforwards.

At December 31, 1998, the Company had approximately $6.8 million of federal
and state net operating loss carryforwards available to offset future taxable
income which expire in varying amounts beginning in 2018 and 2006, respectively.
Under the Tax Reform Act of 1986, the amounts of and benefits from net operating
loss carryforwards may be impaired or limited in certain circumstances. Events
which cause limitations in the amount of net operating losses that the Company
may utilize in any one year include, but are not limited to, a cumulative
ownership change of more than 50%, as defined, over a three year period.

6. BORROWINGS

Promissory Note Payable to Related Party

Promissory note and accrued interest payable of $5,686,103 at December 31,
1998 consists of amounts payable to CNET pursuant to the Company's exercise of
the CNET Option Call Provision (Note 1). The promissory note bears interest at a
compounded annual rate of 6.5%. No payments of principal or interests are
required until October 31, 2000. Payments thereafter depend on the Company's
ability to secure the note with a letter of credit. In the event that the
Company is unable to secure the promissory note on October 31, 2000, the note
will become due and payable in equal quarterly installments through the fourth
anniversary of the note. If a letter of credit is received, the note will be due
and payable on October 31, 2002. As of December 31, 1998, the difference between
the carrying value and the fair value of the CNET note was immaterial based upon
the minimal change in interest rates between October 31 and December 31, 1998.

Convertible Promissory Notes Payable

In July and August 1998, the Company issued convertible promissory notes
with aggregate principal of $1,150,500. The notes bore interest at 5.56%,
compounded annually. In August 1998, the notes converted into approximately
1,392,600 shares of Series C Convertible Preferred Stock at a price per share
equivalent to that paid by the Series C Convertible Preferred Stock investors.

In November and December 1998, the Company issued convertible promissory
notes with aggregate principal of $2,031,803 which, together with accrued
interest thereon aggregated $2,039,008 at December 31, 1998. The convertible
promissory notes bear interest at 4.33%, compounded annually. In February 1999,
the notes converted into 1,279,497 shares of Series D Convertible Preferred
Stock at a price per share equivalent to that paid by the Series D Convertible
Preferred Stock investor. As of December 31, 1998, the difference between the
carrying value and the fair value of the convertible notes payable was
immaterial based upon the minimal change in interest rates between the dates of
issuance and December 31, 1998.

7. COMMITMENTS

Marketing Agreements

Under the Company's marketing agreements with @Home and CNET, the Company's
annual payment commitments total $4.1 million, $2.7 million and $1.8 million in
1999, 2000 and 2001, respectively. Such payments are subject to adjustments as
described in Note 4.

F-33
<PAGE> 115
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Leases

The Company leases office space and equipment under noncancelable operating
and capital leases with various expiration dates through 2001. Rent expense for
the period from March 31, 1998 (Inception) through December 31, 1998 was
$252,000. The terms of the facility lease provide for rental payments on a
graduated scale. The Company recognizes rent expense on a straight-line basis
over the lease period, and has accrued for rent expense incurred but not paid.

Future minimum lease payments under noncancelable operating and capital
leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDED CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
------------ --------- ---------
<S> <C> <C>
1999...................................................... $ 218,912 $447,830
2000...................................................... 122,365 248,066
2001...................................................... -- 19,002
--------- --------
Total minimum lease payments................................ 341,277 $714,898
========
Less: Amount representing interest.......................... (27,013)
---------
Present value of capital lease obligations.................. 314,264
Less: Current portion....................................... (208,962)
---------
Long-term portion of capital lease obligations.............. $ 105,302
=========
</TABLE>

8. CONVERTIBLE PREFERRED STOCK

Convertible Preferred Stock at December 31, 1998 consists of the following:

<TABLE>
<CAPTION>
SHARES
------------------------- LIQUIDATION
SERIES AUTHORIZED OUTSTANDING AMOUNT
------ ---------- ----------- -----------
<S> <C> <C> <C>
A............................................. 8,100,001 8,100,001 $ 598,800
B............................................. 10,000,000 2,621,356 600,000
C............................................. 3,000,000 2,129,631 1,759,075
---------- ---------- ----------
21,100,001 12,850,988 $2,957,875
========== ========== ==========
</TABLE>

In November 1998, the Company entered into the Series D Preferred Stock
Purchase Agreement with @Home. Under the terms of the agreement, @Home placed
$4.0 million in escrow to purchase 2,424,242 shares of Series D Convertible
Preferred Stock at $1.65 per share. The closing of the Series D Preferred Stock
Purchase Agreement was contingent upon a number of items. On February 8, 1999,
the Company issued the shares to @Home and the cash proceeds were released from
escrow to the Company.

The holders of Preferred Stock have various rights and preferences as
follows:

Voting

Each share of Preferred Stock has voting rights equal to an equivalent
number of shares of Common Stock into which it is convertible and votes together
as one class with the Common Stock.

As long as shares of Series B, C and D Convertible Preferred Stock remain
outstanding, the Company must obtain approval from a majority of the holders of
Series B, C and D Convertible Preferred Stock in order to alter the articles of
incorporation as related to Convertible Preferred Stock, change the authorized
number of shares of Convertible Preferred Stock, repurchase any shares of Common
Stock other than shares subject to the right of repurchase by the Company,
change the authorized number of Directors, authorize a dividend for any class or
series other than Convertible Preferred Stock, create a new class of stock or
effect a merger,

F-34
<PAGE> 116
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

consolidation or sale of assets where the existing shareholders retain less than
50% of the voting stock of the surviving entity.

As long as shares of Series A Convertible Preferred Stock remain
outstanding, the Company must obtain the approval from a majority of the holders
of Series A Convertible Preferred Stock to change the rights, preferences,
privileges or authorized number of shares of Series A Convertible Preferred
Stock.

