EMERGE INTERACTIVE INC
S-1/A, 2000-02-01
BUSINESS SERVICES, NEC
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<PAGE>   1


    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 2000


                                                      REGISTRATION NO. 333-89815
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------


                                AMENDMENT NO. 6

                                       TO
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                            eMerge INTERACTIVE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             3698                            65-0534535
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL              (IRS EMPLOYER
  INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NO.)            IDENTIFICATION NUMBER)
</TABLE>

                              10315 102ND TERRACE
                              SEBASTIAN, FL 32958
                                  561/589-5310
    (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                  OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
                               CHARLES L. ABRAHAM
                            CHIEF EXECUTIVE OFFICER
                            eMerge INTERACTIVE, INC.
                              10315 102ND TERRACE
                              SEBASTIAN, FL 32958
                                  561/589-5310
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------

                                   Copies to:

<TABLE>
<S>                                <C>                                <C>
   JAMES A. OUNSWORTH, ESQUIRE        N. JEFFREY KLAUDER, ESQUIRE        PHILIP P. ROSSETTI, ESQUIRE
   SAFEGUARD SCIENTIFICS, INC.        MORGAN, LEWIS & BOCKIUS LLP             HALE AND DORR LLP
    800 THE SAFEGUARD BUILDING             1701 MARKET STREET                  60 STATE STREET
       435 DEVON PARK DRIVE           PHILADELPHIA, PA 19103-2921              BOSTON, MA 02109
         WAYNE, PA 19087                      215/963-5694                       617/526-6000
           610/293-0600
</TABLE>

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

    If the only 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



<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
                                                               PROPOSED MAXIMUM AGGREGATE            AMOUNT OF
    TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED              OFFERING PRICE(1)             REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                              <C>
Class A Common Stock, par value $.008 per share............          $140,000,000(2)                 $38,175(2)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>



(1) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933, as amended.



(2) A fee of $24,117 was previously paid in connection with the previous
    proposed maximum aggregate offering price of $86,750,000. A filing fee of
    $14,058 is being submitted herewith to cover the increase in the maximum
    aggregate offering price of $53,250,000.

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

    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, AS AMENDED OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2

     THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
     UNDERWRITERS 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 IT IS NOT
     SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE OFFER
     OR SALE IS NOT PERMITTED.


                 SUBJECT TO COMPLETION, DATED FEBRUARY 1, 2000


                                8,000,000 SHARES

                                      LOGO
                              CLASS A COMMON STOCK
                            ------------------------
     This is an initial public offering of class A common stock of eMerge
Interactive, Inc. We are offering 6,500,000 shares of class A common stock in
this offering and several stockholders identified in this prospectus are selling
an additional 1,500,000 shares. As part of this offering, we are offering
2,806,000 shares of our class A common stock at the public offering price to
shareholders of Safeguard Scientifics, Inc., one of our principal stockholders,
that owned at least 100 shares of common stock of Safeguard as of October 20,
1999 and Safeguard is offering up to 694,000 shares to its shareholders.
Safeguard or its designees will purchase any shares of class A common stock that
are not purchased by Safeguard shareholders under the Safeguard Subscription
Program. See the section entitled Plan of Distribution -- Safeguard Subscription
Program. We expect the initial public offering price will be between $10.00 and
$12.00 per share.

     SAFEGUARD IS AN UNDERWRITER WITH RESPECT TO THE SHARES OFFERED TO THE
SHAREHOLDERS OF SAFEGUARD. SAFEGUARD IS NOT AN UNDERWRITER WITH RESPECT TO ANY
OTHER SHARES OFFERED AND IS NOT INCLUDED IN THE TERM UNDERWRITER AS USED
ELSEWHERE IN THIS PROSPECTUS.

     Prior to this offering, there has been no public market for the class A
common stock. We have applied to list the class A common stock on the Nasdaq
National Market under the symbol EMRG.
                            ------------------------

     INVESTING IN OUR CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PLEASE SEE THE SECTION ENTITLED RISK FACTORS STARTING ON PAGE 10 TO READ ABOUT
RISKS THAT YOU SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR CLASS A
COMMON STOCK.

     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.
                            ------------------------

<TABLE>
<CAPTION>
                                                                  PER SHARE       TOTAL
    Underwritten Public Offering                                  ---------    -----------
    <S>                                                           <C>          <C>            <C>
    Public Offering Price.......................................   $           $
         Underwriting Discounts.................................   $           $
         Proceeds to eMerge Interactive.........................   $           $
         Proceeds to Selling Stockholders.......................   $           $
</TABLE>

<TABLE>
<CAPTION>
                                                                  PER SHARE       TOTAL
    Safeguard Subscription Program                                ---------    -----------
    <S>                                                           <C>          <C>            <C>
    Public Offering Price.......................................   $           $
         Management Fee.........................................   $           $
         Proceeds to eMerge Interactive.........................   $           $
         Maximum proceeds, before expenses, to Safeguard
          Scientifics, Inc......................................   $           $
</TABLE>

<TABLE>
<CAPTION>
                                                                                  TOTAL
    Aggregate Offering Proceeds                                                -----------
    <S>                                                           <C>          <C>            <C>
    Proceeds to eMerge Interactive from Underwritten Public
    Offering and Safeguard Subscription Program.................               $
</TABLE>

     At our request, the underwriters have reserved 1,000,000 shares of our
class A common stock for sale at the public offering price to two potential
investors identified on page 77. The potential investors have not committed to
purchasing these shares. In addition, at our request, the underwriters have
reserved 350,000 shares of our class A common stock for sale at the public
offering price to our employees, directors and other persons with relationships
with us. See the section entitled Plan of Distribution for more information. The
underwriters have an option to purchase 675,000 additional shares of class A
common stock from us at the initial public offering price to cover any
over-allotments of shares.
                            ------------------------

ADAMS, HARKNESS & HILL, INC.
                                   FIRST UNION SECURITIES, INC.
                                                                    FAC/EQUITIES
                      PROSPECTUS DATED             , 2000
<PAGE>   3

     You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of class A common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our class A common stock.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    4
Risk Factors................................................   10
Forward-Looking Statements..................................   23
Use of Proceeds.............................................   24
Dividend Policy.............................................   24
Capitalization..............................................   25
Dilution....................................................   27
Selected Consolidated Financial Data........................   28
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   29
Business....................................................   37
Management..................................................   54
Related Party Transactions..................................   61
Principal and Selling Stockholders..........................   64
Description of Capital Stock................................   68
Shares Eligible for Future Sale.............................   72
Plan of Distribution........................................   74
Legal Matters...............................................   79
Experts.....................................................   79
Additional Information......................................   80
Index to Financial Statements...............................  F-1
</TABLE>

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

     Until             , all dealers that buy, sell or trade in our class A
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to its unsold
allotments or subscriptions.

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

     We maintain a Web site at www.cattleinfonet.com, which includes information
relating to eMerge Interactive. Information contained on our Web site does not
constitute a part of this prospectus.

     Cyberstockyard(TM) and NutriCharge(TM) are trademarks of eMerge
Interactive. This prospectus also contains trademarks and tradenames of other
companies.
<PAGE>   4

                      [This Page Intentionally Left Blank]
<PAGE>   5

                               PROSPECTUS SUMMARY

                            eMERGE INTERACTIVE, INC.

OVERVIEW

     We are a business-to-business electronic commerce company combining
content, community and transaction services to create an online marketplace for
the cattle industry. We offer our products and services to cattle industry
participants through our family of integrated Web sites, our proprietary
information management application and our direct sales force. Our products and
services are designed to create an efficient market for the purchase and sale of
cattle and to improve quality and productivity in the cattle industry. Our
current products and services include:

     - Livestock procurement services consisting of cattle sales and auctions;

     - Daily performance analyses of a customer's feedlot operations;

     - Comparative cattle industry analysis and feedlot operations benchmarking
       studies;

     - Cattle inventory management tools; and

     - Livestock health management and quality enhancement products.

THE ONLINE LIVESTOCK OPPORTUNITY

     We believe that the production chain of the cattle industry, which includes
cattle producers, feedlots, packers and suppliers, contains inefficiencies that
reduce animal health and value. These inefficiencies, which include excessive
animal transportation and handling, result in additional transaction costs and
reduced beef quality. Further, we believe that inadequate access to current and
accurate data and a lack of integrated information management tools have limited
the ability of industry participants to optimize their operating results and
performance.

     Due to its functionality, scalability and accessibility, the Internet is
emerging as a single destination for commerce and information related to the
livestock industry. Many of the variables that affect beef quality can be
addressed by using the Internet's open architecture, universal accessibility and
ability to provide more timely and comprehensive information. According to
Forrester Research, business-to-business electronic commerce in the United
States is expected to grow from $43.0 billion in 1998 to $1.3 trillion in 2003.

THE eMERGE INTERACTIVE EXPERIENCE

     We offer commerce, information and technology to cattle industry
participants. Our complementary products and services are designed to reduce
inefficiencies throughout the cattle production chain, improve cattle quality
and improve overall productivity in the cattle industry. Our current products
and services include the following:

     - Cyberstockyard.com, our online cattle sales and auction services Web
       site, allows our customers to participate in our live cattle sales and
       auctions, thereby providing efficient and effective access to an
       inventory of cattle by directly connecting buyers and sellers of cattle.
       We believe a less fragmented market for cattle sales may reduce the
       excessive handling of cattle that results from transportation and
       commingling during transactions, thereby reducing animal stress, which
       can lead to improved cattle quality. In addition, by reducing the need
       for multiple transactions, we seek to lower overall transaction costs
       associated with cattle sales.

                                        4
<PAGE>   6

     - The Feedlot Information System, our cattle information management
       product, is designed to assist in the effective daily management of our
       customers' cattle operations. Using our proprietary information
       management application, subscribing feedlot customers transmit raw
       operating data to us on a daily basis over the Internet. We then use each
       subscribing customer's raw data to compile customer-specific information
       and performance data and analyses, such as feed consumption data, feed-
       to-gain ratios and a comprehensive summary of health results, which we
       disseminate daily to that customer over the Internet.

     - PCC-online.com, our Professional Cattle Consultants service, is designed
       to provide our customers with national, regional and customer-specific
       industry analysis services that are derived from our proprietary
       centralized database of cattle industry information. This information has
       been compiled from over 90 different feedlots over the last 26 years.
       These services include feed performance benchmarking services and monthly
       market analysis that we provide to subscribing customers on a periodic
       basis. PCC-online.com enables our feedlot customers to compare the
       performance of their feedlot to the average performance of other feedlots
       in our database.

     - NutriCharge, our therapeutic product for livestock, is a restorative feed
       supplement designed to reduce the effects of stress on the animals caused
       by transportation, handling and commingling. We sell our NutriCharge
       product over our Web sites and through our direct sales force.

     Our customers can access our family of integrated Web sites through our
platform site, CattleInfoNet.com. This industry-specific Web site features
general industry information, such as current industry news, links to
commodities pricing and weather updates, as well as personalized information
based upon customers' individual preferences and geographic location.
CattleInfoNet.com also provides customers with an online community to facilitate
the exchange of information among livestock producers, feedlots and packers and
to provide access to our in-house cattle industry experts.

FINANCIAL INFORMATION

     We currently derive our revenue from:

     - Purchasing and selling cattle through our online cattle sales and auction
       services;

     - Subscription fees for our PCC-online information management services,
       which we provide over the Internet and through our periodic marketing
       reports and newsletters; and

     - Sales of our proprietary products.

     You should be aware that we incurred net losses of approximately $7.8
million for the year ended December 31, 1998 and approximately $10.7 million for
the nine months ended September 30, 1999, resulting in an accumulated deficit of
approximately $27.5 million at September 30, 1999. We expect to continue to
incur substantial losses in the future related to expanding our network,
expanding our product and service offerings, establishing brand recognition and
upgrading and enhancing our technology.

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

     We are a Delaware corporation originally incorporated on September 12, 1994
under the name Enhanced Vision Systems, Inc. On June 11, 1999, we changed our
name to eMerge Interactive, Inc. Our principal executive offices are located at
10315 102nd Terrace, Sebastian, Florida 32958 and our telephone number is
561-589-5310.

                                        5
<PAGE>   7

                                  THE OFFERING

Class A common stock offered by:
     eMerge Interactive..........................   6,500,000 shares
     The Selling Stockholders....................   1,500,000 shares
Common stock to be outstanding after the
offering.........................................   31,732,902 shares

Use of proceeds..................................   For repayment of debt,
                                                    working capital and general
                                                    corporate purposes,
                                                    including sales and
                                                    marketing expenditures,
                                                    research and development
                                                    expenditures and capital
                                                    expenditures. See the
                                                    section entitled Use of
                                                    Proceeds.

Proposed Nasdaq National Market symbol...........   EMRG

     In addition to the 31,732,902 shares of common stock to be outstanding
after this offering, there are:

     - 2,769,116 shares of class A common stock issuable upon the exercise of
       outstanding options granted under our equity compensation plans as of
       December 31, 1999 at a weighted average exercise price of $2.93 per
       share, of which options to purchase 761,045 shares of class A common
       stock were exercisable at a weighted average exercise price of $1.68 per
       share;

     - 1,597,875 additional shares of class A common stock available for
       issuance under our 1996 and 1999 equity compensation plans as of December
       31, 1999; and

     - 1,138,889 shares of class B common stock issuable on the exercise of a
       warrant that will be exercisable upon consummation of this offering at an
       exercise price equal to the initial public offering price.

     For a description of our equity compensation plans, please see the section
entitled Management -- Equity Compensation.

                                        6
<PAGE>   8

                         SAFEGUARD SUBSCRIPTION PROGRAM

     As part of this offering, we are offering shares of our class A common
stock to shareholders of Safeguard Scientifics, Inc. that owned at least 100
shares of Safeguard common stock on October 20, 1999 in the Safeguard
Subscription Program. The program is described in greater detail in the section
of this prospectus entitled Plan of Distribution -- Safeguard Subscription
Program.

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

     Unless otherwise noted, the information in this prospectus takes into
account the conversion of preferred stock into shares of common stock, which
will automatically occur immediately before this offering is completed. Each
outstanding share of series A preferred stock, series B preferred stock and
series C preferred stock will convert into 1.25 shares of class A common stock
and each outstanding shares of series D preferred stock will convert into 1.25
shares of class B common stock. All shares offered by this prospectus are shares
of class A common stock. The holders of class A common stock are entitled to one
vote per share. Holders of our class B common stock are entitled to two and
one-half votes per share. Unless otherwise indicated, the references to common
stock in this prospectus refer to both our class A and class B common stock.

     The information in this prospectus also takes into account a 5-for-4 common
stock split which was authorized by the Company's Board of Directors on December
6, 1999 and was effective on December 23, 1999.

     The references to Safeguard in this prospectus refer to Safeguard
Scientifics, Inc. and its affiliates. The information throughout this prospectus
also assumes that all of the shares offered in the Safeguard Subscription
Program are purchased by shareholders of Safeguard Scientifics, Inc. and, as a
result, no shares are shown as purchased by Safeguard under the Standby Stock
Purchase Agreement. In addition, the information in this prospectus assumes that
the underwriters will not exercise their over-allotment option.

     Please see the section entitled Capitalization for more information
regarding the outstanding shares of our common stock and options to purchase our
common stock.

                                        7
<PAGE>   9

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The following table summarizes consolidated statements of operations data
for our business. The pro forma consolidated statements of operations data gives
effect to our acquisition of CIN, LLC and Professional Cattle Consultants,
L.L.C. as if we had consummated these acquisitions at the beginning of each
period. Cyberstockyard, Inc. is not included because the pro forma effects are
not significant. We acquired CIN, LLC in February 1999 for an aggregate purchase
price of approximately $2.3 million, which consisted of cash, shares of our
class A common stock, assumption of liabilities, future contingent payments
relating to sales of products over the CIN Web site and transaction costs. We
acquired Professional Cattle Consultants, L.L.C. in May 1999 for an aggregate
purchase price of approximately $1.8 million, which consisted of cash, the
assumption of liabilities and transaction costs. We acquired Cyberstockyard,
Inc. in March 1999 for an aggregate purchase price of approximately $542,000,
which consisted of shares of our class A common stock and transaction costs.
Business activities related to our continuing operations began on January 1,
1997. From our inception in 1994 until January 1997, our business activities
related to the development and commercialization of infrared products focused on
the transportation industry, primarily the maritime transportation industry. The
historical data for the nine months ended September 30, 1998 and the pro forma
data for the year ended December 31, 1998 and the nine months ended September
30, 1999 are unaudited.

<TABLE>
<CAPTION>
                                                                                                 NINE
                                                                                                MONTHS
                                        YEAR ENDED       NINE MONTHS ENDED     YEAR ENDED        ENDED
                                       DECEMBER 31,        SEPTEMBER 30,      DECEMBER 31,   SEPTEMBER 30,
                                     -----------------   ------------------       1998           1999
                                      1997      1998      1998       1999      PRO FORMA       PRO FORMA
                                     -------   -------   -------   --------   ------------   -------------
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                  <C>       <C>       <C>       <C>        <C>            <C>
CONSOLIDATED STATEMENTS OF
  OPERATIONS DATA:
Revenue............................  $    --   $ 1,792   $ 1,106   $ 18,339     $ 2,283         $ 18,505
Cost of revenue....................       --     2,623     1,629     18,283       2,801           18,354
Operating expenses.................    1,356     4,769     3,187     10,296       6,266           10,784
Interest expense/other income,
  net..............................      141       332       231        443         315              454
                                     -------   -------   -------   --------     -------         --------
Profit (loss) from continuing
  operations.......................  $(1,497)  $(5,932)  $(3,941)  $(10,683)    $(7,099)        $(11,087)
                                     =======   =======   =======   ========     =======         ========
Profit (loss) from continuing
  operations per common share --
  basic and diluted................  $ (3.91)  $ (1.36)  $ (0.67)  $  (1.59)    $ (1.39)        $  (1.62)
                                     =======   =======   =======   ========     =======         ========
Weighted average number of common
  shares outstanding -- basic and
  diluted..........................      382     4,357     5,846      6,710       5,107            6,854
                                     =======   =======   =======   ========     =======         ========
</TABLE>

                                        8
<PAGE>   10

     The following table summarizes our balance sheet data as of September 30,
1999.

     The unaudited pro forma consolidated balance sheet data give effect to:

     - The issuance of 4,555,556 shares of series D preferred stock and a
       warrant to purchase 1,138,889 shares of class B common stock at an
       exercise price equal to the initial public offering price, for $38.8
       million ($18.0 million of cash and a $20.8 million note receivable) under
       a securities purchase agreement dated October 27, 1999, and the
       application of a portion of the proceeds from that agreement which repaid
       indebtedness to XL Vision of approximately $4.5 million;

     - The automatic conversion of all outstanding shares of series A, series B,
       series C and series D preferred stock into shares of our common stock,
       which will occur immediately prior to the consummation of the offering;

     - The termination of the redemption right relating to 62,500 shares of
       class A common stock, which will occur immediately prior to the
       consummation of the offering; and

     - The repayment of $1,400,000 of a note payable to Turnkey Computer
       Systems, Inc., which is due upon the completion of this offering.

     The unaudited pro forma as adjusted consolidated balance sheet data below
give effect to:

     - The events described in the four preceding paragraphs; and

     - The sale of 6,500,000 shares of class A common stock in this offering and
       our application of the estimated net proceeds from the sale of these
       shares, as described in the section entitled Use of Proceeds.

<TABLE>
<CAPTION>
                                                          SEPTEMBER 30, 1999
                                                 ------------------------------------
                                                                         PRO FORMA AS
                                                 ACTUAL     PRO FORMA      ADJUSTED
                                                 -------    ---------    ------------
                                                            (IN THOUSANDS)
<S>                                              <C>        <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash...........................................  $ 1,650     $13,750       $71,421
Total assets...................................   16,229      28,329        85,658
Total indebtedness.............................   15,133       9,233            --
Total stockholders' equity.....................   (3,907)     14,499        81,061
</TABLE>

     Total indebtedness as of September 30, 1999 includes amounts due to XL
Vision totaling $6.1 million and to Safeguard totaling $7.3 million. We intend
to use a portion of the net proceeds from this offering to pay in full amounts
due to XL Vision and Safeguard. As of December 31, 1999, approximately $1.6
million was owed to XL Vision after repayment of $4.5 million with the net
proceeds from the sale of series D preferred stock and a warrant to purchase
1,138,889 shares of class B common stock to Internet Capital Group, Inc.; the
remaining $1.5 million will be paid with a portion of the net proceeds from this
offering. The amount owed to Safeguard as of December 31, 1999 was approximately
$10.3 million, and is to be repaid with the net proceeds of this offering.
Safeguard owns approximately 14% of the outstanding common stock of Internet
Capital Group, Inc., and owns approximately 55% of the outstanding capital stock
of XL Vision.

                                        9
<PAGE>   11

                                  RISK FACTORS

     You should carefully consider the risks described below before investing in
our class A common stock. The factors discussed below may harm our business,
financial condition and results of operations and could result in a complete
loss of your investment.

                         RISKS RELATED TO OUR BUSINESS

WE BEGAN OPERATIONS IN OUR CURRENT LINE OF BUSINESS IN JANUARY 1997 AND FACE
SIGNIFICANT RISKS TYPICAL OF EARLY STAGE COMPANIES, WHICH COULD HARM OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     We commenced operations in 1994 and commercially released our initial
product in November 1997. Accordingly, we have only a limited operating history
upon which you can evaluate our business. In addition, our business strategy and
revenue model have changed significantly during the past year. Prior to this
change, we generated revenue primarily from the sale and licensing of our AMIRIS
product, a maritime navigational thermal imaging system, which we no longer
sell, and our equine imaging system, an infrared product used to detect injuries
in horses, which we continue to sell. We have sold the AMIRIS product line and
have changed our business strategy to focus on business-to-business Internet
commerce for the livestock industry. We only recently launched our commercial
Web site for our initial target market, the cattle industry, in August 1999. Our
limited operating history, combined with our recent shift in business strategy,
makes predicting our future results of operations difficult. Our new business
model has not been tested and, accordingly, we cannot be certain that our
business strategy will be successful.

     Specific uncertainties relating to our new business model include our
ability to:

     - Achieve acceptance of our Web site as a marketplace for electronic
       commerce;

     - Expand the number of cattle producers, feedlots and packers that utilize
       our services;

     - Develop and upgrade our products and technologies more effectively and
       rapidly than our competitors; and

     - Successfully implement our sales and marketing strategy.

WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE. IF WE CONTINUE TO INCUR LOSSES, OUR BUSINESS MAY NOT
ULTIMATELY BE FINANCIALLY VIABLE.

     We have incurred significant net losses since inception. We reported a net
loss of approximately $7.8 million for the year ended December 31, 1998, or 437%
of total revenue, and approximately $10.7 million for the nine months ended
September 30, 1999, or 58% of total revenue. We expect to continue to incur
significant losses for the foreseeable future. As of September 30, 1999, we had
accumulated net losses totaling approximately $27.5 million and a stockholders'
deficit of $3.9 million. Our operating expenses have increased significantly in
each year of our operation, and we anticipate that such expenses will continue
to increase over the next several years as we expand our operations. Our revenue
may not grow or may not even continue at its current level and, as a result, our
financial condition and results of our operations may be harmed and our business
may not be

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<PAGE>   12

financially viable in the future. To achieve profitability, we must successfully
address the following risks:

     - Lack of commercial acceptance of our online cattle sales and auction
       services;

     - Failure to expand the number of livestock industry participants using our
       network;

     - Failure to obtain access to data from feedlots to adequately address the
       information needs of our customers;

     - Inability to respond to competitive developments;

     - Failure to achieve brand recognition;

     - Failure to introduce new products and services; and

     - Failure to upgrade and enhance our technologies to accommodate expanded
       product and service offerings and increased customer traffic.

     If we are unable to successfully address any of these risks, our business
may be harmed.

THE INTERNET LIVESTOCK PRODUCTS AND SERVICES MARKET, INCLUDING, IN PARTICULAR,
THE ONLINE CATTLE SALES AND AUCTION MARKET, IS NEW AND UNCERTAIN AND OUR
BUSINESS MAY NOT DEVELOP AS WE ANTICIPATE.

     The Internet market for livestock products and services, including, in
particular, the online cattle sales and auction market, has only recently
developed, and its continued development is subject to substantial uncertainty.
To date, we have not realized adequate revenues from this market to achieve
profitability. We cannot assure you that this market will continue to develop as
we expect, if at all. Our revenue model depends on the commercial acceptance of
our Internet-based products and services. We do not know if our target customers
will use the Internet as a means of purchasing products and services. Even if
potential customers choose to purchase livestock products and services over the
Internet, they may not choose our online services to do so. If the market for
livestock products and services over the Internet does not develop as we
anticipate, our business and the results of our operations will be harmed.

     For the nine months ended September 30, 1999, we relied on online cattle
sales and auction services for over 90% of our revenue and we expect to rely on
the success of our online cattle sales and auction services for a significant
majority of our revenue for the foreseeable future. As a result, our ability to
achieve commercial acceptance of our cattle sales and auction services is
critical to our ability to obtain future revenue. To date, we have not achieved
revenues from cattle sales and auction services over the Internet that are
sufficient for us to determine whether these services will achieve commercial
acceptance. Any failure to successfully gain commercial acceptance of these
services would harm our business and the results of our operations.

WE RECENTLY COMPLETED SIGNIFICANT ACQUISITIONS OF BUSINESSES AND TECHNOLOGIES
AND WE MAY MAKE OTHER BUSINESS ACQUISITIONS IN THE FUTURE, WHICH MAY BE
DIFFICULT TO INTEGRATE INTO OUR BUSINESS AND MAY DISRUPT OR NEGATIVELY IMPACT
OUR BUSINESS.

     We recently made, and will continue to make, investments in and
acquisitions of complementary companies, technologies and assets that constitute
critical aspects of our current and future business operations. If we fail to
successfully integrate the operations of these companies, technologies or assets
into our business, we may not be able to successfully execute our business
strategy. We acquired substantially all of the assets of CIN,

                                       11
<PAGE>   13

LLC in February 1999, and Professional Cattle Consultants, L.L.C. in May 1999.
In connection with our acquisition of CIN, we hired Scott Crain, one of our key
employees. We also acquired all of the issued and outstanding stock of
Cyberstockyard, Inc. in March 1999. Each of these acquired businesses is
critical to our current business operations and growth strategy.

     These and any future acquisitions may result in:

     - Difficulties in assimilating technologies, products, personnel and
       operations;

     - Diversion of our management's attention;

     - Entering markets in which we have no or limited prior experience;

     - Loss of key employees of acquired organizations; and

     - Capital requirements in excess of what we anticipate.

     In the future, acquiring companies, assets or technologies may also require
us to make cash payments, assume debt, incur large write-offs related to
intangible assets and issue equity, which will dilute ownership interest.

IF WE FAIL TO GENERATE SUFFICIENT CASH FLOWS IN THE FUTURE, WE MAY BE UNABLE TO
RECOVER THE CARRYING AMOUNT OF OUR INTANGIBLE ASSETS, WHICH WOULD HARM OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     As a result of our recent acquisitions of companies, technologies and
assets, we have recorded $6.3 million of intangible assets on our balance sheet
as of September 30, 1999. If we are unable to generate sufficient cash flows
that are attributable to these intangible assets, we may be unable to recover
all or a portion of the carrying amount of such assets. Therefore, we may be
required to reduce the value of these assets as recorded on our balance sheet.
This would require us to record an expense in our statement of operations. This
would also reduce our net assets and increase our losses, or reduce our profits,
as the case may be. Any negative impact on our results of operations or balance
sheet could reduce the price of your common stock.

A DECLINE IN THE DEMAND FOR BEEF COULD HARM OUR RESULTS OF OPERATIONS.

     For the nine months ended September 30, 1999, we derived over 90% of our
revenue from products and services relating to the sale of cattle. If the demand
for beef declines, the demand for our products and services would likely
decline, and our results of operations would be harmed.

     In addition, because the economic benefit to a customer of using
NutriCharge is based on receiving a substantial premium for higher quality beef
over lower grade beef, if the price of prime beef declines relative to that of
choice or select beef, the lower grades of beef as determined by the U.S.
Department of Agriculture, our sales of NutriCharge could decline and our
results of operations could be harmed. Generally, the difference between the
value of prime grade beef, the most desirable grade, and choice grade beef, the
next highest grade, represents a loss of value of approximately 80%, with an
additional loss of value of 10-15% between choice and select beef.

                                       12
<PAGE>   14

IF WE ARE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS MAY BE HARMED.

     We cannot assure you that we will be able to effectively or successfully
manage our growth. If we are unable to manage our growth effectively, our
business operations would suffer. We seek to grow by increasing transaction and
subscription volume, adding new products and services and by hiring additional
employees. In particular, we are currently seeking to hire a Vice President of
Human Relations and additional order buyers for our cattle auction and sales
services. Our growth is likely to place a significant strain on our resources
and systems. As we continue to increase the scope of our operations, we will
need an effective planning and management process to implement our business
strategy successfully and we will need to implement new and improve existing
systems, procedures and controls. We will also need to expand, train and manage
our workforce.

WE CURRENTLY DO NOT HAVE AN ADEQUATE CORPORATE INFRASTRUCTURE TO SUPPORT OUR
OPERATIONS AND WE DEPEND UPON XL VISION AND SAFEGUARD TO PROVIDE SUCH SERVICES.

     We depend upon XL Vision and Safeguard for accounting, management and
administrative resources. We are currently in the process of establishing our
own corporate infrastructure. If our management team fails to manage this growth
effectively, successfully establish our corporate infrastructure or if there are
unanticipated costs or delays in the improvement and implementation of new and
existing systems, procedures and controls, our business and financial condition
may be harmed.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR BUSINESS AND
COMPETITIVE POSITION WILL BE HARMED.

     Proprietary rights are important to our success and our competitive
position. We protect our intellectual property through a combination of patent,
copyright, trade secret and trademark law and confidentiality agreements with
third parties. We currently have three pending U.S. patent applications, which
relate to (i) the early detection of inflammation using our infrared imaging
camera, (ii) feedlot information systems and methods and (iii) the cattle
transaction process. We also have 31 pending U.S. trademark applications
relating to our corporate identity, products and services. We cannot guarantee
that any of our pending patent or trademark applications will be approved. Even
if they are approved, the patents or trademarks may be challenged by other
parties or invalidated. Because brand recognition is an important component of
our business strategy, the protection of our trademarks is critical to our
success. We also depend upon patents licensed to us by the Canadian government
and trade secret law to protect the proprietary nature of our NutriCharge
products. In addition, we depend upon our proprietary database of industry and
client information to provide our clients with our information services. Despite
our efforts to protect our proprietary rights, unauthorized parties may copy
aspects of our products and technology or obtain access to our confidential
proprietary database. Other parties may also breach confidentiality agreements
and other protective contracts. We may not become aware of these breaches or
have adequate remedies available. In addition, effective copyright, patent and
trademark protection may be unavailable in certain countries to which we might
expand our operations.

     In technology markets generally, there is frequent and substantial
intellectual property litigation. We may be subject to legal proceedings and
claims, including claims that we infringe third-party proprietary rights. While
we are not aware of any patents, copyrights or other rights that would prevent
us from manufacturing and commercializing our products or services in the United
States and abroad, there can be no assurance that other parties will not assert
infringement claims against us. There also can be no assurance that former

                                       13
<PAGE>   15

employers of our present and future employees will not claim that our employees
have improperly disclosed confidential or proprietary information to us. Any of
these claims, with or without merit, could subject us to costly litigation and
divert the attention of our personnel.


     We have filed an application to register eMerge interactive and related
service marks with the U.S. Patent and Trademark Office. We have received notice
from a third party claiming superior rights to these marks and indicating an
intent to oppose our registration of the marks in Patent and Trademark Office
proceedings as well as oppose our commercial use of the marks. If we are
unsuccessful in defending any such opposition, we may be required to cease using
the eMerge marks at a future date.


WE TYPICALLY ASSUME THE OWNERSHIP OF CATTLE SOLD THROUGH OUR INTERNET CATTLE
MARKETPLACE AND ARE SUBJECT TO THE RISK OF LOSS WHILE WE HOLD TITLE AND MARKET
RISK.

     In the sales transactions conducted through our Internet cattle sales and
auction services network, we typically contract to purchase cattle from a
seller, identify a buyer for the cattle, take title to the cattle from the
seller and then resell the cattle to the buyer. In this process, we enter into a
contract to purchase cattle in advance of entering into a contract to sell the
cattle. Therefore, until we actually complete a sale transaction, we are subject
to the risk that we may be unable to sell cattle that we are contractually
obligated to purchase. In addition, once we purchase the cattle, we assume title
to the cattle for generally up to 48 hours. As a result, we assume the risk of
liability, loss and deterioration in value of the cattle during that period.
Although we review the background and credit history of our customers, we cannot
assure you that we will receive full and timely payment in each instance. If the
buyer does not accept the cattle, we may not be able to sell the cattle to other
buyers on the same terms, and our profitability may be harmed. If the cattle
suffer from health deterioration or weight loss while in our ownership, the
purchasers may assert claims against us. Our business and financial condition
may be harmed if we have to defend any claims or pay any refunds. If the cattle
are destroyed while we have ownership, we may be held responsible for the loss
or may be obligated to purchase additional cattle to fulfill our delivery
commitments. As a result, our business may be harmed.

WE RELY ON TECHNOLOGY LICENSED FROM THE CANADIAN GOVERNMENT, THE LOSS OF WHICH
MAY HARM OUR ABILITY TO SELL OUR NUTRICHARGE PRODUCT.

     We incorporate technology licensed exclusively from the Canadian government
under a portfolio of patents relating to animal food science technology into our
NutriCharge product. If we are unable to maintain this license on commercially
favorable terms or need to replace the technology upon termination of the
license, our ability to sell our NutriCharge product may be harmed. The license
agreement expires in July 2018. The Canadian government can terminate the
license agreement prior to its expiration if we breach a material term of the
license agreement and fail to cure such breach, commence bankruptcy or
insolvency proceedings or assign the license agreement without the Canadian
government's prior written consent. If the license is terminated, we must return
all acquired confidential information, including all licensed technologies, to
the Canadian government and pay all costs due under the agreement. In such
event, it may be impossible to develop or otherwise obtain rights to equivalent
noninfringing technology.

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<PAGE>   16

WE HAVE SELECTED ARCHER-DANIELS-MIDLAND COMPANY AS OUR CURRENT SINGLE SOURCE OF
SUPPLY FOR THE BASE COMPONENTS OF NUTRICHARGE. IF THIS RELATIONSHIP IS
TERMINATED OR IF ARCHER-DANIELS-MIDLAND COMPANY IS UNABLE TO MEET OUR NEEDS ON A
TIMELY BASIS, WE MAY INCUR SIGNIFICANT COSTS WHILE SEEKING AN ALTERNATIVE SOURCE
OF SUPPLY AND MAY SUFFER DELAYS IN DELIVERING OUR PRODUCTS, WHICH COULD HARM OUR
BUSINESS AND THE RESULTS OF OUR OPERATIONS.

     We currently have an agreement with a division of Archer-Daniels-Midland
Company, or ADM, to provide us with the base components for NutriCharge. The
agreement expires in August 2000, and will be automatically renewed for
successive 12-month periods. If ADM fails to meet its obligations under the
agreement and does not supply us in a timely fashion, we will be delayed in
shipping products to our customers. ADM may terminate the agreement with 90
days' notice before the end of a term. If ADM terminates our relationship, we
could experience a significant delay in providing NutriCharge as we seek other
suppliers. As a result, we may realize reduced revenue during this period and
may lose NutriCharge customers. In addition, we may incur significant costs
while seeking an alternative source of supply. If we are delayed in delivering
or are unable to deliver products to our customers, our business, financial
condition and operating results would be adversely affected.

WE DEPEND ON OUR KEY EMPLOYEES FOR OUR SUCCESS. THE LOSS OF ANY OF THESE PERSONS
COULD HARM OUR ABILITY TO COMPETE.

     Our success depends on the continued services of the following executive
officers and key employees:

     - Charles L. Abraham;

     - T. Michael Janney;

     - Scott L. Mathews;

     - Marvin L. Slosman;

     - Arvind Subramanian;

     - J. Tom Brink;

     - Scott Crain, D.V.M.; and

     - Jim Gibb, Ph.D.

The loss of the services of any of these persons could harm our business,
including our ability to compete effectively. Our performance also depends on
our ability to attract, retain and motivate additional key officers and
employees. We may be unable to retain our employees or to attract, assimilate
and retain other qualified employees with relevant livestock and electronic
commerce industry skills in the future. If we fail to attract, retain and
motivate qualified employees, our business will be harmed.

WE MAY FACE COSTLY PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN SIGNIFICANT
AWARDS AGAINST US OR IMPAIR OUR ABILITY TO MARKET AND SELL OUR PRODUCTS AND
SERVICES.

     A successful product liability claim brought against us could harm our
financial condition and reputation in the industry. We may face product
liability claims in connection with our cattle sales and auction services,
feedlot operations analysis, comparative cattle industry analysis and
benchmarking studies, cattle inventory management tools and NutriCharge, as well
as future products and services. Even if unsuccessful, a product liability claim
could result in costly litigation and divert management's attention and
resources. We do not maintain product liability insurance.

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<PAGE>   17

WE EXPECT OUR QUARTERLY OPERATING RESULTS TO FLUCTUATE. IF WE FAIL TO MEET THE
EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE OF OUR
COMMON STOCK COULD DECLINE.

     We expect that our revenue and operating results will vary in the future as
a result of a number of factors. Our quarterly results of operations may not
meet the expectations of securities analysts and investors, which could cause
the price of our common stock to decline. Our operating results in the future
may not follow any prior trends. You should not rely on our historical results
as an indication of future results. The factors that affect our quarterly
operating results include:

     - Our ability to retain existing customers and attract new customers;

     - Our ability to develop and market new and enhanced products and services
       on a timely basis;

     - The introduction of new or enhanced Web sites, products and services by
       us;

     - Continued purchases by our existing customers; and

     - Future revenues from our equine imaging system, a decline in which may
       result in disproportionate fluctuations in our results of operations,
       since related manufacturing costs to a large extent remain fixed
       regardless of the number of units sold.

     In addition, a number of factors that are beyond our control will also
affect our quarterly operating results, such as:

     - Demand for our products and services;

     - Product and price competition;

     - The introduction of new or enhanced Web sites, products and services by
       our competitors; and

     - Significant downturns in our targeted markets.

OUR QUARTERLY RESULTS COULD FLUCTUATE AS A RESULT OF SEASONAL FLUCTUATIONS IN
THE CATTLE INDUSTRY.

     The cattle industry has historically experienced, and may continue to
experience, seasonal fluctuations. These seasonal patterns may cause quarterly
fluctuations in our operating results. In particular, a disproportionate number
of cattle are sold to feedlots during the third and fourth quarters of each
calendar year. Therefore, a greater number of sales transactions occur during
these two calendar quarters. Due to our limited operating history and the recent
changes in our business as a result of acquisitions, it is difficult to predict
the effect that this seasonal pattern will have on our revenue and quarterly
operating results.

OUR BACK-UP MECHANISMS ARE UNPROVEN, AND THEREFORE ARE VULNERABLE TO DAMAGE OR
INTERRUPTION WHICH WOULD HARM OUR ABILITY TO RELIABLY SERVICE OUR CUSTOMERS.

     Our network server, satellites, computers and facilities are vulnerable to
damage or interruption from a number of sources, including fire, flood, power
loss, earthquakes, telecommunications failures, system failures, Internet
brownouts, computer viruses, electronic break-ins and similar disruptions. We
depend on these systems to provide our customers with online cattle sales and
auction services, feedlot and cattle industry analyses, cattle inventory
management tools and the sale of NutriCharge. During the past year, we
experienced a system interruption caused by adverse weather conditions, which
resulted in our system shutting down for approximately 24 hours. We may
experience such an

                                       16
<PAGE>   18

interruption in the future. Any substantial interruptions could result in the
loss of data and could impair our ability to provide our products and services
to customers and to generate revenues. Presently, we do not have a formal
disaster recovery plan in effect. Moreover, our business interruption insurance
may not be sufficient to compensate us for losses that may occur if any of our
Internet-based services are interrupted.

WE INTEND TO EXPAND OUR BUSINESS TO INTERNATIONAL MARKETS. THE ADDITIONAL
EXPENSES AND RISKS RELATING TO OUR INTERNATIONAL EXPANSION MAY HARM OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     As part of our business strategy, we intend to expand internationally by
offering our products and services in markets within North and South America,
Asia/Pacific and Europe, although we have not yet completed the development of
our plan for international expansion. International expansion may require
significant management attention, which could negatively impact our business. We
may also incur significant costs in order to enter new international markets,
which could harm our results of operations. Our business would be harmed if:

     - We experience difficulty expanding as a result of foreign laws and
       regulations, including export and import regulations applicable to
       commerce conducted across borders within regions;

     - We experience difficulty in tailoring our products and services to
       international markets; and

     - We experience difficulty in enforcing contractual obligations and
       intellectual property rights in foreign countries.

     If we successfully expand into foreign markets, our international business
and our results of operations could be harmed as the result of:

     - Fluctuations in foreign exchange rates or rates of inflation;

     - Recessions in foreign countries;

     - Adverse U.S. and foreign tax laws; and

     - Political and economic instability.

                         RISKS RELATED TO THE INTERNET

IF ELECTRONIC COMMERCE DOES NOT CONTINUE TO GROW AS EXPECTED, OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL BE HARMED.

     Our long-term success depends on widespread market acceptance of the
Internet and online commercial services as a medium for commerce. If the
Internet commerce market does not grow or grows more slowly than anticipated,
our business, financial condition and results of operations will be harmed. A
number of factors could prevent such acceptance, including:

     - The early stage of the Internet;

     - The lack of continued development of the Internet's technological
       infrastructure; and

     - Consumer concern about the security of electronic commerce transactions.

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<PAGE>   19

IF THE INTERNET OR OUR WEB SITES AND SYSTEMS CANNOT SUPPORT THE GROWTH IN
ELECTRONIC COMMERCE, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS
WILL BE HARMED.

     If the Internet fails to evolve to support growth in electronic commerce,
our business, financial condition and results of operations will be harmed.
Specifically, we would be harmed if:

     - The infrastructure of the Internet does not evolve to sufficiently
       support the substantial growth in usage of the Internet and therefore
       cannot process a growing number of transactions; and

     - The availability of telecommunication services is insufficient or
       telecommunication services do not evolve promptly to support real-time
       interactions with customers.

     If we do not continue to develop our Web sites and systems to sufficiently
support growth in the demand for our services, our business will also be harmed.
Specifically, we would be harmed if:

     - We fail to expand our infrastructure, including our Web sites, internet
       software and servers to accommodate an increased number of users; and

     - We fail to adapt our products and services to be compatible with new
       technology, and are therefore unable to provide our services to users of
       the new technology.

     We may also need to devote substantial resources to updating our Web sites
and online services to support the growth of online commerce.

RISKS ASSOCIATED WITH THE SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY NEGATIVELY IMPACT OUR ELECTRONIC COMMERCE
BUSINESS.

     We believe that concern regarding the security of confidential information
transmitted over the Internet, such as credit card numbers and proprietary data,
may prevent many potential customers from engaging in online transactions and
may harm our business. We intend to use authentication technology, which
requires passwords and other information to prevent unauthorized persons from
accessing a customer's information, or encryption, which transforms information
into a code designed to be unreadable by third parties, to protect confidential
information. In addition, despite the measures we intend to take, our
infrastructure is potentially vulnerable to physical or electronic break-ins,
viruses or similar problems. If our security measures are circumvented,
proprietary information could be misappropriated or our operations could be
interrupted. Security breaches that result in access to confidential information
could expose us to a risk of loss or liability. If we do not adequately address
these concerns or face any claims in connection with a breach of security, our
business, financial condition and operating results could be harmed.

WE COULD FACE LIABILITY FOR INFORMATION RETRIEVED FROM OR TRANSMITTED THROUGH
OUR WEB SITES, WHICH COULD RESULT IN HIGH LITIGATION OR INSURANCE COSTS.

     As a publisher and distributor of online content, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute on our Web sites. Any imposition of liability
could negatively impact our reputation and result in increased insurance costs.
Claims have been successfully brought against online services. Although we carry
general liability insurance, our insurance may not cover claims of these types
or may not be adequate to cover us for all liability that may be imposed.

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<PAGE>   20

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD RESULT IN ADDITIONAL BURDENS
TO DOING BUSINESS ON THE INTERNET.

     The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws including those governing intellectual property,
privacy, libel and taxation apply to the Internet. Our business, results of
operations and financial condition could be harmed by the adoption or
modification of laws or regulations relating to the Internet that result in the
imposition of additional cost on conducting business over the Internet or impose
additional restrictions on our ability to conduct our business operations.

     In 1998, the Internet Tax Freedom Act placed a three-year moratorium on
state and local taxes on Internet access, except for taxes imposed prior to
October 1, 1998, and on taxes which discriminate against online commerce.
However, Congress may not renew this legislation in 2001 and state and local
governments would be able to impose Internet-specific taxes on goods purchased
electronically, in addition to taxes that are otherwise imposed on sales
transactions.

     Laws and regulations that apply to Internet communications, commerce and
advertising could increase the costs of communicating on the Web and adversely
affect the demand for our products and services and thereby harm our business,
results of operations and financial conditions. In addition, as a general
matter, laws and regulations may also be adopted in the future covering
e-commerce issues such as user privacy, pricing, content, copyrights,
distribution, antitrust matters, taxation and quality of products and services
that may increase the cost of e-commerce. Several telecommunications carriers
have asked the Federal Communications Commission to regulate telecommunications
connections to the Internet, which could result in higher costs of doing
business over the Internet. Legislation of these kinds could hinder growth in
the use of the Internet generally and decrease the acceptance of the Internet as
a communications and commercial medium.

     Due to the global nature of the Internet, it is possible that governments
of foreign countries might attempt to regulate our transmissions or levy sales
or other taxes relating to our activities and we may incur significant costs to
comply with foreign laws. Furthermore, the European Union recently adopted a
directive addressing data privacy that may result in limits on the collection
and use of user information. In addition, the growth and development of the
market for Internet 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 over the Internet.

THERE IS INTENSE COMPETITION FOR INTERNET PRODUCTS AND SERVICES, WHICH COULD
REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL PERFORMANCE.

     Competition for Internet products and services and electronic commerce is
intense. We expect that competition will continue to intensify. Barriers to
entry are minimal, and competitors can launch new Web sites at a relatively low
cost. Our competitors, such as traditional cattle auction services, video cattle
auction providers, online cattle auction services, cattle and livestock
information services and cattle industry product manufacturers, may develop
Internet products or services that are superior to, or have greater market
acceptance, than our products and services. If we are unable to compete
successfully against our competitors, our business, financial condition and
operating results will be harmed.

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<PAGE>   21

                         RISKS RELATED TO THE OFFERING

INTERNET CAPITAL GROUP, SAFEGUARD AND XL VISION WILL BE ABLE TO CONTROL MATTERS
REQUIRING STOCKHOLDER APPROVAL AND MAY VOTE AGAINST MATTERS THAT YOU VOTE IN
FAVOR OF OR MAY VOTE IN FAVOR OF MATTERS THAT YOU VOTE AGAINST.

     The concentration of ownership of our common stock may delay, deter or
prevent acts that would result in a change of control, which could reduce the
market price of our common stock. Internet Capital Group and Safeguard are
affiliated entities and Safeguard and XL Vision are affiliated entities.
Following the closing of this offering, Internet Capital Group, Safeguard and XL
Vision together will have the power to vote approximately 79.4% of the aggregate
number of votes to which the holders of our common stock are entitled. In
addition, Safeguard and Internet Capital Group are parties to a joint venture
agreement under which they have agreed to use their best efforts to vote
together on matters submitted to stockholders for approval. As a result, these
stockholders will be able to control all matters requiring stockholder approval.
These stockholders may have interests that differ from yours. Matters that
typically require stockholder approval include:

     - Election of directors;

     - Approval of a merger or consolidation; and

     - Approval of a sale of all or substantially all of our assets.

     Of the seven members of our board of directors, the following four
directors also serve as directors and/or officers of Internet Capital Group,
Safeguard or XL Vision:

     - John S. Scott, Chairman of our board of directors, is the Chief Executive
       Officer and the Chairman of the board of directors of XL Vision;

     - Douglas A. Alexander, a member of our board of directors, is the Managing
       Director of Internet Capital Group;

     - E. Michael Forgash, a member of our board of directors, is a Vice
       President of Safeguard, a member of the board of directors of Internet
       Capital Group and a member of the board of directors of XL Vision; and

     - John W. Poduska, Sr., Ph.D., a member of our board of directors, is a
       member of the board of directors of Safeguard and a member of the board
       of directors of XL Vision.

     In addition, Internet Capital Group has the right to elect two directors to
our board, one of which has not yet been designated. Under the joint venture
agreement, Safeguard and Internet Capital Group have agreed to vote for two
designees of Safeguard and two designees of Internet Capital Group in all future
elections of directors. Safeguard, XL Vision and Internet Capital Group will
therefore have the ability to significantly influence our management.

SINCE WE HAVE NO PLANS FOR THE USE OF THE MOST OF THE PROCEEDS OF THIS OFFERING,
WE WILL HAVE BROAD DISCRETION IN THE USE OF THESE PROCEEDS AND MAY USE THE
PROCEEDS FOR PURPOSES NOT CURRENTLY CONTEMPLATED BY US AND FOR WHICH YOU DO NOT
AGREE, SUCH AS ACQUISITIONS.

     Our primary purpose for this offering is to create a public market for our
common stock. We will have broad discretion in how we use the proceeds of this
offering and you will not have the opportunity to evaluate the economic,
financial or other information on which we base our decisions on how to use the
proceeds. We plan to use the proceeds from this offering to repay outstanding
debt relating to a recent acquisition and for working

                                       20
<PAGE>   22

capital and general corporate purposes. We may also use the proceeds in future
strategic acquisitions of, or investments in, businesses that offer products,
services and technologies that further our ability to provide products and
services to businesses or increase our ability to sell our products and offer
services to new markets. Until the need arises to use the proceeds from this
offering, we plan to invest the net proceeds in investment grade, interest-
bearing securities.

THE SALE OF OUTSTANDING SHARES IN THE MARKET BY OUR EXISTING STOCKHOLDERS IN THE
FUTURE MAY ADVERSELY AFFECT OUR STOCK PRICE.

     If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market following the offering, then the market price of our common stock
could fall. Based upon the number of shares outstanding as of December 31, 1999,
of the 31,732,902 shares that will be outstanding after the consummation of this
offering:

     - 8,000,000 shares offered through this prospectus will be freely tradeable
       in the public market;

     - 23,507,080 shares may be sold subject to compliance with Rule 144, of
       which 11,312,633 shares may be sold without restriction under Rule 144(k)
       if they are not held by our affiliates; and

     - 225,822 shares may be sold 90 days following the date of this prospectus
       subject to compliance with Rule 701.

     Although 23,131,956 of the shares described above are subject to lock-up
agreements, such shares may become tradeable, subject to compliance with Rule
144 or Rule 701, beginning 180 days after the date of this prospectus. In
addition, after the consummation of this offering, there will be options to
purchase 2,769,116 shares of class A common stock outstanding that were granted
under our equity compensation plans. We intend to file a registration statement
on Form S-8 to register the shares issued pursuant to the exercise of options
granted under our equity compensation plans. There is also a warrant to purchase
1,138,889 shares of class B common stock outstanding.

WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE THAT COULD NEGATIVELY
IMPACT THE VALUE OF YOUR INVESTMENT.

     Prior to this offering, there has been no public market for our common
stock. Accordingly, the market price of our common stock, like the market for
Internet-related and technology companies in general, could be highly volatile.
The initial public offering price for our shares will be determined by us and
the representatives of the underwriters and may not be indicative of the price
that will prevail in the public market after our shares begin trading. Any
significant fluctuations in the future might result in a material decline in the
market price of our common stock.

     The price at which our common stock will trade after this offering is
likely to be highly volatile and may fluctuate substantially due to factors such
as:

     - Actual or anticipated variations in quarterly operating results;

     - Announcements of technological innovations;

     - Conditions or trends in the cattle industry;

     - New sales formats of new products or services;

     - Changes in or failure by us to meet financial estimates of securities
       analysts;

     - Conditions or trends in the Internet industry;

                                       21
<PAGE>   23

     - Announcements by us or our competitors of significant acquisitions,
       strategic partnerships or joint ventures;

     - Capital commitments;

     - Additions or departures of key personnel; and

     - Sales of common stock.

     In addition, the U.S. stock markets have from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the common stock of technology companies, particularly Internet companies.
In the past, these broad market fluctuations have been unrelated or
disproportionate to the operating performance of these companies. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. We may become involved in this type of litigation in the future.
Litigation is often expensive and diverts the attention and resources of
management, which could harm our business and operating results.

NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.

     The initial public offering price is substantially higher than the book
value per share of our common stock. Investors purchasing our common stock in
this offering will, therefore, incur immediate dilution of $8.64 in net tangible
book value per share of our common stock. This dilution figure deducts the
estimated underwriting discounts and commissions and estimated offering expenses
payable by us from the initial public offering price. Investors will incur
additional dilution upon the exercise of outstanding stock options.

OUR UNDESIGNATED PREFERRED STOCK MAY DETER POTENTIAL ACQUISITION BIDS FOR OUR
BUSINESS, INCLUDING BIDS THAT MAY BE BENEFICIAL TO YOU.

     Our board of directors may issue up to 15,000,000 shares of preferred stock
in one or more series. The board of directors can fix the number of shares of
each class and the voting rights, preferences, limitations and special rights,
if any, without any further vote or action by our stockholders. The issuance of
shares of preferred stock without further action by our stockholders may delay
or prevent a change in control transaction. The issuance of shares of preferred
stock may adversely affect your relative voting and other rights relating to
your shares of common stock.

DELAWARE LAW MAY DETER POTENTIAL ACQUISITION BIDS FOR OUR BUSINESS, INCLUDING
BIDS WHICH MAY BE BENEFICIAL TO YOU.

     Delaware law may deter potential bids for our business. We are subject to
the anti-takeover provisions of the Delaware General Corporation Law, which
regulates corporate acquisitions. Delaware law prevents us from engaging in a
business combination with any interested stockholder for three years following
the date that the stockholder became an interested stockholder. For purposes of
Delaware law, a business combination includes a merger or consolidation
involving us and the interested stockholder and the sale of more than 10% of our
assets. In general, Delaware law defines an interested stockholder as any entity
or person beneficially owning 15% or more of the outstanding voting stock of a
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. Under Delaware law, a Delaware corporation
may opt out of the anti-takeover provisions. We do not intend to opt out of
these anti-takeover provisions.

                                       22
<PAGE>   24

                           FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements that address electronic
commerce strategy, acquisition and expansion strategy, development of services,
use of proceeds, projected capital expenditures, liquidity, development of
additional revenue sources, development and maintenance of strategic alliances,
market acceptance of the Internet, technological advancement, ability to develop
brand identification and global expansion. These statements may be found in the
sections of this prospectus entitled Prospectus Summary, Risk Factors, Use of
Proceeds, Management's Discussion and Analysis of Financial Condition and
Results of Operations, Business and in this prospectus generally. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including all the risks discussed in
Risk Factors and elsewhere in this prospectus.

                                       23
<PAGE>   25

                                USE OF PROCEEDS

     We expect to receive approximately $66.7 million in net proceeds from the
sale of the 6,500,000 shares of class A common stock in this offering, assuming
an initial public offering price of $11.00 per share, underwriters' discount of
$3.7 million and our offering expenses of $1.3 million. We expect to receive
approximately $6.9 million in net proceeds if the underwriters' over-allotment
option is exercised in full. We will not receive any proceeds from the sale of
class A common stock by the selling stockholders.

     The primary purpose of this offering is to obtain additional capital,
create a public market for the common stock and facilitate future access to
public markets.

     We intend to use a portion of the net proceeds from this offering to pay
outstanding debt owed to XL Vision and Safeguard.

     - We intend to repay approximately $1.6 million of principal and interest
       owed to XL Vision as of December 31, 1999 with the net proceeds from this
       offering. The debt owed to XL Vision is evidenced by a promissory note,
       which bears interest at an annual rate of 7% and matures upon
       consummation of our initial public offering or a sale of the company.

     - We intend to repay approximately $10.3 million of principal and interest
       owed to Safeguard as of December 31, 1999 with the proceeds of this
       offering. The debt owed to Safeguard is evidenced by two promissory
       notes, which bear interest at an annual rate equal to the prime lending
       rate plus 1%. The note covering $3.0 million matures in January 2000 and
       the note covering the remainder matures in October 2000.

     In addition, we intend to use proceeds from this offering to repay any
additional debt that may be incurred by us prior to the completion of this
offering to XL Vision pursuant to our revolving promissory note, which bears
interest at an annual rate equal to the prime lending rate plus 1% and matures
upon consummation of our initial public offering or the sale of the company or
to Safeguard. The actual amount of the proceeds used for the repayment of debt
will depend upon the amount of interest accrued and any additional borrowings or
payments that are made prior to the completion of this offering.

     In addition, we intend to use the net proceeds of this offering for payment
of $1.4 million representing a deferred payment of a portion of the purchase
price of a 19% investment in Turnkey Computer Systems, Inc. The payment is due
and payable upon the earlier of the consummation of this offering or in payments
of $500,000, which was due and paid on December 31, 1999, $500,000 due on
December 31, 2000 and $400,000 due on December 31, 2001. We also intend to use
the proceeds from this offering for working capital and other general corporate
purposes.

     We may also use a portion of the net proceeds to acquire additional
businesses, products and technologies or to establish joint ventures that we
believe will complement our current or future business. However, we have no
specific plans, agreements or commitments, oral or written, to do so. We are not
currently engaged in any negotiations for any acquisition or joint venture. The
amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue growth,
if any, the amount of cash we generate from operations and the progress of our
product development efforts. As a result, we will retain broad discretion in the
allocation of the net proceeds of this offering. Pending the uses described
above, we will invest the net proceeds in short-term interest-bearing,
investment-grade securities.

                                DIVIDEND POLICY

     We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not anticipate paying any cash dividends in the
future.

                                       24
<PAGE>   26

                                 CAPITALIZATION

     The following table sets forth our capitalization as of September 30, 1999.
We present capitalization:

     - On an actual basis;

     - On a pro forma basis to give effect to:

          - The issuance of 4,555,556 shares of series D preferred stock and a
            warrant to purchase 1,138,889 shares of class B common stock for
            $38.8 million ($18.0 million of cash and a $20.8 million note
            receivable) under a securities purchase agreement with Internet
            Capital Group Inc. dated October 27, 1999 and the application of a
            portion of the proceeds therefrom to repay indebtedness to XL Vision
            of approximately $4.5 million; and

          - The automatic conversion of all outstanding shares of series A,
            series B and series C preferred stock into shares of class A common
            stock and all outstanding shares of series D preferred stock into
            shares of class B common stock, which will occur immediately prior
            to the consummation of the offering;

          - The termination of the redemption right relating to 62,500 shares of
            class A common stock, which will occur immediately prior to the
            consummation of the offering; and

          - The repayment of $1,400,000 of a note payable to Turnkey Computer
            Systems, Inc. which is due upon the completion of this offering.

     - On a pro forma as adjusted basis to give effect to:

          - The events described in the four preceding paragraphs; and

          - The sale of the 6,500,000 shares of class A common stock in this
            offering and application of the estimated net proceeds from the sale
            of these shares, as described in the section entitled Use of
            Proceeds, at an assumed initial public offering price of $11.00 per
            share, after deducting underwriting discounts and commissions and
            our estimated offering expenses.

          The table does not include the following:

             - 2,488,494 shares of class A common stock issuable upon the
               exercise of outstanding options granted under our equity
               compensation plans as of September 30, 1999 at a weighted average
               exercise price of $1.54 per share, of which options to purchase
               716,369 shares of class A common stock were exercisable at a
               weighted average exercise price of $1.06 per share;

             - 747,250 additional shares of class A common stock available for
               issuance under our 1996 and 1999 equity compensation plans as of
               September 30, 1999; and

             - 1,138,889 shares of class B common stock issuable on the exercise
               of a warrant that will be exercisable upon consummation of this
               offering at an exercise price equal to the initial public
               offering price.

                                       25
<PAGE>   27

     This table should be read in conjunction with the section entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes to those
statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30, 1999
                                                      ----------------------------------
                                                                              PRO FORMA
                                                       ACTUAL    PRO FORMA   AS ADJUSTED
                                                      --------   ---------   -----------
                                                                (IN THOUSANDS)
<S>                                                   <C>        <C>         <C>
Total indebtedness..................................  $ 15,133   $  9,233     $      --
Class A common stock, subject to redemption; 62,500
shares issued and outstanding actual; no shares
issued and outstanding pro forma or pro forma as
adjusted............................................       406         --            --
                                                      --------   --------     ---------
Stockholders' equity:
  Preferred stock, par value $0.01 per share,
     15,000,000 shares authorized:
     Series A preferred stock; 6,500,000 shares
       designated; 6,443,606 shares issued and
       outstanding actual and no shares issued and
       outstanding pro forma or pro forma as
       adjusted.....................................        64         --            --
     Series B junior preferred stock; 2,400,000
       shares designated; 2,400,000 shares issued
       and outstanding actual and no shares issued
       and outstanding pro forma or pro forma as
       adjusted.....................................        24         --            --
     Series C preferred stock; 1,300,000 shares
       designated; 1,100,000 shares issued and
       outstanding actual; no shares issued and
       outstanding pro forma or pro forma as
       adjusted.....................................        11         --            --
     Series D preferred stock; 4,555,556 shares
       designated; no shares issued and outstanding
       actual, pro forma or pro forma as adjusted...        --         --            --
  Common stock, par value $.008 per share;
     125,000,000 shares authorized:
     Class A common stock; 115,888,887 shares
       designated; 6,957,694 shares issued and
       outstanding actual; 19,449,702 shares issued
       and outstanding pro forma; 25,949,702 shares
       issued and outstanding pro forma as
       adjusted.....................................        56        156           208
     Class B common stock; 9,111,113 shares
       designated; no shares issued and outstanding
       actual; 5,694,445 shares issued and
       outstanding pro forma and pro forma as
       adjusted.....................................        --         46            46
  Additional paid-in capital........................    23,454     62,628       129,138
  Accumulated deficit...............................   (27,453)   (27,453)      (27,453)
  Note receivable from Internet Capital Group,
     Inc. ..........................................        --    (20,815)      (20,815)
  Unearned compensation.............................       (63)       (63)          (63)
                                                      --------   --------     ---------
       Total stockholders' equity...................    (3,907)    14,499        81,061
                                                      --------   --------     ---------
          Total capitalization......................  $ 11,632   $ 23,732     $  81,061
                                                      ========   ========     =========
</TABLE>

                                       26
<PAGE>   28

                                    DILUTION

     As of September 30, 1999, our net tangible book value on a pro forma basis
giving effect to the issuance of 4,555,556 shares of series D preferred stock
and a warrant to purchase 1,138,889 shares of class B common stock for an
aggregate of $18.0 million in cash and a note receivable on October 27, 1999 and
the conversion of our preferred stock into shares of our common stock, the
termination of the redemption right related to the 62,500 shares of class A
common stock, which will automatically occur immediately prior to the
consummation of this offering, was approximately $8.2 million or $0.33 per share
of common stock. Net tangible book value per share represents the amount of our
total tangible assets reduced by the amount of our total liabilities. As of
September 30, 1999, our net tangible book value, on a pro forma basis as
adjusted for the sale of the 6,500,000 shares of our class A common stock, based
on an assumed initial public offering price of $11.00 per share, and after
deducting the underwriting discounts and commissions and our estimated offering
expenses, would have been approximately $2.36 per share. This represents an
immediate increase of $2.03 per share to existing stockholders and an immediate
dilution of $8.64 share to new investors. The following table illustrates this
per share dilution:

<TABLE>
<S>                                                        <C>       <C>
Assumed initial public offering price per share..........            $11.00
Pro forma net tangible book value per share at September
30, 1999.................................................  $ 0.33
  Increase in pro forma net tangible book value per share
     attributable to new investors.......................    2.03
                                                           ------
Pro forma net tangible book value per share after the
  offering...............................................              2.36
                                                                     ------
Dilution per share to new investors......................            $ 8.64
                                                                     ======
</TABLE>

     The following summarizes on a pro forma basis as of September 30, 1999 the
differences between the total consideration paid and the average price per share
paid by the existing stockholders and the new investors with respect to the
number of shares of common stock purchased from us based on an assumed initial
public offering price of $11.00 per share.

