E NET INC
SB-2/A, 1996-08-01
COMPUTER PROGRAMMING SERVICES
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<PAGE>
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1996.
    
 
                                                       REGISTRATION NO. 333-3860
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                                AMENDMENT NO. 11
                                       TO
                                   FORM SB-2
    
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                                  E-NET, INC.
                 (Name of Small Business Issuer in Its Charter)
 
<TABLE>
<S>                               <C>                           <C>
            DELAWARE                          1711                    52-1929282
(State or other jurisdiction of   (Primary standard industrial      (IRS employer
 incorporation or organization)   classification code number)   identification number)
</TABLE>
 
                             7-4 METROPOLITAN COURT
                          GAITHERSBURG, MARYLAND 20878
                                 (301) 548-8880
 
         (Address, including zip code, and telephone number, including
            area code, of Registrant's principal executive offices)
 
                             7-4 METROPOLITAN COURT
                          GAITHERSBURG, MARYLAND 20878
                                 (301) 548-8880
 
(Address of principal place of business or intended principal place of business)
 
            ROBERT A. VESCHI, PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                  E-NET, INC.
                             7-4 METROPOLITAN COURT
                          GAITHERSBURG, MARYLAND 20878
                                 (301) 548-8880
 
      (Name, address, including zip code, and telephone number, including
                        area code, of agent for service)
                            ------------------------
 
                                   COPIES TO:
 
<TABLE>
<S>                                       <C>
     THOMAS T. PROUSALIS, JR., ESQ.             STEVEN F. WASSERMAN, ESQ.
     1919 Pennsylvania Avenue, N.W.             Berstein & Wasserman, LLP
               Suite 800                             950 Third Avenue
         Washington, D.C. 20006                     New York, NY 10022
             (202) 296-9400                           (212) 826-0730
           (202) 296-9403 Fax                       (212) 371-4730 Fax
</TABLE>
 
                            ------------------------
 
          APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
   AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
                            ------------------------
 
    IF  ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUING BASIS, PURSUANT TO RULE 415 UNDER THE SECURITIES ACT  OF
1933, AS AMENDED, CHECK THE FOLLOWING BOX: /X/
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                        CALCULATION OF REGISTRATION FEE
 
   
<TABLE>
<CAPTION>
                                   AMOUNT TO    PROPOSED MAXIMUM  PROPOSED MAXIMUM     AMOUNT OF
     TITLE OF EACH CLASS OF            BE        OFFERING PRICE      AGGREGATE       REGISTRATION
  SECURITIES TO BE REGISTERED      REGISTERED     PER SECURITY     OFFERING PRICE         FEE
<S>                               <C>           <C>               <C>               <C>
Units...........................    575,000          $14.00         $ 8,050,000         $ 2,776
Common Stock, $.01 Par Value....   1,150,000           --                --               --
Class A Warrants................   1,150,000           --                --               --
Common Stock, $.01 Par Value,
 Underlying Class A Warrants....   1,150,000         $ 7.50         $ 8,625,000         $ 2,974
Underwriters' Purchase Option...     50,000          $23.10         $ 1,155,000         $  398
Common Stock $.01, Par Value, in
 Underwriters' Purchase
 Option.........................    100,000            --                --               --
Class A Warrants in
 Underwriters' Purchase
 Option.........................    100,000            --                --               --
Common Stock, $.01 Par Value,
 Underlying Class A Warrants in
 Underwriters' Purchase
 Option.........................    100,000          $ 7.50          $  750,000         $  259
  Total Registration and Fee....                                    $18,580,000         $ 6,407
</TABLE>
    
 
    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.
 
                                       ii
<PAGE>
                                  E-NET, INC.
                             CROSS-REFERENCE SHEET
                            PURSUANT TO ITEM 501(B)
                 SHOWING LOCATION IN PROSPECTUS OF INFORMATION
                         REQUIRED BY ITEMS OF FORM SB-2
 
<TABLE>
<CAPTION>
         REGISTRATION STATEMENT ITEM                 CAPTION IN PROSPECTUS
- ---------------------------------------------  ---------------------------------
<C>  <S>                                       <C>
 1.  Front of Registration Statement and
      Outside Front Cover of Prospectus......  Facing Page; Cross-Reference
                                               Sheet; Prospectus Cover Page
 2.  Inside Front and Outside Back Cover
      Pages of Prospectus....................  Prospectus Cover Page; Prospectus
                                               Back Cover Page
 3.  Summary Information and Risk Factors....  Prospectus Summary; The Company;
                                               Risk Factors
 4.  Use of Proceeds.........................  Use of Proceeds
 5.  Determination of Offering Price.........  Risk Factors; Underwriting
 6.  Dilution................................  Dilution and Other Comparative
                                               Data
 7.  Selling Security-holders................  Description of Securities
 8.  Plan of Distribution....................  Prospectus Cover Page;
                                               Underwriting
 9.  Legal Proceedings.......................  Legal Proceedings
10.  Directors, Executive Officers, Promoters
      and Control Persons....................  Management; Principal
                                               Shareholders
11.  Security Ownership of Certain Beneficial
      Owners and Management..................  Principal Shareholders
12.  Description of Securities...............  Description of Securities
13.  Interest of Named Experts and Counsel...  Legal Matters; Experts
14.  Disclosure of Commission Position on
      Indemnification for Securities Act
      Liabilities............................  Certain Transactions
15.  Organization Within Five Years..........  Prospectus Summary; Business
16.  Description of Business.................  Business
17.  Management's Discussion and Analysis or
      Plan of Operation......................  Management's Discussion and
                                               Analysis or Plan of Operation
18.  Description of Property.................  Business
19.  Certain Relations and Related
      Transactions...........................  Certain Transactions
20.  Market for Common Equity and Related
      Stockholder Matters....................  Description of Securities
21.  Executive Compensation..................  Management
22.  Financial Statements....................  Financial Statements
23.  Changes in and Disagreements With
      Accountants on Accounting and Financial
      Disclosure.............................  Not applicable
</TABLE>
 
                                      iii
<PAGE>
INFORMATION   CONTAINED  HEREIN  IS  SUBJECT   TO  COMPLETION  OR  AMENDMENT.  A
REGISTRATION STATEMENT  RELATING TO  THESE SECURITIES  HAS BEEN  FILED WITH  THE
SECURITIES  AND EXCHANGE  COMMISSION. THESE SECURITIES  MAY NOT BE  SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR  TO THE TIME THE REGISTRATION STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE AN  OFFER  TO  SELL  OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN  ANY STATE IN WHICH SUCH OFFER,  SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
   
                   SUBJECT TO COMPLETION, DATED JULY 31, 1996
    
 
PROSPECTUS
 
   
                                 500,000 UNITS
    
                                  E-NET, INC.
 
   
    e-Net, Inc. ("Company"), a Delaware  corporation, is offering 500,000  units
("Units")  at a price  of $14.00 per Unit.  Each Unit consists  of two shares of
common stock  ("Common Stock"),  $.01  par value,  and  two redeemable  Class  A
warrants  ("Class  A  Warrants"). The  Common  Stock  and Class  A  Warrants are
detachable and  may  trade  separately  immediately  upon  issuance.  See  "Risk
Factors" and "Description of Securities."
    
 
   
    The Class A Warrants shall be exercisable commencing one year after the date
of  this Prospectus ("Effective Date"). Each Class A Warrant entitles the holder
to purchase one share of  Common Stock at $7.50 per  share during the four  year
period  commencing one year from the Effective Date hereof. The Class A Warrants
are redeemable  by  the  Company  for  $.05  per  Warrant,  at  any  time  after
            ,  1998, upon thirty (30) days' prior written notice, if the average
closing price or bid  price of the  Common Stock, as  reported by the  principal
exchange  on  which  the Common  Stock  is  quoted, the  Nasdaq  SmallCap Market
("Nasdaq") or the  OTC Bulletin Board,  as the  case may be,  equals or  exceeds
$10.00  per share, for any twenty (20)  consecutive trading days within a period
of thirty (30) days  ending within ten  (10) days of  the notice of  redemption.
Upon  thirty  (30) days'  prior written  notice to  all holders  of the  Class A
Warrants, the Company shall have the  right to reduce the exercise price  and/or
extend  the term of the Class A  Warrants in compliance with the requirements of
Rule 13e-4 to the extent applicable. See "Description of Securities."
    
 
   
    The Company has applied for  the inclusion of the securities  ("Securities")
on  the National Association  of Securities Dealers,  Inc. ("NASD") OTC Bulletin
Board, an  unorganized,  inter-dealer, over-the-counter  market  which  provides
significantly  less liquidity than the Nasdaq SmallCap Market System ("Nasdaq"),
and quotes for stocks included on the  OTC Bulletin Board are not listed in  the
financial  sections of  newspapers as are  those for the  Nasdaq National Market
System. In the event the Securities are not included on the OTC Bulletin  Board,
quotes  for  the  Securities  may  be included  in  the  "pink  sheets"  for the
over-the-counter market. The Company applied for inclusion of its Securities  on
Nasdaq.  While the application was granted  by the Nasdaq Listing Qualifications
Committee ("Qualifications Committee"),  the Company was  advised by the  Nasdaq
Hearing  and Review Committee ("Review Committee") that it determined to reverse
the decision  of  the Qualifications  Committee  approving the  listing  of  the
Company's Securities on Nasdaq. The determination of the Review Committee is not
final  pending the review  and decision of  the boards of  directors ("Boards of
Directors") of The Nasdaq Stock Market, Inc. and NASD, Inc., which may occur  in
a  short time frame. In the event the  Boards of Directors renders a decision to
affirm the determination of the Review Committee, the Company's securities  will
be  delisted from Nasdaq and the Company's  securities will be traded on the OTC
Bulletin Board, which  may materially affect  the trading and  liquidity of  the
Company's  securities. See "Risk  Factors -- Penny  Stock Regulations May Impose
Certain Restrictions on Marketability of Securities."
    