Dividends

Holders of Series A, B, C and D Convertible Preferred Stock are entitled to
receive noncumulative dividends at the per annum rate of $0.0007, $0.0229,
$0.0826 and $0.165 per share, respectively, when and if declared by the Board of
Directors. The holders of Series A, B and C Convertible Preferred Stock will
also be entitled to participate in dividends on Common Stock, when and if
declared by the Board of Directors, based on the number of shares of Common
Stock held on an as-if converted basis. No dividends on Convertible Preferred
Stock or Common Stock have been declared by the Board from Inception through
December 31, 1998.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets where the beneficial owners of
the Company's Common Stock and Convertible Preferred Stock own less than 51% of
the resulting voting power of the surviving entity, the holders of Series A, B,
C and D Convertible Preferred Stock are entitled to receive an amount of $0.074,
$0.229, $0.826 and $1.65 per share, respectively, plus any declared but unpaid
dividends prior to and in preference to any distribution to the holders of
Common Stock. The remaining assets, if any, shall be distributed to holders of
Common Stock and Preferred Stock (assuming conversion into equivalent shares of
Common Stock). Should the Company's legally available assets be insufficient to
satisfy the liquidation preferences, the funds will be distributed to the
holders of Series A, B, C and D Convertible Preferred Stock pro-rata based on
their respective liquidation values.

Conversion

Each share of Series A, B, C and D Convertible Preferred Stock is
convertible, at the option of the holder, according to a conversion ratio,
subject to adjustment for dilution. Each share of Series A, B, C and D
Convertible Preferred Stock automatically converts into the number of shares of
Common Stock into which such shares are convertible at the then effective
conversion ratio upon: (1) the closing of a public offering of Common Stock
resulting in an implicit post-money market value of the Company of at least $90
million, (2) a merger, sale of substantially all of the assets or other
transactions which result in a change in control, or (3) the consent of the
holders of the majority of Convertible Preferred Stock. At December 31, 1998,
each share of Series A, B, C and D Convertible Preferred Stock was convertible
into one share of Common Stock.

At December 31, 1998, the Company reserved 8,100,001, 3,104,276, and
2,129,631 shares of Common Stock for the conversion of Series A, B and C
Convertible Preferred Stock, respectively.

9. COMMON STOCK

The Company's Articles of Incorporation, as amended, authorize the Company
to issue 60,000,000 shares of $0.0001 par value Common Stock. All of the shares
of Common Stock outstanding at December 31, 1998 were issued pursuant to early
exercises provisions of stock option agreements. Such shares are subject to a
right of repurchase by the Company subject to vesting, which is generally over
the original three year period of the option.

F-35
<PAGE> 117
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

10. STOCK OPTION PLANS

In September 1998, the Company adopted the 1998 Stock Option Plan (the
"Plan"). The Plan provides for the granting of stock options to employees and
consultants of the Company. Options granted under the Plan may be either
incentive stock options or nonqualified stock options. Incentive stock options
("ISO") may be granted only to Company employees (including officers and
directors who are also employees). Nonqualified stock options ("NSO") may be
granted to Company employees and consultants. The Company has reserved 2,309,661
shares of Common Stock for issuance under the Plan.

Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date of
grant as determined by the Board of Directors, provided, however, that (i) the
exercise price of an ISO and NSO shall not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and (ii)
the exercise price of an ISO and NSO granted to a 10% shareholder shall not be
less than 110% of the estimated fair value of the shares on the date of grant,
respectively. Options are exercisable immediately, subject to repurchase options
held by the Company which lapse over the option's original vesting period, and
are exercisable for a maximum period of ten years at such times and under such
conditions as determined by the Board of Directors. To date, options granted
vest 1/3 on each one year anniversary of the vesting commencement date.

During 1998, the Company recorded $665,000 of deferred stock compensation
for the excess of the deemed fair market value over the exercise price at the
date of grant related to certain options granted in 1998. Included in deferred
stock compensation at December 31, 1998, was $149,000 for options granted to a
consultant which were valued using the Black-Scholes model. The Board of
Directors granted the options during September and October 1998. Accordingly,
the deemed fair market values of the Company's Common Stock at those dates was
estimated based on a comparison to the prices in the Series C and Series D
Convertible Preferred Stock Purchase Agreements. Stock compensation expense is
being recognized over the option vesting period of three years.

The following table summarizes activity under the Plan:

<TABLE>
<CAPTION>
SHARES PRICE
-------- -----
<S> <C> <C>
Options granted............................................. 888,000 $0.21
Options exercised........................................... (316,000) 0.21
Options canceled............................................ -- --
--------
Outstanding at December 31, 1998............................ 572,000 $0.21
========
Options exercisable at December 31, 1998.................... 572,000 --
========
</TABLE>

At December 31, 1998, 1,421,661 options remain available for issuance and
316,000 shares of Common Stock acquired pursuant to the early exercise
provisions of stock options are subject to repurchase by the Company over the
remaining vesting period.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1998 OPTIONS EXERCISABLE AT
----------------------------------------- DECEMBER 31, 1998
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
-------- ------------ ------------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.21.................... 572,000 9.75 years $0.21 572,000 $0.21
------- -------
572,000 572,000
======= =======
</TABLE>

F-36
<PAGE> 118
BUYDIRECT.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 31, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

Fair Value Disclosures

Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased by approximately $13,000.

The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes pricing method with the following assumptions:
volatility of 0%; dividend yield at 0%; weighted average expected option term of
10 years; risk free interest rate of 5.6%. The weighted average fair value of
options granted during 1998 was $0.82.

11. EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) defined contribution plan covering all
employees. Contributions made by the Company are determined annually by the
Board of Directors. Employer contributions under this plan amounted to
approximately $7,000 for the period from March 31, 1998 (Inception) to December
31, 1998.

12. SUBSEQUENT EVENTS

Employee Stock Options

In February 1999, the Company granted options to purchase an aggregate
620,175 shares of Common Stock for a weighted average exercise price of $0.44.

Co-Branded Software Site Agreement

On February 12, 1999, the Company entered into a Co-Branded Software Site
Agreement with a provider of broadband Internet subscription services pursuant
to which the Company became the exclusive software store promoted on the
provider's service. Under the agreement, the Company is required to make
aggregate minimum payments of $2.225 million over the three year term, payable
in scheduled quarterly installments. The minimum payments may be reduced
pursuant to an adjustment factor based on the average annual number of
subscribers during each year. Additionally, the minimum annual payments may be
increased if gross profits earned by the Company on sales to the provider's
customers exceed certain levels.

Content and Promotion Agreement and Series E Convertible Preferred Stock
Warrant

On February 19, 1999, the Company entered into a Content and Promotion
Agreement with ZD, Inc. pursuant to which the Company will receive certain
promotion and advertising and on-line software content for use on the Company's
web site. The agreement has a three-year term and requires minimum monthly
payments aggregating approximately $9.0 million. The payments may be increased
if gross revenues received by the Company exceed certain levels.