<TABLE>
<CAPTION>
                                 SHARES PURCHASED      TOTAL CONSIDERATION
                               --------------------   ----------------------   AVERAGE PRICE
                                 NUMBER     PERCENT      AMOUNT      PERCENT   PAID PER SHARE
                               ----------   -------   ------------   -------   --------------
<S>                            <C>          <C>       <C>            <C>       <C>
Existing stockholders........  25,144,147     79.5%   $ 42,271,589     37.2%       $ 1.68
New investors................   6,500,000     20.5      71,500,000     62.8         11.00
                               ----------    -----    ------------    -----
     Total...................  31,644,147    100.0%   $113,771,589    100.0%
                               ==========    =====    ============    =====
</TABLE>

     The total consideration does not include the non-cash portion of the
consideration for the series D preferred stock or the proceeds allocated to the
warrant totaling $24.1 million described above.

     The information set forth above does not include the following:

     - 2,488,494 shares of class A common stock issuable upon the exercise of
       outstanding options granted under our equity compensation plans as of
       September 30, 1999 at a weighted average exercise price of $1.54 per
       share, of which options to purchase 716,369 shares of class A common
       stock were exercisable at a weighted average exercise price of $1.06 per
       share;

     - 747,250 additional shares of class A common stock available for issuance
       under our 1996 and 1999 equity compensation plans as of September 30,
       1999; and

     - 1,138,889 shares of class B common stock issuable on the exercise of a
       warrant that will be exercisable upon consummation of this offering at an
       exercise price equal to the initial public offering price.

                                       27
<PAGE>   29

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data set forth below for the years
ended December 31, 1997 and 1998 and the nine months ended September 30, 1999
are derived from our consolidated financial statements which have been audited
by KPMG LLP, independent certified public accountants, and are included
elsewhere in this prospectus. All business activities from inception through
1996 related to the transportation business segment which was disposed of in
January 1999. As a result, we have not included operations data for the years
ended December 31, 1994, 1995 and 1996.

     We prepared the unaudited pro forma consolidated financial information for
the year ended December 31, 1998 and for nine months ended September 30, 1999 by
combining the historical results of two of the three companies we acquired, CIN,
LLC and Professional Cattle Consultants, L.L.C., with our historical results
using the purchase method of accounting. Cyberstockyard, Inc. is not included
because the pro forma effects are not significant. We acquired CIN, LLC in
February 1999, Professional Cattle Consultants, L.L.C. in May 1999 and
Cyberstockyard, Inc. in March 1999. This is described in the notes accompanying
the pro forma consolidated financial information included elsewhere in this
prospectus. We have presented this information to give you a better picture of
what our business might have looked like if we had owned CIN, LLC and
Professional Cattle Consultants, L.L.C. during the periods presented. These
companies may have performed differently if they had actually been combined with
our operations. You should not rely on the unaudited pro forma information as
being indicative of the historical results that we would have had or the future
results that we will experience after the acquisitions.

     You should read the selected consolidated financial data together with our
historical and pro forma consolidated financial statements and notes thereto and
the section of the prospectus entitled Management's Discussion and Analysis of
Financial Condition and Results of Operations.

<TABLE>
<CAPTION>
                                                                           NINE MONTHS
                                                      YEAR ENDED              ENDED           YEAR ENDED       NINE MONTHS
                                                     DECEMBER 31,         SEPTEMBER 30,      DECEMBER 31,         ENDED
                                                   -----------------   -------------------       1998       SEPTEMBER 30, 1999
                                                    1997      1998       1998       1999      PRO FORMA         PRO FORMA
                                                   -------   -------   --------   --------   ------------   ------------------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>       <C>       <C>        <C>        <C>            <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue..........................................  $    --   $ 1,792   $  1,106   $ 18,339     $  2,283          $ 18,505
Cost of revenue..................................       --     2,623      1,629     18,283        2,801            18,354
Operating expenses:
  Selling, general and administrative............      628     3,660      2,428      7,540        4,815             7,992
  Research and development.......................      728     1,109        759      2,756        1,451             2,792
                                                   -------   -------   --------   --------     --------          --------
    Total operating expenses.....................    1,356     4,769      3,187     10,296        6,266            10,784
Interest expense/other income, net...............      141       332        231        443          315               454
                                                   -------   -------   --------   --------     --------          --------
Profit (loss) from continuing operations.........  $(1,497)  $(5,932)  $ (3,941)  $(10,683)    $ (7,099)         $(11,087)
                                                   =======   =======   ========   ========     ========          ========
Profit (loss) from continuing operations per
  common share -- basic and diluted..............  $ (3.91)  $ (1.36)  $  (0.67)  $  (1.59)    $  (1.39)         $  (1.62)
                                                   =======   =======   ========   ========     ========          ========
Weighted average number of common shares
  outstanding -- basic and diluted...............      382     4,357      5,846      6,710        5,107             6,854
                                                   =======   =======   ========   ========     ========          ========
</TABLE>

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                              --------------------------------------------   SEPTEMBER 30,
                                                              1994     1995      1996      1997      1998        1999
                                                              -----   -------   -------   -------   ------   -------------
                                                                             (IN THOUSANDS)
<S>                                                           <C>     <C>       <C>       <C>       <C>      <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash........................................................  $  --   $    --   $     2   $    --   $   --      $ 1,650
Total assets................................................     --         6       260     2,165    6,602       16,229
Total indebtedness..........................................    411     1,747     3,636     8,040    5,572       15,133
Total stockholders' equity (deficit)........................   (411)   (1,742)   (3,457)   (6,875)       3       (3,907)
</TABLE>

                                       28
<PAGE>   30

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

     The following discussion should be read in conjunction with the financial
information included elsewhere in this prospectus. The following discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results contemplated by these
forward-looking statements as a result of many factors, including those
discussed below and elsewhere in this prospectus.

OVERVIEW

     We are a business-to-business electronic commerce company combining
content, community and transaction services to create an online marketplace for
the cattle industry. We offer our comprehensive cattle products and services
through our integrated family of Web sites, our proprietary information
management application, and our direct sales force. Our products and services
are designed to create an efficient market for the purchase and sale of cattle
and to improve quality and productivity in the cattle industry. Our revenue is
derived from cattle sales through Cyberstockyard, subscriptions to our
information management products and services and sales of NutriCharge and equine
imaging systems.

     We were incorporated in 1994 as a subsidiary of XL Vision, Inc. to develop
and commercialize infrared technology applications. XL Vision is a private
company that provides strategic, technical and business support to create
technology companies. Our initial focus was on the transportation market in
which we sold our navigational infrared imaging system, the AMIRIS system. The
AMIRIS system uses infrared technology to create an image based on small
differences in the temperatures of the objects being viewed, such as an iceberg
in water. In 1997, we expanded our infrared applications to the animal sciences
industry with the development of an equine imaging system to detect health
problems. The equine imaging system enables veterinarians to visualize small
differences in the surface temperature of horses, and therefore identify heat, a
common sign of inflammation associated with injury at early stages. In July
1997, we also completed our first round of private financing and began our
direct relationship with Safeguard Scientifics, Inc., which was the largest
single purchaser of our series A preferred stock. Safeguard beneficially owns
approximately 55% of the outstanding capital stock of XL Vision and
approximately 27% of our outstanding capital stock prior to this offering.

     To expand our product base, in July 1998, we licensed a portfolio of
patents from a division of the Canadian government relating to the application
of infrared technology to the animal science field and a restorative feed
supplement called NutriCharge.

     In order to focus on the cattle industry, we discontinued production of the
AMIRIS system. In January 1999, we entered into a license agreement with Sperry
Marine, Inc., a subsidiary of Litton Industries, Inc., which granted them the
right to become the sole producer of the AMIRIS system. In connection with this
license, we will receive a royalty of 8% of sales of the AMIRIS system up to a
maximum royalty of $4.3 million over a four year period or up to a maximum
royalty of $5.0 million if $4.3 million is not received within four years. Upon
receipt of the maximum amount, we will transfer all rights, title and interest
to the licensed intellectual property to Sperry. To date, we have not received
any royalties from this license. Results from this line of business and the
related loss on disposal have been segregated from continuing operations and
included in discontinued operations in our financial statements.

     In November 1999, we sold 4,555,556 shares of our Series D preferred stock
to Internet Capital Group, as a result of which Internet Capital Group became
one of our principal

                                       29
<PAGE>   31

stockholders. Internet Capital Group owns approximately 31% of our outstanding
capital stock and controls approximately 50% of the voting power of our
outstanding capital stock prior to this offering. Internet Capital Group is an
Internet holding company that invests in business-to-business electronic
commerce companies. Safeguard owns approximately 14% of the outstanding common
stock of Internet Capital Group.

REVENUE RECOGNITION

     We recognize revenue in accordance with the terms of the sale or contract,
generally as products are shipped or services are provided. In cattle sales
transactions we act as principal when purchasing cattle from suppliers and
reselling them to customers. We take title when the supplier delivers the cattle
to us, arrange for shipment to our customer, and own as inventory until
delivered to and accepted by the buyer, typically a 24 to 48 hour period. We are
responsible for the resale of the cattle, bear all risk associated with the
cattle until resold, and bear the credit risk until full payment is received
from our customers. We recognize revenue when cattle are shipped to the customer
equal to the purchase price paid by the customer. Gross profit on cattle sale
transactions is determined by the mark-up that we add to the price that we pay
to purchase the cattle. Revenue from the sale of livestock health management and
quality enhancement products, equine imaging cameras and NutriCharge, is
recognized on shipment to the customer. Revenue from our information management
products is recognized in the period in which the information or analysis is
delivered to the customer, normally on a monthly basis.

ACQUISITIONS

     In February 1999, we purchased substantially all of the tangible and
intangible assets of CIN, LLC for an aggregate purchase price of approximately
$2.3 million. These assets included the Feedlot Information System, a
proprietary, patent pending, information system for cattle feedlots. In
addition, we acquired tangible assets including computers and office equipment
and furnishings, which we are currently utilizing. The purchase price for the
assets consisted of 750,000 shares of our class A common stock valued at
$720,000, the assumption of $812,000 of liabilities, a cash payment due in
October 1999 of $358,000, and an agreement to pay the first $350,000 from
Internet sales of third-party products over the Web site and transaction costs
of $57,000.

     In March 1999, we acquired 100% of the common stock of Cyberstockyard, Inc.
for approximately $542,000. The purchase price consisted of 200,000 shares of
our class A common stock valued at $450,000, the assumption of $90,000 of
liabilities and transaction costs of $2,000. Through this acquisition, we
obtained Cyberstockyard.com, our online cattle sales and auction services, and
related software applications. Cyberstockyard.com has been integrated into our
suite of products and services. During the three months ended June 30, 1999, we
began executing cattle sales utilizing Cyberstockyard.com.

     In May 1999, we purchased substantially all of the tangible and intangible
assets of Professional Cattle Consultants, L.L.C., a leading cattle industry
information resource and database for approximately $1.8 million. The purchase
price consisted of $1.8 million in cash, the assumption of approximately $3,000
in liabilities and transaction costs of $25,000. In June 1999, we began selling
comparative analysis and market information for the feedlot industry with the
assets acquired from Professional Cattle Consultants, L.L.C.

     We have presented pro forma results of operations as if the acquisition of
CIN, LLC and Professional Cattle Consultants, L.L.C. had occurred on January 1,
1998. Cyberstockyard, Inc. is not included because the pro forma effects are not
significant. The pro forma loss from continuing operations for the year ended
December 31, 1998 was $7.1 million compared to

                                       30
<PAGE>   32

the actual net loss of $5.9 million. The increase in the net loss results
primarily from the net losses of the acquired companies and the pro forma
amortization of the intangible assets associated with these acquisitions. The
pro forma loss from continuing operations for the nine months ended September
30, 1999 was $11.1 million compared to the actual loss from continuing
operations of $10.7 million. The increase in the loss is primarily related to
the losses of the companies acquired and the pro forma amortization of the
intangible assets associated with the acquisitions.

     Because of the significance of these acquisitions and the resulting
additions to our products and services, the historical financial results are not
indicative of future performance.

     We have incurred significant net losses since our inception. At September
30, 1999, we had an accumulated deficit of $27.5 million. The net losses and
accumulated deficit resulted from our lack of substantial revenues, the costs of
the significant personnel infrastructure and other costs incurred for the
development and marketing of our initial products. We may never achieve
significant revenue or profitability, or if we achieve significant revenue or
profitability they may not be sustained.

RESULTS OF OPERATIONS

  NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
  SEPTEMBER 30, 1999

     Revenue increased from $1.1 million for the nine months ended September 30,
1998 to $18.3 million for the nine months ended September 30, 1999. Revenue from
our cattle sales segment increased to $17.0 million for the nine months ended
September 30, 1999. There was no revenue from the cattle sales segment in 1998.
Revenue from the animal sciences segment increased by 19% from $1.0 million for
the nine months ended September 30, 1998 to $1.3 million for the nine months
ended September 30, 1999. This growth is due primarily to the increased sales of
NutriCharge and the sale of subscriptions to our comparative feedlot analysis
and market information service. Revenue from sales of our equine imaging system
was flat, as increased average selling prices offset a decline in units sold.

     Cost of revenue consists primarily of the direct cost to acquire cattle,
NutriCharge and equine imaging systems components and indirect manufacturing
overhead costs such as support personnel, facilities costs, supplies and
depreciation, which were primarily associated with the production of the equine
imaging system. Direct costs attributed to our cattle sales segment increased to
$16.9 million for the nine months ended September 30, 1999. There were no direct
costs from the cattle sales segment in 1998. Direct costs attributed to the
animal sciences segment decreased by 23% from $603,000 for the nine months ended
September 30, 1998 to $492,000 for the nine months ended September 30, 1999.
This decrease is due principally to the decline in unit sales of equine imaging
systems. We generated a gross loss of $522,000 for the nine months ended
September 30, 1998 and a gross profit of $56,000 for the nine months ended
September 30, 1999. The change from a gross loss to a gross profit is due
primarily to the increase in revenue, while cost of goods, principally
manufacturing overhead, did not increase in proportion to the increase in
revenue.

     Selling, general and administrative expenses increased 211% from $2.4
million for the nine months ended September 30, 1998 to $7.5 million for the
nine months ended September 30, 1999.

     Sales and marketing expenses consist primarily of salaries and related
costs, commissions for sales and marketing personnel, consulting fees, travel
and entertainment, advertising and trade shows. Sales and marketing expenses
increased 250% from $1.3 million

                                       31
<PAGE>   33

for the nine months ended September 30, 1998 to $4.6 million for the nine months
ended September 30, 1999. The increase is due primarily to expenses associated
with expanding the number of personnel from 11 people at September 30, 1998 to
38 people at September 30, 1999 and consulting, travel and advertising costs to
effect our business strategy. We expect these costs to continue to increase
significantly as we continue to pursue additional sales and marketing
opportunities.

     Our general and administrative expenses consist primarily of salaries,
bonuses and related costs for executives, amortization of intangibles and
administrative and professional service fees, including administrative support
fees to XL Vision and Safeguard. We have contractual service agreements with XL
Vision and Safeguard Scientifics. Under an administrative services agreement
dated December 15, 1997, as amended on August 17, 1999, XL Vision and Safeguard
provide us with management consultation, investor relations, financial
management, human resource management, legal services, insurance programs, and
administrative services. We pay a fee calculated pursuant to a formula that is
based on a percentage of our revenue, not to exceed $300,000 annually. The fee
is not due until we achieve positive cash flow from operations. The agreement
extends through December 31, 2002 and continues unless terminated by either
party. To date, we have not paid any amounts due to XL Vision and Safeguard
under these agreements. As of September 30, 1999, we owed each of XL Vision and
Safeguard approximately $40,000 under these agreements. In addition, under a
direct charge administrative services agreement dated April 14, 1997, XL Vision
also provides us with management services on a time and materials basis. This
agreement continues on a month-to-month basis, and may be terminated at any time
by either party. As of September 30, 1999, we owed XL Vision $850,000 under this
agreement. The amounts due under these agreements will continue to accrue as we
use the services.

     General and administrative expenses increased 99% from $1.1 million for the
nine months ended September 30, 1998 to $2.9 million for the nine months ended
September 30, 1999. The increase was primarily due to increased amortization of
intangibles, increased expenses associated with expanding the number of
personnel from 5 people at September 30, 1998 to 9 people at September 30, 1999
and increased legal and travel expenses required to support and grow our
business. We expect these expenses to continue to increase as additional
personnel are hired and additional expenses are incurred to support future
growth.

     Our research and development expenses consist of salaries and related
costs, payments to outside consultants, material costs for prototype imaging
systems and, to a lesser extent, depreciation on equipment used for development.
Our expenses increased 263% from $759,000 for the nine months ended September
30, 1998 to $2.8 million for the nine months ended September 30, 1999. This
increase in expenses was primarily due to increased consulting costs, increased
expenses associated with expanding the number of personnel from 14 people at
September 30, 1998 to 33 people at September 30, 1999, and increased spending
for materials and supplies. The increase in expenses was required to integrate
and expand our product lines such as our online cattle sales and auction
software, Feedlot Information System software, and continued development efforts
on imaging systems. We expect these costs to increase significantly as we plan
to invest heavily to develop and commercialize new products, expand our
offerings and adapt our technologies to new markets.

     Interest expense/other income, net increased 92% from $231,000 for the nine
months ended September 30, 1998 to $443,000 for the nine months ended September
30, 1999. This increase was primarily due to a higher average level of
borrowing.

                                       32
<PAGE>   34

     Due to the losses incurred, we did not have any income tax expense in the
first nine months of 1998 or the first nine months of 1999. As of September 30,
1999, we had approximately $21.0 million of federal income tax loss carry
forwards that can be used to offset future taxable income. Our tax loss carry
forwards begin to expire in 2010 and we are not currently aware of any
limitation on our ability to offset future taxable income.

  YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

     Substantially all of our 1998 revenue of $1.8 million was from the sale of
equine imaging systems that we began selling in March of 1998. There was no
revenue from equine imaging systems sales in 1997.

     Our gross loss of $831,000 in 1998 was due primarily to a substantial
increase in manufacturing overhead as we built our manufacturing infrastructure.
There was no manufacturing activity related to the production of equine imaging
systems in 1997.

     Selling, general and administrative expenses increased 483% from $628,000
in 1997 to $3.7 million in 1998.

     Our sales and marketing expenses increased 527% from $344,000 in 1997 to
$2.2 million in 1998. The increase in these expenses was due primarily to
increased staffing and related costs, advertising, travel, trade shows and
consulting fees in these areas to effect our business strategy.

     Our general and administrative expenses increased 430% from $284,000 in
1997 to $1.5 million in 1998. The increase in these expenses from 1997 to 1998
was primarily due to increases in the number of personnel and related support
costs to expand and grow our business and increased administrative support fees
to XL Vision and Safeguard.

     Our research and development expenses increased 52% from $728,000 in 1997
to $1.1 million in 1998. This increase was driven primarily by increased
staffing of research and development personnel, related costs, and depreciation
of development equipment costs necessary to further develop our products.

     Interest expense/other income, net increased 134% from $141,000 in 1997 to
$332,000 in 1998. This increase was primarily due to a higher average level of
borrowing.

     Due to the losses incurred, we did not have any income tax expense in 1997
or 1998.

  YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

     There was no business activity in 1996 related to our equine imaging
systems. All sales, cost of goods sold, general and administrative expenses,
sales and marketing expenses and research and development expenses in 1996
related to our transportation segment which has been reported as a discontinued
operation.

     Selling, general and administrative expenses were $628,000 in 1997.

     There was no revenue from sales of equine imaging systems or manufacturing
activity related to equine imaging systems in 1997. All general and
administrative expenses, sales and marketing expenses and research expenses
during 1997 related to our initial activities associated with equine imaging
systems.

     Sales and marketing expenses of $344,000 in 1997 were principally for
salaries and related costs of personnel shifted from the transportation business
segment to support the

                                       33
<PAGE>   35

equine imaging system operations. Additionally we initiated spending for costs
such as advertising, travel, trade shows and consulting fees.

     General and administrative expenses of $284,000 in 1997 were principally
for salaries and related costs for executives and administrative and
professional service fees including administrative support fees to XL Vision
shifted from the transportation operations to support the equine imaging system
operations.

     Research and development expenses of $728,000 in 1997 were principally for
salaries and related costs of personnel shifted from the transportation business
segment to support the equine imaging system development. Additionally, we
initiated spending costs to develop prototype equine imaging systems.

     Interest expense/other income, net was $141,000 in 1997.

     Due to the losses incurred, we did not have any income tax expense in 1997.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain consolidated statements of
operations data for the quarters ended March 31, 1998, June 30, 1998, September
30, 1998, December 31, 1998, March 31, 1999, June 30, 1999 and September 30,
1999. The information for each quarter has been prepared on substantially the
same basis as the audited statements included in other parts of this prospectus
and, in the opinion of management, include all adjustments, consisting of only
normal recurring adjustments necessary for a fair presentation of the results of
operations for such periods. Historical results are not necessarily indicative
of the results to be expected in the future, and the results of the interim
periods are not indicative of results of any future period.

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                               --------------------------------------------------------------------------
                               MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,
                                 1998       1998       1998       1998       1999       1999       1999
                               --------   --------   --------   --------   --------   --------   --------
                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                            <C>        <C>        <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENTS OF
  OPERATIONS DATA
Revenue......................  $   323    $   342    $   442    $   685    $   605    $ 1,973    $15,761
Cost of revenue..............      459        578        649        937        540      2,228     15,514
Operating expenses...........      930        948      1,237      1,654      1,962      3,557      4,777
Interest expense/other
  income, net................       77         85         85         85        127        162        155
                               -------    -------    -------    -------    -------    -------    -------
Profit (loss) from continuing
  operations.................  $(1,143)   $(1,269)   $(1,529)   $(1,991)   $(2,024)   $(3,974)   $(4,685)
                               =======    =======    =======    =======    =======    =======    =======
Profit (loss) from continuing
  operations per common
  share -- basic and
  diluted....................  $ (0.35)   $ (0.39)   $ (0.30)   $ (0.34)   $ (0.33)   $ (0.58)   $ (0.67)
                               =======    =======    =======    =======    =======    =======    =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Historically, we have funded our operating and investing cash requirements
principally through private equity financings and through borrowings from XL
Vision and Safeguard Scientifics. As of December 31, 1999, we have raised
approximately $45.6 million from the sale of our common stock and preferred
stock. On November 16, 1999, we issued 4,555,556 shares of series D preferred
stock and a warrant to purchase 1,138,889 shares of class B common stock to
Internet Capital Group for aggregate consideration of $38.8 million. We

                                       34
<PAGE>   36

received $18.0 million of this amount in cash on November 16, 1999 and $20.8
million in the form of a non-interest bearing note, which is due on November 16,
2000. Interest on the promissory note was imputed at 9.5%, or $2.2 million over
the life of the note. At September 30, 1999, we had approximately $1.7 million
in cash and indebtedness to XL Vision and its affiliates of $13.4 million. We
repaid $4.5 million of this outstanding debt balance on November 16, 1999 from
the cash proceeds of the sale of our series D preferred stock and warrant.

     We have had significant negative cash flows from operating activities for
each fiscal and quarterly period to date. Net cash used in operating activities
was $1.7 million in 1996, $6.0 million in 1997, $8.9 million in 1998 and $10.5
million for the nine months ended September 30, 1999. Cash used in operating
activities from inception through September 30, 1999 consisted mostly of net
operating losses offset by increases in accrued liabilities.

     Net cash used in investing activities was $157,000 in 1996, $507,000 in
1997, $892,000 in 1998, and $1.2 million for the nine months ended September 30,
1999. Net cash used in investing activities in these periods consisted mostly of
business acquisitions and capital expenditures.

     Net cash provided by financing activities was $1.9 million in 1996, $6.5
million in 1997, $9.8 million in 1998 and $13.4 million for the nine months
ended September 30, 1999. Cash provided by financing activities consisted
primarily of the sale of our stock and borrowings from XL Vision and Safeguard.

     In December 1998, XL Vision agreed to cancel $7.5 million of indebtedness,
and convert $4.8 million of indebtedness into 2,400,000 shares of our series B
preferred stock.

     In May 1999, we raised $5.5 million through the issuance of 1,000,000
shares of our series C preferred stock to Safeguard and 100,000 shares of series
C preferred stock to individuals.

     In July 1999, we obtained a revolving credit line from Safeguard evidenced
by a promissory note for working capital advances associated with our cattle
sales operations of up to $3.0 million. Amounts borrowed under the promissory
note, as amended, bear interest at the prime lending rate plus 1%, or 9.5% on
December 31, 1999, and are payable on January 31, 2000.

     In August 1999, we entered into an agreement to acquire a 19% interest in
the common stock of Turnkey Computer Systems, Inc. for a purchase price of
62,500 shares of our common stock valued at $400,000 and additional cash
payments totaling $1.4 million. The cash payments are due in full upon the
completion of our initial public offering or in periodic payments of $500,000 at
December 31, 1999, $500,000 at December 31, 2000 and $400,000 at December 31,
2001, whichever occurs first.

     In August 1999, we signed a demand note with Safeguard in the principal
amount of $2.5 million. The note bears interest at the prime rate plus 1%, or
9.5% on December 31, 1999, and is payable on demand. In September 1999, we
signed a demand note with Safeguard in the principal amount of $2.0 million. The
note bears interest at the prime rate plus 1% and is payable on demand. In
October 1999, we signed a demand note with Safeguard in the principal amount of
$2.5 million. The note bears interest at the prime rate plus 1%, or 9.5% on
December 31, 1999, and is payable on demand. In October 1999, we cancelled these
outstanding notes in exchange for a note in the amount of $7.1 million. The note
bears interest at the prime rate plus 1%, or 9.5% on December 31, 1999, and is
payable in full in October 2000, when we complete an initial public offering or
when the note issued to us in connection with the series D preferred stock is
repaid, whichever occurs earlier.

                                       35
<PAGE>   37

     We believe that our existing cash balances, together with the proceeds from
the sale of series D preferred stock and the warrant to purchase class B common
stock, the revolving line of credit provide adequate liquidity and capital
resources to support operations for the next twelve months. Additionally, we
believe that these sources of liquidity and capital combined with the net
proceeds from this offering will be sufficient to meet our working capital and
capital expenditures needs for at least the next 24 months under our current
business plan, which may change. To the extent we are required to raise
additional capital, we may need to issue additional equity securities or incur
additional debt.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 133, Accounting for Derivatives and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. The
adoption of SFAS No. 133 is not expected to have a material impact on our
results of operations, financial position or cash flows.

     In June 1999, the FASB issued SFAS No. 137 which amended the implementation
date for SFAS No. 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000.

MARKET RISK

     We held no derivative securities as of September 30, 1999. We are exposed
to changes in interest rates as a result of our borrowings from XL Vision and
Safeguard, which are based on the prime lending rate.

     A 10% increase in interest rates related to our borrowings would not have a
material effect on our results of operations over the next fiscal year or the
fair value of our borrowings.

RECENT UNAUDITED FINANCIAL DATA

     Our revenue for the three months ended December 31, 1999 was approximately
$25.4 million, including approximately $25.2 million in revenue resulting from
cattle sales. Our revenue for the year ended December 31, 1999 was approximately
$43.8 million, including approximately $42.2 million in revenue resulting from
cattle sales. Our net loss for the three months ended December 31, 1999 was
approximately $4.9 million, resulting in a net loss of approximately $1.47 per
share. Our net loss for the year ended December 31, 1999 was approximately $15.5
million, resulting in a net loss of approximately $3.10 per share. The financial
data for such periods are unaudited. The preparation of these financial data
requires management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

                                       36
<PAGE>   38

                                    BUSINESS

OVERVIEW

     eMerge Interactive, Inc. is a business-to-business electronic commerce
company combining content, community and transaction services to create an
online marketplace for the cattle industry. We offer our products and services
through our family of integrated Web sites, our proprietary information
management application and our direct sales force. Our products and services are
designed to create an efficient market for the purchase and sale of cattle and
to improve quality and productivity in the cattle industry. Our current products
and services for the cattle industry include:

     - Livestock procurement services consisting of cattle sales and auctions;

     - Daily performance analyses of a customer's feedlot operations;

     - Comparative cattle industry analysis and feedlot operations benchmarking
       studies;

     - Cattle inventory management tools; and

     - Livestock health management and quality enhancement product, NutriCharge.

INDUSTRY BACKGROUND

  BEEF INDUSTRY

     According to the National Cattlemen's Beef Association, or NCBA, the cattle
industry is the largest single segment of the American agricultural economy. The
U.S. Department of Agriculture reports that sales of cattle accounted for
approximately $34 billion in 1998. On an annual basis, the U.S. beef production
industry spends over $6 billion for feed and, based on our estimates,
approximately $600 million for medication. At the retail level, the cattle
industry generates over $51 billion in sales of beef. Furthermore, the NCBA
estimates that worldwide cattle production is three times greater than U.S.
production.

  INDUSTRY PARTICIPANTS

     The U.S. beef production chain can be classified into three primary
segments: producers, feedlots, and packers.

     Producers

     According to the NCBA, there are approximately one million producers
comprised of ranchers and small farm owners who breed and raise cattle. Most of
the producers are independently owned and are dispersed throughout the United
States. Each year these producers market approximately 35 million head of cattle
that are eventually harvested for food, of which approximately 27 million are
processed through feedlots. These cattle, raised for 12-18 months in an average
herd size of approximately 35 head, are often located in different geographic
regions, aggregated into larger herds and then sold to centralized feedlots to
increase their weight and value.

     Feedlots

     Feedlots typically purchase cattle weighing 300 to 900 pounds and manage
the health and growth of the cattle for a period of 110 to 250 days. We estimate
that during this time, each animal is fed on average 20-30 lbs. of grain per
day. There are approximately 700 major feedlot operations concentrated in 10
Midwestern states. These feedlots can manage

                                       37
<PAGE>   39

from 4,000 to 115,000 head of cattle at any given time. After reaching a weight
of approximately 900 to 1,400 pounds, the animal is typically sold to a packer
for harvesting.

     Packers

     Packers usually hold the cattle for 2 to 24 hours before harvesting and
fabricating them for sale and eventual consumption. In addition to processing
beef, packers inspect beef for cleanliness in preparation for quality grading.
There are currently 64 major beef packing operations in the United States, which
in total process approximately 35 million head of cattle into roughly 25 billion
pounds of beef annually. Approximately 82% of the beef processed in the United
States is processed by beef packing operations owned by IBP, Inc., Cargill,
ConAgra, Inc., and Farmland Industries, Inc.

LIMITATIONS OF THE CURRENT SYSTEM

     The current cattle production chain contains a number of inefficiencies
that reduce livestock quality and increase cost. These inefficiencies include
multiple transaction costs, exposure to stress and disease, and the loss of
important feeding and medication information.

  INEFFICIENCIES IN THE CATTLE SALES PROCESS CREATE TRANSACTION COSTS

     As cattle move through the beef production chain, from an individual
producer's ranch to a feedlot to a meat packing facility, the cattle may be
bought, sold and transported three or four times. Due to the highly fragmented
nature of the cattle producer segment, the majority of cattle are sold through
traditional livestock sales and auctions, which bring together regional buyers
and sellers. The cattle are then sold either directly to feedlots or sold once
again to larger buyers and then onto feedlots. Typically, cattle sales and
auctions are hosted at sale barns, where livestock brokers act as agents in the
buying and selling of animals. The livestock broker is paid a fee or commission
each time an individual lot of cattle is bought or sold. As a result of the
geographic dispersion of producers and sale barns, buyers often purchase cattle
from livestock brokers without having the opportunity to visually survey the
cattle. In addition, this current method of exchange does not facilitate easy
access to real-time price information or a geographically broad marketplace for
the product.

  REPETITIVE TRANSPORTATION CREATES ANIMAL STRESS, REDUCING BEEF QUALITY AND
  PROFITABILITY

     The combination of the method of exchange used in traditional cattle sales
and auctions and the fragmentation of the producer segment of the industry
results in the repetitive transportation and handling of cattle. As cattle are
moved from one environment to another throughout the production chain, they are
commingled multiple times and can be exposed to contagious diseases. In
addition, the transportation, handling and commingling of cattle often results
in a predictable stress response, which may cause significant health
deterioration. However, because there is currently no convenient or
cost-effective method available to measure an animal's stress level, stress is
not assessed today as a meaningful measure of health. Stress and exposure to
disease often result in sub-optimal performance at the feedlot and reduced beef
quality. A study conducted by researchers at Texas A&M University estimated that
sick animals yield approximately $80 per head less than comparable healthy
animals, which represents a significant loss based on the average value cited by
the U.S. Department or Agriculture of $600 per head.

                                       38
<PAGE>   40

  THE LACK OF CURRENT AND ACCURATE INFORMATION IMPACTS ANIMAL PERFORMANCE

     We believe that industry participants generally collect and analyze
information on cattle that go through the beef production process inconsistently
and in a manual and time-consuming manner. Due to the nature of data collection
and dissemination, cattle industry participants are unable to exchange critical
information in an efficient and timely manner to optimize performance and beef
quality. We believe that businesses in the cattle industry have not maximized
the use of information to effectively address health, quality and performance
issues.

     Producers

     Cattle producers typically do not receive data related to the weight of
their animals upon arrival to and departure from feedlots or the quality grades
of their animals, making herd management difficult. Animal-specific health and
medication information is generally not passed on to subsequent buyers at or
prior to the feedlot, which may result in unnecessary additional medication.

     Feedlots

     Feedlots are the primary source of information currently used in livestock
management. As a general practice, information is collected manually on a daily
basis and subsequently entered into multiple information systems that are
typically not integrated. Given the time-intensive nature of aggregating data
under the current process, it is difficult to collect, analyze and interpret
this data in a meaningful way. Historically, feedlots collect and share
industry-wide information for benchmarking and performance purposes by
submitting reports to data warehouse services that aggregate and disseminate the
combined results in monthly reports. Although these data warehouse services are
valuable as general strategic and analytical tools, because of the delay in
disseminating the information, they are less effective for daily cattle
management decisions, such as decisions relating to feed and medication.

     Packers

     Packers, at the end of the cattle production chain, collect critical
carcass and quality information such as weight, dimension, yield and meat
quality grade after the animal is harvested. However, in 1997, only 47.5% of
cattle harvested were purchased based on these measures. Therefore, feedlots
receive carcass and quality data on less than half of harvested cattle. The
remaining harvested cattle are sold to packers based strictly on live weight,
and consequently very little health and quality data is provided to feedlots or
producers on these cattle.

                                       39
<PAGE>   41

                           U.S. BEEF PRODUCTION CHAIN

                     [PRODUCERS, FEEDLOTS, PACKERS GRAPHIC]

     We believe improved information flow between and within the three main
groups of industry participants can significantly enhance product quality. There
is currently no network or method for compiling and communicating information
rapidly throughout all stages of the cattle production chain. Product
performance information gathered by packers and feedlots will help refine and
improve handling practices earlier in the production chain. Information relating
to an animal's medical history will minimize redundant medication. In addition,
we believe that information about an animal's genealogy disseminated by
producers and feedlots will enable more accurate differentiation among breeds of
cattle at the packer level and a more easily implemented quality branding
strategy at the retail level. Finally, information linking handling, feeding and
medication techniques and the ensuing performance results, gathered and
disseminated on a daily basis by feedlots, can help the entire segment rapidly
adopt best practices.

THE ONLINE CATTLE MANAGEMENT OPPORTUNITY

     We believe that the cattle industry is well-suited for Internet commerce
and information sharing due to the industry's size and fragmentation and the
inefficiencies associated with the current cattle production chain. The
Internet's widespread and growing acceptance make it an optimal foundation for
business-to-business interaction. Many of the variables that affect cattle
performance can be addressed by the Internet's open architecture, universal
accessibility and ability to provide more timely and comprehensive information.
We believe the Internet can create a more efficient marketplace for the exchange
of cattle by directly connecting buyers and sellers and providing information
related to the cattle for sale. A report by the National Association of Farm
Broadcasters showed that as of February 1999,

                                       40
<PAGE>   42

45.5% of producers and 53.4% of feedlots used a personal computer for farm
business, and 19.7% of producers and 29.1% of feedlots accessed Web sites for
farm-related topics. According to a Gallup and Agricultural Publisher's Survey,
it is estimated that by 2001 over 55% of large producers in the beef industry
will use the Internet for primary information in the conduct of their daily
business.

THE eMERGE INTERACTIVE EXPERIENCE

     We combine content, community and commerce to create an online marketplace
for the cattle industry. We offer our comprehensive cattle products and services
through our integrated Web sites, our proprietary information management
application, and our direct sales force. Our products and services are designed
to create an efficient market for the purchase and sale of cattle and to improve
quality and productivity in the cattle industry. We believe our solution
provides the following benefits throughout the cattle production chain.

                    BENEFITS TO CATTLE INDUSTRY PARTICIPANTS

<TABLE>
<CAPTION>
                                                 PRODUCERS    FEEDLOTS    PACKERS
                                                 ---------    --------    -------
<S>                                              <C>          <C>         <C>
ONLINE CATTLE SALES AND AUCTION MARKETPLACE
- -----------------------------------------------
Broader Access to Buyers and Sellers...........     --          --
Reduced Transportation and Transaction Costs...     --          --
Convenience and Ease of Use....................     --          --
Healthier Cattle...............................     --          --          --
Cattle Source Information......................                 --          --
Access to Additional Products and Services.....     --          --
Quality Certification..........................     --          --          --

PROPRIETARY INFORMATION SERVICES AND MANAGEMENT
TOOLS
- -----------------------------------------------
Performance Information........................     --          --
Detailed Operational Comparisons...............                 --
Historical Best Practices......................     --          --          --
Analytical and Consulting Feedback.............     --          --          --
Comprehensive Content..........................     --          --
</TABLE>

THE eMERGE ONLINE CATTLE MARKETPLACE

     Through our Cyberstockyard.com Web site, we enable cattle producers and
feedlot operators to participate in daily online sales and auctions of cattle.
We believe that because online procurement results in fewer cattle shipments and
less handling, transaction costs are reduced and animals arrive at their
destination healthier and less stressed, thereby increasing the value of the
animals. We also believe that online cattle procurement creates a powerful
medium for obtaining access to market pricing from various buyers and sellers
located throughout the United States. We believe that this may eventually reduce
the amount of commission fees paid by the cattle industry as a whole, and
thereby reduce the cost to produce cattle. Through this comprehensive online
marketplace, we also have the ability to

                                       41
<PAGE>   43

sell products and services that are designed to improve productivity within the
livestock industry. We currently offer NutriCharge through our online
marketplace to help our customers reduce the effects of pre-harvest stress in
their cattle.

  PROPRIETARY INFORMATION MANAGEMENT PRODUCTS AND SERVICES

     We provide cattle producers, feedlots and packers with information
management products and services designed for the more efficient and profitable
production of cattle. Through our integrated Web sites, users can access a broad
range of database services and information related to the cattle industry,
including general industry news, regional weather, commodity prices and industry
analyses and proprietary data. We provide our customers with monthly detailed
pricing, operations and benchmarking data on the cattle industry. In addition,
through our proprietary information application, which is installed on our
customers' systems, we collect cattle data, such as feeding and medication
history, from each customer's disparate systems over the Internet. We then
analyze the data and compile daily reports, which customers subscribing to our
feedlot information systems receive over the Internet and use to improve their
daily management decisions.

     We also provide an online community for the cattle industry where users can
actively communicate with our staff of industry experts through e-mails, which
our staff generally respond to within 24 hours. We believe this proactive
approach can improve overall meat quality and reduce health-related losses of
cattle.

OUR BUSINESS STRATEGY

     Our objective is to expand our position as a provider of
business-to-business electronic commerce products and services for the livestock
industry. Our business strategy includes the following key elements:

 LEVERAGE OUR MARKET POSITION TO BUILD BRAND AWARENESS AND FURTHER ESTABLISH OUR
 ONLINE MARKETPLACE

     We seek to combine our industry expertise with the first Internet-based
cattle information and commerce network to attract industry participants to our
growing online marketplace. By offering industry participants tools to make
better informed purchasing decisions, improve cattle health, and operate more
efficiently, we believe that we will be able to bring users to our Web sites and
build loyalty and future demand for our products, services and solutions. We
seek to increase the supply of cattle offered through our online marketplace by
continuing to build relationships with cattle producers and to stimulate demand
for our marketplace and information services by nurturing relationships with
feedlots. We believe that by attracting additional industry participants to our
marketplace, we will enhance the value of our online community.

 DRIVE COMMUNITY LOYALTY THROUGH THE USE OF MANAGEMENT INFORMATION TOOLS AND
 PROPRIETARY CONTENT

     By providing an online, comprehensive source of cattle-related news,
industry data and management tools, we intend to increase our customers' daily
usage of the eMerge Interactive marketplace. Our electronic commerce marketplace
is prominently featured throughout our integrated Web sites that provide
information management products and services to our customers. We believe our
May 1999 acquisition of Professional Cattle Consultants, L.L.C., serving over 90
feedlots, provides us with a strong customer base and the credibility to develop
a trading community and marketplace. Also, our Feedlot

                                       42
<PAGE>   44

Information System, which is designed to be the principal management system for
daily feedlot operations, will continuously expose feedlot managers to our
online marketplace.

 LEVERAGE OUR STRONG CUSTOMER RELATIONSHIPS AND INDUSTRY EXPERTISE TO EXPAND OUR
 ONLINE COMMUNITY

     Historically, relationships among industry participants have played a key
role in conducting business within the cattle industry. We believe that we have
strong existing customer relationships with key cattle producers, feedlots and
packers. Through our acquisition strategy and human resources strategy, we have
acquired companies and hired individuals with long-standing expertise and
relationships in the cattle industry. Our industry experts and advisers consist
of veterinarians, cattle buyers, nutritionalists, data analysts, cattle
producers and former feedlot managers. We seek to leverage our current customer
base, existing relationships and industry expertise to attract additional
industry participants. We also seek to market and sell additional products and
services to our existing customers.

  DEVELOP NEW PRODUCTS AND SERVICES

     We intend to increase revenue through offering additional products and
services that complement our existing offerings. We seek to obtain new products
and services through strategic acquisitions of technologies or businesses,
internal development and research and development relationships. We currently
have research relationships for the development of proprietary technologies
relating to the cattle and livestock industry with the U.S. Department of
Agriculture, Iowa State University, and the Canadian government. We also intend
to invest in the research and development of new data collection systems to
increase our proprietary electronic commerce offerings to the livestock
industry. For example, we are developing infrared imaging solutions for use in
identification of stress in live animals and fluorescence imaging for use in
improving food safety through the detection of fecal contamination on beef. Our
lead infrared product candidate is still in the development phase and we do not
anticipate that it will be released for commercial use in the foreseeable
future.

  EXPAND INTO NEW MARKET SEGMENTS

     Expand Internationally

     We believe the international appeal of the Internet and the global demand
for cattle products and services present opportunities to expand our
comprehensive cattle solution globally. Although we have not completed the
development of our plan for international expansion, we believe opportunities
exist to offer our products and services, including our cattle sales and auction
services, within other regions of North America, and within South America,
Asia/Pacific and Europe. We intend to expand beyond the United States through
strategic acquisitions or by expanding our capabilities and sales personnel into
the international market.

     Extend Our Products and Services to Beef Retailers

     As part of our comprehensive products and services, we are developing the
capability to track and manage health and performance information related to
individual animals from birth to harvest. We believe that industry participants
may purchase these services because the ability to trace the progress of
individual cattle from the producer through the feedlot, and through grading at
the packer may enable industry participants to improve health and feed
management practices, lower costs and ultimately improve product quality. In
addition, this capacity to track individual cattle from producer through packer
will allow beef retailers to verify the source, history and quality of their
beef, thereby enabling them to develop high quality brands of beef for sale to
consumers at a premium price.

                                       43
<PAGE>   45

     Expand into other Markets Within the Livestock Industry

     We intend to expand our products and services into other market segments
within the livestock industry. In particular, we believe that opportunities may
exist to apply our integrated electronic commerce and information products and
services to the swine and dairy markets.

OUR PRODUCTS AND SERVICES

     We offer our customers a comprehensive set of Internet-based business
products and services designed to address the needs of the livestock industry.
Our products and services can be accessed through our integrated Web sites.
These sites include:

     - CattleInfoNet.com, the platform from which our customers can access our
       comprehensive product and services offerings;

     - Cyberstockyard.com, our online cattle sales and auction site; and

     - PCC-online.com, our cattle industry-specific information Web site.

In addition, through our Feedlot Information System, we provide our feedlot
customers with daily analyses of their feedlot operations as well as information
management products and services.

                             THE eMERGE MARKETPLACE

<TABLE>
 <S>                                       <C>
 ----------------------------------------------------------------------------------
 CATTLEINFONET.COM
                                        - Industry news
                                        - Regional weather
                                        - Links to commodity pricing
                                        - Expert corner
                                        - Reports online
                                        - Links to industry information
 ----------------------------------------------------------------------------------
 ONLINE MARKETPLACE                        MANAGEMENT INFORMATION SOLUTIONS
 Cyberstockyard.com                        Feedlot Information System
 - Cattle sales                            - Feedlot specific content
 - Cattle auctions                         - Daily performance data
 - Order fulfillment                       - Web-enabled with graphical user
 eMerge Online Store                       interface
 - eMerge branded products                 - Analytical services
 - Health products *                       Professional Cattle Consultants
 - General store *                         - Regional feedlot benchmarking data
                                           Specialized Database Services
                                           Advanced Commodities Content *
                                           Advanced Weather Services *
 ----------------------------------------------------------------------------------
</TABLE>

* Expected to be offered in the first quarter of 2000

                                       44
<PAGE>   46

  CATTLEINFONET.COM

     CattleInfoNet.com is our industry-specific Web site that serves as the
platform from which participants in the cattle industry can access our
comprehensive product and service offerings. This site features content to
facilitate cattle management, including industry news, weather and links to
commodities pricing. Also, through this site, our customers can access
Cyberstockyard.com to purchase or sell cattle, and PCC-online.com, our
information resource and database. In addition, our customers can use this Web
site to purchase our NutriCharge product.

  CYBERSTOCKYARD.COM

     Cyberstockyard.com is our cattle sales and auction service Web site.
Through Cyberstockyard.com, our customers utilize our online listing of cattle
to obtain access to inventory and market pricing from various buyers and sellers
located throughout the United States in an efficient and effective manner. In
addition, our customers can access scheduled online video cattle auctions. We
transmit inventory lists with detailed product descriptions to our customers by
both e-mail and facsimile and periodically post schedules for live video
auctions on the Web site.

     Cattle Sales

     We have developed a detailed posting and transaction process to ensure that
adequate information is provided to the purchaser prior to the transaction. We
verify the identity of a purchaser through use of a secure password system and
verify credit-worthiness of each participant prior to enabling access to our
system. Our expert livestock brokers in the field certify all cattle offered for
sale through Cyberstockyard.com. We provide a detailed description of each lot
of cattle, which can be accessed by a purchaser online. We update our inventory
of cattle for sale daily and customers can review our full inventory listings.
In addition, customers can post descriptions, quantity and pricing criteria for
cattle they would like to purchase and our system will automatically search for
a match. If a match is found, the customer is notified immediately online. If no
match is found, the customer can choose to have our system perform a daily
search for a match as new inventory is added to our system. Notification of a
match is sent to the customer by email or facsimile. Our livestock brokers and
online producers also have access to these postings and may respond with
potential matches. After identifying particular cattle to purchase, our
customers complete the transaction through e-mail or the telephone. Once cattle
have been purchased, we manage the shipment logistics through our sales and
customer service organization.

     Cattle Auctions

     In addition to our online cattle sales, we offer cattle for sale through
our online video auctions. Although not necessary to facilitate cattle sales
transactions, video is available to customers who have installed our satellite
dish system. We offer a mock auction to help our customers get acquainted with
the auction process. We have developed a system that allows participants to
automatically bid in set increments up to a predetermined limit. Once a bid is
accepted, the purchaser is notified online. Our customer service team then
follows-up by telephone and e-mail with specific shipment logistics regarding
the cattle.

  MANAGEMENT INFORMATION SOLUTIONS

     The Feedlot Information System

     The Feedlot Information System provides feedlot customers daily information
services. This secure proprietary information management application resides on
our customers'

                                       45
<PAGE>   47

operating systems and interfaces with our centralized database over the
Internet. Our system integrates information contained in their disparate legacy
systems into our database daily to create relevant customer-specific analyses
and graphical presentations. Customers' information is automatically integrated
into our database, analyzed and available for use on the following day. The
analyses created include information and performance data designed to assist in
the effective daily management of a feedlot business. These analyses include:

     - Feed consumption data;

     - Feed-to-gain ratios; and

     - A comprehensive summary of health results.

     The Feedlot Information System also enables our customers to compare their
performance against other regional and national feedlot data and provides useful
proprietary content for business management decisions. Our customers can use our
system to manage their feedlot operations on a real-time basis using numerous
performance variables and individual parameters. Customers can also access data
and product performance results posted by practicing veterinarians to further
refine their business practices. All of our Internet applications are easily
accessible from our Feedlot Information System. In addition, our staff provides
valuable analysis and interpretation of the information contained in the
database.

     Professional Cattle Consultants

     Through PCC-online.com, our Professional Cattle Consultants service, we
provide our customers access to services that are based on our confidential and
proprietary database of cattle industry information. This database has been
compiled over the last 26 years from over 90 different feedlots representing
over 20% of the total cattle processed annually through U.S. feedlots. As part
of their subscription, our customers submit information to our analysts twice
per month to update our database. Each month these customers receive our Cattle
Gram, a marketing report that analyzes and reports cattle market related
information, and our newsletter, a feed performance report containing compiled
data relating to over 100 different feed performance parameters. In our
newsletter, we provide national, regional and customer-specific analyses.
Customers may use a password to view these reports online or receive them via
e-mail or mail.

     Specialized Database Services

     We offer specialized database management and Internet-based networking
services that target specific customer requirements, including individual animal
tracking through the entire production chain. We can also provide customized
data management and formatting services designed to enable suppliers to better
understand product performance in the field. Our analysts are available to
assist customers in understanding how to derive the most value from the
information being acquired.

STRESS MANAGEMENT PRODUCTS AND SERVICES

     As part of our comprehensive solution, we offer our proprietary NutriCharge
restorative feed supplement for sale to our customers through our Web sites and
direct sales force. NutriCharge is designed to reduce the effects of stress on
the animals caused by transportation, handling and commingling, which can result
in a loss of product quality. In addition, we offer educational materials and
services to assist our customers to reduce handling of animals and therefore
reduce stress.

                                       46
<PAGE>   48

EQUINE IMAGING SYSTEMS

     We have developed our infrared imaging thermography system and image
management software for use in the equine industry. Infrared thermography is a
non-invasive diagnostic imaging technique that is used to detect surface
temperature differences. The camera is lightweight, portable and has a high
degree of resolution and sensitivity. Our infrared camera and software allow a
user to download thermal images to the user's computer to be viewed, catalogued,
annotated and measured. Our system is used by veterinarians to detect heat, one
of the first indicators of inflammation or injury, in horses and exotic animals.

PRODUCT DEVELOPMENT RELATIONSHIPS

     We have entered into agreements for the development of technology with a
division of the Canadian government as represented by the Minister of
Agriculture and Agri-Food Canada. We license patents and technology related to
NutriCharge and our Animal Science Tracker infrared camera, which is currently
under development. This agreement also gives us and the Canadian government,
through the Lacombe Research Centre, the right to collaborate with the other on
any project which relates to the license. Any improvements will be owned by
Canada and licensed to us on an exclusive basis. Please see the section entitled
Intellectual Property for a description of the license.

     We have entered into a Research Support Agreement with the Canadian
government, under which we provide the Lethbridge Research Centre with one of
our infrared imaging systems, analytical software, and technical support in
exchange for a right of first refusal to license any resulting technology. The
Canadian government may terminate this agreement at any time.

     We have entered into a cooperative research and development agreement with
the USDA Agricultural Research Service and Iowa State University of Science and
Technology, in which we have been granted exclusive rights and responsibilities
for product development and commercialization of technology developed and
patented by them for the detection of small, diluted quantities of mammalian
fecal matter on animal carcasses. We will provide design and engineering
expertise. When commercialized, we believe that this technology may reduce
safety inspection and processing costs at packing plants while reducing e-coli
contamination risks. The parties to the agreement may only terminate in the
event of a breach by another party. In connection, with this agreement, we have
also entered into an exclusive license agreement with Iowa State for patent
rights relating to the research and development agreement. Under the license
agreement, we have the right to make or have made, use, sell, offer to sell and
import products using technical data and information owned by the Iowa State
University Research Foundation, or ISURF. The license agreement applies to all
present and future patents, patent applications and inventions relating to meat
and carcass inspection technology. In exchange for the license, we paid a
license fee in the amount of $10,000. We will also pay a royalty of six percent
of the net sales of any licensed products. If we sublicense the technology, we
will also pay ISURF 50% of any fees paid to us by the sublicensees. Currently,
there are no licensed products and we have not made any royalty payments to
date. The license will expire when the last of the patents covered by the
license expire, unless we terminate earlier.

BUSINESS ACQUISITIONS

  CIN, LLC

     In February 1999, we purchased substantially all of the assets of CIN, LLC,
a company which collected, analyzed and distributed information for use in
animal food sciences

                                       47
<PAGE>   49

markets, for an aggregate purchase price of approximately $2.3 million. The
purchase price consisted of 750,000 shares of our class A common stock valued at
$720,000, the assumption of $812,000 of liabilities, a cash payment due in
October 1999 of $358,000, an agreement to pay the first $350,000 from Internet
sales of third-party products over the Web site and transaction costs of
$57,000.

  CYBERSTOCKYARD, INC.

     In March 1999, we purchased all of the outstanding stock of Cyberstockyard,
Inc., a company selling cattle and other products through auction software over
the Internet for approximately $542,000. The purchase price consisted of 250,000
shares of our class A common stock valued at $450,000, the assumption of $90,000
of liabilities and transaction costs of $2,000.

  PROFESSIONAL CATTLE CONSULTANTS, L.L.C.

     In May 1999, we purchased substantially all of the assets of Professional
Cattle Consultants, L.L.C. for an aggregate purchase price of approximately $1.8
million. The purchase price consisted of $1.8 million of cash, the assumption of
$3,000 of liabilities and transaction costs of $25,000. The primary asset of
Professional Cattle Consultants, L.L.C. was a proprietary database of cattle and
market information and analysis. For the past 26 years, Professional Cattle
Consultants, L.L.C. has collected a variety of performance and other data from
its subscribers' feedlot operations and provided subscribers with periodic
analyses of certain performance characteristics of their feedlot operations and
comparative analysis related to the performance of feedlots within their
regions.

INVESTMENT IN TURNKEY COMPUTER SYSTEMS, INC.

     In August 1999, we entered into an agreement to acquire 19% of the common
stock of Turnkey Computer Systems, Inc., a provider of administrative/accounting
legacy systems to feedlots, for an aggregate purchase price of $1.8 million. The
purchase price consisted of 62,500 shares of our class A common stock, which is
subject to redemption, $1.4 million of cash and $23,000 of transaction costs. In
connection with this investment, we obtained the exclusive right to provide
cattle sales and auction services and feed sales services to customers of
Turnkey through Turnkey's system. This right will expire in August 2019. If we
reach a specified level of revenue per feedlot that is a customer of Turnkey, we
will pay a fee to Turnkey.

RESEARCH AND DEVELOPMENT

     We intend to continue to devote significant time and resources to enhance
our current core technology to improve our existing products, expand our product
line and enter into other market segments. Approximately $1.1 million during the
period ended December 31, 1998 and approximately $2.7 million for the nine
months ended September 30, 1999 were related to research and development. As of
September 30, 1999, we had 36 employees dedicated to product development. We
intend to continue to invest in research and development and focus on the
recruitment of experienced scientists and engineers. Our current research and
development activities are primarily focused on the development of information
technologies to complement our products and services for the animal sciences
industry.

                                       48
<PAGE>   50

SALES AND MARKETING

  SALES

     Our sales organization is structured around a direct sales team and an
electronic commerce sales team. We have a staff of 13 account managers who are
responsible for sales of products and services through our electronic commerce
platform to feedlot and packer customers in given geographic territories. We
have a staff of cattle buying representatives who, along with independent buyer
representatives with whom we have entered into relationships, are responsible
for obtaining inventory for livestock sales from producers. We are assembling a
dedicated team to increase advertising revenue and to add third party products
to our electronic commerce offering.

  MARKETING

     We seek to establish broad customer awareness of our technologies, products
and services within the industries we serve. Our marketing efforts include
direct advertising through trade journals and press releases coordinated by our
communications and public relations firm. We also participate in professional
societies and university programs and have developed strategic marketing
relationships with industry professionals and academic institutions. Much of the
initial interest in our products and services has been created through the
extensive network of relationships we have in the cattle industry as well as
through our sales organization. We are developing an international marketing
effort to promote our products and services worldwide.

OUR CUSTOMERS

     Our initial customer focus is the 300 largest feedlots in the United
States. These feedlots manage 20.1 million head of cattle annually, accounting
for 74% of cattle processed through feedlots in the United States. Currently, we
sell our products and services to approximately 130 of those feedlots, which
account for approximately 30% of the total cattle harvested in the U.S. We also
offer our products and services to participants throughout the cattle production
chain.

CUSTOMER SERVICE

     Our current customer service organization consists of four individuals who
are responsible for delivering service to our customers. Currently our order
entry, e-commerce transactions and hardware and software support functions are
conducted at our Sebastian, Florida facility. Our current field support
organization is based in Meade, Kansas. We have a dedicated toll free number for
customer calls, which is staffed from 8:00 a.m. to 8:00 p.m. EST.

INFRASTRUCTURE AND TECHNOLOGY INFORMATION SYSTEMS

  SYSTEM ARCHITECTURE

     Our Web sites use multiple front-end servers and a master database located
at our Sebastian, Florida facility. We have implemented scalable Web site
management, search, customer interaction, transaction processing and fulfillment
services and systems. Our Web site and extranet provide customization,
interactivity and performance required for business-to-business electronic
commerce. We utilize applications for:

     - Accepting and validating customer orders;

                                       49
<PAGE>   51

     - Placing and managing orders with suppliers and manufacturers;

     - Notifying and updating customer order status; and

     - Management of shipment of products.

     All data communication between remotely located computers uses secure
socket layer, or SSL, encryption technology. This allows the transfer of a local
database from a feedlot to our main database which uses a Sun Enterprise 4500
server.

  DATA COLLECTION

     The data collection system for our Feedlot Information System gathers
information from the accounting, feedbunk and hospital systems at the feedlot.
This information is compared to a local database, and the changes and additions
are encrypted and transmitted securely to our main database storage along with
any orders that are being processed in the off-line batch mode. Once received,
we add the data to our master database for statistical analysis and generate
reports for individual site locations. The results are encrypted and sent back
to the individual feedlots. All confirmations of placed orders are sent back to
the feedlot that generated the order. Professional Cattle Consultants data is
collected on a monthly basis using a variety of interfaces with feedlot software
vendors. Data is transmitted electronically or by hard copy. This information is
then imported into the Professional Cattle Consultants architecture where it is
stored and utilized as necessary.

  DATA DISSEMINATION

     The data that is sent back to the feedlots includes video data for
Cyberstockyard and daily content and statistical data for our information
management products and services. This information is then stored in our local
databases, which function as a backup for off-line operation. Professional
Cattle Consultants provides information back to feedlots on a monthly basis
either through electronic mail, a password-protected Internet site, or in hard
copy form. Surveys are available only in hard copy form.

  DATA DISPLAY AT THE FEEDLOT

     Our system uses a standard browser to connect to the CattleInfoNet.com Web
site. A secure login is required for full access to Cyberstockyard.com,
PCC-online.com and the Feedlot Information System. When logged on, the system
downloads display applets, written in Java, to the user's system to display
relevant information. The user can view auction videos and bid on cattle in
real-time.

INTELLECTUAL PROPERTY

     Our ability to protect and utilize our intellectual property rights is
important to our continued success. We have filed applications to register
Cyberstockyard and NutriCharge as trademarks of eMerge Interactive with the U.S.
Patent and Trademark Office. We currently have three patent applications that
are pending before the U.S. Patent and Trademark Office relating to:

     - Early detection of inflammation using our infrared imaging camera;

     - Feedlot information systems and methods; and

     - The cattle transaction process.

                                       50
<PAGE>   52

     The intellectual property rights to use several patents that are critical
to our products and services are licensed to us by third parties. The U.S.
patents and corresponding international patent applications related to our
NutriCharge products and infrared animal screening methods are licensed to us by
the Canadian government under a master license agreement dated July 29, 1998.
The master license provides us with an exclusive worldwide license to develop
and sell products and services that utilize the inventions contained in the
patents. The license continues until July 2018 and may be renewed after that
time unless the license is terminated by the Canadian government upon our breach
of and failure to cure a fundamental term of the license agreement, our
commencement of bankruptcy or insolvency proceedings, or the assignment of the
license agreement without Canada's prior written consent. In exchange for the
license, we must pay the Canadian government a royalty on a semi-annual basis
that is calculated as a percentage of the revenues we receive from the sale of
products and services related to the license. Our obligation to pay this royalty
begins July 29, 2000. Under the master license, we must achieve milestones in
order to maintain the master license. To date we are achieving all required
milestones.

     The U.S. patents relating to technology for detecting fecal contamination
on meat carcasses during and after slaughter are licensed to us by the Iowa
State University Research Foundation and the USDA under a license agreement
entered into August 1999. The license provides us with an exclusive worldwide
license until the patents expire on a country by country basis to develop and
sell products and services that utilize the inventions contained in the patents.
In exchange for the license, we are obligated to pay Iowa State University a
royalty on revenues we receive from the sale of products and services related to
the license.

     We believe our commercial success depends on our ability to protect our
proprietary technology and enforce our rights in the technology we license to
other parties. We currently rely on a combination of patents, copyrights and
trade secrets to protect our proprietary technology. We are not aware of any
patents held by others that would prevent us from manufacturing and
commercializing our technology in the United States and abroad.


     We have filed an application to register eMerge Interactive and related
service marks with the U.S. Patent and Trademark Office. We have received notice
from a third party claiming superior rights to these marks and indicating an
intent to oppose our registration of the names in Patent and Trademark Office
proceedings as well as oppose our commercial use of the marks. We believe that
we will be able to ultimately overcome any such challenge. If we are
unsuccessful, however, we may be required to cease using the eMerge marks at a
future date.


  PURCHASE AND LICENSE AGREEMENT

     In January 1999, we granted a license to Sperry Marine, Inc., a subsidiary
of Litton Industries, Inc., to design, manufacture and assemble infrared marine
systems for worldwide sale. The license is exclusive and nontransferable and
applies to infrared technology that is unrelated to our products and markets.
Although we have not received any royalties to date, under the agreement, we
will receive a royalty of 8% of system sales up to a maximum royalty of $4.3
million over a four year period or up to a maximum royalty of $5.0 million if
$4.3 million is not received within four years. Upon receipt of the maximum
amount, we will transfer all rights, title and interests to the licensed
intellectual property. In connection with this license agreement, we also
entered into an asset purchase agreement with Sperry for the sale of assets
relating to the infrared systems for approximately $1.9 million.

COMPETITION

     In the cattle sales and auction services market, we compete against
traditional cattle auction services, as well as video cattle auction providers
and other online cattle auction

                                       51
<PAGE>   53

services. Currently, the majority of cattle and calf sales transactions occur
through auctions held at traditional sale barns. These sale barn operations are
highly fragmented and vary in size. We believe that the primary competitive
factors in the cattle sales and auction services market include:

     - Availability and quality of inventory;

     - Pricing;

     - Reliability of service;

     - Efficiency;

     - Brand awareness;

     - Customer service; and

     - Convenience and ease of use.

     We believe that we compete favorably based on these factors, particularly
due to our access to inventory, our focus on ensuring quality and reliability,
the brand awareness developed through our comprehensive solution and the
convenience and ease of use of our Web site.

