NEOFORMA COM INC, S-1/A, 2000-01-21

NEOFORMA COM INC
S-1/A, 2000-01-21
BUSINESS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000

REGISTRATION NO. 333-89077
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

AMENDMENT NO. 6 TO

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

NEOFORMA.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5961 77-0424252
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

3255-7 SCOTT BLVD.
SANTA CLARA, CALIFORNIA 95054
(408) 654-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

ROBERT J. ZOLLARS
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
3255-7 SCOTT BLVD.
SANTA CLARA, CALIFORNIA 95054
(408) 654-5700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
GORDON K. DAVIDSON, ESQ. WILLIAM H. HINMAN, JR., ESQ.
DAVID K. MICHAELS, ESQ. SHEARMAN & STERLING
SCOTT J. LEICHTNER, ESQ. 1550 EL CAMINO REAL
FENWICK & WEST LLP MENLO PARK, CA 94025
TWO PALO ALTO SQUARE (650) 330-2200
PALO ALTO, CA 94306
(650) 494-0600
</TABLE>

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

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 of 1933, 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>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value per
share................................. 8,050,000(2) $12.00 $96,600,000 $25,503(3)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.

(2) Includes 1,050,000 shares subject to the underwriters' over-allotment
option.

(3) Previously paid.

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

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JANUARY 20, 2000

PROSPECTUS

7,000,000 SHARES

[NEOFORMA.COM LOGO]

COMMON STOCK
------------------------

This is Neoforma.com, Inc.'s initial public offering of common stock.

We expect the public offering price to be between $10.00 and $12.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, our common stock will be quoted on the Nasdaq National Market under
the symbol "NEOF."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price...................................... $ $
Underwriting discount...................................... $ $
Proceeds, before expenses, to Neoforma.com, Inc............ $ $
</TABLE>

The underwriters may also purchase up to an additional 1,050,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.

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.

The shares of common stock will be ready for delivery on or about
, 2000.

------------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY
------------------------

The date of this prospectus is , 2000.
<PAGE> 3

COVER ARTWORK

INSIDE FRONT COVER OF PROSPECTUS:

OVERLEAF PAGE

CAPTION AT TOP OF PAGE: "epowering healthcare commerce"

In the middle of the page, there is a photograph of the Neoforma.com
homepage with links to Neoforma.com's three primary services: Shop, Auction and
Plan.

CAPTION AT LOWER MIDDLE OF PAGE: "Empowering healthcare worldwide by
uniting people, information, and commerce."

The Neoforma.com logo appears at the bottom right corner.

GATE FOLD PAGES

CAPTION AT TOP CENTER OF PAGES: "Healthcare Purchasing Lifecycle"

In the background, there are images of healthcare professionals at work. In
the center of the gatefold pages, there are three images of web pages from the
Neoforma.com website, arranged in a circular pattern. The three images depict
web pages for Neoforma.com's three primary services: Shop, Auction and Plan.
There are arrows connecting each image, with the word "Information" embedded in
each arrow.

CAPTION AT CENTER OF PAGES: Neoforma.com's Plan, Auction and Shop services
together address each stage of the healthcare purchasing process, from planning
through procurement to liquidation.

CAPTION AT TOP RIGHT OF PAGES: "Neoforma.com Shop - Our Shop service
enables transactions between purchasers and sellers of new medical equipment,
products, and supplies by providing them with online access to one another and
allowing them to benefit from the efficiencies of e-commerce." This caption is
next to the image of the web page for Neoforma.com's Shop service.

CAPTION AT BOTTOM LEFT OF PAGES: "Neoforma.com Auction - Our Auction
service offers a comprehensive solution to the challenge of managing used and
refurbished equipment and surplus products through online listings and both live
and online auctions." This caption is next to the image of the web page for
Neoforma.com's Auction service.

CAPTION AT TOP LEFT OF PAGES: "Neoforma.com Plan - Our Plan service
provides photographic images and interactive content demonstrating the use of
medical supplies and equipment in various procedural settings, simplifying the
process of planning and equipping medical facilities." This caption is next to
the image of the web page for Neoforma.com's Plan service.

The Neoforma.com logo appears at the bottom right corner.
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements and
Industry Data............................................. 19
Use of Proceeds............................................. 21
Dividend Policy............................................. 21
Capitalization.............................................. 22
Dilution.................................................... 23
Selected Consolidated Financial Data........................ 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 35
Management.................................................. 51
Certain Transactions........................................ 64
Principal Stockholders...................................... 69
Description of Capital Stock................................ 72
Shares Eligible for Future Sale............................. 76
Underwriting................................................ 78
Legal Matters............................................... 81
Experts..................................................... 81
Where You Can Find More Information......................... 81
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date of
this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.

Except as otherwise indicated, all information in this prospectus assumes:

- the conversion of all outstanding shares of preferred stock into
39,990,988 shares of common stock upon the consummation of this offering;
and

- no exercise of the underwriters' over-allotment option.

Neoforma, Neoforma.com, the Neoforma.com logo, Shop, Auction and Plan are
our trademarks or service marks. Each trademark or service mark of any other
company appearing in this prospectus belongs to its holder.

We incorporated in California on March 4, 1996 and reincorporated in
Delaware on November 4, 1998. Our address is 3255-7 Scott Boulevard, Santa
Clara, California, 95054, and our telephone number is (408) 654-5700.
<PAGE> 5

PROSPECTUS SUMMARY

This summary may not contain all of the information that may be important
to you. You should carefully read the entire prospectus, including "Risk
Factors" and the financial statements and related notes included in the
prospectus, before making an investment decision.

NEOFORMA.COM, INC.

Neoforma.com is a leader in the emerging market of providing
business-to-business e-commerce services to purchasers and sellers of medical
products, supplies and equipment. Our services provide an open, online
marketplace where any manufacturer or distributor may list and sell medical
products. By aggregating a large number of suppliers and products, our services
enable physicians, hospitals and other healthcare providers to efficiently
purchase a wide range of new and used medical products. To increase the breadth
and usage of our services, we have entered into strategic alliances with leading
Internet, technology and healthcare-related organizations and medical products
suppliers, such as Dell, General Electric Medical Systems, Owens & Minor, SAP,
Superior Consultant and VerticalNet.

We offer three primary services that together address the entire healthcare
purchasing lifecycle. Our Shop service, introduced in August 1999, provides a
unified marketplace where purchasers can easily locate and buy new medical
products, and suppliers can access new customers and markets. Healthcare
providers can use Shop to purchase a wide range of products, from disposable
gloves to surgical instruments and diagnostic equipment. Our Auction service
creates an efficient marketplace for idle assets by enabling users to list, sell
and buy used and refurbished equipment and surplus medical products. We
introduced our initial Auction service, an online listing service called
AdsOnline, in May 1999, our second Auction service, a live auction service
called AuctionLive, in August 1999, and our third Auction service, an online
auction service called AuctionOnline, in November 1999. Our Plan service,
introduced in July 1998, provides interactive content to healthcare planners and
designers, including 360 degree interactive photographs of rooms and suites in
medical facilities that we believe represent industry best practices, together
with floor plans and information about the products in the room. This
information helps reduce the complexities of planning and outfitting healthcare
facilities, which we believe increases the appeal of our website to the facility
planners responsible for many product purchasing decisions.

In the U.S. alone, there are over 20,000 manufacturers and distributors
that supply new medical products to over 200,000 healthcare providers, including
hospitals, physicians' offices and other healthcare delivery sites. In the
market for used or surplus medical products, sellers typically are manufacturers
and large healthcare providers located in U.S. urban centers, while buyers
typically are healthcare providers located outside of the U.S. or in rural
markets in the U.S. Recently the widespread adoption of the Internet for
business communications and transactions has created an opportunity for
organizations to streamline business processes and to connect purchasers and
sellers in otherwise fragmented markets. Because of the inefficiencies inherent
in the traditional procurement process for medical products and the industry's
high degree of fragmentation, we believe that participants in this industry will
increasingly conduct business online to take advantage of the efficiencies of
business-to-business e-commerce.

Our online marketplace provides significant benefits to both purchasers and
sellers of new and used medical products, supplies and equipment. By aggregating
product information from numerous suppliers, we offer healthcare providers a
central, easy-to-use location for the purchase of medical products, enabling
them to significantly reduce transaction and procurement costs. By aggregating a
wide range of purchasers, we enable any supplier to offer its new and used
medical products on a global basis, significantly expanding its market exposure
without the expense associated with building or extending traditional
distribution channels.
3
<PAGE> 6

Our objective is to become the leading online marketplace for new and used
medical products. Key elements of our strategy to meet this objective include:

- Build on our position as one of the first to offer comprehensive
e-commerce services to our market and increase recognition of our brand;

- Increase adoption of our online marketplace to create a network effect
where the value of our marketplace significantly increases with each
additional user;

- Increase functionality of our services to drive broad market adoption;

- Establish strategic alliances with leading industry participants; and

- Expand internationally.

Because we have only recently introduced our services, it is difficult to
evaluate our business and our future prospects. We have generated revenue of
only $464,000 for the nine months ended September 30, 1999, which consisted
primarily of transaction fees paid by sellers of medical products using our
AuctionLive service. We have recognized limited revenue to date from services
offered through our website. We expect that in the future, our principal source
of revenue will be transaction fees paid by the sellers of medical products that
use our Shop and Auction services. We also expect to generate revenue from
sponsorship fees paid by suppliers and service providers for the right to
feature their brands and products on our Plan service. We expect to continue to
have operating losses and negative cash flow for the foreseeable future.

THE OFFERING

<TABLE>
<S> <C>
Common stock offered............................... 7,000,000 shares
Common stock to be outstanding after this
offering......................................... 56,364,868 shares
Use of proceeds.................................... For general corporate purposes, including
sales and marketing, product development and
working capital.
Nasdaq National Market symbol...................... NEOF
</TABLE>

The number of shares of our common stock that will be outstanding after
this offering is based on the actual number outstanding on September 30, 1999,
and includes the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we issued
in October 1999 and of the 176,057 shares of our Series E preferred stock that
in November 1999 we agreed to issue and sell to Fisher Scientific International,
Inc., and the 350,000 shares of common stock that we issued to the former
shareholders of FDI Information Resources, Inc. in connection with our
acquisition of substantially all of the assets of FDI in November 1999. The
number of shares outstanding also assumes the conversion of all outstanding
shares of preferred stock into 39,990,988 shares of common stock upon the
completion of this offering. The number of shares outstanding excludes:

- 5,112,965 shares issuable upon the exercise of stock options outstanding
as of September 30, 1999, at a weighted average exercise price of $0.20
per share;

- 858,147 shares issuable upon the exercise of warrants outstanding as of
September 30, 1999, at a weighted average exercise price of $0.61 per
share;

- 13,876,213 shares available for future issuance under our stock plans as
described under "Management -- Employee Benefit Plans;" since September
30, 1999, we have granted options to purchase 1,520,000 of these shares
to new members of our management team; and

- 2,000,000 shares of our common stock that we issued to the former
shareholders of Pharos Technologies, Inc., including shares issuable upon
the exercise of assumed options.
4
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The summary consolidated financial information below should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and the related notes
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED NINE MONTHS ENDED
(MARCH 6, 1996) DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ---------------- ------------------
1996 1997 1998 1998 1999
---------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Total revenue......................... $ -- $ -- $ -- $ -- $ 464
Loss from operations.................. (196) (408) (4,607) (2,350) (25,420)
Net loss.............................. (54) (416) (4,563) (2,308) (25,614)
Basic and diluted net loss per
share............................... (0.01) (0.05) (1.65) (0.61) (14.20)
Weighted-average shares -- basic and
diluted............................. 8,000 8,083 2,762 3,807 1,804
Pro forma basic and diluted loss per
share............................... (0.36) (0.94)
Weighted average shares -- pro forma
basic and diluted................... 12,848 27,225
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 655 $72,155 $142,365
Working capital...................................... (9,110) 62,390 132,600
Total assets......................................... 16,003 87,503 157,713
Notes payable, less current portion.................. 8,069 8,069 8,069
Mandatorily redeemable convertible preferred stock... 15,870 -- --
Total stockholders' equity (deficit)................. (18,771) 74,902 145,112
</TABLE>

See Note 2 of notes to consolidated financial statements for a description
of the method we used to compute our basic and diluted net loss per share.

The above table summarizes our consolidated balance sheet as of September
30, 1999:

- on an actual basis;

- on a pro forma basis to reflect

- the sale of 12,418,633 shares of our Series E and Series E-1 preferred
stock for net proceeds of approximately $70.5 million and the issuance
of 275,000 shares of our Series E-1 preferred stock in connection with
a strategic alliance in October 1999,

- the issuance of 176,057 shares of our Series E preferred stock that in
November 1999 we agreed to sell to Fisher Scientific for net proceeds
of approximately $1.0 million,

- the issuance of 350,000 shares of common stock to the former
shareholders of FDI Information Resources in connection with our
acquisition of substantially all of the assets of FDI in November 1999,
and

- the conversion of all outstanding shares of preferred stock into
39,990,988 shares of common stock upon the completion of this offering;
and

- on a pro forma as adjusted basis to further reflect the application of
the net proceeds from the sale of 7,000,000 shares of common stock in
this offering at an assumed initial public offering price of $11.00 per
share, after deducting the underwriting discount and estimated offering
expenses.
5
<PAGE> 8

RISK FACTORS

Before you invest in our common stock, you should carefully consider the
risks described below, together with all of the other information included in
this prospectus.

RISKS RELATED TO OUR BUSINESS

BECAUSE WE HAVE ONLY RECENTLY INTRODUCED OUR PRIMARY SERVICES AND BECAUSE WE
OPERATE IN A NEW AND RAPIDLY EVOLVING MARKET, YOU MAY HAVE DIFFICULTY ASSESSING
OUR BUSINESS AND OUR FUTURE PROSPECTS

We incorporated in March 1996. Prior to May 1999, our operations consisted
primarily of the initial planning and development of our marketplace and the
building of our operating infrastructure. We introduced our initial Auction
service, AdsOnline, in May 1999, our second Auction service, AuctionLive, in
August 1999 and our third Auction service, AuctionOnline, in November 1999 and
we introduced our Shop service in August 1999. As a result, we have generated
revenues of only $464,000 for the nine months ended September 30, 1999. Because
we have only recently introduced our services, it is difficult to evaluate our
business and our future prospects. For example, it is difficult to predict
whether the market will accept our services and the level of revenue we can
expect to derive from our services. Because we are an early stage company in the
online market for the purchase and sale of new and used medical products,
supplies and equipment, which is a new and rapidly evolving market, we cannot be
certain that our business strategy will be successful. Our business will be
seriously harmed, and may fail entirely, if we do not successfully execute our
business strategy or if we do not successfully address the risks we face. In
addition, due to our limited operating history, we believe that period-to-period
comparisons of our revenue and results of operations are not meaningful.

WE HAVE A HISTORY OF LOSSES, ANTICIPATE INCURRING LOSSES IN THE FORESEEABLE
FUTURE AND MAY NEVER ACHIEVE PROFITABILITY

We have experienced losses from operations in each period since our
inception, including net losses of $25.6 million for the nine months ended
September 30, 1999. In addition, as of September 30, 1999, we had an accumulated
deficit of approximately $30.6 million. We have not achieved profitability and
we expect to continue to incur substantial operating losses for the foreseeable
future. We have generated limited revenue to date. If our revenue does not
increase substantially or if our expenses increase further than we expect, we
may never become profitable.

We anticipate that our operating losses will increase in the future, as we
expect substantial increases in our costs and expenses in a number of areas,
including:

- marketing and promotion of our company and our services, including
building recognition of our brand name;

- expanding our direct field sales force;

- expanding and enhancing our operating infrastructure, including hardware
and software systems and administrative personnel;

- extending the functionality of our online marketplace; and

- expanding our services.

6
<PAGE> 9

OUR OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT, AND IF WE FAIL TO
MEET THE EXPECTATIONS OF INVESTORS OR SECURITIES ANALYSTS, THE MARKET PRICE OF
OUR COMMON STOCK WOULD LIKELY DECLINE SIGNIFICANTLY

Our revenue and operating results are likely to fluctuate significantly
from quarter to quarter, due to a number of factors. These factors include:

- the amount and timing of payments to our strategic partners;

- variability in the amount of equipment that we auction in a given
quarter;

- changes in the fees we charge users of our services;

- budgetary fluctuations of purchasers of medical products, supplies and
equipment; and

- changes in general economic and market conditions.

Fluctuations in our operating results may cause us to fail to meet the
expectations of investors or securities analysts. If this were to happen, the
market price of our common stock would likely decline significantly.

In addition, as a result of our limited operating history, the emerging
nature of our market and the evolving nature of our business model, we are
unable to accurately forecast our revenue. We incur expenses based predominantly
on operating plans and estimates of future revenue. Our expenses are to a large
extent fixed. We may be unable to adjust our spending in a timely manner to
compensate for any unexpected revenue shortfalls. Accordingly, a failure to meet
our revenue projections would have an immediate and negative impact on
profitability.

IF BUYERS AND SELLERS OF MEDICAL PRODUCTS DO NOT ACCEPT OUR BUSINESS MODEL OF
PROVIDING AN ONLINE MARKETPLACE FOR THE PURCHASE AND SALE OF MEDICAL PRODUCTS,
DEMAND FOR OUR SERVICES MAY NOT DEVELOP AND THE PRICE OF OUR COMMON STOCK WOULD
DECLINE

We offer an online marketplace that aggregates a number of suppliers and
purchasers of medical products. This business model is new and unproven and
depends upon buyers and sellers in this market adopting a new way to purchase
and sell medical products, supplies and equipment. If buyers and sellers of
medical products do not accept our business model, demand for our services may
not develop and the price of our common stock would decline. Suppliers and
purchasers of medical products could be reluctant to accept our new, unproven
approach, which involves new technologies and may not be consistent with their
existing internal organization and procurement processes. Suppliers and
purchasers may prefer to use traditional methods of selling and buying medical
products, such as using paper catalogs and interacting in person or by phone
with representatives of manufacturers or distributors. In addition, many of the
individuals responsible for purchasing medical products do not have ready access
to the Internet and may be unwilling to use the Internet to purchase medical
products. Even if suppliers and purchasers accept the Internet as a means of
selling and buying medical products, they may not accept our online marketplace
for conducting this type of business. Instead, they may choose to establish and
operate their own websites to purchase or sell new and used medical products.
Reluctance of suppliers and purchasers to use our services would seriously harm
our business.

7
<PAGE> 10

IF WE CANNOT QUICKLY BUILD A CRITICAL MASS OF PURCHASERS AND SUPPLIERS OF
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT, WE WILL NOT ACHIEVE A NETWORK EFFECT
AND OUR BUSINESS MAY NOT SUCCEED

To encourage suppliers to list their products on our online marketplace, we
need to increase the number of purchasers who use our services. However, to
encourage purchasers to use our marketplace, it must offer a broad range of
products from a large number of suppliers. If we are unable to quickly build a
critical mass of purchasers and suppliers, we will not be able to benefit from a
network effect, where the value of our services to each participant
significantly increases with the addition of each new participant. Our inability
to achieve a network effect would reduce the overall value of our Shop and
Auction services to purchasers and suppliers and, consequently, would harm our
business.

IF WE ARE UNABLE TO EXPAND OUR REGISTERED USER BASE AND THE FUNCTIONALITY OF OUR
SERVICES, WE MAY NOT PROVIDE AN ATTRACTIVE ALTERNATIVE TO THE WEBSITES OR
SYSTEMS USED BY LARGE HEALTHCARE ORGANIZATIONS AND WE MAY NOT ACHIEVE MARKET
ACCEPTANCE WITH THESE ORGANIZATIONS

Currently, we believe that most of the registered users of our website are
relatively small healthcare providers such as physicians offices, and these
users have accounted for most of the purchases of new medical products through
Shop. It is important to our success that our services be used by large
healthcare organizations, such as hospitals, integrated delivery networks and
members of large purchasing organizations. In order for these large
organizations to accept our services, we must integrate our services with their
information systems. In addition, we will need to develop customer-specific
pricing capabilities before these organizations can use our services to purchase
products covered by their negotiated agreements with suppliers. Finally, we will
need to significantly increase the number of suppliers using our services to
address the needs of these large organizations, which typically require a wide
range of medical products. Many of these large healthcare organizations have
established, or may establish, websites that enable sales of their products
directly to consumers or electronic data interchange systems designed
specifically for their needs and integrated with their existing processes and
technologies. If we are unable to extend our capabilities and expand our
registered user base as described above, we may not provide an attractive
alternative to these websites or systems and may not achieve market acceptance
by these large organizations.

IF WE DO NOT SUCCEED IN EXPANDING THE BREADTH OF THE PRODUCTS OFFERED THROUGH
OUR ONLINE MARKETPLACE, SOME PURCHASERS OF MEDICAL PRODUCTS MAY CHOOSE NOT TO
UTILIZE OUR SERVICES WHICH WOULD LIMIT OUR POTENTIAL MARKET SHARE

The future success of our Shop service depends upon our ability to offer
purchasers a wide range of medical products. The products currently listed on
our Shop service are primarily oriented to the physicians' office market. Large
healthcare organizations generally require a much broader range of products. To
increase the breadth of the products listed on Shop, we must establish
relationships with additional suppliers and expand the number and variety of
products listed by existing suppliers. If we are unable to maintain and expand
the breadth of medical products, supplies and equipment listed on Shop, the
attractiveness of our services to purchasers will be diminished, which would
limit our potential market share.

8
<PAGE> 11

A number of factors could significantly reduce, or prevent us from
increasing, the number of suppliers and products offered on our online
marketplace, including:

- reluctance of suppliers to offer medical products in an online
marketplace that potentially includes their competitors;

- exclusive or preferential arrangements signed by suppliers with our
competitors;

- perceptions by suppliers that we give other suppliers preferred treatment
on our online marketplace; and

- consolidation among suppliers, which we believe is currently occurring.

WE EXPECT THAT A SIGNIFICANT PORTION OF THE MEDICAL PRODUCTS, SUPPLIES AND
EQUIPMENT SOLD THROUGH OUR SHOP SERVICE WILL COME FROM A LIMITED NUMBER OF KEY
MANUFACTURERS AND DISTRIBUTORS, AND THE LOSS OF A KEY MANUFACTURER OR
DISTRIBUTOR COULD RESULT IN A SIGNIFICANT REDUCTION IN THE REVENUE WE GENERATE
THROUGH THIS SERVICE

Although to date we have generated only minimal revenues from our Shop
service, we expect that a significant portion of the products to be sold through
and revenue to be generated from our Shop service will come from a limited
number of key manufacturers and distributors. These parties are generally not
obligated to list any medical products on our Shop service. If any of these key
manufacturers or distributors cease doing business with us or reduce the number
of products they list on our Shop service, the revenue we generate through this
service could be significantly reduced. Our supplier agreements are nonexclusive
and, accordingly, these suppliers can sell their medical products, supplies and
equipment to purchasers directly or through our competitors.

IF WE DO NOT TIMELY ADD PRODUCT INFORMATION TO OUR ONLINE MARKETPLACE OR IF THAT
INFORMATION IS NOT ACCURATE, OUR REPUTATION MAY BE HARMED AND WE MAY LOSE USERS
OF OUR ONLINE SERVICES

Currently, we are responsible for entering product information into our
database and categorizing the information for search purposes. If we do not do
so in a timely manner, we will encounter difficulties in expanding our online
marketplace. We currently have a backlog of products to be entered in our
system. We will not derive revenue from the sale of products by these suppliers
until the information is entered in our system. Timely entering of this
information in our database depends upon a number of factors, including the
format of the data provided to us by suppliers and our ability to accurately
enter the data in our product database, any of which could delay the actual
entering of the data. We use an independent company to assist us in digitizing
and inputting the data provided to us by suppliers, and we rely on this company
to accurately input the data. If this company fails to input data accurately,
our reputation could be damaged, and we could lose users of our online services.

IF SUPPLIERS DO NOT TIMELY PROVIDE US WITH ACCURATE, COMPLETE AND CURRENT
INFORMATION ABOUT THEIR PRODUCTS, WE MAY BE EXPOSED TO LIABILITY OR THERE MAY BE
A DECREASE IN THE ADOPTION AND USE OF OUR ONLINE MARKETPLACE

If suppliers do not provide us in a timely manner with accurate, complete
and current information about the products they offer and promptly update this
information when it changes, our database will be less useful to purchasers. We
cannot guarantee that the product information available from our services will
always be accurate, complete and current, or that it will comply with
governmental regulations. This could expose us to liability if this incorrect
information harms users of our services or result in decreased adoption and use
of our online marketplace.

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BECAUSE SOME OF THE PARTICIPANTS IN OUR ONLINE MARKETPLACE ARE STOCKHOLDERS OR
HAVE STRATEGIC RELATIONSHIPS WITH US, WE MAY FIND IT DIFFICULT TO ATTRACT
COMPETING COMPANIES, WHICH COULD LIMIT THE BREADTH OF PRODUCTS OFFERED ON AND
USERS OF OUR ONLINE MARKETPLACE

Some suppliers participating in our online marketplace are our stockholders
or have strategic relationships with us. For example, General Electric Medical
Systems is entitled to sponsor rooms in our Plan service and has agreed to
conduct other activities with us, and an affiliate of General Electric Medical
Systems has recently acquired 2,035,563 shares of our preferred stock which will
convert into 2,035,563 shares of common stock upon the completion of the
offering. See "Business -- Suppliers." These relationships may deter other
suppliers, particularly those that compete directly with these participants,
from participating in our online marketplace due to perceptions of bias in favor
of one supplier over another. This could limit the array of products offered on
our online marketplace, damage our reputation and limit our ability to maintain
or increase our user base.

IF WE FAIL TO DEVELOP THE CAPABILITY TO INTEGRATE OUR ONLINE SERVICES WITH
ENTERPRISE SOFTWARE SYSTEMS OF PURCHASERS AND SUPPLIERS OF MEDICAL PRODUCTS AND
TO ENABLE OUR SERVICES TO SUPPORT CUSTOMER-SPECIFIC PRICING, THESE ENTITIES MAY
CHOOSE NOT TO UTILIZE OUR ONLINE MARKETPLACE, WHICH WOULD HARM OUR BUSINESS

If we do not maintain and expand the functionality and reliability of our
services, purchasers and suppliers of medical products may not use our
marketplace. We believe that we must develop the capability to integrate our
online services with enterprise software systems used by many suppliers of
medical products and by many large healthcare organizations, and to enable our
services to support customer-specific pricing. We may incur significant expenses
to develop these capabilities, and may not succeed in developing them in a
timely manner. In addition, developing the capability to integrate our services
with suppliers' and purchasers' enterprise software systems will require the
cooperation of and collaboration with the companies that develop and market
these systems. Suppliers and purchasers use a variety of different enterprise
software systems provided by third-party vendors or developed internally. This
lack of uniformity increases the difficulty and cost of developing the
capability to integrate with the systems of a large number of suppliers and
purchasers. Failure to provide these capabilities would limit the efficiencies
that our services provide, and may deter many purchasers and suppliers from
using our online marketplace, particularly large healthcare organizations.

WE FACE INTENSE COMPETITION, AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY, WE MAY
BE UNABLE TO MAINTAIN OR EXPAND THE BASE OF PURCHASERS AND SELLERS OF MEDICAL
PRODUCTS USING OUR SERVICES AND WE MAY LOSE MARKET SHARE OR BE REQUIRED TO
REDUCE PRICES

The online market for medical products, supplies and equipment is new,
rapidly evolving and intensely competitive. Our primary competition includes
e-commerce providers that have established online marketplaces for medical
products, supplies and equipment. We also face potential competition from a
number of sources. Many companies have created websites to serve the information
needs of healthcare professionals. Many of these companies are introducing
e-commerce functions that may compete with our services. In addition, providers
of online marketplaces and online auction services that currently focus on other
industries could expand the scope of their services to include medical products.
Existing suppliers of medical products may also establish online marketplaces
that offer services to suppliers and purchasers, either on their own or by
partnering with other companies. Moreover, live auction houses focusing on
medical products may establish online auction services. See
"Business -- Competition" for more information about our current and potential
competitors.

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Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:

- enter into strategic or commercial relationships with larger, more
established healthcare, medical products and Internet companies;

- secure services and products from suppliers on more favorable terms;

- devote greater resources to marketing and promotional campaigns;

- secure exclusive or preferential arrangements with purchasers or
suppliers that limit sales through our marketplace; and

- devote substantially more resources to website and systems development.

Many of our existing and potential competitors have longer operating
histories in the medical products market, greater name recognition, larger
customer bases and greater financial, technical and marketing resources than we
do. As a result of these factors, our competitors and potential competitors may
be able to respond more quickly to market forces, undertake more extensive
marketing campaigns for their brands and services and make more attractive
offers to purchasers and suppliers, potential employees and strategic partners.
In addition, new technologies may increase competitive pressures. We cannot be
certain that we will be able to maintain or expand our user base. We may not be
able to compete successfully against current and future competitors and
competition could result in price reductions, reduced sales, gross margins and
operating margins and loss of market share.

IF WE ARE NOT ABLE TO INCREASE RECOGNITION OF, OR LOSE THE RIGHT TO USE, THE
NEOFORMA.COM BRAND NAME, OUR ABILITY TO ATTRACT USERS TO OUR ONLINE MARKETPLACE
WILL BE LIMITED

We believe that recognition and positive perception of the Neoforma.com
brand name in the healthcare industry are important to our success. We intend to
significantly expand our advertising and publicity efforts in the near future.
However, we may not achieve our desired goal of increasing the awareness of the
Neoforma.com brand name. Even if recognition of our name increases, it may not
lead to an increase in the number of visitors to our online marketplace or
increase the number of users of our services.

Furthermore, in a letter dated January 14, 2000, Forma Scientific, Inc.
notified us that it believes our use of "Neoforma" and "Neoforma.com" violates
its trademark rights in "Forma" and "Forma Scientific." Based on our preliminary
investigation, we believe that we have meritorious defenses to Forma
Scientific's claims and intend to vigorously defend ourselves in any litigation
which may arise from these claims. However, if any litigation were to be decided
adversely to us, we could be enjoined from future use of the names Neoforma and
Neoforma.com. The loss of the use of the Neoforma.com brand would seriously harm
our business. See "Risk Factors -- We have received notice of a trademark
infringement claim brought by a third party and we may be subject to further
intellectual property claims, and if we were to subsequently lose our
intellectual property rights, we could be unable to operate our current
business" and "Business -- Trademark Infringement Claim."

IF PARTICIPATING SELLERS ON OUR SHOP AND AUCTION SERVICES DO NOT PROVIDE TIMELY
AND PROFESSIONAL DELIVERY OF MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT,
PURCHASERS MAY NOT CONTINUE USING OUR SERVICES

We rely on suppliers to deliver the medical products, supplies and
equipment sold through our Shop service to purchasers. We also often rely on
sellers to deliver products sold through our Auction

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<PAGE> 14

service. In addition, suppliers do not guarantee the availability or timely
delivery of products listed on to Shop. If these sellers fail to make delivery
in a professional, safe and timely manner, then our services will not meet the
expectations of purchasers, and our reputation and brand will be damaged. In
addition, deliveries that are non-conforming, late or are not accompanied by
information required by applicable law or regulations could expose us to
liability or result in decreased adoption and use of our services.

WE MAY BE SUBJECT TO LITIGATION FOR DEFECTS IN PRODUCTS SUPPLIED BY SELLERS
USING OUR SERVICES, AND THIS TYPE OF LITIGATION MAY BE COSTLY AND TIME-CONSUMING
TO DEFEND

Because we facilitate the sale of new and used medical products by sellers
using our services, we may become subject to legal proceedings regarding defects
in these medical products, even though we generally do not take title to these
products. Any claims, with or without merit, could:

- be time-consuming to defend;

- result in costly litigation; or

- divert management's attention and resources.

IF WE ARE UNABLE TO ATTRACT QUALIFIED PERSONNEL OR RETAIN OUR EXECUTIVE OFFICERS
AND OTHER KEY PERSONNEL, WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR
INDUSTRY

Our success depends on our ability to attract and retain qualified,
experienced employees. Competition for qualified, experienced employees in both
the Internet and the healthcare industry, particularly in the San Francisco Bay
Area, is intense, and we may not be able to compete effectively to retain and
attract employees. Should we fail to retain or attract qualified personnel, we
may not be able to compete successfully in our industry, and our business would
be harmed.

We believe that our success will depend on the continued services of
executive officers and other key employees. Other than initial offer letters
containing information regarding compensation, we currently have employment
agreements with only two members of our senior management. However, these
agreements do not prevent these executives from terminating their employment at
any time. As a result, our employees, including these executives, serve at-will
and may elect to pursue other opportunities at any time. The loss of any of our
executive officers or other key employees could harm our business.

Other than the limited key person life insurance policies we have with our
founders, Jeffrey H. Kleck and Wayne D. McVicker, we do not maintain any key
person life insurance.

MANY OF OUR EXECUTIVES AND OTHER EMPLOYEES HAVE RECENTLY JOINED OUR COMPANY, AND
IF THEY ARE UNABLE TO EFFECTIVELY WORK TOGETHER, WE MAY NOT BE ABLE TO
EFFECTIVELY MANAGE OUR GROWTH AND OPERATIONS

Many of our executive officers and other employees joined us only recently
and have had a limited time to work together. For example, our Chief Executive
Officer, Robert J. Zollars, joined us in July 1999, our Chief Financial Officer,
Frederick J. Ruegsegger, joined us in July 1999, our Executive Vice President of
Products and Services, Bhagwan D. Goel, joined us in October 1999, our Executive
Vice President of Sales and President of Neoforma Shop, Daniel A. Eckert,
accepted employment with us in July 1999 and joined us in November 1999 and our
Executive Vice President of Strategy and Chief Marketing Officer, Robert W.
Rene, joined us in December 1999. We cannot assure you that they will be able to
work effectively together to manage our growth and continuing operations.

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<PAGE> 15

OUR STRATEGY TO EXPAND OUR SERVICES INTERNATIONALLY IN ORDER TO INCREASE THE USE
OF OUR ONLINE MARKETPLACE BY SUPPLIERS AND PURCHASERS OF MEDICAL PRODUCTS MAY
REQUIRE SIGNIFICANT MANAGEMENT ATTENTION AND FINANCIAL RESOURCES, AND IF WE ARE
UNABLE TO EXECUTE THIS STRATEGY, OUR GROWTH WILL BE LIMITED AND OUR OPERATING
RESULTS MAY BE HARMED

In order to increase the market awareness and the use of our online
marketplace by suppliers of medical products, we intend to expand our services
internationally. If we fail to execute this strategy, our growth will be limited
and our operating results may be harmed. We have limited experience with the
healthcare industry outside the U.S. and with marketing our services
internationally. Our entry into international markets may require significant
management attention and financial resources, which may harm our ability to
effectively manage our existing business. Furthermore, entry into some
international markets would require us to develop foreign language versions of
our services. Accordingly, our planned international expansion may not be
successful. We cannot be sure that we will be able to attract purchasers and
sellers of medical products in foreign jurisdictions to our online marketplace.
In addition, the market for the purchase and sale of medical products in many
foreign countries is different from that in the U.S. For example, in many
foreign countries, the government or a government-controlled entity is the
principal purchaser of medical products. Competitors which have greater local
market knowledge may exist or arise in these international markets and impede
our ability to successfully expand in these markets.

WE MAY CONTINUE TO MAKE NEW ACQUISITIONS, WHICH COULD HARM OUR PROFITABILITY,
PUT A STRAIN ON OUR RESOURCES, OR CAUSE DILUTION TO OUR STOCKHOLDERS

We may find it necessary to make acquisitions of technologies and other
companies in order to expand our business and the services we offer. For
example, on August 6, 1999, we acquired General Asset Recovery LLC, a live
auction house and asset management company focused on medical products. In
addition, on November 18, 1999, we acquired substantially all of the assets of
FDI Information Resources, Inc., a developer of software that facilitates the
planning and design of healthcare facility projects. Integrating newly acquired
organizations and technologies into our company could be expensive, time
consuming and may strain our resources. In addition, we may lose current users
of our services if any acquired companies have relationships with competitors of
our users. Consequently, we may not be successful in integrating any acquired
businesses or technologies and may not achieve anticipated revenue and cost
benefits. In addition, future acquisitions could result in potentially dilutive
issuances of equity securities or the incurrence of debt, contingent liabilities
or amortization expenses related to goodwill and other intangible assets, any of
which could harm our business. For example, in connection with the acquisition
of General Asset Recovery, we recorded approximately $9.7 million in goodwill,
which will be amortized over a period of seven years, and in connection with the
FDI acquisition, we will record an aggregate of approximately $3.3 million in
goodwill in the fourth quarter of 1999, which will be amortized over a period of
three years.

IF WE ARE UNABLE TO MAINTAIN OUR STRATEGIC ALLIANCES OR ENTER INTO NEW
ALLIANCES, WE MAY BE UNABLE TO INCREASE THE ATTRACTIVENESS OF OUR ONLINE
MARKETPLACE OR PROVIDE SATISFACTORY SERVICES TO USERS OF OUR SERVICES

Our business strategy includes entering into strategic alliances with
leading technology and healthcare-related companies to increase users of our
online marketplace, increase the number and variety of products that we offer
and provide additional services and content to our users. We may not achieve our
objectives through these alliances. These agreements do not, and future
relationships may not, afford us any exclusive marketing or distribution rights.
Many of these companies have multiple relationships and they may not regard us
as significant for their business. These companies may pursue relationships with
our competitors or develop or acquire services that compete with our

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<PAGE> 16

services. In addition, in many cases these companies may terminate these
relationships with little or no notice. If any existing alliance is terminated
or we are unable to enter into alliances with leading technology and
healthcare-related companies, we may be unable to increase the attractiveness of
our online marketplace or provide satisfactory services to purchasers and
suppliers of medical products.

OUR RECENT GROWTH HAS PLACED A SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND
RESOURCES, AND IF WE FAIL TO SUCCESSFULLY MANAGE FUTURE GROWTH, WE MAY NOT BE
ABLE TO MANAGE OUR BUSINESS EFFICIENTLY AND MAY BE UNABLE TO EXECUTE OUR
BUSINESS PLAN

We have grown rapidly and will need to continue to grow to execute our
business strategy. Our total number of employees grew from six as of December
31, 1997, to 59 as of December 31, 1998, 148 as of September 30, 1999 and 269 as
of December 31, 1999, and we anticipate further significant increases in the
number of our employees. Our growth has placed significant demands on management
as well as on our administrative, operational and financial resources and
controls. We expect our future growth to cause similar, and perhaps increased,
strain on our systems and controls. For example, our rapid growth requires that
we integrate and manage a large number of new employees. In addition, we will
need to substantially upgrade our information systems including our accounting
system. We also will need to institute new systems such as an auction inventory
tracking system. Any failure to successfully upgrade our systems and controls
could result in inefficiencies in our business and could cause us to be unable
to implement our business plan.

IF OUR SYSTEMS ARE UNABLE TO PROVIDE ACCEPTABLE PERFORMANCE AS THE USE OF OUR
SERVICES INCREASES, WE COULD LOSE USERS OF OUR SERVICES AND WE WOULD HAVE TO
SPEND CAPITAL TO EXPAND AND ADAPT OUR NETWORK INFRASTRUCTURE, EITHER OF WHICH
COULD HARM OUR BUSINESS AND RESULTS OF OPERATIONS

We introduced our Shop service in August 1999, the AdsOnline component of
our Auction service in August 1999 and the AuctionOnline component of our
Auction service in November 1999. Accordingly, we have processed a limited
number and variety of transactions on our website. To date, these transactions
have consisted of sales of new medical products through Shop and sales of used
and refurbished medical products on AdsOnline. Our systems may not accommodate
increased use while providing acceptable overall performance. We must continue
to expand and adapt our network infrastructure to accommodate additional users
and increased transaction volumes. This expansion and adaptation will be
expensive and will divert our attention from other activities. If our systems do
not continue to provide acceptable performance as use of our services increases,
our reputation may be damaged and we may lose users of our services.

OUR INFRASTRUCTURE AND SYSTEMS ARE VULNERABLE TO NATURAL DISASTERS AND OTHER
UNEXPECTED EVENTS, AND IF ANY OF THESE EVENTS OF A SIGNIFICANT MAGNITUDE WERE TO
OCCUR, THE EXTENT OF OUR LOSSES COULD EXCEED THE AMOUNT OF INSURANCE WE CARRY TO
COMPENSATE US FOR ANY LOSSES

The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
process transactions, provide high quality customer service and attract and
retain users of our services. Currently, our infrastructure and systems are
located at one site at Exodus Communications in Sunnyvale, California, which is
an area susceptible to earthquakes. We depend on our single-site infrastructure
and any disruption to this infrastructure resulting from a natural disaster or
other event could result in an interruption in our service, reduce the number of
transactions we are able to process and, if sustained or repeated, could impair
our reputation and the attractiveness of our services or prevent us from
providing our services entirely.

Our systems and operations are vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures,
break-ins, sabotage, computer viruses, intentional

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<PAGE> 17

acts of vandalism and similar events. We do not have a formal disaster recovery
plan or alternative provider of hosting services. In addition, we may not carry
sufficient business interruption insurance to compensate us for losses that
could occur. Any failure on our part to expand our system or Internet
infrastructure to keep up with the demands of our users, or any system failure
that causes an interruption in service or a decrease in responsiveness of our
online services or website, could result in fewer transactions and, if sustained
or repeated, could impair our reputation and the attractiveness of our services
or prevent us from providing our services entirely.

IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND PRIVACY OF THE CONFIDENTIAL
INFORMATION OF THE USERS OF OUR ONLINE MARKETPLACE, THESE USERS MAY DISCONTINUE
USING OUR SERVICES

A significant barrier to the widespread adoption of e-commerce is the
secure transmission of personally identifiable information of Internet users as
well as other confidential information over public networks. If any compromise
or breach of security were to occur, it could harm our reputation and expose us
to possible liability. We use SSL, or secure sockets layer, an Internet security
technology, at appropriate points in the transaction flow and encrypt
information on our servers to protect user information during transactions, and
we employ a security consulting firm that periodically tests our security
measures. Despite these efforts, a party may be able to circumvent our security
measures and could misappropriate proprietary information or cause interruptions
in our operations. We may be required to make significant expenditures to
protect against security breaches or to alleviate problems caused by any
breaches.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR COMPETITORS MAY GAIN
ACCESS TO OUR TECHNOLOGY, WHICH COULD HARM OUR BUSINESS

We regard our intellectual property as critical to our success. If we are
unable to protect our intellectual property rights, our business would be
harmed. We rely on trademark, copyright and trade secret laws to protect our
proprietary rights. We have applied for registration of several marks including
the Neoforma.com logo. Our trademark registration applications may not be
approved or granted, or, if granted, may be successfully challenged by others or
invalidated through administrative process or litigation.

WE HAVE RECEIVED NOTICE OF A TRADEMARK INFRINGEMENT CLAIM BROUGHT BY A THIRD
PARTY AND WE MAY BE SUBJECT TO FURTHER INTELLECTUAL PROPERTY CLAIMS AND IF WE
WERE TO SUBSEQUENTLY LOSE OUR INTELLECTUAL PROPERTY RIGHTS, WE COULD BE UNABLE
TO OPERATE OUR CURRENT BUSINESS

We may from time to time be subject to claims of infringement of other
parties' proprietary rights or claims that our own trademarks, patents or other
intellectual property rights are invalid. In a letter dated January 14, 2000,
Forma Scientific, Inc. notified us that it believes our use of the "Neoforma"
and "Neoforma.com" trademarks violates its trademark rights in "Forma" and
"Forma Scientific", and asked us to discontinue use of our trademarks by January
28, 2000. Forma Scientific has filed a complaint in federal court, although we
have not yet been served with this complaint. Based on our preliminary
investigation, we believe that we have meritorious defenses to Forma
Scientific's claims and intend to vigorously defend ourselves in any litigation
that may arise from these claims. If any litigation were to be decided adversely
to us, we could be enjoined from future use of the names Neoforma and
Neoforma.com and we might be required to pay damages to Forma Scientific. See
"Business -- Trademark Infringement Claim."

Any claims regarding our intellectual property, with or without merit,
could be time consuming and costly to defend, divert management attention and
resources or require us to enter into royalty or license agreements. License
agreements may not be available on commercially reasonable terms, if at all. In
addition, there has been a recent increase in the number of patent applications
related to the

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<PAGE> 18

use of the Internet to perform business processes. Enforcement of intellectual
property rights in the Internet sector will become a greater source of risk as
the number of business process patents increases. The loss of access to any key
intellectual property right, including use of the Neoforma.com brand name, could
result in our inability to operate our current business. See "-- If we are not
able to increase recognition of, or lose the right to use, the Neoforma.com
brand name, our ability to attract users to our online marketplace will be
limited."

IF WE FAIL TO LICENSE THIRD-PARTY SOFTWARE INCORPORATED IN OUR SERVICES, WE MAY
NOT BE ABLE TO OPERATE OUR ONLINE MARKETPLACE

We currently rely on software that we have licensed from a number of
suppliers. For example, we use software that we license from NetDynamics, Inc.,
a subsidiary of Sun Microsystems, to provide part of our website infrastructure,
we use information retrieval software that we license from SearchCafe
Development Corporation to provide part of our search capabilities and we use
software that we license from Moai, Inc. to provide a substantial part of the
functionality of our AuctionOnline service. These licenses may not continue to
be available to us on commercially reasonable terms, or at all. In addition, the
licensors may not continue to support or enhance the licensed software. In the
future, we expect to license other third party technologies to enhance our
services, to meet evolving user needs or to adapt to changing technology
standards. Failure to license, or the loss of any licenses of, necessary
technologies could impair our ability to operate our online marketplace until
equivalent software is identified, licensed and integrated or developed by us.
In addition, we may fail to successfully integrate licensed technology into our
services, which could similarly harm development and market acceptance of our
services.

RISKS RELATED TO OUR INDUSTRY

THE SUCCESS OF OUR BUSINESS DEPENDS ON THE PARTICIPANTS IN THE MARKET FOR
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT ACCEPTING THE INTERNET FOR DISTRIBUTION
AND PROCUREMENT

Business-to-business e-commerce is currently not a significant sector of
the market for medical products, supplies and equipment. The Internet may not be
adopted by purchasers and suppliers in the medical products, supplies and
equipment market for many reasons, including:

- reluctance by the healthcare industry to adopt the technology necessary
to engage in the online purchase and sale of medical products;

- failure of the market to develop the necessary infrastructure for
Internet-based communications, such as wide-spread Internet access,
high-speed modems, high-speed communication lines and computer
availability;

- their comfort with existing purchasing habits, such as ordering through
paper-based catalogs and representatives of medical manufacturers and
distributors;

- their concern with respect to security and confidentiality; and

- their investment in existing purchasing and distribution methods and the
costs required to switch methods.

Should healthcare providers and suppliers of medical products choose not to
utilize or accept the Internet as a means of purchasing and selling medical
products, our business model would not be viable.

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REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD INHIBIT
THE GROWTH OF E-COMMERCE AND LIMIT THE MARKET FOR OUR SERVICES

A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, such as user privacy,
taxation of goods and services provided over the Internet and the pricing,
content and quality of services. Legislation could dampen the growth in Internet
usage and decrease or limit its acceptance as a communications and commercial
medium. If enacted, these laws and regulations could limit the market for our
services. In addition, existing laws could be applied to the Internet, including
consumer privacy laws. Legislation or application of existing laws could expose
companies involved in e-commerce to increased liability, which could limit the
growth of e-commerce.

IF REGULATIONS WITH RESPECT TO HOW AUCTIONS MAY BE CONDUCTED ARE IMPOSED BY
STATES, OUR BUSINESS COSTS MAY INCREASE, WHICH WOULD HARM OUR RESULTS OF
OPERATIONS

Numerous states, including the State of California, where our headquarters
are located, have regulations regarding how auctions may be conducted and the
liability of auctioneers in conducting these auctions. No legal determination
has been made with respect to the applicability of these regulations to our
online business to date and little precedent exists in this area. One or more
states may attempt to impose these regulations upon us in the future, which
could increase our cost of doing business.

IF THERE ARE CHANGES IN THE POLITICAL, ECONOMIC OR REGULATORY HEALTHCARE
ENVIRONMENT THAT AFFECT THE PURCHASING PRACTICE AND OPERATION OF HEALTHCARE
ORGANIZATIONS, OR IF THERE IS CONSOLIDATION IN THE HEALTHCARE INDUSTRY, WE COULD
BE REQUIRED TO MODIFY OUR SERVICES OR TO INTERRUPT DELIVERY OF OUR SERVICES

The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. Factors such as changes in
reimbursement policies for healthcare expenses, consolidation in the healthcare
industry and general economic conditions affect the purchasing practices and
operation of healthcare organizations. Changes in regulations affecting the
healthcare industry, such as any increased regulation by the Food and Drug
Administration of the purchase and sale of medical products, could require us to
make unplanned enhancements of our services, or result in delays or
cancellations of orders or reduce demand for our services. Federal and state
legislatures have periodically considered programs to reform or amend the U.S.
healthcare system at both the federal and state level. These programs may
contain proposals to increase governmental involvement in healthcare, lower
reimbursement rates or otherwise change the environment in which healthcare
industry providers operate. We do not know what effect any proposals would have
on our business.

Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As the
healthcare industry consolidates, competition to provide services to industry
participants will become more intense and the importance of establishing a
relationship with each industry participant will become greater. These industry
participants may try to use their market power to negotiate fee reductions of
our services. If we were forced to reduce our fees, our operating results could
suffer if we cannot achieve corresponding reductions in our expenses.

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OUR BUSINESS DEPENDS UPON THE DELIVERY OF ACCURATE ELECTRONIC INFORMATION VIA
THE INTERNET, AND IF YEAR 2000 ISSUES CAUSE LONG-TERM INOPERABILITY OF THE
INTERNET OR OUR ONLINE MARKETPLACE, WE COULD LOSE USERS OF OUR SERVICES OR BE
UNABLE TO CONTINUE OUR BUSINESS

Significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance problems. Any year 2000 compliance
problems faced by us, users of our online marketplace and strategic partners
could seriously harm our business. In addition, our ability to operate our
business depends upon delivery of accurate, electronic information via the
Internet. To the extent year 2000 issues result in the long-term inoperability
of the Internet or our online marketplace, our business would be seriously
harmed. For more information regarding this risk, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000."

RISKS RELATED TO THIS OFFERING

THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD LEAD TO
LOSSES FOR INDIVIDUAL STOCKHOLDERS

The trading prices of many stocks of Internet-related companies have
experienced extreme price and volume fluctuations. Because we are an
Internet-related company, we expect our stock price to be similarly volatile.
These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. These fluctuations may continue and
could harm our stock price. Any negative change in the public's perception of
the prospects of Internet-related companies could also depress our stock price,
regardless of our results.

WE COULD BE SUBJECT TO SECURITIES CLASS ACTION LITIGATION IF OUR STOCK PRICE IS
VOLATILE, WHICH COULD BE COSTLY AND TIME-CONSUMING TO DEFEND AND COULD DAMAGE
OUR REPUTATION

In the past, there have been class action lawsuits filed against companies
after periods of fluctuations in the market price of their securities. If we
were subject to this type of litigation, it would be a strain on our personnel
and financial resources, and divert management's attention from running our
company and could negatively affect our public image and reputation.

OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL CONTINUE TO HOLD A
SUBSTANTIAL PORTION OF OUR STOCK SUBSEQUENT TO THE COMPLETION OF THIS OFFERING,
AND, CONSEQUENTLY, COULD MAKE SOME TRANSACTIONS MORE DIFFICULT OR IMPOSSIBLE TO
COMPLETE WITHOUT THE SUPPORT OF THESE STOCKHOLDERS

Based on the number of shares of our common stock outstanding as of
September 30, 1999, executive officers, directors and current holders of 5% or
more of our outstanding common stock will, in the aggregate, own approximately
58.4% of our outstanding common stock after this offering. As a result, these
stockholders will be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
may also delay, deter or prevent a change in control of our company and may make
some transactions more difficult or impossible without the support of these
stockholders.

18
<PAGE> 21

WE HAVE ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT THE SALE OF
OUR COMPANY AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK

Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. For a description of these provisions,
see "Description of Capital Stock -- Anti-Takeover Provisions."

AN AGGREGATE OF 49,364,868 SHARES, OR 87.6%, OF OUR OUTSTANDING STOCK, WILL
BECOME ELIGIBLE FOR RESALE IN THE PUBLIC MARKET BETWEEN 180 DAYS AND ONE YEAR
AFTER THIS OFFERING, AND FUTURE SALES OF THIS STOCK MAY CAUSE OUR STOCK PRICE TO
DECLINE

Sales of substantial amounts of our common stock in the public market after
this offering could reduce the prevailing market prices for our common stock. Of
the 56,364,868 shares of common stock to be outstanding upon the closing of this
offering, the 7,000,000 shares offered in this offering will be freely tradable
without restriction or further registration, other than shares purchased by our
officers, directors or other affiliates within the meaning of Rule 144 under the
Securities Act of 1933, which will be restricted from sale until 180 days after
the date of this prospectus under the terms of agreements between these
affiliates and the underwriters. The underwriters may, at their discretion and
without notice, release all or a portion of the shares subject to lock-up
agreements. The remaining 49,364,868 shares of our common stock held by existing
stockholders upon the completion of this offering will become eligible for
resale in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING AFTER
THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ----------------- -----------------------------------------------------------------
<C> <S>
34,890,623 180 days after the date of this prospectus under the terms of
agreements between the stockholders and the underwriters or us,
provided that the underwriters can waive this restriction at any
time. 28,173,146 of these shares will also be subject to sales
volume restrictions under Rule 144 under the Securities Act.
14,474,245 Upon expiration of applicable one-year holding periods under Rule
144, which will expire between August 27, 2000 and October 14,
2000, subject to manner of sale and volume restrictions under
Rule 144.
</TABLE>

In addition, we intend to file a registration statement on Form S-8 under
the Securities Act after the date of this offering to register shares of our
common stock issued or reserved for issuance under our various stock plans.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "intend,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions. We cannot guarantee future
results, levels of activity, performance or achievements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including the risks outlined under
"Risk Factors" and elsewhere in this prospectus.

19
<PAGE> 22

This prospectus contains estimates of market growth related to the
Internet. These estimates have been included in studies published by Forrester
Research, Efficient Healthcare Consumer Response and the Health Industry
Manufacturers' Association. These estimates assume that certain events, trends
and activities will occur. Although we believe that these estimates are
generally indicative of the matters reflected in those studies, these estimates
are inherently imprecise, and we caution you to read these estimates in
conjunction with the rest of the disclosure in this prospectus, particularly the
"Risk Factors" section.

20
<PAGE> 23

USE OF PROCEEDS

The net proceeds to us from the sale of the 7,000,000 shares of common
stock offered by us will be approximately $70.2 million, or approximately $81.0
million if the underwriters' over-allotment option is exercised in full, based
on an assumed initial public offering price of $11.00 per share and after
deducting the underwriting discount and estimated offering expenses.

We intend to use the net proceeds from this offering primarily for general
corporate purposes, including sales and marketing, product development and
working capital. We may use a portion of the net proceeds from this offering to
acquire or invest in businesses, technologies or services that are complementary
to our business. However, we have no present commitments with respect to any
transactions of this type. We will retain broad discretion in the allocation and
use of the net proceeds of this offering. Pending these uses, we intend to
invest the net proceeds in short-term, investment-grade, interest-bearing
securities.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
intend to retain any future earnings to finance future growth and do not
anticipate paying cash dividends for the foreseeable future. In addition, the
terms of our credit facilities prohibit us from paying cash dividends on our
capital stock without prior consent of the lender.

21
<PAGE> 24

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 1999:

- on an actual basis;

- on a pro forma basis to reflect

- the issuance of 176,057 shares of our Series E preferred stock that in
November 1999 we agreed to sell to Fisher Scientific for net proceeds of
approximately $1.0 million,

- the conversion of all outstanding shares of preferred stock into
39,990,988 shares of common stock upon the completion of this offering;
and

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 655 $ 72,155 $142,365
======== ======== ========
Notes payable, less current portion......................... 8,069 8,069 8,069
-------- -------- --------
Mandatorily redeemable convertible preferred stock, $0.001
par value, 15,682,823 shares authorized, 15,261,298 issued
and outstanding, actual; 15,682,823 shares authorized, no
shares issued and outstanding, pro forma and pro forma as
adjusted.................................................. 15,870 -- --
-------- --------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value; 11,860,000 shares
authorized, 11,860,000 shares issued and outstanding,
actual; 11,860,000 shares authorized, no shares issued
and outstanding, pro forma; 5,000,000 shares authorized,
no shares issued and outstanding, pro forma as
adjusted................................................ 12 -- --
Common stock, $0.001 par value; 200,000,000 shares
authorized, 9,023,880 shares issued and outstanding,
actual; 200,000,000 shares authorized, 50,794,833 shares
issued and outstanding, pro forma; 200,000,000 shares
authorized, 57,794,833 shares issued and outstanding,
pro forma as adjusted................................... 9 51 58
Additional paid-in capital.................................. 55,843 149,496 219,706
Valuation of warrants....................................... 3,611 3,611 3,611
Notes receivable from stockholders.......................... (1,302) (1,302) (1,302)
Deferred compensation....................................... (46,297) (46,297) (46,297)
Deficit accumulated during the development stage............ (30,647) (30,647) (30,647)
-------- -------- --------
Total stockholders' equity (deficit).................... (18,771) 74,902 145,112
-------- -------- --------
Total capitalization............................... $ 5,168 $ 82,971 $153,181
======== ======== ========
</TABLE>

- -------------------------
The number of shares of common stock outstanding set forth in the table
above excludes the following:

- 5,112,965 shares issuable upon the exercise of stock options outstanding
as of September 30, 1999, at a weighted average exercise price of $0.20
per share;

- 858,147 shares issuable upon the exercise of warrants outstanding as of
September 30, 1999, at a weighted average exercise price of $0.61 per
share;

- 2,000,000 shares of our common stock that we issued to the former
shareholders of Pharos Technologies, Inc., including shares issuable upon
the exercise of assumed options.

The number of shares of common stock into which each share of our Series E
and Series E-1 preferred stock will be converted upon completion of this
offering may be adjusted under some circumstances as described in Note 9 of
notes to consolidated financial statements.

22
<PAGE> 25

DILUTION

As of September 30, 1999, our pro forma net tangible book value was
approximately $61.0 million, or $1.24 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities, divided by 49,364,868 shares of common stock outstanding
after giving effect to the sale of 12,693,633 shares of our Series E and Series
E-1 preferred stock in October 1999, the issuance of 176,057 shares of our
Series E preferred stock that in November 1999 we agreed to sell to Fisher
Scientific, the issuance of 350,000 shares of common stock to the former
shareholders of FDI Information Resources in connection with our acquisition of
substantially all of the assets of FDI in November 1999 and the conversion of
all outstanding shares of preferred stock into 39,990,988 shares of common stock
upon completion of this offering.

After giving effect to the receipt of the proceeds from the sale of
7,000,000 shares of our common stock in this offering and after deducting the
estimated underwriting discount and estimated offering expenses, our pro forma
net tangible book value as of September 30, 1999 would have been approximately
$131.2 million, or $2.33 per share. This represents an immediate increase in pro
forma net tangible book value of $1.09 per share to existing stockholders and an
immediate dilution of $8.67 per share to new investors purchasing shares at the
assumed initial public offering price. The following table illustrates the per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share as of
September 30, 1999..................................... $ 1.24
Increase per share attributable to new investors.......... 1.09
Pro forma net tangible book value per share after this
offering.................................................. 2.33
------
Dilution per share to new investors......................... $ 8.67
======
</TABLE>

The following table summarizes as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total cash consideration paid to us and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering, before deducting the underwriting discount and estimated offering
expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 49,364,868 87.6% $ 89,012,000 53.6% $ 1.80
New investors....................... 7,000,000 12.4 77,000,000 46.4 11.00
---------- ----- ------------ -----
Total..................... 56,364,868 104.0% $166,012,000 100.0%
========== ===== ============ =====
</TABLE>

The above discussion and tables assume no exercise of any stock options or
warrants outstanding as of September 30, 1999. As of September 30, 1999, we had
outstanding options to purchase 5,112,965 shares of our common stock at a
weighted average exercise price of $0.20 per share and warrants to purchase
858,147 shares of our common stock at a weighted average exercise price of $0.61
per share. If all of these options and warrants are exercised,

- there will be an additional $0.20 per share of dilution to new public
investors;

- existing stockholders would hold 88.8% of our common stock and new
investors would hold 11.2% of our common stock; and

- existing stockholders would have paid 54.0% of total consideration for
our common stock, at an average price per share of $1.64, and new
investors would have paid 46.0% of total consideration.

Please see "Capitalization," "Management -- Employee Benefit Plans" and
Notes 10 and 11 of notes to consolidated financial statements.

23
<PAGE> 26

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data for the period from inception
(March 6, 1996) through December 31, 1996, as of and for the years ended
December 31, 1997 and 1998 and for the nine months ended September 30, 1998 and
1999 are derived from our consolidated financial statements, which have been
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this prospectus. The consolidated balance sheet data as of December
31, 1996 are derived from audited financial statements not included in this
prospectus. When you read this selected consolidated financial data, it is
important that you also read the historical financial statements and related
notes included in this prospectus, as well as the section of this prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Historical results are not necessarily indicative of
future results.

See Note 2 of notes to consolidated financial statements for an explanation
of the determination of the number of shares used in computing per share
amounts.

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR ENDED NINE MONTHS ENDED
(MARCH 6, 1996) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------- -------------------
1996 1997 1998 1998 1999
--------------------- ------ -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Transaction fees................................ $ -- $ -- $ -- $ -- $ 451
Website sponsorship fees and other.............. -- -- -- -- 13
------ ------ -------- ------- --------
Total revenue................................. -- -- -- -- 464
Operating Expenses:
Operations...................................... -- -- 627 458 2,399
Product development............................. 31 179 1,491 801 4,321
Selling and marketing........................... 111 153 1,409 761 5,096
General and administrative...................... 54 76 1,075 330 5,812
Amortization of intangibles..................... -- -- -- -- 230
Amortization of deferred compensation........... -- -- 5 -- 5,662
Cost of warrant issued to recruiter............. -- -- -- -- 2,364
------ ------ -------- ------- --------
Loss from operations.......................... (196) (408) (4,607) (2,350) (25,420)
Other Income (Expense):
Interest income................................. -- -- 66 51 173
Interest expense................................ -- (15) (22) (9) (337)
Other........................................... 142 7 -- -- (30)
------ ------ -------- ------- --------
Net loss...................................... $ (54) $ (416) $ (4,563) $(2,308) $(25,614)
====== ====== ======== ======= ========
Basic and diluted net loss per share.............. $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======== ======= ========
Weighted-average shares -- basic and diluted...... 8,000 8,083 2,762 3,807 1,804
====== ====== ======== ======= ========
Pro forma basic and diluted loss per share
(unaudited)..................................... $ (0.36) $ (0.94)
======== ========
Weighted-average shares -- pro forma basic and
diluted (unaudited)............................. 12,848 27,225
======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998 1999
---- ----- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7 $ 32 $ 812 $ 655
Working capital............................................. 38 (23) 214 (9,110)
Total assets................................................ 51 55 1,672 16,003
Notes payable, less current portion......................... 75 385 279 8,069
Mandatorily redeemable convertible preferred stock.......... -- -- 3,884 15,870
Total stockholders' equity (deficit)........................ (34) (390) (3,155) (18,771)
</TABLE>

24
<PAGE> 27

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

You should read the following discussion of our financial condition and
results of operations in conjunction with our consolidated financial statements
and related notes. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of factors
including those discussed in "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

Neoforma.com is a leading provider of business-to-business e-commerce
services in the large and highly fragmented market for medical products,
supplies and equipment. Our marketplace aggregates suppliers of a wide range of
new and used medical products and presents their offerings to the physicians,
hospitals and other healthcare organizations that purchase these products. We
believe that our services will streamline procurement processes and extend the
reach of existing sales and distribution channels, as well as reduce transaction
costs for both buyers and sellers of medical products, supplies and equipment.

We offer three primary services. Our Shop service provides a unified
marketplace where purchasers can easily identify, locate and purchase new
medical products and suppliers can access new customers and markets. Healthcare
providers can use Shop to purchase a wide range of products, from disposable
gloves to surgical instruments and diagnostic equipment. Our Auction service
creates an efficient marketplace for idle assets by enabling users to list, sell
and buy used and refurbished equipment and surplus medical products. Our Plan
service provides interactive content to healthcare facility planners and
designers, including 360 degree interactive photographs of rooms and suites in
medical facilities that we believe represent industry best practices, together
with floor plans and information about the products in the room. This
information helps reduce the complexities of planning and outfitting facilities,
which we believe increases the appeal of our website to the facility planners
responsible for many product purchasing decisions.

We incorporated on March 4, 1996. From inception, our operating activities
have related primarily to the initial planning and development of our
marketplace and the building of our operating infrastructure. We first
introduced the Neoforma.com website in 1997 and have since released a number of
enhancements to provide new services and content. Initially, our website
provided only information for healthcare professionals. We began offering
e-commerce services with the introduction of our initial Auction service,
AdsOnline, in May 1999 and expanded our services with the introduction of our
second Auction service, AuctionLive, in August 1999, our third Auction service,
AuctionOnline, in November 1999 and Shop in August 1999. Since we introduced our
Auction and Shop services, we have focused on expanding and enhancing our
services, establishing relationships with suppliers of medical products,
expanding our purchaser base, developing strategic alliances, promoting our
brand name and building our operating infrastructure.

We have recognized limited revenue to date. We expect that our principal
source of revenue will be transaction fees paid by the sellers of medical
products that use our Shop and Auction services. These transaction fees
represent a negotiated percentage of the sale price of the medical products sold
through Shop or Auction. We expect our Plan service to facilitate transactions
on our Shop and Auction services by linking Plan content to products and
equipment listed on Shop and Auction. We recognize transaction fees as revenue
when the seller confirms a purchaser's order. For live and online

25
<PAGE> 28

auction services, we recognize seller transaction fees, as well as a buyer's
premium, when the product is sold. We also expect to receive revenue from the
following sources:

- sponsorship fees paid by sellers of medical products and services used in
planning and outfitting healthcare facilities in exchange for the right
to feature their brands and products on our Plan service;

- subscription fees paid by healthcare providers and manufactures and
distributors of medical products for our management and disposition of
their used medical equipment through our asset recovery service on
Auction;

- license fees from the sale of software tools and related technical
information for the equipping and planning of healthcare facilities;

- development fees from participating sellers to digitize their product
information for display on our website; and

- product revenue related to the sale of medical equipment that we purchase
for resale through our live and online auction services.

Development fees are recognized as development services are performed.
Sponsorship and subscription fees will be recognized ratably over the period of
the agreement. Product revenue representing the difference between the amount we
pay for the equipment and the price paid on resale is recognized when the
product is shipped or delivered, depending on the shipping terms associated with
each transaction. With respect to software licenses, we expect to generally
recognize revenue upon shipment of the product and will recognize revenue from
related service contracts, training and customer support ratably over the period
of the related contract.

Our operating expenses have increased significantly since our inception,
and the rate of this increase has accelerated since our introduction of our
Auction and Shop services. These increases are primarily due to additions to our
staff as we have expanded all aspects of our operations. We incurred expenses in
the amount of $3.1 million, including $2.4 million related to the valuation of a
warrant issued to an executive search firm, in connection with the hiring of
Robert J. Zollars, our Chief Executive Officer, and five other executive
officers who have been hired since February 1999. As a result of our expansion,
we have grown from six employees as of December 31, 1997, to 59 full-time
employees as of December 31, 1998, to 148 full-time employees as of September
30, 1999 to 235 full-time employees as of December 31, 1999.

If the initial public offering price of our common stock is less than
$10.00 per share, we will record a non-cash preferred stock dividend of up to
approximately $22.0 million relating to the beneficial conversion rights held by
our Series E and Series E-1 preferred stockholders that would be triggered on
the effective date of this offering. If the public offering price is $10.00 per
share or more, there will not be a preferred stock dividend charge.

On August 6, 1999, we acquired General Asset Recovery LLC, or GAR, a live
auction house and asset management company focused on medical products. The
total purchase price was approximately $9.7 million, including $1.7 million in
cash, the issuance of a promissory note in the principal sum of $7.8 million,
the assumption of $100,000 in liabilities and acquisition-related expenses of
approximately $100,000. The promissory note is payable over five years and bears
interest at 7% per annum. This acquisition was accounted for using the purchase
method of accounting. As a result of this acquisition, we began recording an
aggregate of approximately $9.7 million in goodwill beginning in the third
quarter of fiscal year 1999, which will be amortized on a straight-line basis
over a seven-year period.

26
<PAGE> 29

On November 18, 1999, we acquired substantially all of the assets of FDI
Information Resources, Inc., or FDI, a developer of software that facilitates
the planning and design of healthcare facility projects. The total purchase
price consisted of 350,000 shares of our common stock and up to $75,000 to
reimburse costs incurred by FDI in connection with the acquisition. This
acquisition was accounted for using the purchase method of accounting. As a
result of this acquisition, we will record an aggregate of approximately $3.3
million in goodwill beginning in the fourth quarter of fiscal 1999, which will
be amortized on a straight-line basis over a three-year period.

In order to acquire certain software and technology for use in our Shop,
Auction, and Plan services, we acquired Pharos Technologies, Inc., a developer
of content management software that facilitates the locating, organizing and
updating of product information in an online marketplace. In connection with
this transaction, we issued 2,000,000 shares of our common stock, including
shares issuable upon the exercise of assumed options, to the former shareholders
of Pharos.

Since inception, we have incurred significant losses and, as of September
30, 1999, had an accumulated deficit of $30.6 million. We expect operating
losses and negative cash flow to continue for the foreseeable future. We
anticipate our losses will increase significantly due to substantial increases
in our expenses for sales and marketing, product development, operating
infrastructure, general and administrative staff and development of strategic
alliances.

We have a limited operating history on which to base an evaluation of our
business and prospects. You must consider our prospects in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as the online market for the purchase and sale of new and used medical
products, supplies and equipment. To address these risks, we must, among other
things, expand the number of users of our online services, enter into new
strategic alliances, increase the functionality of our services, implement and
successfully execute our business and marketing strategy, respond to competitive
developments and attract, retain and motivate qualified personnel. We may not be
successful in addressing these risks, and our failure to do so could seriously
harm our business.

RESULTS OF OPERATIONS

Due to our limited operating history, we believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as an indication of future performance.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999

Revenue. Since inception, we have been in the development stage and have
had only limited revenue. We had total revenue of $464,000 for the nine months
ended September 30, 1999 primarily from transaction fees paid by sellers of
medical products using our AuctionLive service. We did not have any revenue for
the nine months ended September 30, 1998.

Operations. Operations expenses consist primarily of expenditures for
digitizing and inputting content and for the operation and maintenance of our
website. These expenditures consist primarily of fees for independent
contractors and personnel expenses for our customer support and site operations
personnel. Operations expenses increased from approximately $458,000 for the
nine months ended September 30, 1998 to $2.4 million for the nine months ended
September 30, 1999. The increase was primarily due to an increase in operations
personnel costs from approximately $127,000 to $1.3 million and an increase in
payments to third party consultants from approximately $207,000 to $936,000.
These increases were primarily due to increased expenditures for digitizing and
inputting content and for the enhancement of the infrastructure of our website.
We expect our operations expenses to significantly increase as we expand our
operating infrastructure and add content and functionality to our website.

27
<PAGE> 30

Product Development. Product development expenses consist primarily of
personnel expenses and consulting fees associated with the development and
enhancement of our services and website. Product development expenses increased
from $801,000 for the nine months ended September 30, 1998 to $4.3 million for
the nine months ended September 30, 1999. The increase was primarily due to an
increase in personnel costs from approximately $236,000 to $2.1 million and an
increase in fees paid to third parties from approximately $476,000 to $1.9
million. These increases were primarily due to increased expenses incurred
during development of our Auction and Shop services. We believe that continued
investment in product development is critical to attaining our strategic
objectives and, as a result, expect product development expenses to increase
significantly in future periods. We expense product development costs as they
are incurred.

Selling and Marketing. Selling and marketing expenses consist primarily of
salaries, commissions, advertising, promotions and related marketing costs.
Selling and marketing expenses increased from approximately $761,000 for the
nine months ended September 30, 1998 to $5.1 million for the nine months ended
September 30, 1999. The increase was primarily due to an increase in sales and
marketing personnel costs from approximately $355,000 to $2.4 million, an
increase in expenses related to travel from approximately $37,000 to $494,000
and an increase in expenses related to advertising and attendance at trade shows
from approximately $141,000 to $1.6 million. These increases were primarily due
to significant expansion of our sales and marketing efforts and the hiring of
additional sales and marketing personnel. We intend to significantly increase
our selling and marketing expenses as we expand our sales force and invest in
new marketing campaigns. In addition, we expect to make significant payments in
connection with our strategic alliances with Superior Consultant, ECRI and
VerticalNet, which will further increase our selling and marketing expenses in
the periods in which these payments are made. See "-- Liquidity and Capital
Resources."

General and Administrative. General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services and other general corporate activities. General and administrative
expenses increased from approximately $330,000 for the nine months ended
September 30, 1998 to $5.8 million for the nine months ended September 30, 1999.
The increase was primarily due to an increase in executive and administrative
personnel costs from approximately $54,000 to $1.6 million related to the hiring
of our chief executive officer, our chief financial officer and additional
finance, accounting and administrative personnel, an increase in facilities
expenses from approximately $135,000 to $552,000, an increase in recruiting,
legal and accounting and litigation settlement expenses from approximately
$109,000 to $1.6 million, primarily as a result of the accrual of litigation
expenses with respect to the hiring of one of our executive officers, and an
increase in expenses related to other consultants from approximately $29,000 to
$849,000, in each case associated with our growth. We expect general and
administrative expenses to increase as we continue to expand our staff and incur
additional costs to support the growth of our business and the costs of being a
public company. We further expect our general and administrative expenses to
increase due to the integration of GAR and FDI with our business.

Amortization of Intangibles. Intangibles include goodwill and the value of
software purchased in acquisitions. Intangibles are amortized on a straight-line
basis over a period of three to seven years. Amortization of intangibles
increased to $230,000 for the nine months ended September 30, 1999. The increase
was a result of the acquisition of GAR in August 1999. We expect that the
amortization of intangibles will increase significantly in future periods due to
the acquisition of substantially all of the assets of FDI in November 1999.

Amortization of Deferred Compensation. Deferred compensation represents the
aggregate difference, at the date of grant, between the exercise price of stock
options and the estimated fair value for accounting purposes of the underlying
stock. Deferred compensation is amortized over the

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vesting period of the underlying options, generally four years, based on an
accelerated vesting method. In connection with the grant of stock options to
employees during fiscal 1998 and for the nine months ended September 30, 1999,
we recorded deferred compensation of $52 million. For the nine months ended
September 30, 1999, we recognized amortization of deferred compensation of $5.7
million.

At September 30, 1999, the remaining deferred compensation of approximately
$46.3 million will be amortized as follows: $6.8 million in the last quarter of
fiscal 1999, $21.1 million during fiscal 2000, $11.1 million during fiscal 2001,
$5.6 million during fiscal 2002 and $1.7 million during fiscal 2003. The
amortization expense relates to options awarded to employees in all operating
expense categories. The amount of deferred compensation has not been separately
allocated to these categories. The amount of deferred compensation expense to be
recorded in future periods could decrease if options for which accrued but
unvested compensation has been recorded are forfeited.

During the year ended December 31, 1998 and the nine months ended September
30, 1999, we recorded deferred compensation of $52,000 and $651,000 related to
options granted to non-employees as determined based upon the fair value at the
date of issuance.

Cost of Warrant Issued to Recruiter. For the nine months ended September
30, 1999, we recorded $2.4 million related to the valuation of a warrant issued
to an executive search firm in connection with services rendered in the search
for our Chief Executive Officer.

Other Income (Expense). Other income (expense) consists of interest and
other income and expense. Interest income for the nine months ended September
30, 1999 was $173,000 compared to $51,000 for the nine months ended September
30, 1998. The increase in interest income was due to an increase in our average
net cash and cash equivalents balance as a result of our issuance of preferred
stock in February 1999. Interest expense increased from $9,000 for the nine
months ended September 30, 1998 to $337,000 for the nine months ended September
30, 1999, primarily as a result of the amortization of the fair value of a
warrant issued in connection with a loan received during the period, together
with an increase in debt.

PERIOD FROM INCEPTION TO DECEMBER 31, 1996, AS COMPARED TO YEAR ENDED DECEMBER
31, 1997 AS COMPARED TO YEAR ENDED DECEMBER 31, 1998

Revenue. We had no revenue for the period from inception to December 31,
1998.

Operations. We had no operations expenses in 1996 and 1997. We began
operating and maintaining our website and acquiring and processing content in
1998, and as a result, incurred operations expenses of $627,000.

Product Development. Product development expenses increased from $31,000 in
1996 to $179,000 in 1997 to $1.5 million in 1998. The increase in 1998 was
primarily due to increased personnel expenses as we developed features and added
functionality to our website.

Selling and Marketing. Selling and marketing expenses increased from
$111,000 in 1996 to $153,000 in 1997 to $1.4 million in 1998. The increase in
1998 was primarily due to the significant expansion of our sales and marketing
efforts and the hiring of additional sales and marketing personnel.

General and Administrative. General and administrative expenses increased
from $54,000 in 1996 to $76,000 in 1997 to $1.1 million in 1998. The increase in
1998 was primarily due to expenses related to increased personnel, professional
service fees and facility expenses associated with our growth.

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Amortization of Deferred Compensation. Amortization of deferred
compensation for the fiscal year ended December 31, 1998 was $5,000. No
amortization of deferred compensation was expensed for fiscal years 1997 or
1996.

Other Income (Expense). Interest income increased from none in 1996 and
1997 to $66,000 in 1998. The increase in interest income was due to an increase
in cash and cash equivalents that resulted from our issuance of preferred stock
during 1998. Interest expense increased from none in 1996 to $15,000 in 1997 to
$22,000 in 1998. Other income was $142,000 in 1996, $7,000 in 1997 and none in
1998. Other income was primarily related to fees received from projects
unrelated to our current business model.

Income Taxes. As of December 31, 1998, we had federal and state net
operating loss carryforwards of approximately $4.5 million which will be
available to reduce future taxable income. The federal net operating loss
carryforwards expire beginning in 2013 through 2018. A valuation allowance has
been recorded for the entire deferred tax asset as a result of uncertainties
regarding the realization of the asset due to our lack of earnings history.
Federal and state tax laws impose significant restrictions on the amount of the
net operating loss carryfowards that we may utilize in a given year. See Note 12
of notes to consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations since inception primarily through the private
placement of equity securities, through which we have raised net proceeds of
$17.5 million through September 30, 1999. We have also financed our operations
through an equipment loan and lease financing and bank and other borrowings. As
of September 30, 1999, we had outstanding bank and other borrowings of $11.6
million. As of September 30, 1999, we had approximately $655,000 of cash and
cash equivalents. Since September 30, 1999, we have raised additional net cash
proceeds of $70.5 million from our October 1999 sale of our Series E and Series
E-1 preferred stock. In November 1999, we agreed to issue Series E preferred
stock to Fisher Scientific for net proceeds of $1.0 million.

In June 1998, we entered into a $750,000 secured credit facility with
Silicon Valley Bank. This facility included a $225,000 term loan due December
1999 and an equipment loan facility providing for up to $525,000 of equipment
loans. In July 1999, we converted the $433,000 of outstanding equipment loans
into a term loan due July 2000. Our term loans from Silicon Valley Bank bear
interest at the lender's prime rate (8.25% as of September 30, 1999). At
September 30, 1999, there were borrowings of approximately $225,000 outstanding
under the term loan and $404,000 outstanding under the equipment loan. This
facility is secured by substantially all of our assets other than equipment. In
consideration for this credit facility, we granted Silicon Valley Bank a warrant
to purchase 45,000 shares of our Series C preferred stock at an exercise price
of $0.77 per share. In consideration for the conversion of our equipment loan to
a term loan and the release of its security interest in equipment, we granted
Silicon Valley Bank a warrant to purchase 10,000 shares of our Series D
preferred stock at an exercise price of $1.18 per share.

In May 1999, Comdisco provided us with a $2.0 million subordinated loan to
provide working capital. We agreed to pay Comdisco principal and interest at a
rate of 12.5% per annum in 36 equal monthly installments, commencing July 1999.
This loan is secured by all of our assets. In connection with this loan, we
issued Comdisco a warrant to purchase 228,813 shares of our Series D preferred
stock at $1.18 per share. As of September 30, 1999, the outstanding balance on
the note was approximately $1.9 million.

In July 1999, Comdisco provided us with a $2.5 million loan and lease
facility to finance computer hardware and software equipment. Amounts borrowed
to purchase hardware bear interest at

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9% per annum and are payable in 48 monthly installments consisting of interest
only payments for the first nine months and principal and interest payments for
the remaining 39 months, with a balloon payment of the remaining principal
payable at maturity. Amounts borrowed to purchase software bear interest at 8%
per annum and are payable in 30 monthly installments consisting of interest only
payments for the first four months and principal and interest payments for the
remaining 26 months, with a balloon payment of the remaining principal payable
at maturity. As of September 30, 1999, we had outstanding approximately $1.3
million in hardware loans due September 2003 and approximately $254,000 in
software loans due March 2002. This facility is secured by the computer
equipment purchased with the loans. In connection with this facility, we issued
Comdisco a warrant to purchase 137,711 shares of our Series D preferred stock at
$1.18 per share.

In August 1999, as a result of the GAR acquisition, we issued a promissory
note in the principal amount of $7.8 million payable monthly over five years
bearing interest at a rate of 7% per annum. As of September 30, 1999, the
outstanding balance on the note was approximately $7.6 million.

In May 1999, we entered into an agreement with ECRI, a non-profit health
services research agency focusing on healthcare technology. The agreement
provides us with content from ECRI's database of information about medical
products and manufacturers and a license to use elements of its classification
system. In addition, the agreement provides for joint marketing activities and
collaboration in the development of Plan's database of product and vendor
information. This agreement requires us to make revenue sharing payments to ECRI
during the three-year term of the agreement and for two years following
expiration or termination of the agreement based on a percentage of revenue
derived from our Plan service. During the second and third years of the term of
the agreement, we are required to pay to ECRI a minimum nonrefundable fee equal
to $600,000 per year, which shall be credited against any revenue sharing
payments payable to ECRI.

In October 1999, we entered into an agreement with Superior Consultant
Company, Inc., a wholly owned subsidiary of Superior Consultant Holdings
Corporation, providing for collaboration between us and Superior. Superior is a
supplier of Digital Business Transformation(TM) services to large healthcare
organizations, including Internet-related services, systems integration,
outsourcing and consulting, which enable Superior clients to utilize digital
technologies and process innovations to improve their businesses. Under the
agreement, we have agreed to market Superior's services to our users, and
Superior has agreed to introduce our services to appropriate clients, based on
their interests, and to incorporate our services into its Digital Business
Transformation(TM) offerings. The agreement also provides for joint marketing
activities. In consideration, we have agreed to make payments to Superior in an
aggregate amount of up to approximately $2.0 million, as well as a percentage of
specified Neoforma.com e-commerce transaction revenue and potential fixed
payments based on the success of our joint marketing activities. We have also
agreed to utilize Superior's services on a preferred basis for systems
integration, development, infrastructure, process improvement and consulting
assistance, totaling at least $1.5 million of services from Superior, at a
discount from Superior's standard fees. Our agreement with Superior expires in
October 2002. See "Certain Transactions -- Commercial Transactions" for more
information regarding this agreement and our relationship with Superior.