In connection with executing the marketing agreement, the Company issued
ZD, Inc. a warrant to purchase 2,005,400 shares of Series E Convertible
Preferred Stock for $1.65 per share. The warrant is exercisable immediately and
for a term of ten years. The Series E Convertible Preferred Stock ("Series E")
has voting, dividend, liquidation and conversion rights identical to those of
the Series D Convertible Preferred Stock described in Note 9.

F-37
<PAGE> 119

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of CNET, Inc.

In our opinion, the accompanying balance sheet and the related statements
of operations, division equity and of cash flows present fairly, in all material
respects, the financial position of E-Commerce, a division of CNET, Inc. at
December 31, 1997 and March 31, 1998, and the results of its operations and its
cash flows for the year ended December 31, 1997 and for the three months ended
March 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICEWATERHOUSECOOPERS LLP

San Francisco, California
March 5, 1999

F-38
<PAGE> 120

E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 165,253 $ 22,636
Accounts receivable, net.................................. 141,368 179,612
Prepaid expenses and other current assets................. 58,262 50,451
----------- -----------
Total current assets.............................. 364,883 252,699
Property and equipment, net................................. 342,145 388,527
Other assets................................................ 12,077 5,927
----------- -----------
Total assets...................................... $ 719,105 $ 647,153
=========== ===========

LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 244,349 $ 389,468
Accrued liabilities....................................... 87,567 255,135
----------- -----------
Total liabilities................................. 331,916 644,603
----------- -----------
Commitments (Note 6)
Division equity:
Advances from CNET........................................ 2,672,944 2,621,420
Accumulated deficit....................................... (2,285,755) (2,618,870)
----------- -----------
Total division equity............................. 387,189 2,550
----------- -----------
Total liabilities and division equity............. $ 719,105 $ 647,153
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 121

E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
Net revenues................................................ $ 1,014,429 $ 355,641
----------- -----------
Operating expenses
Sales and marketing....................................... 1,687,962 389,523
Research and development.................................. 109,900 53,667
General and administrative................................ 921,082 245,566
----------- -----------
Total operating expenses.......................... 2,718,944 688,756
----------- -----------
Net loss.................................................... (1,704,515) (333,115)
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 122

E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

STATEMENT OF DIVISION EQUITY

<TABLE>
<CAPTION>
ADVANCES ACCUMULATED TOTAL
FROM CNET DEFICIT DIVISION EQUITY
---------- ----------- ---------------
<S> <C> <C> <C>
Balance at January 1, 1997.......................... $1,026,338 $ (581,240) $ 445,098
Net advances from (payments to) CNET................ 1,646,606 -- 1,646,606
Net loss............................................ -- (1,704,515) (1,704,515)
---------- ----------- -----------
Balance at December 31, 1997........................ 2,672,944 (2,285,755) 387,189
Net advances from (payments to) CNET................ (51,524) -- (51,524)
Net loss............................................ -- (333,115) (333,115)
---------- ----------- -----------
Balance at March 31, 1998........................... $2,621,420 $(2,618,870) $ 2,550
========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 123

E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,704,515) $(333,115)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 186,476 70,585
Write-off of property and equipment.................... 164,733 53,667
Changes in assets and liabilities:
Accounts receivable.................................. (97,268) (38,244)
Prepaid expenses and other assets.................... (67,941) 13,961
Accounts payable..................................... 244,349 145,119
Accrued liabilities.................................. (23,366) 167,568
----------- ---------
Net cash provided by (used in) operating
activities..................................... (1,297,532) 79,541
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (289,083) (170,634)
----------- ---------
Net cash used in investing activities............. (289,083) (170,634)
----------- ---------
Cash flows from financing activities:
Net advances from (payments to) CNET...................... 1,646,606 (51,524)
----------- ---------
Net cash provided by (used in) financing
activities..................................... 1,646,606 (51,524)
----------- ---------
Net (decrease)/increase in cash............................. 59,991 (142,617)
Cash and cash equivalents at beginning of the period........ 105,262 165,253
----------- ---------
Cash and cash equivalents at end of period.................. $ 165,253 $ 22,636
=========== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 124

E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

NOTES TO FINANCIAL STATEMENTS

1. THE DIVISION

The accompanying financial statements and related notes reflect the
carve-out historical results of operations and financial position of the
E-Commerce Division ("Division") of CNET, Inc. ("CNET"). The Statement of
Operations include all revenues and costs directly attributable to the Division,
including costs for facilities, functions and services used by the Division at
shared sites and allocations of costs for certain administrative function and
services performed by centralized departments within CNET. Costs have been
allocated to the Division based on CNET management's estimate of costs
attributable to the operations of the electronic commerce business. Such costs
are not necessarily indicative of the costs that would have been incurred if the
Division had been a separate entity.

During the periods presented, the Division relied on cash advances and
services provided by CNET to support its operations.

On March 31, 1998, CNET contributed substantially all of the assets and
liabilities of the Division to BuyDirect.com, Inc. ("BuyDirect"), a new venture,
in exchange for an ownership interest.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue recognition

The Division's revenues are primarily derived from sales of third party
software to customers using credit cards and, to a lesser extent, amounts
received for advertising and promotion. The Division's product sales consisted
of electronic copies of software sold pursuant to agency agreements between the
Division and independent software developers. Accordingly, revenues for product
sales include only the commissions earned by the Division on such sales and are
net of the wholesale cost charged by the software developers. Revenue from
product sales, net of estimated returns, is recognized upon delivery of the
electronic product, at which time collectibility is probable and the Division
has no remaining obligations. Revenues for advertising and promotion are
recognized as the services are provided.

Income taxes

The taxable loss of the Division for the year ended December 31, 1997 and
for the three months ended March 31, 1998 was included in the CNET consolidated
tax returns. Separate tax returns were not prepared or filed for the Division.
For all periods presented, deferred income taxes and related tax expenses have
been recorded by applying the asset and liability approach to each component of
the Division as if it were a separate tax payer. Under this approach, deferred
tax assets and liabilities represent the expected future tax consequences of
carryforwards and temporary differences between the carrying amounts and the tax
basis of assets and liabilities.

F-43
<PAGE> 125
E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Cash and cash equivalents

The Division considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of deposits in money market funds. The Division deposits
cash and cash equivalents with high credit quality financial institutions.