 
    Prior to  this offering,  there has  been no  public market  for the  Units,
Common  Stock and  Class A  Warrants. The  price of  the Units,  as well  as the
exercise  price  of  the  Class  A  Warrants,  was  arbitrarily  determined   by
negotiations  between  the Company  and  the Underwriter,  and  do not  bear any
relationship to  the Company's  assets,  book value,  net  worth or  results  of
operations   or  any  other  established   criteria  of  value.  For  additional
information regarding the factors considered  in determining the initial  public
offering  price of the Units and the exercise price of the Class A Warrants, see
"Risk Factors  -- Arbitrary  Offering Price,"  "Description of  Securities"  and
"Underwriting."
 
    The  Underwriter from time to time will  become a market maker and otherwise
effect transactions in the securities of  this offering. The Underwriter, if  it
participates  in the market, may become an  influence and thereafter a factor of
increasing importance in  the market for  the securities. However,  there is  no
assurance  that  the  Underwriter  will  or will  continue  to  be  a dominating
influence. The prices and liquidity of  the Units may be significantly  affected
by  the degree, if any,  of the Underwriter's participation  in such market as a
market maker. The Underwriter may  discontinue such market making activities  at
any time or from time to time.
 
    The  Company does not presently file  reports and other information with the
Securities and  Exchange  Commission.  However,  following  completion  of  this
offering,  the  Company will  be subject  to the  reporting requirements  of the
Securities  Exchange  Act  of  1934  and,  as  such,  intends  to  furnish   its
stockholders  with annual  reports containing  audited financial  statements and
such interim reports as may be required  by law. The Company's fiscal year  ends
March 31.
 
    On  February 28,  1995, the  Underwriter became  subject to  a court-imposed
permanent injunction  to  comply  with  certain  procedures  recommended  by  an
independent  consultant  arising  out  of the  settlement  of  a  Securities and
Exchange Commission ("Commission") proceeding. The failure by the Underwriter to
comply with  the permanent  injunction may  adversely affect  the  Underwriter's
activities  in that the court may issue  a further order restricting the ability
of the Underwriter to  act as a  market maker of  the Company's securities.  See
"Risk Factors."
 
AN  INVESTMENT IN THE SECURITIES  OFFERED HEREBY INVOLVES A  HIGH DEGREE OF RISK
AND IMMEDIATE  SUBSTANTIAL DILUTION  OF THE  BOOK VALUE  OF THE  COMMON  STOCK
  INCLUDED  IN THE UNITS  AND SHOULD BE  CONSIDERED ONLY BY  PERSONS WHO CAN
    AFFORD THE LOSS OF       THEIR  ENTIRE INVESTMENT. SEE "RISK  FACTORS,"
                            PAGE 7, AND "DILUTION."
 
THESE  SECURITIES HAVE  NOT BEEN APPROVED  OR DISAPPROVED BY  THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
   OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR  ADEQUACY
     OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.
 
   
<TABLE>
<CAPTION>
                                                               UNDERWRITING DISCOUNTS    PROCEEDS TO THE
                                            PRICE TO PUBLIC      AND COMMISSIONS (1)       COMPANY (2)
<S>                                        <C>                 <C>                      <C>
Per Unit.................................        $14.00                 $1.40                 $12.60
Total(3).................................      $7,000,000             $700,000              $6,300,000
</TABLE>
    
 
                            (SEE "NOTES," NEXT PAGE)
 
   
    THE  SECURITIES ARE OFFERED BY THE  UNDERWRITER ON A "FIRM COMMITMENT" BASIS
SUBJECT TO  PRIOR  SALE  WHEN, AS  AND  IF  DELIVERED TO  AND  ACCEPTED  BY  THE
UNDERWRITER, AND SUBJECT TO THE UNDERWRITER'S RIGHT TO REJECT ORDERS IN WHOLE OR
IN  PART  AND TO  CERTAIN  OTHER CONDITIONS.  IT  IS EXPECTED  THAT  DELIVERY OF
CERTIFICATES REPRESENTING THE  SECURITIES OF  THE OFFERING  WILL BE  MADE ON  OR
ABOUT AUGUST   , 1996.
    
                         ------------------------------
                               STRATTON OAKMONT, INC.
 
                The date of this Prospectus is August   , 1996.
<PAGE>
                                     NOTES
 
   
(1) Does  not include additional compensation to  be received by the Underwriter
    in the form of (i) a nonaccountable expense allowance of $210,000 if 500,000
    Units are sold (or  $241,500 if the  Underwriter's Over-allotment Option  is
    fully exercised); and (ii) an option (exercisable for a period of four years
    commencing  one  year  after  the date  of  this  Prospectus)  entitling the
    Underwriter to  purchase 50,000  Units at  $23.10 per  Unit  ("Underwriter's
    Purchase  Option"). In addition, the Company and the Underwriter have agreed
    to  indemnity   and   contribution  provisions   regarding   certain   civil
    liabilities,  including  liabilities under  the Securities  Act of  1933, as
    amended. See "Principal Stockholders" and "Underwriting."
    
 
(2) Before deducting expenses of this offering payable by the Company, estimated
    at $1,000,000, including the Underwriter's nonaccountable expense allowance.
    See "Underwriting."
 
   
(3) The Company has granted the Underwriter a 30-day Over-allotment Option  from
    the  date of this Prospectus to purchase  up to 75,000 additional Units upon
    the  same  terms  and  conditions  as  set  forth  above,  solely  to  cover
    over-allotments,  if  any. If  such  Underwriter's Over-allotment  Option is
    exercised in full, the total Price to the Public, Underwriting Discounts and
    Proceeds to  the  Company  will  be  $8,050,000,  $805,000  and  $7,245,000,
    respectively. See "Underwriting."
    
 
   
    IN  CONNECTION WITH THIS OFFERING, THE  UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE  THAT  WHICH  MIGHT  OTHERWISE PREVAIL  IN  THE  OPEN  MARKET.  SUCH
TRANSACTIONS  MAY BE EFFECTED  ON THE NASDAQ SMALL-CAP  MARKET, THE OTC BULLETIN
BOARD OR OTHERWISE. SUCH STABILIZING, IF  COMMENCED, MAY BE DISCONTINUED AT  ANY
TIME. SEE "RISK FACTORS."
    
 
    THE  SECURITIES TO BE SOLD  IN THIS OFFERING MAY,  IN THE ORDINARY COURSE OF
BUSINESS, BE SOLD ONLY TO CUSTOMERS OF THE UNDERWRITER, AND THE CONCENTRATION OF
SECURITIES IN CUSTOMERS OF THE UNDERWRITER  MAY ADVERSELY AFFECT THE MARKET  FOR
AND  LIQUIDITY OF THE COMPANY'S SECURITIES SINCE THE UNDERWRITER MAY BE THE ONLY
MARKET MAKER. IN THE EVENT THAT  ADDITIONAL BROKER-DEALERS DO NOT MAKE A  MARKET
IN  THE COMPANY'S  SECURITIES AND  THE UNDERWRITER  BECOMES A  MARKET MAKER, THE
UNDERWRITER MAY BECOME A  DOMINATING INFLUENCE ON THE  MARKET. NO OTHER  BROKER-
DEALER HAS INDICATED THAT IT WILL MAKE A MARKET IN THE COMPANY'S SECURITIES. THE
UNDERWRITER  DOES NOT HAVE ANY CURRENT PLANS  OR AGREEMENTS TO OFFER AND/OR SELL
ANY OF THE SECURITIES TO A  SPECIFIC CUSTOMER OR CUSTOMERS. SUCH PURCHASERS,  AS
CUSTOMERS  OF THE UNDERWRITER,  SUBSEQUENTLY MAY ENGAGE  IN TRANSACTIONS FOR THE
SALE OR PURCHASE OF THE SECURITIES THROUGH AND/OR WITH THE UNDERWRITER, ALTHOUGH
NO AGREEMENTS OR UNDERSTANDINGS, WRITTEN  OR ORAL, EXIST FOR SUCH  TRANSACTIONS,
AND SUCH TRANSACTIONS MAY FURTHER ENHANCE THE UNDERWRITER'S DOMINATING INFLUENCE
ON  THE MARKET. SEE  "RISK FACTORS -- LITIGATION  INVOLVEMENT OF UNDERWRITER MAY
HAVE ADVERSE  CONSEQUENCES --  UNDERWRITER'S INFLUENCE  ON THE  MARKET MAY  HAVE
ADVERSE CONSEQUENCES."
 
                             AVAILABLE INFORMATION
 
    The   Company  has  filed  with   the  Securities  and  Exchange  Commission
("Commission"), Washington, D.C. 20549, a  Registration Statement on Form  SB-2,
pursuant  to  the  Securities Act  of  1933,  as amended,  with  respect  to the
securities offered by this Prospectus. This  Prospectus does not contain all  of
the  information  set forth  in said  Registration  Statement, and  the exhibits
thereto. For further information with respect to the Company and the  securities
offered  hereby, reference is  made to said  Registration Statement and exhibits
which may be inspected  without charge at the  Commission's principal office  at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
 
    The  Company does not presently file  reports and other information with the
Securities and  Exchange  Commission.  However,  following  completion  of  this
offering,  the  Company will  be subject  to the  reporting requirements  of the
Securities  Exchange  Act  of  1934  and,  as  such,  intends  to  furnish   its
stockholders  with annual  reports containing  audited financial  statements and
such interim reports as may be required  by law. The Company's fiscal year  ends
March 31.
 