In October 1999, we entered into an agreement with Dell Marketing, L.P.
pursuant to which we agreed to develop complementary marketing programs with
Dell and establish hyperlinks between our respective internet websites. We
agreed to use Dell as our exclusive supplier of desktops, portables,
workstations, servers and storage devices unless such products did not meet our
reasonable technical requirements. We also agreed to purchase at least $5.0
million of Dell products and $100,000 of data center consulting services. See
"Certain Transaction -- Commercial Transactions" for more information regarding
this agreement and our relationship with Dell.

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In November 1999, we entered into a co-branding agreement with VerticalNet,
Inc. Under the agreement, VerticalNet will transfer to our website all listings
of new and used medical products offered for sale through its website (on an
exclusive basis to the extent it has the right to do so), and we will transfer
to VerticalNet all listings of used and excess laboratory products offered for
sale on our website (on an exclusive basis to the extent we have the right to do
so). We have also agreed to establish links between our respective websites. In
addition, VerticalNet will develop and maintain a co-branded career center and a
co-branded training and education center, and will provide us with specified
content created for its medical online communities. VerticalNet also has the
non-exclusive right to sell sponsorships on our Plan service and the exclusive
right to sell advertising on the co-branded sites. We have agreed to pay
VerticalNet $2,000,000 of development and promotional fees over the next two
years under this agreement, of which we paid $687,000 in the fourth quarter of
1999. We and VerticalNet have agreed to each pay the other commissions equal to
a percentage of net revenues earned through product listings transferred to its
website by the other, and to share specified sponsorship and advertising
revenue.

Net cash used in operating activities was $87,000 for the period from
inception through December 31, 1996, $322,000 for the year ended December 31,
1997 and $4.0 million for the year ended December 31, 1998. Net cash used in
operating activities for the nine months ended September 30, 1999 was $10.4
million. Net cash used in operating activities from inception through September
30, 1999 related primarily to funding net operating losses and increases in
prepaid expenses, which were partially offset by increases in accrued expenses
and accounts payable.

Net cash used in investing activities was $1,000 for the period from
inception through December 31, 1996, $13,000 for the year ended December 31,
1997 and $825,000 for the year ended December 31, 1998. Net cash used in
investing activities for the nine months ended September 30, 1999 was $5.4
million. Net cash used in investing activities from inception through the nine
months ended September 30, 1999 related primarily to the purchase of equipment
to operate our website and cash paid for the acquisition of General Asset
Recovery LLC.

Net cash provided by financing activities was $95,000 for the period from
inception through December 31, 1996, $360,000 for the year ended December 31,
1997 and $5.6 million for the year ended December 31, 1998. For the nine months
ended September 30, 1999, net cash provided by financing activities was $15.7
million. Net cash provided from financing activities for the period from
inception to September 30, 1999 related primarily to preferred stock issuances
of approximately $17.1 million.

We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through the next 12 months. Our future
long-term capital needs will depend significantly on the rate of growth of our
business, the timing of expanded service offerings and the success of these
services once they are launched. Any projections of future long-term cash needs
and cash flows are subject to substantial uncertainty. If the net proceeds of
this offering, together with our available funds and cash generated from
operations, are insufficient to satisfy our long-term liquidity requirements, we
may seek to sell additional equity or debt securities, obtain a line of credit
or curtail expansion of our services. If we issue additional securities to raise
funds, those securities may have rights, preferences or privileges senior to
those of the rights of our common stock and our stockholders may experience
dilution. We cannot be certain that additional financing will be available to us
on favorable terms when required, or at all.

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YEAR 2000

Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000.

We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
phenomenon. We depend on a third party to host our servers, telecommunications
vendors to maintain our network and other third-party carriers to deliver orders
to customers. Because we are a comparatively new enterprise, the majority of
software and hardware we use to manage our business has all been recently
purchased or developed by us. While this does not completely protect us against
year 2000 exposure, we believe our exposure is limited because the technology we
use to manage our business is not based upon legacy hardware and software
systems.

State of Readiness. We have reviewed the year 2000 compliance of both
internally developed and third-party systems. Internally developed systems
include the software used to provide our website's search, customer interaction,
transaction-processing and monitoring capabilities. Our third-party systems
include software and hardware, and computer technology, back-up, hosting,
accounting, database and security systems. To ensure that both our internally
developed and third-party systems are year 2000 compliant, we continually
assess, analyze and, where necessary, correct potential non-compliance issues.

Based on our assessment to date and our planned activities, we believe that
our internally developed and third-party systems are year 2000 compliant. The
failure of our software and computer systems, or those of our third-party
suppliers, to be year 2000 compliant, would seriously harm our business.

We depend on the integrity and stability of the Internet to provide our
services. We also depend on the year 2000 compliance of the computer systems
used by consumers. Thus, the system necessary to support our operations consists
of a network of computers and telecommunications systems located throughout the
world and operated by numerous unrelated entities and individuals, none of which
has the ability to control or manage the potential year 2000 issues that may
impact the entire system. Our ability to assess the reliability of this system
is limited and relies on generally available news reports, surveys and industry
data. Based on these sources, we believe most entities and individuals that rely
significantly on the Internet have reviewed and attempted to remediate issues
relating to year 2000 compliance, but it is not possible to predict whether
these efforts will be successful in reducing or eliminating the potential
negative impact of year 2000 issues. The failure of our software and computer
systems and those of our third-party suppliers to be year 2000 complaint would
seriously harm our business.

Cost. As of September 30, 1999, we had incurred immaterial costs in
connection with identifying, evaluating and addressing year 2000 compliance
issues. We anticipate that any future costs will not exceed $500,000. Most of
these expenses are expected to relate to operating costs associated with time
spent by our employees in the evaluation process. There may be some charges
related to remediation if any issues are identified during our assessment
process. If these expenses are higher than anticipated, our business could
suffer.

Risks. A failure of our computer systems or the failure of purchasers or
suppliers of medical products to effectively upgrade their software and systems
for transition to the year 2000 could seriously harm our business.

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In addition, we cannot be certain that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be year 2000 compliant. The failure by these
entities to be year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical failure,
that could prevent us from delivering our services to our customers, decrease
the use of the Internet or prevent users from accessing our website, any of
which could seriously harm our business.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which we will be required to adopt for the
year ending December 31, 2000. This statement establishes a new model for
accounting for derivatives and hedging activities. SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Because we currently hold no derivative financial instruments and do not
currently engage in hedging activities, adoption of SFAS No. 133 is expected to
have no material impact on our financial condition or results of operations.

In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
entities to capitalize some of the costs related to internal-use software once
the applicable criteria have been met. SOP No. 98-1 is effective for our 1999
financial statements. The adoption of SOP No. 98-1 did not have a material
impact on our June 30, 1999 financial statements.

In April 1998, the AICPA issued SOP 98-5, Reporting for the Costs of
Start-Up Activities. SOP No. 98-5 requires that all start-up costs related to
new operations to be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP No. 98-5 is adopted.
SOP No. 98-5 is effective for our 1999 financial statements. The adoption of SOP
No. 98-5 did not have a material impact on our June 30, 1999 financial
statements.

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BUSINESS

Neoforma.com is a leading provider of business-to-business e-commerce
services in the large and highly fragmented market for medical products,
supplies and equipment. Our services enable users to efficiently and
cost-effectively buy and sell new and used medical products in an open, online
marketplace. Our marketplace aggregates suppliers of a wide range of medical
products and presents their offerings to the physicians, hospitals and other
healthcare organizations that purchase these products. We believe that our
services provide supply chain efficiencies for both suppliers and purchasers of
medical products and extend the reach of existing sales and distribution
channels.

Neoforma.com offers three primary services that together address the entire
healthcare purchasing lifecycle, from planning through procurement to
liquidation. Our Shop service provides a unified marketplace where purchasers
can easily locate and buy new medical products, and suppliers can access new
customers and markets. Our Auction service creates an efficient marketplace for
idle assets by enabling users to list, sell and buy used, refurbished and
surplus medical products. Our Plan service provides interactive content to
healthcare facility planners to reduce the complexities of planning and
outfitting facilities.

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE

The Internet is rapidly changing the competitive landscape of many
industries, creating significant opportunities for companies to expand and
improve their businesses. Companies have increasingly begun to use the Internet
to create business-to-business networks to streamline complex processes,
purchase and sell goods and exchange information among fragmented groups of
customers, manufacturers and distributors. Forrester Research has estimated that
U.S. business-to-business e-commerce, defined as the total volume of
intercompany trade of goods and services in which the final order is placed over
the Internet, will increase from $109 billion in 1999 to $1.3 trillion in 2003.

Business-to-business e-commerce enables purchasers and sellers in
fragmented markets to reduce supply chain inefficiencies. Sellers are able to
cost-effectively access global markets, streamline their sales, marketing and
distribution operations, reduce their time to market and efficiently distribute
updated product information. Buyers can improve their purchasing process and
easily access current product information and a broad range of products and
services. Because a growing number of businesses are establishing their own
e-commerce websites, it is difficult for any individual business to attract a
significant number of online customers. As a result, companies are increasingly
realizing the value of a global online marketplace that aggregates purchasers
and sellers.

MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT MARKET

Market for New Products

According to information published by the Health Industry Manufacturers'
Association, we estimate the market for new medical products, supplies and
equipment totaled more than $145 billion worldwide in 1998, including more than
$60 billion in the U.S. This market is currently growing at a rate of 6% per
year worldwide and 7% per year in the U.S. This market is comprised of a wide
range of products, including consumable supplies such as syringes and gloves,
reusable medical products such as surgical instruments, and sophisticated
diagnostic equipment such as magnetic resonance imaging systems.

The traditional supply chain for new medical products is highly fragmented
and inefficient. In the U.S. alone, products are supplied by over 20,000
manufacturers and distributors, ranging from

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small companies offering single products to Fortune 500 corporations with
comprehensive offerings. These suppliers serve a diverse group of buyers,
including hospitals, physician practices and clinics. The U.S. market includes
approximately 6,000 hospitals, 185,000 physicians' offices and thousands of
non-hospital healthcare delivery sites such as outpatient care facilities,
nursing homes and ambulatory surgery centers. These organizations may purchase
medical products directly or through centralized buying organizations such as
group purchasing organizations, or GPOs, and integrated delivery networks of
care providers, or IDNs. Buyers within each of these organizations may purchase
products from thousands of suppliers. The high degree of buyer and supplier
fragmentation results in significant inefficiencies at each step of the
procurement process.

In the U.S., healthcare providers are under increasing pressure to reduce
costs because of increased competition, as well as the ongoing tightening of
reimbursement policies by private payors and the government. According to
Efficient Healthcare Consumer Response, a 1996 independent study commissioned by
a number of industry participants, the supply-chain costs of distributing
medical products total approximately $23 billion per year, of which an estimated
$11 billion could be eliminated by more efficient sharing of information,
management of orders and movement of products. As a result, healthcare providers
are increasingly seeking new ways to make their supply chain more efficient.

Market for Used and Surplus Products

Healthcare providers must continuously upgrade their medical equipment in
order to remain competitive and keep up with advances in medical technology.
Without an efficient, global market for the sale of replaced equipment, these
organizations are left with idle equipment for either storage or disposal.
Manufacturers taking trade-ins of existing equipment in connection with sales of
new products also generate significant used equipment inventory. For both
healthcare providers and manufacturers, an inability to efficiently dispose of
idle assets increases their operational costs and ties up capital that could be
used for more productive purposes.

It has traditionally been difficult for buyers and sellers in the market
for used, refurbished and surplus medical products, supplies and equipment to
locate one another. While much of the demand for used equipment comes from
healthcare providers located outside of the U.S. or in rural markets in the
U.S., much of the supply comes from healthcare providers in urban centers in the
U.S. or from manufacturers. The market is currently served primarily by local
auction houses, equipment brokers and refurbishers that are often unable to
reach buyers and sellers outside their local markets. As a result, we believe
this market is significantly under-served and highly inefficient and a
significant opportunity exists to provide buyers and sellers of used medical
products, supplies and equipment with a unified marketplace.

LIMITATIONS OF TRADITIONAL APPROACHES TO BUYING AND SELLING MEDICAL PRODUCTS

Healthcare Providers

Purchasing decisions in physicians' offices and other small healthcare
facilities are generally made by nurses, office managers or administrative
staff. Purchasing activities include searching through paper catalogs, placing
and tracking orders via telephone or fax machines and receiving frequent,
time-consuming visits from numerous medical supply representatives. This
approach makes it difficult and time-consuming for buyers to identify, compare
and purchase specific items. Moreover, these inefficiencies can lead to clinical
delays and purchases that are based on convenience instead of best practices or
cost.

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Large healthcare organizations manage their buying activity through a
centralized purchasing group as well as at the departmental level. Pricing is
either negotiated or based on long term contracts, depending on the
institution's buying power, membership in an IDN or GPO affiliations. The
purchasing process involves evaluating products, negotiating price and delivery,
ensuring compliance with purchasing contracts and placing and tracking orders
through a variety of paper and electronic means. Outdated product and price
information, lack of compliance with negotiated contracts and the significant
effort required to manage a multitude of suppliers and orders can result in
errors and inefficiencies.

Manufacturers and Distributors

Manufacturers and distributors have limited resources to support the
growing challenge of marketing and selling to the increasingly complex worldwide
healthcare market. Many organizations lack the necessary infrastructure to
establish a worldwide sales and marketing presence. In addition, the high cost
of printing and distributing paper catalogs limits the ability of suppliers to
cost-effectively provide timely updates of important catalog product and pricing
information. Although many suppliers offer online versions of their catalogs,
this does not address the primary cause of inefficiency for buyers -- the
inability to quickly and easily find products and consolidate orders from
different suppliers through a single source.

MARKET OPPORTUNITY

We believe that a significant opportunity exists for a business-to-business
e-commerce solution that creates an open and efficient marketplace for
purchasers and sellers of both new and used medical products, supplies and
equipment. A unified online marketplace can offer several important advantages:

- Purchasers and sellers of new and used medical products can have global
access to each other, creating new levels of efficiency in the supply
chain;

- Industry, product and pricing information can be centralized, updated and
organized for simplified access; and

- The time and costs involved with traditional paper, telephone and fax
purchasing methods can be significantly reduced.

THE NEOFORMA.COM SOLUTION

Neoforma.com is a leading provider of business-to-business e-commerce
solutions for purchasers and suppliers of medical products, supplies and
equipment. Our services address the traditional limitations of the medical
products supply chain by enabling our users to efficiently and cost-effectively
buy and sell new and used medical products in an open, online marketplace. Shop,
Auction and Plan together address the entire healthcare purchasing lifecycle,
from planning through procurement to liquidation.

We believe that our services provide a number of benefits that will attract
a growing number of purchasers and suppliers of new and used medical products to
our marketplace. As more purchasers realize these benefits and use our services,
we believe that they will attract more suppliers to our marketplace. As more
suppliers offer products and content through our marketplace, we believe that
more buyers will be encouraged to use our services, resulting in a network
effect, where the value of our services to each participant increases
significantly with the addition of each new participant.

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BENEFITS TO HEALTHCARE PROVIDERS:

- Convenient, Unified Marketplace. We provide healthcare providers a
central, easy-to-use location to identify and purchase a wide range of
medical products from many suppliers. This reduces the time required
to contact multiple distributors and suppliers using traditional paper
or telephone approaches, or single-supplier Internet-based or
electronic data interchange solutions.

- Reduced Processing Costs. Our services streamline the purchasing
process, allowing healthcare providers to reduce their procurement
costs and benefit from centralized purchasing, tracking and
record-keeping.

- Improved Access to Current Information. We provide online access to
current product information, which is a significant improvement over
paper-based catalogs that are often outdated. Our easy-to-use search
capabilities enable healthcare providers to quickly locate products
and obtain current information from multiple suppliers. Additionally,
we provide previously unavailable information regarding used,
refurbished and surplus medical products.

- Efficient Marketplace for Idle Assets. Our Auction service provides an
efficient marketplace for the purchase and sale of used and surplus
medical products, allowing healthcare providers to maximize the value
of their idle assets.

BENEFITS TO MANUFACTURERS AND DISTRIBUTORS:

- Access to New Customers and Markets. Our Shop and Auction services
allow sellers to offer new and used products globally, extending their
reach to new customers and markets. Our Plan service provides a new
way for suppliers to feature their products being used in a best
practices environment.

- Participation in an Open Marketplace. We believe that by providing an
open marketplace where any supplier can list and sell its products, we
increase the attractiveness of our marketplace to a large number of
suppliers. By providing purchasers with access to products from a wide
range of suppliers, we can attract more purchasers to our marketplace,
further increasing the value of our services to suppliers.

- Increased Efficiencies and Reduced Transaction Costs. Because our
services streamline and extend their distribution channels, suppliers
can reduce their selling and marketing costs and time to market. For
example, suppliers can reduce their costs of printing and distributing
paper catalogs and taking individual orders by fax or by telephone. In
addition, our services eliminate the costs and expenditures required
for suppliers to establish and maintain their own e-commerce sites.

- Efficiency in Distributing New Information. Our marketplace allows
suppliers to efficiently reach customers and distribute product
information, reducing the delays associated with printed catalog
distribution. We enable suppliers to quickly and easily update
product, pricing and other information on our website to address
changes in their product line and respond to market requirements.

STRATEGY

Our objective is to become the leading online marketplace for new and used
medical products, supplies and equipment. Our goal is to provide comprehensive
services that together address the

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entire healthcare purchasing lifecycle, from planning through procurement to
liquidation. Key elements of our strategy include:

Build on First Mover Advantage and Increase Brand Recognition. We believe
that our position as one of the first companies to offer comprehensive
business-to-business e-commerce services for new and used medical products,
supplies and equipment provides us with a first mover advantage that can enable
us to attract a critical mass of suppliers and purchasers. To increase the
number of purchasers and sellers that use our services, we intend to
aggressively promote the Neoforma.com brand by advertising, participating in
industry events and trade shows and conducting targeted promotions and public
relations.

Increase Adoption of Our Online Marketplace to Create Network Effect. We
intend to continue to add suppliers and purchasers to become the most
comprehensive online marketplace for medical products, supplies and equipment.
By adding suppliers and broadening the range of products available in our
marketplace, we create additional value for purchasers. By attracting more
purchasers to our marketplace, we create additional value for suppliers. As a
result, we believe that we can create a network effect, where the value of our
services to each participant increases significantly with the addition of each
new participant.

Increase Functionality to Drive Broad Market Adoption. We plan to expand
the functionality of our services, increasing their value to both current and
future purchasers and suppliers. For example, we intend to develop new
information reporting and order management features as well as the capability to
integrate our services with the information systems used by many suppliers and
purchasers. In addition, we intend to develop the functionality to allow
suppliers to provide customer-specific pricing. We believe that these
enhancements will allow our services to become more closely integrated into the
supply chain processes of distributors and group purchasing organizations and
will be particularly important to large purchasers of medical products.

Establish Strategic Alliances With Leading Industry Participants. We intend
to continue to enter into alliances with leading Internet, technology and
healthcare-related organizations to increase usage of our services, broaden the
scope of our content, extend our technology and gain additional marketing
resources. Our current strategic partners include Cisco, Dell, SAP, Superior
Consultant and VerticalNet. In addition, we have strategic relationships with
key suppliers, such as General Electric Medical Systems and Owens & Minor. We
plan to strengthen and broaden these relationships and enter into new strategic
alliances and key supplier relationships.

Expand Internationally. We believe that the capabilities of the Internet
and the fragmented nature of many international markets for new and used medical
products provide a significant opportunity for the creation of a global
marketplace. We intend to capitalize on this opportunity by developing
country-specific web pages for selected international markets and actively
marketing and promoting our services. Based on information provided by
registered users, or visitors to our website who have completed the registration
process, we believe that our registered user base already includes approximately
14,000 users located in over 100 countries. Approximately 4% of these registered
users have purchased products on our online marketplace.

NEOFORMA SERVICES

We offer three primary services -- Shop, Auction, and Plan -- that together
address the entire healthcare purchasing lifecycle, from planning through
procurement to liquidation. We also offer a wide range of content to healthcare
practitioners and purchasers to enable them to make more informed purchasing
decisions.

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Shop

Our Shop service, released in August 1999, provides a unified marketplace
where purchasers can easily identify, locate and purchase new medical products,
and suppliers can access new customers and markets. Shop currently has over
120,000 different stockkeeping units, or SKUs, available for purchase under
agreements with 138 manufacturers and distributors. Our agreements with
distributors provide listings of products from an additional 550 manufacturers.
We have agreements with additional manufacturers and distributors that will
provide us with access to an estimated 29,000 additional SKUs, which we are
currently adding to Shop. The products currently available through Shop range
from disposable gloves to surgical instruments and diagnostic equipment. We
believe that these products represent a significant portion of the products
commonly used in physicians' offices, our initial target market.

Shop provides detailed descriptions, photographic images and vendors'
shipping and billing policies for listed products. We currently provide pricing
information for more than 75% of the SKUs listed on Shop. With regard to
products that do not contain pricing information, prospective purchasers are
provided with contact information to allow them to obtain price quotes directly
from the seller of the product. Listings are displayed in a consistent format
and organized by standard classification schemes to facilitate the selection of
products. Shop's search capabilities further assist purchasers in locating and
selecting products from multiple suppliers. Moreover, we also provide suppliers
the ability to directly update their product information on our website to
include revised pricing, new product introductions or additional information.

Purchasers can use Shop to order products at listed prices or to obtain
price quotes from the supplier. Shop accelerates the process of negotiating and
completing transactions between purchasers and sellers. Our system automatically
notifies the supplier via an email when the purchaser places an order through
Shop. When the supplier responds to or updates the order in any fashion, our
system automatically notifies the buyer. This process is aided by our customer
service organization, which answers questions about our system as necessary.

We do not take ownership or possession of the products sold through Shop.
Suppliers are responsible for providing product availability and delivery
information through our website. They are also responsible for shipping,
delivery, and returns. Suppliers can choose to accept payment by open accounts
with the purchasers, payment upon delivery, letter of credit, or credit card.
The purchaser is required to provide payment information to the supplier through
our website when placing the order, and the supplier is responsible for payment
processing and collection. We derive our revenue from Shop from transaction fees
charged to suppliers for confirmed orders, and fees to digitize their product
information for display on our website and for maintenance of product
information and content on our website. As of December 31, 1999, we have derived
approximately $90,000 in revenues from our Shop services.

Shop product information is provided to us by suppliers in a variety of
electronic formats or in paper form, and is internally reviewed and categorized
by our medical editors. We use an independent firm to assist us in converting
this information into a consistent electronic format that conforms to our
classification systems. We believe that our ability to process large volumes of
product information allows us to rapidly increase our product database and
provides significant flexibility to suppliers in loading and updating
information.

We plan to extend Shop's functionality by introducing new information
reporting and order management features, allowing users to track their use of
our services and helping them better ensure compliance with their procurement
procedures and policies. We also intend to enable Shop to electronically
transmit information directly to the order management and purchasing systems
used by

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many large suppliers and medical product purchasers. In addition, we intend to
develop customer-specific pricing capabilities, allowing our services to better
integrate with the processes of distributors and large purchasing organizations.
We believe these enhancements will be particularly important to large purchasing
organizations, such as hospitals, IDNs and members of GPOs, that are focused on
achieving new efficiencies and frequently rely on pre-negotiated pricing. Our
future success relies on our ability to address the needs of large healthcare
providers by successfully developing and introducing these capabilities in a
timely manner. See "Risk Factors -- If we are unable to expand our registered
user base and the functionality of our services, we may not provide an
attractive alternative to the websites or systems used by large healthcare
organizations and we may not achieve market acceptance with these
organizations."

Auction

Our Auction service enables users to list, sell and buy used and
refurbished equipment and surplus medical products. Auction includes online
listings of used, refurbished and surplus products for bids through our
AdsOnline service, live auctions through our AuctionLive service and online
auctions through our AuctionOnline service.

We introduced our AdsOnline service in May 1999, which enables sellers to
list their used, refurbished and surplus medical products for bids from
prospective buyers. When a buyer submits a bid for a product listed on
AdsOnline, the seller is automatically notified via an email from our website
that a buyer has placed a bid for one of its products. The seller can then
access our website to obtain information about the bid, including the identity
of the buyer, the amount of the bid and the period of time that the buyer has
indicated that it will keep its bid open. The seller can accept the bid it finds
most attractive or choose not to accept any bids. The buyer is automatically
notified via an email if a seller has accepted its bid.

We introduced our AuctionLive service in August 1999 with the acquisition
of General Asset Recovery, a live auction house and asset management company
focused on medical products. Our live auctions are conducted by us either at one
of our warehouses in Chicago or onsite at a seller's facility. These auctions
are conducted by an auctioneer, where each product may have a minimum opening
price and the product is sold to the highest bidder. In addition, our website
contains photographs and more detailed information regarding products that will
be available in future live auctions.

We introduced our AuctionOnline service in November 1999. This service
enables sellers to sell their used and surplus medical products, individually or
in lots, to the highest bidder in an online auction. Prospective bidders can
access a product webpage for each item that typically features a concise product
description and full-color image. In addition, a table lists the minimum opening
bid, the bid range, the minimum incremental bid, the current winning bidders and
the amount of their bids and the time of auction close. After a prospective
buyer bids on a product, the corresponding bidder list is instantly updated to
reflect the bid and the prospective buyer's new position in the list of bidders.
When the auction closes, the highest bidder wins the product at his or her final
bid price. Our AuctionOnline service automatically determines the winning bidder
and sends an e-mail message to confirm his or her purchase the same day.

We offer a complete solution for managing used, refurbished and surplus
healthcare equipment. We work with sellers to determine which of our three
Auction services is the best method for selling their used, refurbished and
surplus medical products. Our Auction agreements typically appoint us as
seller's agent for the purpose of selling their designated used, refurbished and
surplus medical products through any of our Auction services. Purchasers may
choose to remit the purchase price to us in a variety of payment methods and we
then send these proceeds, net of our commissions and

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fees and any taxes owed by the purchaser, to the seller within a specified time
period. We generally take possession of products sold through our Auction
services, and in shipping the sold items to the winning bidders, we transfer the
risk of loss or damage to the purchaser once the product leaves our warehouse.
We are not responsible for delivery and returns. For products sold through our
AdsOnline service for which we do not take possession, payment alternatives,
shipping, delivery and return obligations are substantially identical to those
for our Shop service.

We also provide an online asset recovery service that allows sellers to
specify that their products initially be offered to their other departments and
facilities and subsequently to the public. In addition, the seller may choose to
offer unsold products for charitable donation. We have entered into agreements
with several IDNs and a number of other healthcare providers to allow them to
use this additional service.

We derive revenue from our Auction service primarily from commissions paid
by sellers, equal to a percentage of the sale price. In addition, in our live
and online auctions, the purchaser also typically pays a fee, commonly referred
to as a buyer's premium, equal to a percentage of the purchase price. We also
derive revenues from subscription fees we charge sellers that utilize our asset
recovery service.

Plan

Our Plan service, first introduced in July 1998 and enhanced in November
1999, provides interactive content to architects, healthcare facility planners
and materials managers and purchasers to reduce the complexities of planning and
outfitting facilities. Plan offers interactive photographic images of actual
rooms and suites from medical facilities that we believe represent industry best
practices, together with floor plans and descriptions of products typically used
in these rooms. This service allows users to conduct virtual tours of these
facilities, providing rich information for considering room plans and equipment
purchases. Visitors can zoom in to see room details, including equipment
placement, and can navigate to view different parts of the room in these 360
degree panoramic images. Plan currently displays more than 1,000 rooms from the
University of Chicago's Center for Advanced Medicine and three additional
facilities, and we intend to continue to add rooms from other advanced
facilities. Site visitors can browse a list of departments or can search to find
specific rooms.

The responsibility for designing and equipping facilities is shared by
architects, facility and equipment planners and materials managers and
purchasers. Because there is little standardized information, these
professionals must spend substantial time determining and coordinating project
requirements. The information provided through Plan allows these professionals
to match facility requirements to real-world examples. This enables these
professionals to find necessary information that may not have been included in
their original project plans and to move quickly from information gathering to
creating designs and equipment lists. Plan associates each room with a list of
product categories, typically found there. These categories link to our Shop and
Auction services, enabling these professionals to view and purchase equipment in
a few steps.

We have recently begun offering suppliers and service providers the
ability, for a fee, to sponsor rooms on Plan. By sponsoring rooms that feature
one or more of their products or that are associated with the services they
provide, suppliers and service providers can use these rooms as part of their
own marketing campaigns. As a result of our acquisition of FDI Information
Resources, Inc. in November 1999, we began selling licenses for software tools
and technical specification information for the construction and redesign of
healthcare facility projects. We intend to add new fee-based services to Plan,
such as subscription-based access to more detailed content and data.

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Resources

In addition to our three principal services, since July 1998, we have
provided healthcare professionals with information resources to assist them in
making informed and efficient purchasing decisions. Healthcare professionals can
receive personalized news, review online product and vendor information and
obtain information from other websites. In addition, users can access online
continuing medical education courses and research regulatory and shipping
requirements that may affect the price or delivery of their purchases. In
September 1999, we significantly expanded the amount of information that we
provide, and organized this information into a separate Resources section of our
website to facilitate its use.

SUPPLIERS

Shop. As of December 31, 1999, we had online commerce agreements with 138
manufacturers and distributors to list their products on Shop. The following
representative suppliers have products listed directly on Shop:

<TABLE>
<CAPTION>
DISTRIBUTORS MANUFACTURERS
------------ -------------
<S> <C>
Alimed Accurate Surgical
Independence Medical ARO Surgical Instruments
Maintenance Warehouse Critikon
Medline General Electric Medical Systems
Optimal Wholesale Medical Hospital Associates
Owens & Minor Howard Instruments
PSS World Medical Protocol Systems
Sammons Preston Sparta Surgical
Ves International
</TABLE>

Our agreements with distributors provide listings of products from an additional
550 manufacturers, including 3M, Beckman Coulter, Becton Dickinson, C.R. Bard
and Smith & Nephew. Our agreements with these suppliers provide for the payment
to us of a fee equal to a negotiated percentage of the purchase price of
products than they sell through Shop. These agreements generally do not require
that the supplier list any specific number of products or maintain any listing
for any period of time.

Auction. On Auction, suppliers include hospitals and healthcare
organizations liquidating used equipment, manufacturers and distributors selling
surplus products and finance companies selling leased equipment at the end of
the lease term. We have entered into agreements with a number of Auction
suppliers for whom we provide asset recovery services, including manufacturers
such as General Electric Medical Systems and Stryker and large healthcare
organizations such as Banner Health System, Saint Barnabas Health Care System
and Voluntary Hospitals of America. See "-- Neoforma Services -- Auction" for a
description of these agreements.

Strategic Supplier Relationships. We work with a number of key suppliers,
including Owens & Minor, General Electric Medical Systems or GEMS, and
GeriMedix. We currently list from Owens & Minor approximately 1,625 products
aimed at traditional physicians' offices for sale through Shop.

Under our October 1999 agreement with General Electric Medical Systems,
GEMS has agreed to list products on Shop. GEMS also has the option to sponsor
rooms on Plan on mutually agreed upon terms, and in the event that it sponsors
any rooms, GEMS has agreed to promote Plan to its customers. In addition, GEMS
has agreed to use Auction to sell a specified number of items of

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equipment. This agreement expires in December 2000, subject to automatic renewal
unless either party elects to terminate. In connection with this agreement, we
issued approximately 275,000 shares of our preferred stock to GE Capital Equity
Investments, an affiliate of GEMS, in October 1999. GE Capital Equity
Investments, Inc., also purchased 1,760,563 additional shares of preferred stock
in our October 1999 financing.

Under our November 1999 agreement with GeriMedix, a regional distributor of
medical products and supplies to the long-term care facility market, we have
agreed to collaborate with GeriMedix to enable GeriMedix to offer its products
for sale in our online marketplace and through a co-branded website. In
connection with this agreement, we agreed to purchase 5% of the equity interest
of IntraMedix LLC, the majority owner of GeriMedix, for $2.5 million.

PURCHASERS

Purchasers currently using Shop include physician offices, multi-specialty
groups, clinics and other healthcare providers. Buyers for large organizations,
such as hospitals, IDNs and GPOs that purchase a large volume of products under
negotiated contracts with suppliers, currently use Shop primarily to purchase
products for which they do not have existing supplier contracts. We plan to add
customer-specific pricing capabilities in order to enable these organizations to
use Shop for their purchases of products for which they have contracts.

Our Auction services have been used by a wide range of healthcare providers
to purchase used, refurbished and surplus medical products. We believe that a
large percentage of the products that are sold through our Auction services are
purchased for use outside the U.S. or in rural communities in the U.S.

If we are not able to quickly build a critical mass of purchasers who use
our services, and increase the use of our services by large healthcare
providers, our ability to expand our business would be seriously harmed.

STRATEGIC ALLIANCES

We enter into alliances with leading Internet, technology and
healthcare-related organizations and medical products suppliers to increase
usage of our services, broaden the scope of our content, extend the
functionality of our technology and build additional marketing resources. We
have entered into strategic alliances in the following areas.

Web Portals. Many healthcare professionals use specific portal websites
that provide a variety of healthcare-related information, online interaction and
e-commerce services. We believe that, by entering into relationships with
companies that operate these websites, we can attract their visitors to use our
services and build our brand recognition. We have developed strategic alliances
with VerticalNet, MD On-Line and Healtheon/WebMD to provide us with increased
market visibility and site traffic.

VerticalNet owns and operates a number of industry-specific websites known
as vertical trade communities, including health industry communities such as
Medical Design Online, Hospital Networks.com and Nurses.com. Under our recent
agreement, VerticalNet has agreed to use our marketplace to offer any medical
products listed for sale on its vertical trade communities, and we have agreed
to use VerticalNet to offer any used and excess laboratory products listed for
sale on our marketplace. We have also agreed to establish links between our
respective websites. In addition, VerticalNet will develop and maintain a
co-branded career center and a co-branded training and education center, and
will provide us with specified content created for its medical online

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communities. VerticalNet will also have the non-exclusive right to sell
sponsorships on our Plan service website and the exclusive right to sell
advertising on the co-branded sites. Our agreement with VerticalNet expires in
2001, subject to automatic renewals for additional one-year periods unless
either party elects to terminate. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" for more information about our agreement with VerticalNet.

Under our agreement with Healtheon/WebMD, we are an e-commerce provider of
medical supplies and equipment for Healtheon's registered users, which include
physicians and hospital and clinical administrators. We also provide e-commerce
services for MD On-Line, an Internet-based content provider for the physician
market. Our agreements with MD On-Line and Healtheon/WebMD require us to pay
these companies specified percentages of our revenue generated by their users.
These agreements each expire in 2000, subject to automatic renewals for
additional one-year periods unless either party elects to terminate.
Healtheon/WebMD has informed us that it will not renew its agreement with us
when it expires in August 2000.

Computer Hardware Providers. We believe that alliances with computer
hardware providers will help us build recognition of our brand. We have
established relationships with Dell Marketing, an affiliate of Dell Computer,
and Cisco Systems. We have entered into an agreement with Dell to develop and
undertake complementary marketing programs and to link our websites. See
"Certain Transactions -- Commercial Agreements" for more information about our
agreement with Dell. Our agreement with Cisco provides for complementary
marketing efforts and for joint promotional activities. For example, Cisco uses
our website as a means of demonstrating its equipment to healthcare providers.
As a result, we gain increased exposure of our services to large healthcare
organizations. In addition, we agreed to use Cisco technologies in our website.
This agreement expires in 2002.

Information Technology Partners. We believe that by integrating our
services with existing information systems used by many purchasers and sellers
of medical products, we will further streamline their medical products supply
chains. We have entered into an agreement with Superior Consultant, a supplier
of Digital Business Transformation(TM) services to large healthcare
organizations, including Internet-related services, systems integration,
outsourcing and consulting, which enable Superior clients to utilize digital
technologies and process innovations to improve their businesses. Under the
agreement, we have agreed to market Superior's services to our users, and
Superior has agreed to introduce our services to appropriate clients, based on
their interests, and to incorporate our services into its Digital Business
Transformation(TM) offerings. The agreement also provides for joint marketing
activities. See "Certain Transactions -- Commercial Agreements" for more
information about our agreement with Superior Consultant.

We are collaborating with SAP, a leading provider of enterprise software,
to integrate our services with SAP's R/3 enterprise software products. This
integration is intended to further automate the procurement process by allowing
transactions to be communicated directly to these systems. In addition, we are
integrating our services with MySAP.com, SAP's Internet business service.

Content Providers. We believe that as we increase the breadth and depth of
our content for our online marketplace, we will be able to attract and retain
more users. Since content is often expensive and time-consuming to develop, we
enter into relationships with other companies to provide content for our
marketplace. ECRI, a leading non-profit health services research agency focusing
on healthcare technology, provides us with detailed information about medical
products and technology and facility planning. NewsReal has created a
specialized healthcare headlines service to provide our users with personalized
healthcare business news from over 60 different sources. Reuters provides us
with its standard healthcare business news feed. See "Management's Discussion
and Analysis of

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Financial Condition and Results of Operations -- Liquidity and Capital
Resources" for a description of our agreement with ECRI.

Medical Product Suppliers. We believe that by establishing relationships
with key suppliers of medical products, we increase the depth and breadth of the
products listed on our online marketplace, and benefit from their marketing
resources. We have entered into agreements with Owens & Minor, General Electric
Medical Systems and GeriMedix. See "Suppliers -- Strategic Supplier
Relationships" for more information about our strategic supplier relationships.

TECHNOLOGY

In order to establish a secure and reliable marketplace for suppliers and
purchasers of new and used medical products, our underlying infrastructure is
built on an open, multi-tier, distributed architecture using well-established
applications and hardware from leading technology companies such as Sun
Microsystems, Netscape and Oracle. Our infrastructure enables us to continuously
enhance the features and functionality of our services to meet the evolving
needs of our users.

INFRASTRUCTURE

Open Architecture. Our open architecture supports integration with our
users' many existing legacy systems. The ability to integrate these diverse
systems has enabled us to aggregate a wide range of purchasers and suppliers in
our marketplace. Our architecture is based on industry standards such as Java,
enabling us to rapidly introduce new features and functionality.

Scalability, Performance and Availability. Our highly modular, distributed
architecture is designed to enable us to readily add capacity as the number of
users and transactions increase on our system. We have fully redundant hardware
systems, which when combined with our distributed architecture, enables us to
provide our services on an uninterrupted basis, even in the event of partial
system failure. By locating our data center at an Exodus Communications hosted
facility, we are able to easily and rapidly expand our network bandwidth and
maintain the physical security of our systems.

Secure e-Commerce Marketplace. Our platform contains a variety of features
to ensure the secure transmission of business information among multiple trading
partners and to protect against communication failures. We use SSL, or secure
sockets layer, an Internet security technology, at appropriate points in the
transaction flow to protect user information during transactions. User
information is encrypted to provide a high degree of security. Our employees do
not have access to user information, except as necessary to perform customer
service functions. The system authenticates users through standard secure login
and password technologies.

FUNCTIONALITY

Our systems are designed to replace manual processes traditionally used by
purchasers and suppliers. We have incorporated these processes into an
easy-to-use, intuitive online marketplace that can be accessed with standard web
browsers, without requiring any special software.

To support our online marketplace, we have developed customized search
technologies to meet the requirements of purchasers of medical products,
supplies and equipment. In order to enable users to quickly navigate to
individual products, we have incorporated industry standard classifications,
which support the purchasing process by grouping items that are similar and by
mapping to other industry standard classification systems. Our search function
allows users to continually refine and hone their searches to help them to
quickly and efficiently locate a particular item. Additionally, we

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use three-dimensional visualization technologies which enhance suppliers'
ability to display and feature their medical products, supplies and equipment.
Furthermore, if we complete the acquisition of Pharos Technologies, we plan to
integrate Pharos' technology with Shop, Auction and Plan to enable users to
conduct comprehensive searches on complex product information. The Pharos
technology is also designed to allow suppliers to rapidly update and organize
their product information from their desktop and publish customized subsets of
their product information.

Although to date we have not experienced unscheduled system interruptions
of our online marketplace, outages may occur from time to time as system usage
increases. The volume of traffic on our website and the number of transactions
being conducted by users has been increasing and will require us to expand and
upgrade our technology, transaction processing systems and network
infrastructure and add new engineering personnel. We may be unable to accurately
project the rate or timing of increases, if any, in the use of our services or
timely expand and upgrade our systems and infrastructure to accommodate such
increases in a timely manner. Any failure to expand or upgrade our systems to
keep pace with the growth in demand for capacity could cause the website to
become unstable and possibly cease to operate for periods of time. Unscheduled
downtime could harm our business.

SALES, MARKETING AND SUPPORT

We sell our services through our direct field sales force and our internal
telemarketing staff. Our direct field sales force focuses on purchasers in
physician offices, clinics, hospitals and large healthcare organizations. Our
direct field sales force has significant experience in the sale of medical
products, equipment and information technology systems. Our telemarketing
programs are directed primarily at suppliers of medical products, supplies and
equipment. We plan to augment our internal sales resources by working with the
sales forces of our strategic partners.

Our marketing programs include traditional and Internet-based marketing
initiatives to increase awareness of the Neoforma.com brand and attract new
purchasers and suppliers to our services. These programs include a variety of
public relations initiatives, such as participation in industry conferences and
trade shows, and ongoing relationships with healthcare, Internet and technology
reporters and industry analysts. We also promote our services through
advertising in healthcare industry trade journals and business publications. In
addition, we conduct web-based marketing activities to attract new users to our
online marketplace.

Our relationships with Internet healthcare companies such as
Healtheon/WebMD and MD On-Line, suppliers such as General Electric Medical
Systems and Owens & Minor, technology companies such as Cisco, Dell and SAP, and
professional services providers such as Superior Consultant provide us with
additional marketing resources. These companies conduct a number of activities
designed to strengthen awareness of our brand and our services.