Concentration of credit risk

Financial instruments that potentially subject the Division to a
concentration of credit risk consist of cash and accounts receivable. The
Division generally requires no collateral from its customers. The Division
maintains an allowance for doubtful accounts receivable based upon the expected
collectibility of accounts receivable.

Property and equipment

Equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
three to five years, or the lease term of the respective assets. Maintenance and
repairs are charged to expense as incurred, and improvements and betterments are
capitalized when assets are retired or otherwise disposed of, the cost and
accumulation are removed from the accounts and any resulting gain or loss is
reflected in operations in the period realized.

Long-lived assets

The Division evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of ("SFAS 121"). SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets.

Stock-based compensation

For CNET stock options granted to the Division's employees, the Division
accounts for stock-based employee compensation arrangements in accordance with
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB No. 25") and complies with the disclosure provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation ("SFAS No. 123").

Division Equity

Division equity includes historical investment and advances from CNET,
including net payments to/from CNET, third party, liabilities paid on behalf of
the Division by CNET, amounts due to/from CNET for services for allocated
charges, and current period net loss of the Division.

F-44
<PAGE> 126
E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
ACCOUNTS RECEIVABLE, NET:
Accounts receivable....................................... $201,368 $239,612
Less: Allowance for doubtful accounts..................... (60,000) (60,000)
-------- --------
$141,368 $179,612
======== ========

EQUIPMENT, NET:
Computer equipment and software........................... $536,278 $571,278
Furniture and fixtures.................................... 2,196 4,257
Other assets.............................................. -- 79,906
-------- --------
538,474 655,441
Less: Accumulated depreciation............................ (196,329) (266,914)
-------- --------
$342,145 $388,527
======== ========

ACCRUED LIABILITIES:
Accrued bank charges...................................... $ 60,733 $144,175
Accrued wages............................................. 7,492 40,675
Deferred revenue.......................................... 12,200 13,014
Other..................................................... 7,142 57,271
-------- --------
$ 87,567 $255,135
======== ========
</TABLE>

4. RELATED PARTY TRANSACTIONS; ADVANCES FROM CNET

The accompany financial statements include costs for accounting, legal and
network operations that were provided to the Division by CNET, in addition to
allocated costs for facility charges at shared sites, including rent and
equipment usage. Costs for accounting, legal and network operations have been
incorporated into the monthly management fee paid by the Division to CNET. The
costs for facility charges are based on head count. Such allocations are not
necessarily indicative of the costs that would have been incurred if the
Division had been a separate entity. However, management believes the
differences between the allocated costs and cost to obtain such services from an
outside third party would be insignificant.

For the year ended December 31, 1997, allocated charges of $93,408 and
$180,000 were included in sales and marketing and general and administrative
expenses, respectively. For the three months ended March 31, 1998, allocated
charges of $23,400 and $45,000 were included in sales and marketing and general
and administrative expenses, respectively.

Other expenses charged by CNET included in the Statement of Operations
represent actual costs incurred by CNET which were directly attributable to the
Division. These expenses were primarily payroll and related costs, consulting,
commissions, depreciation and technology support. In addition to allocated
expenses and management fees, CNET provided cash advances for equipment
purchases. Cash received from customers, in excess of operating costs was used
to reduce the balance due to CNET.

F-45
<PAGE> 127
E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

A summary of the activity impacting the net advances from CNET balance for
the year ended December 31, 1997 and the three months ended March 31, 1998 is as
follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
<S> <C> <C>
Beginning balance..................................... $1,026,338 $2,672,944
Allocated charges..................................... 273,408 68,400
Net advances/(payments)............................... 1,373,198 (119,924)
---------- ----------
Ending balance........................................ $2,672,944 $2,621,420
========== ==========
</TABLE>

The average balance of the advances from CNET was approximately $1.8
million and $2.6 million for the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively.

No interest has been charged or credited to the Division related to the
above transactions.

5. INCOME TAXES

The operating results of Division were included in the consolidated tax
returns of CNET. The methodology for allocating tax expense to Division is set
forth in Note 2.

No provision for income taxes was recorded due to the net losses for the
year ended December 31, 1997 and for the three months ended March 31, 1998.

The Division had deferred tax assets of $684,158 and $132,694 at December
31, 1997 and March 31, 1998, respectively. Management believes that, based on a
number of factors, it is more likely than not that the deferred tax assets will
not be realized, such that a full valuation allowance has been recorded.
Deferred tax assets related primarily to net operating loss carryforwards which,
following the contribution of the Division to BuyDirect, remained with CNET.

6. COMMITMENTS

Lease

The Division leased office space under a noncancelable operating lease with
expiration date in 2000. Rent expense of $56,971 and $10,700 was incurred for
the year ended December 31, 1997 and for the three months ended March 31, 1998,
respectively.

Future minimum lease payments under the noncancelable operating lease at
March 31, 1998 were as follows:

<TABLE>
<S> <C>
April 1, 1998 through December 31, 1998..................... $26,672
Year ended December 31, 1999................................ 35,563
Year ended December 31, 2000................................ 29,636
-------
Total minimum lease payments................................ $91,871
=======
</TABLE>

7. STOCK OPTION PLAN

In 1997, the stockholders of CNET approved the 1997 Stock Option Plan (the
"1997 Plan"). The 1997 Plan authorizes grants of options to purchase up to
1,000,000 shares of authorized but unissued CNET common stock. Stock options for
the Division's employees were granted with an exercise price equal to the
stock's fair market value at the date of grant, had 10-year terms and generally
vested and become fully exercisable three years from the date of grant.

F-46
<PAGE> 128
E-COMMERCE, A DIVISION OF CNET, INC.
(PREDECESSOR BUSINESS)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

A summary of the status of the CNET stock options granted to the employees
of the Division is presented below:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Balance as of December 31, 1996............................. 54,125 $ 7.42
Granted..................................................... 11,250 25.64
Exercised................................................... (1,563) 9.54
Cancelled................................................... (2,062) 10.41
------- ------
Balance as of December 31, 1997............................. 61,750 10.58
Granted..................................................... 3,000 28.81
Exercised................................................... (44,813) 7.54
Cancelled................................................... (19,937) 20.17
------- ------
Balance as of March 31, 1998................................ -- $ --
======= ======
</TABLE>

In connection with the formation of BuyDirect.com, Inc. on March 31, 1998,
all vested options were exercised and all unvested options were cancelled. As of
December 31, 1997, 24,875 options were exercisable and the weighted-average
exercise price of those options was $5.71.