    The  Company will  provide without charge  to each person  who receives this
Prospectus, upon written or oral  request of such person, a  copy of any of  the
information  that is  incorporated by  reference herein  (excluding exhibits) by
contacting the Company at 7-4 Metropolitan Court, Gaithersburg, Maryland  20878,
telephone (301) 548-8880, attention: chief financial officer.
 
              SPECIAL STANDARDS FOR SECURITIES SOLD IN CALIFORNIA
 
    Each  California  investor,  and  each  transferee  thereof  who  also  is a
California investor, must have an annual gross income of at least $65,000 and  a
net worth, exclusive of home, furnishings and automobiles, of at least $250,000,
or  in  the  alternative,  a  net  worth  exclusive  of  home,  furnishings  and
automobiles, of at least $500,000. In addition, an investor's total purchase may
not exceed 10% of such investor's net worth.
 
                                       2
<PAGE>
                               PROSPECTUS SUMMARY
 
    The  following summary  is qualified  in its  entirety by  the more detailed
information  and  financial  statements,  including  notes  thereto,   appearing
elsewhere in this Prospectus.
 
THE COMPANY
 
    e-Net,   Inc.  develops,  markets  and  supports  open  client,  server  and
integrated applications software that enables local, national and  international
telephone  communications, information  exchange and commerce  over the Internet
and private Internet Protocol ("IP")  networks. The Company's software  products
are  designed to deliver high  levels of performance, ease  of use and security.
These software products allow individuals  and organizations to execute  secure,
or  private,  voice  communications  across the  Internet,  through  the  use of
authentication  technology,  for  local  national  and  international  telephone
communications,  information exchange and commerce. In addition, through the use
of the Company's software, organizations  can extend their internal  information
systems  and  enterprise  applications to  geographically  dispersed facilities,
remote offices and mobile employees.
 
    In March 1996, the  Company acquired all rights,  title and interest in  the
first  U.S.  patent, U.S.  Patent No.  5,526,353,  for a  system and  method for
communicating high fidelity and  clear transmission of audio  or voice over  the
Internet,  enabling  free  worldwide  high fidelity  and  clear  transmission of
ordinary telephone communications  over the Internet.  The Company acquired  all
rights,  title and  interest in  the patent  from the  inventors, Messrs. Arthur
Henley and  Scott  Grau,  who  are original  stockholders  of  the  Company,  in
consideration  of  a  five  percent overriding  royalty  interest  against gross
profits involving the  use of  the patent. The  Company has  agreed to  allocate
$1,000,000  of  capital  of this  offering  to  develop and  exploit  the market
opportunities for the patent by December 31, 1996, or the patent will be subject
to repurchase by  the inventors  of the patent.  The Company  believes that  its
patent  is  the first  patent awarded  of its  kind, specifically  involving the
transmission of audio or voice over the Internet. The Company also believes that
its patent may provide certain strategic and technological advantages in the new
and burgeoning area of audio or voice over the Internet. The Company can make no
assurances, however, as to the extent  of the advantages or protection, if  any,
that may be granted to the Company as a result of its patent or as to the future
success  of  the Company  in  bringing products  related  to this  technology to
market. The Company's first product utilizing its patent is Telecom-2000-TM-,  a
hardware  and software suite designed  for voice over the  Internet, which is in
the final testing stage and  projected to be available to  market by the end  of
the Company's third quarter of fiscal 1997.
 
    In  March 1996, e-Net  entered into an  agreement with Sprint Communications
Company, L.P.  ("Sprint"), a  leading  telecommunications company,  under  which
e-Net  will  deliver  certain  software  development  services  known  as Sprint
Internet Protocol Dial Services support. Sprint, to date, has been the Company's
largest customer. Under the agreement, e-Net will use highly technical  software
development  services to provide security and  field support to Sprint customers
who use Sprint as a means of accessing the Internet. e-Net's agreement  provides
that  e-Net will  generate all  of the  revenues associated  with the  number of
authorized Sprint  Internet Protocol  Dial Service  user identity  codes.  e-Net
shall  also perform password administration, customer service administration and
emergency help  desk  administration  under  the terms  of  the  agreement.  The
agreement  has a duration of one year, with automatic one year renewals, subject
to mutual consent. e-Net intends to seek additional strategic alliances with the
Regional Bell  Operating Companies  (RBOC's) for  the use  of its  technologies,
products  and services.  The Company  has not  entered into  any negotiations to
enter into any  strategic alliances  with the RBOC's.  The Company  can make  no
assurances  that it will be able to enter into any agreements with such concerns
for its technologies, products and services.
 
    Also, in June 1996, e-Net entered into  a letter of intent with the  Product
Management  Group of the Advanced Data Services Division of Sprint to enter into
an agreement to provide certain  of e-Net's technologies, products and  services
to   Sprint   to   enable   Sprint's   frame   relay   customers,  approximately
 
                                       3
<PAGE>
1,500 nationwide, to  generate network data  reports on an  automated basis  for
their  virtual private networks. The Company can make no assurances that it will
be able to enter  into an agreement with  Sprint for its technologies,  products
and services.
 
   
    In  addition to the  compensation to be  received by the  Underwriter in the
form of commissions  in the amount  of $700,000  if 500,000 Units  are sold  (or
$805,000  if the  Underwriter's Over-allotment  Option is  fully exercised), the
Underwriter will receive (i) a  nonaccountable expense allowance of $210,000  if
500,000  Units are sold (or $241,500  if the Underwriter's Over-allotment Option
is fully exercised); and (ii) an option (exercisable for a period of four  years
commencing one year after the date of this Prospectus) entitling the Underwriter
to  purchase 50,000 Units at $23.10  per unit ("Underwriter's Purchase Option").
The Company has granted the Underwriter a 30-day Over-allotment Option from  the
date  of this Prospectus to purchase up to 75,000 additional Units upon the same
terms and conditions  as set forth  above, solely to  cover over-allotments,  if
any.  If such Over-allotment Option is exercised in full, the total Price to the
Public, Underwriting Discounts and Proceeds  to the Company will be  $8,050,000,
$805,000 and $7,245,000, respectively. See "Underwriting."
    
 
    As   a  result  of  this  offering,   certain  members  of  management  will
substantially benefit in the amount of remuneration to be paid to them from  the
proceeds of this offering in fiscal 1997. See "Management -- Remuneration."
 
   
    In  March and April 1996,  the Company borrowed $1,000,000  in a bridge loan
from four persons who are nonaffiliated with the Underwriter and the Company, to
wit: Edward Ratkovich ($500,000), Robert Foise ($250,000), Armstrong  Industries
($200,000)  and Martin Sumichrast ($50,000), at the rate of eight percent simple
annual interest. General  Ratkovich and Mr.  Sumichrast are officers,  directors
and  principal stockholders of Nasdaq  listed companies recently underwritten by
the Underwriter. In further consideration of the bridge loan, the Company issued
1,000,000 shares of Common Stock, 1,000,000 Class A Warrants and 1,000,000 Class
B Warrants to such persons. However, in June 1996, such persons converted  their
loans  to equity in consideration  of the prior issuance  of the securities. See
"Certain Transactions" and "Description of Securities."
    
 
   
    Also, as a result of  this offering, after deducting underwriting  discounts
of $700,000 and other expenses of the offering estimated to be $1,000,000, which
includes   the  Underwriter's  nonaccountable  expense  allowance  of  $210,000,
assuming an offering  price of  $14.00 per Unit,  the Company  will receive  net
proceeds   from  the  offering  of  approximately  $5,300,000.  These  proceeds,
excluding the exercise of any of the  Warrants, will be utilized by the  Company
for approximately 12 months. See "Use of Proceeds."
    
 
   
    In  July 1996,  the Company  caused a  2:1 reverse  split of  its issued and
outstanding shares  of common  stock, Class  A Warrants  and Class  B  Warrants,
resulting  in 4,000,000 shares  of common stock, 1,000,000  Class A Warrants and
1,000,000 Class B Warrants currently issued and outstanding.
    
 
    The Company was incorporated  in the State of  Delaware on January 9,  1995,
and began its operations on June 8, 1995. The principal executive offices of the
Company are located at 7-4 Metropolitan Court, Gaithersburg, Maryland 20878, and
its  telephone number is (301) 548-8880. Unless the context otherwise indicates,
the terms "Company" and "e-Net" as used in this Prospectus refer to e-Net, Inc.
 
    SEE "RISK FACTORS," "MANAGEMENT" AND "CERTAIN TRANSACTIONS" FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE  CONSIDERED IN EVALUATING THE COMPANY AND  ITS
BUSINESS.
 