     We compete against other companies in the information services segment,
including established cattle and livestock information services. We also face
competition from cattle industry product manufacturers who use information
technology to promote the effectiveness of their products. These services are
often provided in connection with the sale of products to industry participants.
In addition, providers of software to feedlots also offer information services
to their feedlot customers. We believe that the primary competitive factors in
the information services market include:

     - Breadth of available data;

     - Quality of analyses;

     - Timeliness of information;

     - Brand recognition;

     - Value-added consulting services; and

     - Convenience and ease of use.

     We believe that we compete favorably based on these factors particularly
due to the size and quality of our proprietary database, the timeliness of our
service offerings, the expertise of our professionals and the convenience and
ease of use of our Web sites.

     Our current competitors may include large companies that have substantially
greater market presence, brand-name recognition and financial resources than we
do. Some of our smaller competitors may also enjoy greater recognition and close
relationships within a particular community.

EMPLOYEES

     As of September 30, 1999, we employed a total of 99 persons, including 36
persons in product development and engineering, 35 persons in marketing and
sales, 18 persons in production and 10 persons in administration. We are not
subject to any collective bargaining agreements and we believe that our
relationship with our employees is good.

                                       52
<PAGE>   54

FACILITIES

     Our corporate facilities located in Sebastian, Florida, occupy
approximately 17,000 square feet. We lease our facilities from XL Vision, which
leases the entire facility from XL Realty, Inc., a subsidiary of Safeguard. We
believe that the rent that we pay pursuant to our lease is consistent with the
market rent for similar space in the area. Our lease terminates on January 1,
2001, at which time we have the option to renew the lease for an additional one
year term. We believe that this space is adequate to support our needs for the
foreseeable future.

     We also maintain offices in Meade, Kansas; Denver, Colorado; and
Weatherford, Oklahoma.

LEGAL PROCEEDINGS

     We have been named as a defendant in a lawsuit filed on January 12, 2000 in
the Queen's Bench Judicial Centre of Regina, Province of Saskatchewan, Canada.
The complaint alleges that eMerge and a third party were each subject to
confidentiality agreements with the plaintiff, and subsequently engaged in
discussions concerning a potential business arrangement allegedly in violation
of these agreements. The complaint asserts damages, including punitive damages,
from the defendants in the aggregate amount of $18 million (Canadian dollars),
as well as injunctive relief. Although we have not yet completed our assessment
of these claims, we believe that there are a number of substantive and
procedural defenses that exist and intend to defend these claims vigorously.
Furthermore, based on our investigation to date, we are not aware of any facts
that support these allegations or the damages asserted.

                                       53
<PAGE>   55

                                   MANAGEMENT

     This table sets forth information with respect to our executive officers,
directors and key employees with significant industry expertise as of December
31, 1999.

<TABLE>
<CAPTION>
NAME                                   AGE                      POSITION
- ----                                   ---                      --------
<S>                                    <C>   <C>
EXECUTIVE OFFICERS AND DIRECTORS
Charles L. Abraham...................  44    Chief Executive Officer and Director
T. Michael Janney....................  50    Chief Financial Officer and Treasurer
Scott L. Mathews.....................  42    President and Chief Operating Officer
Marvin L. Slosman....................  35    Executive Vice President, Sales
Arvind Subramanian...................  38    Executive Vice President, Marketing and
                                             E-Business
John S. Scott, Ph.D..................  48    Chairman of the Board
Douglas A. Alexander.................  38    Director
E. Michael Forgash...................  41    Director
Thomas C. Lynch......................  57    Director
Christopher Moller, Ph.D.............  46    Director
John W. Poduska, Sr., Ph.D...........  62    Director
KEY EMPLOYEES WITH SIGNIFICANT INDUSTRY
  EXPERTISE
J. Tom Brink.........................  38    Director, Analytical Services
Scott Crain, D.V.M...................  41    Executive Vice President, Professional
                                             Services
Jim Gibb, Ph.D.......................  47    Director, Advanced Technologies
</TABLE>

EXECUTIVE OFFICERS AND DIRECTORS

     Charles L. Abraham has served as Chief Executive Officer and as a member of
the board of directors of eMerge Interactive since July 1998. From July 1997
until July 1998, Mr. Abraham was Vice President and General Manager with the
Home Care Division of Nellcor Puritan Bennett Incorporated. From 1994 until July
1997, Mr. Abraham was Manager of the Global Vascular Business of General
Electric Medical Systems, located in Paris, France.

     T. Michael Janney has served as Chief Financial Officer and Treasurer of
eMerge Interactive since November 1998. From March 1993 until October 1998, Mr.
Janney was Senior Vice President and Chief Financial Officer of Datamax
Corporation, a privately held company that designs, develops, manufactures and
sells bar code printers worldwide.

     Scott L. Mathews has served as President of eMerge Interactive since
November 1999, and as Chief Operating Officer of eMerge Interactive since April
1999. From May 1996 until April 1999, Mr. Mathews was Vice President and General
Manager for Key Technology, Inc., a manufacturer of machine vision and material
handling products for the food processing and pharmaceutical industries. From
January 1994 until May 1996, Mr. Mathews was Manager of the Global Positron
Emission Tomography business of General Electric Medical Systems, located in
Waukesha, Wisconsin and Uppsala, Sweden.

                                       54
<PAGE>   56

     Marvin L. Slosman has served as the Executive Vice President, Sales of
eMerge Interactive since August 1998. From May 1996 until July 1998, Mr. Slosman
was a Division Manager for Cordis, Johnson and Johnson. From April 1995 until
May 1996, Mr. Slosman was a Vice President at GE Capital Corporation. From 1993
until April 1995, he served as a Programs Manager at General Electric Medical
Systems. Mr. Slosman currently serves on the board of directors of ReMar, Inc.

     Arvind Subramanian has served as Executive Vice President, Marketing and
E-business of eMerge Interactive since December 1999. From January 1997 until
December 1999, Mr. Subramanian was a General Manager for General Electric
Information Services. From September 1994 until December 1996, Mr. Subramanian
was a Global Product Line Manager for General Electric Medical Systems.

     John S. Scott, Ph.D. has served as Chairman of the Board of eMerge
Interactive since September 1994 and has served as Chief Executive Officer and
Chairman of the Board of XL Vision, Inc. since its inception in May 1993. From
August 1991 until July 1993, Dr. Scott was President of Lenzar Electro-Optics,
Inc., a manufacturer of imaging devices. Dr. Scott also currently serves as
Chairman of the Board of ChromaVision Medical Systems, Inc., a public company,
and Who?Vision Systems, Inc., both of which are affiliated with Safeguard.

     Douglas A. Alexander has served as a member of the board of directors of
eMerge Interactive since April 1999. Mr. Alexander is a managing director of
Internet Capital Group, Inc., an affiliate of Safeguard and is Chairman of the
Board of VerticalNet, Inc., a public company, and serves as a director of
Arbinet Communications, Inc., Blackboard Inc., ComputerJob.com, Inc., Deja.com,
Inc., LinkShare Corporation, SageMaker, Inc. and Star-Cite! Solutions, Inc., all
of which are privately held companies that are affiliated with Internet Capital
Group. Mr. Alexander co-founded Reality Online, Inc., a company that developed
financial planning tools and online services aimed at the individual investor,
and continued to serve as its President and Chief Executive Officer after its
acquisition by Reuters Group PLC until September 1997.

     E. Michael Forgash has served as a member of the board of directors of
eMerge Interactive since March 1999 and has held the position of Vice President,
Operations at Safeguard Scientifics, Inc. since January 1998. From August 1996
until October 1997, Mr. Forgash was President and Chief Executive Officer of
Creative Multimedia, an interactive marketing agency that consulted, designed
and delivered Web solutions for businesses. From November 1994 until July 1996,
Mr. Forgash served as President of Continental Healthcare Systems, Inc., a
leading supplier of departmental healthcare information systems and consulting
in the United States and England. Mr. Forgash currently serves as a director of
Internet Capital Group, Inc. and US Interactive, Inc., both public companies,
4anything.com, Inc., Who?Vision Systems, Inc. and XL Vision, Inc., all of which
are affiliated with Safeguard. Mr. Forgash is the Safeguard designee on our
board of directors under a stockholders' agreement dated July 17, 1997.

     Thomas C. Lynch has served as a member of the board of directors of eMerge
Interactive since June 1997 and currently serves as the President, Chief
Operating Officer and a member of the board of directors of CompuCom, Inc., a
public company, which is affiliated with Safeguard. From November 1995 until
October 1998, Mr. Lynch held the position of Senior Vice President at Safeguard
Scientifics, Inc. From September 1994 until October 1995, Mr. Lynch was Director
of the Navy Staff, where he was responsible for coordinating Navy defense
issues. Prior to August 1994, Mr. Lynch held several positions in the United
States Navy, including Superintendent of the U.S. Naval Academy.

     Christopher Moller, Ph.D. has served as a member of the board of directors
of eMerge Interactive since June 1997. Since 1990, he has served as Vice
President of TL Ventures, a

                                       55
<PAGE>   57

company which manages a series of private equity funds and is affiliated with
Safeguard. Since 1994, Dr. Moller has served as a Managing Director of the
following funds managed by TL Ventures: Radnor Venture Partners, Technology
Leaders, Technology Leaders II, TL Ventures III and TL Ventures IV. He is also a
Managing Director of TL Leaders Management II L.P. Dr. Moller is a director of
Who?Vision Systems, Inc., an affiliate of Safeguard, Adolor Corporation and
OraPharma, Inc. Dr. Moller serves on the medical advisory board of Lankenau
Research Institute. Dr. Moller is the TL Ventures designated director on our
board of directors, under a stockholder agreement dated July 17, 1997.

     John W. Poduska, Sr., Ph.D. has served as a member of the board of
directors of eMerge Interactive since January 1997. Since 1992, Dr. Poduska, Sr.
has served as the Chairman of Advanced Visual Systems Inc., a provider of
visualization software. From December 1989 until December 1991, Dr. Poduska was
President and Chief Executive Officer of Stardent Computer Inc., a computer
manufacturer. Dr. Poduska is also a member of the board of directors of
Safeguard Scientifics, Inc., Cambridge Technology Partners, Inc., an affiliate
of Safeguard, and Union Pacific Resources Group Inc., all public companies, and
XL Vision, Inc., an affiliate of Safeguard.

KEY EMPLOYEES WITH SIGNIFICANT INDUSTRY EXPERTISE

     J. Tom Brink has served as the Director, Analytical Services of eMerge
Interactive since April 1999. Mr Brink focuses on marketing methods, feedlot and
grid value and cow production costs, and has conducted extensive research on
cattle markets and price cycles. His articles have been featured in many key
industry publications. From December 1996 to April 1999, Mr. Brink served as the
Executive Director of the American Gelbvieh Association, a leading breed
value-based marketer of fed cattle and the largest breed-coordinated alliance in
the United States. From July 1992 until December 1996, Mr. Brink was the
Director of Market Research of Cattle-Fax.

     Scott Crain, D.V.M. has served as the Executive Vice President,
Professional Services of eMerge Interactive since March 1999. Since 1990, Dr.
Crain has also maintained a veterinary feedlot practice. In 1995, Dr. Crain
founded CIN, LLC, a company that established an information system for the beef
industry, and served as its President and Chief Executive Officer until that
company was acquired by eMerge Interactive in 1999.

     Jim Gibb, Ph.D. has served as the Director, Advanced Technologies for
eMerge Interactive since June 1999. Dr. Gibb identifies opportunities to
implement and integrate new technology into eMerge Interactive's informations
system. From May 1996 until June 1999, he served as the Vice President at the
Center for Quality of the National Cattlemen's Beef Association. From 1991 until
May 1996, Dr. Gibb served as the Executive Director of the American Gelbvieh
Association.

BOARD OF DIRECTORS

     Our board of directors is composed of seven members. All of our directors
are elected to serve for one-year terms and are elected at each annual meeting
of our stockholders.

BOARD COMMITTEES

     We have established an audit committee and a compensation committee. Our
audit committee consists of three independent directors. Currently our audit
committee consists of Douglas A. Alexander, Christopher Moller, Ph.D. and John
W. Poduska, Sr., Ph.D. The audit committee reviews the scope and result of the
audit and other services provided by our independent auditors and reviews and
evaluates our internal control functions.

                                       56
<PAGE>   58

     Our compensation committee consists of at least three disinterested
directors who are non-employee directors. Currently, our compensation committee
consists of John S. Scott, Ph.D., E. Michael Forgash and Thomas C. Lynch. The
compensation committee evaluates and approves the compensation and benefits for
our executive officers and administers our equity compensation plans and makes
recommendations to the board of directors regarding such matters.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The compensation committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of eMerge Interactive and administering various incentive compensation
and benefit plans. During the 1998 fiscal year, our compensation committee
consisted of Dr. Scott and Messrs. E. Scott Blackwell and Lynch. Dr. Scott is
the Chief Executive Officer and Chairman of the Board of XL Vision. Mr.
Blackwell is an executive officer of XL Vision. At the end of fiscal 1998, we
owed XL Vision $8.0 million.

DIRECTOR COMPENSATION

     We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. We do not pay our
directors cash compensation for attending meetings of the board of directors and
committee meetings. Directors are eligible to receive options to purchase common
stock under our equity compensation plan. All options granted to directors have
been approved by unanimous vote of the board of directors. In each of October
1997 and March 1999, we granted Dr. Poduska options to purchase 31,250 shares of
our common stock under our 1996 Equity Compensation Plan at an exercise price of
$0.80 and $1.60 per share, respectively. In April 1999, we granted Mr. Alexander
options to purchase 100,000 shares of our common stock under our 1996 Equity
Compensation Plan at an exercise price of $2.40 per share.

EXECUTIVE COMPENSATION

     The table below sets forth information concerning the compensation we paid
to our chief executive officer and each executive officer who was paid
compensation greater than $100,000 in 1999. In 1999, we did not pay any of our
other executive officers salary and bonus exceeding $100,000. The amount
appearing in the All Other Compensation column for Mr. Abraham for 1999 consists
of $13,714 for reimbursement of relocation expenses, $11,050 for car allowance
and $5,484 for 401(k) employer contributions and term life insurance and for
1998 consists of $34,663 for reimbursement of relocation expenses, $5,525 for
car allowance and $1,690 for 401(k) employer contributions. The $3,771 for Mr.
Janney consists of 401(k) employer contributions and term life insurance. For
Mr. Mathews, the $65,935 consists of $63,435 for relocation expenses and $2,500
for 401(k) employer contributions and term life insurance. For Mr. Slosman the
$48,309 consists of $46,586 for relocation expenses and $1,723 for 401(k)
employer contributions and term life insurance. Mr. Abraham joined eMerge
Interactive in April 1998.

                                       57
<PAGE>   59

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                               LONG-TERM
                                                              COMPENSATION
                                                              ------------
                                   ANNUAL COMPENSATION         SECURITIES
                              -----------------------------    UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION    YEAR     SALARY      BONUS     OPTIONS/SARS   COMPENSATION
- ---------------------------   ------   ---------   --------   ------------   ------------
<S>                           <C>      <C>         <C>        <C>            <C>
Charles L. Abraham.........    1999    $175,791    $35,000           --        $30,248
Chief Executive Officer        1998      84,469         --      750,000         41,878
T. Michael Janney..........    1999     136,744      5,625       31,250          3,771
  Chief Financial Officer
     and Treasurer
Scott L. Mathews...........    1999     113,136     50,000      225,000         65,935
  President and Chief
     Operating Officer
Marvin L. Slosman..........    1999     144,517     18,670       31,250         48,309
  Executive Vice President,
     Sales
</TABLE>

     The following table sets forth information regarding options granted in
1999 to the executive officers named in the Summary Compensation Table above.
Charles L. Abraham was not granted any options during fiscal 1999. Amounts
represent the hypothetical gains that could be achieved from the respective
options if exercised at the end of the option term. These gains are based on
assumed rates of stock appreciation of 5% and 10% compounded annually from the
date the respective options were granted to their expiration date based upon the
grant price.

                     OPTION GRANTS DURING LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                   POTENTIAL REALIZABLE
                                           INDIVIDUAL GRANTS                         VALUE AT ASSUMED
                       ---------------------------------------------------------      ANNUAL RATES OF
                       NUMBER OF                                                        STOCK PRICE
                         SHARES                                                       APPRECIATED FOR
                       UNDERLYING   PERCENTAGE OF                                       OPTION TERM
                        OPTIONS     TOTAL OPTIONS      EXERCISE       EXPIRATION   ---------------------
NAME                    GRANTED        GRANTED      PRICE ($/SHARE)      DATE         5%          10%
- ----                   ----------   -------------   ---------------   ----------   ---------   ---------
<S>                    <C>          <C>             <C>               <C>          <C>         <C>
T. Michael Janney....    31,250          2.2%            $2.40          4/21/09    $ 47,167    $119,531
Scott L. Mathews.....   166,665         11.8              2.40          4/21/09     251,555     637,491
                         58,335          4.1              2.40          4/21/09      88,048     223,130
Marvin L. Slosman....    31,250          2.2              2.40          4/21/09      47,167     119,531
</TABLE>

     The following table sets forth information concerning year end option
values for fiscal 1999 for the executive officers named in the Summary
Compensation Table above. The value of unexercised in-the-money options is
calculated based on an assumed value equal to an assumed initial public offering
price of $11.00 per share.

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES

<TABLE>
<CAPTION>
                                                      NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                     UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                            SHARES                 OPTIONS AT FISCAL YEAR END        AT FISCAL YEAR END
                           ACQUIRED      VALUE     ---------------------------   ---------------------------
NAME                      ON EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                      -----------   --------   -----------   -------------   -----------   -------------
<S>                       <C>           <C>        <C>           <C>             <C>           <C>
Charles L. Abraham......     37,500     $60,000      150,000        562,500      $1,530,000     $5,737,500
T. Michael Janney.......      3,313      33,788       82,625        101,563         830,275        998,438
Scott L. Mathews........         --          --       56,250        168,750         483,750      1,451,250
Marvin L. Slosman.......         --          --       85,938        101,563         864,063        998,438
</TABLE>

                                       58
<PAGE>   60

EMPLOYMENT, CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT ARRANGEMENTS

     Charles L. Abraham holds the position of Chief Executive Officer and
receives an annual salary of $175,000 per year, and a bonus of up to $70,000 per
year based on performance objectives established by the board of directors. Mr.
Abraham will receive continued salary and benefits for a period of six months if
we terminate his employment without cause. Mr. Abraham also holds options to
purchase 750,000 shares of common stock at $0.80 per share, of which 25% or
187,500 shares, vest at the grant date with the remaining options vesting in
three annual installments of 25% each. If we experience a change of control,
100% of the options will automatically vest.

     Marvin L. Slosman holds the position of Executive Vice President, Sales and
receives an annual salary of $150,000 and a bonus of up to $60,000 based on the
achievement of annual objectives. Mr. Slosman will receive continued salary and
benefits for a period of six months if we terminate his employment without
cause. Mr. Slosman also holds options to purchase 156,250 shares of common stock
at $0.80 per share and 31,250 shares of common stock at $2.40 per share. These
options vested 25% on the day of grant with the remaining options vesting in
three annual installments of 25% each. If we experience a change of control,
100% of the options will automatically vest.

     T. Michael Janney holds the position of Chief Financial Officer and
receives an annual salary of $150,000 and a bonus of up to $45,000 based on the
achievement of annual objectives. Mr. Janney will receive continued salary and
benefits for a period of six months if we terminate his employment without
cause. Mr. Janney also holds options to purchase 156,250 shares of common stock
at $0.80 per share and 31,250 shares of common stock at $2.40 per share. These
options vested 25% on the day of grant with the remaining options vesting in
three annual installments of 25% each. If we experience a change of control,
100% of the options will automatically vest.

     Scott L. Mathews holds the position of President and Chief Operating
Officer and receives an annual salary of $160,000 and a bonus of up to $64,000
based on the achievement of annual objectives. Mr. Mathews will receive
continued salary and benefits for a period of six months if we terminate his
employment without cause. Mr. Mathews also holds options to purchase 225,000
shares of our common stock at $2.40 per share. These options vested 25% on the
day of grant with the remaining options vesting in three annual installments of
25% each. If we experience a change of control, 100% of the options will
automatically vest.

     Arvind Subramanian holds the position of Executive Vice President, Sales
and E-Business and receives an annual salary of $150,000 and a bonus of up to
$52,500 based on the achievement of annual objectives. Mr. Subramanian will
receive continued salary and benefits for a period of twelve months if we
terminate his employment without cause. Mr. Subramanian also holds options to
purchase 187,500 shares of our common stock at $11.20 per share. These options
vested 25% on the day of grant with the remaining options vesting in three
annual installments of 25% each. If we experience a change of control, 100% of
the options will automatically vest.

EQUITY COMPENSATION

  AMENDED AND RESTATED 1996 EQUITY COMPENSATION PLAN

     Our Amended and Restated 1996 Equity Compensation Plan was approved by our
stockholders on January 26, 1996. The aggregate number of shares of common stock
available for awards under the 1996 plan was 2,168,750 shares. No more than
625,000 shares in the aggregate may be granted to any individual in any calendar
year. As of December 31,

                                       59
<PAGE>   61

1999, there were 1,866,991 shares issuable upon the exercise of outstanding
options granted under the 1996 plan.

  1999 EQUITY COMPENSATION PLAN

     Our 1999 Equity Compensation Plan was approved by our stockholders on May
10, 1999. The aggregate number of shares of common stock available for awards
under the 1999 plan is 2,500,000 shares. No more than 625,000 shares in the
aggregate may be granted to any individual in any calendar year. As of December
31, 1999, there were 902,125 shares issuable upon the exercise of outstanding
options granted under the 1999 plan.

  GENERAL

     The 1996 and 1999 equity compensation plans provide for grants of incentive
stock options, nonqualified stock options, stock appreciation rights, restricted
stock and performance units to our designated employees, advisors and
consultants, and to non-employee directors. The compensation committee of the
board of directors administers and interprets the plans. The compensation
committee consists of two or more persons appointed by the board of directors
from among its members, each of whom must be a non-employee director as defined
by Rule 16b-3 under the Securities Exchange Act of 1934, and an outside director
as defined by section 162(m) of the Internal Revenue Code of 1986 and related
Treasury Regulations.

  ELIGIBILITY FOR PARTICIPATION

     Grants may be made to any of our employees or to employees of any of our
subsidiaries, to any non-employee member of the board of directors or, under the
1999 plan, to individuals to whom an offer of employment has been extended. Key
consultants and advisers who perform services for us or any of our subsidiaries
are eligible if they render bona fide services, not as part of the offer or sale
of securities in a capital-raising transaction.

401(k) PLAN

     We have adopted a tax qualified employee savings and retirement plan, the
401(k) plan, for eligible employees. We make matching contributions on behalf of
all participants who have elected to make deferrals to the 401(k) plan. Any
contributions to the 401(k) plan by us or by the participants are paid to a
trustee. The 401(k) plan, and the accompanying trust, is intended to qualify
under Section 401(k) of the Internal Revenue Code, so that contributions and
income earned, if any, are not taxable to employees until withdrawn. The
contributions made by us vest in increments according to a vesting schedule. At
the direction of each participant, the trustee invests the contributions made to
the 401(k) plan in any number of investment options.

                                       60
<PAGE>   62

                           RELATED PARTY TRANSACTIONS

EQUITY AND DEBT FINANCING AGREEMENTS WITH XL VISION

     We were incorporated in September 1994 as a subsidiary of XL Vision, Inc.,
a private company that provides strategic, technical and business support to
create imaging-related technology companies. From our inception through June
1999, we have funded our operating and investing cash requirements principally
through private placements of common stock and preferred stock and from
borrowings from XL Vision. As of the date of this prospectus, XL Vision owns
24.0% of our outstanding capital stock.

     In July 1997, we signed a subordinated purchase money note with XL Vision
for $4.4 million related to the transfer of infrared technology to eMerge. The
note bears interest at an annual rate of 7% and is due in full when we complete
an initial public offering or sell all of our assets or stock. Approximately
$1.4 million was outstanding under the note as of December 31, 1999, all of
which will be paid with a portion of the proceeds of this offering.

     In December 1998, we issued 2,400,000 shares of series B junior preferred
stock to XL Vision, one of our significant stockholders, at a purchase price of
$2.00 per share. As payment for the shares, XL Vision cancelled our debt of $4.8
million owed to XL Vision related to working capital expenditures, which were
incurred on our behalf by XL Vision. As a result of that transaction, XL
Vision's ownership of our capital stock increased from 22.0% to 35.8% as of
December 1998. XL Vision also canceled $7.5 million of debt related to working
capital expenditures, which were incurred on our behalf by XL Vision as a
contribution of debt to equity. The shares of series B junior preferred stock
are also subject to the registration rights agreement executed in connection
with the series A preferred stock. See the section entitled Description of
Capital Stock for a description of the registration rights agreement. The shares
of series A and series B preferred stock convert into shares of class A common
stock immediately prior to completion of this offering.

     In January 1999, we signed a revolving promissory note with XL Vision for
up to $3.0 million, of which approximately $232,000 was outstanding as of
December 31, 1999. The revolving promissory note bears interest at the prime
lending rate plus 1% and is due in full when we complete an initial public
offering or sell all of our assets or stock.

EQUITY AND DEBT FINANCING AGREEMENTS WITH AFFILIATES OF SAFEGUARD SCIENTIFICS,
INC.

     In April 1999, we signed two promissory notes, totaling $1.1 million with
Safeguard Delaware, Inc., a wholly-owned subsidiary of Safeguard Scientifics,
Inc. and the sole general partner of Safeguard XL Capital and Safeguard 99
Capital L.P., two of our significant stockholders. Safeguard Scientifics, Inc.
beneficially owns approximately 55% of the outstanding shares of capital stock
of XL Vision. These promissory notes were paid in full with the proceeds of the
sale of our series C preferred stock.

     In May 1999, we issued 1,000,000 shares of series C preferred stock to
Safeguard 99 Capital L.P., an affiliate of Safeguard Scientifics, Inc., at a
price of $5.00 per share. The shares of series C preferred stock are also
subject to the registration rights agreement executed in connection with the
series A preferred stock. The shares of series C preferred stock convert into
shares of class A common stock immediately prior to completion of this offering.


     In July 1999, we signed a revolving promissory note with Safeguard
Delaware, Inc. for up to $3.0 million. At September 30, 1999, $3.0 million had
been advanced by Safeguard. The revolving promissory note bears interest at the
prime lending rate plus 1%. In December 1999, we amended the note to extend the
maturity date until January 31, 2000 and in January 2000, we amended the note to
extend the maturity date until March 31, 2000.


                                       61
<PAGE>   63

     In August 1999, we signed a demand note with Safeguard Delaware, Inc. in
the principal amount of $2.5 million. The note bears interest at the prime rate
plus 1% and is payable on demand. In September 1999, we signed a demand note
with Safeguard Delaware, Inc. in the principal amount of $2.0 million. The note
bears interest at the prime rate plus 1% and is payable on demand. In October
1999, we signed a demand note with Safeguard Delaware, Inc. in the principal
amount of $2.5 million. The note bears interest at the prime rate plus 1% and is
payable on demand. In October 1999, we cancelled these outstanding notes in
exchange for a note in the amount of $7.1 million. The note bears interest at
the prime rate plus 1% and is due in full in one year, when we complete an
initial public offering or when Internet Capital Group repays its note to us,
whichever occurs earlier. As of December 31, 1999, we owed a total of
approximately $10.3 million to Safeguard.

ISSUANCE OF PREFERRED STOCK AND A WARRANT TO INTERNET CAPITAL GROUP, INC.

     On November 16, 1999, we issued 4,555,556 shares of series D preferred
stock and a warrant to purchase 1,138,889 shares of class B common stock for the
aggregate consideration of $38.8 million to Internet Capital Group, Inc.

     We received $18.0 million of the total purchase price in cash and $23.0
million in the form of a promissory note. The note will be due and payable one
year after its issue and does not bear interest. The note is secured by
2,555,556 shares of series D preferred stock. Interest on the promissory note
was imputed at 9.5% and amounts to $2.2 million over the life of the note. In
connection with the issuance of the stock and the warrant, we granted Internet
Capital Group registration rights that are substantially the same as those that
apply to our series A preferred stock.

     The series D preferred stock will automatically convert into shares of
class B common stock immediately prior to completion of this offering. Class B
common stock is entitled to two and one-half votes per share. The warrant
expires three years from the date of issuance, and is exercisable at the initial
public offering price of the class A common stock. The class B common stock
automatically converts into class A common stock upon transfer by Internet
Capital Group to a non-affiliated party.

     Douglas A. Alexander, one of our directors, is an executive officer of
Internet Capital Group. E. Michael Forgash, one of our directors, is also a
member of the board of directors of Internet Capital Group. Additionally,
Safeguard Scientifics, Inc. beneficially owns approximately 14.3% of the
outstanding shares of common stock of Internet Capital Group.

     Internet Capital Group and Safeguard are parties to a joint venture
agreement under which each has agreed to:

     - Use best efforts to agree and vote on a course of action that is in the
       best interest of both parties in all matters submitted to the
       stockholders for approval;

     - Vote its shares for the election of two designees of Safeguard and two
       designees of Internet Capital Group in any election of directors of
       eMerge Interactive;

     - Offer shares of eMerge Interactive stock to the other party at the fair
       market price of the shares before offering the shares to any unaffiliated
       party, other than in a sale of all of its shares; and

     - Discuss its intentions with the other party before selling all of its
       shares to an unaffiliated party and use its best efforts to provide the
       other party with the opportunity to purchase or participate in the
       purchase of the shares.

     Together, Internet Capital Group and Safeguard own approximately 58% of our
outstanding capital stock and control approximately 71% of the voting power of
our
                                       62
<PAGE>   64

outstanding capital stock prior to this offering. After this offering, Internet
Capital Group and Safeguard together will own approximately 44% of our
outstanding capital stock and will control approximately 58% of the voting power
of our outstanding capital stock.

SERVICE AGREEMENTS WITH XL VISION AND SAFEGUARD SCIENTIFICS

     We have contractual service agreements with XL Vision and Safeguard
Scientifics. Under an administrative services agreement dated December 15, 1997,
as amended on August 17, 1999, XL Vision and Safeguard provide us with
management consultation, investor relations, financial management, human
resource management, legal services, insurance programs, and administrative
services. We pay a fee pursuant to a formula that is based on a percentage of
our revenue, not to exceed $300,000 annually. The fee is not due until we
achieve positive cash flow from operations. We owe XL Vision and Safeguard each
$18,600 under this agreement for fiscal 1998, and $21,750 for the nine months
ended September 30, 1999. The agreement extends through December 31, 2002 and
continues unless terminated by either party.

     Under a direct charge administrative services agreement dated April 14,
1997, XL Vision also provides us with management services on a time and
materials basis. We owe XL Vision $460,000 under this agreement for fiscal 1998,
and $390,000 for the nine months ended September 30, 1999. This agreement
continues on a month-to-month basis, and may be terminated at any time by either
party.

REAL ESTATE LEASE WITH XL VISION

     We currently lease our facilities in Sebastian, Florida from XL Vision,
Inc., which leases the entire facility from XL Realty, Inc., a subsidiary of
Safeguard Scientifics, Inc. We believe that the rent that we say pursuant to our
lease is consistent with the market rent for similar space in the area. Our
lease terminates on January 1, 2001 and we will have the option to renew the
lease for an additional one year term.


LOAN AGREEMENT WITH MR. ABRAHAM



     On January 28, 2000, we entered into a term note with Charles L. Abraham,
our Chief Executive Officer, under which Mr. Abraham borrowed $100,000. The note
will mature on the earlier to occur of the second anniversary of the date of the
note and the date on which Mr. Abraham receives a bonus from us relating to the
successful completion of this offering. The note is secured by shares of our
common stock owned by Mr. Abraham pursuant to a pledge agreement. The note bears
interest at the prime lending rate plus one percent, which as of February 1,
2000 equaled 9.5%. The proceeds of the loan were used to finance the exercise of
options to purchase 30,000 shares of our common stock and to pay taxes in
connection therewith.


                                       63
<PAGE>   65

                       PRINCIPAL AND SELLING STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of eMerge Interactive's common stock as of December 31, 1999 by:

     - Each person or entity who is known by us to beneficially own more than 5%
       of eMerge Interactive's outstanding common stock;

     - Each of the executive officers set forth on the summary compensation
       table;

     - Each director of eMerge Interactive;

     - All directors and executive officers as a group; and

     - All other selling stockholders.

     In addition, we are voluntarily disclosing information for each of our
other executive officers.

     A person has beneficial ownership of shares if the individual has the power
to vote or dispose of shares. This power can be exclusive or shared, direct or
indirect. In addition, a person beneficially owns shares underlying options that
are presently exercisable or will become exercisable within 60 days of December
31, 1999 and shares acquirable upon conversion of our preferred stock.
Applicable percentage ownership in the following table is based on 25,232,902
shares of common stock outstanding as of December 31, 1999. To the extent that
any shares are issued upon exercise of options, warrants or other rights to
acquire our capital stock that are presently outstanding, granted in the future
or reserved for future issuance under our equity plans, there will be further
dilution to new public investors. Because of the disparate voting rights between
the class A and class B common stock, we have also presented beneficial
ownership as a percent of total voting power in the table below.

     The table below assumes that the underwriters have not exercised their
over-allotment option. In addition, the symbol * means that the percentage is
less than one percent.

<TABLE>
<CAPTION>
                                         SHARES BENEFICIALLY OWNED         NUMBER OF         SHARES BENEFICIALLY OWNED
                                             PRIOR TO OFFERING             SHARES OF             AFTER THE OFFERING
                                   -------------------------------------    CLASS A    --------------------------------------
                                               PERCENT OF    PERCENT OF     COMMON                  PERCENT OF    PERCENT OF
                                   NUMBER OF   BENEFICIAL   TOTAL VOTING     STOCK     NUMBER OF    BENEFICIAL   TOTAL VOTING
    NAME OF BENEFICIAL OWNER        SHARES     OWNERSHIP       POWER        OFFERED      SHARES     OWNERSHIP       POWER
    ------------------------       ---------   ----------   ------------   ---------   ----------   ----------   ------------
<S>                                <C>         <C>          <C>            <C>         <C>          <C>          <C>
5% STOCKHOLDERS:
Internet Capital Group,
Inc.(1)(10)......................  8,083,334      30.7%         50.1%            --     8,083,334      24.6%         42.5%
  800 The Safeguard Building 435
  Devon Park Drive Wayne, PA
  19087
XL Vision, Inc.(2)(3)............  6,058,125      24.0          17.9        500,000     5,558,125      17.5          13.8
  10315 102nd Terrace Sebastian,
  FL 32958
Safeguard XL Capital
  L.P.(4)(10)....................  5,226,644      20.7          15.5        694,000     4,532,644      14.3          11.3
  800 The Safeguard Building 435
  Devon Park Drive Wayne, PA
  19087
XL Partners, L.P.(3).............  3,058,125      12.1           9.1             --     3,058,125       9.6           7.6
  10315 102nd Terrace Sebastian,
  FL 32958
</TABLE>

                                       64
<PAGE>   66

<TABLE>
<CAPTION>
                                         SHARES BENEFICIALLY OWNED         NUMBER OF         SHARES BENEFICIALLY OWNED
                                             PRIOR TO OFFERING             SHARES OF             AFTER THE OFFERING
                                   -------------------------------------    CLASS A    --------------------------------------
                                               PERCENT OF    PERCENT OF     COMMON                  PERCENT OF    PERCENT OF
                                   NUMBER OF   BENEFICIAL   TOTAL VOTING     STOCK     NUMBER OF    BENEFICIAL   TOTAL VOTING
    NAME OF BENEFICIAL OWNER        SHARES     OWNERSHIP       POWER        OFFERED      SHARES     OWNERSHIP       POWER
    ------------------------       ---------   ----------   ------------   ---------   ----------   ----------   ------------
<S>                                <C>         <C>          <C>            <C>         <C>          <C>          <C>
Safeguard 99 Capital
L.P.(4)(5)(10)...................  1,675,000       6.5%          4.9%            --     1,675,000       5.2%          4.1%
  800 The Safeguard Building 435
  Devon Park Drive Wayne, PA
  19087
The Biegert Family Trust(6)......  1,250,000       5.0           3.7             --     1,250,000       3.9           3.1
  c/o Judith Ackland P.O. Box 197
  Shickley, NE 68436
NAMED EXECUTIVE OFFICERS AND
  DIRECTORS:
Charles L. Abraham(9)............    375,000       1.5           1.1             --       375,000       1.2             *
T. Michael Janney (9)............     78,125         *             *             --        78,125         *             *
Scott L. Mathews (9).............     56,250         *             *             --        56,250         *             *
Marvin L. Slosman (9)............     78,125         *             *             --        78,125         *             *
John S. Scott, Ph.D.(11).........     25,000         *             *             --        25,000         *             *
Douglas A. Alexander.............         --         *             *             --            --         *             *
E. Michael Forgash...............         --         *             *             --            --         *             *
Thomas C. Lynch..................         --         *             *             --            --         *             *
Christopher Moller, Ph.D.........         --         *             *             --            --         *             *
John W. Poduska, Ph.D............     65,938         *             *             --        65,938         *             *
OTHER EXECUTIVE OFFICER:
Arvind Subramanian (9)...........     46,875         *             *             --        46,875         *             *
All directors and executive
  officers as a group (11
  persons).......................    725,313       2.8           2.1             --       725,313       2.2           1.8
OTHER SELLING STOCKHOLDERS:
Technology Leaders II(7).........  1,070,000       4.2           3.2        150,000       920,000       2.9           2.3
Technology Leaders I(8)..........  1,004,062       4.0           3.0        150,000       854,062       2.7           2.1
Richard Stanley, D.V.M.(9)(12)...     46,413         *             *          6,000        40,413         *             *
</TABLE>

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

 (1) The share numbers for Internet Capital Group represent 5,694,445 shares of
     class B common stock and a warrant to purchase 1,138,889 shares of class B
     common stock. There are no other shares of class B common stock
     outstanding. Holders of class B common stock are entitled to two and
     one-half votes per share. These numbers also include 1,250,000 shares of
     class A common stock.

 (2) The share numbers for XL Vision, Inc. include 625,000 shares that are
     subject to an option to holders of its 6% convertible subordinated notes.
     The options become exercisable when we complete an initial public offering,
     subject to restrictions.

 (3) XL Vision, Inc. is the sole general partner of XL Partners, L.P. Therefore,
     the share numbers for XL Vision include 3,058,125 shares owned by XL
     Partners, L.P.

 (4) Safeguard Delaware, Inc. holds approximately a 91.6% general partnership
     interest in Safeguard XL Capital L.P. and an 89.8% general partnership
     interest in Safeguard 99 Capital L.P. Safeguard Delaware, Inc., a
     wholly-owned subsidiary of Safeguard Scientifics, Inc., is the sole general
     partner of Safeguard XL Capital L.P. and Safeguard 99 Capital L.P.
     Safeguard

                                       65
<PAGE>   67

     Delaware, Inc. has sole authority and responsibility for all investments,
     voting and disposition decisions regarding such shares. The limited
     partnership interests are held by executives and employees of Safeguard,
     subject to vesting. These numbers exclude any shares that may be purchased
     by Safeguard Scientifics, Inc. that have not been purchased by its
     shareholders in the Safeguard Subscription Program.

 (5) The share numbers for Safeguard 99 Capital L.P. include options to acquire
     425,000 shares of our stock that are currently owned by XL Vision. These
     options become exercisable when we complete an initial public offering,
     subject to restrictions.

 (6) We have a proxy to vote the 1,250,000 shares owned by the Biegert Trust
     until the completion of the series D preferred stock and warrant purchase
     by Internet Capital Group.

 (7) Technology Leaders II Management L.P., a limited partnership, is the sole
     general partner of Technology Leaders II L.P. and a co-general partner of
     Technology Leaders II Offshore C.V. Technology Leaders II L.P. and
     Technology Leaders II Offshore C.V. are venture capital partnerships that
     are required by their governing documents to make all investment, voting
     and disposition actions in tandem. Technology Leaders II L.P. and
     Technology Leaders II Offshore C.V. are referred to as Technology Leaders
     II. Technology Leaders II Management L.P. has sole authority and
     responsibility for all investment, voting and disposition decisions for
     Technology Leaders II. The general partner of Technology Leaders II
     Management, L.P. is Technology Leaders Management, Inc., a wholly-owned
     subsidiary of Safeguard. Robert E. Keith, Jr., Gary J. Anderson, M.D., Mark
     J. DeNino and Christopher Moller, Ph.D., a director of eMerge Interactive,
     are the officers of Technology Leaders Management, Inc. Technology Leaders
     II Management L.P. is managed by an executive committee, by whose decisions
     the general partners have agreed to be bound, which consists of nine voting
     members including (i) Warren V. Musser, who is a designee of Technology
     Leaders Management, Inc., (ii) Mr. Keith, Dr. Anderson, Mr. DeNino, Dr.
     Moller, individually, and (iii) one designee of each of four other
     corporations (the TLA Corporations) and (as a non-voting member) Clayton S.
     Rose. Technology Leaders Management, Inc. is the administrative manager of
     Technology Leaders II, subject to the control and direction of the
     executive committee of Technology Leaders II Management L.P. Mr. Keith is
     Vice Chairman of Safeguard.

 (8) Technology Leaders Management L.P., a limited partnership, is the sole
     general partner of Technology Leaders L.P. and a co-general partner of
     Technology Leaders Offshore C.V. Technology Leaders L.P. and Technology
     Leaders Offshore C.V. are venture capital partnerships that are required by
     their governing documents to make all investment, voting and disposition
     actions in tandem. Technology Leaders MI Corp. is wholly-owned by
     Technology Leaders Offshore C.V. Technology Leaders L.P. and Technology
     Leaders Offshore C.V. are referred to collectively as Technology Leaders I.
     Technology Leaders Management L.P. has sole responsibility for all
     investment, voting and disposition decisions for Technology Leaders I. The
     general partners of Technology Leaders Management L.P. are (i) Technology
     Leaders Management, Inc., a wholly-owned subsidiary of Safeguard, (ii)
     Technology Leaders Partners I, a partnership among Technology Leaders
     Management, Inc. and the Managing Directors of Technology Leaders
     Management, Inc., other than Mark J. DeNino, and four other corporations
     (the TLA Corporations) owned by individuals, one of whom serves as a
     director of Safeguard, and three of whom are not currently otherwise
     affiliated with Safeguard or eMerge Interactive. Technology Leaders
     Management L.P. is managed by an executive committee, by whose decisions
     the general partners have agreed to be bound, that consists of seven voting
     members including (i) Warren V. Musser, Robert E. Keith, Jr. and Gary J.
     Anderson, M.D., each of whom are designees of Technology Leaders
     Management, Inc., and (ii) one designee of each of the TLA Corporations.
     Clayton S. Rose is a non-voting member of that executive committee.
     Technology Leaders Management, Inc. is the administrative manager of
     Technology Leaders, subject to the control and direction of the

                                       66
<PAGE>   68

     executive committee of Technology Leaders Management L.P. Mr. Musser is the
     chairman and Mr. Keith is president and chief executive officer of
     Technology Leaders Management, Inc. and Mr. Keith, Dr. Anderson, Mr. DeNino
     and Christopher Moller, Ph.D., a director of eMerge Interactive, are the
     managing directors of Technology Leaders Management, Inc. Mr. Keith and Dr.
     Anderson are former officers of Safeguard and Mr. Keith is Vice Chairman of
     Safeguard.

 (9) Includes options to purchase the following shares of class A common stock:

     - 337,500 shares by Mr. Abraham;

     - 74,812 shares by Mr. Janney;

     - 56,250 shares by Mr. Mathews

     - 78,125 shares by Mr. Slosman;

     - 6,250 shares by Mr. Stanley; and

     - 46,875 shares by Mr. Subramanian.

(10) Internet Capital Group and Safeguard are parties to a joint venture
     agreement under which they have agreed to use best efforts to agree to vote
     together on matters submitted to the stockholders for approval and for two
     designees of Safeguard and two designees of Internet Capital Group in any
     elections of directors.

(11) John S. Scott, Ph.D. is Chief Executive Officer and Chairman of the Board
     of XL Vision, and disclaims beneficial ownership of the 6,058,125 shares
     held by XL Vision.

(12) Richard Stanley was President and a stockholder of STS Agriventures, Ltd.,
     which was acquired by eMerge Interactive in July 1998. Mr. Stanley
     currently serves as a consultant to eMerge Interactive. Mr. Stanley
     disclaims beneficial ownership of 30,713 shares of our class A common stock
     owned by his wife, Sylvia Doerksen.

                                       67
<PAGE>   69

                          DESCRIPTION OF CAPITAL STOCK

GENERAL

     Upon completion of this offering, we will be authorized to issue up to
125,000,000 shares of common stock, $.008 par value per share, consisting of
115,888,887 shares of class A common stock and 9,111,113 shares of class B
common stock, and 15,000,000 shares of preferred stock, $.01 par value per
share. All outstanding shares of preferred stock will automatically convert into
common stock immediately prior to the closing of this offering as follows:

     - Shares of series A, series B and series C preferred stock will convert
       into shares of class A common stock; and

     - Shares of series D preferred stock will convert into shares of class B
       common stock.

COMMON STOCK

     As of December 31, 1999, there were 25,232,902 shares of common stock
outstanding, assuming the conversion of the shares of preferred stock then
outstanding. After giving effect to the sale of the 6,500,000 shares of our
class A common stock in this offering, there will be 31,732,902 shares of common
stock outstanding.

     Holders of class A common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders of
class B common stock are entitled to two and one-half votes for each share held
of record. The shares of class A and class B common stock are identical in all
other respects. The election of directors is determined by a plurality of the
votes cast and, except as otherwise required by law, all other matters are
determined by a majority of the votes cast. Our stockholders do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors. Holders of common stock are entitled to receive any dividends
declared by the board of directors out of funds legally available for that
purpose, subject to any preferential dividend rights of outstanding shares of
preferred stock. Upon the liquidation, dissolution or winding up of eMerge
Interactive, the holders of common stock are entitled to receive pro-rated
shares of our net assets after we have paid all debts and other liabilities.
Holders of the common stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of holders of common
stock may be adversely affected by the rights of the holders of shares of any
class or series of preferred stock which we may designate and issue in the
future.

     In the event of a sale or transfer of any shares of class B common stock to
a party that is not affiliated with the original purchaser, the shares will
automatically convert into class A common stock.

PREFERRED STOCK

     Under our second amended and restated certificate of incorporation, our
board of directors, without further action by our stockholders, is authorized to
issue up to an aggregate of 15,000,000 shares of preferred stock in one or more
classes or series. Our board of directors may, without stockholder approval,
issue any class or series of preferred stock with dividend rights, dividend
rates, conversion rights, redemption rights, preferences on liquidation or
dissolution, voting rights and any other preferences, which could adversely
affect the voting power of the holders of common stock. Issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions or other corporate

                                       68
<PAGE>   70

purposes, could make it more difficult for a third party to acquire, or could
discourage or delay a third party from acquiring, a majority of our outstanding
stock. Following this offering, after the conversion of all outstanding shares
of series A, series B and series C preferred stock into class A common stock,
and the conversion of all outstanding shares of series D preferred stock into
class B common stock, there will be no shares of preferred stock outstanding. We
have no plans to issue any additional shares of preferred stock.

REGISTRATION RIGHTS

     Some holders of our class A common stock and all holders of preferred stock
have been granted registration rights. Under a registration rights agreement, as
amended, beginning six months after an initial public offering, the holders of
series A, series B, series C and series D preferred stock can, on two occasions,
demand that we register their shares, so long as the shares covered by each
registration have an aggregate market value of more than $5.0 million.

     The holders of series A, series B, series C and series D preferred stock
are also entitled to piggyback registration rights, which may be reduced at the
discretion of an underwriter. Piggyback registration rights entitle stockholders
to include shares in a registered public offering initiated by us. We intend to
obtain a waiver of the piggyback registration rights from all of the holders of
series A, series B, series C and series D preferred stock in connection with
this offering, except from those participating as selling stockholders in this
offering.

     In a stockholders' agreement, we granted the former stockholders of STS
Agriventures, Ltd. and the partners of NutriCharge piggyback registration rights
for their shares of our common stock. In a stockholders' and registration rights
agreement, we granted CIN, LLC (now Lost Pelican, LLC) piggyback registration
rights for its shares of our class A common stock. In a joinder and correction
to the stockholders' and registration rights agreement, we granted the former
stockholders of Cyberstockyard, Inc. piggyback registration rights for their
shares of our common stock. In a common stock purchase agreement, we granted
Turnkey Computer Systems, Inc. piggyback registration rights for its shares of
our class A common stock, except for in an initial public offering. We intend to
obtain waivers of the piggyback registration rights from these holders of class
A common stock, except from those participating as selling stockholders in this
offering.

CERTAIN ANTI-TAKEOVER PROVISIONS

     Provisions of our second amended and restated certificate of incorporation
and bylaws could make the acquisition of eMerge Interactive and the removal of
incumbent officers and directors more difficult. These provisions are expected
to discourage coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of eMerge Interactive to negotiate
with us first.

     Our board of directors has the authority to issue and to establish the
rights of substantial amounts of preferred stock without stockholder approval,
upon such terms and conditions, and having such rights, privileges and
preferences, as our board of directors may determine. This authority may be used
to create voting impediments, hinder changes in control or to dilute the stock
ownership of holders of common stock seeking to obtain control of eMerge
Interactive. The rights of the holders of common stock will be subject to, and
may be adversely affected by, the rights of any preferred stock that may be
issued in the future. The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions, financings and other
corporate transactions, may have the effect of discouraging, delaying or
preventing a change in control.

                                       69
<PAGE>   71

DELAWARE ANTI-TAKEOVER LAW

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or the anti-takeover law, which regulates corporate
acquisitions. The law generally prohibits business combinations between a
publicly held Delaware corporation and an interested stockholder.

     - An interested stockholder is a person who, together with any affiliates,
       beneficially owns, directly or indirectly, 15% or more of the outstanding
       voting shares of a corporation.

     - A business combination includes mergers, consolidations, sales or other
       dispositions of assets having an aggregate value in excess of 10% of the
       consolidated assets of the corporation.

     Section 203 prohibits any business combination that results in a financial
benefit to an interested stockholder for three years following the date the
person became an interested stockholder.

WARRANT

     In November 1999, we issued a warrant to Internet Capital Group to purchase
up to 1,138,889 shares of class B common stock. The warrant is exercisable upon
the earlier of:

     - The consummation of this offering;

     - The closing date of a round of equity financing of at least $20.0
       million; and

     - The one year anniversary of the issue date of the warrant.

     In the event that the warrant becomes exercisable as a result of this
offering or as a result of a private equity offering, the exercise price will be
equal to the offering price per share. If the warrant becomes exercisable as a
result of the one year anniversary of its issue, the exercise price will be
$9.00 per share. The warrant terminates on the third anniversary of its issue.
The warrant is transferable, but once transferred, it will be exercisable for
shares of class A common stock.

LIMITATION ON LIABILITY

     Our second amended and restated certificate of incorporation and bylaws
contain provisions relating to the limitation of liability and indemnification
of directors and officers. Our amended and restated certificate of incorporation
specifies that none of our directors shall be personally liable to us or our
shareholders for monetary damages for a breach of fiduciary duty, except for
liability:

     - For any breach of the duty of loyalty;

     - For acts or omissions not in good faith or involving intentional
       misconduct or a knowing violation of law;

     - For the payment of unlawful dividends and other actions prohibited by
       Delaware General Corporation Law; and

     - For any transaction resulting in receipt of an improper personal benefit
       by the director.

                                       70
<PAGE>   72

     Our bylaws require us to indemnify our directors and officers, so long as
their actions are in good faith, are in the best interests of the corporation,
and are not unlawful. Our bylaws also permit us to purchase and maintain
insurance on behalf of our directors, officers and agents. We intend to obtain
directors' and officers' liability insurance to provide our directors and
officers with insurance coverage for losses arising from claims based on
breaches of duty, negligence, error and other wrongful acts.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, LLC, 85 Challenger Road, Overpeck Centre, Ridgefield Park,
New Jersey 07660.

                                       71
<PAGE>   73

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of this offering, there will be 31,732,902 shares of our
common stock outstanding based upon the number of shares that were outstanding
as of December 31, 1999. Immediately after the offering, the 8,000,000 shares
sold in this offering will be freely tradeable and 23,732,902 shares will be
eligible for resale subject to compliance with Rule 144 or Rule 701, as the case
may be. Of these shares, 23,131,956 shares are subject to 180-day lock-up
agreements with the underwriters.

RULE 144

     In general, shares held by persons deemed not to have been affiliates of
ours at any time during the 90 days preceding a sale and who have beneficially
owned the shares for at least two years can be sold under Rule 144(k) without
regard to the volume limitations, manner of sale provisions or other limitations
of Rule 144. As of the date of this prospectus, immediately after consummation
of the offering, 11,312,423 shares will be eligible for resale in the public
market without restriction under Rule 144(k) if they are not held by our
affiliates.

     In addition, under Rule 144, a person who has beneficially owned shares for
at least one year, including an affiliate, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:

     - one percent of the then outstanding shares of our common stock
       (approximately 317,000 shares immediately following the offering); and

     - the average weekly trading volume during the four calendar weeks
       preceding filing of notice of such sale.

As of the date of this prospectus, immediately after consummation of the
offering, 5,603,125 shares not eligible for resale under Rule 144(k) will be
eligible for resale in the public market subject to the volume, manner of sale
and other limitations of Rule 144.

RULE 701

     We have granted options and issued underlying shares of common stock to our
employees through our equity compensation plans. Under Rule 701, non-affiliated
who purchased shares upon the exercise of options granted under the plans prior
to this offering are entitled to sell their shares 90 days after the date of
this prospectus without having to comply with the holding period, volume
limitations or other restrictions of Rule 144. Rule 701 also permits shares
subject to unexercised options granted under our plans to be sold upon exercise
without having to comply with the provisions of Rule 144. Upon consummation of
this offering, 225,822 shares of common stock will be eligible for resale under
Rule 701.

LOCK-UP AGREEMENTS

     In addition to the restrictions imposed by Rule 144 and Rule 701 as
described above, the holders of common stock and options who collectively
account for 23,131,956 shares of our common stock and options to purchase
1,906,250 shares of our common stock, including all of our officers and
directors, have agreed, pursuant to lock-up agreements, that they will not
offer, sell, contract to sell, or otherwise dispose of, directly or indirectly,
any shares of common stock or securities convertible or exchangeable for common
stock for a period of 180 days after the date of this prospectus without the
prior written consent of Adams, Harkness & Hill, Inc.

                                       72
<PAGE>   74

STOCK OPTIONS

     As of December 31, 1999, there were outstanding options to purchase an
aggregate of 2,769,116 shares of our common stock, at a weighted average
exercise price of $2.93 per share, of which 761,045 were exercisable at a
weighted average of $1.68 per share. The holders of options to purchase a total
of 562,310 shares exercisable upon the offering have executed lock-up agreements
and agreed to restrict their ability to sell or otherwise dispose of common
stock acquired upon the exercise of options for 180 days after the date of this
prospectus without the prior consent of Adams, Harkness & Hill, Inc.

     As of December 31, 1999, we had an additional 1,597,875 shares of common
stock available for future grant under the 1996 and 1999 equity compensation
plans. Prior to the expiration of the lock-up agreements, we intend to file a
registration statement on Form S-8 to register the shares of common stock that
may be issued pursuant to the options granted under the plans. Therefore, the
shares of common stock that are acquired and offered thereafter pursuant to that
registration statement may be resold in the public market without restriction or
limitation, except in the case of our affiliates, who may only resell such
shares in accordance with the provisions of Rule 144.

WARRANT

     On November 16, 1999, we issued a warrant to Internet Capital Group to
purchase up to 1,138,889 shares of class B common stock upon completion of the
series D preferred stock purchase. This warrant is exercisable upon closing of
this offering and will expire on the third anniversary of its issuance. Internet
Capital Group has agreed not to offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any of its shares, the warrant, or the
shares acquired as a result of exercising the warrant, for 180 days after the
date of this prospectus, other than through a bona fide pledge of these
securities to its creditors.

                                       73
<PAGE>   75

                              PLAN OF DISTRIBUTION

     Of the 8,000,000 shares offered by this prospectus, 4,500,000 shares are
being offered by means of an underwritten public offering and 3,500,000 shares
are being offered by means of the Safeguard Subscription Program to shareholders
of Safeguard Scientifics, Inc., one of our principal stockholders.

UNDERWRITTEN PUBLIC OFFERING

     Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each underwriter named
below, for whom Adams, Harkness & Hill, Inc., First Union Securities, Inc. and
FAC/Equities, a division of First Albany Corporation are acting as
representatives, has agreed to purchase from us the respective number of shares
of common stock shown opposite its name below:

<TABLE>
<CAPTION>
                                                                 NUMBER OF
                                                             SHARES OF CLASS A
UNDERWRITERS                                                   COMMON STOCK
- ------------                                                 -----------------
<S>                                                          <C>
Adams, Harkness & Hill, Inc. ..............................
First Union Securities, Inc. ..............................
FAC/Equities, a division of First Albany Corporation.......
                                                                 --------
     Total.................................................
                                                                 ========
</TABLE>

     Of the 4,500,000 shares to be purchased by the underwriters, 3,694,000
shares will be purchased from us and 806,000 shares will be purchased from the
selling stockholders. Of the 3,500,000 shares to be offered by means of the
Safeguard Subscription Program, 2,806,000 shares will be sold by us and 694,000
shares will be sold by Safeguard.

     The underwriting agreement provides that the underwriters' obligation to
purchase shares of class A common stock depends on the satisfaction of the
conditions contained in the underwriting agreement and that, if any of the
shares of class A common stock are purchased by the underwriters under the
underwriting agreement, all of the shares of class A common stock that the
underwriters have agreed to purchase under the underwriting agreement must be
purchased. The conditions contained in the underwriting agreement include the
requirement that the representations and warranties made by us to the
underwriters are true, that all of the shares offered in the Safeguard
Subscription Program have been purchased, that there is no material change in
the financial markets and that we deliver to the underwriters customary closing
documents.

                                       74
<PAGE>   76

     The representatives of the underwriters have advised us that the
underwriters propose to offer the shares of class A common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to dealers, who may include the underwriters, at the public
offering price less a selling concession not in excess of $     per share. The
underwriters may also allow, and dealers may reallow, a concession not in excess
of $     per share to brokers and dealers. After the offering, the underwriters
may change the offering price and other selling terms.

     Adams, Harkness & Hill, Inc., First Union Securities, Inc. and FAC/Equities
have informed us that they do not intend to confirm sales of shares of common
stock offered by this prospectus to any accounts over which they exercise
discretionary authority. In addition, the other underwriters have informed us
that they do not intend to confirm sales to discretionary accounts that exceed
5% of the total number of shares of common stock offered by them.

     The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us and the selling stockholders. This information is
presented assuming both no exercise and full exercise by the underwriters of
their overallotment option.

<TABLE>
<CAPTION>
                                                                      TOTAL
                                                            --------------------------
                                                              WITHOUT         WITH
                                               PER SHARE      OPTION         OPTION
                                               ---------    -----------    -----------
<S>                                            <C>          <C>            <C>
Public offering price........................   $           $              $
Underwriting discount........................   $           $              $
Proceeds before expenses to eMerge
  Interactive................................   $           $              $
Proceeds before expenses to the selling
  stockholders...............................   $           $              $
</TABLE>

     The total proceeds before expenses to be received by us from both the
underwritten public offering and the Safeguard subscription program will be
approximately             , assuming no exercise of the over-allotment option.

     The expenses of the underwritten offering, exclusive of the underwriting
discount, are estimated at $703,000 and are payable by us. The following table
details these expenses. All amounts shown are estimates, with the exception of
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>

<S>                                                  <C>
SEC registration fee.........................        $   13,566
NASD filing fee..............................             6,137
Nasdaq filing fee............................            53,400
Printing and engraving expenses..............           112,500
Legal fees and expenses......................           253,100
Accounting fees and expenses.................           196,900
Blue Sky fees and expenses (including legal
  fees)......................................             5,600
Transfer agent and registrar fees and
  expenses...................................             8,400
Miscellaneous................................            53,397
                                                     ----------
     Total...................................        $  703,000
                                                     ==========
</TABLE>

     The total expenses for the offering, including the expenses associated with
the Safeguard Subscription Program, are estimated at $1.3 million.

                                       75
<PAGE>   77

     We have granted to the underwriters an option to purchase up to 675,000
additional shares of class A common stock, exercisable solely to cover
over-allotments, if any, at the public offering price less the underwriting
discount shown on the cover page of this prospectus. The underwriters may
exercise this option at any time until 30 days after the date of the
underwriting agreement. If this option is exercised, each underwriter will be
committed, so long as the conditions of the underwriting agreement are
satisfied, to purchase a number of additional shares of class A common stock
proportionate to the underwriters' initial commitment as indicated in the
preceding table and we will be obligated, under the over-allotment option, to
sell the shares of class A common stock to the underwriters.

     We have agreed that, without the prior consent of Adams, Harkness & Hill,
Inc., we will not directly or indirectly, offer, sell or otherwise dispose of
any shares of common stock or any securities which may be converted into or
exchanged for any such shares of common stock for a period of 180 days from the
date of this prospectus. All of our executive officers and directors, Safeguard,
XL Vision, Technology Leaders and Internet Capital Group, have agreed under
lock-up agreements that, without the prior written consent of Adams, Harkness &
Hill, Inc., they will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of common stock or any securities that may be converted
into or exchanged for any such share for the period ending 180 days after the
date of this prospectus. All other stockholders who beneficially own over 30,000
shares of common stock, including all of the key employees named in this
prospectus, have agreed under lock-up agreements that, without the prior consent
of Adams, Harkness & Hill, Inc., they will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of common stock or any securities that
may be converted into or exchanged for any such share for the period ending 180
days after the date of this prospectus. These restrictions will also apply to
any shares that Safeguard purchases under the Safeguard share subscription
program. See the section entitled Shares Eligible for Future Sale.

     Prior to the offering, there has been no public market for the shares of
class A common stock. The initial public offering price and the underwriters'
compensation will be negotiated between the representatives and us. In
determining the initial public offering price of the common stock, we and the
representatives will consider, in addition to prevailing market conditions, our
historical performance and capital structure, estimates of our business
potential and earning prospects, an overall assessment of our management and the
consideration of the above factors in relation to the market valuation of
companies in related businesses.

     Our common stock has been approved for quotation on the Nasdaq National
Market under the symbol "EMRG."

     We will indemnify the underwriters against liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
the representations and warranties contained in the underwriting agreement, and
to contribute to payments that the underwriters may be required to make for
these liabilities.

     Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the common stock.

     The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares than
are set forth on the cover

                                       76
<PAGE>   78

page of this prospectus. If the underwriters create a short position, then the
representatives may reduce that short position by purchasing common stock in the
open market. The representatives also may elect to reduce any short position by
exercising all or part of the over-allotment option.

     The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
common stock in the open market to reduce the underwriters' short position or to
stabilize the price of the common stock, the representatives may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering. In addition, the representatives
reserve the right to reclaim selling concessions from underwriters and selling
group members if the representatives receive a report that clients of the
underwriters and selling group members have sold the stock they purchased in
this offering, generally within 30 days following this offering. The
representatives reserve this right even if the representatives do not purchase
shares in the open market.

     In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it might discourage resales of the security by purchasers in an
offering.

     Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such sale is made.

     Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase (outside of the United States), in addition to the
offering price listed on the cover of this prospectus.

     At our request, the underwriters have reserved 1,000,000 shares of our
common stock for sale to Textron Inc. and IncuVest, LLC. These investors have
not committed to purchase these shares. In addition, the underwriters have
reserved up to 350,000 shares of the common stock offered by this prospectus for
sale to our officers, directors, employees and their family members and to our
business associates at the initial public offering price set forth on the cover
page of this prospectus. These persons must commit to purchase no later than the
close of business on the day following the date of this prospectus. The number
of shares available for sale to the general public will be reduced to the extent
these persons purchase the reserved shares.