Our worldwide sales and marketing group consisted of 94 full-time employees
as of December 31, 1999. We intend to expand our sales and marketing group and
to establish additional sales offices. Competition for sales and marketing
personnel is intense, and we may not be able to attract, assimilate or retain
additional qualified personnel in the future.

We believe that we can strengthen our relationships with purchasers and
suppliers by providing good account management, customer support and service.
Our customer service group provides ongoing support to customers, including site
assistance, product searches, basic product questions and order processing
questions.

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PRODUCT DEVELOPMENT

We intend to continue to expand and enhance the functionality of our
services. We are currently focusing our product development resources on
integrating our services with other information systems used by suppliers and
purchasers of healthcare products. In addition, we are developing the capability
to allow suppliers to provide customer-specific pricing through Shop, and
providing increased functionality to our online Auction service. Our future
success, and in particular, our ability to fully address the needs of large
healthcare providers, depends on our ability to successfully develop and
introduce these capabilities in a timely manner. There are a number of risks and
challenges involved in the development of new features and technologies. See
"Risk Factors -- If we fail to develop the capability to integrate our online
services with enterprise software systems of purchasers and suppliers of medical
products and to enable our services to support customer-specific pricing, these
entities may choose not to utilize our online marketplace, which would harm our
business."

Our product development organization includes our product strategy group
and our engineering group. The product strategy group is responsible for
translating user needs into specifications and prototypes for new functions and
services. Our engineering group is responsible for developing the technology
that implements these initiatives, and maintaining and improving the technology,
infrastructure and databases that we use to provide our services. As of December
31, 1999, our product development organization included 54 full-time employees.
Our quality assurance group works with our product development organization
throughout the development cycle to ensure that the new features and functions
of our website meet our standards. In addition, we have a seven person group
that focuses on emerging technologies and market opportunities. In cases
requiring specialized expertise, we have augmented the resources of our product
development organization with independent contractors.

Our product development expenses were $179,000 in 1997, $1.5 million in
1998 and $4.3 million in the first nine months of 1999. To date, substantially
all software development costs related to our services have been expensed as
incurred. We believe that significant investments in product development will be
required to remain competitive.

PROPRIETARY RIGHTS AND LICENSING

Our success and ability to compete depend on our ability to develop and
maintain the proprietary aspects of our technology. We rely on a combination of
copyright, trademark and trade secret laws and contractual restrictions to
establish and protect the proprietary aspects of our technology. We seek to
protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. Finally, we seek to avoid
disclosure of our intellectual property by restricting access to our source code
and by requiring employees and consultants with access to our proprietary
information to execute confidentiality agreements with us.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, and to
determine the validity and scope of the proprietary rights of others. Any
resulting litigation could result in substantial costs and diversion of
resources and could seriously harm our business.

Our success and ability to compete also depend on our ability to operate
without infringing upon the proprietary rights of others. In the event of a
successful claim of infringement against us and our failure or inability to
license the infringed technology, our business would be seriously harmed.

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COMPETITION

We also face potential competition from a number of sources. Many companies
have created websites to serve the information needs of healthcare
professionals, providing medical information, discussion groups, bulletin boards
and directories. Many of these companies are introducing e-commerce functions
that may compete with our services. In addition, providers of online
marketplaces and online auction services that currently focus on other
industries could expand the scope of their services to include medical products.
Existing suppliers of medical products may also establish online marketplaces
that offer services to suppliers and purchasers, either on their own or by
partnering with other companies. Moreover, live auction houses focusing on
medical products may establish online auction services. New companies may also
be formed that compete with us.

We believe that companies in our market compete to provide services to
suppliers based on:
- brand recognition;
- number of purchasers using their services, and the volume of their
purchases;
- level of bias, or perceived bias, towards particular suppliers;
- compatibility with suppliers' existing distribution methods;
- the amount of the fees charged to suppliers;
- ease of use and convenience;
- ability to integrate their services with suppliers' existing systems and
software; and
- quality and reliability of their services.

In addition, we believe that companies in our market compete to provide
services to purchasers based on:
- brand recognition;
- breadth, depth and quality of product offerings;
- ease of use and convenience;
- ability to integrate their services with purchasers' existing systems and
software;
- quality and reliability of their services; and
- customer service.

Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:
- enter into strategic or commercial relationships with larger, more
established healthcare, medical products and Internet companies;
- secure services and products from suppliers on more favorable terms;
- devote greater resources to marketing and promotional campaigns;
- secure exclusive arrangements with buyers that impede our sales; and
- devote substantially more resources to website and systems development.

Our current and potential competitors' services may achieve greater market
acceptance than ours. Our existing and potential competitors may have longer
operating histories in the medical products market, greater name recognition,
larger customer bases or greater financial, technical and

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marketing resources than we do. As a result of these factors, our competitors
and potential competitors may be able to respond more quickly to market forces,
undertake more extensive marketing campaigns for their brands and services and
make more attractive offers to purchasers and suppliers, potential employees and
strategic partners. In addition, new technologies may increase competitive
pressures. We cannot be certain that we will be able to expand our purchaser and
supplier base, or retain our current purchasers and suppliers. We may not be
able to compete successfully against current and future competitors and
competition could seriously harm our revenue, gross margins and market share.

EMPLOYEES

As of December 31, 1999, we had 269 full-time employees, including 54 in
product development, 94 in sales, marketing and customer service, 16 in business
development, 72 in operations, and 33 in general and administrative functions.
Our future success will depend in part on our ability to attract, train, retain,
integrate and motivate highly qualified sales, technical and management
personnel, for whom competition is intense. Our employees are not represented by
any collective bargaining unit, and we have never experienced a work stoppage.
We believe our relations with our employees are good. We also use independent
contractors to support our services. We use a firm based in India to digitize
and format product information for our Shop service. We plan to use a third
party specializing in Internet support to respond to our most common customer
service requests. We also use independent contractors for specific product
development services requiring specialized expertise.

FACILITIES

Our executive, administrative and operating offices are located in
approximately 33,378 square feet of leased office space located in Santa Clara,
California under leases expiring in April 2004 and September 2006. We are
currently seeking a larger facility in the Santa Clara area to support our
growth. We also maintain 19,875 square feet of office and warehouse space for
our AuctionLive service in the metropolitan area of Chicago, Illinois. We have
also entered into a lease for a second warehouse in the Chicago, Illinois
metropolitan area, expiring in November 2001, to provide an additional 120,000
square feet of space to store consigned items until they are sold in auctions.

TRADEMARK INFRINGEMENT CLAIM

In a letter dated January 14, 2000, Forma Scientific, Inc., an affiliate of
Thermo Electron Company, notified us that it believes our use of the "Neoforma"
and "Neoforma.com" trademarks violates its trademark rights in "Forma" and
"Forma Scientific," and asked us to discontinue use of our trademarks by January
28, 2000. Forma Scientific has filed a complaint in the United States District
Court for the Southern District of Ohio, Eastern Division alleging trademark
infringement, violation of the Ohio Deceptive Trade Practices Act, unfair
competition and other claims and seeking compensatory damages and punitive
damages, preliminary and permanent injunctive relief and transfer of the
Neoforma.com Internet domain name to Forma Scientific. Forma Scientific provided
us with a courtesy copy, but has not yet served us with this complaint. Based on
our preliminary investigation, we believe that we have meritorious defenses to
Forma Scientific's claims and intend to vigorously defend ourselves in any
litigation that may arise from these claims. If any litigation were to be
decided adversely to us, we could be enjoined from future use of the names
Neoforma and Neoforma.com and we might be required to pay damages to Forma
Scientific. See "Risk Factors -- We have received notice of a trademark
infringement claim brought by a third party and we may be subject to further
intellectual property claims, and if we were to subsequently lose our
intellectual property rights, we could be unable to operate our current
business" and "Risk Factors -- If we are unable to increase recognition of, or
lose the right to use, the Neoforma.com brand name, our ability to attract users
to our online marketplace may be limited."

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information regarding our executive officers
and directors as of December 31, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Robert J. Zollars.................... 42 Chairman, President and Chief Executive Officer
Jeffrey H. Kleck..................... 39 Co-founder and Senior Vice President
Wayne D. McVicker.................... 40 Co-founder, Senior Vice President, President of
Neoforma Plan and Director
Frederick J. Ruegsegger.............. 44 Chief Financial Officer
Bhagwan D. Goel...................... 36 Executive Vice President of Products and Services
Robert Flury......................... 49 Senior Vice President of Business Development
Daniel A. Eckert..................... 35 Executive Vice President of Sales and President of
Neoforma Shop
Robert W. Rene....................... 42 Executive Vice President of Strategy and Chief
Marketing Officer
S. Wayne Kay......................... 49 Senior Vice President of Supply-Chain Development
Erik Tivin........................... 34 Senior Vice President of Auction Services and
President of Neoforma GAR, Inc.
David Douglass....................... 47 Director
Terence Garnett...................... 42 Director
Madhavan Rangaswami.................. 44 Director
Richard D. Helppie................... 43 Director
Andrew J. Filipowski................. 49 Director
</TABLE>

Robert J. Zollars has served as our Chairman, President and Chief Executive
Officer since July 1999. From January 1997 to July 1999, he served as Executive
Vice President and Group President of Cardinal Health, Inc., a healthcare
products and services company, where he was responsible for four of its
wholly-owned subsidiaries: Pyxis Corporation, Owen Healthcare, Inc., Medicine
Shoppe International and Cardinal Information Corporation. From January 1992 to
December 1996, he served as President of Hospital Supply, Scientific Products
and U.S. Distribution of Baxter Healthcare Corporation, which in October of 1996
was spun off as Allegiance Corporation, a healthcare products and service
company. Mr. Zollars holds an M.B.A. in finance from John F. Kennedy University
and a B.S. in marketing from Arizona State University.

Jeffrey H. Kleck has served as a Senior Vice President since July 1999, and
co-founded Neoforma.com in April 1996. Dr. Kleck served as our Chief Executive
Officer from March 1996 to July 1999 and as one of our directors from April 1996
to October 1999. Dr. Kleck was a senior engineer from June 1991 to February 1997
and Marketing Product Manager from February 1997 to February 1998 at Varian
Associates, Inc., a manufacturer of medical radiology equipment. He is a
visiting scientist at Los Alamos Laboratory. Dr. Kleck holds a Ph.D. in
biomedical physics from, and is a member of the faculty of the School of
Medicine at, the University of California, Los Angeles. He holds an M.S. in
engineering management from Stanford University and M.S. and B.S. degrees in
nuclear engineering from Texas A&M University.

Wayne D. McVicker has served as our Senior Vice President and President of
Neoforma Plan since October 1999 and as a director since April 1996. Mr.
McVicker co-founded Neoforma.com in

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April 1996, and served as our President from April 1996 to February 1999 and as
our Vice President of Strategy from February 1999 to October 1999. From
September 1987 to February 1997, Mr. McVicker worked at Varian Associates, Inc.,
as manager of its architectural planning department. In addition, Mr. McVicker
is a licensed architect.

Frederick J. Ruegsegger has served as our Chief Financial Officer since
July 1999. From December 1996 to July 1999, Mr. Ruegsgegger worked at Axys
Pharmaceuticals, Inc., a biopharmaceutical company, most recently as Senior Vice
President of Finance and Corporate Development and Chief Financial Officer. From
July 1993 to December 1996, Mr. Ruegsegger was President, Chief Executive
Officer and a director of EyeSys Technologies Inc., an eye care diagnostic
equipment and software company. Mr. Ruegsegger holds a Master of Management from
J. L. Kellogg Graduate School of Management, Northwestern University, and a B.S.
in economics from the University of Illinois.

Bhagwan D. Goel has served as our Executive Vice President of Products and
Services since October 1999. From October 1998 to September 1999, Mr. Goel was
Senior Vice President and General Manager, Commerce at InfoSeek Corporation, a
provider of Internet services and software. From October 1996 to September 1998,
Mr. Goel was Vice President of Products and Services at Internet Shopping
Network Inc., an online retailer. From November 1993 to October 1995, Mr. Goel
was Vice President of Product Development at Worldview Systems Corporation, a
provider of online travel information. From October 1989 to October 1995, Mr.
Goel worked at Knowledgeset Corporation, a software company that provides
electronic retrieval systems, most recently as Director of Product Development.
Mr. Goel holds an M.S. in electrical engineering from the University of Toledo
and a B.S. in electrical engineering from the Indian Institute of Technology,
New Delhi.

Robert Flury has served as our Senior Vice President of Business
Development since February 1999. From December 1997 to January 1999, Mr. Flury
was Vice President and General Manager of the healthcare business unit at
PeopleSoft Inc., an enterprise software company. From February 1997 to December
1997, Mr. Flury was a senior vice president at Visix Software Inc., a software
company. From October 1994 to February 1997, Mr. Flury was a Senior Vice
President of the middleware line of business at Software AG, an enterprise
software company. Mr. Flury is a C.P.A. and holds an M.B.A. and a B.B.A. in
accounting from Georgia State University.

Daniel A. Eckert has served as our Executive Vice President of Sales since
August 1999 and President of Neoforma Shop since November 1999. From April 1998
to August 1999, Mr. Eckert was President and Chief Operating Officer of Fisher
Healthcare, a division of Fisher Scientific International, which is a
distributor of medical products. From September 1992 to April 1998, Mr. Eckert
held several positions at McKesson Corporation, including Senior Vice President
of Corporate Sales for the Health Systems Group, Senior Vice President of Sales
and Marketing for McKesson/General Medical Corporation and Vice President of
Acute Care. Mr. Eckert holds an A.B. degree in English and political science
from Occidental College, and completed the Fuqua School of Business' Healthcare
Distributor Executive Program at Duke University.

Robert W. Rene has served as our Executive Vice President of Strategy and
Chief Marketing Officer since December 1999. From April 1999 to December 1999,
Mr. Rene was a strategy, marketing and Internet business development consultant
to e-commerce companies. From January 1998 to April 1999, Mr. Rene was Executive
Vice President, Marketing at United Paramount Network, a television network.
From April 1996 to September 1997, Mr. Rene held several positions at Americast,
a company which provides digital cable service, including Senior Vice President,
Marketing/Strategy/Business Development, Chief Marketing Officer and Senior Vice
President, Marketing/Advertising. From December 1993 to March 1996, Mr. Rene
held several positions at Young & Rubicam, Inc., a marketing and communications
enterprise, including Senior Vice

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President, Marketing/Corporate Ventures and Account Managing Director. Mr. Rene
holds a J.D. and an M.B.A. from Stanford University and a B.A. in
Economics/Government from Cornell University.

S. Wayne Kay has served as our Senior Vice President of Supply-Chain
Development since December 1999. From February 1994 to December 1999, Mr. Kay
was the President and Chief Executive Officer of the Health Industry
Distributors Association, a business trade association of medical products
distributors and home healthcare providers. Mr. Kay holds a B.S. in microbiology
from Virginia Tech, a B.A. in Business Administration from the University of San
Francisco and an M.B.A. from Pepperdine University.

Erik Tivin has served as our Senior Vice President of Auction Services and
President of Neoforma GAR, Inc. since August 1999. From July 1998 to August
1999, Mr. Tivin served as owner and President of General Asset Recovery, LLC., a
live auction house, which was acquired by Neoforma.com. From January 1990 to
July 1998, he served as President of General Industrial Tool, a wholesale
industrial equipment company.

David Douglass has served as one of our directors since February 1999.
Since February 1990, Mr. Douglass has served as a General Partner at Delphi
Ventures L.P., a venture capital firm. Mr. Douglass holds an M.B.A. from
Stanford University and a B.A. in political science from Amherst College.

Terence Garnett has served as one of our directors since April 1998. Mr.
Garnett has been a managing director of Garnett Capital since January 2000.
Before joining Garnett Capital, from April 1995 to December 1999, Mr. Garnett
was a venture partner of Venrock Associates, a venture capital firm. From August
1994 to April 1995, Mr. Garnett was a private investor. From October 1991 to
August 1994, he was a senior vice president of worldwide marketing and business
development and senior vice president of the new media division at Oracle
Corporation, a software company. He also serves as a director of Niku Corp.,
CrossWorlds Software, Inc. and several other private companies. Mr. Garnett
holds an M.B.A. from Stanford University and a B.S. in computer science from the
University of California, Berkeley.

Madhavan Rangaswami has served as one of our directors since April 1998.
Since February 1997, Mr. Rangaswami has served as a Managing Director at Sand
Hill Group LLC, a consulting and private investment company. From March 1995 to
March 1996, Mr. Rangaswami served as Vice President of Worldwide Marketing at
the Baan Company N.V., an enterprise software company. Prior to that, he held
executive positions at Avalon Software Inc., a software company, and Oracle
Corporation. Mr. Rangaswami holds an M.B.A. from Kent State University, and
degrees in law and accounting from the University of Madras.

Richard D. Helppie has served as one of our directors since October 1999.
Since August 1996, he has served as Chairman of the board of directors and Chief
Executive Officer of Superior Consultant Holdings Corporation, a consulting firm
comprised of two subsidiaries founded by Mr. Helppie, Superior Consultant
Company, Inc. and UNITIVE Corporation. He has served as Chairman of the board of
directors and Chief Executive Officer of Superior Consultant Company, a
healthcare management and information systems consulting firm, since 1984 and as
Chief Executive Officer of UNITIVE Corporation, a information technology
consulting firm, since 1993. He has also served as President of Clearwater
Aviation Company, Inc. since 1993. In addition, Mr. Helppie is a director of
drkoop.com, Inc.

Andrew J. Filipowski has served as one of our directors since October 1999.
He is the President, Chief Executive Officer and Chairman of the Board of divine
interVentures, inc., a venture investment firm that he co-founded in May 1999.
He is also Chairman of the Board of PLATINUM

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Venture Partners, Inc., a venture investment firm that he founded in February
1992. Mr. Filipowski founded PLATINUM technology, inc. in April 1987 and served
as its President, Chief Executive Officer and Chairman of the Board until it was
acquired by Computer Associates in June 1999. PLATINUM technology, inc. was a
software company that produced, acquired and distributed system software tools.
Mr. Filipowski serves on the board of directors of Blue Rhino Corporation,
Bluestone Software, Inc., eShare Technologies, Inc., Platinum Entertainment,
Inc., and System Software Associates, Inc.

BOARD COMPOSITION

Our amended and restated bylaws provide for a board of directors consisting
of seven members. Our amended and restated certificate of incorporation and
bylaws, each of which will become effective following the completion of this
offering, provide that our board of directors will be divided into three
classes, each serving staggered three-years terms: Class I, whose term will
expire at the annual meeting of stockholders to be held in 2000; Class II, whose
term will expire at the annual meeting of stockholders to be held in 2001; and
Class III, whose term will expire at the annual meeting of stockholders to be
held in 2002. As a result, only one class of directors will be elected at each
annual meeting of our stockholders, with the other classes continuing for the
remainder of their terms. Messrs. Douglass, McVicker and Rangaswami have been
designated as Class I directors; Messrs. Filipowski and Garnett have been
designated as Class II directors; and Messrs. Helppie and Zollars have been
designated as Class III directors.

BOARD COMMITTEES

The audit committee consists of Messrs. Filipowski, Garnett and Rangaswami.
The audit committee:

- reviews our financial statements and accounting practices;

- makes recommendations to the board of directors regarding the selection
of independent public accountants; and

- reviews the results and scope of the audit and other services provided by
our independent public accountants.

The compensation committee consists of Messrs. Douglass, Filipowski and
Helppie. The compensation committee:

- reviews and recommends to the board of directors the compensation and
benefits of all of our officers, directors and consultants; and

- reviews general policy relating to compensation and benefits.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of our board of directors is currently comprised
of Messrs. Douglass, Filipowski and Helppie. None of these individuals has at
any time been one of our officers or employees. For a description of the
transactions between Neoforma.com and members of the compensation committee and
entities affiliated with the compensation committee members, see "Certain
Transactions." Robert J. Zollars, our President and Chief Executive Officer, is
a member of the board of directors of divine interVentures, inc., of which Mr.
Filipowski is President, Chief Executive Officer and Chairman of the board of
directors.

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EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

Mr. Zollars. In July 1999, we entered into an at-will employment agreement
with Robert J. Zollars for him to serve as our Chairman, President and Chief
Executive Officer. Under this agreement, Mr. Zollars receives a salary equal to
$500,000 for the first year of the agreement, which can be increased by us in
subsequent years. Mr. Zollars is also entitled to a $250,000 bonus if he
continues to be employed by us on December 31, 1999. Beginning in 2000 and for
each following year while he is employed by us, Mr. Zollars is eligible to
receive a bonus payment of at least $500,000 for that fiscal year, based upon
whether we achieve revenue and profitability targets and/or other organizational
milestones to be specified by our board of directors.

Upon entering into this employment agreement, Mr. Zollars received an
option to purchase 1,637,160 shares of our common stock and an option to
purchase 3,602,315 shares of our common stock, each at an exercise price of
$0.10 per share. Both options were immediately exercisable and Mr. Zollars
exercised these options in full in July 1999. As of September 30, 1999, all of
the shares purchased under the option for 3,602,315 shares were subject to a
repurchase right that lapses at a rate of 900,578 shares after his first year of
employment and 75,048 shares per month thereafter. If we are acquired or if a
change in control of Neoforma.com occurs, the then unvested portion of his
option will become vested.

Mr. Zollars is eligible to receive from us a moving assistance loan of $2.5
million, which will be forgiven in equal monthly installments on the last day of
each month from the date of closing on his new home through June 30, 2003. Mr.
Zollars also has the right to be reimbursed by us up to $300,000 for any loss on
the sale of his previous home. We are obligated to reimburse Mr. Zollars for an
additional $338,000 plus additional moving expenses incurred in connection with
his joining us.

If Mr. Zollars' employment is terminated other than for disability or
cause, or if Mr. Zollars resigns for good reason, he will be entitled to receive
an amount equal to his annual salary, bonus and benefits. In addition, our right
to repurchase all outstanding stock held by Mr. Zollars will lapse and the
forgiveness of the home loan will be treated as if he had been employed by us
for 12 additional months after the termination of employment. Good reason
includes a reduction in his duties or responsibilities or a reduction in his
salary, bonus or other benefits.

Mr. Tivin. In August 1999, we entered into an employment agreement with
Erik Tivin for him to serve as our Senior Vice President of Auction Services and
President of Neoforma GAR, Inc. This agreement expires on December 31, 2001.
Under this agreement, Mr. Tivin receives a salary equal to $100,000 per year.
Mr. Tivin is also eligible to receive a bonus payment of at least $50,000 per
year that he is still employed by us, based upon our financial performance. Upon
entering into this employment agreement, Mr. Tivin received an option to
purchase 550,000 shares of our common stock at $0.10 per share. This option is
immediately exercisable. As of September 30, 1999, 33,333 of the shares
underlying the option had vested and none had been exercised. The shares
underlying the option vest at a rate of 33,333 shares per month for the first 12
months of his employment and at a rate of 4,167 shares per month during each of
months 13 through 47, with the balance of the remaining options vesting in month
48, so long as he is employed by us. In addition, in the event of a change of
control of Neoforma.com and termination of Mr. Tivin's employment, 50% of the
then unvested portion of Mr. Tivin's option shall immediately vest.

Mr. Ruegsegger. In June 1999, we entered into an offer letter with
Frederick J. Ruegsegger for him to serve as our Chief Financial Officer. Under
this offer letter, Mr. Ruegsegger receives a salary equal to $200,000 per year.
Mr. Ruegsegger is eligible to receive a bonus of up to $12,500 each quarter,
based upon performance milestones to be specified by our president and assessed
by our board of directors. Mr. Ruegsegger is also entitled to repayment of the
outstanding amount of a

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$25,000 relocation loan. Upon entering into employment with us, Mr. Ruegsegger
received an option to purchase 604,555 shares of our common stock at $0.50 per
share. This option is immediately exercisable and Mr. Ruegsegger has exercised
the option in full. As of September 30, 1999, all of the shares underlying the
option were subject to a right of repurchase. The shares underlying the option
vest over four years, with one fourth of the shares vesting at the end of the
first year of employment with us and an additional one forty-eighth vesting each
month thereafter, for so long as he is employed by us. If Mr. Ruegsegger's
employment is terminated other than for cause, he will be entitled to receive an
amount equal to three months of his salary. In addition, in the event of a
change of control of Neoforma.com and termination of Mr. Ruegsegger's
employment, 50% of the then unvested portion of Mr. Ruegsegger's option shall
immediately vest.

Mr. Goel. In September 1999, we entered into an offer letter with Bhagwan
D. Goel for him to serve as our Executive Vice President of Products and
Services. Under this offer letter, Mr. Goel receives a salary equal to $225,000
per year. Mr. Goel received a $50,000 bonus when he commenced his employment
with us and is entitled to receive a bonus of $50,000 after one year of
employment. Upon entering into employment with us, Mr. Goel received an option
to purchase 595,000 shares of our common stock at $3.00 per share. This option
is immediately exercisable. As of September 30, 1999, this option had not yet
been granted. The shares underlying the option vest in equal monthly
installments over four years, for so long as he is employed by us. If Mr. Goel's
employment is terminated other than for cause, he will be entitled to receive an
amount equal to 12 months of his salary. In addition, in the event of a change
of control of Neoforma.com and termination of Mr. Goel's employment, 50% of the
then unvested portion of Mr. Goel's option shall immediately vest.

Mr. Flury. In December 1998, we entered into an offer letter with Robert
Flury for him to serve as our Vice President of Enterprise Sales. Under this
offer letter, Mr. Flury receives a salary equal to $175,000 per year. Mr. Flury
is entitled to receive a bonus of $25,000 each quarter during his first year
with us, and thereafter is eligible to earn a bonus of up to $25,000 each
quarter, based upon performance milestones to be specified by our president and
assessed by our board of directors. Upon entering into employment with us, Mr.
Flury received an option to purchase 609,392 shares at $0.10 per share. This
option is immediately exercisable. As of September 30, 1999, none of the shares
underlying the option had vested and none had been exercised. The shares
underlying the option vest over four years, with one fourth of the shares
vesting at the end of the first year of employment with us and an additional one
forty-eighth vesting each month thereafter, for so long as he is employed by us.
If Mr. Flury's employment is terminated other than for cause, he will be
entitled to receive an amount equal to three months of his salary. In addition,
in the event of a change of control of Neoforma.com and termination of Mr.
Flury's employment, 50% of the then unvested portion of Mr. Flury's option shall
immediately vest.

Mr. Eckert. In July 1999, we entered into an offer letter with Daniel A.
Eckert for him to serve as our Executive Vice President of Sales. Under this
offer letter, Mr. Eckert receives a salary equal to $250,000 per year. Mr.
Eckert received a $50,000 bonus when he commenced his employment with us and is
entitled to receive a bonus of $50,000 per year, based upon performance
milestones to be specified by our president and assessed by our board of
directors. Upon entering into employment with us, Mr. Eckert received an option
to purchase 450,000 shares of our common stock at $0.50 per share. This option
is immediately exercisable and Mr. Eckert has exercised the option in full. The
shares underlying the option vest in equal monthly installments over four years,
for so long as he is employed by us. If Mr. Eckert's employment is terminated
other than for cause, he will be entitled to receive an amount equal to 6 months
of his salary. In the event of a change of control of Neoforma.com, 50% of the
then unvested portion of Mr. Eckert's option shall immediately vest.

Mr. Rene. In December 1999, we entered into a memorandum concerning
employment with Robert W. Rene for him to serve as our Executive Vice President
of Strategy and Chief Marketing Officer. Under this memorandum, Mr. Rene
receives a salary equal to $150,000 per year for the first

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year of his employment with us, during which he is not entitled to receive a
bonus. During Mr. Rene's second year of employment with us, his minimum
compensation, salary plus bonus, will be $350,000 per year. Mr. Rene's
compensation for his third and subsequent years of employment with us will be
determined in future discussions. The annual bonus for Mr. Rene's second and
subsequent years of employment with us will be based upon the achievement of
performance milestones to be specified by our Chairman or Chief Executive
Officer and assessed by our board of directors. The amount of this annual bonus
will be determined by our board of directors. Upon entering into employment with
us, Mr. Rene received an option to purchase 700,000 shares of our common stock
at $7.00 per share. This option is immediately exercisable and Mr. Rene
exercised this option in full. The shares underlying the option vest over four
years, with one fourth of the shares vesting at the end of the first year of
employment with us and an additional one forty-eighth vesting each month
thereafter, for so long as he is employed by us. In the event of a change of
control of Neoforma.com and termination of Mr. Rene's employment without cause
or constructive termination of Mr. Rene's employment without good reason, our
right to repurchase Mr. Rene's option shall lapse as to 50% of the then unvested
portion of Mr. Rene's option.

Mr. Kay. In December 1999, we entered into an offer letter with S. Wayne
Kay for him to serve as our Senior Vice President of Supply-Chain Development.
Under this offer letter, Mr. Kay receives a salary equal to $200,000 per year.
Mr. Kay received a $40,000 bonus when he commenced his employment with us and is
entitled to receive a quarterly bonus of $12,500 based upon the achievement of
milestones to be specified by our Chairman or Chief Executive Officer and
assessed by our board of directors. Upon entering into employment with us, Mr.
Kay received an option to purchase 225,000 shares of our common stock at $7.00
per share. This option is immediately exercisable. The shares underlying the
option vest in equal monthly installments over four years, with one-fourth of
the shares vesting at the end of the first year of employment with us and an
additional one forty-eighth vesting each month thereafter, for so long as he is
employed by us. If Mr. Kay's employment is terminated other than for cause, he
will be entitled to receive an amount equal to 12 months of his salary. In
addition, in the event of a change of control of Neoforma.com and termination of
Mr. Kay's employment without cause or constructive termination of Mr. Kay's
employment without good reason, 50% of the then unvested portion of Mr. Kay's
option shall immediately vest.

DIRECTOR COMPENSATION

Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses for
attending board and board committee meetings.

Each eligible director who is not our employee and who is or becomes a
member of our board will be automatically granted an option to purchase 100,000
shares of common stock under our 1999 Equity Incentive Plan, unless that
director has previously received an option grant. Immediately following each
annual meeting of stockholders, each eligible director will automatically be
granted an option to purchase 25,000 shares of common stock under our 1999
Equity Incentive Plan, provided that the director is a member of the board on
that date and has served continuously as a member of the board for a period of
at least one year since the date of the director's initial grant. All options
will have an exercise price equal to the fair market value of our common stock
on the date of grant. The options will have 10-year terms and will terminate
three months following the date the director ceases to be one of our directors
or consultants or 12 months after any termination due to death or disability.
Options granted under the plan will generally vest over four years. Any unvested
shares subject to these options will become immediately vested and exercisable
upon a transaction which results in a change in our control. Upon joining our
board of directors in October 1999, we granted each of Richard D. Helppie and
Andrew J. Filipowski an option to purchase 150,000 shares of our common stock at
an exercise price of $4.00 per share. The shares underlying the options vest
over three years, with one-third

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of the shares vesting at the end of the first anniversary of the date of grant
and an additional one thirty-sixth vesting each month thereafter for so long as
they serve as one of our directors.

EXECUTIVE COMPENSATION

The following table shows all compensation awarded to, earned by or paid
for services rendered to us in all capacities during 1998 by our then chief
executive officer and our other current or former executive officers who earned
at least $100,000 in 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS
--------------------------- -------- -------- ------------------
<S> <C> <C> <C>
Jeffrey H. Kleck.................................... $ 91,929 $ -- --
Co-founder and Senior Vice President(1)
Wayne D. McVicker................................... 122,150 -- --
Co-founder, Senior Vice President, President of
Neoforma Plan and a director(2)
Stephen A. Pieraldi................................. 104,421 -- 175,000
Vice President of Business Development(3)
</TABLE>

- ---------------
(1) Mr. Kleck was our Chief Executive Officer and a director in 1998.
(2) Mr. McVicker was our President in 1998.
(3) Mr. Pieraldi was our Vice President of Sales in 1998.

The executive officers listed below joined us after 1998 and are not
included in the tables relating to summary compensation and option grants in
1998.

Robert J. Zollars, our Chairman, President and Chief Executive Officer,
joined us in July 1999. Mr. Zollars is compensated at an annual rate of
$500,000. He will receive a bonus of $250,000 if he continues to be employed by
us on December 31, 1999. Mr. Zollars received an option to purchase 1,637,160
shares of our common stock and an option to purchase 3,602,315 shares of our
common stock, each at $0.10 per share. Both options were immediately exercisable
and Mr. Zollars exercised these options in full in July 1999. As of September
30, 1999, all of the shares underlying the option for 3,602,315 shares were
subject to a repurchase right that lapses at a rate of 900,578 after his first
year of employment and 75,048 shares per month thereafter.

Frederick J. Ruegsegger, our Chief Financial Officer, joined us in July
1999. Mr. Ruegsegger is compensated at an annual rate of $200,000. He is
eligible to receive a bonus of up to $12,500 each quarter. Mr. Ruegsegger was
also granted an option to purchase 604,555 shares of our common stock at $0.50
per share. This option is immediately exercisable and Mr. Ruegsegger has
exercised the option in full. As of September 30, 1999, all of the shares
underlying the option were subject to a repurchase right that lapses at a rate
of 151,138 shares after his first year of employment and 12,594 shares per month
thereafter.

Bhagwan D. Goel, our Executive Vice President of Products and Services,
joined us in October 1999. Mr. Goel is compensated at an annual rate of
$225,000. He received a $50,000 bonus upon joining us. Mr. Goel was also granted
an option to purchase 595,000 shares of our common stock at $3.00 per share.
This option is immediately exercisable. The shares underlying the option will
vest at a rate of 12,395 shares per month.

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<PAGE> 61

Robert Flury, our Senior Vice President of Business Development, joined us
in February 1999. Mr. Flury is compensated at an annual rate of $175,000. He is
entitled to receive a bonus of $25,000 each quarter. Mr. Flury was also granted
an option to purchase 609,392 shares of our common stock at $0.10 per share.
This option is immediately exercisable. As of September 30, 1999, the option had
not yet been exercised. The shares underlying the option will vest at a rate of
152,348 shares after his first year of employment and 12,695 shares per month
thereafter.

Daniel A. Eckert, our Executive Vice President of Sales and President of
Neoforma Shop, accepted employment with us in July 1999. Mr. Eckert is
compensated at an annual rate of $250,000. He received a $50,000 bonus upon
joining us and is entitled to receive a bonus of up to $50,000 each year. Mr.
Eckert was also granted an option to purchase 450,000 shares at $0.50 per share.
This option is immediately exercisable and Mr. Eckert has exercised this option
in full. The shares underlying the option will vest in equal monthly
installments over four years.

For more information regarding the terms of employment agreements and offer
letters with our executive officers, see "-- Employment Contracts and Change of
Control Arrangements."

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1998 to each of the executive officers named in
the Summary Compensation Table above. We granted the option listed below at an
exercise price equal to the fair market value of our common stock, as determined
by our board of directors on the date of grant. The option becomes exercisable
as to 25% of the underlying shares upon the first anniversary of the date of
grant and an additional 2.083% per month thereafter. The option expires on the
earlier of 10 years from the date of grant or three months after termination of
employment.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER PERCENTAGE OF VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED IN 1998(1) PER SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Kleck................ -- -- -- -- -- --
Wayne D. McVicker............... -- -- -- -- -- --
Stephen A. Pieraldi............. 175,000 12.2% $0.05 05/26/2008 $19,756 $36,640
</TABLE>

- -------------------------
(1) Based on an aggregate of 1,457,700 shares underlying the options granted to
our employees during fiscal 1998.

(2) Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by the deemed fair market
value of the underlying common stock at December 31, 1998, (b) compounding
the aggregate stock value derived from the foregoing calculation at an
annual rate of 5% or 10% over the 10 year term of the option, and (c)
subtracting from that result the aggregate option exercise price. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
our estimates or projections of future common stock prices.

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<PAGE> 62

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

The following table sets forth the number of shares of common stock
acquired and the value realized upon exercise of stock options during 1998 and
the number of shares of common stock subject to exercisable and unexercisable
stock options held as of December 31, 1998 by each of the executive officers
named in the Summary Compensation Table. Value at fiscal year end is the
difference between the exercise price and the deemed fair market value of the
underlying common stock at December 31, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Kleck............... -- -- -- -- -- --
Wayne D. McVicker.............. -- -- -- -- -- --
Stephen A. Pieraldi............ -- -- -- 175,000 -- $8,750
</TABLE>

EMPLOYEE BENEFIT PLANS

1997 Stock Plan

Our 1997 Stock Plan was adopted by our board of directors in January 1997.
As of September 30, 1999, there were outstanding options to purchase a total of
5,128,549 shares of common stock under this plan, and 8,126,213 shares remained
available for future grants. This plan will terminate immediately prior to this
offering, and no further options will be granted. However, the termination of
this plan will not affect any outstanding options, which will remain outstanding
until they are exercised, terminate or expire.

1999 Equity Incentive Plan

Our 1999 Equity Incentive Plan will become effective on the date of this
prospectus and will serve as the successor to our 1997 Stock Plan. We have
reserved 5,000,000 shares of common stock for issuance under this plan. The
number of shares reserved for issuance under this plan will be increased to
include:

- any shares reserved under our 1997 Stock Plan not issued or subject to
outstanding grants on the date of this prospectus;

- any shares issued under our 1997 Stock Plan that are repurchased by us at
the original purchase price; and

- any shares issuable upon exercise of options granted under our 1997 Stock
Plan that expire or become unexercisable without having been exercised in
full.

On January 1 of each year, the number of shares reserved and available for
grant and issuance under this plan will be increased automatically such that the
total number of shares reserved under the plan after the automatic increase
shall equal 5% of our total outstanding shares as of the immediately preceding
December 31. The following shares will be available for grant and issuance under
our 1999 Equity Incentive Plan:

- shares issuable upon exercise of an option granted under this plan that
is terminated or cancelled before the option is exercised;

- shares issued upon exercise of an option granted under this plan that are
subsequently repurchased by us at the original purchase price;

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- shares subject to awards granted under this plan that are subsequently
forfeited or repurchased by us at the original issue price; and

- shares subject to stock bonuses granted under this plan that otherwise
terminate without shares being issued.

Our 1999 Equity Incentive Plan will terminate on November 11, 2009, unless
earlier terminated in accordance with the terms of the plan. Our 1999 Equity
Incentive Plan authorizes the award of options, restricted stock awards and
stock bonuses. No person will be eligible to receive more than 4,000,000 shares
in any calendar year under this plan (4,500,000 in the case of new employees).
This plan is administered by the compensation committee of our board of
directors, which currently consists of Messrs. Douglass, Filipowski and Helppie,
all of whom are outside directors, as defined under applicable federal tax laws.
The committee has the authority to interpret this plan and any agreement made
under the plan, grant awards and make all other determinations for the
administration of this plan. Also, our outside directors are entitled to receive
automatic annual grants of options to purchase shares of our common stock, as
described under "-- Director Compensation." Our 1999 Equity Incentive Plan
provides for the grant of both incentive stock options that qualify under
Section 422 of the Internal Revenue Code, and nonqualified stock options.
Incentive stock options may be granted only to employees. Nonqualified stock
options, and all other awards other than incentive stock options, may be granted
to employees, officers, directors, consultants, independent contractors and
advisors of Neoforma.com or subsidiary of Neoforma.com. However, consultants,
independent contractors and advisors are only eligible to receive awards if they
render bona fide services to us, provided these services are not in connection
with the offer and sale of securities in a capital-raising transaction. The
exercise price of incentive stock options must be at least equal to the fair
market value of our common stock on the date of grant. The exercise price of
incentive stock options granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of nonqualified stock options must be at
least equal to 85% of the fair market value of the our common stock on the date
of grant. The maximum term of options granted under our 1999 Equity Incentive
Plan is 10 years. Except as provided under the 1999 Equity Incentive Plan,
awards granted under the plan may not be transferred in any manner other than by
will or by the laws of descent and distribution. The compensation committee may
allow exceptions to this restriction with respect to awards that are not
incentive stock options. Options granted under our 1999 Equity Incentive Plan
generally expire three months after the termination of the optionee's service.
Except for options granted to outside directors, in the event of a change in
control of Neoforma.com, if the successor does not assume outstanding options,
they will expire upon conditions determined by the compensation committee.
Alternatively, the compensation committee may accelerate the vesting of awards
upon a change in control.

1999 Employee Stock Purchase Plan

Our 1999 Employee Stock Purchase Plan will become effective on the first
day on which price quotations are available for our common stock on the Nasdaq
National Market. We have initially reserved 750,000 shares of common stock for
issuance under this plan. The number of shares reserved for issuance under our
1999 Employee Stock Purchase Plan will be increased automatically on January 1
such that the total number of shares reserved under the plan after the automatic
increase shall equal 1% of our total outstanding shares as of the immediately
preceding December 31. Our board of directors or compensation committee may
reduce the amount of the increase in any particular year. Our compensation
committee will administer our 1999 Employee Stock Purchase Plan. Employees
generally will be eligible to participate in our 1999 Employee Stock Purchase
Plan if they are employed by Neoforma.com, or any subsidiaries that Neoforma.com
designates, for more than 20 hours per week and more than five months in a
calendar year. Employees are not eligible to

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<PAGE> 64

participate in our 1999 Employee Stock Purchase Plan if they are 5%
stockholders, or would become 5% stockholders as a result of their participation
in this plan. Under our 1999 Employee Stock Purchase Plan, eligible employees
may acquire shares of our common stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 1% and 15% of their
cash compensation and are subject to maximum purchase limitations. Participation
in this plan will end automatically upon termination of employment for any
reason. A participant will not be able to purchase shares having a fair market
value of more than $25,000, determined as of the first day of the applicable
offering period, for each calendar year in which the employee participates in
this plan. Each offering period under this plan will be for two years and will
consist of four six-month purchase periods. The first offering period is
expected to begin on the first business day on which price quotations for our
common stock are available on the Nasdaq National Market. The first purchase
period may be more or less than six months long. Offering periods thereafter
will begin on February 1 and August 1. The purchase price for common stock
purchased under this plan will be 85% of the lesser of the fair market value of
our common stock on the first day of the applicable offering period or the last
day of each purchase period. The compensation committee will have the power to
change the duration of offering periods. Our 1999 Employee Stock Purchase Plan
is intended to qualify as an employee stock purchase plan under Section 423 of
the Internal Revenue Code. This plan will terminate on November 11, 2009, unless
it is terminated earlier pursuant to its terms.