                                       4
<PAGE>
                                  THE OFFERING
 
   
<TABLE>
<S>                                       <C>
Securities Offered by Company(1)(3).....  500,000 Units
Shares of Common Stock Outstanding Prior  4,000,000 Shares
to Offering.............................
Shares of Common Stock Outstanding After  5,000,000 Shares
Offering(2).............................
Comparative Share Ownership Upon
Completion of Offering:
  Present Stockholders (4,000,000         80.00%
   Shares)(4)...........................
  Public Stockholders (1,000,000          20.00%
   Shares)(4)...........................
Use of Net Proceeds of Sale of            Administrative expenses, operating
Securities Offered by Company...........  costs and working capital, including
                                          software support and development,
                                          capital equipment, marketing and
                                          sales, mergers and acquisitions and
                                          the repayment of debt. See "Use of
                                          Proceeds."
Proposed Nasdaq SmallCap Market           EENTU
Symbols(5)..............................  EENT
                                          EENTW
</TABLE>
    
 
- ------------------------
   
(1) The  Company is offering 500,000  Units at a price  of $14.00 per Unit. Each
    Unit consists  of two  shares of  Common Stock  and two  redeemable Class  A
    Warrants.  The Class  A Warrants  shall be  exercisable commencing  one year
    after the date of the Prospectus.  Each Class A Warrant entitles the  holder
    to  purchase one share  of Common Stock  at $7.50 per  share during the four
    year period commencing one year from the Effective Date hereof. The Class  A
    Warrants are redeemable upon certain conditions. Should the Class A Warrants
    be  exercised, of which there is no  assurance, the Company will receive the
    proceeds  therefrom  aggregating  up   to  an  additional  $7,500,000.   See
    "Description of Securities."
    
 
   
(2) Assumes  no exercise of  (i) the Class  A Warrants offered  hereby; (ii) the
    Underwriter's Over-allotment  Option to  purchase up  to 75,000  Units;  and
    (iii)  the Underwriter's Purchase Option to purchase up to 50,000 Units. See
    "Description of Securities" and "Underwriting."
    
 
(3) The public offering  price of  the Units and  the exercise  price and  other
    terms  of the Class  A Warrants were  arbitrarily determined by negotiations
    between the Company and the Underwriter  and does not necessarily relate  to
    the  assets, book value or results of operations of the Company or any other
    established criteria of value. See "Underwriting."
 
(4) See "Dilution."
 
   
(5) The Company has applied for  the inclusion of the securities  ("Securities")
    on  the  National  Association  of  Securities  Dealers,  Inc.  ("NASD") OTC
    Bulletin Board, an unorganized, inter-dealer, over-the-counter market  which
    provides significantly less liquidity than the Nasdaq SmallCap Market System
    ("Nasdaq"), and quotes for stocks included on the OTC Bulletin Board are not
    listed  in the financial sections of newspapers  as are those for the Nasdaq
    National Market System. In the event the Securities are not included on  the
    OTC  Bulletin Board, quotes for the Securities  may be included in the "pink
    sheets" for the over-the-counter market.  The Company applied for  inclusion
    of its Securities on Nasdaq. While the application was granted by the Nasdaq
    Listing  Qualifications Committee ("Qualifications  Committee"), the Company
    was advised by the Nasdaq Hearing and Review Committee ("Review  Committee")
    that  it determined to reverse the  decision of the Qualifications Committee
    approving  the  listing   of  the  Company's   Securities  on  Nasdaq.   The
    determination  of the Review  Committee is not final  pending the review and
    decision of the boards  of directors ("Boards of  Directors") of The  Nasdaq
    Stock Market, Inc. and NASD, Inc., which may occur in a short time frame. In
    the  event  the  Boards  of  Directors  renders  a  decision  to  affirm the
    determination of  the Review  Committee, the  Company's securities  will  be
    delisted  from Nasdaq and the Company's securities will be traded on the OTC
    Bulletin Board, which may materially affect the trading and liquidity of the
    Company's securities.  See  "Risk Factors  --  Penny Stock  Regulations  May
    Impose Certain Restrictions on Marketability of Securities."
    
 
                                       5
<PAGE>
                            SELECTED FINANCIAL DATA
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATE)
 
   
<TABLE>
<CAPTION>
                                                                    FOR THE PERIOD
                                                              JUNE 8, 1995 (BEGINNING OF
                                                                     OPERATIONS)
                                                                  TO MARCH 31, 1996
                                                         ------------------------------------
<S>                                                      <C>
Statement of Operations Data:
  Revenue..............................................                  $     294
  Income from operations...............................                         90
  Loss before income taxes.............................                       (537)
  Net loss.............................................                       (537)
  Pro forma net loss...................................                       (775)
  Pro forma loss per share.............................                       (.26)
  Average number of common shares outstanding (1)......                  3,017,808
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                       MARCH 31, 1996
                                                         -------------------------------------------
                                                         HISTORICAL   PRO FORMA (2)  AS ADJUSTED (3)
                                                         -----------  -------------  ---------------
<S>                                                      <C>          <C>            <C>
Balance Sheet Data:
  Working capital......................................   $     519     $   1,019       $   6,319
  Total assets.........................................         746         1,246           6,546
  Long-term debt.......................................         500        --              --
  Stockholders' equity.................................         153         1,153           6,453
</TABLE>
    
 
- ------------------------
   
(1) All   references  herein   to  shares   issued  and   outstanding  has  been
    retroactively adjusted to reflect a 2:1 reverse stock split in July 1996.
    
 
   
(2) Pro forma balance  sheet data  illustrates the  effect of  the bridge  loans
    received  in April 1996,  the cancellation of a  promissory note in exchange
    for the  return of  250,000 shares  of Common  Stock in  June 1996  and  the
    conversion  of $1,000,000  of debt associated  with bridge loans  to paid in
    capital in June 1996.
    
 
   
(3) Adjusted to reflect the sale of the Units offered hereby, less  underwriting
    discounts  and  the payment  by  the Company  of  expenses of  this offering
    
    estimated at $1,000,000. See "Use of Proceeds."
 
                                       6
<PAGE>
                                  RISK FACTORS
 
    THE  SECURITIES OFFERED HEREBY ARE SPECULATIVE  AND INVOLVE A HIGH DEGREE OF
RISK. ONLY THOSE PERSONS  ABLE TO LOSE THEIR  ENTIRE INVESTMENT SHOULD  PURCHASE
THESE SECURITIES. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT DECISION,
SHOULD  CAREFULLY READ  THIS PROSPECTUS AND  CONSIDER, ALONG  WITH OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS:
 
    DEVELOPMENT STAGE COMPANY
 
    The Company was incorporated  in Delaware on January  9, 1995 and, as  such,
faces the risks and problems associated with businesses in their early stages of
development and has a limited operating history upon which to base an evaluation
of  its prospects. Such  prospects should be  considered in light  of the risks,
expenses and difficulties frequently encountered in the expansion of a  business
in  an industry  characterized by  a substantial  number of  market entrants and
intense competition.  As of  March  31, 1996,  the  Company had  an  accumulated
deficit of $537,056. See "Business."
 
    BRIDGE FINANCING COSTS WILL NEGATIVELY IMPACT EARNINGS
 
   
    The  Company did  not report  earnings for the  year ending  March 31, 1996,
principally as a  result of the  costs attributed to  the issuance of  1,000,000
shares  of  Common  Stock, 1,000,000  Class  A  Warrants and  1,000,000  Class B
Warrants, as  additional consideration  for  a bridge  loan of  $1,000,000,  the
proceeds  of which were  received in March  and April 1996.  Interest expense of
$6,000,000 related to the issuance of the securities will be accrued during  the
period  from March  19, 1996  through the  date upon  which the  bridge loan was
converted to equity (June 24, 1996) and a corresponding credit will be  credited
to  paid in capital. Consequently, earnings  will be negatively impacted by this
cost;  however,  net  stockholders'   equity  will  not   be  impacted  by   the
corresponding  increase in paid in  capital. In addition, there  will be no cash
outlay  associated  with   the  issuance  of   such  securities.  See   "Certain
Transactions" and "Financial Statements."
    
 
   
    In  March and April 1996,  the Company borrowed $1,000,000  in a bridge loan
from four persons who are nonaffiliated with the Underwriter and the Company, to
wit: Edward Ratkovich ($500,000), Robert Foise ($250,000), Armstrong  Industries
($200,000)  and Martin Sumichrast ($50,000) at  the rate of eight percent simple
annual interest. General  Ratkovich and Mr.  Sumichrist are officers,  directors
and  principal stockholders of Nasdaq  listed companies recently underwritten by
the Underwriter. Mr. Foise and Armstrong Industries have previously participated
as investors in companies recently  underwritten by the Underwriter. In  further
consideration  of the bridge loan, the Company issued 1,000,000 shares of Common
Stock, 1,000,000  Class  A Warrants  and  1,000,000  Class B  Warrants  to  such
persons.  However, in June 1996, such persons converted their loans to equity in
consideration of the prior issuance of the securities.
    
 
    NO ASSURANCE OF FUTURE PROFITABILITY OR PAYMENT OF DIVIDENDS
 
    The Company can make no assurances that the future operations of the Company
will result in additional revenues or will be profitable. Should the  operations
of the Company be profitable, it is likely that the Company would retain much or
all  of its earnings in order to finance future growth and expansion. Therefore,
the Company does not  presently intend to  pay dividends, and  it is not  likely
that  any  dividends  will be  paid  in  the foreseeable  future.  See "Dividend
Policy."
 