The Division applies Accounting Principles Board (APB) Opinion No. 25 in
accounting for the Plan and, accordingly, no compensation cost has been
recognized for the for the year ended December 31, 1997 and for the three months
ended March 31, 1998. Had the Division determined compensation cost based on the
fair value at the grant date for its stock options under SFAS No. 123, the
Division's net loss for the year ended December 31, 1997 and for the three
months ended March 31, 1998 would have been increased to $1,811,764 and
$399,820, respectively. The weighted-average fair value of options granted in
1997 and 1998 was $20.02 and $17.22, respectively. The fair value of each option
grant was estimated on the date of the grant using the Black Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1997 and 1998, respectively: no dividend yield, expected volatility of
75%, risk-free interest rate of 6%, and an expected life of five years. The
effects of applying SFAS No. 123 in this pro forma disclosure is not indicative
of the effects on reported results for future years.

8. EMPLOYEE BENEFIT PLANS

In 1996, the Division adopted a 401(k) Profit Sharing Plan (the "401(k)
Plan") that is intended to qualify under section 401(k) of the Internal Revenue
Code of 1986, as amended. The 401(k) Plan covers substantially all of the
Division's employees. Participants may elect to contribute a percentage of their
compensation to this plan, up to the statutory maximum amount. The Division may
make discretionary contributions to the 401(k) Plan, but have not done so during
1997 and the three months ended March 31, 1998.

F-47
<PAGE> 129

[BEYOND.COM LOGO]
<PAGE> 130

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee.

<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $25,715.00
Nasdaq National Market listing fee.......................... $ *
Blue Sky fees and expenses.................................. $ *
Printing and engraving expenses............................. $ *
Legal fees and expenses..................................... $ *
Accounting fees and expenses................................ $ *
Transfer Agent and Registrar fees........................... $ *
Miscellaneous............................................... $ *
----------
Total............................................. *
==========
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond the indemnification specifically provided by the current
law.

Article IX of our Certificate of Incorporation, as amended, provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.

Article VI of our Bylaws provides for the indemnification of officers,
directors and third parties acting on our behalf if such person acted in good
faith and in a manner reasonably believed to be in, and not opposed to, our best
interest and, with respect to any criminal action or proceeding, the indemnified
party had no reason to believe his or her conduct was unlawful.

We have entered into indemnification agreements with our directors and
executive officers, in addition to providing indemnification in our Bylaws, and
intend to enter into indemnification agreements with any new directors and
executive officers in the future.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM SALES OF
REGISTERED SECURITIES

During the past three years, we and our predecessors, software.net
Corporation, a Delaware corporation, software.net Corporation, a California
corporation and CyberSource Corporation, a California corporation (collectively,
"Predecessor"), have issued unregistered securities to a limited number of
persons as described below. The information regarding our shares of stock has
been adjusted to give effect to the one-for-two stock split of our common stock
effected in June 1996, and the conversion of all outstanding shares of preferred
stock into common stock in connection with our initial public offering in June
1998.

(1) On January 9, 1995, Predecessor issued an aggregate of 1,437,500
shares of Series A preferred stock which are convertible into 2,875,000
shares of common stock, to ten investors for a consideration of either
$0.40 per share of Series A preferred stock ($0.33 per share as adjusted
for the spin-off), or an aggregate of $575,000. The purchasers consisted of
one investor, who was related to a director as of that date and purchased
500,000 shares, and nine unaffiliated investors who purchased 937,500
shares.

(2) On February 27, 1996, Predecessor issued an aggregate of 548,020
shares of Series A preferred stock, which are convertible into 1,096,040
shares of common stock, to three investors for a consideration

II-1
<PAGE> 131

of either $0.91 per share of Series A preferred stock ($0.76 per share as
adjusted for the spin-off), or an aggregate of $498,697. The purchasers
consisted of one investor, who was related to a director as of that date
and purchased 253,131 shares, and two unaffiliated investors who purchased
294,889 shares. Each of the purchasers had previously purchased Series A
preferred stock in January, 1995.

(3) On July 12, 1996, Predecessor issued an aggregate of 2,037,038
shares of Series B preferred stock which are convertible into 4,074,076
shares of common stock, to eleven investors for a consideration of either
$2.70 per share of Series B preferred stock ($2.25 per share as adjusted
for the spin-off), or an aggregate of approximately $5,500,000. The
purchasers consisted of one investor who is presently related to a director
and purchased 925,926 shares, and ten unaffiliated investors who purchased
1,111,112 shares.

(4) On September 26, 1997, September 30, 1997 and December 5, 1997,
Predecessor issued an aggregate of 3,000,000 shares of Series C preferred
stock which are convertible into 3,000,000 shares of common stock, to 19
investors for a consideration of either $2.04 per share of Series C
preferred stock ($1.70 per share as adjusted for the spin-off), or an
aggregate of approximately $6,120,000. The purchasers consisted of eleven
investors, certain of whom were, or are presently, related to one or more
of our directors and purchased 2,677,450 shares, and eight unaffiliated
investors who purchased 322,550 shares.

(5) On March 18, 1998 and April 3, 1998, Predecessor issued an
aggregate of 1,153,846 shares of Series D preferred stock which are
convertible into 1,153,846 shares of common stock, to eleven investors for
a consideration of either $2.60 per share of Series D preferred stock, or
an aggregate of approximately $3,000,000. The purchasers consisted of ten
investors, certain of whom were, or are presently, related to one or more
of our directors and purchased 1,145,264 shares, and one unaffiliated
investor who purchased 8,582 shares.

(6) In March 1998, Predecessor entered in an agreement with America
Online pursuant to which, subject to certain limited exceptions, America
Online agreed to buy shares of common stock at a price per share equal to
the initial public offering price (less the underwriters' discount) for an
aggregate purchase price of $2,000,000. Based on an initial public offering
price of $9.00 per share, America Online purchased 238,949 shares of common
stock on June 19, 1998. Concurrent with the purchase of the shares of
common stock by America Online, we issued to America Online a warrant to
purchase 358,423 shares of the common stock at a per share exercise price
of $8.37, which will vest in increments of 1/36 per month commencing March
1, 1998.