401(k) Plan.

We sponsor a defined contribution plan intended to qualify under Section
401 of the Internal Revenue Code. Participants may make pre-tax contributions to
the plan of up to 15% of their eligible earnings, subject to a statutorily
prescribed annual limit. Participants are fully vested in their contributions
and the investment earnings. We do not make matching contributions to the 401(k)
plan. Contributions by the participants to the 401(k) plan, and the income
earned on these contributions, are generally not taxable to the participants
until withdrawn. Contributions are held in trust as required by law. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Our amended and restated certificate of incorporation includes a provision
that eliminates the personal liability of a director for monetary damages
resulting from breach of his fiduciary duty as a director, except for liability:

- for any breach of the director's duty of loyalty to us or our
stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

- for any transaction from which the director derived an improper personal
benefit.

Our amended and restated bylaws provide that:

- we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation law, subject to
limited exceptions;

- the rights conferred in the amended and restated bylaws are not
exclusive; and

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- we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to
limited exceptions.

In addition to the indemnification required by our amended and restated
certificate of incorporation and bylaws, before the completion of this offering,
we intend to enter into indemnity agreements with each of our current directors
and officers. These agreements provide for the indemnification of our officers
and directors for all expenses and liabilities incurred in connection with any
action or proceeding brought against them by reason of the fact that they are or
were our agents. We also intend to obtain directors' and officers' insurance to
cover our directors, officers and some of our employees for certain liabilities,
including public securities matters. We believe that these indemnification
provisions and agreements and this insurance are necessary to attract and retain
qualified directors and officers.

The limitation of liability and indemnification provisions in our amended
and restated certificate of incorporation and bylaws may discourage stockholders
from bringing a lawsuit against our directors for breach of their fiduciary
duty. They may also reduce the likelihood of derivative litigation against
directors and officers, even though an action, if successful, might benefit us
and other stockholders. Furthermore, the value of a stockholder's investment may
decline to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our
directors, officers or employees regarding which indemnification from us is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification by us.

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<PAGE> 66

CERTAIN TRANSACTIONS

Other than compensation agreements and other arrangements, which are
described in "Management," and the transactions described below, since we
incorporated in March 1996, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or will be a
party:

- in which the amount involved exceeded or will exceed $60,000, and

- in which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.

The agreements described below are included as exhibits to the registration
statement of which this prospectus forms a part.

TRANSACTIONS WITH PROMOTER

In May 1996, in connection with our formation and initial financing,
Jeffrey H. Kleck, our co-founder and Senior Vice President, purchased four
million shares of our common stock at $0.00375 per share in exchange for $10,000
in cash and intellectual property relating to our Plan service and Wayne D.
McVicker, our co-founder, Senior Vice President, President of Neoforma Plan and
a director, purchased four million shares of our common stock at $0.00375 per
share in exchange for $10,000 in cash and intellectual property relating to our
Plan service. Messrs. Kleck and McVicker each hold more than 5% of our common
stock.

STOCK FINANCINGS/STOCK EXCHANGES

Series A preferred stock exchange

In April 1998, we issued 9,000,000 shares of our Series A preferred stock
in exchange for 9,000,000 shares of previously issued common stock. The
following directors, executive officers and/or 5% stockholders purchased our
Series A preferred stock:

- Wayne D. McVicker -- 4,000,000 shares; and

- Jeffrey H. Kleck -- 4,000,000 shares.

Series B preferred stock financing

In April 1998, we sold 2,860,000 shares of our Series B preferred stock for
approximately $0.50 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series B preferred stock:

- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 500,000 shares; and

- Madhavan Rangaswami -- 200,000 shares.

Terence J. Garnett, one of our directors, is a trustee of the Garnett
Family Trust UDT 4/2/97.

Madhavan Rangaswami is one of our directors.

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Series C preferred stock financing

In June 1998, we sold 5,064,937 shares of our Series C preferred stock for
approximately $0.77 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series C preferred stock:

- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 754,870 shares;

- Venrock Associates -- 1,467,073 shares;

- Venrock Associates II, L.P. -- 1,944,724 shares; and

- Madhavan Rangaswami -- 351,732 shares.

Venrock Associates and Venrock Associates II, L.P. together hold more than
5% of our common stock. Both entities are limited partnerships managed by a
group of individuals who serve as general partners of both partnerships. Terence
J. Garnett, one of our directors, is a consultant to Venrock Associates and
Venrock Associates II, L.P. but does not share voting or dispositive power over
the shares held by these entities.

Series D preferred stock financing

In February 1999, we sold 10,196,361 shares of our Series D preferred stock
for approximately $1.18 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series D preferred stock:

- Delphi BioInvestments IV, L.P. -- 59,915 shares;

- Delphi Ventures IV, L.P. -- 2,906,187 shares;

- Terence J. Garnett -- 50,848 shares;

- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 423,728 shares;

- Venrock Associates -- 694,915 shares; and

- Venrock Associates II, L.P. -- 1,000,000 shares.

Delphi Ventures IV, L.P. and Delphi BioInvestments IV, L.P. together hold
more than 5% of our common stock. Both entities are limited partnerships managed
by Delphi Management Partners IV, L.L.C., of which David L. Douglass, one of our
directors, is a managing member.

Series E and Series E-1 preferred stock financing

In October 1999, we sold an aggregate of 12,418,633 shares of our Series E
and Series E-1 preferred stock for approximately $5.68 per share and issued an
additional 275,000 shares of Series E-1 preferred stock in connection with
entering into a strategic alliance in October 1999. The following directors,
executive officers and/or 5% stockholders purchased our Series E and Series E-1
preferred stock:

- Dell USA L.P. -- 4,401,408 shares;

- Venrock Associates -- 133,033 shares;

- Venrock Associates II, L.P. -- 191,438 shares;

- Venrock Entrepreneurs Fund -- 17,077 shares;

- Superior Consultant Company -- 880,282 shares;

- divine interVentures, inc. -- 1,056,338 shares; and

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- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 10,563 shares.

Dell USA L.P. holds more than 5% of our common stock.

Venrock Entrepreneurs Fund, L.P., together with Venrock Associates and
Venrock Associates II, L.P., holds more than 5% of our common stock. Venrock
Entrepreneurs Fund, L.P., is a limited partnership managed by Venrock Management
LLC, its sole general partner. The managing members of Venrock Management LLC
are a group of individuals, most of whom are general partners of Venrock
Associates and Venrock Associates II, L.P. Terence J. Garnett, one of our
directors, is a consultant to Venrock Entrepreneurs Fund, L.P. and does not
share voting or dispositive power over shares held by such entity.

Richard D. Helppie, one of our directors, is Chairman of the Board and
Chief Executive Officer of Superior Consultant Holdings Corporation.

Andrew J. Filipowski, one of our directors, is the President, Chief
Executive Officer and Chairman of the Board of divine interVentures, inc.

Appointment of Board Members. Messrs. McVicker, Garnett, Douglass, Helppie
and Filipowski were appointed to our board of directors pursuant to rights held
by our preferred stockholders. These rights terminate upon the closing of this
offering.

Investor Rights Agreement. In October 1999, we entered into a Second
Amended and Restated Investor Rights Agreement with some of our stockholders,
including some of our officers and directors, or their affiliated entities,
under which they have registration rights with respect to their stock. See
"Description of Capital Stock -- Registration Rights."

CONSULTING AGREEMENTS

In April 1998, we entered into a consulting agreement with Sand Hill Group
LLC. Madhavan Rangaswami, one of our directors, is a member of Sand Hill Group
LLC. Sand Hill Group LLC provides 16 hours per month of services to us through
the end of 1999 in exchange for our sale of 250,000 shares of our common stock
to each of Mr. Rangaswami and another member of Sand Hill Group LLC and our
reimbursement of Sand Hill's out-of-pocket expenses. We retained a right to
repurchase these shares, which right lapses ratably over six quarters after the
issuance of the shares.

In July 1999, we entered into a consulting agreement with Mr. Rangaswami.
Under the agreement, Mr. Rangaswami agreed to provide us with consulting
services for a period of three months in exchange for an option to purchase
95,325 shares of our common stock at an exercise price of $0.10, which vested at
the end of the three month period.

LOANS

On July 10, 1999, we made a loan to Robert J. Zollars, our Chairman,
President and Chief Executive Officer, in connection with his exercise of a
stock option granted to him under the terms of his employment agreement. The
loan is evidenced by a promissory note in the principal amount of $162,078.84,
with interest compounded quarterly on the unpaid balance at a rate of 5.70% per
year.

On July 10, 1999, we made a loan to Robert J. Zollars in connection with
his exercise of a stock option granted to him under the terms of his employment
agreement. The loan is evidenced by a promissory note in the principal amount of
$356,629.19, with interest compounded quarterly on the unpaid balance at a rate
of 5.70% per year.

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On September 7, 1999, we made a loan to Frederick J. Ruegsegger, our Chief
Financial Officer, in connection with his exercise of a stock option granted to
him under the terms of his offer letter. The loan is evidenced by a promissory
note in the principal amount of $301,672.95, with interest compounded quarterly
on the unpaid balance at a rate of 5.85% per year.

On September 7, 1999, we made a loan to Daniel A. Eckert, our Executive
Vice President of Sales and President of Neoforma Shop, in connection with his
exercise of a stock option granted to him under the terms of his offer letter.
The loan is evidenced by a promissory note in the principal amount of $224,550,
with interest compounded quarterly on the unpaid balance of the note at a rate
of 5.85% per year.

On October 1, 1999, we made a loan to Robert Flury, our Senior Vice
President of Business Development, in connection with his exercise of a stock
option granted to him under the terms of his offer letter. The loan is evidenced
by a promissory note in the principal amount of $44,550, with interest
compounded quarterly on the unpaid balance at a rate of 5.89% per year.

On October 4, 1999, we made a loan to Bhagwan D. Goel, our Executive Vice
President of Products and Services, in connection with his exercise of a stock
option granted to him under the terms of his offer letter. The loan is evidenced
by a promissory note in the principal amount of $1,784,404.90, with interest
compounded quarterly on the unpaid balance at a rate of 5.89% per year.

On December 14, 1999, we made a loan to Robert W. Rene, our Executive Vice
President of Strategy and Chief Marketing Officer, in connection with his
exercise of a stock option granted to him under the terms of his memorandum
concerning employment. The loan is evidenced by a promissory note in the
principal amount of $4,899,300.00, with interest compounded quarterly on the
unpaid balance at a rate of 6.06% per year.

On various dates from March 1997 through December 1997, Wayne D. McVicker,
our co-founder, Senior Vice President, President of Neoforma Plan and a
director, made loans to us in an aggregate amount of $190,000. In April 1998, we
issued a convertible note for $197,047.80 to Mr. McVicker in consideration of
his agreement to cancel the outstanding promissory notes representing these
loans. The convertible note paid interest at a rate of 8% per year. This note
has been paid in full.

On various dates from September 1996 through November 1997, Jeffrey H.
Kleck, our co-founder and Senior Vice President, made loans to us in an
aggregate amount of $195,000. In April 1998, we issued a convertible note for
$206,670.95 to Dr. Kleck in consideration of his agreement to cancel the
promissory notes representing these loans. The convertible note paid interest at
a rate of 8% per year. The convertible note was converted into 60,000 shares of
Series B preferred stock at a price per share of $0.50 and the remaining balance
was paid in full.

In August 1999, we paid $1.7 million cash and issued a promissory note to
Erik Tivin, our Senior Vice President of Auction Services, in the amount of $7.8
million as payment of the purchase price of our acquisition of GAR. The note is
payable over a five year period.

On October 1, 1999, we made a loan to Mr. Tivin in connection with his
exercise of a stock option granted to him under the terms of his employment
agreement. This loan is evidenced by a promissory note in the principal amount
of $47,850.07, with interest compounded quarterly on the unpaid balance at a
rate of 5.89% per year.

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<PAGE> 70

COMMERCIAL TRANSACTIONS

In October 1999, Richard D. Helppie, the Chairman and Chief Executive
Officer of Superior Consultant Holdings Corporation, joined our board of
directors as the representative of the holders of our Series E preferred stock.
In addition, in October 1999 we entered into an agreement with Superior
Consultant Company, Inc., a wholly owned subsidiary of Superior Consultant
Holdings Corporation, providing for collaboration between us and Superior.
Superior is a supplier of Digital Business Transformation(TM) services to large
healthcare organizations, including Internet-related services, systems
integration, outsourcing and consulting, which enable Superior clients to
utilize digital technologies and process innovations to improve their
businesses. Under the agreement, we have agreed to market Superior's services to
our users, and Superior has agreed to introduce our services to appropriate
clients, based on their interests, and to incorporate our services into its
Digital Business Transformation(TM) offerings. The agreement also provides for
joint marketing activities. In consideration, we have agreed to make payments to
Superior in an aggregate amount of up to approximately $2.0 million, as well as
a percentage of specified Neoforma.com e-commerce transaction revenue and other
potential fixed payments based on the success of our joint marketing activities.
We have also agreed to utilize Superior's services on a preferred basis for
systems integration, development, infrastructure, process improvement and
consulting assistance, totaling at least $1.5 million of services from Superior,
at a discount from Superior's standard fees. Our agreement with Superior expires
in October 2002.

In October 1999, we entered into an agreement with Dell Marketing, L.P., an
affiliate of Dell Computer, under which we agreed to develop complementary
marketing programs with Dell and to establish links between our respective
Internet websites. We agreed to use Dell as our exclusive supplier of desktops,
portables, workstations, servers and storage devices unless its products did not
meet our reasonable technical requirements. We also agreed to purchase at least
$5.0 million of Dell products and $100,000 of data center consulting services.
Our agreement with Dell expires in 2001, subject to renewal for additional
one-year periods. In addition, Dell purchased approximately 4.4 million shares
of our preferred stock in October 1999 at an average price per share of $5.68
and an aggregate purchase price of approximately $25 million.

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<PAGE> 71

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of our common stock as of September 30, 1999 and as
adjusted to reflect the sale of the common stock in this offering by:

- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;

- each of our directors;

- each executive officer listed in the Summary Compensation Table; and

- all executive officers and directors as a group.

The percentage of outstanding shares beneficially owned before this
offering in the following table is based on 49,364,868 shares of common stock
outstanding as of September 30, 1999, assuming the following:

- issuance of the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we
issued in October 1999;

- issuance of the shares of common stock issuable upon conversion of the
176,057 shares of our Series E preferred stock that we, in November 1999,
agreed to issue and sell to Fisher Scientific International, Inc.;

- issuance of 350,000 shares of common stock to the former shareholders of
FDI Information Resources, Inc. in connection with our acquisition of
substantially all of the assets of FDI in November 1999; and

- conversion of all outstanding shares of preferred stock into 39,990,988
shares of common stock upon the completion of this offering.

The percentage of outstanding shares beneficially owned after this offering in
the following table is based on 56,364,868 shares of common stock outstanding
after the completion of this offering.

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<PAGE> 72

Under the rules of the Securities and Exchange Commission, beneficial
ownership includes voting or investment power with respect to securities and
includes the shares issuable under stock options or warrants that are
exercisable within 60 days of September 30, 1999. Shares issuable under stock
options or warrants are deemed outstanding for computing the percentage held by
the person holding options but are not outstanding for computing the percentage
of any other person. Unless otherwise indicated, the address for each listed
stockholder is: c/o Neoforma.com, Inc., 3255-7 Scott Boulevard, Santa Clara,
California 95054. To our knowledge, except as indicated in the footnotes to this
table and under applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock.

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES BENEFICIALLY OWNED
NUMBER OF SHARES ---------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Robert J. Zollars(1)...................... 5,239,475 10.6% 9.3%
Jeffrey H. Kleck(2)....................... 3,923,734 7.9% 7.0%
Wayne D. McVicker(3)...................... 3,932,208 8.0% 7.0%
Stephen J. Pieraldi(4).................... 175,000 * *
David Douglass(5)......................... 3,066,102 6.2% 5.4%
Terence J. Garnett(6)..................... 2,240,009 4.5% 4.0%
Madhavan Rangaswami(7).................... 997,057 2.0% 1.8%
Richard D. Helppie(8)..................... 880,282 1.8% 1.6%
Andrew J. Filipowski(9)................... 1,056,338 2.1% 1.9%
All 15 executive officers and directors as
a group(10)............................. 23,039,760 46.7% 40.9%
OTHER 5% STOCKHOLDERS
Dell USA L.P.(11)......................... 4,401,408 8.9% 7.8%
Delphi Ventures(5)(12).................... 3,066,102 6.2% 5.4%
Venrock Associates(13).................... 5,448,260 11.0% 9.7%
</TABLE>

- -------------------------
* Represents beneficial ownership of less than 1%.

(1) Includes 3,602,315 shares of common stock subject to a repurchase right
that lapses at a rate of 900,578 shares in July 2000 and 75,048 shares per
month thereafter.

(2) Includes 16,948 shares of common stock held by Jeffrey H. Kleck and Julie
C. Kleck, Trustees of the 1999 Kleck Children's Irrevocable Trust "A" dated
September 28, 1999 for the benefit of Katrina C. Kleck and 16,948 shares of
common stock held by Jeffrey H. Kleck and Julie C. Kleck, Trustees of the
1999 Kleck Children's Irrevocable Trust "B" dated September 28, 1999 for
the benefit of Alaina C. Kleck. Mr. Kleck disclaims beneficial ownership of
the shares held by these entities.

(3) Includes 16,948 shares of common stock held by McVicker Children's Trust A
for the benefit of Weston G. McVicker and 16,948 shares of common stock
held by McVicker Children's Trust B for the benefit of Reece A. McVicker.
Mr. McVicker disclaims beneficial ownership of the shares held by these
entities.

(4) Includes 113,021 shares of common stock issuable under an option held by
Mr. Pieraldi that is presently exercisable in full.

(5) Includes 59,915, 2,906,187 and 67,170 shares of common stock held of record
by Delphi BioInvestments IV, L.P., Delphi Ventures IV, L.P. and individual
partners of Delphi Ventures IV, L.P., respectively. Mr. Douglass, one of
our directors, is a managing member of Delphi Management Partners IV,
L.L.C., the sole general partner of both Delphi BioInvestments IV,

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<PAGE> 73

L.P. and Delphi Ventures IV, L.P. Mr. Douglass disclaims beneficial
ownership of the shares held by these entities and partners.

(6) Represents 550,848 shares of common stock held by Terence J. Garnett and
1,689,161 shares of common stock held by Terence J. and Katrina A. Garnett,
Trustees of the Garnett Family Trust UDT 4/2/97. 58,334 of these shares of
common stock are subject to a repurchase right that lapses over time. This
number does not include 2,295,021, 3,136,162 and 17,077 shares of common
stock held by Venrock Associates, Venrock Associates II, L.P. and Venrock
Entrepreneurs Fund. Mr. Garnett, one of our directors, is a consultant to
Venrock Associates, Venrock Associates II, L.P. and Venrock Entrepreneurs
Fund, L.P. but does not share voting or dispositive power over the shares
held by these entities.

(7) Includes 58,334 shares of common stock that are subject to a repurchase
right that lapses over time.

(8) Represents 880,282 shares of common stock held by Superior Consultant
Holdings Corporation. Mr. Helppie, one of our directors, is the Chairman,
Chief Executive Officer and President of Superior. Does not include 150,000
shares of common stock issuable under an option held by Mr. Helppie which
was granted after September 30, 1999. Mr. Helppie disclaims beneficial
ownership of the shares held by Superior.

(9) Represents 1,056,338 shares of common stock held by divine interVentures,
Inc. Mr. Filipowski, one of our directors, is President, Chief Executive
Officer and Chairman of the Board of divine interVentures, Inc. Does not
include 150,000 shares of common stock issuable under an option held by Mr.
Filipowski which was granted after September 30, 1999. Mr. Filipowski
disclaims beneficial ownership of the shares held by divine interVentures,
Inc.

(10) Includes 1,159,392 shares of common stock issuable under options held by
directors and executive officers that are presently exercisable within 60
days of September 30, 1999. Also includes 4,764,163 outstanding shares that
are subject to repurchase rights that lapse over time. Does not include
595,000 shares of our common stock issued to Bhagwan D. Goel, 700,000
shares of our common stock issued to Robert W. Rene and 275,000 shares of
common stock issuable under options held by S. Wayne Kay, in each case
issued or granted after September 30, 1999 and the 175,000 shares
beneficially owned by Stephen J. Pieraldi who is not currently one of our
executive officers. These shares are subject to a repurchase right that
lapses over time.

(11) The address of Dell USA L.P. Corporation is One Dell Way, Round Rock, TX
78682.

(12) Includes 59,915 and 2,906,187 shares of common stock held by Delphi
BioInvestments IV, L.P. and Delphi Ventures IV, L.P. Both entities are
limited partnerships for which Delphi Management Partners IV, L.L.C., is
the sole general partner. Both entities are limited partnerships managed by
a group of individuals who serve as general partners of both partnerships.
The address of Delphi Ventures is 3000 Sand Hill Road, Bldg. 1 #135, Menlo
Park, CA 94025.

(13) Represents 2,295,021, 3,136,162 and 17,077 shares of common stock held by
Venrock Associates, Venrock Associates II, L.P. and Venrock Entrepreneurs
Fund. The address of Venrock Associates is 2494 Sand Hill Road, Suite 200,
Menlo Park, CA 94025.

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<PAGE> 74

DESCRIPTION OF CAPITAL STOCK

Immediately following the closing of this offering, our authorized capital
stock will consist of 200 million shares of common stock, $0.001 par value per
share, and five million shares of preferred stock, $0.001 par value per share.
As of September 30, 1999, assuming the following:

- issuance of the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we
issued in October 1999,

- issuance of 350,000 shares of common stock to the former shareholder of
FDI Information Resources, Inc. in connection with our acquisition of
substantially all of the assets of FDI in November 1999, and

- conversion of all outstanding shares of preferred stock into 39,990,988
shares of common stock upon the completion of this offering,

there were outstanding 49,364,868 shares of common stock held of record by
approximately 86 stockholders, options to purchase 5,112,965 shares of our
common stock and warrants to purchase 858,147 shares of our common stock. The
number of shares of common stock into which each share of our Series E and
Series E-1 preferred stock will be converted upon completion of this offering
may be adjusted under some circumstances as described in Note 9 of notes to
consolidated financial statements.

COMMON STOCK

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available at the times and
in the amounts as our board of directors may determine.

Each holder of common stock is entitled to one vote for each share of
common stock held on all matters submitted to a vote of stockholders. Cumulative
voting for the election of directors is not provided for in our amended and
restated certificate of incorporation. As a result, commencing at our first
annual meeting of stockholders, the holders of a majority of the shares voted
can elect all of the directors then standing for election.

Our common stock is not entitled to preemptive rights and is not subject to
conversion or redemption.

Upon our liquidation, dissolution or winding-up, the holders of our common
stock are entitled to share ratably with holders of any participating preferred
stock in all assets remaining after payment of all liabilities and the
liquidation preferences of any outstanding preferred stock. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.

PREFERRED STOCK

Upon the closing of this offering, each outstanding share of preferred
stock will be converted into shares of common stock. See Notes 8 and 9 of notes
to consolidated financial statements for a description of our outstanding
preferred stock.

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<PAGE> 75

Following this offering, our board of directors will be authorized, subject
to limitations prescribed by Delaware law, without stockholder approval, to
issue up to five million shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board of directors can also increase or decrease the number of shares of any
series, but not below the number of shares of such series then outstanding,
without any further vote or action by the stockholders. The board of directors
may authorize the issuance of preferred stock with voting, conversion or other
rights that are superior to the rights of the holders of the common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
Neoforma.com and may adversely affect the market price of the common stock and
the voting and other rights of the holders of common stock. We have no current
plan to issue any shares of preferred stock after the offering.

WARRANTS

As of September 30, 1999, we had issued warrants to purchase an aggregate
of 858,147 shares of our common stock at a weighted average exercise price of
$0.61. These warrants will remain outstanding after the completion of this
offering and will represent warrants to purchase shares of our common stock.
These warrants have expiration dates from 2003 to 2009. See Note 10 of notes to
consolidated financial statements.

REGISTRATION RIGHTS

As a result of an investors' rights agreement between Neoforma.com and some
of our stockholders, the holders of approximately 39,990,988 shares of common
stock are entitled to rights with respect to the registration of these shares
under the Securities Act, as described below.

Demand Registration Rights. At any time beginning six months after the
completion of this offering, the holders of at least 75% of the shares of common
stock issuable upon conversion of our preferred stock can request that we
register all or a portion of their shares. We will only be required to file two
registration statements in response to their demand registration rights. We may
postpone the filing of a registration statement for up to 90 days once in a 12
month period if we determine that the filing would be seriously detrimental to
us or our stockholders.

Piggyback Registration Rights. If we register any securities for public
sale, the holders of the shares of common stock issuable upon conversion of our
preferred stock will have the right to include their shares in the registration
statement. However, this right does not apply to a registration relating to any
of our employee benefit plans or a corporate reorganization. The managing
underwriter of any underwritten offering will have the right to limit the number
of shares registered by these holders to 15% of the total shares covered by the
registration statement due to marketing reasons.

Form S-3 Registration Rights. The holders of the shares of common stock
issuable upon conversion of our preferred stock can request that we register
their shares if we are eligible to file a registration statement on Form S-3 and
if the aggregate price of the shares offered to the public is at least $1.0
million. The holders may only require us to file three registration statements
on Form S-3 per calendar year.

We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.

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<PAGE> 76

The registration rights will expire with respect to a particular
stockholder if it can sell all of its shares in a three month period under Rule
144 of the Securities Act. In any event, the registration rights described above
will expire five years after this offering is completed.

Holders of these registration rights have waived the exercise of these
registration rights for 180 days following the date of this prospectus.

ANTI-TAKEOVER PROVISIONS

The provisions of Delaware law, our amended and restated certificate of
incorporation and bylaws may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.

Delaware Law

We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets with any interested stockholder, or a stockholder who owns
15% or more of the corporation's outstanding voting stock, as well as affiliates
and associates of stockholder, for three years following the date that
stockholder became an interested stockholder unless:

- the transaction is approved by the board of directors prior to the date
the interested stockholder attained that status;

- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or

- on or subsequent to such date the business combination is approved by the
board and authorized at an annual or special meeting of stockholders by
at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.

A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. The statute could prohibit or
delay mergers or other takeover or change in control attempts and, accordingly,
may discourage attempts to acquire us.

Charter and Bylaw Provisions

Our amended and restated certificate of incorporation and bylaws provide
that:

- following the completion of this offering, no action shall be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act by
written consent;

- following the completion of this offering, the approval of two-thirds of
the stockholders shall be required to adopt, amend or repeal our bylaws;

- stockholders may not call special meetings of the stockholders or fill
vacancies on the board;

- following the completion of this offering, our board of directors will be
divided into three classes, each serving staggered three-year terms,
which means that only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for the
remainder of their respective terms, and directors may only be removed
for cause; and

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<PAGE> 77

- we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.

These provisions of our certificate of incorporation and bylaws may have
the effect of delaying, deferring or discouraging another person from acquiring
control of our company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. Its address is 40 Wall Street, 46th Floor, New York,
NY 10005 and its telephone number is 1-718-921-8200.

LISTING

Our common stock has been approved for listing on The Nasdaq National
Market under the trading symbol "NEOF."

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<PAGE> 78

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock.
A significant public market for our common stock may not develop or be sustained
after this offering. Future sales of substantial amounts of our common stock in
the public market, or the possibility of these sales occurring, could adversely
affect prevailing market prices for our common stock or our future ability to
raise capital through an offering of equity securities.

Upon completion of this offering, we will have 56,364,868 shares of common
stock outstanding, assuming no exercise of options and warrants outstanding as
of September 30, 1999, and the conversion of all outstanding shares of preferred
stock. Of these shares, the 7,000,000 shares sold in this offering (8,050,000 if
the underwriters' over-allotment option is exercised in full) will be freely
tradable in the public market without restriction or registration under the
Securities Act, unless the shares are held by our "affiliates," as that term is
defined in Rule 144 under the Securities Act.

The remaining 49,364,868 shares of common stock outstanding upon completion
of this offering will be "restricted securities" as defined in Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.

Under the terms of "lock-up" agreements, all the executive officers,
directors and stockholders of Neoforma.com, who collectively hold an aggregate
of 48,336,600 of these restricted securities, have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any of
these shares for a period of 180 days from the date of this prospectus, subject
to limited exceptions. However, Merrill Lynch, Pierce, Fenner & Smith
Incorporated may, in its sole discretion, at any time without notice, release
all or any portion of the shares subject to lock-up agreements.

Taking into account the lock-up agreements, and assuming Merrill Lynch,
Pierce, Fenner & Smith Incorporated does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:

- on the date of this prospectus, the 7,000,000 shares sold in the offering
will be immediately available for sale in the public market;

- 180 days after the date of this prospectus, approximately 34,890,623
shares will be eligible for sale under Rule 701 upon the expiration of
our repurchase right with respect to those shares or under Rule 144, of
which 28,173,146 will be subject to volume, manner of sale and other
limitations under Rule 144; and

- of the remaining shares, 14,474,245 will be eligible for sale under Rule
144 upon the expiration of various one-year holding periods.

Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act or Rule 144. Rule 701 permits resales of these shares beginning
90 days after the date of this prospectus. In general, under Rule 144, after
expiration of the lock-up period, a person who has beneficially owned restricted
securities for at least one year would be

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<PAGE> 79

entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:

- 1% of the then outstanding shares of our common stock, or

- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale and notice
requirements and the availability of current public information about us. Under
Rule 144(k), a person who has not been our affiliate at any time during the
three months before a sale and who has beneficially owned the shares proposed to
be sold for at least two years can sell these shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.

After the effective date of this offering, we intend to file a registration
statement on Form S-8 to register shares of our common stock outstanding or
reserved for issuance under our various stock plans. The registration statement
will become effective automatically upon filing. Shares issued under the
foregoing employee benefit plans, after the filing of a registration statement
on Form S-8, may be sold in the open market, subject, in the case of some
holders, to the Rule 144 limitations applicable to affiliates, the lock-up
agreements and our repurchase rights held by us. We also intend to file a
registration statement to register resales in the open market of shares issued
upon exercise of options we granted prior to the close of this prospectus that
are not otherwise eligible for resale under Rule 701 as described above.

In addition, following this offering, the holders of 39,990,988 shares of
outstanding common stock will, under some circumstances, have right to require
us to register their shares for future sale. See "Description of Capital
Stock -- Registration Rights."

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<PAGE> 80

UNDERWRITING

We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co., Inc.,
FleetBoston Robertson Stephens Inc. and William Blair & Company, L.L.C. are
acting as representatives of each of the underwriters named below. Subject to
the terms and conditions set forth in a purchase agreement between us and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us, the
number of shares of common stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Bear, Stearns & Co., Inc. ..................................
FleetBoston Robertson Stephens Inc. ........................
William Blair & Company, L.L.C..............................

---------
Total......................................... 7,000,000
=========
</TABLE>

In the purchase agreement, the several underwriters have agreed, subject to
the terms and conditions set forth in that agreement, to purchase all of the
shares of our common stock being sold pursuant to the agreement if any of the
shares of common stock being sold pursuant to the agreement are purchased. In
the event of a default by an underwriter, the purchase agreement provides that,
in some circumstances, the purchase commitments of the nondefaulting
underwriters may be increased or the purchase agreement may be terminated.

We have agreed to indemnify the underwriters against some liabilities,
including some liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those
liabilities.

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of various legal matters by counsel for the underwriters and other
conditions. The underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us that the underwriters propose initially
to offer the shares of our common stock to the public at the initial public
offering price set forth on the cover page of this prospectus, and to dealers at
such price less a concession not in excess of $ per share of common stock.
The underwriters may allow, and such dealers may re-allow, a discount not in
excess of $ per share of common stock to other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.

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<PAGE> 81

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. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price........................ $ $ $
Underwriting discount........................ $ $ $
Proceeds, before expenses, to Neoforma.com... $ $ $
</TABLE>

The expenses of this offering, exclusive of the underwriting discount, are
estimated at $1.4 million and are payable by us.

OVER-ALLOTMENT OPTION

We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of an
additional 1,050,000 shares of our common stock at the public offering price set
forth on the cover of this prospectus, less the underwriting discount. The
underwriters may exercise this option solely to cover over-allotments, if any,
made on the sale of our common stock offered hereby. To the extent that the
underwriters exercise this option, each underwriter will be obligated to
purchase a number of additional shares of our common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.

RESERVED SHARES

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 630,000 of the shares offered hereby to be sold to
individuals and entities designated by us. The number of shares of common stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not orally
confirmed for purchase within one day of the pricing of the offering will be
offered by the underwriters to the general public on the same terms as the other
shares offered by this prospectus.

NO SALES OF SIMILAR SECURITIES

We, and our executive officers and directors and existing stockholders have
agreed without the prior written consent of Merrill Lynch on behalf of the
underwriters for a period of 180 days after the date of this prospectus, not to
directly or indirectly:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or securities convertible into or
exchangeable or exercisable for or repayable with our common stock,
whether now owned or later acquired by the person executing the agreement
or with respect to which the person executing the agreement later
acquires the power of disposition, or file any registration statement
under the Securities Act of 1933 relating to any shares of our common
stock, or

- enter into an swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of our common stock whether
any such swap or transaction is to be settled by delivery of our common
stock or other securities, in cash or otherwise;

provided that we may at any time and from time to time grant options to purchase
shares of our common stock under our existing stock plans and issue shares of
our common stock upon the exercise of outstanding options, and our executive
officers and directors and existing stockholders may make limited transfers to
immediate family and affiliated parties and may transfer shares purchased in
this offering or in the open market after this offering. In addition, we may
issue additional shares of our

79
<PAGE> 82

common stock equal to a total of up to 3% of the aggregate shares outstanding
immediately after this offering during this 180-day period in connection with
acquisitions, strategic alliances, technology licensing transactions, joint
ventures or similar transactions provided the shares issued in connection with
this transaction will be subject to "lock-up" agreements for the remainder of
the 180-day period. However, we have no present commitments with respect to any
transactions of these types.

QUOTATION ON THE NASDAQ NATIONAL MARKET

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

Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between us and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, are the valuation multiples of publicly traded
companies that the representatives believe to be comparable to us, some of our
financial information, the history of, and the prospects for, our company and
the industry in which we compete, and an assessment of our management, its past
and present operations, the prospects for, and timing of, our future revenue and
the present state of our development, and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to ours. There can be no assurance that an active trading
market will develop for our common stock or that our common stock will trade in
the public market subsequent to the offering at or above the initial public
offering price.

The underwriters do not expect sales of our common stock to be made to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered hereby.

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

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

If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing our common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment options described above.

The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to reduce the underwriters' short position
or to stabilize the price of our common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those shares.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

Neither our company nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transaction or that such transactions, once commenced, will
not be discontinued without notice.

80
<PAGE> 83

LEGAL MATTERS

Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus for
Neoforma.com. Shearman & Sterling, Menlo Park, California, will pass upon
specified legal matters in connection with this offering for the underwriters.
F&W Investments 1999, an investment partnership comprised of partners of Fenwick
& West LLP, holds 35,212 shares of our common stock.

EXPERTS

The financial statements of Neoforma.com, Inc. from inception (March 6,
1996) to December 31, 1998 and for the nine months ended September 30, 1998 and
1999, General Asset Recovery LLC for the years ended December 31, 1997 and 1998,
and FDI Information Resources, L.L.C. from inception (November 4, 1997) to
December 31, 1998 included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. For further information with respect to Neoforma.com and
our common stock, we refer you to the registration statement and the exhibits
and schedules filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete; we refer you to the
copy of each contract or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by reference to that
exhibit. Upon completion of the offering, we will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and will file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information, as well as the
registration statement, exhibits and schedules, may be inspected, without
charge, or copied, at prescribed rates, at the public reference facility
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. In
addition, the Commission maintains an Internet site that contains reports, proxy
and information statements, and other information, regarding issuers that file
electronically with the Commission. The address of the Commission's site is
http://www.sec.gov.