    IMMEDIATE AND SUBSTANTIAL DILUTION
 
   
    An investor  in  this offering  will  experience immediate  and  substantial
dilution.  As of March 31,  1996, the Company had a  pro forma net tangible book
value of $1,152,809 or $.29 per  share derived from the Company's balance  sheet
as  of March 31, 1996  and the total common stock  outstanding at March 31, 1996
and the issuance in April 1996 related to the bridge financing an certain  other
equity  transactions in June 1996. After giving  effect to the sale of the Units
offered hereby at an assumed offering price of $14.00 per Unit, after  deducting
underwriting  discounts and estimated offering  expenses, pro forma net tangible
book  value   would   have  been   $6,452,809,   or  $.1.29   per   share.   The
    
 
                                       7
<PAGE>
   
result  will be an  immediate increase in  net tangible book  value per share of
$1.00 (345%) to existing shareholders and an immediate dilution to new investors
of $5.71 (82%) per share.  As a result, public investors  will bear most of  the
risk  of loss  since their  shares are being  purchased at  a cost substantially
above  the  price  that  existing   shareholders  acquired  their  shares.   See
"Dilution."
    
 
    POSSIBLE NEED FOR ADDITIONAL FINANCING
 
    The  Company intends to fund its operations  and other capital needs for the
next 12 months substantially from the  proceeds of this offering, but there  can
be  no assurance  that such  funds will  be sufficient  for these  purposes. The
Company may require substantial amounts of the proceeds of this offering for its
future expansion, operating costs and working  capital. The Company has made  no
arrangements  to obtain future additional financing,  if required, and there can
be no  assurance that  such financing  will be  available, or  that it  will  be
available on acceptable terms. See "Use of Proceeds."
 
    DEPENDENCE ON MAJOR CUSTOMERS
 
    For  the period ending March 31, 1996, the Company derived 32% (Sprint), 29%
(Comsat), 16% (First Data Resources) and 13% (Documenta) of its sales from  four
customers,  respectively. The dependence on major customers subjects the Company
to significant financial risks in the  operation of its business should a  major
customer  terminate, for any reason, its business relationship with the Company.
In such event, the financial condition of the Company may be adversely  affected
and  the Company may be required to  obtain additional financing, of which there
is no  assurance. The  Company is  not aware  of any  adverse developments  with
respect   to  its   major  customers.   Also,  dependence   on  major  customers
significantly increases  the Company's  costs, E.G.,  travel, communication  and
delivery  of  products  and  services,  which  are  reflected  in  the Company's
financial performance. See "Business" and "Financial Statements."
 
    DEPENDENCE ON MANAGEMENT
 
    The Company's success  is principally  dependent on  its current  management
personnel  for the operation  of its business. In  particular, Robert A. Veschi,
the Company's president and  chief executive officer,  has played a  substantial
role  in the  development and  management of the  Company, although  there is no
assurance that  additional  managerial  assistance will  not  be  required.  The
analysis  of  new business  opportunities  will be  undertaken  by or  under the
supervision of the management of the  Company. The Company has recently  entered
into  an employment agreement with Mr. Veschi. However, if the employment by the
Company of Mr. Veschi  terminates, or he  is unable to  perform his duties,  the
Company  may be substantially affected.  The agreement also contains non-compete
provisions but are  limited in  geographical scope, I.E.,  the Washington,  D.C.
metropolitan  area. The Company has agreed to purchase key-man life insurance on
Mr. Veschi in the amount  of $1 million prior to  the closing of this  offering.
The  Company will be the owner and beneficiary of the term insurance policy. See
"Use of Proceeds," "Business" and "Management."
 
    DEPENDENCE ON HIGHLY QUALIFIED TECHNICAL PERSONNEL
 
    The Company believes that its future success will depend in large part  upon
its   continued  ability  to  recruit  and  retain  highly  qualified  technical
personnel. Competition for highly qualified technical personnel is  significant,
particularly  in  the  geographic area  in  which the  Company's  operations are
located. No assurances  can be  made that  the Company's  relationship with  its
employees will remain good. See "Management."
 
    PRODUCT SECURITY RISKS
 
    The  Company has included in certain of  its products an implementation of a
security protocol which operates  in conjunction with authentication  technology
that  it has developed. Despite the  existence of this technology, the Company's
products may be vulnerable to  break-ins and similar disruptive problems  caused
by  certain Internet users. Such computer  break-ins and other disruptions would
jeopardize the security  of information  stored in and  transmitted through  the
computer  systems of end  users of the  Company's products, which  may result in
significant liability to  the Company  and may also  deter potential  customers.
Persistent security problems continue to plague public and
 
                                       8
<PAGE>
private  data networks. Recent break-ins at major government institutions, banks
and corporations have involved hackers bypassing firewalls and missappropriating
confidential information.  Alleviating  problems  caused by  third  parties  may
require significant expenditures of capital and resources by the Company and may
cause  interruptions, delays or cessation of service to the Company's customers;
such expenditures or  interruptions may have  a material adverse  effect on  the
Company's  business, operating  results and  financial condition.  Moreover, the
security and privacy concerns  of existing and potential  customers, as well  as
concerns  related to  computer viruses, may  inhibit the growth  of the Internet
marketplace,  generally,  and   the  Company's  customer   base  and   revenues,
specifically. The Company intends to limit its liability to customers, including
liability  arising  from a  failure of  the security  features contained  in the
Company's products, through  provisions in  its future  contracts. However,  the
Company  can  make  no  assurances that  such  contractual  limitations  will be
enforceable. The Company currently does not have liability insurance to  protect
against  these risks and there  can be no assurance  that such insurance will be
available to the Company on commercially  reasonable terms, or available on  any
terms.
 
    UNCERTAINTY OF PROPOSED MERGERS AND ACQUISITIONS CAMPAIGN
 
    Following  the closing of this offering, the  Company intends to engage in a
mergers and acquisitions campaign  in order to merge  with or acquire  companies
engaged in a similar business. The Company has not entered into any negotiations
to  merge  with  or acquire  any  such  target companies,  but  the  Company has
identified several  such  companies engaged  in  a complementary  business.  The
Company can make no assurances that it will be able to merge with or acquire any
companies. Although the Company intends to utilize approximately $500,000 of the
net  proceeds of this offering in its mergers and acquisitions activities during
the 12 months following the date of  this Prospectus, no assurances can be  made
that such funds will enable the Company to expand its base or realize profitable
consolidated  operations. In addition,  the Company's stockholders  may not have
the opportunity to review the financial statements of any of the companies  that
may  be acquired or  have the opportunity  to vote on  any proposed acquisitions
since Delaware law does not require such review and approval. Should such  funds
not  be utilized in its mergers and acquisitions activities, the Company intends
to utilize the funds in equal amounts in working capital, capital equipment  and
marketing and sales. See "Use of Proceeds."
 
    LITIGATION INVOLVEMENT OF UNDERWRITER MAY HAVE ADVERSE CONSEQUENCES.
 
    RECENT NASD ACTIONS INVOLVING UNDERWRITER
    The  Company has been advised by the Underwriter that the NASD (District 10)
filed a complaint (No. C10950081) on  October 5, 1995 ("Complaint") against  the
Underwriter,  Steven  Sanders, the  head trader  of  the Underwriter,  Daniel M.
Porush, the  president of  the  Underwriter, and  Paul  F. Byrne,  formerly  the
Underwriter's director of compliance (collectively, the "Respondents"), alleging
various  violations of the NASD Rules  of Fair Practice. The complaint consisted
of three  causes. The  first  cause alleged  that  the Underwriter  and  Sanders
effected  principal retail sales of securities  at prices that were fraudulently
excessive. The second  cause alleged  that the Underwriter  and Sanders  charged
excessive  markups. The  third cause  alleged that  the Underwriter,  Porush and
Byrne  failed  to  establish,   maintain  and  enforce  reasonable   supervisory
procedures designed to assure compliance with the NASD's rules and policies.
 
    On  April 15,  1996 the NASD  in its  decision found all  of the Respondents
except Paul Byrne  in violation of  all three causes  and imposed the  following
sanctions:
 
    -Sanders was censured, fined $25,000 and was suspended from association with
     any member of the NASD in any capacity for a period of one year.
 
    -Underwriter  was censured, fined $500,000 and  was required to disgorge its
     excess profits  to its  customers,  totaling $1,876,205,  plus  prejudgment
     interest.  In addition, the  Underwriter was suspended for  a period of one
     year from effecting any principal retail transactions.
 
                                       9
<PAGE>
    -Porush was censured, fined  $250,000 and barred  from association with  any
     member of the NASD in any capacity.
 
    The  Underwriter,  Porush  and  Sanders have  appealed  the  NASD's decision
thereby staying imposition of the sanctions.
 
    If the sanctions imposed on the Underwriter are not reversed on appeal,  the
Underwriter's  ability to act as a market maker of the Company's securities will
be restricted. The Company cannot ensure  that other broker dealers will make  a
market  in the Company's securities. In the event that other broker dealers fail
to make a market  in the Company's securities,  the possibility exists that  the
market  for  and the  liquidity  of the  Company's  securities may  be adversely
affected to such an extent that public  security holders may not have anyone  to
purchase their securities when offered for sale at any price. In such event, the
market for and liquidity of the Company's securities may not exist. It should be
noted  that although  the Underwriter may  not be  the sole market  maker in the
Company's securities,  it  may  likely  be the  dominant  market  maker  in  the
Company's securities. See "Underwriting."
 