(7) In March 1998, Predecessor also issued to America Online a warrant
to purchase 369,578 shares of the Series D preferred stock at a price of
$2.60 per share, which vest in increments of 1/36 per month commencing
March 1, 1998; provided, however, that the warrant is not exercisable until
after August 31, 1999, except in the event of a change of control (as
defined herein). This warrant terminated in accordance with its terms
immediately prior to the consummation of our initial public offering.

(8) In May 1998, we issued shares of our capital stock to the
shareholders of the Predecessor in connection with the reincorporation
through a merger of the Predecessor with and into us. We believe this
transaction was exempt from registration under Section 2(3) on the basis
that such transaction did not involve a "sale" of securities.

(9) In June 1998, in connection with the initial public offering of
our common stock, we sold an aggregate of 5,750,000 shares of common stock
pursuant to a registration statement on Form S-1, as amended (File No.
333-51121), which is filed with the Securities and Exchange Commission (the
"Commission"). The registration statement was declared effective by the
Commission on June 17, 1998.

(10) In August 1998, we filed a registration statement on Form S-8
registering an aggregate of 6,000,000 shares of common stock subject to
outstanding options or reserved for issuance under our stock option plans.
As of December 31, 1998, options to purchase an aggregate of 4,495,299
shares of common stock had been granted under our stock option plans and an
aggregate of 126,852 shares of common stock had been issued upon exercise
of such options.
II-2
<PAGE> 132

(11) In November and December 1998, we issued and sold 7 1/4%
Convertible Subordinated Notes Due December 1, 2003 to several initial
purchasers in an aggregate principal amount of $63,250,000 (less discount).
The initial purchasers consisted of two purchasers, who were related to
certain directors as of that date and purchased an aggregate of $2,000
(less discount) of the securities, and an unaffiliated purchaser who
purchased $63,248,000 (less discount).

Except as indicated above, none of the foregoing transactions involved any
underwriters, underwriting discounts or commissions or any public offering, and
we believe that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(2) thereof, Regulation D
promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients in such transactions represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with us and the Predecessor, to
information about us and the Predecessor.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
!1.1 Form of Underwriting Agreement.
**2.1 Form of Agreement and Plan of Merger between the Registrant
and software.net Corporation, a California corporation.
*****3.1 Form of Certificate of Incorporation, as amended.
**3.2 Form of Bylaws of the Registrant.
**4.1 Specimen of Certificate for Common Stock.
**4.2 Common Stock Warrant issued by Registrant to America Online,
Inc.
***4.3 Form of Indenture dated as of November 23, 1998, by and
between the Registrant and LaSalle National Bank.
***4.4 Form of Registration Rights Agreement dated as of November
23, 1998, by and between the Company and Credit Suisse First
Boston Corporation, C.E. Unterberg, Towbin and Donaldson,
Lufkin & Jenrette Securities Corporation.
***4.5 Purchase Agreement dated as of November 17, 1998, by and
between the Company and Credit Suisse First Boston
Corporation, C.E. Unterberg, Towbin and Donaldson, Lufkin &
Jenrette Securities Corporation.
***4.6 Form of Notes (included in Exhibit 4.3).
!5.1 Opinion of Morrison & Foerster LLP.
**10.1 Form of Indemnification Agreement.
**10.2 1995 Stock Option Plan, as amended.
**10.3 1998 Stock Option Plan.
**10.4 Stock Option Agreement dated as of March 31, 1995, by and
between the Registrant and John Pettitt.
**10.5 Series A Preferred Stock Purchase Agreement, as amended.
**10.6 Series B Preferred Stock Purchase Agreement.
**10.7 Series C Preferred Stock Purchase Agreement.
**10.8 Series D Preferred Stock Purchase Agreement.
</TABLE>

II-3
<PAGE> 133

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**10.9 Common Stock and Warrants Subscription Agreement dated as of
March 18, 1998, by and between the Registrant and America
Online, Inc.
**10.10 Conveyance Agreement dated as of December 31, 1997, by and
between the Registrant and Internet Commerce Services
Corporation (now known as CyberSource Corporation).
**10.11 Interactive Marketing Agreement dated as of March 1, 1998,
by and between the Registrant and America Online, Inc.
**10.12 Sponsorship Agreement dated as of March 30, 1998, by and
between the Registrant and Excite, Inc.
**10.13 Co-Marketing Services Agreement dated as of June 23, 1997,
by and between the Registrant and Netscape Communications
Corporation.
**10.14 Trademark License Agreement dated as of June 23, 1997, by
and between the Registrant and Netscape Communications
Corporation.
**10.15 Offer letter to Mark Breier.
**10.16 Inter-Company Cross License Agreement dated as of April 23,
1998, by and between the Registrant and Internet Commerce
Services (now known as CyberSource Corporation), as amended
on May 19, 1998.
**10.17 Promissory Note dated as of April 15, 1998, by and between
the Registrant and William S. McKiernan.
**10.18 Pledge Agreement as of April 15, 1998, by and between the
Registrant and William S. McKiernan.
**10.19 Internet Services and Products Agreement dated as of April
29, 1996, by and between the Registrant and Exodus
Communications, Inc.
**10.20 Office Building Lease dated as of July 8, 1997, as amended,
by and between the Registrant and PGP-South Bay Office
Towers, Inc.
**10.21 Agreement dated as of December 19, 1995, by and between the
Registrant and the United States Department of Defense, DFAS
(#N00140-96-G-D115).
**10.22 Internet Commerce Services Agreement dated as of April 23,
1998, by and between the Registrant and CyberSource
Corporation, as amended on May 19, 1998.
**10.23 Sublease dated as of May 27, 1998 by and between the
Registrant and First Data Merchant Services Corporation.
******10.24 Agreement dated as of June 12, 1998, by and between the
Registrant and the United States Department of Defense,
Defense Logistics Agency (#N00140-98-D-1756).
******10.25 Offer Letter from Registrant to Mala Anand, dated as of June
15, 1998.
*******10.26 Agreement dated as of September 11, 1998, by and between the
Registrant
and the United States National Imaging and Mapping Agency
(NIMA Contract
#N00140-98-D-2139).
*******+10.27 Co-hosting Agreement dated as of September 21, 1998, by and
between the Registrant and Network Associates, Inc.
*******+10.28 Web Site Service Agreement dated as of September 21, 1998,
by and between the Registrant and Network Associates, Inc.
*******+10.29 Electronic Services Distribution Agreement dated as of
September 1, 1997, by and between the Registrant and McAfee
Software, Inc.
***10.30 Offer Letter to John D. Vigouroux dated as of October 26,
1998.
</TABLE>

II-4
<PAGE> 134

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*+10.31 Software Merchant Program Advertising and Promotion
Agreement dated as of February 5, 1999, by and between the
Registrant and Yahoo! Inc.
*23.1 Consent of Ernst & Young LLP, independent auditors.
*23.2 Consent of Morrison & Foerster LLP (included in Exhibit
5.1).
*23.3 Consent of PricewaterhouseCoopers LLP, independent
accountants.
*23.4 Consent of PricewaterhouseCoopers LLP, independent
accountants.
*24.1 Power of Attorney (See page II-7).
*27.1 Financial Data Schedule.
</TABLE>

- ---------------
+ Certain portions of this exhibit have been granted confidential
treatment by the Commission. The omitted portions have been separately
filed with the Commission.