81
<PAGE> 84

NEOFORMA.COM, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEOFORMA.COM, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit).............................................. F-5
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Overview.................................................. F-28
Unaudited Pro Forma Condensed Combined Balance Sheets..... F-29
Unaudited Pro Forma Condensed Combined Statements of
Operations............................................. F-30
Notes to the Unaudited Pro Forma Condensed Combined
Financial Information.................................. F-32

GENERAL ASSET RECOVERY LLC
Report of Independent Public Accountants.................. F-34
Balance Sheets............................................ F-35
Statements of Operations.................................. F-36
Statements of Members' Equity (Deficit)................... F-37
Statements of Cash Flows.................................. F-38
Notes to Financial Statements............................. F-39

FDI INFORMATION RESOURCES, LLC
Report of Independent Public Accountants.................. F-42
Balance Sheets............................................ F-43
Statements of Operations.................................. F-44
Statements of Changes in Members' Equity (Deficit)........ F-45
Statements of Cash Flows.................................. F-46
Notes to Financial Statements............................. F-47

PHAROS TECHNOLOGIES, INC.
Report of Independent Public Accountants.................. F-51
Balance Sheets............................................ F-52
Statements of Operations.................................. F-53
Statements of Shareholders' Equity (Deficit).............. F-54
Statements of Cash Flows.................................. F-55
Notes to Financial Statements............................. F-56
</TABLE>

F-1
<PAGE> 85

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
of Neoforma.com, Inc.:

We have audited the accompanying consolidated balance sheets of
Neoforma.com, Inc. (a Delaware corporation in the development stage) as of
September 30, 1999, and December 31, 1998 and 1997, and the related statements
of operations, changes in stockholders' deficit and cash flows for the nine
months ended September 30, 1999 and 1998 and the three years in the period ended
December 31, 1998 and for the period from inception (March 6, 1996) to September
30, 1999, and for the period from inception (March 6, 1996) to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neoforma.com, Inc. as of
September 30, 1999, and December 31, 1998 and 1997, and the results of its
operations and its cash flows for the nine months ended September 30, 1999 and
1998 and the three years in the period ended December 31, 1998 and for the
period from inception (March 6, 1996) to September 30, 1999, and for the period
from inception (March 6, 1996) to December 31, 1998 in conformity with generally
accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP
San Jose, California
November 19, 1999

F-2
<PAGE> 86

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS' EQUITY AT
--------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999 (NOTE 8)
----- ------- ------------- -----------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 32 $ 812 $ 655
Accounts receivable....................................... -- -- 277
Prepaid expenses and other current assets................. 5 45 380
Deferred debt costs, current portion...................... -- 11 413
----- ------- --------
Total current assets................................ 37 868 1,725
----- ------- --------
PROPERTY AND EQUIPMENT, net................................. 12 731 3,735
INTANGIBLES................................................. -- -- 9,445
OTHER ASSETS................................................ 6 63 393
DEFERRED DEBT COSTS, less current portion................... -- -- 705
----- ------- --------
Total assets........................................ $ 55 $ 1,662 $ 16,003
===== ======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable, current portion............................ $ -- $ 139 $ 3,560
Accounts payable.......................................... 22 285 4,226
Accrued payroll........................................... 13 141 935
Other accrued liabilities................................. 25 89 2,114
----- ------- --------
Total current liabilities........................... 60 654 10,835
----- ------- --------
NOTES PAYABLE, less current portion......................... 385 279 8,069
----- ------- --------
COMMITMENTS (Note 6)
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series C-
Authorized -- 5,110 shares at September 30, 1999
Issued and outstanding; none at December 31, 1997; 5,065
shares at December 31, 1998 and September 30, 1999
(none pro forma); par value -- $0.001; liquidation
preference -- $3,900.................................. -- 3,884 3,884 $ --
----- ------- -------- --------
Series D-
Authorized -- 10,573 shares at September 30, 1999
Issued and outstanding: none at December 31, 1997; none
at December 31, 1998; 10,196 shares at September 30,
1999 (none pro forma); par value $0.001; liquidation
preference -- $12,032................................. -- -- 11,986 --
----- ------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Series A-convertible preferred stock; Authorized -- 9,000
shares at September 30, 1999
Issued and outstanding -- none at December 31, 1997;
9,000 shares at December 31, 1998 and September 30,
1999 (none pro forma); par value -- $0.001;
liquidation preference -- $2,250.................... -- 9 9 --
Series B-convertible preferred stock; Authorized -- 2,860
shares at September 30, 1999
Issued and outstanding -- none at December 31, 1997;
2,860 shares at December 31, 1998 and September 30,
1999 (none pro forma); par value -- $0.001;
liquidation preference -- $1,430.................... -- 3 3 --
Common Stock $0.001 par value:
Authorized -- 75,000 shares at September 30, 1999
Issued and outstanding -- 8,200 shares at December 31,
1997; 1,216 shares at December 31, 1998 and 9,024
shares at September 30, 1999 and 36,145 shares pro
forma................................................. 8 1 9 36
Warrants.................................................. -- 7 3,611 3,611
Additional paid-in capital................................ 72 1,915 55,843 71,698
Notes receivable from stockholders........................ -- (10) (1,302) (1,302)
Deferred compensation..................................... -- (47) (46,297) (46,297)
Deficit accumulated during the development stage.......... (470) (5,033) (30,647) (30,647)
----- ------- -------- --------
Total stockholders' equity (deficit)................ (390) (3,155) (18,771) $ (2,901)
===== ======= ======== ========
Total liabilities and stockholders' equity
(deficit)......................................... $ 55 $ 1,662 $ 16,003
===== ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 87

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
ENDED (MARCH 6, 1996) THROUGH
YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------
------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1998 1998 1999 1998 1999
------ ------ ------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Transaction fees............. $ -- $ -- $ -- $ -- $ 451 $ -- $ 451
Website sponsorship fees and
other...................... -- -- -- -- 13 -- 13
------ ------ ------- ------- -------- ------- --------
Total revenue......... -- -- -- -- 464 -- 464
OPERATING EXPENSES:
Operations................... -- -- 627 458 2,399 627 3,026
Product development.......... 31 179 1,491 801 4,321 1,701 6,022
Selling and marketing........ 111 153 1,409 761 5,096 1,673 6,769
General and administrative... 54 76 1,075 330 5,812 1,205 7,017
Amortization of
intangibles................ -- -- -- -- 230 -- 230
Amortization of deferred
compensation............... -- -- 5 -- 5,662 5 5,667
Cost of warrant issued
to recruiter............... -- -- -- -- 2,364 -- 2,364
------ ------ ------- ------- -------- ------- --------
Total operating
expenses............ 196 408 4,607 2,350 25,884 5,211 31,095
------ ------ ------- ------- -------- ------- --------
Loss from
operations.......... (196) (408) (4,607) (2,350) (25,420) (5,211) (30,631)
OTHER INCOME (EXPENSE):
Interest income.............. -- -- 66 51 173 66 239
Interest expense............. -- (15) (22) (9) (337) (37) (374)
Other income (expense)....... 142 7 -- -- (30) 149 119
------ ------ ------- ------- -------- ------- --------
Net loss.............. $ (54) $ (416) $(4,563) $(2,308) $(25,614) $(5,033) $(30,647)
====== ====== ======= ======= ======== ======= ========
NET LOSS PER SHARE:
Basic and diluted............ $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======= ======= ========
Weighted-average
shares -- basic and
diluted.................... 8,000 8,083 2,762 3,807 1,804
====== ====== ======= ======= ========
PRO FORMA NET LOSS PER
SHARE (unaudited):
Basic and diluted............ $ (0.36) $ (0.94)
======= ========
Weighted-average
shares -- basic and
diluted.................... 12,848 27,225
======= ========
</TABLE>

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

F-4
<PAGE> 88

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 6, 1996) THROUGH SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL NOTES RECEIVABLE
--------------- --------------- --------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL STOCKHOLDERS
------ ------ ------ ------ ------ ------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

BALANCE, MARCH 6, 1996
(inception)..................... -- $-- -- $-- -- $-- $ -- $ -- $ --

Common stock issued for cash of
$20 and intellectual property
valued at $10 at $0.00375 per
share in March 1996........... -- -- -- -- 8,000 8 -- 22 --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1996....... -- -- -- -- 8,000 8 -- 22 --
Common stock issued for cash at
$0.25 per share in May 1997... -- -- -- -- 100 -- -- 25 --

Common stock issued for cash at
$0.25 per share in October
1997.......................... -- -- -- -- 100 -- -- 25 --

Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1997....... -- -- -- -- 8,200 8 -- 72 --
Common stock issued for cash at
$0.25 per share in February
1998.......................... -- -- -- -- 800 1 -- 199 --

Common stock issued in exchange
for consulting services valued
at $0.25 per share in March
1998.......................... -- -- -- -- 500 -- 125 --

Conversion of founders stock to
Series A preferred stock at
$0.00375 per share in April
1998.......................... 8,000 8 -- -- (8,000) (8) -- -- --

Conversion of common stock to
Series A preferred stock at
$0.25 per share in April
1998.......................... 1,000 1 -- -- (1,000) (1) -- -- --

Preferred stock issued for cash
at $0.50 per share in April
and May 1998, net of issuance
costs......................... -- -- 2,520 3 -- -- -- 1,252 --

Conversion of notes payable to
Series B preferred stock at
$0.50 per share in May 1998... -- -- 340 -- -- -- -- 170 --

Common stock issued for cash as
a result of options exercised
at $0.05 per share in May
1998.......................... -- -- -- -- 516 1 -- 25 --

Issuance of warrants to purchase
common stock in November
1998.......................... -- -- -- -- -- -- 7 -- --

Common stock issued for cash as
a result of options exercised
at $0.10 per share in November
1998.......................... -- -- -- -- 200 -- -- 20 (10)

Deferred compensation........... -- -- -- -- -- -- -- 52 --

Amortization of deferred
compensation.................. -- -- -- -- -- -- -- -- --

Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1998....... 9,000 9 2,860 3 1,216 1 7 1,915 (10)

TOTAL
DEFICIT ACCUMULATED STOCKHOLDERS'
DEFERRED DURING THE EQUITY
COMPENSATION DEVELOPMENT STAGE (DEFICIT)
------------ -------------------- -------------
<S> <C> <C> <C>
BALANCE, MARCH 6, 1996
(inception)..................... $ -- $ -- $ --
Common stock issued for cash of
$20 and intellectual property
valued at $10 at $0.00375 per
share in March 1996........... -- -- 30
Net loss........................ -- (54) (54)
-------- -------- --------
BALANCE, DECEMBER 31, 1996....... -- (54) (24)
Common stock issued for cash at
$0.25 per share in May 1997... -- -- 25
Common stock issued for cash at
$0.25 per share in October
1997.......................... -- -- 25
Net loss........................ -- (416) (416)
-------- -------- --------
BALANCE, DECEMBER 31, 1997....... -- (470) (390)
Common stock issued for cash at
$0.25 per share in February
1998.......................... -- -- 200
Common stock issued in exchange
for consulting services valued
at $0.25 per share in March
1998.......................... -- -- 125
Conversion of founders stock to
Series A preferred stock at
$0.00375 per share in April
1998.......................... -- -- --
Conversion of common stock to
Series A preferred stock at
$0.25 per share in April
1998.......................... -- -- --
Preferred stock issued for cash
at $0.50 per share in April
and May 1998, net of issuance
costs......................... -- -- 1,255
Conversion of notes payable to
Series B preferred stock at
$0.50 per share in May 1998... -- -- 170
Common stock issued for cash as
a result of options exercised
at $0.05 per share in May
1998.......................... -- -- 26
Issuance of warrants to purchase
common stock in November
1998.......................... -- -- 7
Common stock issued for cash as
a result of options exercised
at $0.10 per share in November
1998.......................... -- -- 10
Deferred compensation........... (52) -- --
Amortization of deferred
compensation.................. 5 -- 5
Net loss........................ -- (4,563) (4,563)
-------- -------- --------
BALANCE, DECEMBER 31, 1998....... (47) (5,033) (3,155)
</TABLE>

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

F-5
<PAGE> 89

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MARCH 6, 1996) THROUGH SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL NOTES RECEIVABLE
--------------- --------------- --------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL STOCKHOLDERS
------ ------ ------ ------ ------ ------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998....... 9,000 9 2,860 3 1,216 1 7 1,915 (10)
Repayment of note receivable from
shareholder...................... -- -- -- -- -- -- -- -- 10
Common stock issued as a result
of options exercised at $0.10
to $0.50 per share............ -- -- -- -- 7,797 8 -- 1,365 (1,302)
Valuation of stock options to
consultants for services
rendered...................... -- -- -- -- -- -- -- 644 --
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- -- -- -- -- 640 -- --
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- -- -- -- -- 600 -- --
Valuation of common stock issued
to consultants in September
1999.......................... -- -- -- -- 11 -- -- 7 --
Valuation of warrants to
purchase common stock issued
to consultants at $0.10 per
share in September 1999....... -- -- -- -- -- -- 2,364 -- --
Deferred compensation........... -- -- -- -- -- -- -- 51,912 --
Amortization of deferred
compensation.................. -- -- -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, SEPTEMBER 30, 1999...... 9,000 $ 9 2,860 $ 3 9,024 $ 9 $3,611 $55,843 $(1,302)
===== === ===== === ====== === ====== ======= =======

TOTAL
DEFICIT ACCUMULATED STOCKHOLDERS'
DEFERRED DURING THE EQUITY
COMPENSATION DEVELOPMENT STAGE (DEFICIT)
------------ -------------------- -------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1998....... (47) (5,033) (3,155)
Repayment of note receivable from
shareholder...................... -- -- 10
Common stock issued as a result
of options exercised at $0.10
to $0.50 per share............ -- -- 71
Valuation of stock options to
consultants for services
rendered...................... -- -- 644
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- 640
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- 600
Valuation of common stock issued
to consultants in September
1999.......................... -- -- 7
Valuation of warrants to
purchase common stock issued
to consultants at $0.10 per
share in September 1999....... -- -- 2,364
Deferred compensation........... (51,912) -- --
Amortization of deferred
compensation.................. 5,662 -- 5,662
Net loss........................ -- (25,614) (25,614)
-------- -------- --------
BALANCE, SEPTEMBER 30, 1999...... $(46,297) $(30,647) $(18,771)
======== ======== ========
</TABLE>

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

F-6
<PAGE> 90

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
YEARS ENDED ENDED (MARCH 6, 1996) THROUGH
DECEMBER 31, SEPTEMBER 30, ----------------------------
----------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1998 1998 1999 1998 1999
---- ----- ------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.......................................... $(54) $(416) $(4,563) $(2,308) $(25,614) $(5,033) $(30,647)
Adjustment to reconcile net loss to net cash used
in operating activities:
Common stock issued in connection with consulting
services........................................ -- -- 125 125 7 125 132
Valuation of common stock options issued in
connection with consulting services............. -- -- -- -- 644 -- 644
Depreciation and amortization of property and
equipment....................................... 1 1 96 17 417 98 515
Amortization of intangibles....................... -- -- -- -- 230 -- 230
Amortization of deferred compensation............. -- -- 5 -- 5,662 5 5,667
Cost of warrant issued to recruiter............... -- -- -- -- 2,364 -- 2,364
Amortization of deferred debt costs............... -- -- 6 -- 133 6 139
Change in assets and liabilities, net of
acquisitions:
Accounts receivable, net........................ -- -- -- -- (277) -- (277)
Prepaid expenses and other assets............... (44) 43 (97) (70) (650) (98) (748)
Accounts payable................................ 10 12 263 164 3,866 285 4,151
Accrued liabilities and accrued payroll......... -- 38 192 248 2,794 230 3,024
---- ----- ------- ------- -------- ------- --------
Net cash used in operating activities......... (87) (322) (3,973) (1,824) (10,424) (4,382) (14,806)
---- ----- ------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for the acquisition of General Asset
Recovery LLC, net of cash acquired.............. -- -- -- -- (1,800) -- (1,800)
Cash paid on note issued in connection with the
acquisition of General Asset Recovery LLC....... -- -- -- -- (184) -- (184)
Purchases of property and equipment............... (1) (13) (825) (681) (3,411) (839) (4,250)
---- ----- ------- ------- -------- ------- --------
Net cash used in investing activities......... (1) (13) (825) (681) (5,395) (839) (6,234)
---- ----- ------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes payable....... 75 358 418 -- 3,741 851 4,592
Repayments of notes payable....................... -- (48) (215) (215) (146) (263) (409)
Proceeds from the issuance of Series B preferred
stock, net of issuance costs.................... -- -- 1,255 1,255 -- 1,255 1,255
Proceeds from the issuance of Series C mandatorily
redeemable convertible preferred stock, net of
issuance costs.................................. -- -- 3,884 3,884 -- 3,884 3,884
Proceeds from the issuance of Series D mandatorily
redeemable convertible preferred stock, net of
issuance costs.................................. -- -- -- -- 11,986 -- 11,986
Repayments of notes receivable from
stockholders.................................... -- -- -- -- 10 -- 10
Proceeds from the issuance of common stock, net of
notes receivable issued to common
stockholders.................................... 20 50 236 226 71 306 377
---- ----- ------- ------- -------- ------- --------
Net cash provided by financing activities..... 95 360 5,578 5,150 15,662 6,033 21,695
---- ----- ------- ------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................. 7 25 780 2,645 (157) 812 655

CASH AND CASH EQUIVALENTS, beginning of period...... -- 7 32 32 812 -- --
---- ----- ------- ------- -------- ------- --------
CASH AND CASH EQUIVALENTS, end of period............ $ 7 $ 32 $ 812 $ 2,677 $ 655 $ 812 $ 655
==== ===== ======= ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Intellectual property acquired from founders in
exchange for common stock....................... $ 10 $ -- $ -- $ -- $ -- $ 10 $ 10
==== ===== ======= ======= ======== ======= ========
Cash paid during the period for interest.......... $ -- $ -- $ 14 $ -- $ 204 $ 14 $ 218
==== ===== ======= ======= ======== ======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Conversion of common stock into Series A preferred
stock........................................... $ -- $ -- $ 280 $ 280 $ -- $ 280 $ 280
==== ===== ======= ======= ======== ======= ========
Conversion of notes payable into Series B
preferred stock................................. $ -- $ -- $ 170 $ 170 $ -- $ 170 $ 170
==== ===== ======= ======= ======== ======= ========
Issuance of warrants to purchase common stock..... $ -- $ -- $ 7 $ -- $ 2,364 $ 7 $ 2,371
==== ===== ======= ======= ======== ======= ========
Issuance of warrants to purchase mandatorily
redeemable convertible preferred stock.......... $ -- $ -- $ -- $ -- $ 1,240 $ -- $ 1,240
==== ===== ======= ======= ======== ======= ========
Issuance of note payable to related party in
connection with acquisition of General Asset
Recovery LLC.................................... $ -- $ -- $ -- $ -- $ 7,800 $ -- $ 7,800
==== ===== ======= ======= ======== ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements
F-7
<PAGE> 91

NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DEVELOPMENT STAGE RISKS:

Neoforma, Inc. (the "Company"), was incorporated on March 4, 1996 in the
state of California for the purpose of providing business-to-business e-commerce
services for the medical products, supplies and equipment marketplace. On
November 4, 1998, the Company re-incorporated in the state of Delaware. On
September 14, 1999, the Company changed its name to Neoforma.com, Inc. All
information for the year ended December 31, 1996 represents the period from
inception (March 6, 1996) to December 31, 1996.

From inception, the Company has been primarily engaged in organizational
activities, including designing and developing its website, recruiting
personnel, establishing office facilities, raising capital and developing a
marketing plan. The Company began revenue generation activities in 1999 but no
significant revenue has been generated as of September 30, 1999. Accordingly,
the Company is classified as a development stage company. Successful completion
of the Company's development program and, ultimately, the attainment of
profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy and hiring and retaining quality personnel. Negative
developments in any of these conditions could have a material adverse effect on
the Company's business, financial condition and results of operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Neoforma.com,
Inc. and its wholly owned subsidiary General Asset Recovery LLC. All significant
intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

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

REVENUE RECOGNITION

The Company categorizes its services into three primary service lines.
These service lines are Shop, Auction and Plan. Shop revenue is derived from
transaction fees paid by sellers of medical products on the Company's website
and development fees from participating sellers to digitize the seller's product
information for display on the Company's website. Auction revenue is derived
from transaction fees paid by sellers of medical products on the Company's
website and from consigned inventory sold at live auctions. In addition, Auction
revenue includes product revenue related to the sale of medical equipment
purchased by the Company for sale on the Company's website and at live auctions,
and subscription fees for asset recovery services. Plan revenue is derived from
sponsorship fees and software license fees for facilities planning services.

F-8
<PAGE> 92
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Transaction fee revenue represents the Company's percentage of the gross
transaction fees at the time the buyer's order is confirmed or accepted by the
seller. The gross transaction fees include fees paid or payable to sellers. The
Company defers a portion of the transaction fee at the time of acceptance for
potential returns.

Development fee revenue is recognized as development services are
performed. Sponsorship and subscription fee revenues are recognized ratably over
the period of the service agreement.

Product revenue represents the net revenue derived from deducting the
direct costs of products sold from the gross sales amount. Product revenue is
recognized when the product is shipped or delivered, depending on the shipping
terms associated with each transaction. At the time of sale, the Company defers
a portion of product revenue for potential returns. The Company did not have
product revenue for any of the periods presented.

CONCENTRATION OF CREDIT RISK

Financial instruments that may subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents. Cash is on deposit
with one financial institution. Cash investments include high quality short-term
money market instruments through a high credit quality financial institution.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

Cash and cash equivalents consist of cash in banks, investments in money
market accounts and treasury bills and are stated at cost which approximates
fair market value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and are depreciated on a
straight-line basis over two to four years. Leasehold improvements are
amortized, using the straight-line method, over the shorter of the lease term or
the useful lives of the improvements. Repairs and maintenance costs are expensed
as incurred.

INTANGIBLES

Intangibles consist of goodwill, which represents the amount of purchase
price in excess of the fair value of the tangible net assets resulting from the
acquisition of General Asset Recovery LLC (see Note 3). The goodwill is
amortized on a straight-line basis over a period of seven years. Goodwill will
be evaluated quarterly for impairment and written down to net-realizable value,
if necessary. No impairment has been recorded to date.

F-9
<PAGE> 93
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

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

PRODUCT DEVELOPMENT COSTS

Product development costs include expenses incurred by the Company to
develop and enhance the Company's website. Product development costs are
expensed as incurred.

COST OF WARRANT ISSUED TO RECRUITER

For the nine months ended September 30, 1999, the Company recorded $2.4
million of cost of warrant issued to recruiter related to the valuation of a
warrant issued to an executive search firm in connection with services rendered
in the search for the Company's Chief Executive Officer (See Note 10).

STOCK BASED COMPENSATION PLAN

In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which became effective
for the Company's 1996 fiscal year. SFAS No. 123 allows companies which have
stock-based compensation arrangements with employees to adopt a new fair-value
basis of accounting for stock options and other equity instruments or to
continue to apply the existing accounting rules under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," but with
additional financial statement disclosure. The Company has elected to account
for stock-based compensation expense under APB No. 25 and make the required pro
forma disclosures for compensation expense (see Note 11).

COMPREHENSIVE INCOME

Effective January 1, 1998 the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. Through September 30, 1999 the Company
has not had any transactions that are required to be reported in comprehensive
income.

SEGMENT INFORMATION

The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the years ended
December 31, 1996, 1997 and 1998 and the nine months ended September 30, 1999,
the Company operated in a single business segment providing e-commerce content
to healthcare professionals in the medical product, supplies, and

F-10
<PAGE> 94
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

equipment industry. For the nine months ended September 30, 1999, the Company
generated 97% of its revenues from transaction fees associated with live auction
sales. Through September 30, 1999, foreign operations have not been significant
in either revenue or investment in long-lived assets.

BASIC AND DILUTED NET LOSS PER SHARE AND PRO FORMA BASIC AND DILUTED NET LOSS
PER SHARE

Basic net loss per share on a historical basis is computed using the
weighted-average number of shares of common stock outstanding. Diluted net loss
per common share was the same as basic net loss per share for all periods
presented since the effect of any potentially dilutive security is excluded, as
they are anti-dilutive as a result of the Company's net losses. The total number
of shares excluded from the diluted loss per share calculation relating to these
securities was approximately none, 300,000, 18.0 million, 18.2 million and 33.1
million shares for the years ended December 31, 1996, 1997, and 1998 and for the
nine months ended September 30, 1998 and 1999, respectively.

Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, convertible preferred stock and common stock issued or granted
for nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods presented.
To date, the Company has not had any issuance or grants for nominal
consideration.

Pro forma basic and diluted net loss per common share is computed by
dividing net loss by the weighted average number of common shares outstanding
for the period (excluding shares subject to repurchase) plus the weighted
average number of common shares resulting from the automatic conversion of
outstanding shares of convertible preferred stock, which will occur upon the
closing of the planned initial public offering.

F-11
<PAGE> 95
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net loss.............................. $ (54) $ (416) $(4,563) $(2,308) $(25,614)
====== ====== ======= ======= ========
Basic and diluted:
Weighted average shares of common
stock outstanding................ 8,000 8,083 2,977 3,973 3,261
Less: Weighted average shares of
common stock subject to
repurchase....................... -- -- (215) (166) (1,457)
Weighted average shares used in
computing basic and diluted net
loss per share................... 8,000 8,083 2,762 3,807 1,804
====== ====== ======= ======= ========
Basic and diluted net loss per
common share..................... $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======= ======= ========
Pro forma:
Net loss......................... $(4,563) $(25,614)
======= ========
Shares used above..................... 2,762 1,804
Pro forma adjustment to reflect
weighted average effect of assumed
conversion of convertible preferred
stock (unaudited)................... 10,086 25,421
------- --------
Weighted average shares used in
computing pro forma basic and
diluted net loss per share
(unaudited)......................... 12,848 27,225
======= ========
Pro forma basic and diluted net loss
per share (unaudited)............... $ (0.36) $ (0.94)
======= ========
</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal use." SOP No. 98-1
requires entities to capitalize certain costs related to internal-use software
once certain criteria has been met. Neoforma.com adopted SOP No. 98-1 in fiscal
1999. The adoption of SOP No. 98-1 did not have a material impact on the
Company's financial position or results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" SFAS No. 133 will be effective for
Neoforma.com on January 1, 2000. SFAS No. 133 requires certain accounting and
reporting standards for derivative financial instruments and hedging activities.
Because the Company does not currently hold any derivative instruments and does

F-12
<PAGE> 96
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

not engage in hedging activities, management does not believe that the adoption
of SFAS No. 133 will have a material impact on the Company's financial position
or results of operations.

3. ACQUISITION:

In August 1999, the Company acquired substantially all of the assets of
General Asset Recovery LLC ("GAR"), a live auction house and asset management
company focused on medical products. Accordingly, the operations of GAR have
been included in the accompanying September 30, 1999 statement of operations
from the date of acquisition. The acquisition was accounted for using the
purchase method of accounting and accordingly, the purchase price was allocated
to the tangible and intangible assets acquired and liabilities assumed on the
basis of their respective fair values on the acquisition date. According to the
terms of the agreement, a segment of GAR's operations which related to the
auction of non-medical industrial products ("Industrial") was sold back to one
of the original owners of GAR for nominal consideration. Accordingly, the
revenue and direct costs associated with the Industrial operations eliminated in
the pro forma tables presented below.

The total purchase price of approximately $9.7 million consisted of $1.7
million in cash, a note payable of $7.8 million, the assumption of $100,000 of
liabilities and acquisition-related expenses of $100,000. In the allocation of
the purchase price, $25,000 was allocated to tangible assets and $9,675,000 was
allocated to goodwill. The intangible assets will be amortized over an estimated
life of seven years. The note payable is due over a five-year period and bears
interest at 7% per annum.

The unaudited pro forma results of operations of the Company and GAR for
the year ended December 31, 1998 and the nine months ended September 30, 1999,
assuming the acquisition took place at the beginning of each period, are as
follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Revenue.............................................. $ 1,514 $ 2,028
======= ========
Net loss............................................. $(6,778) $(26,828)
======= ========
Basic and diluted net loss per share................. $ (2.45) $ (14.87)
======= ========
</TABLE>

F-13
<PAGE> 97
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. PROPERTY AND EQUIPMENT:

As of December 31, 1997, 1998 and September 30, 1999, property and
equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
---- ----- ------
<S> <C> <C> <C>
Computers and test equipment................................ $10 $ 580 $2,797
Software.................................................... 4 78 696
Furniture and fixtures...................................... -- 140 610
Leasehold improvements...................................... -- 41 147
--- ----- ------
14 839 4,250
Less: Accumulated depreciation and amortization............. (2) (108) (515)
--- ----- ------
Property and equipment, net................................. $12 $ 731 $3,735
=== ===== ======
</TABLE>

5. LOANS AND NOTES PAYABLE:

In 1996 and 1997, certain stockholders exchanged cash for notes payable.
The interest rate for the notes was 5.6%. These notes were convertible into
Series B preferred stock. As of December 31, 1998, $170,000 of the $385,000
notes payable were converted and the remainder was paid in full.

In June 1998, the Company entered into a $750,000 secured credit facility
with a bank. This facility included a $225,000 term loan due December 1999 and
an equipment loan facility providing for up to $525,000 of equipment loans. In
July 1999, the Company converted $433,000 of outstanding equipment loans into a
term loan due June 2000, which bears interest at the lender's prime rate (8.25%
as of September 30, 1999). At September 30, 1999, there were borrowings of
approximately $225,000 and $404,000 under the term loan and equipment loan,
respectively. This facility is secured by substantially all of the Company's
assets other than equipment. In consideration for this credit facility, the
Company granted the bank a warrant to purchase 45,000 shares of Series C
preferred stock at an exercise price of $0.77 per share. In July 1999, in
consideration for the conversion of the equipment loan to a term loan and the
release of the security interest in equipment, the Company granted the bank a
warrant to purchase 10,000 shares of Series D preferred stock at an exercise
price of $1.18 per share (see Note 10).

In May 1999, the Company entered into a subordinated loan agreement (the
"loan agreement") with a lender under which it can borrow up to $2.0 million.
The loan agreement bears interest at 12.5% and expires in July 2002. At
September 30, 1999 there were borrowings of approximately $1.9 million
outstanding under the loan agreement. The loan agreement is collateralized by
all of the assets of the Company. In addition, a warrant to purchase 228,813
shares of Series D preferred stock at an exercise price of $1.18 per share was
issued in conjunction with the loan agreement (see Note 10).

In July 1999, the Company entered into a $2.5 million loan/lease facility
with a lender to finance computer hardware and software equipment. Hardware
amounts bear interest at 9% per annum and are payable in 48 monthly installments
consisting of interest-only payments for the first nine months and principal and
interest payments for the remaining 39 months, with a balloon payment of the
remaining principal payable at maturity. Software amounts bear interest at 8%
per annum and are payable in 30 monthly installments consisting of interest-only
for the first four months

F-14
<PAGE> 98
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and principal and interest for the remaining 26 months, with a balloon payment
of the remaining principal payable at maturity. The computer equipment purchased
secures this facility. In connection with this facility, the Company issued the
lender a warrant to purchase 137,711 shares of our Series D preferred stock at
$1.18 per share (see Note 10). At September 30, 1999, the principal balance was
1.6 million.

As part of the purchase price of GAR (see Note 3), the Company issued in
August 1999 a promissory note payable to an owner of GAR in the amount of $7.8
million. The note bears interest at 7% per annum and is payable in 60 monthly
installments of scheduled principal amounts plus interest. At September 30, 1999
the remaining principal balance was approximately $7.6 million.

Future maturities of principal on the loans and notes payable as of
September 30, 1999 are as follows (in thousands):

6. COMMITMENTS:

The Company leases its office facilities under an operating lease. Rent
expense for the years ended December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1998 and 1999 was approximately $22,000, $40,000,
$304,000, $81,000 and, $370,000, respectively.

Future minimum obligations under the non-cancelable operating lease at
September 30, 1999 are as follows (in thousands):

<TABLE>
<S> <C>
2000............................................ $1,132
2001............................................ 1,109
2002............................................ 1,150
2003............................................ 1,191
2004............................................ 885
Thereafter...................................... 847
------
$6,314
======
</TABLE>

In May 1999, the Company entered into an agreement with a non-profit health
services research organization (the "Organization"), which allows the Company to
use content from the Organization's database of information about medical
products and manufacturers and obtain a license to use elements of its
classification system. Additionally, the agreement provides for joint marketing
activities and collaboration in the creation of a database of product and vendor
information. This agreement requires the Company to make revenue sharing
payments to the Organization during the three-year term of the agreement and for
two years following expiration or termination of the agreement with respect to
revenue derived from the Company's Plan service. During the second and

F-15
<PAGE> 99
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

third years, the Company is required to pay a nonrefundable fee of $600,000 per
year, in equal monthly installments, which shall be credited against any revenue
sharing amounts payable.

7. LITIGATION:

On August 6, 1999, Fisher Scientific International, Inc. ("Fisher") filed a
petition in the District Court of Montgomery County, Texas, against the Company
and an individual that the Company had hired to serve as Executive Vice
President of Sales. Fisher previously employed this individual and Fisher
alleged, among other things, unfair competition and breach of a covenant not to
compete. On November 11, 1999, the case was settled out of court. The terms of
the settlement are such that the Company agreed to issue 176,057 shares of the
Company Series E Preferred Stock at $5.68 per share to Fisher in exchange for
cash and reimbursement of Fisher's legal fees. As of September 30, 1999, the
Company accrued $1.0 million in litigation expenses, none of which has been paid
as of September 30, 1999. These litigation expenses are included in general and
administrative expenses for the nine months ended September 30, 1999.

8. STOCKHOLDERS' EQUITY:

On October 12, 1999 the Company amended and restated its articles of
incorporation. The number of authorized shares of common stock and preferred
stock was increased to 200,000,000 and 40,747,048, respectively. The preferred
stock authorized is designated as 9,000,000, 2,860,000, 5,109,937, 10,572,886,
11,168,662, and 2,035,563 shares of Series A, B, C, D, E, and E-1 preferred
stock, respectively (see Note 9).

UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY

In October 1999, the Company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with the proposed initial public
offering ("IPO"). If the IPO is consummated under the terms presently
anticipated, all of the currently outstanding shares of preferred stock and the
mandatorily redeemable convertible preferred stock will be converted into shares
of common stock upon the closing of the IPO. The effect of this conversion has
been reflected as unaudited pro forma stockholders' equity in the accompanying
consolidated balance sheet as of September 30, 1999.

COMMON STOCK

As of September 30, 1999, the Company has reserved the following shares of
common stock for future issuance as follows (in thousands):

<TABLE>
<S> <C>
Conversion of Series A outstanding preferred stock.......... 9,000
Conversion of Series B outstanding preferred stock.......... 2,860
Conversion of Series C outstanding preferred stock.......... 5,065
Conversion of Series D outstanding preferred stock.......... 10,196
1997 Stock Option Plan...................................... 13,239
Conversion of warrants outstanding.......................... 858
------
41,218
======
</TABLE>

F-16
<PAGE> 100
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the year ended December 31, 1998, the Company amended an agreement
to issue approximately 26,000 shares of common stock in exchange for services
rendered. As of December 31, 1998 approximately 17,000 of the shares were due
but had not been issued. In February 1999, approximately 13,000 of the shares
were issued. Approximately 9,000 additional shares of common stock were due
under the terms of the same agreement for the period ended September 30, 1999.
As of September 30, 1999, such shares had not been issued; however, the related
expense associated with the issued shares is included in the accompanying
consolidated statements of operations.

PREFERRED STOCK

Preferred stock consists of 9,000,000 shares designated as Series A
preferred stock ("Series A") and 2,860,000 shares designated as Series B
preferred stock ("Series B"). The Series A preferred stock was issued in
exchange for 9,000,000 shares of previously issued common stock. The Series B
preferred stock was issued for cash at $0.50 per share.

The rights and preferences of the outstanding Series A and B preferred
stock are as follows:

DIVIDENDS

The holders of Series A and B preferred stock are entitled to receive
non-cumulative dividends at $.02 and $.04 per share, respectively, or, if
greater, an amount equal to that paid on any other outstanding shares of the
Company, except that the shares of a given series of preferred stock shall not
receive any greater dividend as a result of the Company's payment of a dividend
on any such series of preferred stock. Such dividends shall be payable only
when, as, and if declared by the board of directors. No dividends shall be
payable on any common stock until dividends to Series A and Series B preferred
stock have been paid or declared by the board of directors. As of September 30,
1999, no dividends had been declared.

LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A and B are entitled to receive (along with the liquidation
preference available to Series C and D stockholders -- see Note 9), in
preference to holders of common stock, the amount of $0.25 and $0.50 per share,
respectively, plus all declared but unpaid dividends. Such amounts will be
adjusted for any stock split, stock dividends and recapitalizations. If such
assets of the Company are not available to sufficiently satisfy the full
preferential amount of all series of preferred stock then the entire assets and
funds of the Company shall be distributed among the holders of all series of the
preferred stock in accordance with the aggregate preference payment to which
they are entitled. After the payment or the setting aside of the payment set
forth above, the remaining assets of the corporation shall be distributed on a
pro-rata basis to the holders of the preferred stock, on an as-converted basis,
and the holders of common stock until the holders of the Series A, B, C and D
have received an additional $0.25, $0.50, $0.77 and $1.18 per share,
respectively. After the distributions to the holders of preferred stock and
redeemable preferred stock have been made the remaining assets of the
corporation available for distribution to shareholders shall be distributed pro-
rata among the holders of common stock.

F-17
<PAGE> 101
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

VOTING RIGHTS

The holders of the Series A and B are entitled to a number of votes equal
to a number of shares of common stock into which such preferred stock is
convertible.

CONVERSION

Each share of Series A and B is convertible into one share of common stock
at the option of the holder at any time after the date of issuance of such
shares, and automatically converts at the consummation of the Company's sale of
common stock in an underwritten public offering which results in net cash
proceeds to the Company of at least $60,000,000 and an offering price to the
public of a least $7.00 per share. The conversion rate is subject to adjustment
for dilution, including but not limited to, stock splits, stocks dividends and
stock combinations.

9. MANDATORILY REDEEMABLE PREFERRED STOCK:

In August 1998, the Company completed an offering of 5,064,937 shares of
Series C mandatorily redeemable preferred stock ("Series C") at $0.77 per share.
Total proceeds of the offering amounted to approximately $3.9 million.

On February 19, 1999 the Company completed an offering of 10,196,361 shares
of Series D mandatorily redeemable preferred stock ("Series D") at $1.18 per
share. Total proceeds of the offering amounted to approximately $12.0 million.

On October 12, 1999 the Company completed an offering of 10,658,070 shares
of Series E mandatorily redeemable preferred stock ("Series E") and 2,035,563
shares of Series E-1 mandatorily redeemable preferred stock ("Series E-1") at
$5.68 per share. Included in the issuance of the Series E-1 is 275,000 shares
issued in connection with a strategic alliance the Company entered into in
October 1999. Thus, the net cash proceeds amounted to approximately $70.5
million. In addition, the Company agreed to issue 176,057 shares of the
Company's Series E at $5.68 per share in settlement of a lawsuit in exchange for
cash and reimbursement of legal fees (see Note 7).

The rights and preferences of the outstanding Series C, D, E and E-1 are as
follows:

DIVIDENDS

The holders of Series C, D, E and E-1 are entitled to receive
non-cumulative dividends at $0.062, $0.0944, $0.4544, and $0.4544 per share
annum, respectively, or, if greater, an amount equal to that paid on any other
outstanding shares of the Company, except that the shares of a given series of
preferred stock shall not receive any greater dividend as a result of the
Company's payment of a dividend on any such series of preferred stock. Such
dividends shall be payable only when, as, and if declared by the board of
directors. As of September 30, 1999, no dividends had been declared.

If the offering price to the public of the Company's Common Stock in the
IPO is at least $7.00 per share but less than $10.00 per share, the Company will
record a preferred stock dividend of up to approximately $22 million relating to
the Series E and E-1 beneficial conversion rights that will be triggered on the
effective date of the Company's IPO. If the public offering price is $10.00 per
share or more, there will not be a preferred stock dividend charge.

F-18
<PAGE> 102
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution or winding up of the Company,
holders of Series C, D, E, and E-1 are entitled to receive (along with the
liquidation preference available to Series A and B stockholders -- see Note 8)
in preference to the amount of $0.77, $1.18, $5.68, and $5.68 per share,
respectively, plus all declared but unpaid dividends. Such amounts will be
adjusted for any stock split, stock dividends and recapitalizations. In the
occurrence, or in the event the Company assets and funds are unable to
sufficiently satisfy the full preferential amounts of all series of preferred
stock, the Company will then distribute their entire assets and funds that are
legally available among the holders of all series of preferred stock in
accordance with the aggregate preference payment to which they are entitled.

After the payment or the setting aside of the payment set forth above, the
remaining assets and funds of the Company that are legally available shall be
distributed, on a pro-rata basis to the holders of the preferred stock, on an
as-converted basis, and the holders of common stock until the holders of the
Series A, B, C, D, E, and E-1, have received an additional $0.25, $0.50, $0.77,
$1.18, $5.68 and $5.68 per share, respectively.

After the distributions to the holders of preferred stock and redeemable
preferred stock have been made, the remaining assets of the corporation
available for distribution to stockholders shall be distributed pro rata solely
among the holders of common stock.

VOTING RIGHTS

The holders of the Series C, D, E and E-1 are entitled to the number of
votes equal to a number of shares of common stock into which such redeemable
preferred stock is convertible.

CONVERSION

Each share of Series C, D, E, and E-1 is convertible into one share of
common stock at the option of the holder at any time after the date of issuance
of such shares, and automatically converts at the consummation of the Company's
sale of common stock in an underwritten public offering which results in net
cash proceeds to the Company of at least $60,000,000 and an offering price to
the public of at least $7.00 per share. The conversion rate is subject to
adjustment for dilution, including, but not limited to, stock splits, stock
dividends and stock combinations.

The Series E and E-1 will be subject to the following adjustment:

If the offering price to the public of the Company's common stock in the
IPO is at least $7.00 per share but less than $10.00 per share, each share of
Series E and E-1 will convert into the number of shares of common stock
determined by (1) dividing the offering price to the public by $10.00 and
multiplying the quotient obtained by the conversion price of the Series E and
E-1 then in effect (the "Conversion Price") and (2) dividing $5.68 by the
Conversion Price.

The Series E-1 will be subject to the following additional adjustments:

(1) If the Company achieves $11.75 million or more of combined revenue from
its Shop and Plan operations for fiscal year 2000, as set forth in the financial
plan provided to the investors by the

F-19
<PAGE> 103
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company (the "Financial Plan"), then each share of Series E-1 will be converted
into 0.7143 shares of common stock; and

(2) If the Company achieves $5 million or less of combined revenue from its
Shop and Plan operations for fiscal year 2000, as set forth in the Financial
Plan, and a holder of Series E-1 shares is in compliance with the terms of its
commercial agreement with the Company, then each share of Series E-1 will be
converted into 1.6667 shares of common stock.

MANDATORY REDEMPTION

Upon the affirmative vote of the holders of the majority of the Series C,
D, E, and E-1 the Company can be required to redeem all shares of Series C, D, E
and E-1 outstanding as of the date of such demand, which date shall hereinafter
be referred to as the "Redemption Date." The Redemption Price of the Series C,
D, E and E-1 will be $0.77, $1.18, $5.68 and $5.68 per share, respectively,
subject to adjustment for dilution. The stockholders cannot require redemption
prior to seven years after the issuance of the Series C, D, E, and E-1.

Beginning with the first year anniversary of the Redemption Date, the
Company shall be required to redeem annually no more than that number of shares
of Series C, D, E and E-1, equal to 25% of the Series C, D, E, and E-1,
outstanding as of the Redemption Date. From and after the Redemption Date, all
rights of the shares designated for redemption shall cease with respect to such
shares. If the funds of the Company legally available for redemption of Series
C, D, E and E-1 on any Redemption Date are insufficient to redeem the total
number of shares of the Series C, D, E, and E-1 to be redeemed on such date,
those funds which are legally available will be used to redeem the maximum
number of such shares on a pro rata basis among the holders of Series C, D, E
and E-1 based on each holder's share of the total redemption price. At any time
thereafter when additional funds of the Company are legally available for the
redemption of the shares of the Series C, D, E and E-1, such funds will
immediately be set aside for the Redemption Date but which it has not redeemed.

10. WARRANTS:

In June 1998, the Company issued a warrant to purchase 45,000 shares of
Series C at an exercise price of $0.77 per share in conjunction with a loan
agreement. The fair value of the warrant at the date of issuance was determined
to be approximately $7,000 and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free rate of 5.6%; expected life of
one year; and expected volatility of 70%. This amount is being recognized as
additional interest expense over the expected life of the loan agreement.

In May 1999, the Company issued a warrant to purchase 228,813 shares of
Series D at $1.18 per share in connection with a loan agreement. The warrant is
exercisable immediately and expires the later of May 12, 2006 or three years
from the effective date of an initial public offering. The fair value of the
warrant at the date of issuance was determined to be approximately $640,000 and
was estimated using the Black-Scholes valuation model with the following
assumptions: risk-free interest rate of 5.0%; expected life of one year; and
expected volatility of 70%. This amount will be recognized as additional
interest expense over the expected life of the loan agreement.

F-20
<PAGE> 104
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In July 1999, the Company issued a warrant to purchase 10,000 shares of
Series D at an exercise price of $1.18 per share in conjunction with a loan
agreement. The fair value of the warrant at the date of issuance was determined
to approximately $40,000 and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free rate of 5.3%; expected life of
one year; and expected volatility of 70%. This amount will be recognized as
additional interest expense over the expected life of the loan agreement.

In July 1999, the Company issued a warrant to purchase 137,711 shares of
Series D at $1.18 per share in connection with an equipment lease line. The
warrant is exercisable immediately and expires the later of July 7, 2006 or
three years from the effective date of an initial public offering. The fair
value of the warrant at the date of issuance was determined to be approximately
$559,000 and was estimated using the Black-Scholes valuation model with the
following assumptions: risk-free interest rate of 5.3%; expected life of one
year; and expected volatility of 70%. This amount will be recognized as
additional interest expense over the expected life of the lease line.

In September 1999, the Company issued to a retained executive search firm a
warrant to purchase 436,623 shares of the Company's common stock at an exercise
price of $0.10 per share. The warrant is exercisable immediately and expires on
September 9, 2009. The fair value of the warrant was determined to be
approximately $2.4 million and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free interest rate of 5.5%; expected
life of four months; and expected volatility of 70%. This expense is included in
cost of warrant issued to recruiter for the nine months ended September 30,
1999.

As of September 30, 1999, none of the warrants mentioned above had been
exercised.

11. STOCK OPTIONS:

1997 STOCK PLAN

The Company, under the 1997 Stock Plan (the "Plan"), reserved approximately
14.7 million shares of common stock. The stock is reserved for the employees,
directors, and consultants. The term of each option will be stated in the option
agreement and is not to exceed 10 years after the grant date. If the optionee
owns stock representing more than 10% of the voting power the term of the option
will not exceed 5 years after the grant date.

Option pricing shall be no less than 85% of the fair market value per share
on the date of the grant. If the optionee owns stock representing more than 10%
of the voting power the option price shall not be less than 110% of the fair
market value per share on the date of the grant. If the stock option is an
incentive stock option, then the price for the stock cannot be less than 100% of
the fair market value per share on the date of the grant.