    In  April 1996, the NASD settled an action whereby it fined Stratton Oakmont
$325,000 for fraud and other violations (which were neither admitted or  denied)
in  connection  with  its underwriting  of  an initial  public  offering. Steven
Sanders was  fined $50,000  and  was suspended  for a  period  of 45  days  from
associating  with an NASD member and agreed not to engage in any trading-related
activities for any  NASD member for  a period  of 50 days.  The settlement  also
required  that Stratton Oakmont file certain new supervisory procedures with the
NASD. The Underwriter filed with the NASD on April 11, 1996 procedures  relating
to  the conduct  of associated  persons during  and preceding  an initial public
offering, which  were  aimed  at  preventing violations  of  Section  5  of  the
Securities  Act of 1933  and Rule 10b-6  promulgated under Section  10(b) of the
Securities Exchange  Act  of  1934  and aimed  at  preventing  SEC  Rule  10b-10
violations  and the type of arbitrary  pricing which occurred in connection with
the trading of securities underwritten by  the Underwriter on January 16,  1991.
These procedures have been in effect since April 11, 1996. See "Underwriting."
 
    The  Company has been advised by the Underwriter that the NASD (District 10)
filed a  complaint (No.  C10960080)  on June  6,  1996 ("June  1996  Complaint")
against the Underwriter, Daniel Porush, Steven Sanders, Irving Stitsky, a former
registered  representative  of  the  Underwriter,  and  Jordan  Shamah,  a  vice
president and a director of  the Underwriter (collectively, the  "Respondents"),
alleging  various violations  of the  Exchange Act  and the  NASD Rules  of Fair
Practice. The June 1996 Complaint consists of seven causes of action. The  first
cause  alleges that the Underwriter, through  Porush and Sanders, engaged in the
use of fraudulent  and manipulative  devices in the  failure to  make bona  fide
distributions  in  five  public  offerings  of  securities  underwritten  by the
Underwriter between June 1993 and April 1994. The second cause alleges that  the
Underwriter,  through Porush, Sanders, Stitsky and Shamah, engaged in the use of
fraudulent and  manipulative  devices  in  the  failure  to  make  a  bona  fide
distribution  of the common stock of a company whose initial public offering was
underwritten by the Underwriter. The  third cause alleges that the  Underwriter,
through  Porush and Sanders for  a period of three  days, manipulated the common
stock of such company.  The fourth cause alleges  that the Underwriter,  through
Sanders,  charged fraudulently excessive markups in connection with the warrants
of such company. The fifth cause  alleges that the Underwriter, through  Porush,
violated  the NASD's Free-Riding  and Withholding Interpretation  inasmuch as he
allegedly allocated securities in certain public offerings to persons restricted
from purchasing such securities. The sixth cause alleges that Porush and Stitsky
failed to  adequately  supervise  the Underwriter's  activity  relating  to  the
various  alleged violations. The seventh cause  alleges that the Underwriter and
Porush failed to  establish and  maintain reasonable  supervisory procedures  to
prevent  the  Underwriter's violative  conduct. The  Respondents intend  to file
answers to the June 1996 Complaint denying all material allegations and  alleged
violations.
 
                                       10
<PAGE>
    In  addition, the Company has been advised  by the Underwriter that the NASD
(District 10) filed a  complaint (No. C10960068) on  June 6, 1996  ("Complaint")
against the Underwriter and Patrick Gerard Hayes, the compliance director of the
Underwriter  (collectively, the "Respondents"), alleging  violations of the NASD
Rules of Fair  Practice. The  Complaint consists of  two causes  of action.  The
first  cause alleges that the Underwriter failed to report information regarding
at least 59  customer complaints  the Underwriter received  during the  relevant
time  periods as required by  the NASD Rules of  Fair Practice. The second cause
alleges that  the  Underwriter,  through  its  compliance  director,  failed  to
establish,  maintain and enforce written procedures  designed to ensure that the
Underwriter complied with the NASD Rules of Fair Practice. The Respondents  have
filed answers to the Complaint and are contesting the proceeding.
 
    On  or  about July  13, 1996,  the District  Business Conduct  Committee for
District No. 10 ("District  Committee") of the NASD  issued a complaint  against
the  Underwriter alleging that  the Underwriter violated  Article III, Section 1
and Article IV, Section 5  of the NASD Rules of  Fair Practice by entering  into
settlement  agreements with former customers  which condition customers' ability
to cooperate with NASD investigations. The charges in the complaint were  upheld
by  the District Committee  on this same  date as well  as the National Business
Conduct Committee  of the  NASD, and  a fine  of $20,000  was assessed  and  the
Underwriter  was ordered to get the NASD's agreement on language used in certain
customer settlement agreements. The firm also is required, if asked by the NASD,
to identify customers that  should be released  from settlement agreements  that
impose  conditions on a  customer's ability to provide  information to the NASD.
The sanctions follow an appeal of findings that the firm used certain agreements
when settling  customer complaints  that precluded,  restricted, or  conditioned
customers'   ability  to  cooperate  with  the   NASD  in  connection  with  its
investigation of customer complaints. The firm also failed to release a customer
from the  restrictive provisions  of such  a settlement.  This action  had  been
appealed  to the SEC and the sanctions aren't in effect pending consideration of
the appeal. The Underwriter contests the charges and has perfected an appeal  to
the Securities and Exchange Commission.
 
   PERMANENT  INJUNCTION  GRANTED --  STRATTON OAKMONT  ENJOINED TO  COMPLY WITH
   RECOMMENDATIONS OF  AN  INDEPENDENT  CONSULTANT AND  AN  INDEPENDENT  AUDITOR
   APPOINTED PURSUANT TO AN ADMINISTRATION ORDER
 
    The  Company  has  been  advised by  Stratton  Oakmont  that  the Commission
instituted an action on  December 14, 1994 in  the United States District  Court
for  the District  of Columbia against  Stratton Oakmont.  The complaint alleged
that Stratton Oakmont was not complying with the Administrative Order entered by
the Commission on March  17, 1994 ("Administrative Order")  by failing to  adopt
the  recommendations of an independent  consultant. The Administrative Order was
previously consented to by  Stratton Oakmont, without  admitting or denying  the
findings  contained  therein,  as  settlement  of  an  action  commenced against
Stratton Oakmont by the Commission in March 1992, which found willful violations
of the anti-fraud provisions of the securities laws such that Stratton Oakmont:
 
    -engaged in fraudulent sales practices;
 
    -engaged in and/or permitted unauthorized trading in customer accounts;
 
    -knowingly and  recklessly  manipulated  the market  price  of  a  company's
     securities by dominating and controlling the market for those securities;
 
    -made  improper and unsupported price predictions with regard to recommended
     over-the-counter securities; and
 
    -made material misrepresentations and omissions regarding certain securities
     and its experience in the securities industry.
 
                                       11
<PAGE>
    Pursuant to the Administrative Order,  Stratton Oakmont was censured and  an
independent  consultant ("Stratton Consultant") was  chosen by the Commission to
advise and  consult  with Stratton  Oakmont  and  to review  and  recommend  new
supervisory and compliance procedures. The complaint sought:
 
    -to enjoin Stratton Oakmont from violating the Administrative Order;
 
    -an  order  commanding Stratton  Oakmont to  comply with  the Administrative
     Order; and
 
    -to have a Special  Compliance Monitor appointed  to ensure compliance  with
     the  Administrative  Order.  Stratton  Oakmont  claimed  that  the Stratton
     Consultant exceeded his  authority under the  Administrative Order and  had
     violated the terms of the Administrative Order.
 
    On  February  28, 1995,  the  court granted  the  Commission's motion  for a
permanent injunction ("Permanent  Injunction") and ordered  Stratton Oakmont  to
comply  with  the Administrative  Order, which  required  the appointment  of an
independent consultant and a separate independent auditor and required that  all
recommendations  be  complied  with,  including  the  taping  of  all  telephone
conversations  between  Stratton  Oakmont's  brokers  and  their  customers.  In
granting   the  Commission's  motion  for  a  Permanent  Injunction,  the  court
determined that Stratton Oakmont's conduct unequivocally demonstrated that there
is a substantial likelihood that it will continue to evade its  responsibilities
under  the Administrative  Order. On April  20, 1995, Stratton  Oakmont filed an
appeal to the United States Court of  Appeals for the District of Columbia,  and
on  April 24, 1995 filed  a motion to stay  the Permanent Injunction pending the
outcome of the  appeal. The motion  to stay was  denied. Subsequently,  Stratton
Oakmont  voluntarily dismissed  its appeal. The  failure by  Stratton Oakmont to
comply with  the  Administrative Order  or  Permanent Injunction  may  adversely
effect Stratton Oakmont's activities in that the court may enter a further order
restricting  the ability  of Stratton Oakmont  to act  as a market  maker of the
Company's securities. The effect of such  action may prevent the holders of  the
Company's  securities from selling such securities since Stratton Oakmont may be
restricted from acting  as a market  maker of the  Company's securities and,  in
such  event, will  not be able  to execute a  sale of such  securities. Also, if
other broker dealers  fail to  make a market  in the  Company's securities,  the
public  security holders may  not have anyone to  purchase their securities when
offered for sale at any  price and the security holders  may suffer the loss  of
their entire investment.
 