SAFEGUARD SUBSCRIPTION PROGRAM

     As part of this offering, we are offering 2,806,000 shares of our class A
common stock in the Safeguard Subscription Program to shareholders of Safeguard,
one of our principal stockholders, and Safeguard is offering 694,000 shares to
its shareholders. Safeguard's shareholders may subscribe for one share of class
A common stock for every ten shares of Safeguard common stock held by them, and
may not transfer the opportunity to subscribe to another person except
involuntarily by operation of law. Persons who owned at least 100 shares of
Safeguard common stock as of October 20, 1999 are eligible to purchase shares
from us under the program. Shareholders who own less than 100 shares of
Safeguard common stock will be ineligible to participate in the Safeguard
Subscription Program.

     Under a standby stock purchase agreement, which is filed as an exhibit to
this registration statement relating to this prospectus, Safeguard will purchase
from us any of the shares offered by us under the program that are not purchased
by the shareholders of

                                       77
<PAGE>   79

Safeguard. Distribution of share certificates purchased through the Safeguard
Subscription Program will be made to the purchasers as soon as practicable
following closing of the sale of the shares to the public. It is expected that
sales under the Safeguard Subscription Program will be reflected in purchasers'
book-entry accounts at the Depository Trust Company, if any, upon the closing of
these sales. After the closing of these sales, we will mail stock certificates
to all purchasers who do not maintain book-entry accounts at the Depository
Trust Company. Prior to this offering, Safeguard beneficially owned 27.2% of our
common stock. After this offering, Safeguard will beneficially own approximately
19.5% of our common stock, assuming that all 3,500,000 shares are purchased by
shareholders of Safeguard, and will beneficially own approximately 30.5% of our
common stock assuming that none of the 3,500,000 shares are purchased by the
shareholders of Safeguard. The purchase price under the program, whether paid by
Safeguard or its shareholders, will be the same price per share as set forth on
the cover page of this prospectus. All shares will be sold either to Safeguard
or to shareholders of Safeguard. The underwriters, as a group, will receive a
2.8% management fee on all shares offered through the Safeguard Subscription
Program, including any shares actually purchased by Safeguard. The management
fee represents compensation for the underwriters' role as it relates to due
diligence, participation in the drafting of this prospectus, and general
coordination of the overall offering. Safeguard will not receive any
compensation from eMerge Interactive or any other person, with respect to this
offering, including any underwriting discounts or commissions.

     The following table shows the per share and total offering price,
management fee to be paid by us to the underwriters and the proceeds before
expenses to us.

<TABLE>
<CAPTION>
                                                     PER SHARE       TOTAL
                                                     ---------    -----------
<S>                                                  <C>          <C>
Public offering price..............................   $           $
Management fee.....................................   $           $
Proceeds before expenses to eMerge Interactive.....   $           $
Proceeds before expenses to Safeguard..............   $           $
</TABLE>

     The total proceeds before expenses to be received by eMerge Interactive
from both the underwritten public offering and the Safeguard Subscription
Program will be approximately        , assuming no exercise of the
over-allotment option.

     The expenses of the Safeguard Subscription Program, exclusive of the
management fee to be paid to the underwriters, are estimated at $547,000 and are
payable by us. The following table details these expenses. All amounts shown are
estimates, with the exception of the Securities and Exchange Commission
registration fee and the NASD filing fee.

<TABLE>
<S>                                                           <C>
SEC registration fee........................................  $ 10,551
NASD filing fee.............................................     4,773
Nasdaq filing fee...........................................    41,600
Printing and engraving expenses.............................    87,500
Legal fees and expenses.....................................   196,900
Accounting fees and expenses................................   153,100
Blue Sky fees and expenses (including legal fees)...........     4,400
Transfer agent and registrar fee and expenses...............     6,600
Miscellaneous...............................................    41,576
                                                              --------
Total.......................................................  $547,000
                                                              ========
</TABLE>

                                       78
<PAGE>   80

     The total expenses for the offering, including the expenses associated with
the underwritten public offering, are estimated at approximately $1.3 million.

     Safeguard is an underwriter with respect to the shares included in the
Safeguard Subscription Program. Safeguard is not an underwriter with respect to
the other shares offered by this prospectus. Safeguard is not included in the
term "underwriter" as used in this prospectus. Safeguard's sole condition to
purchase any shares that are not purchased by its shareholders in the Safeguard
Subscription Program is that the conditions to the underwriter's obligations
have been met. This means that Safeguard will be required to purchase these
shares if, and only if, the underwriters are obligated to purchase shares.
Safeguard has not participated in any discussions or negotiations with the
Company and the underwriters regarding the initial public offering price.
Safeguard will not have any right to seek indemnification from eMerge
Interactive regarding its agreement to accept underwriter liability with respect
to the shares included in the Safeguard Subscription Program.

                                 LEGAL MATTERS

     An opinion as to the validity of the shares of class A common stock offered
hereby will be provided to us by Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania. Certain legal matters in connection with this offering are being
passed upon for the underwriters by Hale and Dorr LLP, Boston, Massachusetts.

                                    EXPERTS

     Our financial statements as of December 31, 1997 and 1998 and September 30,
1999 and for each of the years in the three-year period ended December 31, 1998
and the nine months ended September 30, 1999 have been included in this
Prospectus and the Registration Statement in reliance upon the report of KPMG
LLP, independent certified public accountants and upon the authority of said
firm as experts in accounting and auditing.

     The financial statements of Lost Pelican, L.L.C. (d/b/a Cattlemen's
Information Network) as of December 31, 1997 and 1998 and for each of the years
in the two-year period ended December 31, 1998 have been included in this
Prospectus and the Registration Statement in reliance upon the report of KPMG
LLP, independent certified public accountants and upon the authority of said
firm as experts in accounting and auditing.

     The financial statements of QDD Investment Company, L.L.C. (d/b/a
Professional Cattle Consultants, L.L.C.) as of December 31, 1998 and for the
year then ended have been included in this Prospectus and the Registration
Statement in reliance upon the report of KPMG LLP, independent certified public
accountants and upon the authority of said firm as experts in accounting and
auditing.

                                       79
<PAGE>   81

                             ADDITIONAL INFORMATION

     We have filed with the SEC a registration statement on Form S-1 with
respect to the common stock offered hereby. This prospectus, which constitutes a
part of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are part
of the registration statement. For further information with respect to eMerge
Interactive and the common stock, reference is made to the registration
statement and the exhibits and schedules thereto. You may read and copy any
document we file at the SEC's public reference rooms located at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices in Chicago,
Illinois and New York, New York. Copies of these materials can be obtained from
the SEC at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Our SEC filings are also available
to the public from the SEC's Web site at http://www.sec.gov. Upon completion of
this offering, we will become subject to the information and periodic reporting
requirements of the Securities Exchange Act and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC. Such
periodic reports, proxy statements and other information will be available for
inspection and copying at the SEC's public reference rooms, and the Web site of
the SEC referred to above.

                                       80
<PAGE>   82

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                           <C>
eMerge INTERACTIVE, INC.
Independent Auditors' Report................................  F-2
Consolidated Balance Sheets as of December 31, 1997 and
  1998, September 30, 1999 and pro forma September 30, 1999
  (unaudited)...............................................  F-3
Consolidated Statements of Operations for the years ended
  December 31, 1996, 1997 and 1998 and the nine months ended
  September 30, 1998 (unaudited) and September 30, 1999.....  F-4
Consolidated Statements of Stockholders' Equity (Deficit)
  for the years ended December 31, 1996, 1997 and 1998 and
  the nine months ended
  September 30, 1999........................................  F-5
Consolidated Statements of Cash Flows for the years ended
  December 31, 1996, 1997 and 1998, and the nine months
  ended September 30, 1998 (unaudited) and September 30,
  1999......................................................  F-7
Notes to Consolidated Financial Statements..................  F-9

PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Statement of
  Operations for the year ended December 31, 1998...........  F-25
Unaudited Pro Forma Condensed Combined Statement of
  Operations for the nine months ended September 30, 1999...  F-26
Notes to Unaudited Pro Forma Condensed Combined Financial
  Statements................................................  F-27

LOST PELICAN, L.L.C. (FORMERLY CIN, LLC) D/B/A CATTLEMEN'S
  INFORMATION NETWORK
Independent Auditors' Report................................  F-29
Balance Sheets as of December 31, 1997 and 1998 and February
  23, 1999..................................................  F-30
Statements of Operations for the years ended December 31,
  1997 and 1998, the nine months ended September 30, 1998
  (unaudited), and for the period January 1, 1999 through
  February 23, 1999 (unaudited).............................  F-31
Statements of Members' Equity (Deficit) for the years ended
  December 31, 1997 and 1998 and for the period January 1,
  1999 through February 23, 1999 (unaudited)................  F-32
Statements of Cash Flows for the years ended December 31,
  1997 and 1998, the nine months ended September 30, 1998
  (unaudited), and for the period January 1, 1999 through
  February 23, 1999 (unaudited).............................  F-33
Notes to Financial Statements...............................  F-34

QDD INVESTMENT COMPANY, L.L.C. D/B/A PROFESSIONAL CATTLE
  CONSULTANTS, L.L.C.
Independent Auditors' Report................................  F-38
Balance Sheets as of December 31, 1998 and May 19, 1999
  (unaudited)...............................................  F-39
Statements of Operations for the year ended December 31,
  1998, the nine months ended September 30, 1998 (unaudited)
  and for the period January 1, 1999 through May 19, 1999
  (unaudited)...............................................  F-40
Statements of Members' Equity for the year ended December
  31, 1998 and for the period January 1, 1999 through May
  19, 1999 (unaudited)......................................  F-41
Statements of Cash Flows for the year ended December 31,
  1998, the nine months ended September 30, 1998 (unaudited)
  and for the period January 1, 1999 through May 19, 1999
  (unaudited)...............................................  F-42
Notes to Financial Statements...............................  F-43
</TABLE>

                                       F-1
<PAGE>   83

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
  eMerge Interactive, Inc.:

     We have audited the accompanying consolidated balance sheets of eMerge
Interactive, Inc. as of December 31, 1997 and 1998 and September 30, 1999 and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1998, and for the nine months ended September 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of eMerge
Interactive, Inc. at December 31, 1997 and 1998 and September 30, 1999 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, and for the nine months ended
September 30, 1999 in conformity with generally accepted accounting principles.

                                              /s/ KPMG LLP

Orlando, Florida
December 6, 1999

                                       F-2
<PAGE>   84

                            eMERGE INTERACTIVE, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                              PROFORMA
                                                                                                            SEPTEMBER 30,
                                                              DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,       1999
                                                                  1997           1998           1999         (NOTE 1(B))
                                                              ------------   ------------   -------------   -------------
                                                                                                             (UNAUDITED)
<S>                                                           <C>            <C>            <C>             <C>
                                                         ASSETS
Current assets:
  Cash......................................................  $       400    $       268    $  1,650,134    $  1,650,134
  Trade accounts receivable.................................           --        368,421       2,790,427       2,790,427
  Inventories (note 3)......................................      635,963        706,557         655,129         655,129
  Cattle deposits...........................................           --             --         489,760         489,760
  Prepaid expenses..........................................       33,642         27,837         103,242         103,242
  Net assets of discontinued operations (note 12)...........    1,066,804      2,285,341         390,336         390,336
                                                              -----------    ------------   ------------    ------------
        Total current assets................................    1,736,809      3,388,424       6,079,028       6,079,028
Property and equipment, net (note 4)........................      428,140        513,837       1,711,404       1,711,404
Capitalized offering costs..................................           --             --         341,967         341,967
Investment in Turnkey Computer Systems, Inc. (note 5).......           --             --       1,822,833       1,822,833
Intangibles, net (note 6)...................................           --      2,699,828       6,273,309       6,273,309
                                                              -----------    ------------   ------------    ------------
        Total assets........................................  $ 2,164,949    $ 6,602,089    $ 16,228,541    $ 16,228,541
                                                              ===========    ============   ============    ============
                                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Current installments of capital lease obligation with
    related party (note 10).................................  $        --    $    79,852    $     83,917    $     83,917
  Note payable (note 5).....................................           --             --         500,000         500,000
  Accounts payable..........................................      725,369        423,946       1,633,132       1,633,132
  Accrued liabilities:                                                                                                --
    Salaries and benefits...................................      175,597        283,103         908,271         908,271
    Other...................................................       98,704        319,989       1,435,987       1,435,987
  Advanced payments from customers..........................           --             --         619,270         619,270
  Due to related parties (note 10)..........................    8,040,304      5,187,334      13,405,957      13,405,957
                                                              -----------    ------------   ------------    ------------
        Total current liabilities...........................    9,039,974      6,294,224      18,586,534      18,586,534
Capital lease obligation with related party, excluding
  current installments (note 10)............................           --        305,018         242,673         242,673
Note payable (note 5).......................................           --             --         900,000         900,000
                                                              -----------    ------------   ------------    ------------
        Total liabilities...................................    9,039,974      6,599,242      19,729,207      19,729,207
                                                              -----------    ------------   ------------    ------------
Commitments and contingencies (notes 6, 10 and 13)
Redeemable Class A common stock, issued and outstanding. No
  shares issued and outstanding in 1997 and 1998, 62,500
  shares issued and outstanding in 1999. No shares issued
  and outstanding pro forma (note 5)........................           --             --         406,000              --
                                                              -----------    ------------   ------------    ------------
Stockholders' equity (deficit) (notes 7, 9 and 14):
  Preferred stock, $.01 par value, authorized 15,000,000
    shares:
    Series A preferred stock, (aggregate involuntary
      liquidation preference of $6,741,954 in 1997,
      $7,386,314 in 1998 and $7,545,198 in 1999), designated
      6,500,000 shares, issued and outstanding 6,443,606
      shares in 1997, 1998 and 1999. No shares designated,
      issued and outstanding pro forma......................       64,436         64,436          64,436              --
    Series B junior preferred stock, (aggregate involuntary
      liquidation preference of $-0- in 1997, $4,801,315 in
      1998 and $4,919,671 in 1999), designated 2,400,000
      shares, issued and outstanding -0- shares in 1997,
      2,400,000 shares in 1998 and 1999. No shares
      designated, issued and outstanding pro forma..........           --         24,000          24,000              --
    Series C preferred stock, designated 1,300,000 shares,
      issued and outstanding -0- shares in 1997 and 1998 and
      1,100,000 shares in 1999. No shares designated, issued
      and outstanding pro forma.............................           --             --          11,000              --
    Series D preferred stock, designated 4,555,556 shares,
      no shares issued and outstanding in 1997, 1998 and
      1999. No shares designated, issued and outstanding pro
      forma.................................................           --             --              --              --
  Common stock, $.008 par value, authorized 125,000,000
    shares:
    Class A common stock, designated 115,888,887 shares,
      issued and outstanding 3,258,125 shares in 1997,
      5,845,625 shares in 1998 and 6,957,694 shares in 1999
      and 19,449,702 shares pro forma.......................       26,065         46,765          55,662         155,723
    Class B common stock, designated 9,111,113 shares; no
      shares issued and outstanding in 1997, 1998, 1999 or
      pro forma.............................................           --             --              --              --
  Additional paid-in capital................................    1,982,986     16,648,286      23,454,170      23,859,545
  Accumulated deficit.......................................   (8,948,512)   (16,780,640)    (27,452,825)    (27,452,825)
  Unearned compensation.....................................           --             --         (63,109)        (63,109)
                                                              -----------    ------------   ------------    ------------
        Total stockholders' equity (deficit)................   (6,875,025)         2,847      (3,906,666)     (3,500,666)
                                                              -----------    ------------   ------------    ------------
        Total liabilities and stockholders' equity
          (deficit).........................................  $ 2,164,949    $ 6,602,089    $ 16,228,541    $ 16,228,541
                                                              ===========    ============   ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>   85

                            eMERGE INTERACTIVE, INC

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                  YEARS ENDED DECEMBER 31,                 SEPTEMBER 30,
                                           ---------------------------------------   --------------------------
                                              1996          1997          1998          1998           1999
                                           -----------   -----------   -----------   -----------   ------------
                                                                                     (UNAUDITED)
<S>                                        <C>           <C>           <C>           <C>           <C>
Revenue..................................  $        --   $        --   $ 1,792,471   $ 1,106,452   $ 18,338,645
Cost of revenue (including $0, $0,
$511,000, $388,000 and $255,000 to
related parties -- note 10)..............           --            --     2,623,447     1,628,757     18,282,330
                                           -----------   -----------   -----------   -----------   ------------
     Gross profit (loss).................           --            --      (830,976)     (522,305)        56,315
                                           -----------   -----------   -----------   -----------   ------------
Operating expenses:
  Selling, general and administrative
     (including $0, $219,000, $627,000,
     $507,000, and $600,000 to related
     parties -- note 10).................           --       627,606     3,659,810     2,427,944      7,539,689
  Research and development (including $0,
     $51,000, $119,000, $95,000 and
     $171,000 to related parties -- note
     10).................................           --       727,753     1,109,382       759,434      2,756,262
                                           -----------   -----------   -----------   -----------   ------------
     Total operating expenses............           --     1,355,359     4,769,192     3,187,378     10,295,951
                                           -----------   -----------   -----------   -----------   ------------
     Profit (loss) from continuing
       operations........................           --    (1,355,359)   (5,600,168)   (3,709,683)   (10,239,636)
Related party interest expense (note
  10)....................................           --      (141,167)     (331,594)     (231,000)      (458,624)
Other income.............................           --            --            --            --         15,655
                                           -----------   -----------   -----------   -----------   ------------
     Profit (loss) from continuing
       operations before income taxes....           --    (1,496,526)   (5,931,762)   (3,940,683)   (10,682,605)
Income tax expense (benefit) (note 8)....           --            --            --            --             --
                                           -----------   -----------   -----------   -----------   ------------
     Profit (loss) from continuing
       operations........................           --    (1,496,526)   (5,931,762)   (3,940,683)   (10,682,605)
Discontinued operations (note 12):
  Income (loss) from operations of
     discontinued transportation segment
     (including $468,000, $814,000,
     $370,000, $287,000, and $171,000 to
     related parties -- note 10).........   (1,719,492)   (3,987,097)   (1,808,951)   (1,721,060)        10,420
  Loss on disposal of transportation
     segment.............................           --            --       (91,415)           --             --
                                           -----------   -----------   -----------   -----------   ------------
     Net profit (loss)...................  $(1,719,492)  $(5,483,623)  $(7,832,128)  $(5,661,743)  $(10,672,185)
                                           ===========   ===========   ===========   ===========   ============
Profit (loss) from continuing operations
  per common share -- basic and
  diluted................................  $        --   $     (3.91)  $     (1.36)  $     (0.67)  $      (1.59)
                                           ===========   ===========   ===========   ===========   ============
Net profit (loss) per common
  share -- basic and diluted.............  $     (9.24)  $    (14.34)  $     (1.80)  $     (0.97)  $      (1.59)
                                           ===========   ===========   ===========   ===========   ============
Weighted average number of common shares
  outstanding -- basic and diluted.......      186,096       382,273     4,356,926     5,845,625      6,709,854
                                           ===========   ===========   ===========   ===========   ============
</TABLE>

See accompanying notes to consolidated financial statements

                                       F-4
<PAGE>   86

                            eMERGE INTERACTIVE, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
                                  PREFERRED STOCK       PREFERRED STOCK       PREFERRED STOCK     PREFERRED STOCK
                                     SERIES A              SERIES B              SERIES C             SERIES D
                                -------------------   -------------------   -------------------   ----------------
                                 SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT    SHARES   AMOUNT
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
<S>                             <C>         <C>       <C>         <C>       <C>         <C>       <C>      <C>
Balances at December 31,
 1995.........................         --   $   --           --   $   --           --   $   --       --    $   --
Issuance of common stock to XL
Vision, Inc., for cash at
$.008 per share...............         --       --           --       --           --       --       --        --
Issuance of common stock for
 cash at $.008 per share......         --       --           --       --           --       --       --        --
Exercise of stock options for
 cash at $.008 per share......         --       --           --       --           --       --       --        --
Net profit (loss).............         --       --           --       --           --       --       --        --
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
Balances at December 31,
 1996.........................         --       --           --       --           --       --       --        --
Issuance of common stock to XL
 Vision, Inc., for cash at
 $.008 per share..............         --       --           --       --           --       --       --        --
Sale of Series A preferred
 stock for cash at $1.00 per
 share (note 7)...............  6,443,606   64,436           --       --           --       --       --        --
Transfer of technology by XL
 Vision, Inc. (note 10).......         --       --           --       --           --       --       --        --
Net profit (loss).............         --       --           --       --           --       --       --        --
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
Balances at December 31,
 1997.........................  6,443,606   64,436           --       --           --       --       --        --
Contribution of debt to equity
 by XL Vision, Inc. (note
 10)..........................         --       --           --       --           --       --       --        --
Issuance of Series B preferred
 stock in exchange for
 contribution of debt to
 equity by XL Vision, Inc. at
 $2.00 per share (notes 7 and
 10)..........................         --       --    2,400,000   24,000           --       --       --        --
Issuance of common stock in
 connection with Nutri-Charge
 transaction at $0.80 per
 share (note 6)...............         --       --           --       --           --       --       --        --
Contribution of put rights by
 XL Vision, Inc. (note 6).....         --       --           --       --           --       --       --        --
Net profit (loss).............         --       --           --       --           --       --       --        --
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
Balances at December 31,
 1998.........................  6,443,606   64,436    2,400,000   24,000           --       --       --        --
Exercise of stock options for
 cash at $0.80 per share......         --       --           --       --           --       --       --        --
Issuance of common stock in
 connection with CIN
 transaction at $0.96 per
 share (note 6)...............         --       --           --       --           --       --       --        --
Issuance of common stock in
 connection with
 Cyberstockyard transaction at
 $1.80 per share (note 6).....         --       --           --       --           --       --       --        --
Issuance of Series C preferred
 stock at $5.00 per share
 (note 7).....................         --       --           --       --    1,100,000   11,000       --        --

<CAPTION>
                                   COMMON STOCK        COMMON STOCK
                                      CLASS A             CLASS B       ADDITIONAL
                                -------------------   ---------------     PAID-IN     ACCUMULATED      UNEARNED
                                 SHARES     AMOUNT    SHARES   AMOUNT     CAPITAL       DEFICIT      COMPENSATION      TOTAL
                                ---------   -------   ------   ------   -----------   ------------   ------------   -----------
<S>                             <C>         <C>       <C>      <C>      <C>           <C>            <C>            <C>
Balances at December 31,
 1995.........................      1,250   $   10       --     $ --    $     3,816   $(1,745,397)     $     --     $(1,741,571)
Issuance of common stock to XL
Vision, Inc., for cash at
$.008 per share...............    248,750    1,990       --       --             --            --            --           1,990
Issuance of common stock for
 cash at $.008 per share......    175,000    1,400       --       --             --            --            --           1,400
Exercise of stock options for
 cash at $.008 per share......     25,000      200       --       --             --            --            --             200
Net profit (loss).............         --       --       --       --             --    (1,719,492)           --      (1,719,492)
                                ---------   -------    ----     ----    -----------   ------------     --------     -----------
Balances at December 31,
 1996.........................    450,000    3,600       --       --          3,816    (3,464,889)           --      (3,457,473)
Issuance of common stock to XL
 Vision, Inc., for cash at
 $.008 per share..............  2,808,125   22,465       --       --             --            --            --          22,465
Sale of Series A preferred
 stock for cash at $1.00 per
 share (note 7)...............         --       --       --       --      6,379,170            --            --       6,443,606
Transfer of technology by XL
 Vision, Inc. (note 10).......         --       --       --       --     (4,400,000)           --            --      (4,400,000)
Net profit (loss).............         --       --       --       --             --    (5,483,623)           --      (5,483,623)
                                ---------   -------    ----     ----    -----------   ------------     --------     -----------
Balances at December 31,
 1997.........................  3,258,125   26,065       --       --      1,982,986    (8,948,512)           --      (6,875,025)
Contribution of debt to equity
 by XL Vision, Inc. (note
 10)..........................         --       --       --       --      7,500,000            --            --       7,500,000
Issuance of Series B preferred
 stock in exchange for
 contribution of debt to
 equity by XL Vision, Inc. at
 $2.00 per share (notes 7 and
 10)..........................         --       --       --       --      4,776,000            --            --       4,800,000
Issuance of common stock in
 connection with Nutri-Charge
 transaction at $0.80 per
 share (note 6)...............  2,587,500   20,700       --       --      2,049,300            --            --       2,070,000
Contribution of put rights by
 XL Vision, Inc. (note 6).....         --       --       --       --        340,000            --            --         340,000
Net profit (loss).............         --       --       --       --             --    (7,832,128)           --      (7,832,128)
                                ---------   -------    ----     ----    -----------   ------------     --------     -----------
Balances at December 31,
 1998.........................  5,845,625   46,765       --       --     16,648,286   (16,780,640)           --           2,847
Exercise of stock options for
 cash at $0.80 per share......    112,069      897       --       --         88,758            --            --          89,655
Issuance of common stock in
 connection with CIN
 transaction at $0.96 per
 share (note 6)...............    750,000    6,000       --       --        714,000            --            --         720,000
Issuance of common stock in
 connection with
 Cyberstockyard transaction at
 $1.80 per share (note 6).....    250,000    2,000       --       --        448,000            --            --         450,000
Issuance of Series C preferred
 stock at $5.00 per share
 (note 7).....................         --       --       --       --      5,489,000            --            --       5,500,000
</TABLE>

                                       F-5
<PAGE>   87
<TABLE>
<CAPTION>
                                  PREFERRED STOCK       PREFERRED STOCK       PREFERRED STOCK     PREFERRED STOCK
                                     SERIES A              SERIES B              SERIES C             SERIES D
                                -------------------   -------------------   -------------------   ----------------
                                 SHARES     AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT    SHARES   AMOUNT
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
<S>                             <C>         <C>       <C>         <C>       <C>         <C>       <C>      <C>
Accretion to redemption value
of Class A common stock issued
in connection with the Turnkey
Computer Systems, Inc. (note
5)............................         --       --           --       --           --       --       --        --
Net profit (loss).............         --       --           --       --           --       --       --        --
Unearned compensation
 (note 9).....................         --       --           --       --           --       --       --        --
Amortization of unearned
 compensation (note 9)........         --       --           --       --           --       --       --        --
                                ---------   -------   ---------   -------   ---------   -------   ------   -------
Balances at
 September 30, 1999...........  6,443,606   $64,436   2,400,000   $24,000   1,100,000   $11,000      --    $   --
                                =========   =======   =========   =======   =========   =======   ======   =======

<CAPTION>
                                   COMMON STOCK        COMMON STOCK
                                      CLASS A             CLASS B       ADDITIONAL
                                -------------------   ---------------     PAID-IN     ACCUMULATED      UNEARNED
                                 SHARES     AMOUNT    SHARES   AMOUNT     CAPITAL       DEFICIT      COMPENSATION      TOTAL
                                ---------   -------   ------   ------   -----------   ------------   ------------   -----------
<S>                             <C>         <C>       <C>      <C>      <C>           <C>            <C>            <C>
Accretion to redemption value
of Class A common stock issued
in connection with the Turnkey
Computer Systems, Inc. (note
5)............................         --       --       --       --         (6,000)           --            --          (6,000)
Net profit (loss).............         --       --       --       --             --   (10,672,185)           --     (10,672,185)
Unearned compensation
 (note 9).....................         --       --       --       --         72,126            --       (72,126)             --
Amortization of unearned
 compensation (note 9)........         --       --       --       --             --            --         9,017           9,017
                                ---------   -------    ----     ----    -----------   ------------     --------     -----------
Balances at
 September 30, 1999...........  6,957,694   $55,662      --     $ --    $23,454,170   $(27,452,825)    $(63,109)    $(3,906,666)
                                =========   =======    ====     ====    ===========   ============     ========     ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>   88

                            eMERGE INTERACTIVE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                              YEARS ENDED DECEMBER 31,                 SEPTEMBER 30,
                                       ---------------------------------------   --------------------------
                                          1996          1997          1998          1998           1999
                                       -----------   -----------   -----------   -----------   ------------
                                                                                 (UNAUDITED)
<S>                                    <C>           <C>           <C>           <C>           <C>
Cash flows from operating activities:
Net profit (loss)....................  $(1,719,492)  $(5,483,623)  $(7,832,128)  $(5,661,743)  $(10,672,185)
  Adjustments to reconcile net profit
    (loss) to net cash used in
    operating activities:
    Depreciation and amortization....        1,503       122,486       438,576       230,964      1,176,431
    Amortization of unearned
      compensation...................           --            --            --            --          9,017
    Changes in operating assets and
      liabilities:
      Trade accounts receivable,
         net.........................           --            --      (368,421)     (138,705)    (2,405,456)
      Inventories....................           --      (635,963)      (70,594)      (30,741)        51,428
      Cattle deposits................           --            --            --            --       (489,760)
      Prepaid expenses and other
         assets......................       (1,304)      (32,338)        5,805       (77,079)       (75,405)
      Net assets of discontinued
         operations..................      (96,209)     (853,501)   (1,140,425)   (1,477,150)            --
      Accounts payable...............        5,675       719,694      (301,423)      (32,037)     1,038,877
      Accrued liabilities............       75,542       198,759       328,791       151,016        214,739
      Advanced payments from
         customers...................           --            --            --            --        619,270
                                       -----------   -----------   -----------   -----------   ------------
      Net cash used by operating
         activities..................   (1,734,285)   (5,964,486)   (8,939,819)   (7,035,475)   (10,533,044)
                                       -----------   -----------   -----------   -----------   ------------
Cash flows from investing activities:
  Business combinations, net of cash
    acquired of $737.................           --            --            --            --     (1,799,263)
  Purchases of property and
    equipment........................      (56,861)     (506,540)     (460,290)     (269,831)    (1,228,432)
  Purchase of intangibles............     (100,000)           --      (431,923)     (431,923)            --
  Proceeds from discontinued
    operations.......................           --            --            --            --      1,825,407
  Investment in Turnkey Computer
    Systems, Inc.....................           --            --            --            --        (22,833)
                                       -----------   -----------   -----------   -----------   ------------
      Net cash used by investing
         activities..................     (156,861)     (506,540)     (892,213)     (701,754)    (1,225,121)
                                       -----------   -----------   -----------   -----------   ------------
Cash flows from financing activities:
  Net borrowings from related
    parties..........................    1,889,101         3,810     9,447,030     7,737,227      8,218,623
  Proceeds from capital lease
    financing with related party.....           --            --       440,832            --             --
  Payments on capital lease
    obligations......................           --            --       (55,962)           --        (58,280)
  Offering costs.....................           --            --            --            --       (341,967)
  Sale of preferred stock............           --     6,443,606            --            --      5,500,000
  Sale of common stock...............        3,590        22,465            --            --         89,655
                                       -----------   -----------   -----------   -----------   ------------
      Net cash provided by financing
         activities..................    1,892,691     6,469,881     9,831,900     7,737,227     13,408,031
                                       -----------   -----------   -----------   -----------   ------------
      Net increase (decrease) in
         cash........................        1,545        (1,145)         (132)           (2)     1,649,866
Cash -- beginning of period..........           --         1,545           400           400            268
                                       -----------   -----------   -----------   -----------   ------------
Cash -- end of period................  $     1,545   $       400   $       268   $       398   $  1,650,134
                                       ===========   ===========   ===========   ===========   ============
</TABLE>

                                       F-7
<PAGE>   89

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                              YEARS ENDED DECEMBER 31,                 SEPTEMBER 30,
                                       ---------------------------------------   --------------------------
                                          1996          1997          1998          1998           1999
                                       -----------   -----------   -----------   -----------   ------------
                                                                                 (UNAUDITED)
<S>                                    <C>           <C>           <C>           <C>           <C>
Supplemental disclosures:
  Cash paid for interest.............  $        --   $        --   $    23,594   $    13,517   $     20,628
  Non-cash investing and financing
    activities:
    Transfer of technology by XL
      Vision, Inc. (note 10).........           --     4,400,000            --            --             --
    Contribution of debt to equity by
      XL Vision, Inc. (note 10)......           --            --     7,500,000            --             --
    Issuance of preferred stock in
      exchange for contribution of
      debt to equity by XL Vision,
      Inc. (note 10).................           --            --     4,800,000            --             --
    Non-cash issuance of Class A
      common stock in connection with
      Nutri-Charge transaction (note
      6).............................           --            --     2,070,000     2,070,000             --
    Contribution of put rights by XL
      Vision, Inc. (note 6)..........           --            --       340,000       340,000             --
    Issuance of Class A common stock
      in connection with CIN
      transaction (note 6)...........           --            --            --            --        720,000
    Issuance of Class A common stock
      with Cyberstockyard transaction
      (note 6).......................           --            --            --            --        450,000
    Issuance of redeemable Class A
      common stock with Turnkey
      Computer Systems, Inc.
      transaction (note 5)...........           --            --            --            --        400,000
    Issuance of note payable to
      Turnkey Computer Systems, Inc.
      (note 5).......................           --            --            --            --      1,400,000
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-8
<PAGE>   90

                            eMERGE INTERACTIVE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (INFORMATION INSOFAR AS IT RELATES TO SEPTEMBER 30, 1998 OR THE NINE MONTHS
                                     ENDED
                        SEPTEMBER 30, 1998 IS UNAUDITED)

(1) ORGANIZATION

  (a) OVERVIEW

     eMerge Interactive, Inc. (the "Company") is a Delaware corporation that was
incorporated on September 12, 1994 as Enhanced Vision Systems, a wholly owned
subsidiary of XL Vision, Inc. ("XL Vision"). The Company's name was changed to
eMerge Vision Systems, Inc. on July 16, 1997 and to eMerge Interactive, Inc. on
June 11, 1999.

     The Company was incorporated to develop and commercialize infrared
technology focused on the transportation segment. In 1997, the Company entered a
new business segment, animal sciences, by developing an infrared camera system
for use primarily by veterinarians. The Company further expanded its operations
in 1998 by licensing NutriCharge and infrared technology (see note 5) for
commercialization. In December 1998, the Company's Board of Directors decided to
dispose of the transportation segment. The Company's AMIRIS thermal imaging
system, which was the sole product sold by the transportation segment, was sold
on January 15, 1999.

  (b) BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of eMerge
Interactive, Inc. and its wholly-owned subsidiaries, STS Agriventures, Ltd.
("STS"), a Canadian corporation and Cyberstockyard, Inc. ("Cyberstockyard").

     All significant intercompany balances and transactions have been eliminated
upon consolidation.

     The pro forma balance sheet as of September 30, 1999 assumes the conversion
of all preferred stock to Class A common stock upon the Company's planned
initial public offering ("IPO").

  (c) MANAGEMENT'S PLANS

     As of September 30, 1999, the Company had a working capital deficiency of
$12,507,506 and stockholders' deficit of $3,906,666. Management expects
additional working capital requirements as the Company continues its marketing
and development efforts for its products. Subsequent to September 30, 1999, the
Company obtained equity financing (see note 14). The Company also plans an IPO.
Although management believes that its IPO will be successful, there can be no
assurances that it will be completed.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) REVENUE RECOGNITION

     The Company recognizes revenue in accordance with the terms of the sale or
contract, generally as products are shipped or services are provided. The
Company bears both the inventory and credit risk with respect to sales of all of
its products. In cattle sales transactions, the Company purchases cattle from
the seller, takes title at shipment and records the cattle as inventory until
delivered to and accepted by the buyer, typically a 24 to

                                       F-9
<PAGE>   91
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

48 hour period. In both cattle auction and resale transactions, the Company acts
as a principal in purchasing cattle from suppliers and sales to customers so
that the Company recognizes revenue equal to the amount paid by customers for
the cattle.

  (b) INVENTORIES

     Inventories are stated at standard cost which approximates the lower of
first-in, first-out cost or market.

  (c) PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Amortization of equipment under capital lease is computed
over the shorter of the lease term or the estimated useful life of the related
assets.

  (d) INTANGIBLES

     Intangibles are stated at amortized cost. Amortization is computed using
the straight-line method over the estimated useful lives of the assets.

  (e) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

     The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of". This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of their carrying
amount or fair value less costs to sell.

  (f) INCOME TAXES

     The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

  (g) STOCK-BASED COMPENSATION

     Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," permits entities to recognize as expense over the
vesting period the

                                      F-10
<PAGE>   92
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB Opinion No. 25") and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure provisions of SFAS No. 123.

  (h) USE OF ESTIMATES

     The preparation of the Company's consolidated 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, disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses. Actual results could differ from those
estimates.

  (i) NET PROFIT (LOSS) PER SHARE

     Net profit (loss) per share is computed in accordance with SFAS No. 128,
"Earnings Per Share," by dividing the net profit (loss) allocable to common
stockholders (net profit (loss) less accretion related to redeemable Class A
common stock) by the weighted average number of shares of common stock
outstanding less the 62,500 shares of redeemable Class A commom stock. The
Company's stock options (338,125 at December 31, 1997, 1,632,500 at December 31,
1998 and 2,488,494 at September 30, 1999) and convertible preferred stock
(6,443,606 at December 31, 1997, 8,843,606 at December 31, 1998 and 9,943,606 at
September 30, 1999), have not been used in the calculation of diluted net profit
(loss) per share because to do so would be anti-dilutive. As such, the numerator
and the denominator used in computing both basic and diluted net profit (loss)
per share allocable to common stockholders are equal.

     Pursuant to Securities and Exchange Commission ("SEC") Staff Accounting
Bulletin No. 98 and SEC staff policy, all common stock and common stock
equivalents issued for nominal consideration during the periods presented herein
and through the filing of the registration statement for the IPO are to be
reflected in a manner similar to a stock split or stock dividend for which
retroactive treatment is required in the calculation of net profit (loss) per
share; the Company did not have any such issuances.

  (j) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash, trade accounts receivable, accounts payable,
accrued liabilities and amounts due to related parties reflected in the
consolidated financial statements approximates fair value due to the short-term
maturity of these instruments.

  (k) INTERIM FINANCIAL INFORMATION

     The consolidated financial statements for the period ended September 30,
1998 are unaudited but reflect only normal and recurring adjustments which are,
in the opinion of management, necessary for the fair presentation of financial
position and results of

                                      F-11
<PAGE>   93
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations. Operating results for the nine months ended September 30, 1999 and
1998 are not necessarily indicative of the results that may be expected for the
full year.

(3) INVENTORIES

     Inventories consist of:

<TABLE>
<CAPTION>
                                            DECEMBER 31,
                                        --------------------    SEPTEMBER 30,
                                          1997        1998          1999
                                        --------    --------    -------------
<S>                                     <C>         <C>         <C>
Raw materials.........................  $346,335    $424,130      $594,337
Work-in-process.......................   289,628     282,427        60,792
                                        --------    --------      --------
                                        $635,963    $706,557      $655,129
                                        ========    ========      ========
</TABLE>

(4) PROPERTY AND EQUIPMENT

     Property and equipment consists of:

<TABLE>
<CAPTION>
                                        DECEMBER 31,
                                    --------------------    SEPTEMBER 30,     ESTIMATED
                                      1997        1998          1999         USEFUL LIVES
                                    --------    --------    -------------    ------------
<S>                                 <C>         <C>         <C>              <C>
Engineering and manufacturing
  equipment.......................  $258,082    $366,150     $  634,625        5 years
Office and computer equipment.....   179,315     259,462      1,532,298        3 years
Furniture and fixtures............    67,282     104,706        112,122        7 years
Leasehold improvements............    46,865      46,865         80,430        7 years
Automobiles.......................        --          --         54,717        5 years
                                    --------    --------     ----------
                                     551,544     777,183      2,414,192
Less accumulated depreciation and
  amortization....................   123,404     263,346        702,788
                                    --------    --------     ----------
Property and equipment, net.......  $428,140    $513,837     $1,711,404
                                    ========    ========     ==========
</TABLE>

     Assets under capital lease amounted to $-0-, $440,832 and $440,832 as of
December 31, 1997, 1998 and September 30, 1999, respectively. Accumulated
amortization for assets under capital lease totaled approximately $-0-, $152,300
and $217,500 as of December 31, 1997, 1998 and September 30, 1999, respectively.

(5) INVESTMENT IN TURNKEY COMPUTER SYSTEMS, INC.

     On August 16, 1999, the Company acquired 19% of the common stock of Turnkey
Computer Systems, Inc. ("Turnkey") for $1,822,833. The purchase price consisted
of 62,500 shares of the Company's redeemable Class A common stock valued at
$400,000, $1,400,000 in cash and $22,833 of transaction costs. The $1,400,000 is
payable upon the earlier of the completion of the Company's IPO or $500,000 at
December 31, 1999, $500,000 at December 31, 2000 and $400,000 at December 31,
2001. This investment is carried on the cost method since the Company does not
have significant influence over Turnkey. The

                                      F-12
<PAGE>   94
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

common stock purchase agreement with Turnkey contains a put right which allows
Turnkey to have a one time right to put to the Company its 62,500 redeemable
Class A common shares with a fixed purchase price of $500,000. The put right can
only be exercised upon a change in control or after December 31, 2001, if the
Company has not completed an IPO. This redeemable Class A common stock is
classified outside of stockholders' equity (deficit). The difference between the
carrying amount and the redemption amount of $500,000 is being accreted to
redeemable Class A common stock as a charge to additional paid-in capital from
issuance to December 31, 2001 using the effective interest method.

(6) INTANGIBLES

     Intangibles consists of:

<TABLE>
<CAPTION>
                                          DECEMBER 31,
                                       ------------------    SEPTEMBER 30,     ESTIMATED
                                       1997       1998           1999         USEFUL LIFE
                                       ----    ----------    -------------    -----------
<S>                                    <C>     <C>           <C>              <C>
NutriCharge license..................  $ --    $2,273,538     $2,273,538       10 years
Infrared technology license..........    --       568,385        568,385        5 years
Goodwill -- CIN......................    --            --      2,076,368        5 years
Non-compete agreement -- CIN.........    --            --        100,000        5 years
Goodwill -- Cyberstockyard...........    --            --        427,274        3 years
Non-compete agreement --
  Cyberstockyard.....................    --            --        100,000        3 years
Goodwill -- PCC --...................    --            --      1,487,791        5 years
Non-compete agreement -- PCC.........                            100,000        4 years
                                       ----    ----------     ----------
                                         --     2,841,923      7,133,356
Less accumulated amortization........    --       142,095        860,047
                                       ----    ----------     ----------
Intangibles, net.....................  $ --    $2,699,828     $6,273,309
                                       ====    ==========     ==========
</TABLE>

     On July 29, 1998, the Company acquired licenses for NutriCharge and
infrared technology. The purchase price of $2,841,923 (consisting of $300,000 in
cash, 2,587,500 of the Company's Class A common shares valued at $0.80 per
share, $131,923 in acquisition costs and the estimated fair value of put rights
granted by XL Vision) was allocated to the acquired NutriCharge and infrared
technology licenses based on estimated fair values determined by estimated cash
flows from the underlying licensed product. In connection with the transaction,
XL Vision granted a put right that allows the sellers to require XL Vision to
purchase up to 1,250,000 shares of the Company's Class A common stock at $3.00
per share. The fair value of the put was estimated to be $340,000 and was
credited to additional paid-in capital. The put right may only be exercised
thirty days prior to or after the fourth anniversary of the agreement. The
ultimate amount payable under the put agreement is reduced by the amount, if
any, of indemnification obligations related to the transaction. The estimated
fair value of the put was determined with the assistance of an independent,
third party valuation expert by calculating the net present value (at 10%
interest) of the product of the $2,000,000 intrinsic value of the put adjusted
for the 25% probability that the put would be exercised.

                                      F-13
<PAGE>   95
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On February 24, 1999, the Company acquired substantially all of the
tangible and intangible assets of CIN, LLC d/b/a/ Cattlemen's Information
Network ("CIN") for $2,296,610. The purchase price for the assets consisted of
750,000 shares of the Company's Class A common stock valued at $720,000, the
assumption of $812,021 of liabilities, a cash payment due in October 1999 of
$357,816, and an agreement to pay the first $350,000 from Internet sales of
third party products over the Company's Web site and transaction costs of
$56,773. CIN is in the business of selling access to its cattle feedlot
performance measurements database. Immediately after the closing, CIN changed
its name to Lost Pelican, L.L.C.

     On March 29, 1999, the Company acquired 100% of the stock of
Cyberstockyard, Inc. for $542,265. The purchase price consisted of 250,000
shares of the Company's Class A common stock valued at $450,000, the assumption
of $89,972 of liabilities and transaction costs of $2,293. Cyberstockyard, Inc.
is in the business of selling cattle through its proprietary auction software
over the Internet.

     On May 19, 1999, the Company acquired substantially all of the tangible and
intangible assets of PCC, LLC d/b/a Professional Cattle Consultants, L.L.C.
("PCC") for $1,827,861. The purchase price consists of a cash payment of
$1,800,000 and an assumption of $2,861 of liabilities and transaction costs of
$25,000. PCC is in the business of providing comparative analysis and market
information for the feedlot industry. Immediately after the closing, PCC changed
its name to QDD Investment Company, L.L.C.

     Each acquisition was accounted for as a purchase and the results of
operations of the acquired companies is included in the statement of operations
since the respective date of acquisition.

     The aggregate purchase price of the above acquisitions was approximately
$4,666,736, which included related acquisition costs of approximately $84,000
and was allocated as follows:

<TABLE>
<S>                                              <C>
Goodwill.......................................  $3,991,433
Non-compete agreements.........................     300,000
Equipment......................................     358,016
Current assets, including cash acquired of
  $737.........................................      17,287
                                                 ----------
                                                 $4,666,736
                                                 ==========
</TABLE>

     Unaudited pro forma information for the Company as if the acquisitions
above had been consummated as of January 1, 1998 and 1999 follows:

<TABLE>
<CAPTION>
                                        NINE MONTHS ENDED SEPTEMBER 30,
                                        -------------------------------
                                            1998              1999
                                        ------------      -------------
<S>                                     <C>               <C>
Revenue...............................  $ 1,687,077       $ 18,560,565
                                        ===========       ============
Net profit (loss).....................  $(4,987,862)      $(11,097,329)
                                        ===========       ============
Net profit (loss) per common share....  $     (0.97)      $      (1.61)
                                        ===========       ============
</TABLE>

                                      F-14
<PAGE>   96
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) EQUITY

  COMMON STOCK

     As of September 30, 1999, the Company had authorized the issuance of
125,000,000 shares of common stock.

     CLASS A -- In 1999, the Company designated 115,888,887 shares as Class A
common stock.

     CLASS B -- In 1999, the Company designated 9,111,113 shares as Class B
common stock. Holders of Class B common stock are entitled to two and one-half
votes for each share. The shares of Class A and Class B are identical in all
other respects.

  PREFERRED STOCK

     As of September 30, 1999, the Company had authorized the issuance of
15,000,000 shares of preferred stock and had designated 6,500,000 as Series A
shares, and 2,400,000 as Series B shares, 1,300,000 as Series C shares and
4,555,556 as Series D shares. Each share of preferred stock is convertible into
1.25 shares of Class A common stock at the option of the holder or upon the vote
of holders of two-thirds of the respective preferred stock class outstanding
except for Series D shares which is convertible at the offering price into 1.25
shares Class B common stock. Preferred stock is automatically converted into
common stock upon a qualified IPO of at least $10 million with a Company
valuation of at least $30 million or upon a public rights offering of the
Company to shareholders of Safeguard Scientifics, Inc.

     SERIES A -- The Series A shares are entitled to a liquidation preference
before any distribution to common stockholders equal to the greater of (a) $1.00
per share plus an additional $.10 per year (pro rated for partial years) from
July 16, 1997 or (b) the amount which would be distributed if all of the
preferred stock of the Company were converted to Class A common stock prior to
liquidation. The holders of Series A preferred stock are entitled to vote as a
separate class to elect two directors to the Board of Directors of the Company.

     SERIES B -- Series B shares are entitled to a liquidation preference before
any distribution to common stockholders equal to the greater of (a) $2.00 per
share plus an additional $.20 for each year (pro rated for partial years) from
December 31, 1998 or until the date of distribution of available assets or (b)
the amount which would be distributed if all of the preferred stock of the
Company were converted to Class A common stock prior to liquidation. Series B
shares are junior to Series A, C and D shares.

     SERIES C -- Series C shares are entitled to a liquidation preference before
any distribution to common stockholders equal to the greater of (a) $5.00 per
share plus an additional $.50 for each year (pro rated for partial years) from
April 15, 1999 or until the date of distribution of available assets or (b) the
amount which would be distributed if all of the preferred stock of the Company
were converted to Class A common stock prior to liquidation. Series C shares are
on parity with Series A and D shares except as to voting rights.

     SERIES D -- Series D shares are entitled to a liquidation preference before
any distribution to common stockholders equal to the greater of (a) $9.00 per
share plus an additional $1.00 for each year (pro rated for partial years) from
October 27, 1999 or until the

                                      F-15
<PAGE>   97
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

date of distribution of available assets or (b) the amount which would be
distributed if all the preferred stock of the Company were converted to Class B
common stock prior to liquidation. Series D shares are on parity with Series A
and C shares except as to voting rights. Series D stockholders are entitled to
two and one-half votes per share.

(8) INCOME TAXES

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

<TABLE>
<CAPTION>
                                    DECEMBER 31,
                               -----------------------   SEPTEMBER 30,
                                  1997         1998          1999
                               ----------   ----------   -------------
<S>                            <C>          <C>          <C>
Deferred tax assets:
Net operating loss
carryforwards................  $3,237,000   $5,967,000    $ 8,057,000
  Amortization of acquired
     technology from XL
     Vision (note 10)........   1,829,000    1,704,000      1,704,000
  Research and
     experimentation tax
     credits.................     294,000      448,000        718,000
  Other......................     125,000      596,000      1,524,000
                               ----------   ----------    -----------
                                5,485,000    8,715,000     12,003,000
  Less valuation allowance...   5,370,000    8,715,000     12,003,000
                               ----------   ----------    -----------
     Net deferred tax
       assets................     115,000           --             --
Deferred tax liability:
  Imputed interest...........    (115,000)          --             --
                               ----------   ----------    -----------
     Net deferred tax asset
       (liability)...........  $       --   $       --    $        --
                               ==========   ==========    ===========
</TABLE>

     The Company has available at September 30, 1999 for federal income tax
purposes, unused net operating loss carryforwards of approximately $21,000,000
which may be applied against future taxable income and expires in years
beginning in 2010. The Company also has approximately $718,000 in research and
experimentation credits carryforwards. The research and experimentation credits,
which begin to expire in 2010, can also be used to offset future regular tax
liabilities. A valuation allowance for deferred tax assets is provided when it
is more likely than not that some portion or all of the deferred tax assets will
not be realized.

     The difference between the "expected" tax benefit (computed by applying the
federal corporate income tax rate of 34% to the loss before income taxes) and
the actual tax benefit is primarily due to the effect of the valuation
allowance.

                                      F-16
<PAGE>   98
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) STOCK PLAN

     In January 1996, the Company adopted an equity compensation plan (the "1996
Plan") pursuant to which the Company's Board of Directors may grant shares of
common stock or options to acquire common stock to certain directors, advisors
and employees. The Plan authorizes grants of shares or options to purchase up to
2,168,750 shares of authorized but unissued common stock. Stock options granted
have a maximum term of ten years and have vesting schedules which are at the
discretion of the Compensation Committee of the Board of Directors and
determined on the effective date of the grant.

     In May 1999, the Company's stockholders approved the 1999 Equity
Compensation Plan (the "1999 Plan"). Under the 1999 Plan, an additional
1,250,000 shares of authorized, unissued shares of common stock of the Company
are reserved for issuance to employees, advisors and for non-employee members of
the Board of Directors. Option terms under the 1999 Plan may not exceed 10
years.

     A summary of option transactions follows:

<TABLE>
<CAPTION>
                                                                                   WEIGHTED
                                                   RANGE OF                         AVERAGE
                                                   EXERCISE       WEIGHTED         REMAINING
                                                  PRICES PER      AVERAGE         CONTRACTUAL
                                       SHARES       SHARE      EXERCISE PRICE   LIFE (IN YEARS)
                                      ---------   ----------   --------------   ---------------
<S>                                   <C>         <C>          <C>              <C>
Balance outstanding, December 31,
  1996..............................      3,125   $     0.80       $ 0.80            4.85
                                                                                     ====
  Granted...........................    335,000         0.80         0.80
                                      ---------   ----------       ------
Balance outstanding, December 31,
  1997..............................    338,125         0.80         0.80            9.64
                                                                                     ====
  Granted...........................  1,692,500    0.80-1.60         0.84
  Canceled..........................   (398,125)        0.80         0.80
                                      ---------   ----------       ------
Balance outstanding, December 31,
  1998..............................  1,632,500    0.80-1.60          .84            9.48
                                                                                     ====
  Granted...........................  1,010,250    1.60-7.20         2.58
  Exercised.........................   (112,069)        0.80         0.80
  Canceled..........................    (42,187)   0.80-1.60         1.04
                                      ---------   ----------       ------
Balance outstanding, September 30,
  1999..............................  2,488,494   $0.80-7.20       $ 1.54            9.08
                                      =========   ==========       ======            ====
</TABLE>

     At December 31, 1997, 1998 and September 30, 1999, there were 76,719,
414,375 and 716,369 shares exercisable, respectively at weighted average
exercise prices of $0.80, $0.82 and $1.06, respectively.

     At December 31, 1997 and 1998 and September 30, 1999, 99,375, 511,250 and
747,250 shares were available for grant, respectively.

                                      F-17
<PAGE>   99
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The per share weighted-average fair value of stock options granted was $0
in 1996, $0 in 1997, $0.08 in 1998 and $0.84 in 1999 on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                1996    1997    1998    1999
                                                ----    ----    ----    ----
<S>                                             <C>     <C>     <C>     <C>
Volatility....................................     0%      0%      0%      0%
Dividend paid.................................     0%      0%      0%      0%
Risk-free interest rate.......................  6.35%   6.11%   4.73%   4.99%
Expected life in years........................  5.77    6.75    5.57    6.75
</TABLE>

     No volatility was assumed due to the use of the Minimum Value Method of
computation for options issued by the Company as a private entity as prescribed
by SFAS No. 123.

     All stock options granted, except as noted in the paragraph below, have
been granted to directors or employees with an exercise price equal to the fair
value of the common stock at the date of grant. The Company applies APB Opinion
No. 25 for issuances to directors and employees in accounting for its Plan and,
accordingly, no compensation cost has been recognized in the consolidated
financial statements through December 31, 1998.

     On March 19, 1999, the Company granted 360,625 stock options with an
exercise price of $1.60 and a fair value of $1.80. The Company recorded $72,126
of unearned compensation at the date of grant and is amortizing the unearned
compensation over the vesting period. Compensation expense amounted to $9,017
for the nine months ended September 30, 1999.

     Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net loss
would have increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                               1996          1997          1998           1999
                            -----------   -----------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Net loss as reported......  $(1,719,492)  $(5,483,623)  $(7,832,128)  $(10,672,185)
                            ===========   ===========   ===========   ============
Pro forma net loss........  $(1,719,492)  $(5,483,623)  $(7,865,031)  $(10,887,665)
                            ===========   ===========   ===========   ============
Net loss per share, as
  reported:
  Basic and diluted.......  $     (9.24)  $    (14.34)  $     (1.80)  $      (1.59)
                            ===========   ===========   ===========   ============
Pro forma net loss per
  share:
  Basic and diluted.......  $     (9.24)  $    (14.34)  $     (1.81)  $      (1.62)
                            ===========   ===========   ===========   ============
</TABLE>

                                      F-18
<PAGE>   100
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) RELATED PARTY TRANSACTIONS

  DUE TO RELATED PARTIES

     Due to related parties consist of:

<TABLE>
<CAPTION>
                                               DECEMBER 31,         SEPTEMBER 30,
                                          -----------------------   -------------
                                             1997         1998          1999
                                          ----------   ----------   -------------
<S>                                       <C>          <C>          <C>
XL Vision...............................  $8,029,995   $5,158,436    $ 6,057,978
Safeguard Scientifics, Inc. and
Safeguard Delaware, Inc.................      10,309       28,898      7,347,979
                                          ----------   ----------    -----------
                                          $8,040,304   $5,187,334    $13,405,957
                                          ==========   ==========    ===========
</TABLE>

  AMOUNTS DUE TO XL VISION

<TABLE>
<S>                                                           <C>
Amounts due to XL Vision consist of:
Balance as of December 31, 1996.............................  $ 3,636,494
     Allocation of costs and funding of working capital to
      the Company...........................................    6,318,405
     Technology transfer fee................................    4,400,000
     Interest charges on technology transferred.............      141,167
     Proceeds from Series A Preferred Stock.................   (6,443,606)
     Issuance of Class A common stock.......................      (22,465)
                                                              -----------
  Balance as of December 31, 1997...........................    8,029,995
     Allocation of costs and funding of working capital to
      the Company...........................................    9,120,441
     Interest charges on technology transferred.............      308,000
     Contribution of debt to equity.........................   (7,500,000)
     Contribution of debt to equity in exchange for Series B
      Preferred Stock.......................................   (4,800,000)
                                                              -----------
  Balance as of December 31, 1998...........................    5,158,436
     Allocation of costs and funding of working capital to
      the Company...........................................      668,542
     Interest charges on technology transferred.............      231,000
                                                              -----------
  Balance as of September 30, 1999..........................  $ 6,057,978
                                                              ===========
</TABLE>

     The average outstanding balance due to XL Vision was approximately
$2,690,900 in 1996, $6,239,600 in 1997, $12,782,400 in 1998 and $7,342,435 in
1999.

     On January 1, 1999, the Company signed a revolving promissory note with XL
Vision for up to $3,000,000. The revolving promissory note bears interest at the
prime rate plus 1% and is due in full when the Company completes an IPO or sells
all of its assets or stock.

                                      F-19
<PAGE>   101
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  NOTE PAYABLE TO SAFEGUARD DELAWARE, INC.

     On July 21, 1999, the Company obtained a $3,000,000 revolving note payable
from Safeguard Delaware, Inc ("Safeguard"). The revolving note payable, as
amended, bears interest payable monthly at the prime rate plus 1% and is due
December 31, 1999.

     In August, September and October 1999, the Company signed demand notes with
interest payable monthly at the prime rate plus 1% with Safeguard for
$2,500,000, $2,000,000 and $2,500,000, respectively. These notes were cancelled
in October 1999, in exchange for a $7,050,000 note due in full on October 25,
2000, the repayment of a promissory note issued concurrently with the sale of
Series D preferred stock or an IPO, whichever is earlier.

  TECHNOLOGY FEE

     On July 15, 1997, the Company entered into an agreement with XL Vision for
the transfer of certain technology that is used by the Company in the sale of
its products for a $4,400,000 note payable. The transfer was accounted for as a
distribution to XL Vision as it represented amounts paid for an asset to an
entity under common control in excess of the cost of such asset. The note
payable bears interest at 7% per annum. Interest expense was $141,167 in 1997,
$308,000 in 1998 and $231,000 in 1999.

  DIRECT CHARGE FEE

     Prior to April 1, 1997 personnel, and other services were provided by XL
Vision and the costs were allocated to the Company. The Company believes that
the allocation method used by XL Vision was reasonable. Effective April 1, 1997,
the Company entered into a direct charge fee agreement with XL Vision which
allows for cost-based charges based upon actual hours incurred. Costs allocated
by or service fees charged by XL Vision were approximately $468,000 in 1996,
$720,000 in 1997, $460,000 in 1998 and $390,000 in 1999. A portion of the fees
in 1998 and 1999 and all of the costs and fees in 1996 and 1997 were allocated
to the discontinued transportation segment.

  ADMINISTRATIVE SERVICES FEE

     Effective December 15, 1997, the Company entered into an agreement which
requires accrual of an administrative services fee based upon a percentage of
gross revenues. The fee for administrative support services, including
management consultation, investor relations, legal services and tax planning, is
payable monthly to XL Vision and Safeguard Scientifics, Inc., the largest
shareholder of XL Vision, based upon an aggregate of 1.5% of gross revenues with
such service fees to be not more than $300,000 annually. Effective August 17,
1999, the agreement was amended such that the administrative services fee is
applied to net contribution margin on cattle sales and gross revenue for all
other sales. The fee is accrued monthly but is only payable in months during
which the Company has achieved positive cash flow from operations. The agreement
extends through December 31, 2002 and continues thereafter unless terminated by
any party. Administrative service fees were approximately $10,300 in 1997,
$37,200 in 1998 and $43,500 in 1999.

                                      F-20
<PAGE>   102
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  LEASES

     The Company leases equipment under a capital lease, effective April 20,
1998, with an affiliated entity, XL Realty, Inc. Future minimum lease payments,
including imputed interest at 7.53%, are $79,852 in 1999, $85,765 in 2000,
$92,684 in 2001, $100,154 in 2002 and $26,415 in 2003. Interest expense was
$23,594 in 1998 and $20,627 in 1999.

     The Company rents its facility from XL Vision. Rent expense varies based on
space occupied by the Company and includes charges for base rent, repairs and
maintenance, telephone and networking expenses, real estate taxes and insurance.
Rent expense is approximately $68,000 in 1996, $354,000 in 1997, $1,129,000 in
1998, and $528,000 in 1999.

  LICENSE AGREEMENT WITH XL VISION, INC.

     In February 1999, the Company signed a license agreement with XL Vision,
granting XL Vision a license to use Company software for the limited purpose of
evaluating whether the software could provide the basis for a new company that
would operate in the agricultural industry. The license agreement terminated on
November 30, 1999. If XL Vision forms a new company, the Company will negotiate
a long-term license agreement. In addition, XL Vision is obligated to give the
Company at least 25% of the new company. The Company is obligated to transfer
all amounts up to 25% of the company to Lost Pelican, LLC.

(11) SEGMENT INFORMATION

     In 1998, the Company adopted SFAS No. 131, which requires the reporting of
segment information using the "management approach" versus the "industry
approach" previously required. The management approach requires the Company to
report certain financial information related to continuing operations that is
provided to the Company's chief operating decision-maker. The Company's chief
operating decision-maker receives revenue and contribution margin (revenue less
direct costs and excluding overhead) by source, and all other statement of
operations data and balance sheet on a consolidated basis. The Company's
reportable segments consist of cattle sales and animal sciences products and
services. While the Company operates entirely in the animal science marketplace,
the contribution margin associated with cattle sales and the related prospects
for this portion of the Company's business differ from the rest of the Company's
product offerings.

                                      F-21
<PAGE>   103
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarizes revenue, cost of revenue and gross profit and
contribution margin information related to the Company's two operating segments:

<TABLE>
<CAPTION>
                                                      NINE MONTHS ENDED
                                                -----------------------------
                               YEAR ENDED       SEPTEMBER 30,   SEPTEMBER 30,
                            DECEMBER 31, 1998       1998            1999
                            -----------------   -------------   -------------
                                                 (UNAUDITED)
<S>                         <C>                 <C>             <C>
Revenue:
Cattle....................     $       --        $       --      $17,022,862
  Animal sciences.........      1,792,471         1,106,452        1,315,783
                               ----------        ----------      -----------
         Total............     $1,792,471        $1,106,452      $18,338,645
                               ==========        ==========      ===========
Cost of revenue:
  Direct costs:
       Cattle.............     $       --        $       --      $16,860,452
       Animal sciences....        900,824           603,410          492,115
                               ----------        ----------      -----------
         Total direct
           costs..........        900,824           603,410       17,352,567
  Unallocated overhead....      1,722,623         1,025,347          929,763
                               ----------        ----------      -----------
         Total............     $2,623,447        $1,628,757      $18,282,330
                               ==========        ==========      ===========
Gross profit (loss):
    Contribution margin:
       Cattle.............     $       --        $       --      $   162,410
       Animal sciences....        891,647           503,042          823,668
                               ----------        ----------      -----------
         Total............        891,647           503,042          986,078
    Unallocated
       overhead...........     (1,722,623)       (1,025,347)        (929,763)
                               ----------        ----------      -----------
         Gross profit
           (loss).........     $ (830,976)       $ (522,305)     $    56,315
                               ==========        ==========      ===========
</TABLE>

     The Company's assets, and other statement of operations data are not
allocated to a segment.

(12) DISCONTINUED OPERATIONS

     In December 1998, the Company's Board of Directors decided to dispose of
its transportation segment. The Company's AMIRIS thermal imaging system, which
was the sole product sold in the transportation segment, was sold on January 15,
1999 to Sperry Marine, Inc. for approximately $1,900,000. The Company received
$200,000 of cash at closing and collected an additional $1,388,000 through
September 30, 1999. The remaining balance of approximately $312,000 is expected
to be collected by December 31, 1999. The Company is entitled to a royalty of 8%
of net AMIRIS system sales, up to a maximum royalty of $4.3 million over a four
year period or up to a maximum royalty of $5.0 million, if $4.3 million is not
received within four years.