! To be filed.

* Filed herewith.

** Incorporated by reference to Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-51121), as amended, filed with the Commission on
June 17, 1998.

*** Incorporated by reference to Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-70957) filed with the Commission on January 21,
1999.

***** Incorporated by reference to Beyond.com's Current Report on Form 8-K
filed with the Commission on December 31, 1998, as amended.

****** Incorporated by reference to Beyond.com's Quarterly Report on Form 10-Q
filed with the Commission on August 14, 1998.

******* Incorporated by reference to Beyond.com's Quarterly Report, as amended,
on Form 10-Q/A filed with the Commission on November 20, 1998.

(b) FINANCIAL STATEMENT SCHEDULES

BEYOND.COM CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTION/ END OF
DESCRIPTION OF PERIOD EXPENSES WRITEOFF PERIOD
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Accounts receivable allowances...................... $ -- $ 77 $ (12) $ 65
Year ended December 31, 1997
Accounts receivable allowances...................... 65 240 (30) 275
Period ended December 31, 1998
Accounts receivable allowances...................... 275 730 (117) 878
</TABLE>

All other schedules are omitted because they are inapplicable or the
requested information is shown in the financial statements of the registrant or
related notes thereto.

II-5
<PAGE> 135

ITEM 17. UNDERTAKINGS

We hereby undertake to:

(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;

provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That, for purposes of determining any liability under the
Securities Act, each filing of our annual report pursuant to section 13(a)
or section 15(d) of the Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-6
<PAGE> 136

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Sunnyvale, California,
on March 12, 1999.

Beyond.com Corporation

By: /s/ MARK L. BREIER
------------------------------------
Mark L. Breier
President, Chief Executive Officer
and Director

POWER OF ATTORNEY

Each person whose signature appears below appoints, jointly and severally,
Mark L. Breier and Michael J. Praisner, and each of them, individually and
without the other, his or her true and lawful attorney-in-fact and agent, each
acting alone, with full power of substitution and resubstitution, for him or her
and his or her name, place and stead, in any and all capacities, to sign any or
all amendments to this registration statement (including post-effective
amendments and any amendments or abbreviated registration statements pursuant to
Rule 462(b) increasing the amount of securities for which registration is
sought) and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission. Each person
whose signature appears below hereby grants unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratifies and
confirms all that each of said attorney-in-fact may lawfully perform or cause to
be performed each and every act requisite and necessary to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on the 12th day of March, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
PRINCIPAL EXECUTIVE OFFICER:

By: /s/ MARK L. BREIER President, Chief Executive March 12, 1999
---------------------------------------------- Officer and Director
Mark L. Breier

PRINCIPAL FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING OFFICER:

By: /s/ MICHAEL J. PRAISNER Vice President, Finance & March 12, 1999
---------------------------------------------- Administration and Chief
Michael J. Praisner Financial Officer

ADDITIONAL DIRECTORS:

By: /s/ WILLIAM S. MCKIERNAN Chairman of the Board of March 12, 1999
---------------------------------------------- Directors
William S. McKiernan

By: /s/ DOUGLAS CARLSTON Director March 12, 1999
----------------------------------------------
Douglas Carlston

By: /s/ JOHN S. CHEN Director March 12, 1999
----------------------------------------------
John S. Chen

By: /s/ BERT KOLDE Director March 12 ,1999
----------------------------------------------
Bert Kolde

By: /s/ RONALD S. POSNER Director March 12, 1999
----------------------------------------------
Ronald S. Posner
</TABLE>

II-7
<PAGE> 137

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION PAGE NO.
-------------- ----------- ------------
<C> <S> <C>
!1.1 Form of Underwriting Agreement..............................
**2.1 Form of Agreement and Plan of Merger between the Registrant
and software.net Corporation, a California corporation......
*****3.1 Form of Certificate of Incorporation, as amended............
**3.2 Form of Bylaws of the Registrant............................
**4.1 Specimen of Certificate for Common Stock....................
**4.2 Common Stock Warrant issued by Registrant to America Online,
Inc.........................................................
***4.3 Form of Indenture dated as of November 23, 1998, by and
between the Registrant and LaSalle National Bank............
***4.4 Form of Registration Rights Agreement dated as of November
23, 1998, by and between the Company and Credit Suisse First
Boston Corporation, C.E. Unterberg, Towbin and Donaldson,
Lufkin & Jenrette Securities Corporation....................
***4.5 Purchase Agreement dated as of November 17, 1998, by and
between the Company and Credit Suisse First Boston
Corporation, C.E. Unterberg, Towbin and Donaldson, Lufkin &
Jenrette Securities Corporation.............................
***4.6 Form of Notes (included in Exhibit 4.3).....................
*5.1 Opinion of Morrison & Foerster LLP..........................
**10.1 Form of Indemnification Agreement...........................
**10.2 1995 Stock Option Plan, as amended
**10.3 1998 Stock Option Plan......................................
**10.4 Stock Option Agreement dated as of March 31, 1995, by and
between the Registrant and John Pettitt.....................
**10.5 Series A Preferred Stock Purchase Agreement, as amended.....
**10.6 Series B Preferred Stock Purchase Agreement.................
**10.7 Series C Preferred Stock Purchase Agreement.................
**10.8 Series D Preferred Stock Purchase Agreement.................
**10.9 Common Stock and Warrants Subscription Agreement dated as of
March 18, 1998, by and between the Registrant and America
Online, Inc.................................................
**10.10 Conveyance Agreement dated as of December 31, 1997, by and
between the Registrant and Internet Commerce Services
Corporation (now known as CyberSource Corporation)..........
**10.11 Interactive Marketing Agreement dated as of March 1, 1998,
by and between the Registrant and America Online, Inc.......
**10.12 Sponsorship Agreement dated as of March 30, 1998, by and
between the Registrant and Excite, Inc......................
**10.13 Co-Marketing Services Agreement dated as of June 23, 1997,
by and between the Registrant and Netscape Communications
Corporation.................................................
**10.14 Trademark License Agreement dated as of June 23, 1997, by
and between the Registrant and Netscape Communications
Corporation.................................................
**10.15 Offer letter to Mark Breier.................................
</TABLE>
<PAGE> 138