   RECENT STATE ADMINISTRATIVE PROCEEDINGS INVOLVING STRATTON OAKMONT --
   POSSIBLE LOSS OF LIQUIDITY
 
    As a result of the Permanent Injunction, the states of Pennsylvania, Indiana
and  Illinois  have commenced  administrative  proceedings seeking,  among other
things, to revoke Stratton Oakmont's license  to do business in such states.  In
Indiana,  the Commissioner suspended Stratton Oakmont's license for a three year
period. Stratton Oakmont  has appealed  the decision  and has  requested a  stay
pending appeal. The requested stay would maintain the status quo pending appeal.
In  Illinois, Stratton Oakmont  intends to file an  answer to the administrative
complaint denying the basis for  revocation. The District of Columbia  suspended
Stratton  Oakmont's license pending the outcome  of an investigation. The states
of North Carolina and  Arkansas also have  suspended Stratton Oakmont's  license
pending  a  resolution  of  the  proceedings  in  those  states.  The  states of
Minnesota, Vermont,  and Nevada  have served  upon Stratton  Oakmont notices  of
intent  to revoke Stratton Oakmont's license in  such states. The state of Rhode
Island has served on Stratton Oakmont a Notice of Intent to suspend its  license
in  that state. The state of Connecticut has served on Stratton Oakmont a notice
of intent to suspend or revoke registration in that state with a notice of right
to hearing.  In the  state of  Mississippi,  Stratton Oakmont  has agreed  to  a
suspension of its license pending resolution of certain claims and review of its
procedures and practices by the state authorities. In addition, Stratton Oakmont
withdrew  its registration  in the  state of  New Hampshire  (with the  right of
reapplication) and in the state of Maryland. There may be further administrative
action against  the firm  in Maryland.  The firm  withdrew its  registration  in
Massachusetts with a right to reapply for registration after two years, withdrew
its  registration in Delaware with a right  to reapply in three years and agreed
to a temporary
 
                                       12
<PAGE>
cessation of  business  in  Utah  pending  an  on-site  inspection  and  further
administrative  proceedings.  Stratton Oakmont's  license  in the  state  of New
Jersey was revoked by an administrative law judge, which revocation was affirmed
by the New Jersey Bureau  of Securities, and an appeal  has been filed with  the
appellate  division of  the New  Jersey Superior  Court. The  states of Georgia,
Alabama and  South  Carolina have  lifted  their suspensions  and  have  granted
Stratton  Oakmont conditional  licenses. Such conditional  licenses were granted
pursuant to an  order, which Stratton  Oakmont has proposed  to various  states,
which provides provisions for: (i) the suspension of revocation, (ii) compliance
with  recommendations  of the  Consultant, (iii)  an expedited  claims mediation
arbitration process, (iv) resolution of claims seeking compensatory damages, (v)
restrictions on use of operating revenue,  (vi) the limitation on selling  group
members  in offerings  underwritten by Stratton  Oakmont and  the prohibition of
participating as a  selling group  member in offerings  underwritten by  certain
other NASD member firms, (vii) the periodic review of Stratton Oakmont's agents,
(viii)  the retention of an accounting  firm, and (ix) supervision and training,
restrictions on trading, discretionary accounts and other matters. The state  of
Oregon, as a result of the Permanent Injunction, has filed a notice of intent to
revoke  Stratton  Oakmont's  license subject  to  the  holding of  a  hearing to
determine definitively Stratton Oakmont's license status, and Stratton  Oakmont,
in  this  proceeding  as  well  as other  proceedings,  expects  to  be  able to
demonstrate that the Permanent Injunction is not  of a nature as to be a  lawful
basis  to  revoke  Stratton  Oakmont's  license  permanently.  Finally, Stratton
Oakmont has received an  order limiting license in  the state of Nebraska.  Such
proceedings,  if ultimately successful, may adversely  affect the market for and
liquidity of the Company's securities if additional broker-dealers do not make a
market in the Company's securities.  Moreover, should investors purchase any  of
the  securities in this offering from Stratton  Oakmont prior to a revocation of
Stratton Oakmont's license in  their state, such investors  will not be able  to
resell  such  securities in  such  state through  Stratton  Oakmont but  will be
required to retain a new broker-dealer firm for such purpose. The Company cannot
ensure that other broker-dealers will make a market in the Company's securities.
In the event that other  broker-dealers fail to make  a market in the  Company's
securities,  the possibility exists that the market for and the liquidity of the
Company's securities may  be adversely affected  to such an  extent that  public
security  holders may not have anyone  to purchase their securities when offered
for sale at any price. In such  event, the market for, and liquidity and  prices
of  the Company's  securities may  not exist. It  should be  noted that although
Stratton Oakmont may not be the  sole market maker in the Company's  securities,
it will most likely be the dominant market maker in the Company's securities. In
addition,  in the event that the Underwriter's license to do business is revoked
in the states set forth above, the Underwriter has advised the Company that  the
members  of the selling syndicate in this offering  may be able to make a market
in the Company's securities in such states and that such an event will not  have
a  materially adverse effect on this offering, although no assurance can be made
that such an event will not have  a materially adverse effect on this  offering.
The  Company has applied to register this offering for the offer and sale of its
securities in the following states: California, Colorado, Connecticut, Delaware,
Florida, Georgia,  Hawaii,  Illinois,  Louisiana, New  York,  Rhode  Island  and
Virginia.  The  offer  and sale  of  the  securities of  this  offering  are not
available in  any  other  state,  absent an  exemption  from  registration.  See
"Underwriting."
 
    FOR  ADDITIONAL INFORMATION  REGARDING STRATTON OAKMONT,  INVESTORS MAY CALL
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. AT 1-800-289-9999.
 
    PAUL CARMICHAEL V. STRATTON OAKMONT.
 
    The Company has  been advised  by Stratton  Oakmont that  Honorable John  E.
Sprizzo,  United States Judge for  the Southern District of  New York, on May 6,
1994 denied  the  class certification  motion  in PAUL  CARMICHAEL  V.  STRATTON
OAKMONT,  INC., ET AL., Civ.  0720 (JES), of the  plaintiff Paul Carmichael. The
class action complaint  alleges manipulation and  fraudulent sales practices  in
connection  with  a number  of  securities. The  allegations  were substantially
similar and  involve much  of the  same time  period as  the Commission's  civil
complaint  (discussed above). The Company has further been informed that counsel
for the  class  action  plaintiff  sought  to  re-argue  the  motion  for  class
certification, which motion for re-argument was denied.
 
                                       13
<PAGE>
    BROAD DISCRETION IN APPLICATION OF PROCEEDS
 
    The management of the Company has broad discretion to adjust the application
and  allocation of the  net proceeds of this  offering, including funds received
upon exercise of the Class A Warrants, of which there is no assurance, in  order
to  address  changed  circumstances  and  opportunities.  As  a  result  of  the
foregoing, the success of the Company  will be substantially dependent upon  the
discretion  and judgment of  the management of  the Company with  respect to the
application and  allocation of  the net  proceeds hereof.  Pending use  of  such
proceeds,  the net proceeds of this offering  will be invested by the Company in
temporary, short-term interest-bearing obligations. See "Use of Proceeds."
 
   UNCERTAIN PROTECTION OF PATENT, TRADEMARK, COPYRIGHT AND PROPRIETARY RIGHTS
 
    In March 1996, the  Company acquired all rights,  title and interest in  the
first  U.S.  patent, U.S.  Patent No.  5,526,353,  for a  system and  method for
communicating high fidelity and  clear transmission of audio  or voice over  the
Internet,   enabling   free   worldwide  transmission   of   ordinary  telephone
communications over the  Internet. The  Company acquired all  rights, title  and
interest in the patent from the inventors, Messrs. Arthur Henley and Scott Grau,
who are original stockholders of the Company, in consideration of a five percent
overriding  royalty  interest against  gross profits  involving  the use  of the
patent. The  Company  has agreed  to  allocate  $1,000,000 of  capital  of  this
offering  to  develop and  exploit  the market  opportunities  of the  patent by
December 31, 1996, or the patent will be subject to repurchase by the  inventors
of  the patent. The Company believes that its patent is the first patent awarded
of its kind, specifically involving the transmission of audio or voice over  the
Internet.  The  Company  also  believes  that  its  patent  may  provide certain
strategic and technological advantages in the  new and burgeoning area of  audio
or  voice over the Internet. The Company  can make no assurances, however, as to
the extent of the advantages or protection,  if any, that may be granted to  the
Company as a result of its patent.
 
    The   Company  currently  does  not  have  any  other  patent  or  copyright
applications pending. However,  the Company has  trademark applications  pending
related  to  certain of  its  products and  technologies.  The Company  may file
additional patent, trademark and copyright  applications relating to certain  of
the  Company's products and  technologies. If patents,  trademarks or copyrights
were to be issued, there can be no assurance as to the extent of the  protection
that  will  be  granted to  the  Company as  a  result of  having  such patents,
trademarks or copyrights or that the Company will be able to afford the expenses
of any complex  litigation which  may be  necessary to  enforce its  proprietary
rights.  Failure of the Company's  patents, trademark and copyright applications
may have a material adverse impact on  the Company's business. Except as may  be
required  by the  filing of  patent, trademark  and copyright  applications, the
Company will attempt  to keep all  other proprietary information  secret and  to
take  such actions as may be necessary  to insure the results of its development
activities are not disclosed and are  protected under the common law  concerning
trade secrets. Such steps will include the execution of nondisclosure agreements
by  key Company  personnel and  may also  include the  imposition of restrictive
agreements on purchasers  of the Company's  products and services.  There is  no
assurance that the execution of such agreements will be effective to protect the
Company,  that  the Company  will  be able  to  enforce the  provisions  of such
nondisclosure agreements or  that technology and  other information acquired  by
the  Company pursuant to its development activities will be deemed to constitute
trade secrets by any court of competent jurisdiction.
 