                                      F-22
<PAGE>   104
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net assets of the discontinued transportation segment consist of:

<TABLE>
<CAPTION>
                                           DECEMBER 31,
                                     ------------------------    SEPTEMBER 30,
                                        1997          1998           1999
                                     ----------    ----------    -------------
<S>                                  <C>           <C>           <C>
Accounts receivable................  $  145,500    $  381,435      $ 419,784
Inventory, net.....................   1,076,043     2,020,625        123,093
Property and equipment, net........      22,650       134,098             --
Intangibles, net...................      94,444        61,108         36,106
Accounts payable...................    (271,833)      (80,510)       (63,647)
Accrued liabilities including
  provision for operating loss
  during phase out period of
  $72,667 in 1998 and $18,748 in
  1999.............................          --      (231,415)      (125,000)
                                     ----------    ----------      ---------
  Net assets.......................  $1,066,804    $2,285,341      $ 390,336
                                     ==========    ==========      =========
</TABLE>

(13) COMMITMENTS AND CONTINGENCIES

  VOLUNTARY EMPLOYEE SAVINGS 401(k) PLAN

     The Company established a voluntary employee savings 401(k) plan in 1997
which is available to all full time employees 21 years or older. The plan
provides for a matching by the Company of the employee's contribution to the
plan for 50% of the first 6% of the employee's annual compensation. The
Company's matching contributions were $6,300 in 1996, $38,195 in 1997, $62,108
in 1998 and $54,229 in 1999.

  ROYALTIES

     In connection with the NutriCharge license, the Company is obligated to a
royalty of 5% of gross revenues from the sale of NutriCharge products and
infrared technology related to the Company's Canadian license agreement.

     The Company is also obligated to a royalty of 6% of net revenues from
product or services related to technology patented by Iowa State University.

(14) SUBSEQUENT EVENTS

  SALE OF SERIES D PREFERRED STOCK

     On October 27, 1999, the Company agreed to issue 4,555,556 shares of Series
D preferred stock and a warrant to acquire 1,138,889 shares of Class B common
stock. Each share of Series D preferred stock is convertible into 1.25 shares of
Class B common stock at any time at the option of the holder or immediately upon
an IPO. The warrant is exercisable at the Company's IPO price. In the event the
Company does not complete an IPO, the warrant is exercisable at $9.00 after
November 16, 2000 or earlier if the Company has an equity financing of not less
that $20,000,000 from private investors. The warrant expires on November 16,
2002. In return for these instruments, the Company received $18,000,000 of cash
in November 1999 and a $23,000,000 non-interest, bearing note receivable due on
October 27, 2000. Imputed interest at 9.5% amounts to $2,185,000 over the life
of the note.

                                      F-23
<PAGE>   105
                            eMERGE INTERACTIVE, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The net consideration of $38,815,000 was allocated to the warrant and
preferred stock as follows. The warrant was valued at $3,325,553 using the
Black-Scholes method and assuming a strike price of $11.20, expiration of three
years, 90% volatility, and 5.8% interest. The remaining proceeds were allocated
to preferred stock and amounted to $7.79 per preferred share ($6.23 per common
share). The beneficial conversion feature was calculated as the difference
between the conversion price ($6.23) and the fair value of the common stock
($7.20) multiplied by the number of Class B common shares into which the
preferred stock is convertible (5,694,445) and amounts to $5,523,612.

     The note receivable will be shown as a reduction of stockholders' equity,
net of imputed interest. Interest income will be accreted over the life of the
note using the effective interest method. The value of the warrant will be
credited to additional paid-in capital. The beneficial conversion feature will
be credited to preferred stock with a corresponding charge to additional paid-in
capital at issuance. The beneficial conversion feature will reduce net income
available to common shareholders.

  STOCK SPLIT

     On December 6, 1999, the Board of Directors of the Company authorized a
five-for-four stock split. The stock split has been reflected in these financial
statements as if it had occurred on the first day of the first period presented.

  LEGAL PROCEEDING (UNAUDITED)

     The Company has been named as a defendant in a lawsuit filed on January 12,
2000 in the Queen's Bench Judicial Centre of Regina, Province of Saskatchewan,
Canada. The complaint alleges that eMerge and a third party were each subject to
confidentiality agreements with the plaintiff, and subsequently engaged in
discussions concerning a potential business arrangement in violation of such
agreements. The complaint asserts damages, including punitive damages, from the
defendants in the aggregate amount of $18 million (Canadian dollars), as well as
injunctive relief. Although the Company has not yet completed its assessment of
these claims, the Company believes that there are a number of substantive and
procedural defenses that exist and intends to defend these claims vigorously.
Furthermore, based on the Company's investigation to date, the Company is not
aware of any facts that support these allegations or the damages asserted.

                                      F-24
<PAGE>   106

                            eMERGE INTERACTIVE, INC.

         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                         LOST PELICAN, L.L.C.
                                                    eMerge      --------------------------------------
                                                 INTERACTIVE,                 PRO FORMA
                                                     INC.       HISTORICAL   ADJUSTMENTS    PRO FORMA
                                                 ------------   ----------   -----------    ----------
<S>                                              <C>            <C>          <C>            <C>
Revenue........................................  $ 1,792,471    $ 157,692     $      --     $  157,692
Cost of revenue................................    2,623,447       25,736            --         25,736
                                                 -----------    ---------     ---------     ----------
    Gross profit (loss)........................     (830,976)     131,956            --        131,956
                                                 -----------    ---------     ---------     ----------
Operating expenses:
  Selling, general and administrative..........    3,659,810      231,883       435,274(4a)    667,157
  Research and development.....................    1,109,382      341,588            --        341,588
                                                 -----------    ---------     ---------     ----------
    Total operating expenses...................    4,769,192      573,471       435,274      1,008,745
                                                 -----------    ---------     ---------     ----------
    Profit (loss) from continuing operations...   (5,600,168)    (441,515)     (435,274)      (876,789)
Other income...................................           --          245            --            245
Interest expense...............................     (331,594)     (20,077)           --        (20,077)
                                                 -----------    ---------     ---------     ----------
    Profit (loss) from continuing operations
      before income taxes......................   (5,931,762)    (461,347)     (435,274)      (896,621)
Income tax expense (benefit)...................           --           --            --             --
                                                 -----------    ---------     ---------     ----------
    Profit (loss) from continuing operations...  $(5,931,762)   $(461,347)    $(435,274)    $ (896,621)
                                                 ===========    =========     =========     ==========
Profit (loss) from continuing operations per
  common share -- basic and diluted............  $     (1.36)
                                                 ===========
Weighted average number of common shares
  outstanding -- basic and diluted.............    4,356,926
                                                 ===========

<CAPTION>
                                                    QDD INVESTMENT COMPANY, L.L.C.
                                                 -------------------------------------
                                                               PRO FORMA                  PRO FORMA
                                                 HISTORICAL   ADJUSTMENTS    PRO FORMA    COMBINED
                                                 ----------   -----------    ---------   -----------
<S>                                              <C>          <C>            <C>         <C>
Revenue........................................   $332,730     $      --     $332,730    $ 2,282,893
Cost of revenue................................    152,158            --      152,158      2,801,341
                                                  --------     ---------     ---------   -----------
    Gross profit (loss)........................    180,572            --      180,572       (518,448)
                                                  --------     ---------     ---------   -----------
Operating expenses:
  Selling, general and administrative..........    162,428       325,790(4b)  488,218      4,815,185
  Research and development.....................         --            --           --      1,450,970
                                                  --------     ---------     ---------   -----------
    Total operating expenses...................    162,428       325,790      488,218      6,266,155
                                                  --------     ---------     ---------   -----------
    Profit (loss) from continuing operations...     18,144      (325,790)    (307,646)    (6,784,603)
Other income...................................     36,548            --       36,548         36,793
Interest expense...............................     (1,927)        1,927(4c)       --       (351,671)
                                                  --------     ---------     ---------   -----------
    Profit (loss) from continuing operations
      before income taxes......................     52,765      (323,863)    (271,098)    (7,099,481)
Income tax expense (benefit)...................         --            --           --             --
                                                  --------     ---------     ---------   -----------
    Profit (loss) from continuing operations...   $ 52,765     $(323,863)    $(271,098)  $(7,099,481)
                                                  ========     =========     =========   ===========
Profit (loss) from continuing operations per
  common share -- basic and diluted............                                          $     (1.39)
                                                                                         ===========
Weighted average number of common shares
  outstanding -- basic and diluted.............                                            5,106,926(4d)
                                                                                         ===========
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

                                      F-25
<PAGE>   107

                            eMERGE INTERACTIVE, INC.

         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
                      NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
                                             eMerge                    LOST PELICAN, L.L.C.
                                          INTERACTIVE,    ----------------------------------------------
                                              INC.           HISTORICAL
                                          -------------   -----------------
                                           NINE MONTHS     FOR THE PERIOD
                                              ENDED       JANUARY 1, 1999-
                                          SEPTEMBER 30,     FEBRUARY 23,       PRO FORMA          PRO
                                              1999              1999          ADJUSTMENTS        FORMA
                                          -------------   -----------------   -----------      ---------
<S>                                       <C>             <C>                 <C>              <C>
Revenue.................................  $ 18,338,645        $  11,758        $     --        $ 11,758
Cost of revenue.........................    18,282,330            4,176              --           4,176
                                          ------------        ---------        --------        ---------
    Gross profit (loss).................        56,315            7,582              --           7,582
                                          ------------        ---------        --------        ---------
Operating expenses:
  Selling, general and administrative...     7,539,689          182,814          65,590(4a)     248,404
  Research and development..............     2,756,262           35,596              --          35,596
                                          ------------        ---------        --------        ---------
    Total operating expenses............    10,295,951          218,410          65,590         284,000
                                          ------------        ---------        --------        ---------
    Profit (loss) from continuing
      operations........................   (10,239,636)        (210,828)        (65,590)       (276,418)
Other Income............................        15,655
Interest expense........................      (458,624)         (11,619)             --         (11,619)
                                          ------------        ---------        --------        ---------
    Profit (loss) from continuing
      operations before income taxes....   (10,682,605)        (222,447)        (65,590)       (288,037)
Income tax expense (benefit)............            --               --              --              --
                                          ------------        ---------        --------        ---------
    Profit (loss) from continuing
      operations........................  $(10,682,605)       $(222,447)       $(65,590)       $(288,037)
                                          ============        =========        ========        =========
Profit (loss) from continuing operations
  per common share -- basic and
  diluted...............................  $      (1.59)
                                          ============
Weighted average number of common shares
  outstanding -- basic and diluted......     6,709,854
                                          ============

<CAPTION>
                                                 QDD INVESTMENT COMPANY, L.L.C.
                                          ---------------------------------------------
                                             HISTORICAL
                                          ----------------
                                           FOR THE PERIOD
                                             JANUARY 1,
                                               1999-          PRO FORMA          PRO       PRO FORMA
                                            MAY 19, 1999     ADJUSTMENTS        FORMA       COMBINED
                                          ----------------   -----------      ---------   ------------
<S>                                       <C>                <C>              <C>         <C>
Revenue.................................      $154,901        $      --       $154,901    $ 18,505,304
Cost of revenue.........................        67,752               --         67,752      18,354,258
                                              --------        ---------       ---------   ------------
    Gross profit (loss).................        87,149               --         87,149         151,046
                                              --------        ---------       ---------   ------------
Operating expenses:
  Selling, general and administrative...        79,683          124,067(4b)    203,750       7,991,843
  Research and development..............            --               --             --       2,791,858
                                              --------        ---------       ---------   ------------
    Total operating expenses............        79,683          124,067        203,750      10,783,701
                                              --------        ---------       ---------   ------------
    Profit (loss) from continuing
      operations........................         7,466         (124,067)      (116,601)    (10,632,655)
Other Income............................                                                        15,655
Interest expense........................        (1,272)           1,272(4c)         --        (470,243)
                                              --------        ---------       ---------   ------------
    Profit (loss) from continuing
      operations before income taxes....         6,194         (122,795)      (116,601)    (11,087,243)
Income tax expense (benefit)............            --               --             --              --
                                              --------        ---------       ---------   ------------
    Profit (loss) from continuing
      operations........................      $  6,194        $(122,795)      $(116,601)  $(11,087,243)
                                              ========        =========       =========   ============
Profit (loss) from continuing operations
  per common share -- basic and
  diluted...............................                                                  $      (1.62)
                                                                                          ============
Weighted average number of common shares
  outstanding -- basic and diluted......                                                     6,854,298
                                                                                          ============
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

                                      F-26
<PAGE>   108

                   eMERGE INTERACTIVE, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                              FINANCIAL STATEMENTS

(1) OVERVIEW

     The pro forma condensed combined financial statements are unaudited and
give effect to the acquisition of Lost Pelican L.L.C. (formerly CIN, LLC) d/b/a
Cattlemen's Information Network ("Lost Pelican") on February 24, 1999, the
acquisition of QDD Investment Company L.L.C. d/b/a Professional Cattle
Consultants ("QDD") on May 19, 1999 and the issuance of Series "C" preferred
stock by eMerge Interactive, Inc. (the "Company") on May 4, 1999, a portion of
the proceeds of which were used to acquire QDD.

     The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1998 is based on the historical financial statements of
the Company, Lost Pelican and QDD, giving effect to the transactions under the
purchase method of accounting and the assumptions and adjustments discussed
below. The pro forma condensed combined statement of operations for the nine
months ended September 30, 1999 is based on the historical financial statements
of the Company, Lost Pelican (for the period from January 1, 1999 to February
23, 1999, date prior to acquisition) and QDD (for the period from January 1,
1999 to May 19, 1999, date prior to acquisition), giving effect to the
transactions under the purchase method of accounting and the assumptions and
adjustments discussed below. The Company's purchase of Cyberstockyard, Inc. on
March 29, 1999 is not included because the pro forma effects are not
significant. The pro forma adjustments give effect to the transactions as if
they occurred as of January 1, 1998 for both periods presented.

     These unaudited pro forma financial statements may not be indicative of the
results of operations that actually would have occurred if the combination had
been in effect on January 1, 1998 or which may be obtained in the future. The
pro forma financial statements should be read in conjunction with the audited
financial statements of the Company, Lost Pelican and QDD contained elsewhere
herein.

(2) ACQUISITION OF LOST PELICAN

     On February 24, 1999, the Company acquired substantially all of the
tangible and intangible assets of Lost Pelican for $2,296,610. The purchase
price for the assets consisted of 750,000 shares of the Company's Class A common
stock valued at $720,000, the assumption of $812,021 of liabilities, a cash
payment due in October 1999 of $357,816, and an agreement to pay the first
$350,000 from Internet sales of third party products over the Company's Web site
and transaction costs of $56,773.

(3) ACQUISITION OF QDD

     On May 19, 1999, the Company acquired substantially all of the tangible and
intangible assets of QDD for a cash payment of $1,800,000, an assumption of
$2,361 of liabilities and transaction costs of $25,000.

(4) PRO FORMA ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE NINE
MONTHS ENDED SEPTEMBER 30, 1999

     The unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1998 and the nine months ended September 30, 1999
combines the

                                      F-27
<PAGE>   109
                   eMERGE INTERACTIVE, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                      FINANCIAL STATEMENTS -- (CONTINUED)

statements of operations of the Company, Lost Pelican and QDD. In combining the
companies, the pro forma adjustments reflect the following:

     (a) Record amortization of goodwill ($415,274 in 1998 and $62,576 in 1999)
         and non-compete agreements ($20,000 in 1998 and $3,014 in 1999) for
         Lost Pelican over estimated useful lives of five years.

     (b) Record amortization of goodwill ($300,790 in 1998 and $114,547 in 1999)
         and non-compete agreements ($25,000 in 1998 and $9,520 in 1999) for QDD
         over estimated useful lives of five years and four years, respectively.

     (c) To eliminate interest on debt of QDD not acquired of $1,927 in 1998 and
         $1,272 in 1999.

     (d) Record the issuance of 750,000 shares of Class A common stock in
         connection with Lost Pelican transaction.

        There is no income tax effect on the above pro forma adjustments due to
the full valuation allowance on net deferred tax assets.

                                      F-28
<PAGE>   110

                          INDEPENDENT AUDITORS' REPORT

To the Board of Members
  Lost Pelican, L.L.C.:

     We have audited the accompanying balance sheets of Lost Pelican, L.L.C.
(d/b/a Cattlemen's Information Network) as of December 31, 1997 and 1998 and the
related statements of operations, members' equity (deficit) and cash flows for
each of the two years 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.

     As discussed in note 1 to the financial statements, on February 23, 1999,
Lost Pelican, L.L.C. sold substantially all of its assets and trade names to
eMerge Interactive, Inc.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lost Pelican, L.L.C. at
December 31, 1997 and 1998 and the results of its operations and its cash flows
for each of the two years ended December 31, 1998 in conformity with generally
accepted accounting principles.

                                              /s/ KPMG LLP

Orlando, Florida
April 13, 1999

                                      F-29
<PAGE>   111

                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                              ------------------------    FEBRUARY 23,
                                                1997          1998            1999
                                              ---------    -----------    ------------
                                                                          (UNAUDITED)
<S>                                           <C>          <C>            <C>
                                        ASSETS
Current assets:
  Cash......................................  $      --    $        --    $       737
  Trade accounts receivable, net of
     allowance for uncollectible accounts of
     $-0-, $9,135, and $8,500 as of December
     31, 1997 and 1998 and February 23,
     1999, respectively.....................         --          8,548          6,497
                                              ---------    -----------    -----------
          Total current assets..............         --          8,548          7,234
Property and equipment, net (notes 3 and
  5)........................................      1,288        102,233        105,247
                                              ---------    -----------    -----------
          Total assets......................  $   1,288    $   110,781    $   112,481
                                              =========    ===========    ===========

                      LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
  Line of credit (note 4)...................  $      --    $   293,983    $   267,109
  Current installments of long-term debt
     (note 5)...............................     60,544         91,471        241,950
  Accounts payable..........................      7,991          3,710          1,518
  Accrued liabilities.......................      2,614         15,481         18,646
                                              ---------    -----------    -----------
          Total current liabilities.........     71,149        404,645        529,223
Long-term debt, excluding current
  installments (note 5).....................         --        112,944        109,854
                                              ---------    -----------    -----------
          Total liabilities.................     71,149        517,589        639,077
                                              ---------    -----------    -----------
Commitment (note 6)
Subsequent event (note 8)
Members' equity (deficit) (note 7):
  Unit capital..............................    879,419      1,003,819      1,106,478
  Accumulated deficit.......................   (949,280)    (1,410,627)    (1,633,074)
                                              ---------    -----------    -----------
          Total members' equity (deficit)...    (69,861)      (406,808)      (526,596)
                                              ---------    -----------    -----------
          Total liabilities and members'
            equity (deficit)................  $   1,288    $   110,781    $   112,481
                                              =========    ===========    ===========
</TABLE>

See accompanying notes to financial statements.
                                      F-30
<PAGE>   112

                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                    YEAR ENDED                               FOR THE PERIOD
                                   DECEMBER 31,           NINE MONTHS        JANUARY 1, 1999
                               ---------------------         ENDED               THROUGH
                                 1997        1998      SEPTEMBER 30, 1998   FEBRUARY 23, 1999
                               ---------   ---------   ------------------   -----------------
                                                          (UNAUDITED)          (UNAUDITED)
<S>                            <C>         <C>         <C>                  <C>
Revenue......................  $  43,672   $ 157,692       $  68,415            $  11,758
Cost of revenue..............     13,789      25,736          10,804                4,176
                               ---------   ---------       ---------            ---------
     Gross profit............     29,883     131,956          57,611                7,582
Selling, general and
  administrative.............    377,504     231,883         179,939              182,814
Research and development.....    124,043     341,588         227,773               35,596
                               ---------   ---------       ---------            ---------
     Profit (loss) from
       operations............   (471,664)   (441,515)       (350,101)            (210,828)
Other income (expense):
  Other income...............         --         245              90                   --
  Interest expense...........     (4,764)    (20,077)        (15,178)             (11,619)
                               ---------   ---------       ---------            ---------
     Net other income
       (expense).............     (4,764)    (19,832)        (15,088)             (11,619)
                               ---------   ---------       ---------            ---------
     Net profit (loss).......  $(476,428)  $(461,347)      $(365,189)           $(222,447)
                               =========   =========       =========            =========
</TABLE>

See accompanying notes to financial statements.
                                      F-31
<PAGE>   113

                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                    STATEMENTS OF MEMBERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                              UNIT CAPITAL
                                        -------------------------   ACCUMULATED
                                           UNITS         AMOUNT       DEFICIT       TOTAL
                                        ------------   ----------   -----------   ---------
<S>                                     <C>            <C>          <C>           <C>
Balances at January 1, 1997...........    600,000      $  473,380   $  (472,852)  $     528
Non-cash contribution of services by
members (note 7)......................         --         222,557            --     222,557
Cash contribution by majority members
  (note 7)............................         --         183,482            --     183,482
Net profit (loss).....................         --              --      (476,428)   (476,428)
                                          -------      ----------   -----------   ---------
Balances at December 31, 1997.........    600,000         879,419      (949,280)    (69,861)
Non-cash contribution of services by
  members (note 7)....................         --          39,583            --      39,583
Cash contribution by majority members
  (note 7)............................         --          84,817            --      84,817
Net profit (loss).....................         --              --      (461,347)   (461,347)
                                          -------      ----------   -----------   ---------
Balances at December 31, 1998.........    600,000       1,003,819    (1,410,627)   (406,808)
Non-cash contribution of services by
  members (unaudited) (note 7)........         --         102,659            --     102,659
Net profit (loss) (unaudited).........         --              --      (222,447)   (222,447)
                                          -------      ----------   -----------   ---------
Balances at February 23, 1999
  (unaudited).........................    600,000      $1,106,478   $(1,633,074)  $(526,596)
                                          =======      ==========   ===========   =========
</TABLE>

See accompanying notes to financial statements.
                                      F-32
<PAGE>   114

                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                          YEARS ENDED                              FOR THE PERIOD
                                         DECEMBER 31,           NINE MONTHS        JANUARY 1, 1999
                                     ---------------------         ENDED               THROUGH
                                       1997        1998      SEPTEMBER 30, 1998   FEBRUARY 23, 1999
                                     ---------   ---------   ------------------   -----------------
                                                                (UNAUDITED)          (UNAUDITED)
<S>                                  <C>         <C>         <C>                  <C>
Cash flows from operating
  activities:
Net profit (loss)..................  $(476,428)  $(461,347)      $(365,189)           $(222,447)
  Adjustments to reconcile net
    profit (loss) to net cash used
    in operating activities:
    Non-cash contribution of
      service by members...........    222,557      39,583              --              102,659
    Depreciation...................        322      26,606          17,826                9,964
    Provision for doubtful
      accounts.....................         --       9,135              --                   --
    Changes in operating assets and
      liabilities:
      Trade accounts receivable....         --     (17,683)             --                2,051
      Accounts payable.............      7,991      (4,281)          9,491               (2,192)
      Accrued royalties............      2,320       6,054                                   --
      Accrued liabilities..........        294       6,813          18,178                3,165
                                     ---------   ---------       ---------            ---------
      Net cash provided by (used
         in) operating
         activities................   (242,944)   (395,120)       (319,694)            (106,800)
                                     ---------   ---------       ---------            ---------
Cash flows from investing
  activities:
  Purchases of property and
    equipment......................     (1,610)   (127,551)        (73,713)             (12,978)
                                     ---------   ---------       ---------            ---------
Cash flows from financing
  activities:
  Net borrowings under line of
    credit agreements..............         --     293,983         117,513              (26,874)
  Proceeds from long-term debt.....     60,544     547,834         547,834              150,000
  Repayments of long-term debt.....         --    (403,963)       (396,340)              (2,610)
  Proceeds from capital
    contributions..................    183,482      84,817         124,400                   --
                                     ---------   ---------       ---------            ---------
      Net cash provided by
         financing activities......    244,026     522,671         393,407              120,516
                                     ---------   ---------       ---------            ---------
      Net increase (decrease) in
         cash......................       (528)         --              --                  738
Cash -- beginning of period........        528          --              --                   --
                                     ---------   ---------       ---------            ---------
Cash -- end of period..............  $      --   $      --       $      --            $     738
                                     =========   =========       =========            =========
Supplemental disclosure:
  Cash paid for interest...........  $   2,444   $  14,023       $  10,204            $  11,619
                                     =========   =========       =========            =========
</TABLE>

See accompanying notes to financial statements.
                                      F-33
<PAGE>   115

                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
 (INFORMATION INSOFAR AS IT RELATES TO FEBRUARY 23, 1999, THE SIX MONTHS ENDED
 JUNE 30, 1998 AND FOR THE PERIOD JANUARY 1, 1999 THROUGH FEBRUARY 23, 1999 IS
                                   UNAUDITED)

(1) ORGANIZATION

     Lost Pelican, L.L.C. (the "Company") was formed on April 1, 1996 as
Cattlemen's Management Network as a limited liability company under the laws of
the state of Kansas and its affairs are governed by its Limited Liability
Company Agreement (the "Agreement"). The Company's income and losses are
allocated in accordance with the terms of the Agreement. On December 21, 1998,
the Company changed its name to CIN L.L.C. On February 24, 1999, the Company
changed its name to Lost Pelican, L.L.C. and sold its assets and trade names
("CIN" and "Cattlemen's Information Network") to eMerge Interactive, Inc.
("eMerge").

     Prior to formation as an L.L.C., the Company's business was financed and
operated by Cattle Management Health Network, "CMHN", which was owned by the
majority members of the Company. The primary business of the Company is selling
access to its cattle feedlot performance measurements database.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation of property and
equipment is computed using accelerated methods over the estimated useful lives
of the assets.

  (b) REVENUE RECOGNITION

     The Company recognizes revenue in accordance with the terms of the sale or
contract, generally as services are provided.

  (c) INCOME TAXES

     As a limited liability Company, the Company is classified as a partnership
for income tax purposes and is not directly subject to U.S. federal and most
state income taxes, including Kansas state income tax.

  (d) USE OF ESTIMATES

     The preparation of the Company's 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,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.

  (e) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash, accounts receivable, line of credit, long term
debt, accounts payable and accrued liabilities reflected in the financial
statements approximates fair value

                                      F-34
<PAGE>   116
                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

due to the short-term maturity of these instruments or the interest rate fairly
reflects the credit risk.

  (f) INTERIM FINANCIAL INFORMATION

     The financial statements as of February 23, 1999 and for the periods ended
September 30, 1998 and February 23, 1999 are unaudited but reflect only normal
and recurring adjustments which are, in the opinion of management, necessary for
the fair presentation of financial position and results of operations. Operating
results for the periods ended September 30, 1998 and February 23, 1999 are not
necessarily indicative of the results that may be expected for the full year.

(3) PROPERTY AND EQUIPMENT

     Property and equipment consists of:

<TABLE>
<CAPTION>
                                         DECEMBER 31,
                                      ------------------    FEBRUARY 23,     ESTIMATED
                                       1997       1998          1999        USEFUL LIVES
                                      ------    --------    ------------    ------------
                                                            (UNAUDITED)
<S>                                   <C>       <C>         <C>             <C>
Office and computer equipment.......  $1,610    $125,770      $138,748      5 - 7 years
Purchased software..................      --       3,391         3,391          3 years
                                      ------    --------      --------
                                       1,610     129,161       142,139
Less accumulated depreciation.......     322      26,928        36,892
                                      ------    --------      --------
Property and equipment, net.........  $1,288    $102,233      $105,247
                                      ======    ========      ========
</TABLE>

(4) LINE OF CREDIT

     During 1998, the Company entered into a $300,000 line of credit agreement,
guaranteed by the principal shareholders, with a bank that expires on September
15, 1999. Under the agreement, principal is payable on September 15, 1999, and
interest is payable monthly at 9.5%. Outstanding borrowings under this agreement
were $293,983 as of December 31, 1998 and $267,109 (unaudited) as of February
23, 1999.

                                      F-35
<PAGE>   117
                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

     Long-term debt consists of:

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                  -------------------    FEBRUARY 23,
                                                   1997        1998          1999
                                                  -------    --------    ------------
                                                                         (UNAUDITED)
<S>                                               <C>        <C>         <C>
Note payable to Kansas Technology Enterprise
  Corporation, including interest at 10% (see
  note 6).......................................  $60,544    $ 60,544      $ 60,544
Variable rate note payable in monthly
installments of $3,814, including interest at
prime plus 1% (9.25% at December 31, 1998)
through October 1, 2002; secured by equipment...       --     143,871       141,260
Variable rate note payable, interest payable
  monthly at 9.5% through September 15, 1999;
  secured by equipment..........................       --          --       150,000
                                                  -------    --------      --------
                                                   60,544     204,415       351,804
Less current installments.......................   60,544      91,471       241,950
                                                  -------    --------      --------
Long-term debt, excluding current
  installments..................................  $    --    $112,944      $109,854
                                                  =======    ========      ========
</TABLE>

     The aggregate maturities of long-term debt for each of the four years
subsequent to December 31, 1998 are as follows: 1999, $91,471; 2000, $36,856;
2001, $40,413; and 2002, $35,675.

(6) COMMITMENT

  ROYALTY AGREEMENT

     On September 6, 1996, the Company entered into a funding agreement with
Kansas Technology Enterprise Corporation (KTEC) for the development of a cattle
management network (the "Product"). The Company received $60,544 under this
agreement. Under the terms of this agreement, the Company will pay KTEC a
royalty of 3% on gross sales of the Product, until the award amount of $60,544
plus interest at 10% per annum is repaid. Interest begins to accrue on the date
KTEC makes its last payment on the project. Once the original obligation is met,
the Company will pay KTEC a royalty of 1% on future gross sales of the product
up to an additional $60,544 in royalty payments.

     If the Company licenses, sells, or otherwise transfers the rights to
manufacture the Product to another Kansas firm, such that the primary point of
activity occurs in Kansas, the Company shall pay KTEC: (1) twenty five percent
of the proceeds of such sale, up to the award amount of $60,544 plus interest at
10%; and (2) an ongoing royalty on gross sales of the Product up to an
additional $60,544 in royalty payments. In the event such transfer of the
Product within Kansas involves the exchange of other assets or is unsuitable to
this type of repayment structure, then repayment terms may be subject to
renegotiation.

     If the Company: (1) commercializes the Product out-of-state such that no
management, marketing or production activity occurs in Kansas; or (2) sells,
transfers, licenses, or otherwise disposes of the rights to the Product
out-of-state, such that no management,

                                      F-36
<PAGE>   118
                              LOST PELICAN, L.L.C.
                     D/B/A CATTLEMEN'S INFORMATION NETWORK
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

marketing or production activity occurs in Kansas, the Company shall pay KTEC:
(1) within thirty (30) days of such transfer, the award amount of $60,544 plus
interest at 10%; and (2) an ongoing royalty of 2% on gross sales up to an
additional $90,816. If significant benefits to Kansas can occur as a result of
such out-of-state transfer, this repayment obligation may be subject to
renegotiation. The Company does note anticipate the acquisition by eMerge
Interactive, Inc. (eMerge) as described in note 8 to impact the agreement with
KTEC.

(7) MEMBERS' EQUITY

     Since inception of the Company, the Company's majority members have
contributed approximately $383,000 in services and paid expenses on behalf of
the business from other sources totaling approximately $503,000. Non-cash
contributions totaled $222,557 in 1997, $39,583 in 1998 and $102,659 (unaudited)
in 1999 and cash contributions totaled $183,482 in 1997, $84,817 in 1998 and $0
(unaudited) in 1999.

(8) SUBSEQUENT EVENT

     On February 24, 1999, the Company assets were acquired by eMerge for
750,000 shares of eMerge's Class A common stock, $383,000 in cash, assumption of
liabilities of $600,000 and a commitment to pay $350,000 of the first net sales
of CIN products.

                                      F-37
<PAGE>   119

                          INDEPENDENT AUDITORS' REPORT

To the Board of Members
  QDD Investment Company, L.L.C.:

     We have audited the accompanying balance sheet of QDD Investment Company,
L.L.C. (d/b/a Professional Cattle Consultants, L.L.C.) as of December 31, 1998,
and the related statements of operations, members' equity and cash flows, for
the year then ended. 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 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 audit provides a reasonable basis for our opinion.

     As discussed in Note 1 to the financial statements, on May 19, 1999, QDD
Investment Company, L.L.C. sold substantially all of its assets and trade names
to eMerge Interactive, Inc.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of QDD Investment Company,
L.L.C. as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

                                              /s/ KPMG LLP

Oklahoma City, Oklahoma
July 7, 1999

                                      F-38
<PAGE>   120

                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           DECEMBER 31,      MAY 19,
                                                               1998           1999
                                                           ------------    -----------
                                                                           (UNAUDITED)
<S>                                                        <C>             <C>
                                        ASSETS
Current assets -- trade accounts receivable, net.........    $ 18,872       $ 46,875
                                                             --------       --------
Computer software and hardware:
  Software (note 1)......................................     182,394        220,825
  Hardware...............................................      45,480         51,995
                                                             --------       --------
          Total computer software and hardware, at
            cost.........................................     227,874        272,820
  Less accumulated depreciation and amortization.........      10,330         13,901
                                                             --------       --------
          Net computer software and hardware.............     217,544        258,919
                                                             --------       --------
          Total assets...................................    $236,416       $305,794
                                                             ========       ========

                           LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
  Accounts payable.......................................    $ 29,135       $ 25,319
  Related party payable (note 5).........................      12,000         14,000
  Notes payable (note 3).................................      34,930         74,930
                                                             --------       --------
          Total current liabilities......................      76,065        114,249
Members' equity (note 4).................................     160,351        191,545
Commitments and contingencies (notes 5, 6 and 8).........
                                                             --------       --------
          Total liabilities and members' equity..........    $236,416       $305,794
                                                             ========       ========
</TABLE>

See accompanying notes to financial statements.
                                      F-39
<PAGE>   121

                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                          FOR THE PERIOD
                                       YEAR ENDED                         JANUARY 1, 1999
                                      DECEMBER 31,   NINE MONTHS ENDED        THROUGH
                                          1998       SEPTEMBER 30, 1998    MAY 19, 1999
                                      ------------   ------------------   ---------------
                                                        (UNAUDITED)         (UNAUDITED)
<S>                                   <C>            <C>                  <C>
Service revenue.....................    $332,730          $245,298           $154,901
                                        --------          --------           --------
Operating expenses:
  Cost of services..................     152,158           128,398             67,752
  General and administrative (note
     4).............................     162,428           102,138             79,683
                                        --------          --------           --------
          Total operating
            expenses................     314,586           230,536            147,435
                                        --------          --------           --------
          Operating income..........      18,144            14,762              7,466
Other income (expense):
  Advertising income (note 2).......      36,548            27,000                 --
  Interest expense..................      (1,927)           (1,110)            (1,272)
                                        --------          --------           --------
          Net income................    $ 52,765          $ 40,652           $  6,194
                                        ========          ========           ========
</TABLE>

See accompanying notes to financial statements.
                                      F-40
<PAGE>   122

                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                         STATEMENTS OF MEMBERS' EQUITY

<TABLE>
<S>                                                           <C>
Balance, December 31, 1997..................................  $ 68,586
Net income..................................................    52,765
  Non-cash contribution of services by members (note 4).....    39,000
                                                              --------
Balance, December 31, 1998..................................   160,351
  Net income (unaudited)....................................     6,194
  Non-cash contributions of services by members (note 4)
     (unaudited)............................................    25,000
                                                              --------
Balance, May 19, 1999 (unaudited)...........................  $191,545
                                                              ========
</TABLE>

See accompanying notes to financial statements.
                                      F-41
<PAGE>   123

                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            FOR THE PERIOD
                                         YEAR ENDED                         JANUARY 1, 1999
                                        DECEMBER 31,   NINE MONTHS ENDED        THROUGH
                                            1998       SEPTEMBER 30, 1998    MAY 19, 1999
                                        ------------   ------------------   ---------------
                                                          (UNAUDITED)         (UNAUDITED)
<S>                                     <C>            <C>                  <C>
Cash flows from operating activities:
Net income............................   $  52,765          $ 40,652           $  6,194
  Adjustments to reconcile net income
     to net cash provided by operating
     activities:
     Non-cash contribution of services
       by members.....................      39,000            30,000             25,000
     Depreciation and amortization
       expense........................       7,035             5,276              3,571
     Changes in operating assets and
       liabilities:
       Accounts receivable............         778             3,339            (28,003)
       Accounts and related party
          payable.....................      17,101            16,601             (1,816)
                                         ---------          --------           --------
          Net cash provided by
            operating activities......     116,679            95,868              4,946
                                         ---------          --------           --------
Cash used in investing activities --
  purchases of computer software and
  hardware............................    (141,631)          (95,868)           (44,946)
                                         ---------          --------           --------
Cash flows from financing activities:
  Payments on notes payable...........     (10,000)          (10,000)                --
  Borrowings on notes payable.........      34,952            10,000             40,000
                                         ---------          --------           --------
          Net cash provided by
            financing activities......      24,952                --             40,000
                                         ---------          --------           --------
Net increase in cash..................          --                --                 --
Cash at beginning of period...........          --                --                 --
                                         ---------          --------           --------
Cash at end of period.................   $      --          $     --           $     --
                                         =========          ========           ========
Supplemental cash flow information:
  Cash payments of interest...........   $   1,927          $  1,110           $  1,272
                                         =========          ========           ========
</TABLE>

See accompanying notes to financial statements.
                                      F-42
<PAGE>   124

                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
  (INFORMATION INSOFAR AS IT RELATES TO MAY 19, 1999 OR THE NINE MONTHS ENDED
 SEPTEMBER 30, 1998 AND FOR THE PERIOD JANUARY 1, 1999 THROUGH MAY 19, 1999 IS
                                   UNAUDITED)

(1) ORGANIZATION AND BASIS OF PRESENTATION

     QDD Investment Company, L.L.C. (the Company) is a provider of performance
measurement information related to the United States cattle feedyard industry.
The Company's customers consist primarily of cattle feedyards located in the
United States, and to a lesser extent, other organizations involved in the
United States cattle industry.

     In May 1999, the Company changed its name to QDD Investment Company, L.L.C.
On May 19, 1999, the Company sold substantially all of its assets and trade
names ("Professional Cattle Consultants, L.L.C." and "PCC") to eMerge
Interactive, Inc. ("eMerge") for $1,800,000 in cash. eMerge also assumed certain
of the Company's liabilities.

     In the opinion of management, the accompanying unaudited financial
statements as of May 19, 1999 and for the nine months ended September 30, 1998
and for the period January 1, 1999 through May 19, 1999, reflect adjustments
(all of which were normal and recurring) which, in the opinion of management,
are necessary for a fair statement of the financial position and results for the
interim periods presented.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) 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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

  (b) COMPUTER SOFTWARE AND HARDWARE

     Computer software and hardware is recorded at cost. Depreciation and
amortization of computer hardware and software is calculated using the
straight-line method over periods ranging from five to seven years.

     In late 1997, the Company engaged a third party to develop and install a
performance measurement system. Costs related to the design, configuration,
coding, installation and testing of the system have been capitalized; all other
costs have been expensed. The Company plans to begin using the new performance
measurement system in late 1999.

     The Company reviews long-lived assets, including computer software, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets.

                                      F-43
<PAGE>   125
                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (c) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of the Company's accounts receivable and accounts
payable, related party payable and notes payable approximate fair value because
of the short maturity of those instruments.

  (d) REVENUE RECOGNITION

     The Company recognizes revenue as services are provided.

  (e) ADVERTISING INCOME

     In 1998, the Company contracted with an organization which placed
advertising on the Company's monthly and semi-annual newsletters for a fee of
$36,000. The contract terminated in December 1998 and was not renewed.

  (f) INCOME TAXES

     As a limited liability company, the Company is not directly subject to
income taxes. Income taxes, if any, are payable by the Company's members.

  (g) COMPREHENSIVE INCOME

     The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (SFAS No. 130) on January 1, 1998. SFAS No.
130 establishes standards for reporting and display of "comprehensive income"
and its components in a set of financial statements. It requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company had no items of
comprehensive income as defined by SFAS No. 130 not included in the accompanying
statements of operations; therefore, statements of comprehensive income have not
been presented in the accompanying financial statements.

                                      F-44
<PAGE>   126
                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(3) NOTES PAYABLE

     Notes payable at December 31, 1998 and May 19, 1999 consisted of the
following:

<TABLE>
<CAPTION>
                                                           DECEMBER 31,      MAY 19,
                                                               1998           1999
                                                           ------------    -----------
                                                                           (UNAUDITED)
<S>                                                        <C>             <C>
Term loan from a bank, bearing interest at 9.5%;
  principal and interest are due on September 30, 1999
  (maturity date)(a).....................................    $20,035         $    --
Term loan from a bank, bearing interest at 10%; principal
and interest are due on February 5, 1999 (maturity
date)(a).................................................     14,895              --
Term loan from a bank, bearing interest at 10%; principal
  and interest are due on July 15, 1999 (maturity
  date)(a)...............................................         --          74,930
                                                             -------         -------
                                                             $34,930         $74,930
                                                             =======         =======
</TABLE>

- -------------------------
(a) On January 22, 1999, the Company renegotiated its two term notes, resulting
    in the conversion of the two notes into a single term note, additional
    borrowings, changing the maturity date and increasing the interest rate. The
    term note is unsecured; however, it is guaranteed by a manager and owner of
    the Company.

(4) MEMBERS' EQUITY

     The Company operates as a limited liability company organized in the State
of Oklahoma until February 14, 2097, unless sooner terminated. Members' equity
is allocated to the members in accordance with the operating agreement of the
Company based on each members' capital account and each member's liability is
limited to its capital account.

     During the year ended December 31, 1998, the nine months ended September
30, 1998 and for the period January 1, 1999 through May 19, 1999, the Company's
members contributed $39,000, $30,000 (unaudited), and $25,000 (unaudited),
respectively, in services to the Company. Services contributed on behalf of the
Company by its members are recorded as expenses and non-cash contributions in
the accompanying financial statements.

(5) RELATED PARTY TRANSACTIONS

     The Company leases office space and equipment from one of its managers and
owners. The Company leases the space and equipment on a month-to-month basis.
Rent expense totaled $12,000 for the year ended December 31, 1998, $9,000 for
the nine months ended September 30, 1998 and $5,000 (unaudited) for the period
January 1, 1999 through May 19, 1999. Outstanding at December 31, 1998 and May
19, 1999 was $12,000 and $14,000 (unaudited), respectively, due to the manager
and owner of the Company for unpaid rent.

                                      F-45
<PAGE>   127
                         QDD INVESTMENT COMPANY, L.L.C.
                 D/B/A PROFESSIONAL CATTLE CONSULTANTS, L.L.C.
                         (A LIMITED LIABILITY COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) LEASE OBLIGATIONS

     The Company leases office equipment and a vehicle under operating leases,
which expire over the next two years. Rent expense approximated $11,000 for the
year ended December 31, 1998, $8,000 for the nine months ended September 30,
1998 and $5,000 (unaudited) for the period January 1, 1999 through May 19, 1999.
Future minimum lease payments under noncancellable operating leases will
approximate $12,000 and $2,500 in 1999 and 2000, respectively. As discussed in
note 5, the Company also leases office space from a related party.

(7) BUSINESS SEGMENT INFORMATION

     The Company manages its business by services it provides, which resulted in
one operating segment during the year ended December 31, 1998 and for the period
January 1, 1999 through May 19, 1999. The Company is a provider of performance
measurement information related to the United States cattle feedyard industry.

     All of the Company's revenues for the year ended December 31, 1998 and for
the period January 1, 1999 through May 19, 1999, were derived from customers in
the United States. One customer accounted for 38% of the Company's revenues for
the year ended December 31, 1998, and 34% (unaudited) and 38% (unaudited) of the
Company's revenues for the nine months ended September 30, 1998 and for the
period January 1, 1999 through May 19, 1999, respectively. The same customer
accounted for none and 95% (unaudited) of the Company's trade accounts
receivable balance at December 31, 1998 and May 19, 1999, respectively.

(8) YEAR 2000 RISKS

     Existing computer programs of many businesses were developed with a
two-digit year identification without consideration of the upcoming change in
the century or millennium in the year 2000. The Company is in the process of
addressing its year 2000 readiness. In late 1997, the Company engaged a third
party to develop a new performance measurement system to replace its outdated
system and to handle the year 2000 issue. Final testing and use of the new
system is expected to occur in mid 1999.

     Failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could adversely affect the Company's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the year 2000 problem, resulting in part from the uncertainty of the
year 2000 readiness of third party suppliers, vendors and customers, the Company
is unable to determine at this time whether the consequences of year 2000
failures will have a material impact on the Company's results of operations,
liquidity and financial condition. The Company believes that, upon completion of
the new system, the possibility of interruptions of material consequences to
normal operations will be reduced. The Company is relying on the new system to
be year 2000 compliant and has not developed a contingency plan to minimize any
potential disruptions which could occur because of the year 2000.

                                      F-46
<PAGE>   128

                                8,000,000 SHARES

                         [MERGE INTERACTIVE GLOBE LOGO]

                              CLASS A COMMON STOCK

                           -------------------------
                                   PROSPECTUS
                           -------------------------

                          ADAMS, HARKNESS & HILL, INC.

                          FIRST UNION SECURITIES, INC.

                                  FAC/EQUITIES

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

                                               , 2000
<PAGE>   129

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The expenses (other than underwriting discounts and commissions) payable in
connection with the sale of the Class A Common Stock offered hereby are as
follows:

<TABLE>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $   24,117
NASD filing fee.............................................      10,910
Nasdaq filing fee...........................................      95,000
Printing and engraving expenses.............................     200,000
Legal fees and expenses.....................................     450,000
Accounting fees and expenses................................     350,000
Blue Sky fees and expenses (including legal fees)...........      10,000
Transfer agent and registrar fees and expenses..............      15,000
Miscellaneous...............................................      94,973
                                                              ----------
     Total..................................................  $1,250,000
                                                              ==========
</TABLE>

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The Registrant's Certificate of Incorporation permits indemnification to
the fullest extent permitted by Delaware law. The Registrant's By-laws require
the Registrant to indemnify any person who was or is an authorized
representative of the Registrant, and who was or is a party or is threatened to
be made a party to any proceeding by reason of the fact that such person was or
is an authorized representative of the Registrant, against expenses, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such third party proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interests of the Registrant and, with respect to any
criminal proceeding (including any action or investigation which could or does
lead to a criminal proceeding) had no reasonable cause to believe such conduct
was unlawful. The Registrant shall also indemnify any person who was or is an
authorized representative of the Registrant, and who was or is a party or is
threatened to be made a party to any proceeding by reason of the fact that such
person was or is an authorized representative of the Registrant against expenses
actually and reasonably incurred by such person in connection with the defense
or settlement of such action if such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Registrant unless and only to the extent that the Delaware Court
of Chancery or the court in which such proceeding was pending shall determine
that, despite the adjudication of liability but in view of all the circumstances
of the case, such authorized representative is fairly and reasonably entitled to
indemnity. Such indemnification is mandatory under the Registrant's By-laws as
to expenses actually and reasonably incurred to the extent that an authorized
representative of the Registrant has been successful on the merits or otherwise
in defense of any proceeding or in defense of any claim, issue or matter
therein. The determination of whether an individual is entitled to
indemnification may be made by a majority of disinterested directors,
independent legal counsel in a written legal opinion or

                                      II-1
<PAGE>   130

the stockholders. Delaware law also permits indemnification in connection with a
proceeding brought by or in the right of the Registrant to procure a judgment in
its favor. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in that Securities
and Exchange Act of 1934 and is therefore unenforceable. The Registrant expects
to obtain a directors and officers liability insurance policy prior to the
effective date of this Registration Statement.

     The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Securities Act of 1933. Reference is made to Section 8.4 of the form
of underwriting agreement which is filed as Exhibit 1.1 hereto.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     In the preceding three years, the Registrant has issued the following
securities that were not registered under the Act:

          As of December 31, 1999, eMerge Interactive had sold to employees and
     certain other persons an aggregate of 7,110,979 shares of class A common
     stock, including class A common stock issued in connection with business
     acquisitions, as follows:

          In July 1998, eMerge Interactive issued 2,500,000 shares of class A
     common stock in connection with the acquisition of 100% of the partnership
     interests of NutriCharge, a South Dakota partnership, at a price of $.80
     per share. In July 1998, eMerge Interactive issued 87,500 shares of its
     class A common stock to the shareholders of STS Agriventures, Ltd., at a
     price of $.80 per share. In February of 1999, eMerge Interactive issued
     750,000 shares of class A common stock in connection with the acquisition
     of assets, including CIN, LLC, at a price of $.96 per share. eMerge
     Interactive issued 250,000 shares of class A common stock in connection
     with the acquisition of 100% of the issued and outstanding stock of
     Cyberstockyard, Inc. on March 29, 1999, at a price of $1.60 per share. In
     August of 1999, eMerge Interactive issued 62,500 shares of class A common
     stock at $6.40 per share, for 19% of the common stock of Turnkey Computer
     Systems, Inc. All of such sales were made under the exemption from
     registration provided under Section 4(2) of the Act. The issuance to the
     stockholders of Cyberstockyard, Inc. was also made pursuant to Rule 504
     under the Act.

          As of December 31, 1999, eMerge Interactive had sold an aggregate of
     14,499,162 shares of preferred stock, as follows:

          In December 1998, we issued 2,400,000 shares of series B preferred
     stock to XL Vision at a price equal to $2.00 per share, in exchange for the
     cancellation of debt. In May of 1999, we issued 1,000,000 shares of series
     C preferred stock to Safeguard 99 Capital L.P. and 100,000 shares to
     purchasers associated with Applewood Associates, L.P., now Wheatley
     Partners II, L.P., at a price of $5.00 per share. In November 1999, we
     issued 4,555,556 shares of series D preferred stock to Internet Capital
     Group, Inc. at a purchase price of $8.23 per share, payable in cash and a
     promissory note. In connection with the sale of preferred stock, we also
     agreed issued to Internet Capital Group a warrant to purchase up to
     1,138,889 shares of class B common stock. All of such sales were made under
     the exemption from registration provided under Section 4(2) of the Act.

                                      II-2
<PAGE>   131

     Pursuant to eMerge Interactive's 1996 and 1999 Equity Compensation Plans,
eMerge Interactive has granted options to purchase a total of 3,470,875 shares
of common stock to its employees and certain other persons through December 31,
1999 at a weighted average exercise price of $2.51 per share. For more detailed
descriptions of eMerge Interactive's Equity Compensation Plans, see the section
entitled Management -- Equity Compensation in this registration statement. In
granting the options and selling the underlying securities upon exercise of the
options, eMerge Interactive is relying upon exemptions from registration set
forth in Rule 701 and Section 4(2) of the Act.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS:


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
 1.1      Form of Underwriting Agreement.
 1.2      Form of Standby Stock Purchase Agreement.*
 3.1      Second Amended and Restated Certificate of Incorporation of
          eMerge Interactive.
 3.2      Amended and Restated Bylaws of eMerge Interactive.
 5.1      Opinion of Morgan, Lewis & Bockius LLP.
10.1      Amended and Restated 1996 Equity Compensation Plan.
10.2      1999 Equity Compensation Plan.
10.3      Master License Agreement dated July 29, 1998 between eMerge
          Interactive and Her Majesty the Queen of Canada, as
          represented by the Minister of Agriculture and Agri-Food
          Canada.+*
10.4      Administrative Services Agreement dated December 15, 1997
          between eMerge Interactive, Safeguard Scientifics, Inc. and
          XL Vision, Inc., as amended on August 17, 1999.
10.5      Direct Charge Administrative Services Agreement dated April
          15, 1997 between eMerge Interactive and XL Vision, Inc.
10.6      Asset Purchase Agreement dated February 24, 1999 between
          eMerge Interactive, CIN, LLC and Dr. Scott Crain.
10.7      Stock Purchase Agreement dated March 22, 1999 between eMerge
          Interactive, Cyberstockyard, Inc. and J. Scott Sanders,
          David Sanders, Scott Calhoun and Dr. Duane Pankratz.
10.8      Stockholders Agreement dated July 29, 1998 among eMerge
          Interactive and individuals designated as the former
          shareholders of STS Agriventures, Ltd,.
10.9      Purchase Agreement dated July 29, 1998 among eMerge
          Interactive, NutriCharge, J Technologies, LLC, and the
          Biegert Family Irrevocable Trust.
10.10     Asset Purchase Agreement dated January 15, 1999 between
          eMerge Interactive and Sperry Marine, Inc.
10.11     Purchase and License Agreement dated January 15, 1999
          between eMerge Interactive and Sperry Marine, Inc.
10.12     Asset Purchase Agreement dated May 19, 1999 between eMerge
          Interactive and Professional Cattle Consultants, L.L.C.
10.13     Letter of Agreement dated January 12, 2000 between eMerge
          Interactive and Southern States.+
10.14     Subscription Agreement letter for purchase of Series B
          Junior Preferred Stock.
</TABLE>


                                      II-3
<PAGE>   132


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
10.15     Preferred Stock Purchase Agreement dated April 1, 1999
          (Series C Preferred Stock).
10.16     Common Stock Purchase Agreement dated August 16, 1999
          between eMerge Interactive and Turnkey Computer Systems,
          Inc.
10.17     Registration Rights Agreement dated July 18, 1997.
10.18     Real Property Sublease between XL Vision and eMerge
          Interactive, dated December 1999.
10.19     Stockholders' and Registration Rights Agreement dated
          February 24, 1999.
10.20     Joinder and Correction to Stockholders and Registration
          Rights Agreement dated March 29, 1999.
10.21     (a) Revolving Note dated July 21, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc., Amended Revolving
          Note dated August 3, 1999, (b) second Amended Revolving Note
          dated October 25, 1999 and (c) Third Amended Revolving Note
          dated December 6, 1999 and (d) Fourth Amended Revolving Note
          dated January 31, 2000.*
10.22     Revolving Note dated January 1, 1999 from XL Vision to
          eMerge Interactive.
10.23     Promissory Note dated August 31, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc. (cancelled).
10.24     Term Note dated October 25, 1999 from eMerge Interactive to
          Safeguard.
10.25     Promissory Note dated October 6, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc. (cancelled).
10.26     Stockholders Agreement dated July 17, 1997 and Joinder to
          Stockholders' Agreement.
10.27     Subordinated Purchase Money Note from eMerge Interactive to
          XL Vision dated July 15, 1997.
10.28     Toll Processing Agreement dated August 16, 1999 between
          eMerge Interactive and ADM Animal Health & Nutrition, a
          division of Archer-Daniels-Midland Company.+
10.29     Term Note dated October 25, 1999 from eMerge Interactive to
          Safeguard Delaware, Inc.
10.30     Securities Purchase Agreement dated October 27, 1999 between
          eMerge Interactive Technologies, LLC and Internet Capital
          Group, Inc.
10.31     Registration Rights Agreement dated October 27, 1999 between
          eMerge Interactive and Internet Capital Group, Inc.
10.32     Cooperative Research and Development Agreement between
          USDA's Agricultural Research Service, eMerge and Iowa State
          University of Science and Technology concerning Methods for
          Detecting Fecal and Ingesta Contamination on Meat dated
          August 4, 1999.
10.33     Exclusive License Agreement between Iowa State University
          Research Foundation, Inc., and eMerge dated August 3, 1999.
10.34     Term Note and Pledge Agreement dated January 28, 2000
          between eMerge and Charles Abraham.*
21.1      Subsidiaries of the Registrant.
23.1      Consent of KPMG LLP.*
23.2      Consent of Morgan, Lewis & Bockius LLP (to be included in
          Exhibit 5.1).
24.1      Power of Attorney (included on signature page).
27.1      Financial Data Schedule.
</TABLE>


                                      II-4
<PAGE>   133

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
99.1      Form letter from eMerge Interactive, Inc. to holders of more
          than 100 shares of Safeguard Scientifics, Inc. describing
          the Safeguard Subscription Program.
99.2      Form of letter from Adams, Harkness & Hill, Inc. to
          Safeguard Scientifics, Inc. shareholders.
99.3      Form of letter from eMerge Interactive, Inc. to Brokers
          describing the Safeguard Subscription Program.
99.4      Form of Subscription Form for Safeguard Subscription
          Program.
</TABLE>

- -------------------------
* Filed herewith.

# To be filed by amendment.

+ We have requested confidential treatment of certain provisions of this exhibit
  pursuant to Rule 406 of the Securities Act of 1933. The entire agreement has
  been filed separately with the Securities and Exchange Commission.

(b) FINANCIAL STATEMENT SCHEDULES

     All information for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission is either included in the
financial statements or is not required under the related instructions or are
inapplicable, and therefore have been omitted.

ITEM 17.  UNDERTAKINGS.

     The undersigned registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, 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 the 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 the
     registration statement. Notwithstanding the foregoing, any increase or
     decrease in volume of securities offered (if the total dollar value of
     securities offered would not exceed that which was registered) and any
     deviation from the low or high and of the estimated maximum offering range
     may be reflected in the form of prospectus filed with the Commission
     pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
     price represent no more than a 20 percent change in the maximum aggregate
     offering price set forth in "Calculation of Registration Fee" table in the
     effective registration statement; and

          (iii) To include any material information with respect to the plan of
     distribution not previously disclosed in the registration statement or any
     material change to such information in the prospectus.

     (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement

                                      II-5
<PAGE>   134

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.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

     The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430A and contained in the form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this registration statement
as of the time it was declared effective; and (3) that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus 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.

     The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by Safeguard, and
the terms of any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on the cover
page of the prospectus, a post-effective amendment will be filed to set forth
the terms of such offering.

                                      II-6
<PAGE>   135

                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Sebastian, Florida on February 1,
2000.


                                          eMERGE INTERACTIVE, INC.

                                          By: /s/   CHARLES L. ABRAHAM
                                             -----------------------------------
                                              Charles L. Abraham
                                              Chief Executive Officer

     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
SIGNATURES                                              TITLE(S)                   DATE
- ----------                                              --------                   ----
<S>                                            <C>                           <C>
           /s/ CHARLES L. ABRAHAM              Chief Executive Officer       February 1, 2000
- ---------------------------------------------    and Director (Principal
             Charles L. Abraham                  Executive Officer)

            /s/ T. MICHAEL JANNEY              Chief Financial Officer       February 1, 2000
- ---------------------------------------------    (Principal Financial and
              T. Michael Janney                  Accounting Officer)

*                                              Chairman of the Board         February 1, 2000
- ---------------------------------------------
John S. Scott, Ph.D.

*                                              Director                      February 1, 2000
- ---------------------------------------------
Douglas Alexander

*                                              Director                      February 1, 2000
- ---------------------------------------------
E. Michael Forgash

*                                              Director                      February 1, 2000
- ---------------------------------------------
Thomas C. Lynch

*                                              Director                      February 1, 2000
- ---------------------------------------------
Christopher Moller, Ph.D.

*                                              Director                      February 1, 2000
- ---------------------------------------------
John W. Poduska, Sr., Ph.D.

          * /s/ CHARLES L. ABRAHAM                                           February 1, 2000
- ---------------------------------------------
             Charles L. Abraham
             As Attorney-in-Fact
</TABLE>


                                      II-7
<PAGE>   136

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
 1.1      Form of Underwriting Agreement.
 1.2      Form of Standby Stock Purchase Agreement.*
 3.1      Second Amended and Restated Certificate of Incorporation of
          eMerge Interactive.
 3.2      Amended and Restated Bylaws of eMerge Interactive.
 5.1      Opinion of Morgan, Lewis & Bockius LLP.
10.1      Amended and Restated 1996 Equity Compensation Plan.
10.2      1999 Equity Compensation Plan.
10.3      Master License Agreement dated July 29, 1998 between eMerge
          Interactive and Her Majesty the Queen of Canada, as
          represented by the Minister of Agriculture and Agri-Food
          Canada.+*
10.4      Administrative Services Agreement dated December 15, 1997
          between eMerge Interactive, Safeguard Scientifics, Inc. and
          XL Vision, Inc., as amended on August 17, 1999.
10.5      Direct Charge Administrative Services Agreement dated April
          15, 1997 between eMerge Interactive and XL Vision, Inc.
10.6      Asset Purchase Agreement dated February 24, 1999 between
          eMerge Interactive, CIN, LLC and Dr. Scott Crain.
10.7      Stock Purchase Agreement dated March 22, 1999 between eMerge
          Interactive, Cyberstockyard, Inc. and J. Scott Sanders,
          David Sanders, Scott Calhoun and Dr. Duane Pankratz.
10.8      Stockholders Agreement dated July 29, 1998 among eMerge
          Interactive, and individuals designated as the former
          shareholders of STS Agriventures, Ltd.
10.9      Purchase Agreement dated July 29, 1998 among eMerge
          Interactive, NutriCharge, J Technologies, LLC, and the
          Biegert Family Irrevocable Trust.
10.10     Asset Purchase Agreement dated January 15, 1999 between
          eMerge Interactive and Sperry Marine, Inc.
10.11     Purchase and License Agreement dated January 15, 1999
          between eMerge Interactive and Sperry Marine, Inc.
10.12     Asset Purchase Agreement dated May 19, 1999 between eMerge
          Interactive and Professional Cattle Consultants, L.L.C.
10.13     Letter of Agreement dated January 12, 2000 between eMerge
          Interactive and Southern States.+
10.14     Subscription Agreement letter for purchase of Series B
          Junior Preferred Stock.
10.15     Preferred Stock Purchase Agreement dated April 1, 1999
          (Series C Preferred Stock).
10.16     Common Stock Purchase Agreement dated August 16, 1999
          between eMerge Interactive and Turnkey Computer Systems,
          Inc.
10.17     Registration Rights Agreement dated July 18, 1997.
10.18     Real Property Sublease between XL Vision and eMerge
          Interactive, dated December 1999.
10.19     Stockholders' and Registration Rights Agreement dated
          February 24, 1999.
10.20     Joinder and Correction to Stockholders and Registration
          Rights Agreement dated March 29, 1999.
</TABLE>

<PAGE>   137


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
10.21     (a) Revolving Note dated July 21, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc., Amended Revolving
          Note dated August 3, 1999, (b) second Amended Revolving Note
          dated October 25, 1999 and (c) Third Amended Revolving Note
          dated December 6, 1999 and (d) Fourth Amended Revolving Note
          dated January 31, 2000.*.
10.22     Revolving Note dated January 1, 1999 from XL Vision to
          eMerge Interactive.
10.23     Promissory Note dated August 31, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc. (cancelled)
10.24     Term Note dated October 25, 1999 from eMerge Interactive to
          Safeguard.
10.25     Promissory Note dated October 6, 1999 from eMerge
          Interactive to Safeguard Delaware, Inc. (cancelled)
10.26     Stockholders Agreement dated July 17, 1997 and Joinder to
          Stockholders' Agreement.
10.27     Subordinated Purchase Money Note from eMerge Interactive to
          XL Vision dated July 15, 1997.
10.28     Toll Processing Agreement dated August 16, 1999 between
          eMerge Interactive and ADM Animal Health & Nutrition, a
          division of Archer-Daniels-Midland Company.+
10.29     Term Note dated October 25, 1999 from eMerge Interactive to
          Safeguard Delaware, Inc.
10.30     Securities Purchase Agreement dated October 27, 1999 between
          eMerge Interactive Technologies, LLC and Internet Capital
          Group, Inc.
10.31     Registration Rights Agreement dated October 27, 1999 between
          eMerge Interactive and Internet Capital Group, Inc.
10.32     Cooperative Research and Development Agreement between
          USDA's Agricultural Research Service, eMerge and Iowa State
          University of Science and Technology concerning Methods for
          Detecting Fecal and Ingesta Contamination on Meat dated
          August 4, 1999.
10.33     Exclusive License Agreement between Iowa State University
          Research Foundation, Inc., and eMerge dated August 3, 1999.
10.34     Term Note and Pledge Agreement dated January 28, 2000
          between eMerge and Charles Abraham.*
21.1      Subsidiaries of the Registrant.
23.1      Consent of KPMG LLP.*
23.2      Consent of Morgan, Lewis & Bockius LLP (to be included in
          Exhibit 5.1).
24.1      Power of Attorney (included on signature page).
27.1      Financial Data Schedule.
99.1      Form letter from eMerge Interactive, Inc. to holders of more
          than 100 shares of Safeguard Scientifics, Inc. describing
          the Safeguard Subscription Program.
99.2      Form of letter from Adams, Harkness & Hill, Inc. to
          Safeguard Scientifics, Inc. shareholders.
</TABLE>

<PAGE>   138

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------
<C>       <S>
99.3      Form of letter from eMerge Interactive, Inc. to Brokers
          describing the Safeguard Subscription Program.
99.4      Form of Subscription Form for Safeguard Subscription
          Program.
</TABLE>

- -------------------------
* Filed herewith.