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION PAGE NO.
-------------- ----------- ------------
<C> <S> <C>
**10.16 Inter-Company Cross License Agreement dated as of April 23,
1998, by and between the Registrant and Internet Commerce
Services (now known as CyberSource Corporation), as amended
on May 19, 1998.............................................
**10.17 Promissory Note dated as of April 15, 1998, by and between
the Registrant and William S. McKiernan.....................
**10.18 Pledge Agreement as of April 15, 1998, by and between the
Registrant and William S. McKiernan.........................
**10.19 Internet Services and Products Agreement dated as of April
29, 1996, by and between the Registrant and Exodus
Communications, Inc.........................................
**10.20 Office Building Lease dated as of July 8, 1997, as amended,
by and between the Registrant and PGP-South Bay Office
Towers, Inc.................................................
**10.21 Agreement dated as of December 19, 1995, by and between the
Registrant and the United States Department of Defense, DFAS
(#N00140-96-G-D115).........................................
**10.22 Internet Commerce Services Agreement dated as of April 23,
1998, by and between the Registrant and CyberSource
Corporation, as amended on May 19, 1998.....................
**10.23 Sublease dated as of May 27, 1998 by and between the
Registrant and First Data Merchant Services Corporation.....
******10.24 Agreement dated as of June 12, 1998, by and between the
Registrant and the United States Department of Defense,
Defense Logistics Agency (#N00140-98-D-1756)................
******10.25 Offer Letter from Registrant to Mala Anand, dated as of June
15, 1998....................................................
*******10.26 Agreement dated as of September 11, 1998, by and between the
Registrant and the United States National Imaging and
Mapping Agency (NIMA Contract #N00140-98-D-2139)............
*******+10.27 Co-hosting Agreement dated as of September 21, 1998, by and
between the Registrant and Network Associates, Inc..........
*******+10.28 Web Site Service Agreement dated as of September 21, 1998,
by and between the Registrant and Network Associates, Inc...
*******+10.29 Electronic Services Distribution Agreement dated as of
September 1, 1997, by and between the Registrant and McAfee
Software, Inc...............................................
***10.30 Offer Letter to John D. Vigouroux dated as of October 26,
1998........................................................
!+10.31 Software Merchant Program Advertising and Promotion
Agreement dated as of February 5, 1999, by and between the
Registrant and Yahoo! Inc.
*23.1 Consent of Ernst & Young LLP, independent auditors..........
*23.3 Consent of PricewaterhouseCoopers LLP, independent
accountants.................................................
*23.4 Consent of PricewaterhouseCoopers LLP, independent
accountants.................................................
!23.2 Consent of Morrison & Foerster LLP (to be included in
Exhibit 5.1)................................................
*24.1 Power of Attorney (See signature page)......................
*27.1 Financial Data Schedule.....................................
</TABLE>

- ---------------
+ Certain portions of this exhibit have been granted confidential
treatment by the Commission. The omitted portions have been separately
filed with the Commission.

! To be filed.
<PAGE> 139

* Filed herewith.

** Incorporated by reference from Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-51121), as amended, filed with the Commission on
June 17, 1998.

*** Incorporated by reference from Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-70957) filed with the Commission on January ,
1999.

***** Incorporated by reference from Beyond.com's Current Report on Form 8-K
filed with the Commission on December 31, 1998, as amended.

****** Incorporated by reference from Beyond.com's Quarterly Report on Form
10-Q filed with the Commission on August 14, 1998.

******* Incorporated by reference from Beyond.com's Quarterly Report, as
amended, on Form 10-Q/A filed with the Commission on November 20, 1998.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
January 11, 1999 in the Registration Statement (Form S-1) and the related
Prospectus of Beyond.com Corporation for the registration of 4,000,000 shares of
common stock.

Our audits also included the financial statement schedule of Beyond.com
(incorporated as software.net Corporation) listed in Item 16(b). This schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ ERNST & YOUNG LLP
------------------------------------------

San Jose, California
March 15, 1999

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 5, 1999 relating
to the consolidated financial statements of BuyDirect.com, Inc., which appears
in such Prospectus. We also consent to the references to us under the heading
"Experts" in such Prospectus.

PRICEWATERHOUSECOOPERS LLP
San Francisco, California
March 12, 1998

<PAGE> 1

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 5, 1999 relating
to the financial statements of E-Commerce, a division of CNET, Inc., which
appears in such Prospectus. We also consent to the references to us under the
heading "Experts" in such Prospectus.

PRICEWATERHOUSECOOPERS LLP
San Francisco, California
March 12, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 81,548
<SECURITIES> 0
<RECEIVABLES> 8,785
<ALLOWANCES> (878)
<INVENTORY> 0
<CURRENT-ASSETS> 102,059
<PP&E> 3,150
<DEPRECIATION> (608)
<TOTAL-ASSETS> 109,904
<CURRENT-LIABILITIES> 21,931
<BONDS> 63,250
0
0
<COMMON> 69,311
<OTHER-SE> (44,588)
<TOTAL-LIABILITY-AND-EQUITY> 109,904
<SALES> 36,650
<TOTAL-REVENUES> 36,650
<CGS> 31,074
<TOTAL-COSTS> 31,074
<OTHER-EXPENSES> 36,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> (31,073)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,073)
<DISCONTINUED> 0
<EXTRAORDINARY> (51)
<CHANGES> 0
<NET-INCOME> (31,124)
<EPS-PRIMARY> (1.65)<F1>
<EPS-DILUTED> (1.28)<F2>
<FN>
<F1>For Purposes of This Exhibit, Primary means Basic & Diluted.
<F2>For Purposes of This Exhibit, Diluted means Pro-forma.
</FN>

</TABLE>