Any option granted shall be exercisable at such times and under such
conditions as determined by the board of directors. However, for most options,
25% of the shares subject to the option shall vest 12 months after the vesting
commencement date, and 1/48 of the shares shall vest each month thereafter.
Options under the Plan are exercisable immediately, subject to repurchase rights
held by the Company, which lapse over the vesting period as determined.

F-21
<PAGE> 105
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company's right of repurchase will lapse at a rate determined by the
board of directors. However, for most options the Company's right to repurchase
will lapse at a rate of 25% of the shares after the first 12 months and 1/48 of
the shares, per month, after the vesting commencement date.

Activity under the Plan was as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------
SHARES WEIGHTED-
AVAILABLE AVERAGE
FOR GRANT NUMBER EXERCISE PRICE
--------- ------ --------------
<S> <C> <C> <C>
BALANCE, JANUARY 24, 1997..................... 1,000 -- $ --
Granted under the Plan........................ (300) 300 $0.05
------- ------ -----
BALANCE, DECEMBER 31, 1997.................... 700 300 $0.05
Authorized.................................. 1,000 -- $ --
Granted..................................... (1,458) 1,458 $0.08
Exercised................................... -- (716) $0.06
Canceled.................................... 30 (30) $0.10
------- ------ -----
BALANCE, DECEMBER 31, 1998.................... 272 1,012 $0.09
Authorized.................................. 12,656 -- $ --
Granted under the Plan...................... (5,442) 5,442 $0.21
Granted outside of the Plan(a).............. -- 7,107 $0.17
Exercised................................... -- (7,808) $0.20
Canceled.................................... 640 (640) $0.10
------- ------ -----
BALANCE, SEPTEMBER 30, 1999................... 8,126 5,113 $0.20
======= ====== =====
</TABLE>

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

(a) In July, August and September 1999, the Company granted options to purchase
approximately 7,107,000 shares of common stock to certain Company
executives, directors and consultants. Such options were issued outside of
the Plan.

The Company accounts for the Plan under the provisions of APB No. 25. Had
compensation expense for the stock option plans been determined consistent with
SFAS No. 123, net losses would have increased to the following pro forma amounts
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
NINE
YEAR ENDED MONTHS
DECEMBER 31, ENDED
----------------- SEPTEMBER 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Net loss as reported........................... $ (416) $(4,563) $(25,614)
====== ======= ========
Net loss pro forma............................. $ (424) $(4,597) $(36,041)
====== ======= ========
Net loss per share as reported................. $(0.05) $ (1.65) $ (14.20)
====== ======= ========
Net loss per share pro forma................... $(0.05) $ (1.66) $ (19.98)
====== ======= ========
</TABLE>

The weighted-average fair value of options granted during the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999 was
$0.03, $0.07, and $4.26, respectively.

F-22
<PAGE> 106
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model using the following assumptions: risk-free
interest rates ranging from 4.22 to 5.99 percent; expected dividend yields of
zero percent for all four periods; an average expected life of 3.5 years; and
expected volatility of 0.001% for all periods except the nine months ended
September 30, 1999, for which a volatility factor of 70% was used.

The following table summarizes the stock options outstanding and
exercisable as of September 30, 1999 (shares in thousands):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE REMAINING EXERCISE EXERCISE
PRICE NUMBER YEARS PRICE NUMBER PRICE
- -------- ------ --------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
$0.05 193 8.7 $0.05 193 $0.05
$0.10 3,566 9.5 $0.10 3,566 $0.10
$0.50 1,354 9.9 $0.50 1,354 $0.50
----- --- ----- ----- -----
5,113 9.6 $0.20 5,113 $0.20
===== === ===== ===== =====
</TABLE>

During October 1999 the board of directors approved a change in the Plan
providing for the exercise of options prior to an employee's vesting date. At
September 30, 1999, 5,421,178 shares previously issued under the Plan were
subject to repurchase at a weighted-average exercise price of $0.21 per share.
At September 30, 1999, 183,609 outstanding options were vested and exercisable.

DEFERRED COMPENSATION

In connection with the grant of certain stock options to employees during
fiscal 1998 and for the nine months ended September 30, 1999, the Company
recorded deferred compensation of approximately $52 million, representing the
difference between the estimated fair value of the common stock for accounting
purposes and the option exercise price of these options at the date of grant.
Such amount is presented as a reduction of stockholders' equity and amortized
over the vesting period of the applicable options using an accelerated method of
amortization. Under the accelerated method, each vested tranche of options is
accounted for as a separate option grant awarded for past services. Accordingly,
the compensation expense is recognized over the period during which the services
will be provided; however, the method results in a front-loading of the
compensation expense. Based on the above assumptions, the weighted-average fair
values per share of options granted were $0.29 and $4.60 for the year ended
December 31, 1998 and for the nine months ended September 30, 1999,
respectively. The Company recorded amortization of deferred compensation of $5.7
million during the nine months ended September 30, 1999.

12. INCOME TAXES:

Effective January 1, 1998, the Company accounts for income taxes pursuant
to the provisions of SFAS No. 109, "Accounting for Income Taxes." SFAS 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the

F-23
<PAGE> 107
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined using the current applicable enacted tax rate and
provisions of the enacted tax law.

Due to the Company's loss position, there was no provision for income taxes
for the year ended December 31, 1998 and nine months ended September 30, 1999.

At inception, the Company elected S-Corporation status. As of January 1,
1998, the Company elected C-Corporation status for Federal and state purposes.
As a result, the Company is not entitled to any tax benefits associated with the
period prior to C-Corporation election.

At September 30, 1999, the Company had cumulative net operating loss carry
forwards of approximately $19.0 million for Federal and state income tax
purposes, expiring in the years ended 2018 and 2006, respectively.

At September 30, 1999, the Company had cumulative research and development
credit carry forwards of approximately $116,000 and $126,000 for Federal and
state income tax purposes, respectively. These credits are subject to expiration
through various periods through 2018.

The Tax Reform Act of 1986 contains provisions which may limit the net
operating loss and credit carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership.

The estimated tax effects of significant temporary differences and
carryforwards that give rise to deferred income tax assets are as follows (in
thousands):

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Temporary differences................................ $ 943 $ 943
Net operating loss carryforwards..................... 1,845 8,337
Research and development tax credit carryforwards.... 102 242
------- -------
2,890 9,522
Valuation allowance.................................. (2,890) (9,522)
------- -------
$ -- $ --
======= =======
</TABLE>

Due to uncertainty surrounding the realization of the deferred tax
attributes in future years, the Company has recorded a valuation allowance
against its net deferred tax assets.

The provision for income taxes at the Company's effective tax rate differed
from the benefit from income taxes at the statutory rate due mainly to the
increase in valuation allowance and no benefit of the operating losses was
recognized.

F-24
<PAGE> 108
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income tax rate of 35% to loss before
taxes is as follows:

<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Federal statutory rate............................... 35.0% 35.0%
State taxes, net of federal benefit.................. 5.8 5.8
Change in valuation allowance........................ (40.8) (40.8)
----- -----
0.0% 0.0%
===== =====
</TABLE>

13. RELATED PARTY TRANSACTIONS:

During 1996 and 1997, the Company borrowed a total of $433,000 from certain
stockholders and officers. During 1997, $48,000 of the loans from these
individuals was repaid in cash. At December 31, 1997, $385,000 of the loans from
these individuals is included in notes payable. During 1998, $170,000 of the
notes payable were converted to 340,000 shares of Series B and the remaining
$215,000 was repaid in cash.

14. SUBSEQUENT EVENTS (UNAUDITED):

COMMITMENTS

In October 1999, the Company entered into a three-year agreement with a
consulting firm (the "Consultant"), which is a stockholder as a result of the
Series E financing, in which the Consultant agreed to introduce the Company's
services to appropriate clients, based on their interests, and to incorporate
the Company's services into certain of its service offerings. The agreement also
provides for joint marketing activities. In consideration, the Company has
agreed to make payments to the Consultant in an aggregate amount of up to
approximately $2.0 million, as well as a percentage of specified Neoforma.com
e-commerce transaction revenue and other payments. The Company has also agreed
to utilize the Consultant's services on a preferred basis for systems
integration, development, infrastructure, process improvement and consulting
assistance, totaling at least $1.5 million of services from the Consultant, at a
discount from the Consultant's standard fees.

In October 1999, the Company entered into an agreement with a hardware
vendor, which is a stockholder as a result of the Series E financing, pursuant
to which the Company agreed to develop complementary marketing programs with the
vendor and establish hyperlinks between their respective internet websites. The
Company agreed to use the vendor as its exclusive supplier of certain hardware
products and agreed to purchase at least $5.0 million of the vendor's products
and $100,000 of consulting services on a mutually agreed upon schedule. As of
September 30, 1999, the Company had approximately $256,000 of payables due to
this stockholder.

F-25
<PAGE> 109
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ACQUISITIONS

In November 1999, the Company completed an asset purchase agreement with
FDI Information Resources, LLC in exchange for 350,000 shares of the Company's
common stock. Under the terms of the agreement, the Company acquired the rights
to software and customer contracts. The acquisition will be accounted for using
the purchase method of accounting and accordingly, the purchase price will be
allocated to the intangible assets acquired and liabilities assumed on the basis
of their respective fair values on the acquisition date.

The total purchase price of approximately $3.3 million, including estimated
acquisition-related expenses of $125,000 and estimated assumed liabilities of
$50,000, will be allocated to intangible assets according to their respective
fair market values. In the initial allocation of the purchase price,
approximately $600,000, $240,000, and $2,485,000 was allocated to acquired
software, assembled workforce and trade names, and goodwill type assets,
respectively. The intangible assets will be amortized over an estimate useful
life of three years.

LOANS AND NOTES PAYABLE

In October 1999, the Company borrowed approximately $37,000 and $275,000
under the software and hardware provisions of the loan/lease agreement dated
July 1999 (see Note 5).

1999 EQUITY INCENTIVE PLAN

In November 1999, the board of directors approved the 1999 Equity Incentive
Plan ("the 1999 Plan") to replace the 1997 Stock Plan. The Company has reserved
approximately 5,000,000 shares of common stock for issuance under the 1999 Plan,
and the 1999 Plan stipulates that the amount authorized will automatically be
increased each year by shares equal to 5% of the total outstanding shares as of
December 31 of the preceding year. Incentive stock options may only be granted
to employees under the 1999 plan, and they must be granted at an option price no
less than 100% of the fair market value of the common stock on the date of
grant. If the optionee owns stock representing more than 10% of the outstanding
voting stock, incentive stock options must be granted at an option price no less
than 110% of the fair market value of the common stock on the date of grant.
Nonqualified stock options may be granted to employees, officers, directors,
consultants, independent contractors or advisors to the Company, and must be
granted at an option price no less than 85% of the fair market value of the
common stock on the date of grant. All options granted under the 1999 Plan carry
a maximum term of 10 years from the date of grant, and shall be exercisable at
such times and under such conditions as determined by the board of directors at
the date of grant. However, for most options, 1/4 of the shares subject to the
option shall vest 12 months after the vesting commencement date, and 1/48 of the
shares subject to the option shall vest each month thereafter.

F-26
<PAGE> 110
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1999 EMPLOYEE STOCK PURCHASE PLAN

In November 1999, the board of directors approved the 1999 Employee Stock
Purchase Plan (the "ESPP") to become effective on the first day on which price
quotations are available for the Company's common stock on the NASDAQ National
Market. The Company has reserved 750,000 shares of common stock for issuance
under the ESPP, and the terms of the ESPP stipulate that amount will
automatically be increased each year by shares equal to 1% of the total
outstanding shares of common stock as of December 31 of the preceding year.
Subject to certain eligibility requirements, employees may elect to withhold up
to a maximum of 15% of their cash compensation for participation in the ESPP.
Each offering period under the ESPP will be two years in duration and will
consist of four six-month purchase periods. The first offering period is
expected to commence on the first day on which price quotations are available
for the Company's common stock on the NASDAQ National Market with subsequent
purchasing periods commencing on February 1 and August 1 each year. The purchase
price for common stock purchased under this plan will be 85% of the lesser of
the fair market value of our common stock on the first day of the applicable
offering period or the last day of the purchase period.

ACQUISITION OF PHAROS TECHNOLOGIES, INC.

On January 18, 1999, the Company completed an agreement to acquire Pharos
Technologies, Inc., a developer of content management software that facilitates
the locating, organizing and updating of product information in an online
marketplace. Under the terms of the agreement, the Company will issue 2,000,000
shares of common stock for all of the outstanding stock of Pharos Technologies,
Inc. 706,963 of the shares to be issued relate to the exercise of unvested
Pharos options, which are subject to repurchase rights. These purchase rights
will lapse over the vesting term of the original options.

F-27
<PAGE> 111

NEOFORMA.COM, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

On August 6, 1999, Neoforma.com, Inc. ("Neoforma.com") completed the
acquisition of General Asset Recovery LLC ("GAR"). The acquisition of GAR has
been accounted for as a purchase. Accordingly, the results of operations of GAR
have been included in the historical consolidated statement of operations of
Neoforma.com commencing on the date of acquisition.

In November 1999, Neoforma.com acquired certain assets and operations of
FDI Information Resources, LLC ("FDI"). The acquisition of FDI will be accounted
for as a purchase.

In January 2000, Neoforma.com, Inc. acquired Pharos Technologies, Inc.
("Pharos"). The acquisition of Pharos will be accounted for as a purchase. The
inception of Pharos was March 5, 1998, thus the amounts for the twelve months
ended December 31, 1998 represents operating activity from March 5, 1998 to
December 31, 1998.

The accompanying pro forma condensed combined statements of operations of
Neoforma.com for the twelve months ended December 31, 1998 and for the nine
months ended September 30, 1999 assume that the acquisitions of GAR, FDI and
Pharos took place as of the beginning of each of these periods. The statements
combine Neoforma.com's, GAR's, FDI's and Pharos' statements of operations for
the twelve months ended December 31, 1998 and for the nine months ended
September 30, 1999, respectively, as if the acquisitions took place at the
beginning of each period.

The pro forma condensed combined balance sheet as of September 30, 1999
combines Neoforma.com's September 30, 1999 balance sheet with FDI's and Pharos'
September 30, 1999 balance sheets.

The unaudited pro forma condensed combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have actually occurred if the
acquisition had been consummated as of the date indicated, nor is it necessarily
indicative of future operating results or financial position. The pro forma
adjustments are based on the information available at the time of the printing
of this prospectus.

The historical financial statements of Neoforma.com, GAR, FDI and Pharos
are included elsewhere in this prospectus and the unaudited pro forma condensed
combined information presented herein should be read in conjunction with those
financial statements and related notes.

F-28
<PAGE> 112

NEOFORMA.COM, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

SEPTEMBER 30, 1999

(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NEOFORMA.COM FDI PHAROS ADJUSTMENTS COMBINED
------------ ----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........... $ 655 $ 53 $ 205 $ (500)(E) $ 360
(53)(C)
Accounts receivable................. 277 4 66 (4)(C) 343
Prepaid expenses and other current
assets........................... 380 6 6 (6)(C) 386
Deferred debt costs, current
portion.......................... 413 -- -- -- 413
-------- ----- ------ ------- -------
Total current assets............. 1,725 63 277 (563) 1,502
PROPERTY AND EQUIPMENT, net........... 3,735 12 57 3,000(G) 6,792
(12)(C)
OTHER ASSETS.......................... 393 18 33 (18)(C) 426
DEFERRED DEBT COSTS, less current
portion............................. 705 -- -- -- 705
GOODWILL and other untangibles........ 9,445 -- -- 3,325(D) 29,227
16,457(G)
-------- ----- ------ ------- -------
Total assets..................... $ 16,003 $ 93 $ 367 $22,189 $38,652
======== ===== ====== ======= =======

LIABILITY AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable, current portion...... $ 3,560 $ 6 $ -- $ (6)(C) $ 3,560
Accounts payable.................... 4,226 307 91 (307)(C) 4,317
Deferred revenue and other accrued
liabilities...................... 3,049 74 3 (24)(C) 3,457
230(F)
125(B)
-------- ----- ------ ------- -------
Total current liabilities........ 10,835 387 94 18 11,334
NOTES PAYABLE, less current portion... 8,069 236 -- (236)(C) 8,069
MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK..................... 15,870 -- 1,000 (1,000)(F) 15,870
MEMBERS' CONTRIBUTIONS................ -- 10 -- (10)(C) --
STOCKHOLDERS' EQUITY
(DEFICIT)........................... (18,771) (540) (727) 540(C)
727(F)
(3,000)(G)
3,150(B)
22,000(F) (3,379)
-------- ----- ------ ------- -------
Total liabilities and
stockholders' equity
(deficit)...................... $ 16,003 $ 93 $ 367 $22,189 $38,652
======== ===== ====== ======= =======
</TABLE>

F-29
<PAGE> 113

NEOFORMA.COM, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1998

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ELIMINATION OF
INDUSTRIAL
PRODUCTS
OPERATIONS PRO FORMA PRO FORMA
NEOFORMA.COM GAR FDI PHAROS OF GAR ADJUSTMENTS COMBINED
------------ ------ ----- ------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE................................ $ -- $2,986 $ 47 $ -- $(1,472) $ -- $ 1,561
COST OF SALES.......................... -- 1,273 18 -- (754) -- 537
------- ------ ----- ---- ------- ------- --------
-- 1,713 29 -- (718) -- 1,024
------- ------ ----- ---- ------- ------- --------
OPERATING EXPENSES:
Operations........................... 627 -- -- -- -- -- 627
Product development.................. 1,491 -- -- 23 -- -- 1,514
Selling and marketing................ 1,409 345 260 -- (45) -- 1,969
General and administrative........... 1,075 1,756 110 62 (264) -- 2,739
Amortization of intangibles.......... -- -- -- -- -- 7,813(A) 7,813
Amortization of deferred
compensation....................... 5 -- -- -- -- -- 5
------- ------ ----- ---- ------- ------- --------
Total operating expenses........... 4,607 2,101 370 85 (309) 7,813 14,667
------- ------ ----- ---- ------- ------- --------
Loss from operations............... (4,607) (388) (341) (85) (409) (7,813) (13,643)
OTHER INCOME (EXPENSE), net............ 44 (32) (19) 4 -- -- (3)
------- ------ ----- ---- ------- ------- --------
Net loss........................... $(4,563) $ (420) $(360) $(81) $ (409) $(7,813) $(13,646)
======= ====== ===== ==== ======= ======= ========
NET LOSS PER SHARE:
Basic and diluted.................... $ (2.67)
========
Weighted average shares -- basic
and diluted........................ 5,112
========
</TABLE>

F-30
<PAGE> 114

NEOFORMA.COM, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ELIMINATION OF
INDUSTRIAL
PRODUCTS
OPERATIONS PRO FORMA PRO FORMA
NEOFORMA.COM GAR FDI PHAROS OF GAR ADJUSTMENTS COMBINED
------------ ------ ----- ------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE................................. $ 464 $2,164 $ 196 $ -- $(600) $ -- $ 2,224
COST OF SALES........................... -- 1,189 17 -- (489) -- 717
-------- ------ ----- ----- ----- ------- --------
464 975 179 -- (111) -- 1,507
-------- ------ ----- ----- ----- ------- --------
OPERATING EXPENSES:
Operations............................ 2,399 -- -- -- -- -- 2,399
Product development................... 4,321 -- -- 241 -- -- 4,562
Selling and marketing................. 5,096 446 182 140 (85) -- 5,779
General and administrative............ 5,812 809 137 500 (143) -- 7,115
Amortization of intangibles........... 230 -- -- -- -- 5,650(A) 5,880
Amortization of deferred
compensation........................ 5,662 -- -- -- -- -- 5,662
Cost of warrant issued to recruiter... 2,364 -- -- -- -- -- 2,364
-------- ------ ----- ----- ----- ------- --------
Total operating expenses............ 25,884 1,255 319 881 (228) 5,650 33,761
-------- ------ ----- ----- ----- ------- --------
Loss from operations................ (25,420) (280) (140) (881) 117 (5,650) (32,254)
OTHER INCOME (EXPENSE), net............. (194) (11) (16) 19 -- -- (202)
-------- ------ ----- ----- ----- ------- --------
Net loss............................ $(25,614) $ (291) $(156) $(862) $ 117 $(5,650) $(32,456)
======== ====== ===== ===== ===== ======= ========
NET LOSS PER SHARE:
Basic and diluted..................... $ (7.81)
========
Weighted average shares -- basic and
diluted............................. 4,154
========
</TABLE>

F-31
<PAGE> 115

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The total purchase price of the FDI acquisition has been allocated to
acquired assets based on estimates of their fair values. The purchase price of
approximately $3.3 million has been assigned to the intangible assets acquired
as follows:

<TABLE>
<S> <C>
Assembled work force and customer list...................... $ 240,000
Software.................................................... 600,000
Goodwill.................................................... 2,485,000
----------
3,325,000
Less: liabilities assumed................................... (50,000)
----------
$3,275,000
==========
</TABLE>

The total purchase price of the Pharos acquisition has been allocated to
acquired assets based on estimates of their fair values. The purchase price of
approximately $22.2 million has been assigned to the assets acquired as follows:

<TABLE>
<S> <C>
Current assets.............................................. $ 277,000
Property, plant and equipment............................... 57,000
Other assets................................................ 33,000
Acquired in-process research and development................ 3,000,000
Developed technology........................................ 3,000,000
Goodwill.................................................... 16,457,000
-----------
22,824,000
Less: liabilities assumed................................... (94,000)
Less: loan to Pharos prior to acquisition that remained
outstanding at the acquisition date....................... (500,000)
-----------
$22,230,000
===========
</TABLE>

The adjustments to the unaudited pro forma condensed combined statements of
operations for the year ended December 31, 1998 and for the nine months ended
September 30, 1999 assume the acquisitions occurred as of January 1, 1998 and
January 1, 1999, respectively, and are as follows:

(A) To reflect the amortization of approximately $29.2 million of
estimated goodwill and other intangibles resulting from the GAR, FDI and
Pharos acquisitions. The intangible assets will be amortized over three to
seven years. Developed technology has not been amortized in the
accompanying unaudited pro forma condensed combined statements of
operations as the technology has not yet been placed in service.

The adjustments to the unaudited pro forma condensed combined balance sheet
as of September 30, 1999 are as follows:

(B) To reflect the purchase price paid for FDI as follows: issuance of
the Company's common stock valued at approximately $3.2 million (at an
assumed value of $9 per share), the assumption of $50,000 of liabilities,
and acquisition-related expenses of approximately $125,000.

(C) To adjust asset and liability values of FDI to fair value of the
specific assets acquired and liabilities assumed at the acquisition date.

(D) To reflect goodwill and other intangibles of approximately $3.3
million resulting from the acquisition of FDI.

(E) To reflect the loan of $.5 million to Pharos from Neoforma.com in
December of 1999. Such amount was forgiven in connection with the
acquisition.

F-32
<PAGE> 116
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(CONTINUED)

(F) To reflect the purchase price paid for Pharos as follows: issuance
of the Company's common stock valued at approximately $22.0 million (at
assumed fair value of $11 per share) and acquisition related expenses of
approximately $.2 million.

(G) To reflect Goodwill, other intangibles and in-process research and
development of $22.5 million resulting from the acquisition of Pharos. We
expect to allocate approximately $3.0 million of the purchase price to
Pharos' in-process research and development, which will be expensed upon
consummation of the merger as it has not reached technological feasibility
and, in the opinion of management, has no alternative future use. The
estimated amount allocated is subject to adjustment based upon completion
of a third party appraisal, which is currently in process. This amount has
not been reflected in the accompanying pro forma statements of operations
as it is a nonrecurring charge, but has been reflected as an adjustment to
stockholders' equity (deficit) in the accompanying pro forma balance sheet.

The Company will allocate values to in-process research and development
based on an assessment of the R&D projects. The value assigned to these assets
will be limited to significant research projects for which technological
feasibility has not been established, including development, engineering and
testing activities associated with the introduction of the Pharos'
next-generation technologies.

The value assigned to purchased in-process technology is being determined
by estimating the costs to develop the purchased in-process technology into
commercially viable products, estimating the resulting net cash flows from the
projects and discounting the net cash flows to their present value. The revenue
projection used to value the in-process research and development will be based
on estimates of relevant market sizes and growth factors, expected trends in
technology, and the nature and expected timing of new product introductions by
the Company and its competitors.

The Industrial Products operations of GAR was sold to an owner of GAR
("Owner") prior to its acquisition. Accordingly the revenue and direct expenses
(consisting of only the salary of the Owner and certain employees) are
eliminated in the accompanying pro forma statements of operations.

F-33
<PAGE> 117

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Members of
General Asset Recovery LLC:

We have audited the accompanying balance sheets of GENERAL ASSET RECOVERY,
LLC (an Illinois limited liability company) as of December 31, 1997 and 1998,
and the related statements of operations, members' equity (deficit) and cash
flows for the years 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 audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Asset Recovery LLC
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
October 1, 1999

F-34
<PAGE> 118

GENERAL ASSET RECOVERY LLC

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1997 1998 1999
--------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash................................................ $ 29,712 $ 24,805 $ 88,146
Accounts receivable............................... 78,523 49,288 718,314
Prepaid expenses.................................. -- 2,587 --
--------- -------- ----------
Total current assets......................... 108,235 76,680 806,460
--------- -------- ----------
PROPERTY AND EQUIPMENT, NET......................... 30,479 60,188 83,665
--------- -------- ----------
OTHER ASSETS:
Employee advances................................. -- -- 26,674
--------- -------- ----------
Deposits.......................................... 17,310 21,223 21,223
--------- -------- ----------
Total assets................................. $ 156,024 $158,091 $ 938,022
========= ======== ==========

LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit.................................... $ 374,540 $147,500 $ 125,000
Accounts payable.................................. 68,749 67,445 1,208,885
Accrued expenses.................................. 164,156 36,771 38,695
--------- -------- ----------
Total current liabilities.................... 607,445 251,716 1,372,580
COMMITMENTS AND CONTINGENCIES (NOTE 7)
MEMBERS' EQUITY (DEFICIT):
Total members' (deficit)..................... (451,421) (93,625) (434,558)
--------- -------- ----------
Total liabilities and members' (deficit)..... $ 156,024 $158,091 $ 938,022
========= ======== ==========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-35
<PAGE> 119

GENERAL ASSET RECOVERY LLC

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ -------------------------
1997 1998 1998 1999
---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE............................... $2,404,654 $2,986,099 $1,667,908 $1,675,852
COST OF SALES......................... 1,349,462 1,273,333 696,072 885,714
---------- ---------- ---------- ----------
1,055,192 1,712,766 971,836 790,138
OPERATING EXPENSES:
Selling and marketing............... 296,885 344,365 239,806 363,053
General and administrative.......... 1,059,130 1,756,355 720,551 700,140
---------- ---------- ---------- ----------
Total operating expenses.... 1,356,015 2,100,720 960,357 1,063,193
---------- ---------- ---------- ----------
Operating income (loss)..... (300,823) (387,954) 11,479 (273,055)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Other income........................ 2,357 13,425 13,425 --
Rental income....................... 210,047 134,150 57,172 --
Interest expense, net............... (35,326) (47,768) (6,073) (11,287)
---------- ---------- ---------- ----------
Total other income
(expense)................ 177,078 99,807 64,524 (11,287)
---------- ---------- ---------- ----------
Net income (loss)........... $ (123,745) $ (288,147) $ 76,003 $ (284,342)
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-36
<PAGE> 120

GENERAL ASSET RECOVERY LLC

STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND THE SIX MONTHS ENDED JUNE 30,
1999

<TABLE>
<CAPTION>
TOTAL
MEMBERS'
EQUITY (DEFICIT)
-----------------
<S> <C>
BALANCE, December 31, 1996.................................. $(218,525)
Net loss.................................................. (123,745)
Member distributions...................................... (109,151)
---------
BALANCE, December 31, 1997.................................. (451,421)
---------
Net loss.................................................. (288,147)
Member distributions...................................... (37,612)
Member contributed capital................................ 683,555
---------
BALANCE, December 31, 1998.................................. (93,625)
---------
Net loss.................................................. (284,342)
Member distributions...................................... (56,591)
---------
BALANCE, June 30, 1999 (unaudited).......................... $(434,558)
=========
</TABLE>

The accompanying notes are an integral part of these statements.

F-37
<PAGE> 121

GENERAL ASSET RECOVERY, LLC

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------- ----------------------
1997 1998 1998 1999
--------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)............................... $(123,745) $(288,147) $ 76,003 $ (284,342)
Adjustments to reconcile net income(loss) to
net cash provided by (used in) operating
activities
Depreciation and amortization........... 2,458 27,814 3,294 11,560
Changes in operating assets and
liabilities..........................
Accounts receivable.................. 123,380 29,235 46,645 (669,026)
Prepaid expenses..................... -- (2,587) 2,587
Other assets......................... -- (3,913) (19,175) (26,674)
Accounts payable..................... 35,914 (1,304) 26,318 1,141,440
Accrued expenses..................... 118,671 (127,385) (163,156) 1,924
--------- --------- --------- ----------
Net cash provided by (used in)
operating activities......... 156,678 (366,287) (30,071) 177,469
--------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........... (32,937) (57,523) (148) (35,037)
--------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital.......................... -- 683,555 -- --
Dividends.................................... (109,151) (37,612) (16,500) (56,591)
Net borrowings (repayments) under
line-of-credit agreement.................. (10,460) (227,040) 17,007 (22,500)
--------- --------- --------- ----------
Net cash provided by (used in)
financing activities......... (119,611) 418,903 507 (79,091)
--------- --------- --------- ----------
Net increase (decrease) in cash
and cash equivalents......... 4,130 (4,907) (29,712) 63,341
CASH AND CASH EQUIVALENTS, beginning of year... 25,582 29,712 29,712 24,805
--------- --------- --------- ----------
CASH AND CASH EQUIVALENTS, end of year......... $ 29,712 $ 24,805 $ -- $ 88,146
========= ========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.................... $ 35,326 $ 32,767 $ 11,287 $ 21,074
========= ========= ========= ==========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Assumption of debt by majority member........ $ -- $ 683,555 $ -- $ --
========= ========= ========= ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-38
<PAGE> 122

GENERAL ASSET RECOVERY LLC

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

General Asset Recovery LLC (the "Company") is in the business of conducting
live auctions and appraisals of medical equipment.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies of the Company are as follows:

REVENUE RECOGNITION

Auction revenue is recognized when the equipment is sold which is
represented by an auction commission received from the buyer and seller. Auction
commissions represent a percentage of the final price at auction sales. Buyers
pay an additional percentage of the final price as a buyer's premium. The
Company does not provide any guarantee with respect to the authenticity of
property offered for sale at auction. Each item is sold on an "as-is" basis with
guarantee only of title.

Upon completion of a final appraisal or inventory report, the Company
recognizes appraisal and inventory revenue. Typically a final payment is due
upon delivery of the report.

MANAGEMENT'S USE OF ESTIMATES

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

CONCENTRATION OF CREDIT RISK

The Company may extend trade credit in connection with its auction sales
which are held throughout the United States. The Company evaluates each
customer's creditworthiness on a case-by-case basis; generally, the customers
who receive trade credit are professional dealers who have regularly purchased
property at the Company's auctions or whose reputation within the industry is
known and respected by the Company.

In situations where trade credit is extended, the purchaser does not take
possession of the property before payment is made by the purchaser to the
Company, and the Company is liable to the consignor for the net sales proceeds
(final auction price less commission to the Company). The Company pays the
consignor generally not later than the 10th day after the sale, and when trade
credit is extended, the Company assumes all risk of loss associated with the
trade credit, and the responsibility of collection of the trade credit amount
from the purchaser. Losses to date under these situations have not been
material.

INVENTORY

The majority of the warehouse inventory is on consignment from the seller.
For purchased inventory, the Company periodically reviews the age and turnover
of its inventory to determine whether any inventory has become obsolete or has
declined in value and incurs a charge to operations for known and anticipated
inventory obsolescence. Inventories are stated at the lower of cost or market.
Cost is determined by specific identification.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is recognized using
both accelerated and straight-line methods. When assets are retired or otherwise
disposed of, the cost and related

F-39
<PAGE> 123
GENERAL ASSET RECOVERY LLC

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

accumulated depreciation are removed from the accounts, and any resulting gain
or loss is recognized in results of operations for the period. The cost of
repairs and maintenance is charged to operations as incurred.

3. RECEIVABLES

Receivables represent advance payments, or loans, to the consignor prior to
the auction sale, collateralized by the items received and held by the Company
for the auction sale and the proceeds from such sale. Such advances generally
are not outstanding for more than one month from the date of the note.

4. PROPERTY AND EQUIPMENT, NET

As of December 31, 1998, property and equipment consisted of the following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
AMOUNT LIFE
-------- -----------
<S> <C> <C>
Computer equipment....................................... $ 11,074 5 - 7 years
Furniture and fixtures................................... 79,387 5 - 7 years
Less accumulated depreciation............................ (30,273)
--------
Net property and equipment............................. $ 60,188
========
</TABLE>

Depreciation expense for the years ended December 31, 1997 and 1998 was
approximately $3,000 and $28,000, respectively.

5. LEASES

The Company conducts its business on premises leased under leases that
expire through the year 2004. Future minimum lease payments under noncancellable
leases in effect at December 31, 1998, are set forth below:

<TABLE>
<S> <C>
1999.................................................. $ 83,309
2000.................................................. 50,198
2001.................................................. 45,060
2002.................................................. 45,828
2003.................................................. 46,786
2004.................................................. 7,826
--------
Total future minimum lease payments................. $279,007
========
</TABLE>

Rent expense was approximately $97,000 and $111,000 for the years ended
December 31, 1997 and 1998, respectively.

6. LINE OF CREDIT

As of December 31, 1998, the Company had a line of credit agreement with a
bank that allowed for maximum borrowings of $400,000. Interest was at the bank's
prime rate plus 0.5%. Borrowings were collateralized by all assets of the
Company. At December 31, 1998, borrowings outstanding on the line of credit were
$147,500 with a final payment due July 30, 1999. The Company paid off and
terminated the entire line of credit on July 30, 1999.

F-40
<PAGE> 124
GENERAL ASSET RECOVERY LLC

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to occasional lawsuits,
investigations and claims arising out of the normal conduct of business.
Management does not believe the outcome of any pending claims will have a
material adverse effect on the Company's financial position or results of
operations.

8. AGREEMENTS

In March 1997, the Company entered into an agreement with a hospital to
sell the hospital's surplus assets. The hospital engaged the Company to be its
exclusive agent for a five-year period for the purpose of selling the surplus
assets. In the event that an item does not sell within thirty days of the
possession by the Company, the Company will return such items to the hospital.
The gross sales, less a fee to the Company, are required to be disbursed to the
hospital within five days of the end of the month of the sale.

In December 1998, the Company entered into a one-year services agreement
with a hospital organization to market and promote the Company's services to
members and affiliates of the hospital organization. The Company is required to
pay a marketing fee equal to a percentage of the total net proceeds, as defined,
received from the current month's sale of the assets. During 1999, various
auction agreements have been signed with hospitals in the organization. The
agreements appoint the Company as the exclusive independent agent for periods up
to three years for the purpose of selling the assets privately or at public
auction. The Company must move the assets, catalog the assets, advertise the
auction by publication and mailing of circulars and auction the assets for cash,
"as is" and "where is", among other obligations. The net proceeds are required
to be paid within 10 days of the auction sale. The Company receives a percentage
of the net proceeds as a commission.

In June 1999, a hospital appointed the Company as its exclusive agent for
the purposes of selling auction assets. The Company receives a percentage of the
net proceeds, less expenses and any buyers premium as a commission. The Company
must, among other obligations, advertise the auction sale by publication and
mailing of circulars, sell the assets for cash, keep accurate records of the
auction sale and provide the records to the hospital within ten days of the sale
and provide adequate personnel to supervise the removal of the assets sold.

9. INCOME TAXES

The Company has elected to include its income and expenses with those of
its members for federal income tax purposes. Accordingly, the statements of
operations for the years ended December 31, 1997 and 1998 do not include a
provision for federal income taxes.

10. SUBSEQUENT EVENT

In August 1999, Neoforma.com, Inc. acquired the Company. The acquisition
will be accounted for using the purchase method of accounting on Neoforma.com,
Inc.'s financial statements.

F-41
<PAGE> 125

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Neoforma.com and
FDI Information Resources, L.L.C.:

We have audited the accompanying balance sheets of FDI Information
Resources, L.L.C. (an Arizona limited liability company) (the Company) as of
December 31, 1998 and 1997, and the related statements of operations, changes in
members' equity (deficit) and cash flows for the year ended December 31, 1998
and for the period from inception (November 4, 1997) to December 31, 1997. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of the Company as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
year ended December 31, 1998 and for the period from inception (November 4,
1997) to December 31, 1997, in conformity with generally accepted accounting
principles.

/s/ ARTHUR ANDERSEN LLP

Phoenix, Arizona,
November 18, 1999.

F-42
<PAGE> 126

FDI INFORMATION RESOURCES, L.L.C.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1997 1998 1999
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 59,934 $ 37,512 $ 53,330
Accounts receivable.............................. -- 32,282 4,312
Related party receivable, net.................... 16,421 -- --
Prepaid expenses and other assets................ 96 5,570 5,500
-------- --------- ---------
Total current assets..................... 76,451 75,364 63,142
PROPERTY AND EQUIPMENT, net........................ 4,803 10,592 11,860
SOFTWARE DEVELOPMENT COSTS, net.................... 47,222 30,555 18,063
-------- --------- ---------
$128,476 $ 116,511 $ 93,065
======== ========= =========
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable................................. $ 22,578 $ 8,004 $ 3,480
Related party payable, net....................... -- 141,765 302,803
Deferred revenue and other accrued liabilities... 8,198 98,211 74,012
Current portion of notes payable to related
parties....................................... -- 3,448 6,293
-------- --------- ---------
Total current liabilities................ 30,776 251,428 386,588
-------- --------- ---------
NOTES PAYABLE TO RELATED PARTIES, net of current
portion.......................................... 120,000 239,052 236,207
-------- --------- ---------
MEMBERS' EQUITY (DEFICIT):
Members' contributions........................... 2,000 10,000 10,000
Accumulated deficit.............................. (24,300) (383,969) (539,730)
-------- --------- ---------
Total members' equity (deficit).......... (22,300) (373,969) (529,730)
-------- --------- ---------
$128,476 $ 116,511 $ 93,065
======== ========= =========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-43
<PAGE> 127

FDI INFORMATION RESOURCES, L.L.C.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
INCEPTION
(NOVEMBER 14, NINE MONTHS ENDED
1997) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
------------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Software license and other revenue
($46,675 and $6,458 in 1997 and 1998,
respectively, is related party
revenue)............................. $ 46,675 $ 46,557 $ 42,595 $ 196,268
COST OF PRODUCTS SOLD..................... 2,884 18,040 13,635 16,630
-------- --------- --------- ---------
Gross Margin.................... 43,791 28,517 28,960 179,638
-------- --------- --------- ---------
OPERATING EXPENSES:
Salaries................................ 45,212 280,562 222,035 202,767
Marketing............................... 2,532 53,245 41,017 29,801
General and administrative.............. 19,602 35,705 27,889 86,661
-------- --------- --------- ---------
Total operating expenses........ 67,346 369,512 290,941 319,229
-------- --------- --------- ---------
LOSS FROM OPERATIONS...................... (23,555) (340,995) (261,981) (139,591)
-------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income......................... 5 561 546 --
Interest expense and other.............. (750) (19,235) (12,908) (16,170)
-------- --------- --------- ---------
Total other income (expense).... (745) (18,674) (12,362) (16,170)
-------- --------- --------- ---------
NET LOSS.................................. $(24,300) $(359,669) $(274,343) $(155,761)
======== ========= ========= =========
</TABLE>

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

F-44
<PAGE> 128

FDI INFORMATION RESOURCES, L.L.C.

STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
MEMBERS' ACCUMULATED
CONTRIBUTIONS DEFICIT TOTAL
------------- ----------- ---------
<S> <C> <C> <C>
BALANCE, inception (November 14, 1997)............... $ -- $ -- $ --
Members' investment.................................. 2,000 -- 2,000
Net loss........................................... -- (24,300) (24,300)
------- --------- ---------
BALANCE, December 31, 1997........................... 2,000 (24,300) (22,300)
Members' investment................................ 8,000 -- 8,000
Net loss........................................... -- (359,669) (359,669)
------- --------- ---------
BALANCE, December 31, 1998........................... 10,000 (383,969) (373,969)
Net loss (unaudited)............................... -- (155,761) (155,761)
------- --------- ---------
BALANCE, September 30, 1999 (unaudited).............. $10,000 $(539,730) $(529,730)
======= ========= =========
</TABLE>

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

F-45
<PAGE> 129

FDI INFORMATION RESOURCES, L.L.C.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
INCEPTION
(NOVEMBER 14, NINE MONTHS ENDED
1997) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
------------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(24,300) $(359,669) $(274,343) $(155,761)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........ 3,031 20,088 14,748 14,805
Changes in assets and liabilities:
Accounts receivable................ -- (32,282) (22,610) 27,970
Related party receivable/payable,
net............................. (16,421) 158,186 125,570 161,038
Prepaid expenses and other
assets.......................... (96) (5,474) (6,022) 70
Accounts payable................... 22,578 (14,574) (14,679) (4,524)
Deferred revenue and other accrued
liabilities..................... 8,198 90,013 22,255 (24,199)
-------- --------- --------- ---------
Net cash provided by (used in)
operating activities......... (7,010) (143,712) (155,081) 19,399
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..... (5,056) (9,210) (11,076) (3,581)
Payments for capitalized software....... (50,000) -- -- --
-------- --------- --------- ---------
Net cash used in investing
activities................... (55,056) (9,210) (11,076) (3,581)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
to related parties................... 125,000 122,500 122,500 --
Payments on note payable to related
parties.............................. (5,000) -- -- --
Proceeds from member contributions...... 2,000 8,000 8,000 --
-------- --------- --------- ---------
Net cash provided by financing
activities................... 122,000 130,500 130,500 --
-------- --------- --------- ---------
Net increase (decrease) in
cash......................... 59,934 (22,422) (35,657) 15,818
CASH, beginning of period................. -- 59,934 59,934 37,512
-------- --------- --------- ---------
CASH, end of period....................... $ 59,934 $ 37,512 $ 24,277 $ 53,330
======== ========= ========= =========
</TABLE>

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

F-46
<PAGE> 130

FDI INFORMATION RESOURCES, L.L.C.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

(1) FORMATION OF THE COMPANY AND NATURE OF THE OPERATIONS:

FDI Information Resources, L.L.C. (the Company), an Arizona limited
liability company formed on November 4, 1997, operates under an operating
agreement between its various members. The Company is in the business of
developing and licensing equipment planning software. In addition, the Company
supports its products with product installation, training and system support.