# To be filed by amendment.

+ We have requested confidential treatment of certain provisions of this exhibit
  pursuant to Rule 406 of the Securities Act of 1933. The entire agreement has
  been filed separately with the Securities and Exchange Commission.

<PAGE>   1
                                                                     EXHIBIT 1.2



                        STANDBY STOCK PURCHASE AGREEMENT



                                 BY AND BETWEEN



                           SAFEGUARD SCIENTIFICS, INC.



                                       AND



                            EMERGE INTERACTIVE, INC.



                          DATED JANUARY ________, 2000
<PAGE>   2
                        STANDBY STOCK PURCHASE AGREEMENT



         THIS STANDBY STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into on this January _______, 2000 between SAFEGUARD SCIENTIFICS, INC.,
a Pennsylvania corporation ("Safeguard"), and eMERGE INTERACTIVE, INC., a
Delaware corporation (the "Company").


                                   BACKGROUND

         A. The Company is contemplating an initial public offering (the "Public
Offering") of its class A common stock, par value $.008 per share (the "Common
Stock"), through an underwritten public offering lead by Adams Harkness & Hill,
Inc. as the representative of the several underwriters (the "Underwriters").

         B. In connection with the Public Offering the Company will offer
2,806,000 shares of its class A common stock (the "SSP Shares") directly to the
shareholders of Safeguard pursuant to a share subscription program (the "SSP").

         C. If and to the extent any of the SSP Shares are not subscribed for
or, if subscribed for, are not purchased by the shareholders of Safeguard under
the SSP, Safeguard has agreed to purchase all such SSP Shares directly from the
Company for its own account for investment purposes only on the terms and
subject to the conditions set forth herein.

         D. In the event that the shareholders of Safeguard subscribe for more
shares of Common Stock than the number of SSP Shares, Safeguard will make an
offer of up to 694,000 shares of Common Stock owned by it prior to the Public
Offering (the "Safeguard eMerge Stock"), and the Safeguard eMerge Stock shall be
included in the SSP.

         E. Chase Mellon Shareholder Services, L.L.C. ("Chase") will act as the
offering agent for the SSP and as the Company's transfer agent. The offering
agent will determine the record date shareholders eligible to participate in the
SSP and will collect subscriptions and subscription payments from eligible
Safeguard shareholders until 6:00 p.m. on the third business day following the
date the Company determines the initial public offering price for the Common
Stock.


         NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, intending to be legally bound hereby, the parties
hereto hereby agree as follows:
<PAGE>   3
                                    ARTICLE 1

                                 THE TRANSACTION

1.1.     Purchase and Purchase Price.

         (a)      In the event that any of the SSP Shares are not subscribed for
                  or, if subscribed for are not purchased by the shareholders of
                  Safeguard under the SSP, Safeguard shall, or shall cause its
                  wholly owned subsidiary Safeguard Delaware, Inc. to, purchase
                  these remaining shares.

         (b)      The purchase price for the SSP Shares (the "Purchase Price")
                  shall be equal to the product of multiplying (i) the aggregate
                  number of SSP Shares, by (ii) the price per share of Common
                  Stock sold pursuant to the Public Offering (the "IPO Price").

         (c)      Safeguard shall transfer, or Safeguard shall cause Safeguard
                  Delaware, Inc. to transfer, or shall cause Chase to pay out of
                  subscription funds received on behalf of Safeguard's
                  shareholders participating in the SSP, to the Company, an
                  amount equal to the Purchase Price on the day of the closing
                  of the Public Offering by wire transfer.

         (d)      In the event that the shareholders of Safeguard subscribe for
                  more shares of Common Stock than the number of SSP Shares,
                  Safeguard shall make an offer of the shares of Safeguard
                  eMerge Stock, and the shares of Safeguard eMerge Stock shall
                  be included in the SSP.

1.2.     Closing.

         (a)      Time and Place. The closing under this Agreement (the
                  "Closing") will take place at _________, EST time, at the time
                  of the closing of the Public Offering, at the offices of
                  Morgan, Lewis & Bockius LLP, or at such other time, date or
                  place as the parties shall mutually agree. The date on which
                  the Closing occurs is sometimes referred to herein as the
                  "Closing Date."

         (b)      Deliveries and Proceedings to Offering Agent. On the Closing
                  Date, the Company shall instruct Chase to accept instructions
                  from Deirdre Blackburn, or her designee at Safeguard, for:

                  (i) delivery of the subscription funds collected by the
                  offering agent to the extent not paid to the Company at the
                  Closing.

         (c)      Deliveries and Proceedings to Transfer Agent. On the Closing
                  Date, the Company shall instruct Chase to accept instructions
                  from Deirdre Blackburn, or her designee at Safeguard, for:

                  (i)      delivery of the shares of SSP Shares purchased in the
                           SSP;
<PAGE>   4
                  (ii)     delivery to Safeguard of the SSP Shares not purchased
                           by Safeguard shareholders; and

                  (iii)    the return to Safeguard of any shares of Safeguard
                           eMerge Stock that were not purchased in the SSP.


                                    ARTICLE 2

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to Safeguard as follows:

2.1      Organization. The Company is a corporation duly incorporated, validly
         existing and in good standing under the laws of the State of Delaware.

2.2.     Power and Authority. The Company has full corporate power and authority
         to make, execute, deliver and perform this Agreement and the
         transactions contemplated hereby.

2.3.     Authorization and Enforceability. The execution, delivery and
         performance of this Agreement by the Company have been duly authorized
         by all necessary corporate action on the part of the Company, and this
         Agreement constitutes the legal, valid and binding obligation of the
         Company, enforceable against the Company in accordance with its terms.


                                    ARTICLE 3

                   REPRESENTATION AND WARRANTIES OF SAFEGUARD

         Safeguard represents and warrants to the Company as follows:

3.1      Organization. Safeguard is a corporation duly incorporated, validly
         existing and in good standing under the laws of the Commonwealth of
         Pennsylvania.

3.2.     Power and Authority. Safeguard has full corporate power and authority
         to make, execute, deliver and perform this Agreement and the
         transactions contemplated hereby.

3.3.     Authorization and Enforceability. The execution, delivery and
         performance of this Agreement by Safeguard have been duly authorized by
         all necessary corporate action on the part of Safeguard, and this
         Agreement constitutes the legal, valid and binding obligation of
         Safeguard, enforceable against Safeguard in accordance with its terms.
<PAGE>   5
3.4      Authorization and Approvals. All consents, approvals, authorizations
         and orders necessary for the execution and delivery of this Agreement
         and the sale and delivery of the shares of Safeguard eMerge Stock have
         been obtained; and Safeguard, or an affiliate have full rights, power
         and authority to enter into this Agreement and to sell the shares of
         Safeguard eMerge Stock as provided hereunder.

3.5      Investment Intent. Safeguard represents, warrants and covenants that it
         is acquiring the SSP Shares for its own account, as a long-term
         investment, and not with the view to resale or redistribution. To that
         end, Safeguard agrees it will retain and not sell, pledge, hypothecate
         or otherwise transfer, directly or indirectly, any interest (beneficial
         or otherwise) in the SSP Shares for a period of one year from the date
         of the Closing.

                                    ARTICLE 4

                       CONDITIONS TO CLOSING; TERMINATION

4.1      Conditions Precedent to Obligations of Safeguard. The obligations of
         Safeguard to proceed with the Closing are subject to the fulfillment
         prior to or at Closing of the following conditions (any one or more of
         which may be waived in whole or in part by Safeguard at Safeguard's
         option):

         (a)      Bringdown of Representations and Warranties. The
                  representations and warranties of the Company contained in
                  this Agreement shall be true and correct on and as of the time
                  of Closing, with the same force and effect as though such
                  representations and warranties had been made on, as of and
                  with reference to such time, and Safeguard shall have received
                  a certificate, signed by an executive officer of the Company,
                  to such effect.

         (b)      Performance and Compliance. The Company shall have performed
                  all of the covenants and complied with all of the provisions
                  required by this Agreement to be performed or complied with by
                  it on or before the Closing, and Safeguard shall have received
                  a certificate, signed by any vice president of the Company, to
                  such effect.

         (c)      Public Offering. The Closing of the Public Offering shall have
                  occurred.

4.2.     Conditions Precedent to the Obligations of the Company. The obligations
         of the Company to proceed with the Closing hereunder are subject to the
         fulfillment prior to or at Closing of the following conditions (any one
         or more of which may be waived in whole or in part by the Company at
         the Company's option):

         (a)      Bringdown of Representations and Warranties. The
                  representations and warranties of Safeguard contained in this
                  Agreement shall be true and correct on and as of the time of
                  Closing, with the same force and effect as
<PAGE>   6
                  though such representations and warranties had been made on,
                  as of and with reference to such time, and Safeguard shall
                  have delivered to the Company a certificate, signed by an
                  executive officer of Safeguard, to such effect.

         (b)      Performance and Compliance. Safeguard shall have performed all
                  of the covenants and complied with all the provisions required
                  by this Agreement to be performed or complied with by it on or
                  before the Closing and Safeguard shall have delivered to the
                  Company a certificate, signed by any vice president of
                  Safeguard, to such effect.

         (c) Public Offering. The closing of the Public Offering shall have
occurred.

4.3.     Termination.

         (a)      When Agreement May Be Terminated. This Agreement may be
                  terminated at any time prior to Closing:

                  (i)      by mutual consent of Safeguard and the Company; or

                  (ii)     by Safeguard or the Company, if the Company shall
                           have withdrawn its Registration Statement on Form S-1
                           relating to the Public Offering (Reg. No. 333-89815).

         (b)      Effect of Termination. In the event of termination of this
                  Agreement by either Safeguard or the Company, as provided
                  above, this Agreement shall forthwith terminate and there
                  shall be no liability on the part of either Safeguard or the
                  Company, except for liabilities arising from a breach of this
                  Agreement prior to such termination; provided, however, that
                  the obligations set forth in Article 5 hereof shall survive
                  such termination.


                                    ARTICLE 5
                          CERTAIN ADDITIONAL COVENANTS

5.1      Indemnification.

         (a)      Safeguard hereby agrees to indemnify the Company and its
                  underwriters, affiliates, officers, employees, representatives
                  and directors (the "Indemnified Persons") against, and hold
                  them harmless from, any loss, liability, claim, damage or
                  expense, joint or several ("Losses"), arising directly or
                  indirectly, out of or in connection with, the SSP, including,
                  without limitation, (i) costs and expenses associated with the
                  failure of any shareholders of Safeguard to consummate
                  purchases of SSP Shares for which they have subscribed and
                  (ii) any claims by shareholders of Safeguard or other persons
                  arising
<PAGE>   7
                  from the SSP, and expenses, arising from the establishment,
                  execution and performance of the SSP. Notwithstanding the
                  foregoing, Safeguard shall not indemnify the Company against
                  liabilities arising from any untrue or allegedly untrue
                  statement of a material fact, or omission or alleged omission
                  of a material fact required to be stated to make the
                  statements not misleading, in the prospectus contained in the
                  Company's Registration Statement on Form S-1 (Reg. No.
                  333-89815) (the "Prospectus"), except for statements or
                  omissions regarding the SSP and except for any materials
                  related to the SSP delivered to Safeguard's shareholders and
                  not to other recipients of the Prospectus generally. Safeguard
                  agrees to reimburse the Indemnified Persons, as incurred, for
                  any reasonable legal or other expenses reasonably incurred by
                  them in connection with investigating or defending any Losses.

         (b)      Promptly after receipt by an Indemnified Person of notice of
                  the commencement of any action for which indemnification or
                  contribution may be sought hereunder, such Indemnified Person
                  will notify Safeguard in writing of the commencement thereof.
                  The failure to so notify Safeguard will not relieve Safeguard
                  from liability under Section 5.1(a) above unless and to the
                  extent that Safeguard did not otherwise learn of such action
                  and such failure results in the forfeiture of substantial
                  rights and defenses. Safeguard shall be entitled to appoint
                  counsel at Safeguard's expense to represent the Indemnified
                  Person in any action for which indemnification is sought (in
                  which case Safeguard shall not thereafter be liable for the
                  fees and expenses of separate counsel retained by the
                  Indemnified Person except as set forth below); provided,
                  however, that such counsel shall be reasonably satisfactory to
                  the Indemnified Person. Notwithstanding Safeguard's election
                  to appoint counsel to represent the Indemnified Person in an
                  action, the Indemnified Person shall have the right to employ
                  separate counsel (including local counsel), and Safeguard
                  shall bear the reasonable fees, costs and expenses of such
                  counsel if (i) the use of counsel chosen by Safeguard to
                  represent the Indemnified Person would present such counsel
                  with a conflict of interest, (ii) the actual or potential
                  defendants in, or targets of, any such action include both
                  Safeguard and the Indemnified Person and the Indemnified
                  Person shall have reasonably concluded that there may be legal
                  defenses available to it that are different from or in
                  addition to those available to Safeguard, (iii) Safeguard
                  shall not have employed counsel reasonably satisfactory to the
                  Indemnified Person within a reasonable time after notification
                  of the commencement of such action or (iv) Safeguard shall
                  have authorized the Indemnified Person to employ separate
                  counsel at the expense of Safeguard.

         (c)      Safeguard shall not, without the prior written consent of the
                  relevant Indemnified Person, settle or compromise or consent
                  to the entry of any judgment with respect to any pending or
                  threatened claim, action, suit or
<PAGE>   8
                  proceeding in respect of which indemnification or contribution
                  may be sought hereunder unless such settlement, compromise or
                  consent includes an unconditional release of such Indemnified
                  Person from all liability arising from such claim, action,
                  suit or proceeding. An Indemnified Person may not settle or
                  compromise or consent to the entry of any judgment with
                  respect to any pending or threatened claim, action, suit or
                  proceeding in respect of which indemnification or contribution
                  may be sought hereunder without the consent of Safeguard, such
                  consent not to be unreasonably withheld.

         (d)      In the event that the indemnity provided for in this Article 5
                  is unavailable to or insufficient to hold harmless an
                  Indemnified Person for any reason, the Indemnified Persons and
                  Safeguard shall contribute to the Losses (including the legal
                  and other expenses attributable to investigating or defending
                  same) to which the Indemnified Person may be subject in such
                  proportion as is appropriate to reflect the relative fault of
                  the Indemnified Person and Safeguard in connection with the
                  statements or omissions that resulted in such Losses as well
                  as any other relevant equitable considerations, including that
                  the Company performed the SSP as an accommodation to Safeguard
                  without any legal obligation to do so. Relative fault shall be
                  determined by reference to, among other things, whether any
                  untrue or allegedly untrue statement of a material fact or the
                  omission or alleged omission to state a material fact relates
                  to information provided by the Indemnified Person or
                  Safeguard, the intent of the Indemnified Person and Safeguard,
                  and their relative knowledge, access to information and
                  opportunity to correct or prevent such untrue statement or
                  omission. The parties agree that it would not be just and
                  equitable if contribution was determined by any method of
                  allocation that does not take into account the equitable
                  considerations discussed above.


                                    ARTICLE 6

                                  MISCELLANEOUS

6.1.     Nature and Survival of Representations. The representations,
         warranties, covenants and agreements of Safeguard and the Company
         contained in this Agreement, and all statements contained in this
         Agreement or any exhibit hereto or any certificate or other document
         delivered pursuant to this Agreement or in connection with the
         transactions contemplated hereby, shall be deemed to constitute
         representations, warranties, covenants and agreements of the respective
         party delivering the same. All such representations, warranties,
         covenants and agreements shall survive the Closing.

6.2.     Notices. All notices, requests, demands and other communications
         hereunder shall be in writing and shall be deemed to have been duly
         given if personally delivered
<PAGE>   9
         or, if mailed, when mailed by United States first-class, certified or
         registered mail, postage prepaid, to the other party at the following
         addresses (or at such other address as shall be given in writing by any
         party to the other):

         (a) If to Safeguard, to:

                                    Safeguard Scientifics, Inc.
                                    800 The Safeguard Building
                                    435 Devon Park Drive
                                    Wayne, PA  19087

                                    Attention: James A. Ounsworth, Esq.

         (b) If to the Company, to:

                           eMerge Interactive, Inc.
                           10315 102nd Terrace
                           Sebastian, FL  32958

                                    Attention: T. Michael Janney

                  With a required copy to:

                  Morgan, Lewis & Bockius LLP
                  1701 Market St.
                  Philadelphia, PA  19103-2921
                  Attention: Michael Shim, Esquire

6.3.     Third Party Beneficiaries. Safeguard acknowledges that each of the
         Underwriters of the Public Offering shall be a third party beneficiary
         entitled to exercise the rights and remedies provided for herein
         directly against Safeguard. The Company shall cooperate with and assist
         each of the Underwriters of the Public Offering with respect to any
         action such Underwriters take to exercise such rights and remedies
         directly against Safeguard.

6.4.     Successors and Assigns. This Agreement, and all rights and powers
         granted hereby, will bind and inure to the benefit of the parties
         hereto and their respective successors and permitted assigns but shall
         not be assignable or delegable by any party without the prior written
         consent of the other party.

6.5.     Governing Law. This Agreement shall be governed by and construed in
         accordance with the internal laws of Pennsylvania, without giving
         effect to its principles of conflicts of laws or choice of forum.

6.6.     Headings. The headings preceding the text of the sections and
         subsections hereof are inserted solely for convenience of reference,
         and shall not
<PAGE>   10
         constitute a part of this Agreement, nor shall they affect its meaning,
         construction or effect.

6.7.     Counterparts. This Agreement may be executed in two counterparts, each
         of which shall be deemed an original, but which together shall
         constitute one and the same instrument. Each such copy shall be deemed
         an original and it shall not be necessary in making proof of this
         Agreement to produce or account for more than one such counterpart.

6.8.     Further Assurances. Each party shall cooperate and take such action as
         may be reasonably requested by the other party in order to carry out
         the provisions and purposes of this Agreement and the transactions
         contemplated hereby.

6.9.     Amendment and Waiver. The parties may by mutual agreement amend this
         Agreement in any respect, and either party, as to such party, may (a)
         extend the time for the performance of any of the obligations of the
         other party, (b) waive any inaccuracies in representations by the other
         party, (c) waive compliance by the other party with any of the
         agreements contained herein and performance of any obligations by the
         other party, and (d) waive the fulfillment of any condition that is
         precedent to the performance by such party of any of its obligations
         under this Agreement. To be effective, any such amendment or waiver
         must be in writing and be signed by the party against whom enforcement
         of the same is sought.

6.10.    Entire Agreement. This Agreement sets forth all of the promises,
         covenants, agreements, conditions and undertakings between the parties
         hereto with respect to the subject matter hereof, and supersedes all
         prior and contemporaneous agreements and understandings, inducements or
         conditions, express or implied, oral or written.

6.11.    Interpretations. No party to this Agreement shall be considered the
         draftsman. This Agreement has been reviewed, negotiated and accepted by
         all parties and their attorneys and shall be construed and interpreted
         according to the ordinary meaning of the words used so as fairly to
         accomplish the purposes and intentions of all parties hereto.
<PAGE>   11
                           [Intentionally left blank]
<PAGE>   12
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.




                         SAFEGUARD SCIENTIFICS, INC.

                         By:______________________________________________
                         Name:
                         Title:








                        eMERGE INTERACTIVE, INC.

                         By:______________________________________________
                         Name:
                         Title:


<PAGE>   1
                                                                    Exhibit 10.3


                  * Certain portions of this exhibit have been omitted based
                  upon a request for confidential treatment that has been filed
                  with the Commission. The omitted portions have been filed
                  separately with the Commission.


                            MASTER LICENCE AGREEMENT

                  ELECTROLYTE THERAPY & INFRA-RED THERMOGRAPHY



BETWEEN:

                    HER MAJESTY THE QUEEN IN RIGHT OF CANADA

       as represented by the Minister of Agriculture and Agri-Food Canada

                                   (LICENCOR)


AND:
                           eMERGE VISION SYSTEMS INC.

             a corporation incorporated under the laws of Delaware;
               and having its head office at 10315 102nd Terrance
                    Sebastian, Florida, United States, 32958

                                   (LICENCEE)

<PAGE>   2
                                                PROTECTED - BUSINESS INFORMATION

                                TABLE OF CONTENTS
                                  ------------
                            MASTER LICENCE AGREEMENT

                  ELECTROLYTE THERAPY & INFRA-RED THERMOGRAPHY




INTRODUCTION..................................................................
1       DEFINITIONS...........................................................
2       SURRENDER & GRANT OF LICENCE..........................................
        Surrender.............................................................
        Grant.................................................................
        Sub-licencing.........................................................
        Canada's Consent......................................................
        Sub-licence Conditions................................................
        Termination...........................................................
        Third Party Obligations - eVS.........................................
        Third Party Obligations - Canada......................................
        Use of Canadian Corporations..........................................
        Disclosure Obligation - Canada........................................
        Material Terms........................................................
3       TERM..................................................................
        Initial Term..........................................................
        Renewal Conditions....................................................
                 No Dispute...................................................
                 Dispute /Contingent Renewal Pending ADR......................
4       EXPLOITATION OF LICENCED TECHNOLOGIES.................................
        Best Efforts to Commercialize.........................................
        Royalty Holiday.......................................................
        Start-Up Costs........................................................
        Continuing Obligations During Holiday.................................
                 Patents......................................................
                 Collaborations...............................................
                 Research Support Payment.....................................
        Fundamental Terms.....................................................
5       ROYALTIES.............................................................
        Percentage Royalty of Gross Revenues..................................
        Payments Semi-Annually................................................


                                                                               2
<PAGE>   3
                                                PROTECTED - BUSINESS INFORMATION

        Payment Dates.........................................................
        Payment Method........................................................
        Cheque Requirements...................................................
        Payments to Canada after Termination..................................
        Attribution of Royalties..............................................
6       IP OWNERSHIP & REPRESENTATIONS........................................
        Canada Owns Licenced Technologies.....................................
        No Impeachment........................................................
        Inimical Use of Confidential Information..............................
        Regulatory Rights.....................................................
        Inventors Rights......................................................
        No Litigation.........................................................
        Third Party Rights....................................................
        Infringement..........................................................
        Patent Coverage & Formula.............................................
        US Federal Department of Agriculture (FDA) Regulatory.................
                 Manufacture..................................................
                 No Export....................................................
                 Disclosure by Canada.........................................
                 Product Claims...............................................
                 Animal Food..................................................
                 FDA Problems.................................................
                 No Misrepresentations........................................
                 Laboratory Practices.........................................
        Material Terms........................................................
7       IMPROVEMENTS, R & D, COLLABORATIONS...................................
        Carve Out.............................................................
        Licencing of Improvements from Canada's R & D under Carve Out.........
        No Competition........................................................
        Collaborations Between eVS and Canada.................................
        Licencing of Improvements from eVS / Canada Collaborations............
        Licencing of Serendipitous Technologies from eVS / Canada
                 Collaborations...............................................
        Third Party Licences Resulting Technology.............................
        Improvements Part of Licenced Technologies............................
        Discretion to Collaborate.............................................
        Either Party Unable / Unwilling to Collaborate........................
        Third Party Collaborations............................................
        Ownership of Background Intellectual Property.........................
        Material Terms........................................................
8       WARRANTIES OF QUALITY.................................................
        No Warranties.........................................................

                                                                               3
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                                                PROTECTED - BUSINESS INFORMATION

        Disclaimer of Implied Warranties......................................
        Third Party Representations...........................................
        Disclosure by Canada..................................................
        Disclosure & Due Diligence............................................
        Confidential Information Without Warranty / No Reliance...............
9       PATENTS...............................................................
        Queen Owns All Patents................................................
        eVS Discretion to Patent..............................................
        eVS Responsibility for Patent Costs...................................
        Canada Responsibility for Patent Costs................................
        Material Terms........................................................
10      REGULATORY............................................................
        Notice to Assist......................................................
        Assistance............................................................
        Canada's Advisory Board Positions.....................................
        Costs of Canada's Advisory Board Members..............................
        Regulatory Costs......................................................
        Decision to Register..................................................
        Registration Ownership................................................
        Trademark Use.........................................................
        Trademark and Quality Control.........................................
11      AUDITS & QUALITY CONTROL..............................................
        Audit Rights and Purposes.............................................
        Audit Timing / Process / Cost.........................................
        Regulatory Quality Standards..........................................
        Contractual Quality Standards.........................................
        Spot Audits...........................................................
        Material Terms........................................................
12      REPORTS...............................................................
        Administrative Meetings...............................................
13      CORPORATE REPRESENTATIONS & WARRANTIES................................
        eVS...................................................................
                 Ability......................................................
                 Authorization................................................
                 Enforceable..................................................
                 Litigation...................................................
                 Veracity of Statements.......................................
                 Third Party Representations..................................
        Canada................................................................
                 Authorization................................................
                 Veracity of Statements.......................................

                                                                               4
<PAGE>   5
                                                PROTECTED - BUSINESS INFORMATION

                 Compliance of Laws...........................................
14      PATENT INFRINGEMENT...................................................
        Notice ...............................................................
        Core Countries........................................................
        Canada Defends / Prosecutes...........................................
        eVS Co-Counsel........................................................
                 eVS Assumes Control of Litigation............................
        Costs when eVS Assumes Control of Litigation..........................
        Canada Controls Payment of Damage / Settlement Terms..................
                 Canada's Damage Awards Distribution..........................
        eVS Defends / Prosecutes..............................................
                 Non-Core Country Infringement Actions........................
                 Parties Jointly Police Infringement..........................
15      INDEMNIFICATION.......................................................
        Reciprocal for Negligence / Contract Breach...........................
        Procedures............................................................
                 Notice.......................................................
                 Indemnifying Party Defends...................................
                 Indemnified Party Defends....................................
                 Co-operation.................................................
                 Mutual Consent of Settlement.................................
16      TERMINATION...........................................................
        By Canada for Cause...................................................
        Trademark Rights Terminated...........................................
        Procedure.............................................................
        The Company's Duties on Termination...................................
        Surviving Obligations.................................................
        Surrender of Licence..................................................
17      CONFIDENTIALITY / FIDUCIARY & EQUITABLE REMEDIES......................
        Confidentiality Obligations...........................................
        Confidentiality Measures..............................................
        Distribution by the Receiving Party...................................
        Common Law Duty of Confidentiality....................................
        Confidentiality Exceptions............................................
                 Public Domain................................................
                 Published....................................................
                 Already Known................................................
                 Third Party Discloses........................................
                 Independently Developed......................................
                 Judicial / Administrative Order..............................
        Access to Information.................................................

                                                                               5
<PAGE>   6
                                                PROTECTED - BUSINESS INFORMATION

                 Access to Information Disclosure.............................
                 Fiduciary....................................................
                 Elements of Fiduciary Relationship...........................
        Equitable Relief......................................................
        Fundamental Terms.....................................................
18      ALTERNATE DISPUTE RESOLUTION (ADR)....................................
        Negotiation...........................................................
                 Informal Negotiations........................................
                 Formal Negotiations..........................................
        Mediation.............................................................
                 Direct to Arbitration........................................
                 Process .....................................................
                 Location.....................................................
                 Unsuccessful.................................................
        Arbitration...........................................................
        Procedure.............................................................
                 Law, Code & Rules............................................
                 Tribunal & Jurisdiction......................................
                 Final & Binding..............................................
                 Proceedings..................................................
                 Language.....................................................
                 Written Communications.......................................
                 Costs........................................................
                 Arbitrator's Written Decision................................
                 Power to Settle..............................................
                 Adjournment to Empower Representative........................
                 Deemed Abandonment...........................................
        General ADR Conditions................................................
                 No Litigation................................................
                 Obligations During Alternate Dispute Resolution (ADR)........
                 Privilege....................................................
                 Confidentiality..............................................
                 ADR Disclosures Not Admissible in Subsequent Proceedings.....
                 Normally Admissible Evidence.................................
                 Material Breach..............................................
19      INTENT AND INTERPRETATION.............................................
        Entire Agreement......................................................
        Pre-Contractual Representations.......................................
        Due Diligence Search..................................................
        Independent Legal Advice..............................................
        No Adverse Presumption in Case of Ambiguity...........................



                                                                               6
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                                                PROTECTED - BUSINESS INFORMATION

        Severability..........................................................
        Plurality and Gender..................................................
        Not a Joint Venture...................................................
        Minister Not Fettered.................................................
        Federal Legislation...................................................
        Right to Legislate....................................................
        No Implied Obligations................................................
        Access to Information.................................................
        Governing Law.........................................................
        Waiver................................................................
        Contract Always Speaks................................................
        Time is of the Essence................................................
        Force Majeure.........................................................
        Headings..............................................................
        Appendices............................................................
20      LEGAL RIGHTS..........................................................
        Amendments............................................................
        Assignment by Canada..................................................
        Sub-Contract Rights...................................................
        Assignment............................................................
        No Third Party Rights.................................................
        Remedies Cumulative...................................................
        Mutual Assistance.....................................................
        Facsimile Counterparts................................................
21      CROWN GENERAL.........................................................
        No Bribes.............................................................
        No Share to Members of Parliament.....................................
        Public Office Holders.................................................
        Compliance with Law...................................................
        Disclosure of Master Licence during Due Diligence Audit - eVS.........
        Disclosure of Master Licence during Due Diligence Audit - Canada......
        Material Terms........................................................
22      NOTICE................................................................
        Addresses / Contacts..................................................
        Deemed Delivery.......................................................
        Change of Address.....................................................
APPENDIX......................................................................
        LICENCED TECHNOLOGIES PATENTS.........................................
APPENDIX......................................................................
        ARBITRATION RULES.....................................................
APPENDIX......................................................................


                                                                               7
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                                                PROTECTED - BUSINESS INFORMATION

        PRE-MIX FORMULATION...................................................
APPENDIX......................................................................
        RMS / AGRESEARCH AGREEMENTS...........................................
APPENDIX......................................................................
        eVS INFRA RED TECHNOLOGIES............................................







                                                                               8
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                                                PROTECTED - BUSINESS INFORMATION

                            MASTER LICENCE AGREEMENT

                  ELECTROLYTE THERAPY & INFRA-RED THERMOGRAPHY

BETWEEN:

                    HER MAJESTY THE QUEEN IN RIGHT OF CANADA
          as represented by the Minister of Agriculture and Agri-Food

                                   ("Canada")

AND:

                           eMERGE VISION SYSTEMS INC.,
             a corporation incorporated under the laws of Delaware;
               and having its head office at 10315 102nd Terrance
                               Sebastian, Florida

                                     ("eVS")

        INTRODUCTION

A.       A. Transport and handling stress can cause significant, metabolic and
         physiological changes in livestock. Dehydration, low blood and tissue
         sugar levels, electrolyte imbalance and thermoregulatory problems
         associated with stress can result in live and carcass weight losses, as
         well as degraded meat quality;

B.       Live weight losses in 500 kg market-weight steers can vary from
         approximately 5 kg (1% of body weight) for short-hauled (1-2 hours)
         animals to upwards of 50kg (10% of body weight) in long-distance (24 to
         48 hours) transported beef animals;

C.       Stress during handling and transport can result in dark, firm, dry
         (DFD) beef that results in significant discounts for these carcasses by
         packers as the DFD meat is discriminated against by most consumers;

D.       Stress also results in the loss of intramuscular fat as cattle quickly
         mobilize this source of energy while under stress, thereby resulting in
         a potential grade loss;

E.       Canada has developed, patented and registered an electrolyte therapy
         which significantly reduces live weight shrink associated with
         transport and handling stress in cattle. This therapy together with all
         directly related know-how and any



                                                                               9
<PAGE>   10
                                                PROTECTED - BUSINESS INFORMATION

         directly related trade secrets is referred to herein as "ET". This
         supplement has also been shown to significantly reduce the incidence of
         DFD carcasses as well as reducing the incidence of grade loss;

F.       Canada has also developed and patented a method, and the software
         required, to identify cattle that are under physiological stress using
         infra-red thermography. This software and method, together with all
         directly related know-how and any directly related trades secrets is
         referred to herein as "IR". This technology is effective in identifying
         stressed animals which are pre-disposed to producing poor quality meat;

G.       R and ET are complementary technologies in that IR detects stressed
         cattle at various stages in the production cycle while ET is a
         restorative which reduces weight and grade loss and the incidence of
         poor quality, DFD, meat;

H.       ET has been licenced and marketed based on a PRE-MIX and LICENCED
         PRODUCT concept.

         i)       The PRE-MIX consists of the protected formulation of the
                  essential elements for the electrolyte therapy.

         ii)      The LICENCED PRODUCT is a mix of a specific quantity of
                  PRE-MIX and other feed base materials such as corn, barley,
                  alfalfa, or other carriers (dependent on the livestock and the
                  medium of delivery, for instance pellets).

        In order to ensure maintenance of quality standards as well as protect
        the confidentiality of the Pre-Mix formulation, the PRE-MIX is licenced
        to a single supplier. Distributers who manufacture and sell the LICENCED
        PRODUCT must purchase the PRE-MIX from this sole supplier;

I.       Several formulations of the ET for beef cattle are registered in
         Canada, and one is in the process of being registered in the U.S.
         Formulations for other livestock, such as swine and poultry are being
         developed;

J.       Although the IR technology has been proven in a pilot setting, it is
         recognized that it requires considerable engineering development to
         scale-up to a commercial system;

K.       Canada has previously licenced selected rights, selected versions and
         different territories of the ET and IR and consented to sub-licences of
         those licenced rights;

L.       An abbreviated version of those licenced selected rights is shown in
         the following

                                                                              10
<PAGE>   11
                                                PROTECTED - BUSINESS INFORMATION

         table, fixed approximately at the point when the PARTIES were
         negotiating the MASTER LICENCE;


<TABLE>
<S>    <C>             <C>    <C>                <C>               <C>             <C>                <C>
1      STS             ET     United States      Exclusive         LICENCED        Sale &             Beef
                                                                   PRODUCT         Distribution       cattle
2      STS             ET     Canada             Exclusive         LICENCED        Manufacture        Beef
                                                                   PRODUCT &                          Cattle
                                                                   PRE-MIX
3      Nutri-Charge    ET     USA                Sub-licence       LICENCED        Non-Excl.          Beef
                                                 Exclusive         PRODUCT &       Manufacture,       Cattle
                                                 Non-exclusive     PRE-MIX         Excl. Sale &
                                                                                   Distribute
4      RMS             ET     Canada             Sub-licence       LICENCED        Manufacture        Beef
                                                                   PRODUCT                            Cattle
5      RMS             ET     Canada             Exclusive         LICENCED        Manufacture,       Beef
                                                                   PRODUCT         Sale & Distribute  Cattle
6      AgResearch      ET     Australia & New    Exclusive         LICENCED        Manufacture,       Beef
                              Zealand                              PRODUCT         Sale & Distribute  Cattle
7      STS             IR     North America      Exclusive         n/a             Manufacture,       Beef &
                                                                                   Sale & Distribute  Swine
8      Nutri-Charge    IR     USA                Sub-licence       n/a             Manufacture,       Beef &
                                                                                   Sale & Distribute  Swine
</TABLE>

M.       Discussions with STS Agriventures Ltd. ("STS") and RMS Research
         Management Systems, Inc. ("RMS") concerning new licence rights resulted
         in new arrangements implemented during the time the PARTIES were
         negotiating the . This also resulted in the termination of a
         sub-licence.

                                                                              11
<PAGE>   12
                                                PROTECTED - BUSINESS INFORMATION

N.       The following table details the state of agreements prior to signing of
         this MASTER LICENCE:

<TABLE>
<S>        <C>             <C>    <C>            <C>               <C>           <C>                       <C>
New        STS             ET     Worldwide      Exclusive         PRE-MIX       Manufacture and           All
                                                                                 sale                      animals
                                                                                 manufacturers of
                                                                                 LICENCED
                                                                                 PRODUCT
1          STS             ET     U.S.           1)   Exclusive    LICENCED      1) Sales and              Beef
                                                 2)       Non-     PRODUCT &          Distribution         Cattle
                                                      exclusive    PRE-MIX       2) Manufacture
                                                                                 LICENCED PRODUCT
3          Nutri-Charge    ET     U.S.           Sub-licence       LICENCED      1) Sales and              Beef
                                                 1)   Exclusive    PRODUCT &          Distribution         Cattle
                                                 2) Non-           PRE-MIX       2) Manufacture
                                                      Exclusive                  LICENCED PRODUCT
5          RMS             ET     Canada         Exclusive         LICENCED      Manufacture, Sale &       Beef
                                                                   PRODUCT       Distribute
6          AgResearch      ET     Australia &    Exclusive         LICENCED      Manufacture, Sale &       Beef
                                  New                              PRODUCT       Distribute
                                  Zealand
New        RMS             ET     Canada         Exclusive         LICENCED      Manufacture Sales &       Swine
Pend                                                               PRODUCT       Distribution
- -ing
7          STS             IR     North          Exclusive         n/a           Manufacture, Sale &       Beef &
                                  America                                        Distribute                Swine
8          Nutri-Charge    IR     USA            Sub-licence       n/a           Manufacture, Sale &       Beef &
                                                                                 Distribute                Swine
</TABLE>


O.       eVS is a company whose strength is in commercializing image
         technologies, with emphasis on animal science applications. eVS's
         affiliated company, Safeguard Scientifics Inc., has considerable
         expertise in the development of spin-off companies which commercialize
         new technologies;

P.       Simultaneously with the execution of this Licence ("MASTER LICENCE"),
         eVS is purchasing all of the shares of the capital stock of STS and all
         of the partnership interests of Nutricharge, and will thereby take
         ownership of the licences previously held by STS and Nutricharge but
         not those held by New Zealand Pastoral Agriculture Research Institute
         Limited ("AgResearch") and RMS;

Q.       As a result of the share purchases identified in recital P, eVS has:

         i)       the North American rights to manufacture, sell and distribute
                  IR for beef &

                                                                              12
<PAGE>   13
                                                PROTECTED - BUSINESS INFORMATION

                  swine;

         ii)      the worldwide rights to manufacture, sell and distribute ET in
                  PRE-MIX format for kingdom animalia; and

         iii)     the U.S. rights to manufacture, sell, and distribute ET in
                  LICENCED PRODUCT format for beef cattle.

R.       eVS and Canada agreed to a process under which concurrently with the
         execution of the MASTER LICENCE:

         i)       eVS will cause the identified licencees and sub-licencees
                  assign, transfer and release all their rights, whether under
                  executed Licence / sub-licence or inchoate, to eVS;

         ii)      eVS surrenders those rights to Canada; and

         iii)     Canada and eVS execute the MASTER LICENCE that globally:

                  a        incorporates the then extant rights and obligations;
                           and

                  b        augments those rights and obligations;

S.       Under the MASTER LICENCE, eVS has:

         i)       an exclusive Licence;

         ii)      to IR and ET;

         iii)     worldwide for IR for food animals, including but not limited
                  to beef & dairy cattle, sheep, swine, elk, bison, deer,
                  reindeer, ratites (i.e. emus) poultry, rabbit;

         iv)      worldwide for ET PRE-MIX for Kingdom Animalia; and

         v)       worldwide for ET sales, manufacture and distribution of the
                  LICENCED PRODUCT;

                  a      except for Australia, New Zealand and Canada for beef;
                         and

                  b      except for Canada for swine.

                  with no right to export the LICENCED PRODUCT into the
                  territories cited in T(v)(a)(b) above, in which eVS does not
                  have the right to sell or distribute such LICENCED PRODUCT.

T.       The underlying principles of the MASTER LICENCE are that:

         i)       eVS has commercial freedom with the concomitant obligation to
                  make all commercially reasonable best efforts to COMMERCIALIZE
                  the ET and IR;

         ii)      Canada will receive a royalty from the COMMERCIALIZATION of ET
                  and IR or either of them or any technology sold or licenced
                  incorporating either or both of them;

         iii)     Canada and eVS collaborate on the enhancement of ET and IR;

         iv)      Canada provides scientific backing to eVS; and


                                                                              13
<PAGE>   14
                                                PROTECTED - BUSINESS INFORMATION

         v) Canada has scientific freedom to continue to conduct research and
         development concerning IR and ET with the concomitant obligation to
         notify eVS to any IMPROVEMENTS.

NOW THEREFORE in consideration of the premises, the terms and conditions
hereinafter contained and other good and valuable consideration, the receipt of
which is hereby acknowledged by each PARTY, the PARTIES hereto covenant and
agree as follows:

1       DEFINITIONS

         1.1      "AFFILIATE" means a subsidiary or corporation controlled (as
                  defined in the Income Tax of Act of Canada) by eVS, but does
                  not include a parent or upstream corporation or sister
                  corporation of eVS or Safeguard Scientifics Inc.

         1.2      "COMMERCIALIZATION" or "COMMERCIALIZE" means:

                  1.2.1   the making, using and sale (and when sold, sold at the
                          SALES PRICE);

                  1.2.2    by eVS;

                  1.2.3    of the LICENCED TECHNOLOGIES;

                  1.2.4    within the LICENCED TERRITORIES;

                  1.2.5    within the FIELDS OF USE;

                  1.2.6    for the commercially reasonable best efforts return
                           to eVS and Canada in accordance with Article 4
                           (Exploitation of Licenced Technologies); and includes

                  1.2.7    eVS obtaining any authorizations or permits that may
                           be required in order for eVS to legally carry out all
                           of its activities under this MASTER LICENCE.

         1.3      "CONFIDENTIAL INFORMATION" means:

                  1.3.1    without limitation:

                           1.3.1.1  all scientific (including INTELLECTUAL
                                    PROPERTY), technical, business, financial,
                                    legal or marketing information; and

                           1.3.1.2  information that is non-public,
                                    confidential, privileged or proprietary in
                                    nature;

                  1.3.2    disclosed orally, in writing or by any medium,
                           electronic or otherwise (and includes, without
                           limitation, samples, prototypes, specimens and
                           derivatives);


                                                                              14
<PAGE>   15
                                                PROTECTED - BUSINESS INFORMATION

                  1.3.3    during discussions, audits, spot audits, meetings,
                           tests, demonstrations, correspondence or otherwise;

                 or any part or portion thereof, related to activities pursuant
                 to the LICENCE AGREEMENT, irrespective of whether or not such
                 information is specifically marked confidential or identified
                 as confidential at the time of disclosure. Notwithstanding the
                 foregoing any oral disclosures that contain CONFIDENTIAL
                 INFORMATION may be identified either:

                  1.3.4    at the time of disclosure as confidential; or

                  1.3.5    reduced into writing and designated as confidential
                           within fifteen (15) days of disclosure.

         1.4      "CORE COUNTRIES" means:

                  1.4.1    Canada;

                  1.4.2    USA;

                  1.4.3    France;

                  1.4.4    Denmark;

                  1.4.5    Germany;

                  1.4.6    Ireland;

                  1.4.7    United Kingdom;

                  1.4.8    Australia; and

                  1.4.9    New Zealand.

         1.5      "DISCLOSING PARTY" or "RECEIVING PARTY" as applicable means
                  either of the PARTIES who is releasing CONFIDENTIAL
                  INFORMATION to the other PARTY or is acquiring CONFIDENTIAL
                  INFORMATION from the other PARTY.

         1.6      "ET" means:

                  1.6.1    the use and formulation of electrolyte therapy (as
                           invented and practised by the Lacombe Research
                           Centre) to improve the general health, meat quality
                           and grading of meat and livestock and other
                           agricultural, zoological and nutraceutical
                           applications premised on such electrolyte therapy;
                           and


                                                                              15
<PAGE>   16
                                                PROTECTED - BUSINESS INFORMATION

                  1.6.2    the use and formulation of electrolyte therapy as
                           claimed in Canadian Patent #2,009,532; US Patent
                           #5,728,675" and the other patents listed in Appendix
                           A (LICENCED TECHNOLOGIES PATENTS);

                  1.6.3    including all directly related know-how and directly
                           related trade secrets in respect of the matter
                           identified in subparagraphs 1.6.2 and 1.6.2.

         1.7      "ET PENDING PRODUCT" means the ET formula which is the subject
                  of the US Federal Department of Agriculture's (FDA) Notice of
                  Claimed Investigations Exemption for a New Animal Drug (INAD).

         1.8      "FIELDS OF USE" means the family of agricultural, zoological
                  or nutraceutical products directly related to ET and IR, more
                  particularly:

                  1.8.1    ET as PRE-MIX and LICENCED PRODUCT, for the Kingdom
                           Animalia in any medium (including without limitation,
                           liquid, pelletized or cubed); and

                  1.8.2    IR for food animals, which includes without
                           limitation: beef and dairy cattle, swine, sheep, elk,
                           deer, bison, ratites (i.e. emus); reindeer (or
                           caribou), poultry and rabbit.

         1.9      "GROSS REVENUES" means revenues received by eVS (or its
                  sub-licencees under paragraph 2.3 (Sub-licencing)) after the
                  two (2) year royalty holiday prescribed by paragraph 4.2
                  (Royalty Holiday) from the:

                  1.9.1    the COMMERCIALIZATION (including
                           without limitation, all transfers, sub-licences,
                           leases, transfers, distributorships or other
                           transactions) of the ET and IR or either of them if
                           only one is being COMMERCIALIZED; and

                  1.9.2    the COMMERCIALIZATION of any agricultural, zoological
                           or nutraceutal derivative of, or product that
                           incorporates in any percentage, ET or IR;

                  For greater clarity, whenever eVS sells a product
                  incorporating in any way ET or IR, in a bona fide commercial
                  transaction the GROSS REVENUES shall be the monies received as
                  the SALES PRICE in that transaction. Alternatively phrased, in
                  transactions which do not constitute sub-licences under
                  paragraph 2.3 (Sub-licencing), in which eVS sells product
                  derivatives of or incorporating ET or IR, to third parties for
                  a specified SALES PRICE, including a distributor or other
                  entity which intends to resell such product, GROSS REVENUES
                  shall means such SALES PRICE.

         1.10     "IMPROVEMENT" means any modification to the LICENCED
                  TECHNOLOGIES which would infringe the PATENTS for either ET or
                  IR or otherwise directly modify or directly improve the
                  LICENCED TECHNOLOGIES:


                                                                              16
<PAGE>   17
                                                PROTECTED - BUSINESS INFORMATION

         1.11     "INTELLECTUAL PROPERTY" means ET and IR; and all directly
                  related: copyrights, designs, methods and processes, show-how,
                  know-how, trade secrets; and other intellectual property
                  rights directly related to the LICENCED TECHNOLOGIES, and for
                  greater clarity, includes any IMPROVEMENTS.

         1.12     "IR" means:

                  1.12.1            use of infra-red technology (as invented and
                                    practised by the Lacombe Research Centre)
                                    for the determination of general health,
                                    meat quality and grading of meat and
                                    livestock and other agricultural, zoological
                                    and nutraceutical applications premised on
                                    such infra-red technology; as claimed in
                                    Canadian patent #2,099,529; US patent
                                    #5,458,418 & 5,595,44 and the other relevant
                                    patents listed in Appendix A (LICENCED
                                    TECHNOLOGIES PATENTS); and

                  1.12.2            including all directly related know-how and
                                    directly related trade secrets needed to
                                    exercise the technology claimed in the
                                    PATENTS

                                    but excluding without limitation:

                  1.12.3            the infra red technology previously created
                                    or owned by eVS and identified in Appendix E
                                    (eVS Infra Red Technologies) and all
                                    improvements thereto not directly derived
                                    from the IR or IMPROVEMENTS;

                  1.12.4            any other infra red technology or
                                    improvements thereto acquired by eVS or
                                    independently developed by eVS after the
                                    date hereof which is not directly derived
                                    from the IR or IMPROVEMENTS; and

                  1.12.5            the visual grading system (known as "CVS")
                                    previously created or owned by Canada
                                    including subsequent improvements thereto
                                    which is not directly derived from the IR or
                                    IMPROVEMENTS;.

         1.13     "LICENCED PRODUCT" means any livestock or animal ready form of
                  ET, more particularly

                  1.13.1            the appropriate mix of a specific quantity
                                    of PRE-MIX and certain feed base materials,

                           1.3.1.1          which mix is dependent on both the
                                            livestock or animal being treated
                                            and the medium of delivery.

         1.14     "LICENCED TERRITORIES" means:


                                                                              17
<PAGE>   18
                                                PROTECTED - BUSINESS INFORMATION

                  1.14.1  worldwide for IR;

                  1.14.2  worldwide for (ET) PRE-MIX;

                  1.14.3  worldwide for (ET) LICENCED PRODUCT except for:

                         1.14.3.1     Australia, New Zealand and Canada for
                                      beef; and

                         1.14.3.2     Canada for swine.

         1.5      "LICENCED TECHNOLOGIES " means ET and IR and any IMPROVEMENTS
                  that eVS elects to licence pursuant to Article 7
                  (Improvements, R & D, Collaborations).

         1.6      "MASTER LICENCE" means this agreement that includes attached
                  appendices and refers to the whole of this agreement, not to
                  any particular section or portion thereof.

         1.7      "NUTRI-CHARGE AGREEMENTS" means the following licences, as
                  those agreements stood, as of the date of execution of the
                  MASTER LICENCE

                  1.17.1   Sub-Licence Nutri-Charge Agreement dated December 1,
                           1993, between the parties S.T.S. Agriventures Ltd.
                           and Nutri-Charge; and

                  1.17.2   Sub-Licence Detection Technology Agreement dated
                           December 1, 1993, between the parties S.T.S.
                           Agriventures Ltd. and Nutri-Charge.

         1.18     "PARTY" means any one of the signatories to the MASTER LICENCE
                  and PARTIES means both of them and their respective employees,
                  servants and agents.

         1.19     "PATENT" means:

                  1.19.1   the patents listed Appendix A (LICENCED TECHNOLOGIES
                           PATENTS);


                  1.19.2   any continuations, divisions, reissues and any
                           subsequent patents whose priorities are derived from
                           any of the patents in Appendix A (LICENCED
                           TECHNOLOGIES PATENTS); and

                  1.19.3   subsequently patented improvements to the patents in
                           Appendix A (LICENCED TECHNOLOGIES PATENTS).

         1.20     "PATENT OFFICE" means a PATENT OFFICE in any part of the
                  LICENCED TERRITORIES and PATENT Offices means all of them.


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         1.21     "PERIOD ONE" means for each year during any subsisting term of
                  the MASTER LICENCE the period from 1 January through 30 June
                  inclusive.

         1.22     "PERIOD TWO" means for each year during any subsisting term of
                  the MASTER LICENCE the period from 1 July through 31 December
                  inclusive.

         1.23     "PRE- MIX" means the protected / confidential formulation of
                  the essential active ingredients of ET, which when combined
                  with carriers such as corn constitute the LICENCED PRODUCT as
                  specified and identified in Appendix "C" (PRE-MIX FORMULATION)
                  and as claimed in the US patents.

         1.24     "SALES PRICE" means the gross price paid by an arms length
                  purchaser for any LICENCED TECHNOLOGIES sold by eVS or its
                  authorized sub-licencees. In an non-arms length transaction,
                  involving an AFFILIATE, Safeguard Scientifics Inc. or a sister
                  corporation, if the gross price is less than the fair market
                  value, then, for royalty calculation purposes, the gross price
                  shall then be deemed to be the fair market value as set by
                  Canada.

         1.25     "SERENDIPITOUS TECHNOLOGIES" are technologies or improvements
                  that:

                  1.25.1   do not infringe the PATENTS; and

                  1.25.2   are created at the Agriculture Canada's Lacombe
                           Research Centre, Alberta, Canada.

         1.26     "STS AGREEMENTS" means the following licences, as those
                  agreements stood, as of the date of execution of the MASTER
                  LICENCE:

                  1.26.1   Exclusive Licence Agreement - NUTRI-CHARGE(R) - dated
                           October 22, 1993, between Her Majesty the Queen in
                           Right of Canada, as represented by the Minister of
                           Agriculture and S.T.S. Agriventures Ltd.;

                  1.26.2   Amendment to the Exclusive Licence Agreement -
                           NUTRI-CHARGE(R) - STS dated March 21 1997, between
                           Her Majesty the Queen in Right of Canada, as
                           represented by the Minister of Agriculture and S.T.S.
                           Agriventures Ltd.;

                  1.26.3   Sub-licence - NUTRI-CHARGE(R) - Agreement dated
                           December 1, 1993, between S.T.S. Agriventures Ltd.
                           and Nutri-Charge;

                  1.26.4   Agreement - NUTRI-CHARGE(R) - dated March 21, 1997,
                           between Her Majesty the Queen in Right of Canada, as
                           represented by the Minister of Agriculture and S.T.S.
                           Agriventures Ltd.;


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                  1.26.5   Sole Licence Agreement - Detection Technology dated
                           December 1, 1993, between Her Majesty the Queen in
                           Right of Canada, as represented by the Minister of
                           Agriculture and S.T.S. Agriventures Ltd.;

                  1.26.6   Sub-licence Agreement - Detection Technology - dated
                           December 1, 1993, between S.T.S. Agriventures Ltd.
                           and Nutri-Charge; and

                  1.26.7   Exclusive Licence Agreement - NUTRICHARGE(R) -
                           between Her Majesty the Queen in Right of Canada, as
                           represented by the Minister of Agriculture and STS
                           Agriventures Ltd.

         1.27     "TRADEMARK" means the trade name NUTRI-CHARGE(R) which is
                  owned by Canada for Canada, but does not include that trade
                  name as owned by:

                  1.27.1   AgResearch for New Zealand, Australia;

                  1.27.2   STS Agriventures for the UK & EEC; and

                  1.27.3    Nutri-charge Partnership for the United States





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2        SURRENDER & GRANT OF LICENCE

                 Surrender

         2.1      eVS hereby surrenders its STS AGREEMENTS and NUTRI-CHARGE
                  AGREEMENTS to Canada, and Canada accepts the surrender of
                  those agreements. Thereafter the aforementioned agreements:

                  2.1.1    shall be of no further force and effect; and

                  2.1.2    neither PARTY shall have any further liabilities or
                           obligations under any such agreements

                  Grant

         2.2      Subject to the provisions of this MASTER LICENCE, Canada
                  grants to eVS an exclusive, fixed term, terminable pursuant to
                  Article 16 (Termination), royalty bearing licence for:

                  2.2.1    the COMMERCIALIZATION of the LICENCED TECHNOLOGIES;
                           and

                  2.2.2    the TRADEMARK in any jurisdictions for which Canada
                           owns the TRADEMARK and Canada is free to licence it,
                           whether such ownership vests in Canada prior to or
                           subsequent to the execution of the MASTER LICENCE.

                 Sub-licencing

         2.3      eVS is permitted to sub-licence on the same terms and
                  conditions as the MASTER LICENCE:

                  2.3.1    AFFILIATES without the consent of Canada; or

                  2.3.2    non-affiliated or non-controlled parties with the
                           prior written consent of Canada, which consent shall
                           not be unreasonably withheld;

                 granted that in either situation:

                  2.3.3    the sub-licencee is a reputable party capable of
                           meeting its obligations under the sub-licence; and

                  2.3.4    the sub-licence or sub-licencee is in no way
                           prejudicial to Canada's good faith commercial
                           interests concerning the COMMERCIALIZATION of the
                           LICENCED TECHNOLOGIES.

                  Canada's Consent


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     2.4  Canada's consent is required in order to:

          2.4.1  avoid any pronounced conflicts of interest with respect to
                 ongoing planned research or licenced activities by Canada;

          2.4.2  avoid any contractual conflicts by Canada; or

          2.4.3  allow Canada to know who has access to and are exploiting the
                 LICENCED TECHNOLOGIES for reasons of feedback to Canada to
                 allow improvements and development.

          Sub-licence Conditions

          2.5    Any sub-licence granted by eVS shall:

                 2.5.1   be royalty-bearing, revocable, without the right to
                         sub-licence, only within the LICENCED TERRITORIES or
                         any portion thereof, and only within the FIELDS OF USE
                         or a subset thereof;

                 2.5.2   prescribe a royalty against GROSS REVENUES of the
                         sub-licencee of not less than [ ** ];

                 2.5.3   the first [ ** ] of any undivided royalty shall be
                         payable directly to Canada so that Canada is receiving
                         the same monies as if eVS has conducted the
                         COMMERCIALIZATION of the LICENCED TECHNOLOGIES rather
                         than the sub-licencee;

                 2.5.4   give eVS all rights necessary to strictly monitor and
                         enforce quality control standards;

                 2.5.5   be subject to the same obligations and restrictions as
                         those required of eVS under the MASTER LICENCE;

                 2.5.6   be copied to Canada within thirty (30) days of
                         execution; and

                 2.5.7   not be a de facto assignment.

                 Termination

          2.6    Termination of the MASTER LICENCE shall also terminate any
                 subsisting sub-licences.

                 Third Party Obligations - eVS



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          2.7    eVS shall honour any obligations Canada has in its licences or
                 collaboration agreements with RMS and AgResearch including
                 without limitation

                 2.7.1   the supply and pricing of ET PRE-MIX;

                 2.7.2   use of the TRADEMARK; and

                 2.7.3   rights to improvements to the technologies licenced
                         under those agreements.

                 These eVS obligations only apply to the contracts listed in
                 Appendix D (RMS / AgResearch Agreements). For greater
                 certainty, the RMS contract for swine ET in Canada shall be
                 deemed to be an executed contract antecedent in time to the
                 MASTER LICENCE, notwithstanding its actual date of execution or
                 effective date.

                 Third Party Obligations - Canada

          2.8    Canada shall not modify or extend the Appendix D Agreements
                 other than pursuant to the terms of those Appendix D
                 Agreements. Canada will not agree to renew any such agreement
                 without offering to eVS the prior right to enter into an
                 agreement on substantially the same terms and conditions unless
                 the other contracting party has the right to renew such
                 agreement.

                 Use of Canadian Corporations

          2.9    eVS agrees that, when it deems such action to be commercially
                 prudent, it will use Canadian corporations to provide
                 outsourcing or subcontracting services in connection with the
                 COMMERCIALIZATION of ET and IR.

                 Disclosure Obligation - Canada

          2.10   Canada shall have a continuing obligation to disclose in a
                 reasonable manner and time to eVS any new INTELLECTUAL
                 PROPERTY.

                 Material Terms

          2.11   Paragraphs 2.3 (Sub-licencing) to 2.10 (Disclosure Obligation -
                 Canada) are material terms of the MASTER LICENCE.




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3 TERM

                 Initial Term

          3.1    Subject to paragraph 3.2 (Renewal Conditions) and Article 16
                 (Termination) the term of the MASTER LICENCE shall be twenty
                 (20) years from the date of execution.

                 Renewal Conditions

          3.2    eVS shall have the right to elect to renew after the initial
                 term for five (5) year terms, so long as:

                         No Dispute

                 3.2.1   eVS is not in breach of the extant MASTER LICENCE; or

                         Dispute /Contingent Renewal Pending ADR

                 3.2.2   if at the time of an automatic renewal, there is an
                         outstanding dispute or disputes between the PARTIES
                         that has been articulated and referred to negotiation,
                         paragraph 18.2 (Formal Negotiations) or in mediation,
                         paragraph 18.3 (Mediation) or in arbitration, paragraph
                         18.8 (Arbitration) as the case may be, then the MASTER
                         LICENCE shall contingently renew until the dispute is
                         resolved under the dispute resolution mechanisms
                         prescribed under Article 18 (Alternate Dispute
                         Resolution (ADR)).

                         3.2.2.1   If the resolution of the dispute determines
                                   that eVS has committed an act of termination
                                   as defined in Article 16 (Termination), then
                                   Canada shall elect either to:

                                   3.2.2.1.1   allow the renewal to vest; or

                                   3.2.2.1.2   terminate the MASTER LICENCE,
                                               subject to any cure periods.

                         3.2.2.2   If the resolution of the dispute determines
                                   that eVS was not or is not in breach of the
                                   MASTER LICENCE, then the renewal of the
                                   MASTER LICENCE shall vest.





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4 EXPLOITATION OF LICENCED TECHNOLOGIES

                  Best Efforts to Commercialize

          4.1    During the term (or the renewal) of the MASTER LICENCE, eVS
                 shall:

                 4.1.1   use its commercially reasonable best efforts to
                         COMMERCIALIZE the LICENCED TECHNOLOGIES; and

                 4.1.2   not do, or assist anyone to do, anything inimical to
                         the COMMERCIALIZATION of the LICENCED TECHNOLOGIES or
                         TRADEMARK.

                Royalty Holiday

          4.2    Notwithstanding paragraph 4.1 (Best Efforts to Commercialize),
                 because:

                 4.2.1   ET requires regulatory approvals for each of the
                         different products;

                 4.2.2   as of the date of the execution of the MASTER LICENCE,
                         IR is not sufficiently developed for COMMERCIALIZATION
                         due to software and hardware issues; and

                 4.2.3   acquisition, start-up, marketing, manufacturing costs
                         are substantial and well in excess of one million
                         dollars US ($1,000,000).

                 eVS shall have a two (2) year royalty holiday from the date of
                 execution of the MASTER LICENCE in order to obtain the
                 necessary regulatory approvals, mature the IR for market and
                 preserve capital for COMMERCIALIZATION purposes.

                 Start-Up Costs

          4.3    If Canada requires broad details of the costs cited in
                 sub-paragraph 4.2.3 (Royalty Holiday), then eVS shall provide
                 those details sufficient to satisfy Canada's need and
                 motivation for such details. Such information is deemed to be
                 CONFIDENTIAL INFORMATION because of the highly sensitive
                 financial and marketing intelligence contained therein.

                 Continuing Obligations During Holiday

          4.4    The royalty holiday under paragraph 4.2 (Royalty Holiday), does
                 not relieve eVS of its obligations to:

                           Patents



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                 4.4.1   apply for, register, prosecute, secure and maintain
                         PATENTS as further prescribed in Article 9 (Patents);

                           Collaborations

                 4.4.2   fund collaborations concerning ET and IR as prescribed
                         in Article 7 (Improvements, R & D, Collaborations); and

                           Research Support Payment

                 4.4.3   pay twenty thousand dollars US ($20,000) to Canada at
                         the first anniversary of the execution of MASTER
                         LICENCE towards a research support agreement for
                         research purposes designated solely by Canada which may
                         or may not involve the LICENCED TECHNOLOGIES.

                 Fundamental Terms

          4.5    Paragraph 4.1 (Best Efforts to Commercialize) is a fundamental
                 term of the MASTER LICENCE.






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5 ROYALTIES

                 Percentage Royalty of Gross Revenues

          5.1    eVS shall pay a royalty to Canada of [ ** ] of GROSS REVENUES.

                 Payments Semi-Annually

          5.2    The royalties under paragraph 5.1 (Percentage Royalty of Gross
                 Revenues) shall be payable semi-annually to Canada.

                 Payment Dates

          5.3    eVS shall calculate the royalties for PERIOD ONE and PERIOD TWO
                 each year.

                 5.3.1   The payment related to PERIOD ONE, which shall be
                         estimated and based upon unaudited financial
                         statements, shall be made on or about 31 July each
                         year.

                 5.3.2   The payment related to PERIOD TWO, which shall be based
                         upon audited year-end financial statements and
                         adjusted, if necessary, to reflect actual royalties
                         earned in PERIOD ONE, shall be made on or before 15
                         March each year.

                 Payment Method

          5.4    Cheques for the payment of royalties shall be in US funds and
                 made payable to the "Receiver General for Canada". They shall
                 be sent to:

                  Director
                 Agriculture and Agri-Food Canada
                 Lacombe Research Centre
                 6000 C&E Trail
                 Lacombe, Alberta
                 T4L 1W1

                 Cheque Requirements

          5.5    Each cheque shall be accompanied by a statement bearing the
                 Financial Coding of this MASTER LICENCE and the LICENCED
                 TECHNOLOGIES name/identification, and showing the period
                 covered, the total sales, the royalty applicable and the total
                 royalty paid.

                 Payments to Canada after Termination



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          5.6    eVS shall pay to Canada any sums due and payable under the
                 MASTER LICENCE, whether incurred prior to termination or after,
                 in accordance with Article 16 (Termination).

                 Attribution of Royalties

         5.7      eVS shall use its commercially reasonable best efforts to
                  identify how much of the aggregate annual royalties are
                  attributable to each of ET or IR. This information will be
                  disclosed to Canada at the same time the PERIOD TWO payment is
                  made.






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6 IP OWNERSHIP & REPRESENTATIONS

                 Canada Owns Licenced Technologies

          6.1    eVS agrees and is estopped from alleging otherwise, that:

                 6.1.1   subject to the provisions of paragraph 7.12 (Ownership
                         of Background Intellectual Property) the LICENCED
                         TECHNOLOGIES, its creation, discovery, development and
                         every matter relating thereto, forming part thereof and
                         arising therefrom, are vested in and are the sole
                         property of Canada;

                 6.1.2   subject to the provisions of paragraph 7.12 (Ownership
                         of Background Intellectual Property) ownership and all
                         rights to, related to, connected with or arising out of
                         the foregoing, including without limitation, PATENTS,
                         INTELLECTUAL PROPERTY and copyright in and the right to
                         produce and publish or cause to be produced and
                         published all information material and documents, and
                         the right to issue a licence, are vested in and are the
                         sole property of Canada;

                 6.1.3   eVS shall have no rights in and to the foregoing except
                         as may be expressly granted in the MASTER LICENCE and
                         eVS shall not apply for any pertinent or other right
                         and shall not divulge or disclose, without the prior
                         written consent of Canada, any information, material or
                         documents concerning same or make available in any way
                         or use the LICENCED TECHNOLOGIES except as expressly
                         provided in this MASTER LICENCE;

                 6.1.4   Canada is the exclusive owner of the TRADEMARK and all
                         goodwill associated therewith, and any unauthorized use
                         of the TRADEMARK is an infringement of Canada's rights;
                         and

                 6.1.5   eVS acquires no right, title or interest in the
                         TRADEMARK, and eVS shall not in any manner represent
                         that it has any ownership interest in the TRADEMARK or
                         applications or registrations therefor.

                 No Impeachment

          6.2    eVS shall neither impeach or otherwise attack, directly or
                 indirectly, the PATENTS the TRADEMARK or any INTELLECTUAL
                 PROPERTY rights held by Canada in the LICENCED TECHNOLOGIES nor
                 assist any third party to do the same, except where prohibited
                 by law.

                 Inimical Use of Confidential Information

          6.3    Notwithstanding prohibition in paragraph 6.2 (No Impeachment),
                 eVS shall not use any CONFIDENTIAL INFORMATION obtained from
                 Canada in the negotiation of the


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                 MASTER LICENCE, under due diligence searches or otherwise
                 related to this MASTER LICENCE in any manner that violates eVS
                 rights and obligations under the MASTER LICENCE and is inimical
                 to the interests of Canada.

                 Regulatory Rights

          6.4    Canada represents to the best of its knowledge that any
                 regulatory rights to the LICENCED TECHNOLOGIES are as follows:

                 6.4.1   STS Agriventures Ltd. owns the registration for Canada
                         for five ET products for beef cattle;

                 6.4.2   Nutricharge Partnership is in the final stages of the
                         process of getting ownership for one ET product for
                         beef cattle in the USA;

                 6.4.3   Canada is in the process getting ownership for one ET
                         product in Canada for swine; and

                 6.4.4   Agriventures STS Ltd. has obtained a registration for
                         one ET product beef cattle in UK and EEC, which
                         registration does not provide proprietary rights.

                 Inventors Rights

          6.5    Canada has obtained an enforceable written assignment from each
                 named inventor, and the proper inventors have been identified
                 in the PATENTS. Canada has provided to eVS true and correct
                 copies of each such assignment.

          6.6    To the best of Canada's knowledge the PATENTS both constitute a
                 valid and enforceable right of Canada and do not infringe or
                 conflict with the rights of any other person. To the best of
                 Canada's knowledge, Canada has no obligation to compensate any
                 non-governmental third parties in order to use the LICENCED
                 TECHNOLOGIES other than:

                 6.6.1   as prescribed under the Public Servants Inventions Act,
                         pursuant to which payments are carved from any
                         royalties received by Canada for the use of the
                         LICENCED TECHNOLOGIES;


                 6.6.2   a carve out of any royalty stream of Canada's
                         attributable to the use of technology arising out of a
                         collaboration with the Alberta Pork Producers
                         Development Corporation, which collaboration was
                         terminated on 1 July 1994, and which carve shall, as
                         between the PARTIES, be Canada's sole responsible.



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                 No Litigation

          6.7    As of the date of execution of the MASTER LICENCE, to the best
                 of Canada's knowledge, there is no threatened suit, action,
                 claim, arbitration, grievance, litigation, administrative or
                 legal or other proceeding, or investigation, against Canada or
                 its licencees contesting the validity of, or Canada's rights to
                 use, any of the LICENCED TECHNOLOGIES.

                 Third Party Rights

          6.8    Except for:

                 6.8.1   the licences listed in Appendix D ("RMS / AgResearch
                         Agreements);

                 6.8.2   the right to conduct research concerning the LICENCED
                         TECHNOLOGIES; and

                 6.8.3   the regulatory rights listed in paragraph 6.4
                         (Regulatory Rights);

                 as of the date of execution of the MASTER LICENCE, Canada has
                 not granted any commercial licence or other commercial right to
                 use, in any manner, any item of the LICENCED TECHNOLOGIES
                 whether or not requiring the payment of royalties.

                 Infringement

          6.9    To the best of Canada's knowledge, as of the date of execution
                 of the MASTER LICENCE, no person or entity is infringing upon
                 any of Canada's rights to the PATENTS. To the best of Canada's
                 knowledge, Canada's use of the PATENTS prior to the date of
                 this MASTER LICENCE does not infringe, and has not infringed,
                 the rights of any third party. Canada has not received any
                 formal notice of infringement upon, misappropriation of any
                 asserted right of any third party, and to the best of Canada's
                 knowledge, there is no basis for any such notice.

                 Patent Coverage & Formula

          6.10   Canada represents and warrants that:

                 6.10.1  the confidential formulation of the PRE-MIX as
                         identified in Appendix "C" in particular
                         NUTRI-CHARGE(R) MR (market-ready) and NUTRI-CHARGE(R)
                         ON (over- night), but excluding NUTRI-CHARGE(R) TM
                         (tank mixable) are within at least one claim on the US
                         patents;

                 6.10.2  this formulation, as adapted for a particular species
                         or medium of delivery, was disclosed under licence to
                         STS Agriventures Ltd. and Nutricharge (a limited
                         partnership) for regulatory registration.



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                 US Federal Department of Agriculture (FDA) Regulatory

                       Manufacture

          6.11   As of the date of execution of the MASTER LICENCE, to the best
                 of Canada's knowledge, its licencee for the US territory,
                 Nutricharge, manufactured ET PENDING PRODUCT in full compliance
                 with FDA good manufacturing practice requirements.

                       No Export

          6.12   As of the date of execution of the MASTER LICENCE, Canada has
                 not exported PRE-MIX or LICENCED PRODUCT to the USA, and to the
                 best of Canada's knowledge, none of Canada's licencees have
                 exported PRE-MIX or LICENCED PRODUCT to the USA.

                       Disclosure by Canada

          6.13   As of the date of execution of the MASTER LICENCE, Canada has
                 made its best efforts to discuss, satisfy inquiries, locate and
                 disclose to eVS or its agents, all documents or other
                 information in Canada's possession concerning communications to
                 or from the FDA or prepared by the FDA, concerning the ET
                 PENDING PRODUCT, and the related FDA regulatory requirements
                 for new animal drugs.

                       Product Claims

          6.14   As of the date of execution of the MASTER LICENCE, Canada has
                 agreed with the FDA as to a protocol to prove the following
                 claims concerning the ET PENDING PRODUCT:

                 6.14.1  increased dressing percentage;

                 6.14.2  reduced proportions of dark cutter which are animals
                         with low muscle glycogen and high pH;

                 6.14.3  reduced mobility of intra-muscular fat resulting in a
                         higher marbling score;

                 As evidenced by FDA memo dated 28 June 1996, an FDA letter 29
                 September 1997.

                        Animal Food

          6.15   As of the date of the execution of the MASTER LICENCE, to the
                 best of Canada's knowledge, the ET PENDING PRODUCT meets all
                 FDA requirements for use as a


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                 non-human animal food. For greater clarity, Canada has not
                 assessed the ET PENDING PRODUCT with respect to the American
                 Association of Feed Control Officials (AAFCO).

                       FDA Problems

          6.16   As of the date of execution of the MASTER LICENCE, Canada is
                 not currently aware of any issues or problems that would
                 significantly delay or prevent FDA approval of a new animal
                 drug application for the ET PENDING PRODUCT, with the exception
                 of clinical trial results which are the subject of the report
                 entitled "Investigator Final Study Report, INAD, 9267-0-0004".

                       No Misrepresentations

          6.17   As of the date of execution of the MASTER LICENCE, Canada has
                 not, and to the best of Canada's knowledge, Her authorized
                 agents and licencees have not,

                 6.17.1  made any untrue statements of a material fact or
                         fraudulent statement to the FDA;

                 6.17.2  deliberately failed to disclose a fact requirement to
                         be disclosed to the FDA; and


                 6.17.3  paid any bribe or illegal gratuities or committed any
                         deceptive act to or upon the FDA.

                         Laboratory Practices

          6.18   Canada has conducted itself with respect to ET and IR under
                 good laboratory practices, but Canada has not knowingly
                 conducted itself in accordance with any good laboratory
                 practices prescribed by a statute or regulation of another
                 nation.


                 Material Terms

          6.19   Article 6 (IP Ownership & Representations) is a material term
                 of the MASTER LICENCE.






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7 IMPROVEMENTS, R & D, COLLABORATIONS

                 Carve Out

          7.1    Notwithstanding any other provision of this MASTER LICENCE,
                 Canada shall retain from the MASTER LICENCE any and all rights
                 necessary for research and development both:

                 7.1.1   to improve ET and IR; and

                 7.1.2   to pursue research and development directly or
                         indirectly related to ET and IR.

                 Licencing of Improvements from Canada's R & D under Carve Out
          7.2    If IMPROVEMENTS arise from research conducted by Canada at the
                 Lacombe Research Centre under paragraph 7.1 (Carve Out), and

                 7.2.1   those IMPROVEMENTS are exclusively owned by Canada; or

                 7.2.2   there are no pre-emptory or third party rights to those
                         IMPROVEMENTS under pre-existing agreements concerning
                         IR or ET;

                 then those IMPROVEMENTS shall be licenced exclusively to eVS
                 under the MASTER LICENCE upon notification by Canada of such
                 IMPROVEMENTS and acceptance of same by eVS in writing within
                 one hundred and eighty (180) days of the notification. Any
                 SERENDIPITOUS IMPROVEMENTS arising from research conducted by
                 Canada under paragraph 7.1 (Carve Out) shall not be covered by
                 the MASTER LICENCE.

                 No Competition

          7.3    Canada shall not COMMERCIALIZE ET or IR or any IMPROVEMENTS,
                 but nothing in this obligation shall derogate or diminish
                 Canada's right to conduct research and development as
                 contemplated in paragraph 7.1 (Carve Out).

                 Collaborations Between eVS and Canada


          7.4    eVS and Canada shall each have the option to be a collaborator
                 with the other in any projects concerning IR or ET. If the
                 PARTIES agree to such a collaboration, then eVS and Canada
                 (through the Lacombe Research Centre) shall support on a
                 case-by-case, mutually agreed upon basis, such collaborations
                 in cash or in kind, or both. Each PARTY shall thereafter
                 provide the other PARTY with periodic progress reports
                 regarding the status of the collaboration as provided for in
                 the applicable collaboration agreement.



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                 Licencing of Improvements from eVS / Canada Collaborations

          7.5    Any IMPROVEMENTS produced in any collaboration between eVS and
                 Canada (Lacombe Research Centre) pursuant to paragraph 7.4
                 (Collaborations Between eVS and Canada) shall be licenced
                 exclusively to eVS under the MASTER LICENCE after notification
                 by Canada of such IMPROVEMENT and acceptance of same by eVS in
                 writing within one hundred and eighty (180) days from such
                 notification. The IMPROVEMENTS shall be owned by Canada unless
                 eVS brought technology into the collaboration which was crucial
                 to the collaboration in which case the resulting technology
                 shall be jointly owned in proportion to the values of the
                 technologies brought by the PARTIES.

                 Licencing of Serendipitous Technologies from eVS / Canada
                 Collaborations

          7.6    After notification by Canada of any SERENDIPITOUS TECHNOLOGIES
                 produced in any collaboration between eVS and Canada pursuant
                 to paragraph 7.4 (Collaborations Between eVS and Canada), eVS
                 shall have an option (exercisable in writing within one hundred
                 and eighty (180) days from the aforementioned notification) to
                 exclusively licence those SERENDIPITOUS TECHNOLOGIES, on
                 reasonable commercial terms which terms shall include a
                 commercially reasonable best efforts to COMMERCIALIZE
                 obligations. The SERENDIPITOUS TECHNOLOGIES resulting from the
                 collaboration shall be owned by Canada unless eVS brought
                 technology into the collaboration which was crucial to the
                 collaboration in which case the resulting technology shall be
                 jointly owned in proportion to the values of the technology
                 brought by the PARTIES.

                 Third Party Licences Resulting Technology

          7.7    If under paragraph 7.6, (Licencing Serendipitous Technologies
                 from eVS / Canada Collaborations)

                 7.7.1   eVS funds a collaboration but does not exercise any
                         rights to licence any technology resulting from that
                         collaboration; and

                 7.7.2   Canada commercializes that resulting technology with a
                         third party;

                 then eVS shall be entitled to a portion of any consideration
                 payable under the licence with the third party in an amount to
                 be agreed upon by the PARTIES, which may be determined in part
                 by considering each PARTY's contribution to the collaboration.

                 Improvements Part of Licenced Technologies

          7.8    For greater clarity, if eVS elects to licence IMPROVEMENTS,
                 pursuant to any or all of:



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                 7.8.1   paragraph 7.2 (Canada's R & D under Carve Out);

                 7.8.2   paragraph 7.5 (eVS / Canada Collaborations); and

                 7.8.3   paragraph 7.6 (Serendipitous Technologies from eVS /
                         Canada Collaborations);

                 then such IMPROVEMENTS shall be deemed to be included in the
                 definition of LICENCED TECHNOLOGIES of ET or IR, as applicable.

                 Discretion to Collaborate

          7.9    Collaborations pursuant to paragraph 7.4 (Collaborations
                 Between eVS and Canada) shall be conducted subject to the
                 discretion of Canada and eVS (as applicable), factoring in,
                 amongst other factors:

                 7.9.1   research planning priorities;

                 7.9.2   mandate;

                 7.9.3   pre-existing contractual obligations;

                 7.9.4   scarcity of resources & personnel;

                 7.9.5     Ministerial prerogative; and

                 7.9.6     commercial needs / priorities / time constraints.

                 Either Party Unable / Unwilling to Collaborate

          7.10   If either PARTY is unable or unwilling to collaborate or
                 conduct a collaboration pursuant to paragraph 7.4
                 (Collaborations Between eVS and Canada) due to reasons
                 contemplated in paragraph 7.9 (Discretion to Collaborate) then
                 the other PARTY may enter into a collaboration with a third
                 party, subject to the applicable criteria in paragraph 7.11
                 (Third Party Collaborations).


                 Third Party Collaborations

          7.11   When the PARTIES enter into third party collaboration, as
                 prescribed in paragraph 7.10 (Either Party Unable / Unwilling
                 to Collaborate), Canada and eVS shall:

                 7.11.1  disclose to the other the nature of the collaboration
                         prior to the start of the project;



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                 7.11.2  determine if the third party would collaborate with
                         Canada or eVS as the case may be;

                 7.11.3  ensure that if Canada or eVS (as applicable) do not
                         actively participate in collaborative project, then the
                         project shall be subject to any necessary
                         confidentiality restrictions and third party approvals
                         necessary to protect the CONFIDENTIAL INFORMATION of
                         either Canada or eVS;

                 7.11.4  supply candid, timely and complete disclosure of the
                         findings, results and their impact, potential or
                         otherwise, on ET or IR notwithstanding any
                         confidentiality strictures, to Canada or eVS (as
                         applicable);

                 7.11.5  ensure that eVS or Canada, as the case may be, are
                         signatories to any third party collaborations, even
                         though eVS or Canada are not actively participating in
                         the third party collaboration; and

                 7.11.6  if Canada is an active PARTY to a third party
                         collaboration and eVS is not, Canada will use its best
                         efforts to ensure that any IMPROVEMENTS resulting from
                         such third party collaborations are licenced to eVS
                         under the MASTER LICENCE.

                 For greater clarity, pursuant to subparagraph 7.11.5 (Third
                 Party Collaborations), the PARTIES agree that each must deliver
                 an executed signature page to any third party agreement within
                 thirty (30) days of the receipt of the execution copy of such
                 agreement.

                 Ownership of Background Intellectual Property

          7.12   Any IMPROVEMENTS solely discovered, created, assigned to,
                 licenced or otherwise bought by Canada or eVS remain the
                 property of the PARTY that discovered, created or bought that
                 IMPROVEMENT. Any jointly discovered, created or bought
                 IMPROVEMENTS shall be jointly owned in the ratio which may be
                 determined by the collaboration, contribution or purchase.


                 Material Terms

          7.13   eVS's obligations under this Article are material terms of the
                 MASTER LICENCE.




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8 WARRANTIES OF QUALITY

                 No Warranties

          8.1    Other than as explicitly stated in the MASTER LICENCE, Canada
                 makes no warranties, express or implied, of any nature, for the
                 LICENCED TECHNOLOGIES including without limitation:

                 8.1.1   merchantability;

                 8.1.2   fitness for any or a particular purpose;

                 8.1.3   commercial utility;

                 8.1.4   latent or other defects;

                 8.1.5   infringement or non-infringement of PATENTS or other
                         third party rights;

                 8.1.6   conformity with the laws of any jurisdictions; or

                 8.1.7   fitness for eVS's corporate objectives.

                 Disclaimer of Implied Warranties

          8.2    No legal or equitable warranties implied by law or convention
                 under any domestic, foreign or international legal regime shall
                 apply to the MASTER LICENCE. eVS acknowledges this disclaimer
                 and is estopped from relying on any such warranties against
                 Canada.

                 Third Party Representations

          8.3    eVS shall not represent to any sub-licencee the existence of
                 any warranty concerning the LICENCED TECHNOLOGIES unless such
                 warranty is explicitly stated in the MASTER LICENCE.

                 Disclosure by Canada

          8.4    As of the date of execution of the MASTER LICENCE, Canada has
                 made its best efforts to locate and disclose to eVS all
                 relevant information, studies, publications in Canada's
                 possession or control concerning:

                 8.4.1   any regulatory processes;

                 8.4.2   the use, safety and effectiveness of the PATENTS; and



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                 8.4.3   the safety for consumption by animals that have been
                         treated by the PATENTS;

                 for the purposes originally contemplated under the MASTER
                 LICENCE. To the best of Canada's knowledge all of the
                 aforementioned information, studies, and publications are true
                 and correct in all material respects and omit no material facts
                 the absence of which renders the studies misleading.

                 Disclosure & Due Diligence

          8.5    eVS acknowledges that:

                 8.5.1   eVS has conducted a due diligence search of all matters
                         relevant to the LICENCED TECHNOLOGIES, the PATENTS and
                         the MASTER LICENCE;

                 8.5.2   eVS has had an opportunity to confer with Canada and
                         receive satisfactory answers from Canada; and

                 8.5.3   Canada makes no representation that all the
                         characteristics both favourable and unfavourable have
                         been identified.

                 Confidential Information Without Warranty / No Reliance

          8.6    Except for the representations of Canada in the MASTER LICENCE,

                 8.6.1   eVS shall not rely in any way on the accuracy or
                         completeness of any CONFIDENTIAL INFORMATION or other
                         information provided by Canada under the MASTER
                         LICENCE;

                 8.6.2   any use of such CONFIDENTIAL INFORMATION shall be at
                         eVS sole risk and expense; and

                 8.6.3   any CONFIDENTIAL INFORMATION provided to eVS by Canada
                         is without any warranty or guarantee of any kind
                         whatsoever.



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9 PATENTS

                 Queen Owns All Patents

          9.1    The PARTIES agree that all PATENTS shall be in the name of "Her
                 Majesty the Queen in Right of Canada as represented by the
                 Minister of Agriculture and Agri-Food Canada" except in those
                 instances of joint inventions as contemplated in Article 7
                 (Improvements, R & D, & Collaborations) in which case such
                 patents shall be in joint names.

                 eVS Discretion to Patent

          9.2    eVS shall have discretion as to the jurisdictions in which it
                 seeks patent protection.

                 eVS Responsibility for Patent Costs

          9.3    eVS shall be responsible for all future fees related to present
                 and future PATENT applications, registration, prosecution and
                 maintenance for:

                 9.3.1   all PATENTS in existence at the time of the execution
                         of the MASTER LICENCE, irrespective of whether or not
                         eVS deems those extant PATENTS necessary; and

                 9.3.2   patents deemed necessary by eVS and Canada, or by eVS
                         only.

                 Canada Responsibility for Patent Costs

          9.4    Canada shall be responsible for all fees for patent
                 applications that:

                 9.4.1   are initiated after the execution of the MASTER
                         LICENCE; and

                 9.4.2   deemed necessary by Canada alone.

                 Material Terms

          9.5    eVS's obligations under this Article are material terms of the
                 MASTER LICENCE.




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10 REGULATORY

                 Notice to Assist

          10.1   Canada shall assist eVS to obtain any required regulatory
                 approvals in the CORE COUNTRIES and as necessary elsewhere, for
                 the COMMERCIALIZATION of ET and IR. Such assistance shall be
                 provided after receipt of advance notice by Canada from eVS.
                 eVS shall use its best efforts to provide advance notice to
                 Canada to enable resource planning and allocation, which notice
                 in any event shall be given not less than two (2) weeks prior
                 to the date on which Canada's assistance is needed.

                 Assistance

          10.2   This assistance shall include without limitation:

                 10.2.1  educating eVS personnel or clients in the technology in
                         support of hearings or registration trials;

                 10.2.2  making scientists familiar with the technology
                         available for hearings or registration trials;

                 10.2.3  disclosing scientific reports (under appropriate
                         confidentiality strictures when applicable);

                 10.2.4  establishing / disclosing protocols; and

                 10.2.5  scientific support.

                 eVS acknowledges that when possible, third parties will be used
                 to provide the said assistance in order to preserve and best
                 utilize Canada's scientific resources. Such assistance will be
                 provided by Canada subject to:

                 10.2.6  scarcity of scientific resources and personnel;

                 10.2.7  pre-existing contractual obligations;

                 10.2.8  research and development priorities; and

                 10.2.9  time constraints.

                 In the event third parties cannot be utilized, Canada shall
                 render the necessary support to eVS within a reasonable period
                 of time as mutually agreed to by the parties taking into
                 account the foregoing after receipt of sufficient advance
                 notice pursuant to paragraph 10.1 (Notice to Assist).



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                 Canada's Advisory Board Positions

          10.3   Canada shall have up to two positions on any scientific
                 advisory boards used by eVS regarding ET and IR
                 COMMERCIALIZATION. Canada shall ensure that, as applicable, the
                 Director of the Lacombe Research Centre (or the Director's
                 designate) and one of its scientists who is most conversant
                 with IR or ET shall be Canada's nominees. Canada's scientist
                 position on any advisory boards will be filled on a revolving
                 basis as required.

                 Costs of Canada's Advisory Board Members

          10.4   eVS shall pay all travel, accommodation and victualing and
                 incidental costs for Canada's members to travel for regulatory
                 or advisory board purposes at rates:

                 10.4.1  not to exceed those prescribed by the Treasury Board of
                         Canada for civil servants where those costs are
                         incurred before notice or approval of the
                         aforementioned costs by eVS; or

                 10.4.2  at the rates in accordance with the policies and
                         procedures of eVS then in effect when the
                         aforementioned costs are approved in advance by eVS;

                 but salary and related expenses shall be borne by Canada.

                 Regulatory Costs

          10.5   eVS shall be solely responsible for any and all regulatory
                 costs, applicable in any jurisdiction, including without
                 limitation: professional fees, consultant costs, trial costs,
                 government fees, levies and charges. For greater clarity and
                 without restricting the generality of the foregoing, eVS shall
                 not be responsible for infringement or litigation costs, other
                 than as prescribed under Article 14 (Patent Infringement).

                 Decision to Register

          10.6   eVS shall be responsible, upon consultation with Canada, for
                 determining if a product is to be registered under any
                 regulatory regime, as well as the nature of the registration.
                 Should eVS decide not to register, with or without claims,
                 Canada may independently pursue registration at Canada's own
                 cost.


                 Registration Ownership

          10.7   Registrations shall vest in the name of the PARTY that paid for
                 the registration. Any registrations in the name of eVS shall be
                 as soon as practicable assigned,


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                 transferred or licenced to Canada, for one dollar, upon the
                 expiration or termination of the MASTER LICENCE.

                 Trademark Use

          10.8   eVS shall:

                 10.8.1  use the TRADEMARK only in the manner and form
                         prescribed by Canada in accordance with the reasonable
                         standards and specifications of Canada;

                 10.8.2  observe such reasonable requirements with respect to
                         trademark notices and other forms of marking as Canada
                         from time to time may, in its sole discretion, direct
                         and communicate to eVS; and

                 10.8.3  indicate clearly when using the TRADEMARK that the
                         TRADEMARK is owned by Canada and that the TRADEMARK is
                         being used by eVS under a licence from Canada.

                 Trademark and Quality Control

          10.9   eVS shall only use the TRADEMARK in the territories for which
                 Canada is the owner and only in association with ET which
                 conforms in nature and quality and are produced or performed by
                 eVS in compliance with the contractual and regulatory standards
                 as prescribed in Article 11 (Audits & Quality Control).




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11      AUDITS & QUALITY CONTROL

                 Audit Rights and Purposes

        11.1     Canada shall have the right to audit eVS and examine eVS's
                 records, documentation and data related to the
                 COMMERCIALIZATION of ET and IR in ensure compliance with all
                 terms of the MASTER LICENCE and protection of the TRADEMARK.

                 Audit Timing / Process / Cost

        11.2     Such audits will be conducted during the 2nd quarter of any
                 fiscal year after the completion of the preceding years annual
                 audit. The audit will be conducted during normal business hours
                 following reasonable written notice. Canada shall have the
                 option to use the independent auditors of eVS to conduct the
                 forensic royalty audit. If there is a five percent (5%) or more
                 deficiency in royalty payment uncovered by the forensic arm of
                 the independent auditors of eVS, then in addition to
                 immediately paying the deficiency, eVS shall pay Canada's
                 costs, if any, in conducting the audit.

                 Regulatory Quality Standards

        11.3     eVS shall use its best efforts to ensure that all ET and IR
                 processes or products meet or exceed any contractual (pursuant
                 to paragraph 11.4 - Contractual Quality Standards), regulatory
                 or statutory standards. eVS shall contractually require the
                 same compliance from its contractors, sub-contractors or
                 sub-licences.

                 Contractual Quality Standards

        11.4     Canada and eVS shall clearly define in writing quality
                 standards with respect to both product and manufacturing
                 procedures, prior to the manufacture of each product.

                 Spot Audits

        11.5     If:

                 11.5.1   eVS becomes insolvent;

                 11.5.2    eVS fails to pay royalties within thirty (30) days of
                           written notice of the arrears;

                 11.5.3   eVS is notified by a regulatory authority that eVS or
                          one of its contractors, sub-licencees has breached
                          statutory or regulatory standards in the production or
                          use of ET or IR;

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                 11.5.4   eVS fails to meet the contractual standards as
                          prescribed in the procedure in paragraph 11.4
                          (Contractual Quality Standards); or

                 11.5.5    Canada becomes aware of bona fide complaints about
                           the quality of PRE-MIX or LICENCED PRODUCT;

                 then irrespective of the quarter, Canada may ask eVS to conduct
                 spot audits of eVS production and sales sites anywhere in the
                 LICENCED TERRITORIES within fourteen (14) days from written
                 notification from Canada. eVS shall disclose those audit
                 results to Canada within thirty (30) days of each audit.

                 Material Terms

                 11.6 eVS's obligations under this Article are material terms of
the MASTER LICENCE.

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  12     REPORTS

                 Administrative Meetings

        12.1     The PARTIES agree to meet annually to review for the preceding
                 and upcoming year, both the progress of the COMMERCIALIZATION
                 of ET and IR, and related scientific research, in addition to
                 any other issues the PARTIES deem relevant. At the meeting the
                 PARTIES may address:

                 12.1.1    a description of the steps taken by eVS to
                           COMMERCIALIZE and sub-licence the LICENCED
                           TERRITORIES;

                 12.1.2    a description of the marketing conditions for the
                           LICENCED PRODUCT;

                 12.1.3    a report on the production, distribution and sales of
                           the LICENCED PRODUCT;

                 12.1.4    a statement of:

                           12.1.4.1         the names and addresses of all
                                            sub-licences to whom the LICENCED
                                            PRODUCT has been sub-licenced;

                           12.1.4.2         the latest period (PERIOD ONE or
                                            TWO) reports, and if possible the
                                            revenues from each sub-licencee;

                 12.1.5    a discussion of the business plan for the
                           COMMERCIALIZATION of the LICENCED TECHNOLOGIES both
                           on a strategic and short term basis;

                 12.1.6    a discussion of the research conducted by the PARTIES
                           relevant to the LICENCED TECHNOLOGIES; and

                 12.1.7    a discussion of the proposed research for the next
                           two (2) years both on a strategic and short term
                           basis.

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13      CORPORATE REPRESENTATIONS & WARRANTIES

                 eVS

         13.1    eVS represents and warrants to Canada that as of the date of
                 execution of the MASTER LICENCE:

                          Ability

                 13.1.1  eVS can COMMERCIALIZE the LICENCED PRODUCTS, and eVS
                         has the necessary access to funds, resources and
                         personnel to perform its obligations under the MASTER
                         LICENCE subject to:

                         13.1.1.1          eVS demonstrating that it can produce
                                           products or services or both based on
                                           the LICENCED TECHNOLOGIES in a
                                           financially profitable manner and
                                           that a commercial market exists for
                                           such sales at profitable prices; and

                         13.1.1.2           the receipt of the anticipated
                                            applicable USDA regulatory approvals
                                            for the LICENCED TECHNOLOGIES;

                         This representation and warranty is a fundamental
                         condition of the MASTER LICENCE but is not a guarantee
                         by eVS that there is commercial market for the LICENCED
                         TECHNOLOGIES or that the LICENCED TECHNOLOGIES can be
                         successfully COMMERCIALIZED.

                          Authorization

                 13.1.2   it has the corporate power and authority to negotiate,
                          execute and comply with the MASTER LICENCE;

                          Enforceable

                 13.1.3   it is bound by the MASTER AGREEMENT as a legal, valid
                          and enforceable contract upon execution, limited only
                          by applicable bankruptcy or creditor laws, and general
                          principles of equity;

                          Litigation


                 13.1.4   it has no knowledge of any no legal proceeding or
                          order pending against or, to the knowledge of eVS,
                          threatened against or affecting, eVS or any of its
                          properties or otherwise that could adversely affect or
                          restrict the ability of eVS to consummate fully the
                          transactions contemplated by this MASTER LICENCE,
                          (including without limitation the COMMERCIALIZATION of
                          the

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                          LICENCED TECHNOLOGIES) or that in any manner draws
                          into question the validity of this MASTER LICENCE.

                          Veracity of Statements

                 13.1.5   no representation or warranty by eVS contained in this
                          MASTER LICENCE and no statement contained in any
                          certificate, schedule or other instrument furnished to
                          Canada pursuant hereto or in connection with the
                          transactions contemplated hereby, contains any untrue
                          statement of a material fact or omits to state a
                          material fact.

                          Third Party Representations

                 13.1.6 it has not given any undertaking, express or implied, to
any third party which would:

                          13.1.6.1         preclude eVS from fulfilling eVS's
                                           obligations under the MASTER LICENCE;
                                           or

                          13.1.6.2         cause eVS to breach an agreement with
                                           a third party.

                 Canada

        13.2 Canada represents and warrants to eVS as of the date of execution
             of the MASTER LICENCE.

                          Authorization

                 13.2.1   She has the power and authority to negotiate, execute
                          and comply with the MASTER LICENCE, subject to all
                          applicable laws and the royal prerogative and

                          13.2.1.1         no further action is required by or
                                           in respect of any governmental or
                                           regulatory authority;

                          13.2.1.2         to the best of Canada's knowledge the
                                           MASTER LICENCE does not contravene,
                                           violate or constitute a breach or
                                           default under, any requirement of law
                                           applicable to Canada or any contract
                                           to which Canada is bound or subject;
                                           and

                          13.2.1.3         the MASTER LICENCE is legal, binding
                                           and enforceable in accordance with
                                           its terms.

                          Veracity of Statements

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                 13.2.2   no representation or warranty by Canada contained in
                          this MASTER LICENCE and no statement contained in any
                          certificate, schedule or other instrument furnished to
                          eVS pursuant hereto or in connection with the
                          transactions contemplated hereby, contains any untrue
                          statement of a material fact or omits to state a
                          material fact.

                          Compliance of Laws

                 13.2.3   to the best of Canada's knowledge as of the date of
                          execution of the MASTER LICENCE there is:

                           13.2.3.1         no suit, action, claim, arbitration,
                                            administrative or legal or other
                                            proceeding, or governmental or other
                                            investigation pending or threatened
                                            against or affecting the PATENTS
                                            other than

                                    13.2.3.1.1       a grievance by a fee for
                                                     service contractor, Dick
                                                     Graham,(operating under the
                                                     corporate name of
                                                     sensIRscan) who assigned
                                                     his rights of inventorship
                                                     to Canada under IR patent
                                                     #5,458,418, and is now
                                                     claiming a share of any
                                                     royalties received by
                                                     Canada for that patent.

                           13.2.3.2         no failure to comply with, nor any
                                            default under, any law, requirement,
                                            regulation, or order affecting the
                                            PATENTS;

                           13.2.3.3         no violation of or default with
                                            respect to any order, or judgment of
                                            any court, board, agency, or other
                                            instrumentality with jurisdiction
                                            issued or pending against Canada
                                            which might have a material adverse
                                            effect on the PATENTS or the
                                            ownership or use thereof; and

                           13.2.3.4         no incident, events and claims of
                                            product liability relating to the
                                            PATENTS.

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14      PATENT INFRINGEMENT

                 Notice

        14.1     In case of a PATENT infringement, or suspected PATENT
                 infringement eVS or Canada shall promptly notify the other in
                 writing of the alleged infringement of which a PARTY has
                 knowledge.

                 Core Countries

        14.2     If the infringement occurs in the CORE COUNTRIES then Canada
                 shall have

                  14.2.1   in the case of a defence, fourteen (14) days from
                           service of a claim; or

                  14.2.2   in the case of a prosecution / enforcement, ninety
                           (90) days from notification the possible
                           infringement,

                  to determine if Canada will prosecute or defend the
                  infringement action, as the case may be.

                  Canada Defends / Prosecutes

        14.3     If Canada elects to prosecute / enforce or defend an action in
                 a CORE COUNTRY, then eVS shall have the right to participate in
                 the litigation as co-counsel at eVS's sole cost. Any
                 prosecution / enforcement action will claim in addition to any
                 other applicable damages or costs, both the lost revenues to
                 the Canada and the lost revenues to eVS.

                 eVS Co-Counsel

        14.4     All decisions related to the conduct and settlement of the
                 litigation shall be made jointly by the PARTIES except that
                 Canada may settle suits seeking damages for infringement
                 against third party patents without the consent of eVS so long
                 as:

                  14.4.1   such settlement is solely for monetary damages for
                           which Canada is solely responsible as owner of ET or
                           IR;

                  14.4.2   such settlement in no way derogates, diminishes or
                           restricts the rights granted to eVS in the MASTER
                           LICENCE.

                           For greater clarity, the prior written consent of eVS
                  shall be required in all cases where a settlement would
                  derogate, diminish or restrict the rights granted to eVS in
                  the MASTER LICENCE.

                  eVS Assumes Control of Litigation

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         14.5     If there is a disagreement between the PARTIES as to a
                  significant strategic or tactical decision during the course
                  of litigation contemplated in paragraph 14.3 (Canada Defends /
                  Prosecutes), then eVS shall have the right to take over the
                  litigation pursuant to paragraph 14.9 (eVS Defends /
                  Prosecutes) and conduct the litigation in a commercially
                  responsible manner.

                  Costs when eVS Assumes Control of Litigation

         14.6     eVS shall remain responsible for its costs up to the point the
                  transfer of the case under paragraph 14.5 (eVS Assumes Control
                  of Litigation).

                  Canada Controls Payment of Damage / Settlement Terms

         14.7     Notwithstanding the foregoing, eVS shall not have the right
                  to:

                  14.7.1   compromise or otherwise settle damages that might be
                           payable by Canada; or

                  14.7.2   enter a settlement that might derogate, diminish or
                           restrict the rights granted to Canada in the Patents,

                  without Canada's written prior consent.

                  Canada's Damage Awards Distribution

         14.8     If Canada is awarded damages or costs or both, then Canada
                  shall:

                  14.8.1   firstly, deduct its total litigation costs from the
                           amount of the award, if costs are not awarded;

                  14.8.2   secondly, if the court issues a judgment identifying
                           damages for the lost revenues of Canada and of eVS,
                           then the lost revenues damages of eVS shall be
                           forthwith paid to eVs upon receipt;

                  14.8.3   thirdly, if a global damage award is made which does
                           not identify the damage owing to Canada and eVS
                           respectively, then the remaining amount of the award
                           (excluding any punitive damages), shall be deemed to
                           be GROSS REVENUES, and subject to the royalty rate
                           under the MASTER LICENCE; and

                  14.8.4   any punitive damages shall be divided equally between
                           the PARTIES.

                  eVS Defends / Prosecutes

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         14.9     If Canada declines to prosecute or defend in a CORE COUNTRY,
                  then eVS shall be free to take all action that is commercially
                  responsible to prosecute or defend the infringement action,
                  subject always to paragraph 14.7 (Canada Controls Payment of
                  Damage / Settlement Terms).

                  14.9.1   From the date the litigation is commenced, in the
                           case of a prosecution, or from the date of service,
                           in the case of a defence, eVS shall then be entitled
                           to defray from the subsequently generated royalties
                           Article 5 (Royalties) costs of the litigation
                           including without limitation legal fees, court costs,
                           disbursements, and expert fees.

                  14.9.2   If at the time of the PERIOD ONE and PERIOD TWO
                           royalty payments pursuant to paragraph 5.3 (Payment
                           Dates), litigation costs exceed accrued royalties,
                           then no royalties shall be paid, and the excess costs
                           shall be carried forward and set-off against future
                           royalties.

                  14.9.3   If the PARTIES determine that no future royalties are
                           possible, then from that time forward eVS shall bear
                           any additional litigation costs. In any case, Canada
                           shall not be liable for funds greater than the
                           royalty stream owing to Canada.

                  14.9.4   If eVS is awarded damages or costs or both, then
                           after deducting total litigation costs from the
                           amount of the award, if costs are not awarded, eVS
                           shall reimburse Canada:

                           14.9.4.1         firstly, for any amounts set-off
                                            against royalties pertaining to any
                                            litigation costs;

                           14.9.4.2         secondly, the remaining amount of
                                            the award (excluding any punitive
                                            damages) shall be deemed to be GROSS
                                            REVENUES, and subject to the royalty
                                            rate under the MASTER Licence; and

                           14.9.4.3         thirdly, any punitive damages shall
                                            be divided equally between the
                                            PARTIES.

                           Notwithstanding the foregoing, eVS shall not be
                           entitled to "double dip" or have its total litigation
                           costs reimbursed both by Canada and under any general
                           damages or costs award. It is the intention of the
                           PARTIES that for every dollar in costs recovered by
                           eVS, eVS shall reimburse Canada a dollar in set-off
                           royalties.

                  Non-Core Country Infringement Actions

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         14.10    In non-CORE COUNTRIES, eVS alone shall be responsible for all
                  decisions, costs and obligations associated with any
                  infringement prosecutions / enforcements or defences and shall
                  indemnify Canada for the same. Notwithstanding the foregoing,
                  eVS shall brief Canada on not less than an annual basis as to
                  the status of such actions, unless requested by Canada on a
                  case specific basis.

                  Parties Jointly Police Infringement

         14.11    The PARTIES agree that they will jointly police infringement
                  of the ET/IR PATENTS and will consult with the other with
                  respect thereto.

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15       INDEMNIFICATION

                  Reciprocal for Negligence / Contract Breach

         15.1     Subject to any applicable federal laws, Canada and eVS shall
                  each defend, indemnify and hold the other harmless against:

                  15.1.1   any third party claims, costs, or suits arising out
                           of the negligence of the other; and

                  15.1.2   negligence damages related to breaches of material or
                           fundamental representations or covenants contained in
                           the MASTER LICENCE.

                  Procedures

                           Notice

         15.2     Promptly after acquiring knowledge of any claims that fall
                  within the compass of paragraph 15.1 (Reciprocal for
                  Negligence / Contract Breach) Canada or eVS, as the case may
                  be, shall give to the other written notice of such claim.
                  Failure to give this notice shall not relieve the indemnifying
                  party of any liability it may have to the indemnified party if
                  such failure does not materially prejudice the indemnifying
                  party.

                           Indemnifying Party Defends

         15.3     Subject to indemnifying party waiving its right to contest its
                  obligation to indemnify the indemnified party for any such
                  claims, the indemnifying party shall have the right to assume
                  the defense. The indemnifying party shall not be liable to the
                  indemnified party for any legal expenses of other counsel or
                  any other expenses subsequently incurred by such indemnified
                  party in connection with the defense.

                           Indemnified Party Defends

         15.4     If the indemnifying party fails to assume such defense or
                  advises that there are issues which raise conflicts of
                  interest between the PARTIES, the indemnified party may retain
                  one counsel satisfactory to it, and the indemnifying party
                  shall pay all reasonable fees and expenses of such counsel
                  promptly as statements therefor are receive. If the conflict
                  of interest is the reason for such claims or the indemnified
                  party's action resulted in such claims, then the indemnifying
                  party shall be reimbursed by the indemnified party all monies
                  paid under paragraph 15.4.

                           Co-operation

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         15.5     The indemnifying party shall receive from the indemnified
                  party all necessary and reasonable cooperation in said defense
                  including, but not limited to, the services of employees who
                  are familiar with the transactions out of which any such
                  claims may have arisen.

                           Mutual Consent of Settlement

         15.6     The indemnifying party shall not be liable for any settlement
                  effectuated without its prior written consent.

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16       TERMINATION

                  By Canada for Cause

         16.1     The MASTER LICENCE, at the option of Canada, may be terminated
                  forthwith by Canada without compensation to eVS if:

                  16.1.1   eVS fails to COMMERCIALIZE either one of ET or IR in
                           at least one of the CORE COUNTRIES within the earlier
                           of two (2) years from the USFDA regulatory approval
                           for ET as a New Animal Drug Application or four (4)
                           years from the execution of the MASTER LICENCE;

                  16.1.2   eVS fails to fund at least one collaboration or
                           research support agreement within two (2) years from
                           the date of the execution of the MASTER LICENCE;

                  16.1.3   eVS fails to make any required payment within forty
                           five (45) days of receipt of the written notice of
                           the arrears;

                  16.1.4   eVS continues to neglect, or fails to meet, a
                           contractual, regulatory, or statutory standard after
                           receipt of written notice of such deficiency and the
                           expiration of a reasonable period of time to cure the
                           deficiency, as defined in the paragraph 11.3
                           (Regulatory Quality Standards) or paragraph 11.4
                           (Contractual Quality Standards);

                  16.1.5   eVS commits or permits a breach of the identified
                           material or fundamental terms and conditions in the
                           MASTER LICENCE identified in paragraphs and Articles:

                           2.1,     Surrender
                           2.2,     Grant
                           2.3,     Sub-licencing
                           2.4,     Canada's Consent
                           2.5,     Sub-licencing Conditions
                           2.6,     Termination
                           2.7,     Third Party Obligations - eVS
                           4.1,     Best Efforts to Commercialize
                           6.2,     No Impeachment
                           6.3,     Inimical Use of Confidential Information
                           8.3,     Third Party Representations
                           8.6,     Confidential Information without Warranty /
                                    No Reliance
                           9.3,     eVS Responsibility for Patent Costs
                           10.4,    Costs of Canada's Advisory Board Members
                           10.5,    Regulatory Costs
                           10.6,    Decision to Register

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                           10.7,    Registration Ownership
                           10.8,    Trademark Use
                           10.9,    Trademark and Quality Control
                           11.1,    Audit Rights and Purposes
                           11.2,    Audit Timing / Process / Costs
                           11.5,    Spot Audits
                           14.6,    Costs when eVS Assumes Control of Litigation
                           14.7,    Canada Controls Payment of Damage /
                                    Settlement Terms
                           15.1,    Reciprocal Indemnification for Negligence /
                                    Contract Breach
                           17.1,    Confidentiality Obligations
                           17.2,    Confidentiality Measures
                           17.3,    Distribution by the Receiving Party
                           17.4,    Common Law Duty of Confidentiality
                           17.5,    Confidentiality Exceptions
                           17.8,    Fiduciary
                           17.9,    Elements of Fiduciary Relationship
                           17.10,   Equitable Relief
                           21.1,    No Bribes
                           21.4,    Compliance with Law; and

                           Article 7, Improvements, R & D Collaborations.

                           and fails to remedy such breach within ninety (90)
                           days after being required in writing to do so by
                           Canada;

                  16.1.6   eVS breaches a representation or warranty in
                           paragraph 13.1 ( eVS) made to Canada hereunder and
                           such breach has a material adverse effect on the
                           benefits to Canada or eVS's ability to perform its
                           obligations hereunder;

                  16.1.7   eVS commences bankruptcy or insolvency proceedings,
                           or has a receiving order made against it or has a
                           receiver appointed to continue its operations, or has
                           its assets seized or otherwise attached for the
                           benefit of creditors, or passes a resolution for
                           winding up, or takes the benefit of any statute for
                           the time being in force, relating to bankrupt or
                           insolvent debtors or the orderly payment of debts;

                  16.1.8   eVS assigns the MASTER LICENCE without the prior
                           written consent of Canada; or


                  Trademark Rights Terminated

         16.2     Canada may terminate the trademark rights and permissions
                  granted under the MASTER LICENCE if eVS breaches any of its
                  obligations with respect to the

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                  TRADEMARK including without limitation eVS's obligations to
                  maintain the quality and character of the LICENCED
                  TECHNOLOGIES or the quality control standards as prescribed in
                  the MASTER LICENCE and such breach is not remedied within 30
                  days of written notice thereof or sooner as circumstances
                  dictate. For greater certainty the termination of the
                  TRADEMARK rights / licence shall not mean or result in the
                  termination of the MASTER LICENCE and the rights granted
                  thereunder to ET and IR.

                  Procedure

         16.3     Termination shall be effected by a notice, that shall be
                  effective as of the date stated therein, but subject to
                  paragraph 16.4 (The Company's Duties on Termination), to
                  terminate the MASTER LICENCE, together with all rights of eVS
                  hereunder, without prejudice:

                  16.3.1   to the right of Canada to sue for and recover any
                           royalties or other sums due Canada; and

                  16.3.2   to the remedy of either PARTY in respect of any
                           previous breach of the MASTER LICENCE.

                  The Company's Duties on Termination

         16.4     Upon termination or expiration of the MASTER LICENCE, eVS
                  shall, at its own cost:

                  16.4.1   return immediately to Canada all CONFIDENTIAL
                           INFORMATION and LICENCED TECHNOLOGIES, including
                           copies thereof;

                  16.4.2   certify in writing to Canada, within thirty (30)
                           days, that to the best of eVS's knowledge all of the
                           CONFIDENTIAL INFORMATION (including copies) has been
                           returned;

                  16.4.3   deliver a detailed statement to Canada of the
                           inventory of the LICENCED TECHNOLOGIES, then
                           existing, but not sold by eVS, as of the date of
                           expiration or termination;

                  16.4.4   provide Canada the right of first refusal to purchase
                           from eVS any LICENCED TECHNOLOGIES stocks at fair
                           market value;

                  16.4.5   dispose of any remaining LICENCED TECHNOLOGIES stocks
                           as specified by Canada;

                  16.4.6   pay all costs due under the MASTER LICENCE, up to and
                           including the termination date, within thirty (30)
                           days of the termination;

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                  16.4.7   pay all costs due under the MASTER LICENCE,
                           subsequent to the termination, for any LICENCED
                           TECHNOLOGIES sold after termination, within seven (7)
                           days of the liability being incurred; and

                  16.4.8   transfer to Canada at no cost, all rights, permits,
                           authorizations, registrations concerning the LICENCED
                           TECHNOLOGIES not already in Canada's name.

                  Surviving Obligations

         16.5     All obligations of the PARTIES which expressly or by their
                  nature survive termination or expiration, shall continue in
                  full force and effect subsequent to and notwithstanding such
                  termination or expiration, until they are satisfied or by
                  their nature expire. For greater clarity, and without
                  restricting the generality of the foregoing, the following
                  provisions survive termination or expiration: Articles 5
                  (Royalties), 17 (Confidentiality / Fiduciary & Equitable
                  Remedies), 15 (Indemnification) and 14 (Patent Infringement)
                  shall survive early termination or expiration of the MASTER
                  LICENCE.

                  Surrender of Licence

         16.6     If eVS does not pay any royalty to Canada within seven (7)
                  years from the execution of the MASTER LICENCE, then eVS shall
                  surrender the MASTER LICENCE to Canada at Canada's election.

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17       CONFIDENTIALITY / FIDUCIARY & EQUITABLE REMEDIES

                  Confidentiality Obligations

         17.1     The CONFIDENTIAL INFORMATION disclosed to the RECEIVING PARTY
                  shall be:

                  17.1.1   used by the RECEIVING PARTY solely for purposes
                           authorized under the MASTER LICENCE;

                  17.1.2   held in confidence, safeguarded and not disclosed by
                           the RECEIVING PARTY; and

                  17.1.3   held in trust and dealt with only as authorized under
                           the MASTER LICENCE.

                  Confidentiality Measures

         17.2     The RECEIVING PARTY shall require that all persons who receive
                  any CONFIDENTIAL INFORMATION:

                  17.2.1   have a need to know;

                  17.2.2   are properly instructed to maintain the CONFIDENTIAL
                           INFORMATION in confidence; and

                  17.2.3   sign a confidentiality agreement that binds the
                           person to the same terms and conditions as outlined
                           herein.

                  Distribution by the Receiving Party

         17.3     Distribution of documents beyond the RECEIVING PARTY'S staff
                  shall be conducted on a need to know basis and only with the
                  written permission of the DISCLOSING PARTY.

                  Common Law Duty of Confidentiality

         17.4     Nothing contained in the MASTER LICENCE derogates, displaces
                  or otherwise diminishes the common law duty of confidentiality
                  vested in the RECEIVING PARTY concerning the CONFIDENTIAL
                  INFORMATION. For greater certainty, the RECEIVING PARTY
                  acknowledges and is estopped from alleging otherwise that:

                  17.4.1   the CONFIDENTIAL INFORMATION is inaccessible
                           (non-public) and identifiable;

                  17.4.2   the CONFIDENTIAL INFORMATION was imparted in
                           circumstances importing an obligation of confidence;
                           and

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                  17.4.3   any use or disclosure of the CONFIDENTIAL
                           INFORMATION, except as authorized in the MASTER
                           LICENCE, prejudices and is detrimental to the
                           DISCLOSING PARTY'S commercial and scientific
                           interests.

                  Confidentiality Exceptions

         17.5     The contractual and common law duties of confidentially
                  shall not apply to the RECEIVING PARTY, if the RECEIVING PARTY
                  can demonstrate that:

                           Public Domain

                  17.5.1   the information was legally and legitimately in the
                           public domain through no act or omission of the
                           RECEIVING PARTY at the time of disclosure;

                           Published

                  17.5.2   the information was legally and legitimately
                           published or otherwise becomes part of the public
                           domain after the time of disclosure of the
                           CONFIDENTIAL INFORMATION to the RECEIVING PARTY,
                           through no act or omission of the RECEIVING PARTY;

                           Already Known

                  17.5.3   the information was already in the possession of the
                           RECEIVING PARTY at the time of disclosure and was not
                           acquired by the RECEIVING PARTY directly or
                           indirectly from the DISCLOSING PARTY, (as shown by
                           documentation sufficient to establish the time of
                           such possession), and the RECEIVING PARTY is free to
                           disclose the information to others without breaching
                           any contractual obligations or common law duties;

                           Third Party Discloses

                  17.5.4   the information become available from an outside
                           source who has a lawful and legitimate right to
                           disclose the information to others, and the RECEIVING
                           PARTY is free to disclose the information to others
                           without breach of any contractual obligations or
                           common law duties;

                           Independently Developed

                  17.5.5   The information was independently developed by the
                           RECEIVING PARTY without the RECEIVING PARTY reviewing
                           or accessing any of the


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                           CONFIDENTIAL INFORMATION (as shown by documentation
                           sufficient to establish the timing of such
                           development); or

                           Judicial / Administrative Order

                  17.5.6   the information was released due to a compulsory
                           disclosure order under a judicial process or under a
                           compulsory regulatory requirement, none of which was
                           invited by or consented to by the RECEIVING PARTY,
                           and if the RECEIVING PARTY is Canada, the invitation
                           or consent did not emanate from the Western Region of
                           Agriculture and Agr-Food Canada's Research Branch.

                  Access to Information

         17.6     The PARTIES agree that any document containing the following
                  information shall be treated by the PARTIES as "confidential
                  third party" information pursuant to section 20 of the Access
                  to Information Act:

                  17.6.1   trade secrets of eVS;

                  17.6.2   financial, commercial, scientific or technical
                           information that is consistently treated in a
                           confidential manner by eVS;

                  17.6.3   information, the disclosure of which could reasonably
                           be expected to result in material financial loss or
                           gain to, or could reasonably be expected to prejudice
                           the competitive position of eVS; and

                  17.6.4   information, the disclosure of which could reasonably
                           be expected to interfere with contractual or other
                           negotiations of eVS.

                  Access to Information Disclosure

         17.7     Notwithstanding paragraph 17.6 (Access to Information), eVS
                  acknowledges that:

                  17.7.1   a court of competent jurisdiction could order the
                           release of information, considered hereunder as
                           confidential third party information; and


                  17.7.2   the Access to Information Act, s. 27, requires that
                           both Canada and eVS be notified of any such release
                           and eVS be allowed to make representations against
                           such release.

                  Fiduciary


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         17.8     eVS acknowledges that in the event eVS breaches its
                  obligations under the confidentiality provisions of paragraph
                  17.1 (Confidentiality Obligations) to 17.7 (Access to
                  Information Disclosure) inclusive, then:

                  17.8.1   eVS shall be deemed a fiduciary of Canada concerning
                           the CONFIDENTIAL INFORMATION disclosed by Canada;

                  17.8.2   eVS shall be deemed to hold in trust for Canada, the
                           CONFIDENTIAL INFORMATION and any benefits arising
                           from eVS improper or unauthorized use of the
                           CONFIDENTIAL INFORMATION

                  Elements of Fiduciary Relationship

         17.9     eVS agrees that under the MASTER LICENCE in the event eVS
                  breaches its obligations under the confidentiality provisions
                  of paragraph 17.1 (Confidentiality Obligations) to 17.7
                  (Access to Information Disclosure) inclusive, then:

                  17.9.1   eVS has power and discretion affecting Canada's
                           interests arising from the disclosure of the
                           CONFIDENTIAL INFORMATION and the licencing of the
                           LICENCED TECHNOLOGIES;

                  17.9.2   eVS can unilaterally exercise that power and
                           discretion so as to affect Canada's commercial and
                           other interests;

                  17.9.3   Canada is vulnerable to the power and discretion
                           vested in eVS; and

                  17.9.4   eVS's primary obligations are to COMMERCIALIZE the
                           LICENCED TECHNOLOGIES and safeguard the CONFIDENTIAL
                           INFORMATION.

                  Equitable Relief

         17.10    eVS acknowledges, and is estopped from alleging otherwise,
                  that:


                  17.10.1  any unauthorized use of the LICENCED TECHNOLOGIES or
                           unauthorized disclosure of the CONFIDENTIAL
                           INFORMATION would cause irreparable harm to Canada;

                  17.10.2  Canada has spent significant money and dedicated
                           significant human, capital and financial resources
                           (some of which are no longer available) in order to
                           create, assemble, or integrate the CONFIDENTIAL
                           INFORMATION or the LICENCED TECHNOLOGIES, as the case
                           may be; and

                  17.10.3  Canada shall be entitled to any and all legal and
                           equitable relief, including, without limitation,
                           injunctive relief, without the need for posting a
                           bond or


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                           security, as well as the equitable remedy of
                           disgorgement (being the ejection of all benefits
                           gained by eVS traceable to the material breach).

                  Fundamental Terms

         17.11    eVS's obligations of confidentiality as prescribed in this
                  Article are fundamental terms of the MASTER LICENCE.


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18       ALTERNATE DISPUTE RESOLUTION (ADR)

                  Negotiation

                           Informal Negotiations

         18.1     If a dispute arises between the PARTIES concerning the
                  construction, interpretation, compliance with or breach of
                  this MASTER LICENCE, then the PARTIES shall:

                  18.1.1   reduce the dispute to writing, and if the PARTIES
                           cannot agree on the wording of the dispute, both
                           PARTIES may submit to each other their written
                           version of the dispute;

                  18.1.2   make bona fide efforts to resolve the dispute by
                           amicable negotiations; and

                  18.1.3   provide full, frank and timely disclosure of all
                           relevant facts, information and documents to
                           facilitate those negotiations.

                           Formal Negotiations

         18.2     If the PARTIES are unable to resolve the dispute within
                  fourteen (14) calendar days from the date of the dispute being
                  reduced to writing by the first PARTY to do so, then within
                  the following thirty (30) days the dispute shall be referred
                  to the Director General Western Region (or the Director of the
                  Lacombe Centre), on behalf of Canada, and to the CEO (or a
                  directly reporting designate) on behalf of eVS to negotiate a
                  resolution.

                  18.2.1   These individuals may not delegate, substitute or
                           direct surrogates for them at these negotiations.

                  18.2.2   These individuals shall meet in person to negotiate
                           and the PARTIES shall bear their own costs.

                  18.2.3   Unless otherwise agreed, the meeting shall alternate
                           between the Edmonton, Alberta, Canada and Orlando,
                           Florida, USA, commencing in Orlando for the first
                           dispute. There shall only be one meeting per dispute,
                           which meeting shall not exceed one business day in
                           length.

                  18.2.4   The meeting shall be held within sixty (60) days from
                           the expiration of the thirty (30) day period in
                           paragraph 18.2 (Formal Negotiations); and

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                  18.2.5   The PARTIES may bring no more than two consultants to
                           a meeting. The two consultants shall not have a right
                           of audience or otherwise to negotiate the dispute.

                  Mediation

         18.3     If, within thirty (30) days following the close of the meeting
                  under paragraph 18.2 (Formal Negotiations), the PARTIES have
                  not succeeded in negotiating a resolution, then the PARTIES
                  may jointly submit the dispute to mediation.

                           Direct to Arbitration

         18.4     If the PARTIES cannot agree to jointly submit the dispute to
                  mediation, then either PARTY may submit the dispute to binding
                  arbitration.

                           Process

         18.5     The PARTIES shall:

                  18.5.1   appoint a mutually acceptable mediator with sixty
                           (60) days from the close of the formal negotiation
                           meeting under subparagraph;

                  18.5.2   participate in good faith in the mediation and
                           negotiations related thereto;

                  18.5.3   send representatives to the mediation shall be
                           empowered or have sufficient delegated authority to
                           resolve, compromise, negotiate or settle the dispute
                           submitted to arbitration, without seeking further
                           instructions or approvals from any superiors or
                           committees / corporate structures, unless the nature
                           of the dispute by law or corporate policies or
                           practices requires approval from the respective
                           corporate structure. In such event, such approval
                           shall be obtained within five (5) business days of
                           the proffer of any settlement offer;

                  18.5.4   bear the costs of the mediation equally, except that
                           each PARTY shall bear its own personal costs of the
                           mediation; and

                  18.5.5   disclose in a full, frank and timely manner all
                           relevant facts, information and documents to
                           facilitate the mediation.

                           Location

         18.6     The mediation shall take place in the city that was not the
                  site of the formal negotiations for the dispute.

                           Unsuccessful


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         18.7     The dispute shall be referred to binding arbitration if the
                  PARTIES are not successful in resolving the dispute through
                  mediation.

                  Arbitration

         18.8     After negotiation (and if applicable, mediation), any
                  subsisting dispute between the PARTIES, shall be referred to
                  arbitration by a written submission signed by either Canada or
                  eVS.

                  Procedure

                           Law, Code & Rules

         18.9     The arbitration tribunal shall be governed by the UN
                  Commercial Arbitration Code, incorporated into the Commercial
                  Arbitration Act, R.S.C. 1985, c. C-34.6 and the Rules in
                  Appendix (Rules). Unless the PARTIES otherwise agree in
                  writing, where there is an inconsistency between the Code and
                  the Rules, the Rules shall prevail to the extent of any such
                  inconsistency.

                           Tribunal & Jurisdiction

         18.10    The arbitration tribunal shall consist of one arbitrator
                  chosen by the PARTIES.

         18.11    The scope of the arbitration shall be limited to the
                  resolution of the dispute submitted to arbitration.

         18.12    The arbitration tribunal shall decide the dispute or
                  difference in accordance with the laws in force in the
                  Province of Ontario and any applicable federal laws. The
                  arbitration tribunal shall not be authorized to decide ex
                  aequo et bono or as amiable compositeur.

                           Final & Binding

         18.13    Subject to the Code, the PARTIES agree that the award and
                  determination of the arbitration tribunal shall be final and
                  binding on both PARTIES.

                           Proceedings

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         18.14    The proceedings shall take place in the city that was not the
                  site of the mediation (or if there was no mediation, in the
                  city that was not the site of the negotiation meeting), unless
                  the PARTIES agree otherwise.

                           Language

         18.15    The language to be used in the proceedings is English, unless
                  the PARTIES hereto agree otherwise.

                           Written Communications

         18.16    All written communication shall be delivered to the PARTIES
                  hereto in the manner provided for in Article 22 (Notice).

                           Costs

         18.17    The costs of the tribunal's fees and expenses shall be shared
                  equally by the PARTIES. The PARTIES shall bear their own
                  costs.

                           Arbitrator's Written Decision

         18.18    The arbitrator shall render a written decision with reasons
                  within thirty (30) days from the close of the hearing or
                  submission of written argument. The decision of the arbitrator
                  shall be final and binding, and not subject to judicial
                  review.

                           Power to Settle

         18.19    The PARTIES' representatives at any arbitration shall be
                  empowered or have sufficient delegated authority to resolve,
                  compromise, negotiate or settle the dispute submitted to
                  arbitration, without seeking further instructions or approvals
                  from any superiors or committees / corporate structures,
                  unless the nature of the dispute by law or corporate policies
                  or practices requires approval from the respective corporate
                  structure. In such event, such approval shall be obtained
                  within five (5) business days of the proffer of any settlement
                  offer.

                           Adjournment to Empower Representative

         18.20    Breach of this provision shall entitle the other PARTY to seek
                  an adjournment of the arbitration proceedings, to give the
                  breaching PARTY time to appoint a duly empowered
                  representative within the thirty (30) days. All costs of the
                  such delay, including tribunal costs and the non-breaching
                  PARTY's costs, shall be paid forthwith by the breaching PARTY.

                           Deemed Abandonment


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         18.21    Failure of the breaching PARTY to appoint such a
                  representative within the thirty (30) day period shall be
                  deemed a withdrawal or abandonment of the dispute by the
                  breaching PARTY and the arbitrator shall render a formal
                  decision, finding in favour of the non-breaching PARTY.

                  General ADR Conditions

                           No Litigation

         18.22    If either PARTY has submitted the dispute to court, then the
                  court filing PARTY shall discontinue the court proceedings
                  forthwith, upon notice from the other PARTY, and both PARTIES
                  shall remit the dispute to alternate dispute resolution as
                  prescribed hereunder.