RELATED BUSINESS ENTITIES

The Company is related to other business entities through common ownership
or control. Specifically, the Company is related to Facilities Development, Inc.
(FDI). FDI is a medical equipment planning and consulting firm. All related
party revenue represents sales of the Company's products to FDI. These financial
statements do not include any other related business entities that are under
common ownership or in which the members have a direct or indirect controlling
financial interest. The financial effects of control for two or more business
enterprises by common ownership are more appropriately reflected in combined
financial statements presented in accordance with generally accepted accounting
principles applicable.

OPERATING AGREEMENT

The Managers, as defined in the operating agreement, shall direct, manage,
and control the business with full and complete authority, power and discretion
to make any and all decisions to accomplish the business and objectives of the
Company. Only a Manager shall have the authority to act for or bind the Company.

The Company's members have made capital contributions of $10,000, and the
ownership is divided 37.5%, 37.5% and 25% amongst its three members.

Distributions shall be made to the members at such times and in such
amounts as determined by the Managers in the Managers' sole discretion. Upon
dissolution or liquidation of the Company, each member will solely look to the
assets of the Company for return of capital contributions without any recourse
against the Company.

The Company shall continue until such time of dissolution. Dissolution will
occur upon one of the following: the written consent of a majority in interest
of the members, the sale of all or substantially all of the Company's assets, or
the occurrence of an event of withdrawal of the last remaining member.

EXPENSE ALLOCATIONS

The majority of the Company's expenses are paid through its related
business entities. Such expenses are allocated to the Company either through a
specific identification of expenses, or on a percentage basis. Expenses incurred
in this manner are reflected as related party receivable (payable), net in the
accompanying balance sheets.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

UNAUDITED INTERIM FINANCIAL DATA

The unaudited interim financial statements as of and for the nine months
ended September 30, 1999 and for the nine months ended 1998 have been prepared
on the same basis as the audited

F-47
<PAGE> 131
FDI INFORMATION RESOURCES, L.L.C.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997

financial statements and, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial information set forth therein, in accordance with generally
accepted accounting principles. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.

USE OF ESTIMATES

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

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and are depreciated on a
straight-line basis over three to five years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." Under SFAS No. 121, long-lived assets and certain identifiable intangible
assets, including goodwill, are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. An impairment loss is recognized if the sum of the expected
long-term undiscounted cash flows is less than the carrying amount of the
long-lived assets being evaluated.

SOFTWARE DEVELOPMENT COSTS

In accordance with SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed, the Company capitalizes
software development costs by project commencing when technological feasibility
is established and concluding when the product is ready for commercial release.
The establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic product lives and changes in
software and hardware technology. Software development costs are amortized on a
straight-line basis over three years or the expected life of the product,
whichever is less. The Company periodically evaluates the net realizable value
of capitalized software development costs based on factors such as budgeted
sales, product development cycles and management's market emphasis. Research and
development costs are charged to expense when incurred.

INCOME TAXES

The Company, with the consent of its members, is a limited liability
company, which qualifies for tax treatment as a partnership for federal and
state income tax purposes. As a result, the

F-48
<PAGE> 132
FDI INFORMATION RESOURCES, L.L.C.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997

Company's results of operations are included in the income tax returns of its
members. Therefore, the accompanying financial statements do not include any
provision for income taxes.

REVENUE RECOGNITION

The Company recognizes revenues in accordance with the provisions of
Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by
SOP 98-4, Deferral of the Effective Date of Certain Provisions of SOP 97-2.
Under SOP 97-2, the Company recognizes revenue for software sales upon shipment
of the product, provided collection of the resulting receivable is deemed
probable and any remaining obligations under the license agreements are
insignificant. Revenue from service contracts, instruction and user training and
post-contract customer support is recognized ratably over the period of the
related contract. Deferred revenue represents the Company's obligation to
perform under existing contracts.

For contracts with multiple obligations (e.g., deliverable and
undeliverable products, maintenance and other services), the Company allocates
revenue to each component of the contract based on vendor specific objective
evidence of its fair value, which is specific to the Company or for products not
being sold separately, the price established by management. The Company
recognizes revenue allocated to undelivered products when the criteria for
product revenue set forth above are met.

(3) PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1997 1998
------ -------
<S> <C> <C>
Computers and equipment..................................... $5,056 $14,266
Less: accumulated depreciation.............................. (253) (3,674)
------ -------
$4,803 $10,592
====== =======
</TABLE>

Depreciation expense was approximately $253 and $3,421 for the period from
November 4, 1997 to December 31, 1997 and the year ended December 31, 1998,
respectively.

(4) SOFTWARE DEVELOPMENT COSTS:

Software development costs consisted of the following at December 31:

<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Capitalized software costs.................................. $50,000 $ 50,000
Less: accumulated amortization.............................. (2,778) (19,445)
------- --------
$47,222 $ 30,555
======= ========
</TABLE>

The Company's policy is to amortize capitalized software costs by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. It is reasonably possible that
those estimates of anticipated future gross revenues, the remaining estimated
economic life of the product, or both will be reduced significantly in the near
term. As a result, the carrying amount of the capitalized software costs may be
reduced materially in the near term.

F-49
<PAGE> 133
FDI INFORMATION RESOURCES, L.L.C.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997

Amortization of capitalized software development costs are included in
costs of products sold and was approximately $2,778 and $16,667 for the period
from November 4, 1997 to December 31, 1997 and the year ended December 31, 1998,
respectively. The Company did not capitalize any software development costs
during the year ended December 31, 1998.

(5) NOTES PAYABLE TO RELATED PARTIES:

Notes payable to related parties consisted of the following at:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Various notes payable totaling $197,500 payable to a
member of the Company. Eight annual installments of
$23,198, including interest at 10%, are due, beginning
on December 31, 1999. ................................ $ 75,000 $197,500 $197,500
Note payable to FDI in the amount of $45,000. Interest
at 10% is payable annually on November 1. Principal is
due on November 1, 2002. ............................... 45,000 45,000 45,000
-------- -------- --------
120,000 242,500 242,500
Less: current portion.............................. -- (3,448) (6,293)
-------- -------- --------
$120,000 $239,052 $236,207
======== ======== ========
</TABLE>

Maturities of long term debt are as follows at December 31:

<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
1999........................................................ $ 3,448
2000........................................................ 3,793
2001........................................................ 4,172
2002........................................................ 49,590
Thereafter.................................................. 181,497
--------
$242,500
========
</TABLE>

(6) SUBSEQUENT EVENT:

On November 18, 1999, the Company sold substantially all its assets to
Neoforma.com in exchange for 350,000 shares of Neoforma.com's common stock and
$75,000 in cash for transaction-related expenses. Under the terms of the
agreement, Neoforma.com acquired the rights to the software and customer
contracts of the Company.

F-50
<PAGE> 134

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of

Pharos Technologies, Inc.:

We have audited the accompanying balance sheet of Pharos Technologies, Inc.
(a California Company in the development stage) as of December 31, 1998, and the
related statements of operations, shareholders' equity and cash flows for the
period from inception (March 5, 1998) to 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 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pharos Technologies, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the period from inception (March 5, 1998) to December 31, 1998, in conformity
with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

San Jose, California
January 19, 2000

F-51
<PAGE> 135

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 919,040 $ 205,201
Related party receivable.................................. -- 66,402
Prepaids and other current assets......................... 5,065 6,142
---------- ----------
Total current assets............................... 924,105 277,745
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and fixtures.................................... -- 1,728
Computer hardware......................................... 4,701 64,700
Equipment................................................. 7,500 8,088
---------- ----------
12,201 74,516
Less: Accumulated depreciation............................ -- (17,665)
---------- ----------
12,201 56,851
---------- ----------
OTHER ASSETS................................................ 16,840 32,611
---------- ----------
$ 953,146 $ 367,207
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 30,618 $ 91,207
Accrued expenses.......................................... 14 2,918
---------- ----------
Total current liabilities.......................... 30,632 94,125
---------- ----------
COMMITMENTS (Note 4)
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A, par value $0.53
Authorized -- 1,886,793 shares at December 31, 1998
and September 30, 1999 (unaudited)
Issued and outstanding -- 1,886,793 shares at December
31, 1998 and September 30, 1999 (unaudited);
liquidation preference -- $1,000,000................. 1,000,000 1,000,000
---------- ----------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, par value -- $.001
Authorized -- 10,000,000 shares at December 31, 1998
and September 30, 1999 (unaudited)
Issued and outstanding -- 4,000,000 shares at December
31, 1998 and September 30, 1999 (unaudited).......... 4,000 4,000
Additional paid-in capital................................ -- 1,000,233
Deferred compensation..................................... -- (787,000)
Deficit accumulated during the development stage.......... (81,486) (944,151)
---------- ----------
Total shareholders' equity (deficit)............... (77,486) (726,918)
---------- ----------
$ 953,146 $ 367,207
========== ==========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-52
<PAGE> 136

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

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

F-53
<PAGE> 137

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD FROM INCEPTION (MARCH 5, 1998) TO SEPTEMBER 30, 1999

<TABLE>
<CAPTION>
COMMON STOCK DEFICIT ACCUMULATED TOTAL
------------------ ADDITIONAL DEFERRED DURING THE SHAREHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL COMPENSATION DEVELOPMENT STAGE EQUITY
--------- ------ --------------- ------------ ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION (March 5,
1998).................... -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock on
March 5, 1998 to founders
for cash at $0.001 per
share...................... 4,000,000 4,000 -- -- -- 4,000
Net loss............... -- -- -- -- (81,486) (81,486)
--------- ------ ---------- --------- --------- ---------
BALANCE AT DECEMBER 31,
1998..................... 4,000,000 4,000 (81,486) (77,486)
UNAUDITED:
Fair value of stock
options to
consultants for
services rendered.... -- -- 18,233 -- -- 18,233
Deferred compensation
on grant of stock
options.............. -- -- 982,000 (982,000) -- --
Amortization of
deferred
compensation......... -- -- -- 195,000 -- 195,000
Net loss............... -- -- -- -- (862,665) (862,665)
--------- ------ ---------- --------- --------- ---------
BALANCE AT SEPTEMBER 30,
1999 (Unaudited)......... 4,000,000 $4,000 $1,000,233 $(787,000) $(944,151) $(726,918)
========= ====== ========== ========= ========= =========
</TABLE>

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

F-54
<PAGE> 138

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION NINE MONTHS FROM INCEPTION FROM INCEPTION
(MARCH 5, 1998) ENDED (MARCH 5, 1998) (MARCH 5, 1998)
TO DECEMBER 31, SEPTEMBER 30, TO SEPTEMBER 30, TO SEPTEMBER 30,
1998 1999 1999 1998
---------------- ------------- ---------------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $ (81,486) $(862,665) $ (944,151) $(5,076)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... -- 17,665 17,665 --
Amortization of deferred
compensation...................... -- 195,000 195,000 --
Valuation of common stock options
issued in connection with
consulting services............... -- 18,233 18,233 --
Changes in assets and liabilities:
Related party receivable.......... -- (66,402) (66,402) --
Prepaid and other current
assets......................... (5,065) (1,077) (6,142) (160)
Accounts payable.................. 30,618 60,589 91,207 16,153
Accrued liabilities............... 14 2,904 2,918 7,289
---------- --------- ---------- -------
Net cash (used in) provided by
operating activities......... (55,919) (635,753) (691,672) 3,628
---------- --------- ---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of other assets.............. (16,840) (15,771) (32,611) (5,179)
Purchases of property and equipment.... (12,201) (62,315) (74,516) --
---------- --------- ---------- -------
Net cash used in investing
activities................... (29,041) (78,086) (107,127) (5,179)
---------- --------- ---------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of
mandatorily redeemable preferred
stock............................... 1,000,000 -- 1,000,000 --
Proceeds from issuance of common
stock............................... 4,000 -- 4,000 4,000
---------- --------- ---------- -------
Net cash provided by financing
activities................... 1,004,000 -- 1,004,000 4,000
NET INCREASE IN CASH AND CASH
EQUIVALENTS............................ 919,040 (713,839) 205,201 2,449
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD................................. -- 919,040 -- --
---------- --------- ---------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................. $ 919,040 $ 205,201 $ 205,201 $ 2,449
========== ========= ========== =======
</TABLE>

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

F-55
<PAGE> 139

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION OF THE COMPANY:

Pharos, Inc. (the "Company") was incorporated on March 5, 1998 in
California, to develop and market Pharos' Product Information Management System
(PIMS). PIMS is a computer software used for the creation, management,
publishing and maintenance of product information.

From inception, the Company has been primarily engaged in organizational
activities, including designing and developing its product, recruiting
personnel, establishing office facilities, raising capital and developing its
marketing plan. The Company has not yet had a general release of its product and
has not yet generated revenues from sales of its software product, accordingly,
the Company is classified as a development stage company. The attainment of
profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy and hiring and retaining quality personnel. Negative
developments in any of these conditions could have a material adverse effect on
the Company's business, financial condition and results of operations.

2. SIGNIFICANT ACCOUNTING POLICIES:

UNAUDITED INTERIM FINANCIAL DATA

The unaudited interim financial statements as of September 30, 1999, for
the period from inception (March 5, 1998) to September 30, 1998 and 1999 and for
the nine months ended September 30, 1999 have been prepared on the same basis as
the audited financial statements and, in the opinion of management, reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance with
generally accepted accounting principles. Operating results for the nine months
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.

USE OF ESTIMATES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial assets and liabilities,
including cash and cash equivalents and accounts payable at December 31, 1998
and September 30, 1999, approximate fair value due to the short maturity of
these instruments.

CASH AND CASH EQUIVALENTS

The Company considers highly liquid investments with an original maturity
of three months or less from the date of purchase to be cash equivalents.

F-56
<PAGE> 140

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

CONCENTRATION OF CREDIT RISK

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of 1 to 7 years.
Repairs and maintenance costs are expensed as incurred.

IMPAIRMENT OF LONG-LIVED ASSETS

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

SOFTWARE DEVELOPMENT COSTS

Under the criteria set forth in Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," capitalization of software development costs
begins upon the establishment of technological feasability of the product. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgement by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. Amounts that could have been capitalized under this
statement after consideration of the above factors were immaterial and,
therefore, no software development costs have been capitalized by the Company to
date.

STOCK BASED COMPENSATION PLAN

Under the criteria set forth in SFAS No. 123, "Accounting for Stock-Based
Compensation," companies which have stock-based compensation arrangements with
employees apply a fair-value basis of accounting for stock options and other
equity instruments or apply the accounting rules under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," but with
additional financial statement disclosure. The Company has elected to account
for stock-based compensation expense under APB No. 25 and make the required pro
forma disclosures for compensation expense (see Note 7).

COMPREHENSIVE INCOME

The Company has adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity

F-57
<PAGE> 141

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(net assets) during a period from non-owner sources. Through December 31, 1998,
the Company has not had any transactions that are required to be reported in
comprehensive income.

3. INCOME TAXES:

As of December 31, 1998 and September 30, 1999, the Company has federal and
state net deferred tax assets of approximately $30,300 and $240,300,
respectively, consisting primarily of its net operating loss carryforwards. A
valuation allowance has been recorded for the entire net deferred tax asset as a
result of uncertainty, regarding realization of the asset due to the limited
operating history of the Company, the lack of profitability and uncertainty over
future operating profitability and future taxable income. The Company has net
operating loss carryforwards of approximately $730,000 on an accrual basis to
offset both Federal and state taxable income. The net operating loss
carryforwards expire at various dates through the year 2019. The Tax Reform Act
of 1986 contains provisions which may limit the net operating loss carryforwards
to be used in any given year upon the occurrence of certain events, including a
significant change in ownership interest. The acquisition of the Company by
Neoforma.com, Inc. discussed in note 10 will be a change in ownership interests.

4. COMMITMENTS:

The Company has lease agreements for its facility and certain other assets
under noncancelable operating lease agreements. Rent expense under such
operating leases was $38,972 for the nine months ended September 30, 1999.

Minimum future lease payments under all noncancelable operating leases as
of September 30, 1999 are summarized as follows:

<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1999.......................................... $ 14,300
2000.......................................... 52,400
2001.......................................... 50,100
2002.......................................... 50,100
2003.......................................... 50,100
2004.......................................... 50,100
--------
Total....................................... $267,100
========
</TABLE>

5. SHAREHOLDER'S EQUITY:

COMMON STOCK

On March 5, 1998, the articles of incorporation authorized 10,000,000
shares of common stock. As of September 30, 1999, the Company has reserved the
following shares of common stock for future issuance as follows:

<TABLE>
<S> <C>
Conversion of Series A outstanding preferred stock.......... 1,886,793
1998 Stock Option Plan...................................... 2,500,000
---------
4,386,793
=========
</TABLE>

F-58
<PAGE> 142

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Company issued 4,000,000 Common Shares to its founders. Of these
shares, 3,000,000 were subject to repurchase at cost by the Company. The
Company's repurchase rights lapse at a rate of 1/48 per month. At September 30,
1999, 1,425,000 of these shares issued to the founders were subject to
repurchase.

6. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

On October 9, 1998, the Company completed an offering of 1,886,793 shares
of Series A mandatorily redeemable convertible preferred stock ("Series A") at
$0.53 per share. Total proceeds of the offering amounted to approximately $1.0
million.

The rights and preferences of the outstanding Series A are as follows:

DIVIDENDS

The holders of Series A are entitled to receive non-cumulative dividends,
if declared, prior to and in preference to any declaration or payment of any
dividend on the common stock at the rate of $0.053 per share per annum. As of
September 30, 1999, no dividends had been declared.

LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A are entitled to receive $0.53 per share, plus all declared
but unpaid dividends. In the occurrence, or in the event the Company's assets
and funds are unable to sufficiently satisfy the full preferential amounts to
Series A shareholders, the Company will then ratably distribute its entire
assets and funds that are legally available for distribution among the holders
of Series A preferred in proportion to the amount of Series A owned by each such
holder. After the payment or the setting aside of the payment set forth above,
the remaining assets and funds of the Company that are legally available shall
be distributed, on a pro-rata basis, to the holders of Series A, on an
as-converted basis, with the holders of common stock until the holders of the
Series A have received an additional $1.06 per share. After the distributions to
the holders of Series A have been made, the remaining assets of the Company
available for distribution to stockholders shall be distributed pro rata solely
among the holders of common stock.

VOTING RIGHTS

The holders of the Series A are entitled to the number of votes equal to a
number of shares of common stock into which such Series A stock is convertible.
At each election of directors, the holders of Series A, voting as a separate
class, shall be entitled to elect one member of the Company's board of
directors. Subsequent to the election of two members of the Company's board of
directors by the holders of common stock, the remaining directors will be
elected by the holders of Series A and common stock, voting together.

CONVERSION

Each share of Series A is convertible into one share of common stock at the
option of the holder at any time after the date of issuance of such shares, and
automatically converts at the consummation of the Company's sale of common stock
in an underwritten public offering which results in net cash proceeds to the
Company of at least $10,000,000 and an offering price to the public of at least
$1.59

F-59
<PAGE> 143

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

per share. The conversion rate is subject to adjustment for dilution, including,
but not limited to, stock splits, stock dividends and stock combinations.

MANDATORY REDEMPTION

Upon the affirmative vote of the holders of the majority of the Series A,
after December 31, 2003, the Company can be required to redeem all shares of
Series A outstanding as of the date of such demand (Redemption Date). The
redemption price of the Series A will be $0.53 per share. In the event the
Company is legally permitted to redeem only a part of the then outstanding
Series A, the Company will redeem the maximum number of such shares on a pro
rata basis among the holders of Series A.

From and after the Redemption Date, all rights of the shares designated for
redemption shall cease with respect to such shares. If the funds of the Company
legally available for redemption of Series A on any Redemption Date are
insufficient to redeem the total number of shares of the Series A to be redeemed
on such date, those funds which are legally available will be used to redeem the
maximum number of such shares on a pro rata basis among the holders of Series A
based on each holder's share of the aggregate number of outstanding shares of
Series A. At any time thereafter when additional funds of the Company are
legally available for the redemption of the shares of the Series A, such funds
will immediately be set aside for the Redemption Date but which it has not
redeemed.

7. EMPLOYEE STOCK OPTIONS:

In 1998, the Company adopted a stock option plan (the Plan), which reserved
2,500,000 shares of common stock for future issuance under the Plan. The Plan
allows the issuance of both incentive stock options and nonqualified stock
options at an exercise price to be determined by management. Options granted
under the Plan vest over varying periods up to 4 years using the straight line
method and expire 10 years from the date of grant. Shares of common stock
available for future grant as options under the Plan were 2,500,000 and
1,085,000 as of December 31, 1998 and September 30, 1999, respectively.

Stock option activity was as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION FOR THE NINE
(MARCH 5, 1998) TO MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
--------------------- ---------------------
(UNAUDITED)
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of period........... -- $-- -- $ --
Granted.................................... -- -- 1,415,000 0.21
Exercised................................ -- -- -- --
Canceled or expired...................... -- -- -- --
-- -- --------- -----
Outstanding, end of period................. -- $-- 1,415,000 $0.21
== == ========= =====
</TABLE>

F-60
<PAGE> 144

PHAROS TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The weighted average fair value of options granted, estimated on the date
of grant using the Black-Scholes option pricing model, was $0.71 as of September
30, 1999. The fair value options granted is estimated on the date of grant using
the following assumptions: risk-free interest rate range of 4.6 to 5.2 percent,
depending on the grant date, volatility of zero percent, expected life of 2
years, and no expected dividends. Had compensation expense for the Plan been
determined based on the fair value at the grant dates for awards consistent with
the method of SFAS 123, the Company's net loss would not have been materially
different from what was reported for any of the periods in the accompanying
statements of operations.

DEFERRED COMPENSATION

In connection with the grant of certain stock options to employees for the
nine months ended September 30, 1999, the Company recorded deferred compensation
of approximately $982,000, representing the difference between the estimated
fair value of the common stock for accounting purposes and the option exercise
price of these options at the date of grant. Such amount is presented as a
reduction of stockholders' equity and amortized over the vesting period of the
applicable options using the straight-line method of amortization. Based on the
above assumptions, the weighted-average fair value per share of options granted
was $0.90 for the nine months ended September 30, 1999. The Company recorded
amortization of deferred compensation of $195,000 during the nine months ended
September 30, 1999.

8. STOCK OPTIONS GRANTED FOR SERVICES:

The Company has elected to satisfy certain obligations for services
received through the issuance of stock options. The estimated fair market value
of these options was $18,233 for the nine months ended September 30, 1999, and
has been expensed in the accompanying Statements of Operations.

9. RELATED PARTY TRANSACTIONS:

The Company entered into a $500,000 development contract with the holder of
its Series A preferred stock in 1998. The Company offsets the related research
and development expenses with this funding as agreed upon milestones are met.
Such offsets totaled $416,402 in 1999.

10. SUBSEQUENT EVENTS:

On November 12, 1999, the Company entered into a Promissory Note Agreement
(the "Note") with Neoforma.com, Inc. in the amount of $500,000. The Note bears
interest at 9% per annum and is due upon the earlier of August 9, 2000, or the
completion of a round of equity financing. Additionally, the balance may be
forgiven upon the successful completion of a merger of the Company with
Neoforma.com, Inc. As of December 31, 1999, the outstanding principle balance on
the Note was $500,000.

On January 18, 2000, Neoforma.com, Inc. acquired all of the common and
preferred stock of the Company in exchange for 2,000,000 shares of Neoforma.com,
Inc.'s common stock and forgiveness of the above Note.

F-61
<PAGE> 145

[NEOFORMA.COM LOGO]
<PAGE> 146

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

Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

7,000,000 SHARES

[NEOFORMA.COM LOGO]

COMMON STOCK

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

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

MERRILL LYNCH & CO.

BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY

, 2000

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 147

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses to be paid by
Neoforma.com in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the SEC registration
fee, the NASD filing fee and the Nasdaq National Market filing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 25,503
NASD filing fee............................................. 10,160
Nasdaq National Market initial filing fee................... 5,000
Printing and engraving...................................... 400,000
Legal fees and expenses of the Registrant................... 500,000
Accounting fees and expenses................................ 350,000
Blue sky fees and expenses.................................. 5,000
Transfer agent and registrar fees and expenses.............. 15,000
Miscellaneous............................................... 89,337
----------
Total............................................. $1,400,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers under certain circumstances and subject to certain limitations. The
terms of Section 145 of the Delaware General Corporation Law are sufficiently
broad to permit indemnification under certain circumstances for liabilities,
including reimbursement of expenses incurred, arising under the Securities Act
of 1933.

As permitted by the Delaware General Corporation Law, the Registrant's
amended and restated certificate of incorporation includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a directory, except for liability:

- for any breach of the director's duty of loyalty to the Registrant or its
stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

- for any transaction from which the director derived an improper personal
benefit.

As permitted by the Delaware General Corporation Law, the Registrant's
amended and restated bylaws provide that:

- the Registrant is required to indemnify its directors and officers to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions;

- the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions; and

- the rights conferred in the bylaws are not exclusive.

In addition, the Registrant intends to enter into indemnity agreements with
each of our current directors and officers. These agreements provide for the
indemnification of officers and directors for

II-1
<PAGE> 148

all expenses and liabilities incurred in connection with any action or
proceeding brought against them by reason of the fact that they are or were
agents of the Registrant.

The Registrant intends to obtain directors' and officers' insurance to
cover its directors, officers and some of its employees for certain liabilities,
including public securities matters.

The Underwriting Agreement filed as Exhibit 1.01 to this Registration
Statement provides for indemnification by the underwriters of the Registrant and
its directors and officers for certain liabilities under the Securities Act of
1933, or otherwise.

Reference is made to the following documents filed as exhibits to the
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein.

<TABLE>
<CAPTION>
EXHIBIT DOCUMENT NUMBER
---------------- ------
<S> <C>
Underwriting Agreement...................................... 1.01
Registrant's Amended and Restated Certificate of
Incorporation............................................... 3.02
Registrant's Amended and Restated Bylaws.................... 3.04
Form of Indemnity Agreement................................. 10.01
</TABLE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In the three years prior to the effective date of this Registration
Statement, we have issued and sold the following unregistered securities:

(1) In May 1996, the Registrant sold 8,000,000 shares of Common Stock to
two founders of the Registrant for $0.00375 per share.

(2) In April 1998, the Registrant issued 9,000,000 shares of its Series A
preferred stock in exchange for 9,000,000 shares of previously issued
common stock.

(3) In April 1998, the Registrant sold 2,860,000 shares of its Series B
preferred stock for approximately $0.50 per share.

(4) In June 1998, the Registrant sold 5,064,937 shares of its Series C
Preferred Stock for approximately $0.77 per share.

(5) In February 1999, the Registrant sold 10,196,361 shares of its Series
D Preferred Stock for approximately $1.18 per share.

(6) In October 1999, the Registrant sold 12,418,633 shares of its Series E
and Series E-1 preferred stock for $5.68 per share and issued 275,000
shares of its Series E-1 preferred stock in consideration for certain
obligations in connection with a strategic alliance.

(7) In November 1999, the Registrant agreed to issue and sell 176,057
shares of its Series E preferred stock for $5.68 per share.

(8) In November 1999, the Registrant issued 350,000 shares of common stock
to the former shareholders of FDI Information Resources, Inc. in
connection with our acquisition of substantially all of the assets of
FDI.

(9) In January 2000, the Registrant issued 2,000,000 shares of its common
stock, including shares issuable upon the exercise of assumed options,
to the former shareholders of Pharos Technologies, Inc.

(10) As of September 30, 1999, the Registrant had issued an aggregate of
12,660,161 shares of Common Stock pursuant to exercises of stock
options and stock purchase rights granted under the Registrant's 1997
Stock Plan at prices ranging from $0.05 to $0.50 per share.

II-2
<PAGE> 149

(11) In October 1999, the Registrant issued a warrant to purchase 436,623
shares of Common Stock at a price of $0.10 per share to an executive
search firm in connection with recruitment services.

(12) In June 1998, the Registrant issued a warrant to purchase 45,000
shares of Series C Preferred Stock at a price of $0.77 per share to
Silicon Valley Bank in connection with a financing transaction.

(13) In May 1999, the Registrant issued a warrant to purchase 228,814
shares of Series D Preferred Stock at a price of $1.18 per share to
Comdisco, Inc. in connection with a financing transaction.

(14) In July 1999, the Registrant issued a warrant to purchase 10,000
shares of Series D Preferred Stock at a price of $1.18 per share to
Silicon Valley Bank in connection with a financing transaction.

(15) In July 1999, the Registrant issued a warrant to purchase 137,711
shares of Series D Preferred Stock at a price of $1.18 per share to
Comdisco, Inc. in connection with a financing transaction.

All sales of common stock made pursuant to the exercise of stock options were
made in reliance on Rule 701 of the Securities Act or on Section 4(2) of the
Securities Act.

All other sales were made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act. These sales were made
without general solicitation or advertising. Each purchaser was a sophisticated
investor with access to all relevant information necessary to evaluate the
investment and represented to the Registrant that the shares were being acquired
for investment.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed herewith:

<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
1.01** Form of Underwriting Agreement.
2.01** Securities Purchase Agreement By and Among Neoforma GAR,
Inc. and Neoforma, Inc. and General Asset Recovery, LLC,
Erik Tivin and Fred Tivin dated as of July 16, 1999. Certain
schedules have been omitted and will be furnished to the
Commission upon request.
2.02** Agreement for Purchase of Assets, dated November 18, 1999,
by and among the Registrant, FDI Information Resources, Inc.
and FDI Information, LLC. Certain schedules have been
omitted and will be furnished to the Commission upon
request.
2.03** Agreement and Plan of Merger, dated as of December 23, 1999,
by and among the Registrant, Pharos Technologies, Inc. and
Minimee, Inc.
3.01** Amended and Restated Certificate of Incorporation of the
Registrant, as amended through October 12, 1999.
3.02** Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be effective upon the
closing of the offering made pursuant to this Registration
Statement.
3.03** Restated Bylaws of the Registrant, as adopted on November
12, 1999.
4.01** Form of Specimen Certificate for Registrant's common stock.
4.02** Second Amended and Restated Investors' Rights Agreement, as
amended in November 1999.
4.03** Warrant to Purchase Common Stock of Registrant issued to
Heidrick & Struggles.
</TABLE>

II-3
<PAGE> 150

<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
4.04** QuickStart Warrant to Purchase Series C Preferred Stock of
Registrant dated June 25, 1998 issued to Silicon Valley
Bank, as amended on March 5, 1999.
4.05** Warrant Agreement to Purchase Series D Preferred Stock of
Registrant dated as of May 12, 1999 issued to Comdisco, Inc.
4.06** QuickStart Warrant to Purchase Series D Preferred Stock of
Registrant dated July 20, 1999 issued to Silicon Valley
Bank.
4.07** Warrant to Purchase Series D Preferred Stock of Registrant
dated as of July 7, 1999 issued to Comdisco, Inc.
5.01** Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
10.01** Form of Indemnity Agreement between the Registrant and its
directors and officers.
10.02** Neoforma, Inc. 1997 Stock Plan, as amended.
10.03** Neoforma.com, Inc. 1999 Equity Incentive Plan.
10.04** Neoforma.com, Inc. 1999 Employee Stock Purchase Plan.
10.05+** Development and License Agreement dated May 14, 1999 between
ECRI and the Registrant.
10.06+** Distribution and Services Agreement dated October 1, 1999
between Superior Consultant Company, Inc. and the
Registrant.
10.07+** Strategic Alliance Agreement dated October 11, 1999 between
Dell Marketing L.P. and the Registrant.
10.08** Consulting Agreement dated July 1, 1999 between Madhavan
Rangaswami and the Registrant.
10.09** Employment Agreement dated July 1, 1999 between Robert J.
Zollars and the Registrant.
10.10** Employment Agreement dated August 1999 between Erik Tivin
and the Registrant.
10.11** Offer Letter dated September 17, 1999 with Bhagwan D. Goel.
10.12** Offer Letter dated December 19, 1998 with Robert Flury, as
amended on January 5, 1999.
10.13** Offer Letter dated June 29, 1999 with Frederick Ruegsegger.
10.14** Consulting Agreement dated August 1999 between Fred Tivin
and the Registrant.
10.15** Promissory Note for $7,800,000 dated August 1999 payable to
Erik Tivin.
10.16** Quickstart Loan and Security Agreement dated June 25, 1998
between Silicon Valley Bank and the Registrant, as amended
on July 20, 1999.
10.17** Subordinated Loan and Security Agreement dated May 12, 1999
between Comdisco, Inc. and the Registrant.
10.18** Subordinated Promissory Note for $2,000,000 dated May 27,
1999 payable to Comdisco, Inc.
10.19** Loan and Security Agreement dated as of July 7, 1999 between
Comdisco, Inc. and the Registrant.
10.20** Hardware Secured Promissory Note for $1,032,001.98 dated
September 3, 1999 payable to Comdisco, Inc.
10.21** Softcost Secured Promissory Note for $240,363.61 dated
September 3, 1999 payable to Comdisco, Inc.
10.22** Lease Agreement dated July 30, 1998 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
</TABLE>

II-4
<PAGE> 151

<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
10.23** Amendment No. 1 dated March 1, 1999 to Lease Agreement dated
July 30, 1998 between the Registrant and John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (John
Arrillaga Survivor's Trust) as amended, and Richard T.
Peery, Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended.
10.24** Lease Agreement dated March 1, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.25** Lease Agreement dated August 16, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.26+** Co-Branding Agreement, dated as of November 19, 1999, by and
between the Registrant and VerticalNet, Inc.
10.27** Offer Letter dated July 28, 1999 with Daniel A. Eckert.
10.28** Industrial Building Lease, dated as of October 1999, by and
between the Registrant and Centerpoint Properties Trust.
10.29** Memorandum Concerning Employment of Robert W. Rene by the
Registrant.
10.30** Offer Letter dated December 11, 1999 with S. Wayne Kay.
21.01** Subsidiary of the Registrant.
23.01** Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Arthur Andersen LLP, independent public
accountants.
24.01** Power of Attorney (included on signature page).
27.01** Financial Data Schedule.
</TABLE>

- -------------------------
** Previously filed.

+ Confidential treatment has been granted with respect to portions of this
exhibit.

Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or the
notes thereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes 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.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under 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 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 and will be governed by the final adjudication of such issue.

II-5
<PAGE> 152

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, 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.

II-6
<PAGE> 153

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, State of California, on the 20th day of January, 2000.

NEOFORMA.COM, INC.

By: /s/ ROBERT J. ZOLLARS*

------------------------------------
ROBERT J. ZOLLARS
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ ROBERT J. ZOLLARS* President, Chief January 20, 2000
- ----------------------------------------------------- Executive Officer,
ROBERT J. ZOLLARS Chairman of the Board
and Director

/s/ FREDERICK J. RUEGSEGGER Chief Financial Officer January 20, 2000
- -----------------------------------------------------
FREDERICK J. RUEGSEGGER

/s/ DAVID DOUGLASS* Director January 20, 2000
- -----------------------------------------------------
DAVID DOUGLASS

/s/ TERENCE GARNETT* Director January 20, 2000
- -----------------------------------------------------
TERENCE GARNETT

/s/ RICHARD D. HELPPIE* Director January 20, 2000
- -----------------------------------------------------
RICHARD D. HELPPIE

/s/ WAYNE D. MCVICKER* Director January 20, 2000
- -----------------------------------------------------
WAYNE D. MCVICKER

/s/ ANDREW J. FILIPOWSKI* Director January 20, 2000
- -----------------------------------------------------
ANDREW J. FILIPOWSKI

/s/ MADHAVAN RANGASWAMI* Director January 20, 2000
- -----------------------------------------------------
MADHAVAN RANGASWAMI

*By: /s/ FREDERICK J. RUEGSEGGER
-----------------------------------------------
Attorney-in-Fact
</TABLE>

II-7
<PAGE> 154

EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
1.01** Form of Underwriting Agreement.
2.01** Securities Purchase Agreement by and among Neoforma GAR,
Inc. and Neoforma, Inc. and General Asset Recovery, LLC,
Erik Tivin and Fred Tivin dated as of July 16, 1999. Certain
schedules have been omitted and will be furnished to the
Commission upon request.
2.02** Agreement for Purchase of Assets, dated November 18, 1999,
by and among the Registrant, FDI Information Resources, Inc
and FDI Information, LLC. Certain schedules have been
omitted and will be furnished to the Commission upon
request.
2.03** Agreement and Plan of Merger, dated as of December 23, 1999,
by and among the Registrant, Pharos Technologies, Inc. and
Minimee, Inc.
3.01** Amended and Restated Certificate of Incorporation of the
Registrant, as amended through October 12, 1999.
3.02** Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be effective upon the
closing of the offering made pursuant to this Registration
Statement.
3.03** Restated Bylaws of the Registrant, as adopted on November
12, 1999.
4.01** Form of Specimen Certificate for Registrant's common stock.
4.02** Second Amended and Restated Investors' Rights Agreement, as
amended in November 1999.
4.03** Warrant to Purchase Common Stock of Registrant issued to
Heidrick & Struggles.
4.04** QuickStart Warrant to Purchase Series C Preferred Stock of
Registrant dated June 25, 1998 issued to Silicon Valley
Bank, as amended on March 5, 1999.
4.05** Warrant Agreement to Purchase Series D Preferred Stock of
Registrant dated as of May 12, 1999 issued to Comdisco, Inc.
4.06** QuickStart Warrant to Purchase Series D Preferred Stock of
Registrant dated July 20, 1999 issued to Silicon Valley
Bank.
4.07** Warrant to Purchase Series D Preferred Stock of Registrant
dated as of July 7, 1999 issued to Comdisco, Inc.
5.01** Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
10.01** Form of Indemnity Agreement between the Registrant and its
directors and officers.
10.02** Neoforma, Inc. 1997 Stock Plan, as amended.
10.03** Neoforma.com, Inc. 1999 Equity Incentive Plan.
10.04** Neoforma.com, Inc. 1999 Employee Stock Purchase Plan.
10.05+** Development and License Agreement dated May 14, 1999 between
ECRI and the Registrant.
10.06+** Distribution and Services Agreement dated October 1, 1999
between Superior Consultant Company, Inc. and the
Registrant.
10.07+** Strategic Alliance Agreement dated October 11, 1999 between
Dell Marketing L.P. and the Registrant.
10.08** Consulting Agreement dated July 1, 1999 between Madhavan
Rangaswami and the Registrant.
10.09** Employment Agreement dated July 1, 1999 between Robert J.
Zollars and the Registrant.
10.10** Employment Agreement dated August 1999 between Erik Tivin
and the Registrant.
10.11** Offer Letter dated September 17, 1999 with Bhagwan D. Goel.
10.12** Offer Letter dated December 19, 1998 with Robert Flury, as
amended on January 5, 1999.
</TABLE>

<PAGE> 155

<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
10.13** Offer Letter dated June 29, 1999 with Frederick Ruegsegger.
10.14** Consulting Agreement dated August 1999 between Fred Tivin
and the Registrant.
10.15** Promissory Note for $7,800,000 dated August 1999 payable to
Erik Tivin.
10.16** Quickstart Loan and Security Agreement dated June 25, 1998
between Silicon Valley Bank and the Registrant, as amended
on July 20, 1999.
10.17** Subordinated Loan and Security Agreement dated May 12, 1999
between Comdisco, Inc. and the Registrant.
10.18** Subordinated Promissory Note for $2,000,000 dated May 27,
1999 payable to Comdisco, Inc.
10.19** Loan and Security Agreement dated as of July 7, 1999 between
Comdisco, Inc. and the Registrant.
10.20** Hardware Secured Promissory Note for $1,032,001.98 dated
September 3, 1999 payable to Comdisco, Inc.
10.21** Softcost Secured Promissory Note for $240,363.61 dated
September 3, 1999 payable to Comdisco, Inc.
10.22** Lease Agreement dated July 30, 1998 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.23** Amendment No. 1 dated March 1, 1999 to Lease Agreement dated
July 30, 1998 between the Registrant and John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (John
Arrillaga Survivor's Trust) as amended, and Richard T.
Peery, Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended.
10.24** Lease Agreement dated March 1, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.25** Lease Agreement dated August 16, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.26+** Co-Branding Agreement, dated as of November 19, 1999, by and
between the Registrant and VerticalNet, Inc.
10.27** Offer Letter dated July 28, 1999 with Daniel A. Eckert.
10.28** Industrial Building Lease, dated as of October 1999, by and
between the Registrant and Centerpoint Properties Trust.
10.29** Memorandum Concerning Employment of Robert W. Rene by the
Registrant.
10.30** Offer Letter dated December 11, 1999 with S. Wayne Kay.
21.01** Subsidiary of the Registrant.
23.01** Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Arthur Andersen LLP, independent public
accountants.
24.01** Power of Attorney (included on signature page).
27.01** Financial Data Schedule.
</TABLE>

- -------------------------
** Previously filed.

+ Confidential treatment has been granted with respect to portions of this
exhibit.

<PAGE> 1
Exhibit 23.02

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.

/s/ Arthur Andersen LLP
- ------------------------------

San Jose, California
January 20, 2000