                           Obligations During Alternate Dispute Resolution (ADR)

         18.23    During the progress of ADR, the PARTIES shall continue to
                  perform their obligations under the MASTER LICENCE.

                           Privilege

         18.24    Neither PARTY shall be required to disclose documents that are
                  privileged or created in contemplation of litigation. If a
                  PARTY does disclose such a document during ADR, that
                  disclosure shall not be construed as a waiver of any privilege
                  unless the DISCLOSING PARTY so elects in writing.

                           Confidentiality

         18.25    The ADR procedure under this Article is confidential and all
                  conduct, statements, promises, offers, views and opinions,
                  whether oral or written, made in the course of the ADR by
                  either PARTY, or the mediator, or the arbitrator, are
                  confidential.

                           ADR Disclosures Not Admissible in Subsequent
                           Proceedings

         18.26    Subject to the paragraph 18.23 (Obligations During
                  Alternative Dispute Resolution (ADR)), all conduct,
                  statements, promises, offers, views and opinions, whether oral
                  or written, made in the course of the ADR by either PARTY, or
                  the mediator, or the arbitrator, are not discoverable or
                  admissible for any purposes, including impeachment, in any
                  litigation or other proceedings involving the PARTIES.

                           Normally Admissible Evidence

         18.27    Evidence that would otherwise be discoverable or admissible is
                  not excluded from use in subsequent civil or administrative
                  proceedings merely as a result of its use in the ADR.


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                           Material Breach

         18.28    The failure, neglect or unwillingness of a PARTY to use or
                  diligently participate in and prosecute a dispute through ADR
                  is a material breach of the MASTER LICENCE.


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19       INTENT AND INTERPRETATION

                  Entire Agreement

         19.1     The MASTER LICENCE constitutes the entire agreement between
                  the PARTIES. The MASTER LICENCE sets forth all representations
                  forming part of, or in any way affecting or relating to the
                  MASTER LICENCE. The PARTIES acknowledge that there are no
                  representations, either oral or written, between eVS and
                  Canada other than those expressly set out in the MASTER
                  LICENCE.

                  Pre-Contractual Representations

         19.2     The MASTER LICENCE supersedes and revokes all negotiations,
                  arrangements, letters of intent, offers, proposals, brochures,
                  representations and information conveyed, whether oral or in
                  writing, between the PARTIES hereto or their respective
                  representatives, or any other person purporting to represent
                  eVS or Canada. The PARTIES agree that:

                  19.2.1   none has been induced to enter into the MASTER
                           LICENCE by any representations not set forth in the
                           MASTER LICENCE;

                  19.2.2   none has relied on any such representations;

                  19.2.3   no such representations shall be used in the
                           interpretation or construction of the MASTER LICENCE;
                           and

                  19.2.4   no claims (including, without limitation, loss of
                           profits, consequential damages and economic loss)
                           arising directly or indirectly from any such
                           representation shall accrue in law or equity to, or
                           be pursued by eVS, and Canada shall have no liability
                           for any such claims.

                  Due Diligence Search

         19.3     eVS agrees that it has conducted its own due diligence
                  examinations.

                  Independent Legal Advice

         19.4     It is acknowledged by the PARTIES that each has had legal
                  advice to the full extent deemed necessary by each PARTY.
                  Furthermore, the PARTIES acknowledge that neither acted under
                  any duress in negotiating, drafting and executing the MASTER
                  LICENCE.


                  No Adverse Presumption in Case of Ambiguity


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         19.5     There shall be no presumption that any ambiguity in the MASTER
                  LICENCE be resolved in favour of either of the PARTIES. For
                  greater certainty, the contra proferentum rule shall not be
                  applied in any interpretation of the MASTER LICENCE.

                  Severability

         19.6     If any part of the MASTER LICENCE is declared or held invalid
                  for any reason, the invalidity of that part will not affect
                  the validity of the remainder, which will continue in full
                  force and effect and be construed as if the MASTER LICENCE had
                  been executed without the invalid portion. The intention of
                  the PARTIES is that the MASTER LICENCE would have been
                  executed without reference to any portion which may, for any
                  reason, be declared or held invalid.

                  Plurality and Gender

         19.7     The MASTER LICENCE will be for the benefit of and be binding
                  upon the heirs, executors, administrators, successors,
                  permitted assigns of eVS and other legal representatives, as
                  the case may be, of each of the PARTIES. Every reference in
                  the MASTER LICENCE to any PARTY includes the heirs, executors,
                  administrators, successors, permitted assigns and other legal
                  representatives of the PARTY.

                  Not a Joint Venture

         19.8     The PARTIES expressly disclaim any intention to create a
                  partnership, joint venture or joint enterprise.

         19.9     The PARTIES acknowledge and agree that:

                  19.9.1   nothing contained in the MASTER LICENCE nor any acts
                           of any PARTY shall constitute or be deemed to
                           constitute the PARTIES as partners, joint venturers
                           or principal and agent in any way or for any purpose;

                  19.9.2   no PARTY has the authority to act for, or to assume
                           any obligation or responsibility on behalf of any
                           other PARTY; and

                  19.9.3   the relationship between the PARTIES is that of
                           licencor and licencee.

                  Minister Not Fettered

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         19.10    Nothing in the MASTER LICENCE shall derogate or otherwise
                  fetter the ability of Canada to regulate, administer, manage
                  or otherwise deal with agriculture and all attendant matters
                  thereto.

                  Federal Legislation

         19.11    The reference in the MASTER LICENCE to any Federal act or
                  regulation includes any subsequent amendment, revision,
                  substitution, consolidation to that act or regulation,
                  notwithstanding that such amendment, revision or substitution
                  occurred after the execution of the MASTER LICENCE or may have
                  a retroactive effect.

                  Right to Legislate

         19.12    Nothing in the MASTER LICENCE shall prohibit, restrict or
                  affect the right or power of the Parliament of Canada to enact
                  any laws of general application whatsoever with respect to any
                  area of law for which the Parliament of Canada has legislative
                  jurisdiction, even if the enactment of any such law affects
                  the MASTER LICENCE, its interpretation, or the rights of
                  either PARTY.

                  No Implied Obligations

         19.13    No implied terms or obligations of any kind, by or on behalf
                  of either of the PARTIES, shall arise from anything in the
                  MASTER LICENCE. The express covenants and agreements herein
                  contained and made by the PARTIES are the only covenants and
                  agreements upon which any rights against either of the PARTIES
                  may be founded.

                  Access to Information

         19.14    Notwithstanding any provision to the contrary in the MASTER
                  LICENCE, eVS acknowledges that Canada is subject to the Access
                  to Information Act, R.S.C. 1985, c.A-1 and related acts, and
                  may be required to release, in whole or in part, the MASTER
                  LICENCE and any other information or documents in Canada's
                  possession or control relating to the MASTER LICENCE and the
                  PARTIES.

                  Governing Law

         19.15    The MASTER LICENCE shall be governed firstly by applicable
                  Canadian Federal laws, and secondly by the laws of the
                  Province of Ontario. The PARTIES expressly exclude:

                  19.15.1  application of the United Nations Convention on
                           Contracts for the International Sale of Goods; and


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                  19.15.2  any conflict of laws rules or principles which might
                           refer disputes under the MASTER LICENCE to the laws
                           of another jurisdiction.

                  The MASTER LICENCE shall be treated in all respects as an
                  Alberta, Canada contract. Subject to Article 18 (Alternate
                  Dispute Resolution (ADR)) the PARTIES irrevocably attorn to
                  and submit to the exclusive jurisdiction of the courts of
                  Ontario, Canada with respect to any matter arising under the
                  MASTER LICENCE

                  Waiver

         19.16    No condoning, excusing, or overlooking by either of the
                  PARTIES of any default by the other PARTY, at any time or
                  times, in performing or observing any of the PARTIES'
                  respective covenants, will operate as a waiver of or otherwise
                  affect the rights of the PARTIES in respect of any continuing
                  or subsequent default. No waiver of these rights will be
                  inferred from anything done or omitted by the PARTIES, except
                  by an express waiver in writing.

         19.17    For greater clarity, the failure by either of the PARTIES or
                  their authorized representatives, as the case may be, to
                  require the fulfilment of these obligations or to exercise any
                  rights herein contained, shall not constitute a waiver, a
                  renunciation, or a surrender of those obligations or rights.

                  Contract Always Speaks

         19.18    Where a matter or thing is expressed in the present tense, it
                  shall be applied to the circumstances as they arise, so that
                  effect may be given to the MASTER LICENCE according to its
                  true spirit, intent and meaning.

                  Time is of the Essence

         19.19    Time shall be of the essence in this MASTER LICENCE.

                  Force Majeure

         19.20    Except with regard to any payments required pursuant to the
                  MASTER LICENCE neither of the PARTIES shall be liable for any
                  default, or delay in performance in any obligations under the
                  MASTER LICENCE occasioned by any cause beyond the power of
                  that PARTY, including without limitation:

                  19.20.1  acts of God, war, riot, fire, explosion, flood,
                           sabotage, accidents floods, droughts, weather,
                           natural calamities;

                  19.20.2  compliance with any demand or requirement of any
                           governmental agency or authority other than
                           Agriculture and Agri-Food Canada's Western Research
                           Branch; or


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                  19.20.3  restraining orders or decrees of any court or judge
                           having jurisdiction.

                  The PARTY affected by such event hereunder shall give written
                  notice to the other PARTY upon becoming aware of the event.
                  The affected PARTY shall complete performance as required by
                  this MASTER LICENCE immediately after removal or cessation of
                  the cause for the delay.

                  Headings

         19.21    All headings in the MASTER LICENCE have been inserted as a
                  matter of convenience and for reference only, and in no way
                  define, limit, enlarge, modify, the scope or meaning of the
                  MASTER LICENCE or any of its provisions.

         19.22    Any reference in the MASTER LICENCE to an Article, paragraph,
                  subparagraph, will mean an Article, paragraph or subparagraph
                  of the MASTER LICENCE, unless otherwise expressly provided.

                  Appendices

         19.23....The documents attached hereto as Appendix "A" to " E" form an
                  integral part of this MASTER LICENCE as fully as if it were
                  set forth herein in extenso, and consist of:

                  Appendix "A"      -       LICENCED TECHNOLOGIES
                  Appendix "B"      -       (Arbitration) Rules
                  Appendix "C"      -       PRE-MIX Formulation
                  Appendix "D"      -       RMS / AgResearch Agreements
                  Appendix "E"      -       eVS Infra Red Technologies


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20       LEGAL RIGHTS

                  Amendments

         20.1     No modification or waiver of any provision of the MASTER
                  LICENCE will be inferred from anything done or omitted by
                  either of the PARTIES, except by an express amendment in
                  writing, duly executed by the PARTIES.

                  Assignment by Canada

         20.2     Canada shall not sell, assign or transfer the MASTER LICENCE
                  or any of the LICENCED Technologies without the prior written
                  consent of eVS, which consent shall not be unreasonably
                  withheld.

                  Sub-Contract Rights

         20.3     eVS shall have the right to subcontract any portion of its
                  obligations under the MASTER LICENCE granted:

                  20.3.1   all of eVS's material obligations under the MASTER
                           LICENCE are not subcontracted to any one
                           subcontractor or group of related subcontractors;

                  20.3.2   eVS notifies Canada in writing in a timely manner of
                           any significant subcontracts or subcontractors;

                  20.3.3   eVS takes all necessary precautions to ensure quality
                           control and protection of any disclosed CONFIDENTIAL
                           INFORMATION; and

                  20.3.4   the subcontract is not a de facto assignment.

                  Assignment

         20.4     eVS shall not assign (or transfer, sell, encumber, sub-licence
                  or otherwise deal) or permit any such assignment, in whole or
                  in part, of the MASTER LICENCE, whether such assignment takes
                  place by way of:

                  20.4.1   sale of assets;

                  20.4.2   amalgamation, merger or other reorganization of eVS;

                  20.4.3   acquisition by a person or persons acting in concert
                           of a majority interest of the securities of eVS, by a
                           person or persons acting in concert who did not hold
                           such a majority interest at the time of the initial
                           public offering (IPO), at any time after the IPO



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                  20.4.4   operation of law;

                  20.4.5   operation of contract; or

                  20.4.6   otherwise;

                  without the prior written consent of Canada, which consent
                  will not be unreasonably withheld. The failure to obtain
                  written consent shall render such assignment void, and shall
                  be a material breach of the MASTER LICENCE.

         20.5     It will not be unreasonable for Canada to refuse to consent to
                  any assignment, if it is foreseeable that the assignment might
                  negatively affect Canada in any way or derogate from the
                  COMMERCIALIZATION of the LICENCED TECHNOLOGIES.
                  Notwithstanding the foregoing, Canada may still consent in
                  exchange for payment of [ ** ] of the consideration . being
                  exchanged between eVS and any assignee, transferee,
                  sub-licencee or otherwise.

         20.6     Consent to any assignment will not be construed as consent to
                  any other assignment.

         20.7     Failure of eVS to obtain the prior written consent of Canada
                  to any assignment shall be deemed to be a material breach of
                  the MASTER LICENCE.

                  No Third Party Rights

         20.8     Nothing expressed or implied in the MASTER LICENCE is intended
                  to, or shall be construed to confer on or give to, any person
                  other than the PARTIES and their respective successors and
                  permitted assigns, any rights or remedies under or by reason
                  of the MASTER LICENCE.

                  Remedies Cumulative

         20.9     All rights and remedies of the PARTIES are cumulative and are
                  in addition to, and do not exclude any other right or remedy
                  provided in the MASTER LICENCE, or otherwise allowed by law.

                  Mutual Assistance

         20.10    The PARTIES will at all times hereafter, upon every reasonable
                  request of the other, make, do, and execute or cause to be
                  procured, made, done, and executed, all such further acts,
                  deeds and assurances for the carrying out of the terms,
                  covenants and agreements of the MASTER LICENCE, according to
                  the true intent and meaning of the MASTER LICENCE.



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                                                PROTECTED - BUSINESS INFORMATION


                  Facsimile Counterparts

         20.11    The MASTER LICENCE may be validly executed by facsimile
                  transmission and in any number of counterparts, all of which
                  taken together shall constitute one and the same agreement and
                  each of which shall constitute an original. MASTER LICENCE.




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21       CROWN GENERAL

                  No Bribes

         21.1     eVS warrants that no bribe, gift, or other inducement has been
                  paid, given, promised or offered to any Government official or
                  employee for the obtaining of this MASTER LICENCE.

                  No Share to Members of Parliament

         21.2     Pursuant to the Parliament of Canada Act, R.S.C. 1985, c.P-1,
                  no member of the House of Commons or Senate will be admitted
                  to any share or part of the MASTER LICENCE or to any benefit
                  to arise from the MASTER LICENCE.

                  Public Office Holders

         21.3     It is a term of this MASTER LICENCE that no former public
                  Office holder, who is not in compliance with the post
                  employment provisions of the Conflict of Interest and
                  Post-Employment Code for Public OFFICE Holders, shall derive a
                  direct benefit from this MASTER LICENCE.

                  Compliance with Law

         21.4     eVS shall comply with all municipal, provincial, state and
                  federal laws applicable to eVS's obligations under the MASTER
                  LICENCE in that jurisdiction. The failure by eVS to comply
                  with such laws shall have a material adverse effect on eVS or
                  Canada in order to be a grounds of termination as contemplated
                  in Article 16 (Termination).

                  Disclosure of Master Licence during Due Diligence Audit - eVS

         21.5     If under a commercially prudent practice involving a
                  commercial transaction a third party conducting due diligence
                  searches, requires the disclosure of the fact and contents of
                  the MASTER LICENCE, then eVS authorizes Canada to disclose the
                  MASTER LICENCE to such a third party, less any material
                  financial, scientific or business information that could
                  prejudice eVS or is not relevant to the due diligence search.

                  Disclosure of Master Licence during Due Diligence Audit -
                  Canada

         21.6     If under a commercially prudent practice involving a
                  commercial transaction a third party conducting due diligence
                  searches, requires the disclosure of the fact and contents of
                  the MASTER LICENCE, then subject to:



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                  21.6.1   the Access to Information Act, Privacy Act, and any
                           other then relevant statutes or regulations; and

                  21.6.2   the protection and confidentiality of any material
                           financial, business scientific information that could
                           prejudice Canada or is not relevant to the due
                           diligence search;

                  Canada authorizes eVS to disclose the MASTER LICENCE to such a
                  third party.

                  Material Terms

         21.7     The obligations invested in eVS pursuant to this Article
                  (Crown General) are material terms of the MASTER LICENCE.




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22       NOTICE

                  Addresses / Contacts

         22.1     Wherever in this MASTER LICENCE it is required or permitted
                  that notice or demand be given, or served by either PARTY to
                  or on the other PARTY, such notice or demand will be in
                  writing and will be validly given or sufficiently communicated
                  if hand delivered or forwarded by certified mail, priority
                  post mail, telegram, telex, or facsimile or sent by overnight
                  delivery by a nationally recognized courier as follows:

                  The addresses for delivery are:

                           To eMERGE Vision Systems Inc.:

                           Chuck Abraham,
                           President & CEO
                           10315 102nd Terrance
                           Sabastian, Florida
                           United States, 32958
                           Telephone:  (561) 581-7135
                           Facsimile:    (561) 581-7110

                           To Canada:

                           Director
                           Agriculture and Agri-Food Canada
                           Lacombe Research Centre, 6000 C&E Trail
                           Lacombe, Alberta, T4L 1W1
                           Telephone: (403) 327-4561
                           Facsimile:   (403) 382-3156

                  Deemed Delivery

         22.2     Notice will be deemed to have been delivered:

                  22.2.1   if delivered by hand, upon receipt;

                  22.2.2   if sent by electronic transmission, forty eight (48)
                           hours after the time of transmission, excluding from
                           the calculation weekends and public holidays;

                  22.2.3   if sent by certified mail, four (4) days after the
                           mailing thereof, provided that if there is a postal
                           strike or other disruption, such notice will be
                           delivered by hand or electronic transmission.



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                                                PROTECTED - BUSINESS INFORMATION


                  Change of Address

         22.3     The PARTIES may change their respective addresses for delivery
                  by delivering notice of change as provided in this paragraph.


IN WITNESS WHEREOF this MASTER LICENCE has been executed by duly authorized
representatives of the PARTIES.

Executed in duplicate and effective this 29th day of July 1998.


FOR HER MAJESTY THE QUEEN IN RIGHT OF CANADA:


- ---------------------------   --------------------------
(Witness)                     Dr. David Bailey
                              Director
                              Lacombe Research Centre
                              Agriculture & Agri-Food Canada


EMERGE VISION SYSTEMS INC.:


- ---------------------------   --------------------------
(Witness)                     Chuck Abraham
                              President & CEO


FINANCIAL CODE:
               --------------------



                                                                              82

<PAGE>   1
                                                                EXHIBIT 10.21(a)


                                 REVOLVING NOTE
                           (eMERGE INTERACTIVE, INC.)


$3,000,000                                                   Wayne, Pennsylvania
                                                                   July 21, 1999

      FOR VALUE RECEIVED, eMerge Interactive, Inc., a Delaware corporation (the
"Borrower"), having an office at 10315 102nd Terrace, Sebastian, Florida 32958,
hereby promises to pay to the order of Safeguard Delaware, Inc., a Delaware
corporation (the "Lender"), at the Lender's office located at 103 Springer
Building, 3411 Silverside Road, Wilmington, Delaware 19810 or at such other
place in the continental United States as the Lender may designate in writing,
upon demand, in lawful money of the United States, and in immediately available
funds, the principal sum of up to THREE MILLION DOLLARS ($3,000,000), or so much
thereof as shall have been advanced by the Lender to the Borrower as hereinafter
set forth and then be outstanding, and to pay interest thereon monthly in
arrears on the first business day of each calendar month at an annual rate equal
to the announced prime rate of PNC Bank, N.A. (the "Prime Rate") plus one
percent (1%). All amounts advanced hereon, but not to exceed $3,000,000 at any
one time outstanding in the aggregate, shall be so advanced upon the request of
the Borrower. All amounts so advanced hereon and all payments made on account of
the principal hereof shall be recorded in the books of the Lender, which records
shall be final and binding, but failure to do so shall not release the Borrower
from any of its obligations hereunder.

      All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Accrued and unpaid interest shall be due
and payable upon maturity of this Note. After maturity or in the event of
default, interest shall continue to accrue on the Note at the rate set forth
above and shall be payable on demand of the Lender.

      The outstanding principal amount of this Note may be prepaid by the
Borrower upon notice to the Lender in whole at any time or in part from time to
time without any prepayment penalty or premium; provided, that upon such payment
any interest due to the date of such prepayment on such prepaid amount shall
also be paid.

      Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.

      An event of default hereunder shall consist of:


                                    1
<PAGE>   2
      (i) a default in the payment by the Borrower to the Lender of principal or
interest under this Note as and when the same shall become due and payable;

      (ii) an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money, beyond any applicable notice
and/or grace period;

      (iii) institution of any proceeding by or against the Borrower under any
present or future bankruptcy or insolvency statute or similar law and, if
involuntary, if the same are not stayed or dismissed within sixty (60) days, or
the Borrower's assignment for the benefit of creditors or the appointment of a
receiver, trustee, conservator or other judicial representative for the Borrower
or the Borrower's property or the Borrower's being adjudicated a bankrupt or
insolvent.

Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), the
entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available or now or
hereafter available at law or in equity.

      Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $100,000 ("Summary
Proceeding"), arising out of or relating to this Agreement, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute and (vii) understands and
agrees that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of our otherwise related to this Agreement
waives any and all rights to any such jury trial or to seek punitive damages.

      In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $100,000 (a "Proceeding"), arising out of or relating to this Agreement
or the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such


                                    2
<PAGE>   3
time as such application is rejected, such Proceeding shall be treated as a
Summary Proceeding and all of the foregoing provisions of this Section relating
to Summary Proceedings shall apply to such Proceeding.

      If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Agreement and
the substantive law of the State of Delaware. The arbitration shall be conducted
at the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.

      Neither party shall be precluded hereby from securing equitable remedies
in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.

      The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof may be made before, at or after maturity by agreement by the
Lender. Upon default hereunder, the Lender shall have the right to offset the
amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of an event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all costs
and expenses, including, without limitation, attorneys' fees and legal expenses,
that may be incurred by the Lender in connection with the enforcement of this
Note.

      Notices required to be given hereunder shall be deemed validly given (I)
three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the sender,
by next day delivery or other guaranteed delivery service, (iii) when sent by
facsimile transmission, or (iv) when delivered by hand:

      If to the Lender:       Safeguard Delaware, Inc.
                              800 The Safeguard Building
                              435 Devon Park Drive
                              Wayne, PA  19087
                              Attn: Chief Financial Officer


                                    3
<PAGE>   4
      If to the Borrower:     eMerge Interactive, Inc.
                              10315 102nd Terrace
                              Sebastian, FL 32858
                              Attn:  Michael Janney, Chief Financial Officer

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

      Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Note shall be binding upon the
Lender unless in writing and signed by it. Any provision hereof found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect the
validity, legality or enforceability of the remainder hereof. This Note shall
apply to and bind the successors of the Borrower and shall inure to the benefit
of the Lender, its successors and assigns.

      This Note shall be governed by and interpreted in accordance with the laws
of the State of Delaware.

      IN WITNESS WHEREOF, the Borrower, by its duly authorized officer intending
to be legally bound hereby, has duly executed this Revolving Note as of the date
first written above.

                                    EMerge Interactive, Inc.


                                    By: /s/: Michael Janney
                                        -------------------
                                        Michael Janney, Chief Financial Officer


                                    4
<PAGE>   5
                                                                EXHIBIT 10.21(b)


                             AMENDED REVOLVING NOTE
                           (eMERGE INTERACTIVE, INC.)


$3,000,000                                                  Wayne, Pennsylvania
                                                                 August 3, 1999

      WHEREAS, Safeguard Delaware, Inc. (the "Lender") was the holder of a
$3,000,000 Revolving Note dated July 21, 1999 (the $3,000,000 Note") made by
eMerge Interactive, Inc. (the "Borrower"); and

      WHEREAS, Borrower and Lender desire to amend the terms of the
$3,000,000 Note to provide for a 60 day term;

      NOW, THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged Borrower and lender hereby agree as follows:

      FOR VALUE RECEIVED, eMerge Interactive, Inc., a Delaware corporation (the
"Borrower"), having an office at 10315 102nd Terrace, Sebastian, Florida 32958,
hereby promises to pay to the order of Safeguard Delaware, Inc., a Delaware
corporation (the "Lender"), at the Lender's office located at 103 Springer
Building, 3411 Silverside Road, Wilmington, Delaware 19810 or at such other
place in the continental United States as the Lender may designate in writing,
upon demand, in lawful money of the United States, and in immediately available
funds, the principal sum of up to THREE MILLION DOLLARS ($3,000,000), or so much
thereof as shall have been advanced by the Lender to the Borrower as hereinafter
set forth and then be outstanding, and to pay interest thereon monthly in
arrears on the first business day of each calendar month at an annual rate equal
to the announced prime rate of PNC Bank, N.A. (the "Prime Rate") plus one
percent (1%). All amounts advanced hereon, but not to exceed $3,000,000 at any
one time outstanding in the aggregate, shall be so advanced upon the request of
the Borrower. All amounts so advanced hereon and all payments made on account of
the principal hereof shall be recorded in the books of the Lender, which records
shall be final and binding, but failure to do so shall not release the Borrower
from any of its obligations hereunder.

      All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Accrued and unpaid interest shall be due
and payable upon maturity of this Note. After maturity or in the event of
default, interest shall continue to accrue on the Note at the rate set forth
above and shall be payable on demand of the Lender.

      The outstanding principal amount of this Note may be prepaid by the
Borrower upon notice to the Lender in whole at any time or in part from time to
time without any


                                    5
<PAGE>   6
prepayment penalty or premium; provided, that upon such payment any interest due
to the date of such prepayment on such prepaid amount shall also be paid.

      Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.

      An event of default hereunder shall consist of:


      a default in the payment by the Borrower to the Lender of principal or
interest under this Note as and when the same shall become due and payable;

      an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money, beyond any applicable notice
and/or grace period;

      institution of any proceeding by or against the Borrower under any present
or future bankruptcy or insolvency statute or similar law and, if involuntary,
if the same are not stayed or dismissed within sixty (60) days, or the
Borrower's assignment for the benefit of creditors or the appointment of a
receiver, trustee, conservator or other judicial representative for the Borrower
or the Borrower's property or the Borrower's being adjudicated a bankrupt or
insolvent.

Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), the
entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available or now or
hereafter available at law or in equity.

      Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $100,000 ("Summary
Proceeding"), arising out of or relating to this Agreement, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (I) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that the Delaware Superior Court has been brought in an
improper or otherwise inconvenient forum, (v) waives, and agrees not to plead or
to make, any claim that the Delaware Superior Court lacks personal jurisdiction
over it, (vi) waives its right to remove any


                                    6
<PAGE>   7
Summary Proceeding to the federal courts except where such courts are vested
with sole and exclusive jurisdiction by statute and (vii) understands and agrees
that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of our otherwise related to this Agreement
waives any and all rights to any such jury trial or to seek punitive damages.

      In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $100,000 (a "Proceeding"), arising out of or relating to this Agreement
or the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.

      If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Agreement and
the substantive law of the State of Delaware. The arbitration shall be conducted
at the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.

      Neither party shall be precluded hereby from securing equitable remedies
in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.

      The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof may be made before, at or after maturity by agreement by the
Lender. Upon default hereunder, the Lender shall have the right to offset the
amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of an event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all costs
and expenses, including, without limitation, attorneys' fees and legal expenses,
that may be incurred by the Lender in connection with the enforcement of this
Note.


                                    7
<PAGE>   8
      Notices required to be given hereunder shall be deemed validly given (I)
three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the sender,
by next day delivery or other guaranteed delivery service, (iii) when sent by
facsimile transmission, or (iv) when delivered by hand:

      If to the Lender:      Safeguard Delaware, Inc.
                             800 The Safeguard Building
                             435 Devon Park Drive
                             Wayne, PA 19087
                             Attn: Chief Financial Officer

      If to the Borrower:    eMerge Interactive, Inc.
                             10315 102nd Terrace
                             Sebastian, FL 32858
                             Attn:  Michael Janney, Chief Financial Officer

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

      Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Note shall be binding upon the
Lender unless in writing and signed by it. Any provision hereof found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect the
validity, legality or enforceability of the remainder hereof. This Note shall
apply to and bind the successors of the Borrower and shall inure to the benefit
of the Lender, its successors and assigns.

      This Note shall be governed by and interpreted in accordance with the laws
of the State of Delaware.

      IN WITNESS WHEREOF, the Borrower, by its duly authorized officer intending
to be legally bound hereby, has duly executed this Revolving Note as of the date
first written above.

                                    EMerge Interactive, Inc.


                                    By: /s/: Michael Janney
                                        --------------------
                                        Michael Janney, Chief Financial Officer


                                    8
<PAGE>   9
                                                               Exhibit 10.21(c)

                          THIRD AMENDED REVOLVING NOTE
                           (EMERGE INTERACTIVE, INC.)

                                                            Wayne, Pennsylvania
$3,000,000                                                     December 6, 1999


WHEREAS, Safeguard Delaware, Inc. (the "Lender") is the holder of a $3,000,000
Revolving Note dated July 21, 1999, an Amended Revolving Note dated August 3,
1999, and a Second Amended Revolving Note dated October 25, 1999 (collectively
referred to as the "Revolving Note") made by eMerge Interactive, Inc. (the
"Borrower"); and

      WHEREAS, Borrower and Lender desire to amend the terms of the Revolving
Note to extend the maturity date (as defined therein) to January 31, 2000;

      NOW, THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged Borrower and Lender hereby agree as follows:

      FOR VALUE RECEIVED, eMerge Interactive, Inc., a Delaware corporation (the
"Borrower"), having an office at 10315 102nd Terrace, Sebastian, Florida 32958,
hereby promises to pay to the order of Safeguard Delaware, Inc., a Delaware
corporation (the "Lender"), at the Lender's office located at 103 Springer
Building, 3411 Silverside Road, Wilmington, Delaware 19810 or at such other
place in the continental United States as the Lender may designate in writing,
upon demand, in lawful money of the United States, and in immediately available
funds, the principal sum of up to Three Million Dollars ($3,000,000), or so much
thereof as shall have been advanced by the Lender to the Borrower as hereinafter
set forth and then be outstanding, and to pay interest thereon monthly in
arrears on the first business day of each calendar month at an annual rate equal
to the announced prime rate of pnc Bank, N.A. (the "Prime Rate") plus one
percent (1%). All amounts advanced hereon, but not to exceed $3,000,000 at any
one time outstanding in the aggregate, shall be so advanced upon the request of
the Borrower and shall be paid on January 31, 2000 (the "Maturity Date"). All
amounts so advanced hereon and all payments made on account of the principal
hereof shall be recorded in the books of the Lender, which records shall be
final and binding, but failure to do so shall not release the Borrower from any
of its obligations hereunder.

      This Note is issued in substitution for a Revolving Note dated July 21,
1999, an Amended Revolving Note dated August 3, 1999, and a Second Amended
Revolving Note dated October 25, 1999, and shall evidence all outstanding
indebtedness thereunder existing as of the date hereof and any additional
indebtedness incurred in the future.

      All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Accrued and unpaid interest shall be due
and payable on the Maturity Date of this Note. After the Maturity Date or in the
event of default,


                                       1
<PAGE>   10
interest shall continue to accrue on the Note at the rate set forth above and
shall be payable on demand of the Lender.

      The outstanding principal amount of this Note may be prepaid by the
Borrower upon notice to the Lender in whole at any time or in part from time to
time without any prepayment penalty or premium; provided, that upon such payment
any interest due to the date of such prepayment on such prepaid amount shall
also be paid.

      Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.

      An event of default hereunder shall consist of:

      (i) a default in the payment by the Borrower to the Lender of principal or
   interest under this Note as and when the same shall become due and payable;

      (ii) an event of default by the Borrower under any other obligation,
   instrument, note or agreement for borrowed money, beyond any applicable
   notice and/or grace period;

      (iii) institution of any proceeding by or against the Borrower under any
   present or future bankruptcy or insolvency statute or similar law and, if
   involuntary, if the same are not stayed or dismissed within sixty (60) days,
   or the Borrower's assignment for the benefit of creditors or the appointment
   of a receiver, trustee, conservator or other judicial representative for the
   Borrower or the Borrower's property or the Borrower's being adjudicated a
   bankrupt or insolvent.

Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), the
entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.

      Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $100,000 ("Summary
Proceeding"), arising out of or relating to this Agreement, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to


                                       2
<PAGE>   11
plead or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute and (vii) understands and
agrees that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of or otherwise related to this Agreement
waives any and all rights to any such jury trial or to seek punitive damages.

      In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $100,000 (a "Proceeding"), arising out of or relating to this Agreement
or the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.

      If a Summary Proceeding is not available to resolve any dispute hereunder,
the controversy or claim shall be settled by arbitration conducted on a
confidential basis, under the U.S. Arbitration Act, if applicable, and the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "Association") strictly in accordance with the terms of this Agreement and
the substantive law of the State of Delaware. The arbitration shall be conducted
at the Association's regional office located closest to the Lender's principal
place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.

      Neither party shall be precluded hereby from securing equitable remedies
in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.

      The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof may be made before, at or after the Maturity Date by agreement
by the Lender. Upon default hereunder, the Lender shall have the right to offset
the amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of an event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all costs
and expenses, including, without limitation, attorneys' fees and legal expenses,
that may be incurred by the Lender in connection with the enforcement of this
Note.


                                       3
<PAGE>   12
      Notices required to be given hereunder shall be deemed validly given (i)
three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the sender,
by next day delivery or other guaranteed delivery service, (iii) when sent by
facsimile transmission, or (iv) when delivered by hand:

      If to the Lender:       Safeguard Delaware, Inc.
                              800 The Safeguard Building
                              435 Devon park Drive
                              Wayne, PA 19087
                              Attn: Chief Financial Officer

      If to the Borrower:     eMerge Interactive, Inc.
                              10315 102nd Terrace
                              Sebastian, FL 32858
                              Attn: Michael Janney, Chief Financial Officer

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

      Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Note shall be binding upon the
Lender unless in writing and signed by it. Any provision hereof found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect the
validity, legality or enforceability of the remainder hereof. This Note shall
apply to and bind the successors of the Borrower and shall inure to the benefit
of the Lender, its successors and assigns.

      This Note shall be governed by and interpreted in accordance with the laws
of the State of Delaware.

       IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Third Amended
Revolving Note as of the date first written above.

                                        eMerge Interactive, Inc,


                                        By:______________________________
                                        Michael Janney, Chief Financial Officer


                                       4
<PAGE>   13
                          FOURTH AMENDED REVOLVING NOTE
                           (eMERGE INTERACTIVE, INC.)

                                                             Wayne, Pennsylvania
$3,000,000                                                    January 31, 2000


WHEREAS, Safeguard Delaware, Inc. (the "Lender") is the holder of a $3,000,000
Revolving Note dated July 21, 1999, an Amended Revolving Note dated August 3,
1999, an Second Amended Revolving Note dated October 25, 1999 and a Third
Amended Revolving Note dated December 6, 1999 (collectively referred to as the
"Revolving Note") made by eMerge Interactive, Inc. (the "Borrower"); and

         WHEREAS, Borrower and Lender desire to amend the terms of the Revolving
Note to extend the maturity date (as defined therein) to March 31, 2000;

         NOW, THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged Borrower and Lender hereby agree as follows:

         FOR VALUE RECEIVED, eMerge Interactive, Inc., a Delaware corporation
(the "Borrower"), having an office at 10315 102nd Terrace, Sebastian, Florida
32958, hereby promises to pay to the order of Safeguard Delaware, Inc., a
Delaware corporation (the "Lender"), at the Lender's office located at 103
Springer Building, 3411 Silverside Road, Wilmington, Delaware 19810 or at such
other place in the continental United States as the Lender may designate in
writing, upon demand, in lawful money of the United States, and in immediately
available funds, the principal sum of up to Three Million Dollars ($3,000,000),
or so much thereof as shall have been advanced by the Lender to the Borrower as
hereinafter set forth and then be outstanding, and to pay interest thereon
monthly in arrears on the first business day of each calendar month at an annual
rate equal to the announced prime rate of pnc Bank, N.A. (the "Prime Rate") plus
one percent (1%). All amounts advanced hereon, but not to exceed $3,000,000 at
any one time outstanding in the aggregate, shall be so advanced upon the request
of the Borrower and shall be paid on March 31, 2000 (the "Maturity Date"). All
amounts so advanced hereon and all payments made on account of the principal
hereof shall be recorded in the books of the Lender, which records shall be
final and binding, but failure to do so shall not release the Borrower from any
of its obligations hereunder.

         This Note is issued in substitution for a Revolving Note dated July 21,
1999, an Amended Revolving Note dated August 3, 1999, an Second Amended
Revolving Note dated October 25, 1999 and a Third Amended Revolving Note dated
December 6, 1999, and shall evidence all outstanding indebtedness thereunder
existing as of the date hereof and any additional indebtedness incurred in the
future.

         All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Accrued and unpaid interest shall be due
and
<PAGE>   14
payable on the Maturity Date of this Note. After the Maturity Date or in the
event of default, interest shall continue to accrue on the Note at the rate set
forth above and shall be payable on demand of the Lender.

         The outstanding principal amount of this Note may be prepaid by the
Borrower upon notice to the Lender in whole at any time or in part from time to
time without any prepayment penalty or premium; provided, that upon such payment
any interest due to the date of such prepayment on such prepaid amount shall
also be paid.

         Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.

         An event of default hereunder shall consist of:

         (i) a default in the payment by the Borrower to the Lender of principal
     or interest under this Note as and when the same shall become due and
     payable;

         (ii) an event of default by the Borrower under any other obligation,
     instrument, note or agreement for borrowed money, beyond any applicable
     notice and/or grace period;

         (iii) institution of any proceeding by or against the Borrower under
     any present or future bankruptcy or insolvency statute or similar law and,
     if involuntary, if the same are not stayed or dismissed within sixty (60)
     days, or the Borrower's assignment for the benefit of creditors or the
     appointment of a receiver, trustee, conservator or other judicial
     representative for the Borrower or the Borrower's property or the
     Borrower's being adjudicated a bankrupt or insolvent.

Upon the occurrence of any event of default, interest shall accrue on the
outstanding balance of this Note at the Prime Rate plus three percent (3%), the
entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.

         Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $100,000 ("Summary
Proceeding"), arising out of or relating to this Agreement, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not

                                       2
<PAGE>   15
to plead or to make, any claim that any Summary Proceeding brought in the
Delaware Superior Court has been brought in an improper or otherwise
inconvenient forum, (v) waives, and agrees not to plead or to make, any claim
that the Delaware Superior Court lacks personal jurisdiction over it, (vi)
waives its right to remove any Summary Proceeding to the federal courts except
where such courts are vested with sole and exclusive jurisdiction by statute and
(vii) understands and agrees that it shall not seek a jury trial or punitive
damages in any Summary Proceeding based upon or arising out of or otherwise
related to this Agreement waives any and all rights to any such jury trial or to
seek punitive damages.

         In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $100,000 (a "Proceeding"), arising out of or relating to this Agreement
or the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.

         If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the U.S. Arbitration Act, if applicable, and the
then current Commercial Arbitration Rules of the American Arbitration
Association (the "Association") strictly in accordance with the terms of this
Agreement and the substantive law of the State of Delaware. The arbitration
shall be conducted at the Association's regional office located closest to the
Lender's principal place of business by three arbitrators, at least one of whom
shall be knowledgeable in general business matters and one of whom shall be an
attorney. Judgment upon the arbitrators' award may be entered and enforced in
any court of competent jurisdiction. Neither party shall institute a proceeding
hereunder unless at least 60 days prior thereto such party shall have given
written notice to the other party of its intent to do so.

         Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.

         The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof may be made before, at or after the Maturity Date by agreement
by the Lender. Upon default hereunder, the Lender shall have the right to offset
the amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of an event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all costs
and expenses, including, without limitation, attorneys' fees and legal expenses,
that may be incurred by the Lender in connection with the enforcement of this
Note.

                                       3
<PAGE>   16
         Notices required to be given hereunder shall be deemed validly given
(i) three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the sender,
by next day delivery or other guaranteed delivery service, (iii) when sent by
facsimile transmission, or (iv) when delivered by hand:

         If to the Lender:          Safeguard Delaware, Inc.
                                    800 The Safeguard Building
                                    435 Devon park Drive
                                    Wayne, PA 19087
                                    Attn: Chief Financial Officer

         If to the Borrower:        eMerge Interactive, Inc.
                                    10315 102nd Terrace
                                    Sebastian, FL 32858
                                    Attn: Michael Janney,
                                          Chief Financial Officer

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

         Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Note shall be binding upon the
Lender unless in writing and signed by it. Any provision hereof found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect the
validity, legality or enforceability of the remainder hereof. This Note shall
apply to and bind the successors of the Borrower and shall inure to the benefit
of the Lender, its successors and assigns.

         This Note shall be governed by and interpreted in accordance with the
laws of the State of Delaware.

          IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Third Amended
Revolving Note as of the date first written above.

                                                       eMerge Interactive, Inc,


                                                       By: /s/ T. Michael Janney
                                                       T. Michael Janney,
                                                       Chief Financial Officer

                                        4

<PAGE>   1
                                                                   EXHIBIT 10.34



                                    TERM NOTE

                              (CHARLES L. ABRAHAM)


$100,000                                                        January 28, 2000



         In consideration of the loan (hereinafter referred to as a "Loan"),
eMerge Interactive, Inc., a Delaware corporation (the "Lender"), has made to
Charles L. Abraham, (the "Borrower"), and for value received, the Borrower
hereby promises to pay to the order of the Lender, at the Lender's office
located at 10315 102nd Terrace, Sebastian, Florida 32958 or at such other place
in the continental United States as the Lender may designate in writing, in
lawful money of the United States, and in immediately available funds, the
principal sum of $100,000 together with all accrued interest thereon.

         The Borrower hereby further promises to pay to the order of the Lender
interest on the outstanding principal amount from the date hereof, and to pay
interest thereon monthly in arrears on the first business day of each calendar
month at an annual rate equal to the announced prime rate of PNC Bank, N.A. (the
"Prime Rate") plus one percent (1%) (the "Loan Rate"). The Borrower shall pay on
demand interest on any overdue payment of principal and interest (to the extent
legally enforceable) at the Loan Rate plus three percent (3%).

         The unpaid principal balance of the Note, together with all accrued and
unpaid interest, shall be payable in full on the earlier of the second
anniversary of the loan or the date on which Mr. Abraham's bonus for the
successful completion of the Company's initial public offering has been paid,
and shall be secured by the shares of stock acquired upon exercise of the
option.

         All payments made on this Note (including, without limitation,
prepayments) shall be applied, at the option of the Lender, first to late
charges and collection costs, if any, then to accrued interest and then to
principal. Interest payable hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. All accrued and unpaid interest shall be
due and payable upon maturity of this Note. After maturity or in the event of
default, interest shall continue to accrue on the Note at the rate set forth
above and shall be payable on demand of the Lender.

         The outstanding principal amount of this Note may be prepaid in whole
or in part without any prepayment penalty or premium at any time or from time to
time by Borrower upon notice to the Lender; provided, that any prepayment shall
be applied first to any interest due to the date of such prepayment on this Note
and thereafter shall be applied to the installments of principal hereunder in
the inverse order of maturity.
<PAGE>   2
         Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by Borrower at any time shall be applied to the unpaid balance of
any outstanding principal of this Note.

         An event of default hereunder shall consist of:

         (i) a default in the payment by the Borrower to the Lender of principal
     or interest under this Note as and when the same shall become due and
     payable; or

         (ii) an event of default under the Pledge Agreement;

         (iii) institution of any proceeding by or against the Borrower under
     any present or future bankruptcy or insolvency statute or similar law and,
     if involuntary, if the same are not stayed or dismissed within sixty (60)
     days, or the Borrower's assignment for the benefit of creditors or the
     appointment of a receiver, trustee, conservator or other judicial
     representative for the Borrower or the Borrower's property or the
     Borrower's being adjudicated a bankrupt or insolvent; or

         (iv) the expiration of the thirty (30) day period following the date
     the Borrower ceases for any reason to remain in the employ of Lender.

         Upon the occurrence of an event of default hereunder, this Note shall
automatically without any action or notice by Lender, be accelerated and become
immediately due and payable, and Lender shall have all of the rights and
remedies provided for herein or otherwise available at law or in equity, all of
which remedies shall be cumulative.

         In the event the Borrower sells or otherwise transfers for value one or
more shares of the Lender's common stock purchased with the proceeds of this
Note, then any unpaid portion of the principal balance of this Note attributable
to the purchase price of those shares shall become immediately due and payable,
together with all accrued and unpaid interest on that principal portion.

         For purposes of applying the provisions of this Note, the Borrower
shall be considered to remain in the Lender's employ for so long as the Borrower
renders services as a full-time employee of the Lender, any successor entity or
one or more of the Lender's fifty (50%) percent or more owned (directly or
indirectly) subsidiaries.

         The proceeds of the loan evidenced by this Note shall be applied solely
to the payment of the option exercise price of 30,000 shares of the Lender's
common stock and to the payment of any taxes related to such exercise and
payment of this Note shall be secured by a pledge of those shares with the
Lender pursuant to the Pledge Agreement to be executed this date by the
Borrower. THE BORROWER, HOWEVER, SHALL REMAIN PERSONALLY LIABLE FOR PAYMENT OF
THIS NOTE AND ASSETS OF THE BORROWER, IN ADDITION

                                       2
<PAGE>   3
TO THE COLLATERAL UNDER THE PLEDGE AGREEMENT, MAY BE APPLIED TO THE SATISFACTION
OF THE BORROWER'S OBLIGATIONS HEREUNDER.

         Neither the reference to nor the provisions of any agreement or
document referred to herein shall affect or impair the absolute and
unconditional obligation of the Borrower to pay the principal of and interest on
this Note as herein provided.

         Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $1,000,000 ("Summary
Proceeding"), arising out of or relating to this Agreement, or the breach,
termination or validity thereof, shall be litigated exclusively in the Superior
Court of the State of Delaware (the "Delaware Superior Court") as a summary
proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or any
successor rules (the "Summary Proceeding Rules"). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute and (vii) understands and
agrees that it shall not seek a jury trial or punitive damages in any Summary
Proceeding based upon or arising out of or otherwise related to this Agreement
waives any and all rights to any such jury trial or to seek punitive damages.

         In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $1,000,000 (a "Proceeding"), arising out of or relating to this Agreement
or the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.

         If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the U.S. Arbitration Act, if applicable, and the
then current Commercial Arbitration Rules of the American Arbitration
Association (the "Association") strictly in accordance with the terms of this
Agreement and the substantive law of the State of Delaware. The arbitration
shall be conducted at the Association's regional office located closest to the
Lender's principal place of business by a single arbitrator. Judgment upon the
arbitrator's award may be entered and enforced in any court of competent
jurisdiction. Neither party shall institute a proceeding hereunder unless at
least 60 days prior thereto such party shall have given written notice to the
other party of its intent to do so.

                                       3
<PAGE>   4
         Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceedings.

         Each of the parties hereto hereby irrevocably designates and appoints
Corporation Service Company (the "Service Agent") with offices on the date
hereof at 1013 Centre Road, Wilmington, Delaware 19805, as its agent to receive
service of process in any Proceeding or Summary Proceeding. Each of the parties
hereto further covenants and agrees that, so long as this Agreement or the
Pledge Agreement shall be in effect, each such party shall maintain a duly
appointed agent for the service of summonses and other legal processes in the
State of Delaware and will notify the other parties hereto of the name and
address of such agent if it is no longer the Service Agent.

         The Borrower hereby waives presentment, demand, protest and notice of
dishonor and protest, and also waives all other exemptions; and agrees that
extension or extensions of the time of payment of this Note or any installment
or part thereof may be made before, at or after maturity by agreement by the
Lender. Upon default hereunder the Lender shall have the right to offset the
amount owed by the Borrower against any amounts owed by the Lender in any
capacity to the Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of offset and to have made a charge against any such
account or amounts immediately upon the occurrence of an event of default
hereunder even though such charge is made or entered on the books of the Lender
subsequent thereto. The Borrower shall pay to the Lender, upon demand, all costs
and expenses, including, without limitation, attorneys' fees and legal expenses,
that may be incurred by the Lender in connection with the enforcement of this
Note.

         Notices required to be given hereunder shall be deemed validly given
(i) three business days after sent, postage prepaid, by certified mail, return
receipt requested, (ii) one business day after sent, charges paid by the sender,
by Federal Express Next Day Delivery or other guaranteed delivery service, (iii)
when sent by facsimile transmission, or (iv) when delivered by hand:


If to the Lender:          eMerge Interactive, Inc.
                           10315 102nd Terace
                           Sebastian, FL 32958
                           Attn:    Chief Financial Officer

If to the Borrower:        Charles L. Abraham
                           275 Seacrest Drive
                           Melbourn Beach, FL 32951

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

         Any failure by the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or

                                       4
<PAGE>   5
modification of this Note shall be binding upon the Lender unless in writing and
signed by it. Any provision hereof found to be illegal, invalid or unenforceable
for any reason whatsoever shall not affect the validity, legality or
enforceability of the remainder hereof. This Note shall apply to and bind the
successors of the Borrower and shall inure to the benefit of the Lender, its
successors and assigns.

         This Note shall be governed by and interpreted in accordance with the
laws of the State of Delaware.

         This Note has been amended and restated to accurately reflect the
agreement between the Lender and the Borrower as approved by the Board of
Directors of the Lender.

          IN WITNESS WHEREOF, the Borrower has duly executed this Term Note as
of the date first written above.


                                   /s/ Charles L. Abraham
                                   Charles L. Abraham

                                       5
<PAGE>   6
                                PLEDGE AGREEMENT

         For good and valuable consideration and intending to be legally bound,
CHARLES L. ABRAHAM ("PLEDGOR") hereby assigns, pledges and grants to EMERGE
INTERACTIVE, INC. a Delaware corporation ("LENDER"), a security interest in the
shares of capital stock and/or other securities of Lender, now owned by or
standing in the name of Pledgor or in which Pledgor has a legal or beneficial
interest, which are described on Schedule A attached hereto and made a part
hereof (collectively, the "SECURITIES"), together with all (a) additional
property issued by Borrower from time to time acquired by Pledgor in any manner,
and the certificates or instruments representing such additional property, and
all dividends, interest, cash, instruments, and other property from time to time
received, receivable, or otherwise distributed or distributable in respect of or
in exchange for any or all of such additional property; and (b) cash and
non-cash proceeds, distributions, additions, substitutions, exchanges,
redemptions and replacements of, on or by reason of any of the foregoing
(collectively, the "COLLATERAL"), as security for the payment and performance of
all indebtedness, liabilities and obligations of Borrower (primary, secondary,
direct, contingent, related, unrelated, sole, joint or several) to Lender,
whether for principal, interest, fees, expenses or otherwise, (the
"OBLIGATIONS"), arising under that certain promissory note, dated of even date
herewith, issued by Borrower in the principal amount of $100,000 (the "NOTE"),
all on the following terms and conditions.

         A. Representations and Warranties. Pledgor represents and warrants
that:

                  1. Pledgor has good title to the Securities free and clear of
all liens and encumbrances except the security interest created hereby.

                  2. Pledgor has delivered to Lender all stock certificates
representing or evidencing the Securities, accompanied by corresponding
assignment or transfer powers duly executed in blank by Pledgor, and this Pledge
Agreement and such powers have been duly and validly executed and are binding
and enforceable against Pledgor in accordance with their terms; and the pledge
of the Securities in accordance with the terms hereof creates a valid and
perfected first priority security interest in the Securities securing payment of
the Obligations.

                  3. No authorization, approval, consent, or other action by,
and no notice to or filing with, any governmental authority, regulatory body or
other person or entity is required either (i) for the pledge by Pledgor of the
Collateral pursuant to this Pledge Agreement or for the execution, delivery or
performance of this Pledge Agreement by Pledgor, or (ii) for the exercise by
Lender of the voting or other rights provided for in this Pledge Agreement or
the remedies in respect of the Collateral pursuant to this Pledge Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities generally).

         B. Negative Pledge. Pledgor agrees not to (i) sell or otherwise dispose
of, or grant any option with respect to, any of the Collateral, or (ii) create
or permit to exist any lien, security interest or other charge or encumbrance
upon or with respect to any of the Collateral, except the security interest
under this Pledge Agreement.

                                       6
<PAGE>   7
         C. Additional Collateral. Prior to the full payment and performance of
the Obligations, Pledgor shall pledge hereunder, as additional Collateral, and
shall forthwith transfer and deliver to Lender immediately upon acquisition
(directly or indirectly) thereof, any and all additional shares of stock or
other securities of Borrower and any other property of any kind received,
receivable, or otherwise distributed or distributable on or by reason of the
Collateral, whether in the form of or by way of stock dividends, warrants,
partial liquidation, conversion, prepayments or redemptions (in whole or in
part), liquidation or otherwise with the sole exception of normal, regularly
declared cash dividends or cash interest payments (as the case may be) paid in
respect of the Collateral.

         D. Pledgor's Rights in the Pledged Collateral Before Default. So long
as no Event of Default (as such term is defined in the Note) shall have occurred
and be continuing and Pledgor is in full compliance with the terms hereof:

                  1. Pledgor shall be entitled to receive and retain any normal,
regularly declared cash dividends or cash interest payments (as the case may be)
paid in respect of the Collateral, if such dividends and payments are permitted
under the Loan Documents.

                  2. Pledgor may exercise all voting rights, if any, pertaining
to the Collateral for any purpose not inconsistent with the terms hereof or of
the Obligations or Loan Documents. In the event any Collateral has been
transferred into the name of Lender or a nominee or nominees of Lender prior to
the occurrence of such Event of Default, Lender or its nominee shall execute and
deliver upon request of Pledgor an appropriate proxy in order to permit Pledgor
to vote, if applicable, the same.

         E. Further Assurances. Pledgor shall from time to time promptly take
all actions (and execute, deliver and record all instruments and documents)
necessary or appropriate or requested by Lender, to continue the validity,
enforceability and perfected status of the pledge of the Collateral hereunder or
to enable Lender to exercise and enforce the rights and remedies hereunder with
respect to any of the Pledged Collateral.

         F. Lender's Duties Toward Collateral. Lender shall be under no
obligation to take any actions and shall have no liability (except for gross
negligence or willful misconduct) with respect to the preservation or protection
of the Collateral or any underlying interests represented thereby as against any
prior or other parties. In the event Pledgor requests that Lender take or omit
to take action(s) with respect to the Collateral, Lender may refuse so to do
with impunity if Pledgor does not, upon request of Lender, post sufficient,
creditworthy indemnities with Lender which, in Lender's sole discretion, are
sufficient to hold it harmless from any possible liability of any kind in
connection therewith.

         G. Waivers by Pledgor. Pledgor agrees that Lender, at any time and
without affecting its rights in the Collateral and without notice to Pledgor,
may grant any extensions, releases or other modifications of any kind respecting
the Loan Documents, the Obligations and any Collateral. Pledgor, except as
otherwise provided herein or in the Loan Documents, waives all notices of any
kind in connection with the Obligations, the Loan Documents and any changes

                                       7
<PAGE>   8
therein or defaults or enforcements proceedings thereunder, whether against
Pledgor or any other party. Pledgor hereby waives any rights it has at equity or
in law to require Lender to apply any rights of marshalling or other equitable
doctrines in such circumstances.

         H. Remedies Upon Default. After the occurrence of any Event of Default
(as defined in the Loan Documents) or if any representation, warranty or
agreement of Pledgor hereunder is breached or proves to be false, erroneous or
misleading in any material respect:

                  1. Lender may transfer or cause to be transferred any of the
Collateral into its own or a nominee's or nominees' names.

                  2. Lender shall be entitled to receive and apply in payment of
the Obligations any cash dividends, interest or other payment on the Collateral.

                  3. Lender shall be entitled to exercise in Lender's discretion
all voting rights, if any, pertaining to the Collateral, and in connection
therewith and at the written request of Lender, Pledgor shall promptly execute
any appropriate dividend, payment or brokerage orders or proxies.

                  4. Pledgor shall promptly take any action necessary or
required or requested by Lender, in order to allow Lender fully to enforce the
pledge of the Collateral hereunder and realize thereon to the fullest possible
extent including, but not limited to, the filing of any claims with any court,
liquidator or trustee, custodian, receiver or other like person or party.

                  5. Lender shall have all the rights and remedies granted or
available to it hereunder, under the Uniform Commercial Code as in effect from
time to time in Delaware, under any other statute or the common law, or under
any of the Loan Documents, including without limitation the right to sell the
Collateral or any portion thereof at one or more public or private sales upon
ten (10) days' written notice and to bid thereat or purchase any part or all
thereof in its own or a nominee's or nominees' names, free and clear of any
equity of redemption; and to apply the net proceeds of the sale, after deduction
for any expenses of sale, including without limitation the payment of all
Lender's reasonable attorneys' fees in connection with the Obligations and the
sale, to the payment of the Obligations in any manner or order which Lender in
its sole discretion may elect, without further notice to or consent of Pledgor
and without regard to any equitable principles of marshalling or other like
equitable doctrines.

                  6. Lender may increase, in its sole discretion, but shall not
be required to do so, the Obligations by making additional advances or incurring
expenses for the account of Pledgor deemed appropriate or desirable by Lender in
order to protect, enhance, preserve or otherwise further the sale or disposition
of the Collateral or any other property it holds as security for the
Obligations.

         I. Dispositions of Collateral. Pledgor recognizes that Lender may be
unable to effect a sale to the public of all or part of the Collateral by reason
of certain prohibitions or restrictions in the federal or state securities laws
and regulations (collectively, the "SECURITIES LAWS"), or the provisions of
other federal and state laws, regulations or rulings, but may be

                                       8
<PAGE>   9
compelled to resort to one or more private sales to a restricted group of
purchasers who will be required to agree to acquire the Collateral for their own
account, for investment and not with a view to the further distribution or
resale thereof without restriction. Pledgor agrees that any sales(s) so made may
be at prices and on other terms less favorable to Pledgor than if the Collateral
was sold to the public, and that Lender has no obligation to delay sale of the
Collateral for period(s) of time necessary to permit the issuer thereof to
register the Collateral for sale to the public under any of the Securities Laws.
Pledgor agrees that negotiated sales whether for cash or credit made under the
foregoing circumstances shall not be deemed for that reason not to have been
made in a commercially reasonable manner. Pledgor shall cooperate with Lender
and shall satisfy any requirements under the Securities Laws applicable to the
sale or transfer of the Collateral by Lender.

                  In connection with any sale or disposition of the Collateral,
Lender is authorized to comply with any limitation or restriction as it may be
advised by its counsel is necessary or desirable in order to avoid any violation
of applicable law or to obtain any required approval of the purchaser(s) by any
governmental regulatory body or officer and it is agreed that such compliance
shall not result in such sale being considered not to have been made in a
commercially reasonable manner nor shall Lender be liable or accountable by
reason of the fact that the proceeds obtained at such sale(s) are less than
might otherwise have been obtained.

                  Lender may elect to obtain the advice of any independent
nationally-known investment banking firm, which is a member firm of the New York
Stock Exchange, with respect to the method and manner of sale or other
disposition of any of the Collateral, the best price reasonably obtainable
therefor, the consideration of cash and/or credit terms, or any other details
concerning such sale or disposition. Lender, in its sole discretion, may elect
to sell on such credit terms which it deems reasonable.

         J. Lender's Expenses. Pledgor shall pay Lender on demand all costs and
expenses incurred by Lender (including, without limitation, counsel fees and
expenses) in connection with (i) the preparation, negotiation, and closing of
this Pledge Agreement, and any modifications hereto, (ii) the custody,
preservation, sale or collection or realization of the Collateral, and (iii) the
exercise or enforcement of Lender's rights hereunder.

         K. Successors and Assigns. This Pledge Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns and shall be governed as to its
validity, interpretation and effect by the laws of the State of Delaware; and
any terms used herein which are defined in the Uniform Commercial Code as
enacted in Delaware shall have the meanings therein set forth.

         L. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure or delay on
the part of Lender in the exercise of any right, power, or remedy under this
Pledge Agreement or any of the Loan Documents shall under any circumstances

                                       9
<PAGE>   10
constitute or be deemed to be a waiver thereof, or prevent the exercise thereof
in that or any other instance.

         M. Attorney-in-Fact. Pledgor hereby irrevocably appoints Lender as its
attorney-in-fact, in the name of Pledgor or otherwise, from time to time in
Lender's discretion and at Pledgor's expense, to take any action and to execute,
deliver and record any instruments or documents in connection with the
Collateral which Lender may deem necessary or advisable to accomplish the
purposes of this Pledge Agreement including, without limitation, to receive,
endorse, and collect all instruments made payable to Pledgor representing any
dividend, interest, or other distribution in respect of the Pledged Collateral
or any part thereof and to give full discharge for the same. Lender shall not,
in its capacity as such attorney-in-fact, be liable for any acts or omissions,
nor for any error of judgment or mistake of fact or law, but only for gross
negligence or willful misconduct.

         N. Entire Agreement. This Pledge Agreement, and all agreements and
instruments to be delivered by the parties pursuant hereto or in connection
herewith, represent the entire understanding of the parties with respect to the
subject matter hereof. Except as otherwise indicated, all agreements defined
herein refer to the same as from time to time amended or supplemented or the
terms thereof waived or modified in accordance herewith and therewith. Any
provision hereof found to be illegal, invalid or unenforceable for any reason
whatsoever shall not affect the legality, validity or enforceability of the
remainder hereof.

         P. Joint and Several Obligations. If more than one Pledgor signs this
Pledge Agreement, all references herein to Pledgor shall include all such
Pledgors and each shall be jointly and severally bound by the terms and
provisions hereof.

         Q. Notices. All notices, demands or other communications required or
permitted hereunder shall be in writing and shall be given as provided in the
Note, using Pledgor's address as indicated below.

         R. Partial Releases; Termination. Any of the Collateral may be released
from this Pledge Agreement without altering, varying, or diminishing in any way
this Pledge Agreement or the security interest granted hereby as to the
Collateral not expressly released, and this Pledge Agreement and such security
interest shall continue in full force and effect as to all of the Collateral not
expressly released. This Pledge Agreement and Lender's rights in the Collateral
shall cease, terminate and be void upon the repayment in full of the
Obligations. Upon such repayment and termination, Lender shall execute such
documents as may reasonably be required by Pledgor to release Lender's security
interest in the Collateral.

         S. Amended and Restated. This Pledge Agreement has been amended and
restated to accurately reflect the agreement between the Pledgor and Lender as
approved by the Board of Directors of the Lender.

         IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the 28th day of January 2000.

                                       10
<PAGE>   11
WITNESS OR ATTEST:                          PLEDGOR:


                                            /s/Charles L. Abraham
___________________________                 ___________________________
                                            Name: Charles L. Abraham

                                            Address: 275 Seacrest Drive
                                                     Melbourne Beach, FL

                                       11
<PAGE>   12
                                   Schedule A

                        Description of Pledged Securities

<TABLE>
<CAPTION>
        Issuer              Class of Stock       Stock Certificate No.   No. of Shares
- ------------------------ ---------------------- ---------------------- -----------------
<S>                      <C>                    <C>                    <C>
eMerge Interactive,      Class A Common Stock   134                    30,000
Inc.                                                                   30,000
- ------------------------ ---------------------- ---------------------- -----------------
</TABLE>

                                        1

<PAGE>   1
                                                                    Exhibit 23.1

              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
eMerge Interactive, Inc.

We consent to the use of our reports dated April 13, 1999 on the financial
statements of Lost Pelican, L.L.C. as of December 31, 1997 and 1998 and for each
of the years in the two-year period ended December 31, 1998 and July 7, 1999 on
the financial statements of QDD Investment Company, L.L.C. as December 31, 1998
and for the year then ended, and December 6, 1999 on the consolidated financial
statements of eMerge Interactive, Inc. as of December 31, 1997 and 1998 and
September 30, 1999 and for each of the years in the three-year period ended
December 31, 1998 and for the nine months ended September 30, 1999, included
herein and to the references to our firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.


                                   /s/ KPMG LLP



Orlando, Florida
February 1, 2000



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