    SUBSTANTIAL COMPETITION
 
    Businesses in the  United States  and abroad  that are  engaged in  Internet
technologies,  products  and  services  are  substantial  in  number  and highly
competitive. Many of the companies with which the Company intends to compete are
substantially larger and have substantially greater resources than the  Company.
It  is also likely that other competitors will emerge in the future. The Company
will compete  with  companies  that have  greater  market  recognition,  greater
resources  and broader capabilities than the Company. As a consequence, there is
no assurance  that the  Company will  be  able to  successfully compete  in  the
marketplace. See "Business."
 
                                       14
<PAGE>
    LIMITATION ON DIRECTOR LIABILITY
 
    As  permitted  by  the  Delaware  General  Corporation  Law,  the  Company's
Certificate of Incorporation limits the liability of directors to the Company or
its stockholders for monetary damages for breach of a director's fiduciary  duty
except for liability in four specific instances. These are for (i) any breach of
the  director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or  which involve intentional misconduct or  knowing
violation  of  law,  (iii)  unlawful payments  of  dividends  or  unlawful stock
purchases or redemptions  as provided  in Section  174 of  the Delaware  General
Corporation  Law, or  (iv) any  transaction from  which the  director derived an
improper personal benefit. As  a result of the  Company's charter provision  and
Delaware  law,  stockholders may  have more  limited  rights to  recover against
directors for  breach  of  fiduciary  duty. See  "Management  --  Limitation  on
Liability of Directors."
 
    ARBITRARY OFFERING PRICE
 
   
    There  has been  no prior  public market  for the  Company's securities. The
price to the public of the Units offered hereby has been arbitrarily  determined
by   negotiations  between  the  Company  and   the  Underwriter  and  bears  no
relationship to  the Company's  earnings,  book value  or any  other  recognized
criteria  of value. The offering  price of $14.00 per  Unit ($7.00 per share) is
substantially in  excess of  the net  tangible  book value  of $.04  per  share,
derived  from the Company's balance sheet as of March 31, 1996, and in excess of
the price received  by the Company  for shares sold  in prior transactions.  See
"Prospectus  Summary -- Selected Financial  Data," "Underwriting," "Dilution and
Other Comparative Data" and "Certain Transactions."
    
 
   REQUIREMENTS OF CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN
   CONNECTION WITH THE EXERCISE OF THE WARRANTS
 
   
    The Company will be able to  issue the securities offered hereby, shares  of
its  Common Stock upon the  exercise of the Warrants  and the Underwriters' Unit
Purchase Option  only if  (i) there  is  a current  prospectus relating  to  the
securities  offered hereby under an  effective registration statement filed with
the Securities  and Exchange  Commission, and  (ii) such  Common Stock  is  then
qualified for sale or exempt therefrom under applicable state securities laws of
the  jurisdictions in which the various holders of Warrants reside. Although the
Company intends to maintain  a current registration statement,  there can be  no
assurance, however, that the Company will be successful in maintaining a current
registration statement. After a registration statement becomes effective, it may
require  updating by the filing of  a post-effective amendment. A post-effective
amendment is required (i) anytime after nine months subsequent to the  Effective
Date  when any  information contained in  the prospectus is  over sixteen months
old; (ii)  when facts  or events  have occurred  which represent  a  fundamental
change in the information contained in the registration statement; or (iii) when
any  material  change  occurs  in  the  information  relating  to  the  plan  or
distribution of the  securities registered by  such registration statement.  The
Company  anticipates that this Registration  Statement will remain effective for
not more than nine months following the date of this Prospectus or until May   ,
1997, assuming a post-effective amendment is not filed by the Company, which may
be required. The Company intends to qualify the sale of the Class A Warrants  in
a  limited number  of states,  although certain  exemptions under  certain state
securities ("Blue  Sky") laws  may  permit the  Warrants  to be  transferred  to
purchasers  in  states other  than those  in which  the Warrants  were initially
qualified. Qualification for the exercise or sale of the Class A Warrants in the
states is essential for the establishment of a trading market in the securities.
The Company  can  make  no assurances  that  it  will be  able  to  qualify  its
securities  in any state.  The Company will be  prevented, however, from issuing
Common Stock upon exercise of the Warrants in those states where exemptions  are
unavailable and the Company has failed to qualify the Common Stock issuable upon
exercise of the Warrants. The Company may decide not to seek, or may not be able
to  obtain qualification  of the  issuance of  such Common  Stock in  all of the
states in which the ultimate purchasers of the Warrants reside. In such a  case,
the  Warrants of those purchasers will expire and have no value if such Warrants
cannot be exercised  or sold. Accordingly,  the market for  the Warrants may  be
limited  because of  the Company's obligation  to fulfill both  of the foregoing
requirements. See "Description of Securities," and "Underwriting."
    
 
                                       15
<PAGE>
   ADDITIONAL AUTHORIZED SHARES AVAILABLE FOR ISSUANCE MAY ADVERSELY AFFECT THE
   MARKET
 
   
    The Company is authorized  to issue 50,000,000 shares  of its Common  Stock,
$.01  par value. If all of the 500,000 Units offered hereby are sold, there will
be a total of 5,000,000 shares of Common Stock issued and outstanding.  However,
the  total number  of shares  of Common  Stock issued  and outstanding  does not
include the exercise of up to 1,000,000  Class A Warrants and 1,000,000 Class  B
Warrants  to  purchase up  to 2,000,000  shares of  the Company's  Common Stock.
Moreover, the Underwriters have been granted an option to purchase 50,000  Units
in  connection with this offering, which has  been authorized by the Company for
issuance. Also,  this  does  not  include  the  exercise  of  the  Underwriters'
Over-allotment  Option to  purchase up to  75,000 Units in  connection with this
offering, which has been authorized by the Company for issuance. After reserving
a total of 2,250,000 shares  of Common Stock for  issuance upon the exercise  of
all the Warrants, if all of the Warrants are exercised, the Company will have at
least  42,500,000 shares of authorized but  unissued capital stock available for
issuance without  further shareholder  approval. As  a result,  any issuance  of
additional  shares of Common Stock may cause current shareholders of the Company
to suffer significant dilution which  may adversely affect the market.  Pursuant
to   the  terms  of   the  Underwriting  Agreement,   the  Company's  restricted
stockholders and the Company have agreed not to sell, transfer, assign or  issue
any  restricted shares of Common  Stock for a period  of 36 months following the
date of this Prospectus. The sale of a significant number of these shares in the
public market may  adversely affect  prevailing market prices  of the  Company's
securities  following this  offering. See  "Dilution," "Principal Stockholders,"
"Certain Transactions," "Description of Securities" and "Underwriting."
    
 
    LACK OF PRIOR MARKET FOR SECURITIES OF THE COMPANY
 
    No prior  market existed  for the  securities being  offered hereby  and  no
assurance  can be given that a market  will develop subsequent to this offering.
The Underwriter may  make a market  in the  securities of the  Company upon  the
closing  of this offering, but there is  no assurance that it will be successful
in its efforts. See "Description of Securities" and "Underwriting."
 
    WARRANTS SUBJECT TO REDEMPTION
 
   
    The Class A Warrants shall be exercisable commencing one year after the date
of this Prospectus ("Effective Date"). Each Class A Warrant entitles the  holder
to  purchase one share of  Common Stock at $7.50 per  share during the four year
period commencing one year from the Effective Date hereof. The Class A  Warrants
are redeemable by the Company for $.05 per Warrant, at any time after August   ,
1998,  upon thirty (30) days' prior written notice, if the average closing price
or bid price of the Common Stock, as reported by the principal exchange on which
the Common Stock is quoted, the  Nasdaq SmallCap Market, the OTC Bulletin  Board
or  the National Quotation Bureau,  Incorporated, as the case  may be, equals or
exceeds $10.00 per share, for any twenty (20) consecutive trading days within  a
period  of  thirty  (30) days  ending  within ten  (10)  days of  the  notice of
redemption. Upon thirty (30)  days' prior written notice  to all holders of  the
Class  A Warrants, the Company shall have the right to reduce the exercise price
and/or extend the term of the Class A Warrants. Redemption of the Warrants  will
force  holders thereof to either (i) exercise such Warrants and pay the exercise
price at a time when it may be less than advantageous economically to do so,  or
(ii)  accept  the redemption  price, which  may be  substantially less  than the
market value  thereof at  the time  of redemption.  See "Certain  Transactions,"
"Description of Securities" and "Underwriting."
    
 
    The  Company intends  to qualify  the sale  of the  securities in  a limited
number of states,  although certain  exemptions under  certain state  securities
("Blue  Sky") laws may  permit the Warrants  to be transferred  to purchasers in
states other than  those in  which the  Warrants were  initially qualified.  The
Company  will be prevented, however, from  issuing Common Stock upon exercise of
the Warrants in those  states where exemptions are  unavailable and the  Company
has  failed to qualify the Common Stock  issuable upon exercise of the Warrants.
The Company may decide not to seek,  or may not be able to obtain  qualification
of  the issuance of such Common Stock in all of the states in which the ultimate
purchasers of  the  Warrants  reside.  In  such  case,  the  Warrants  of  those
purchasers will expire and have no value if such Warrants cannot be exercised or
sold.  Accordingly, the market  for the Warrants  may be limited  because of the
Company's obligation to fulfill the foregoing requirements.
 
                                       16
<PAGE>
   UNDERWRITER'S INFLUENCE ON THE MARKET MAY HAVE ADVERSE CONSEQUENCES
 
    A significant  number  of  securities  may  be  sold  to  customers  of  the
Underwriter. Such customers of the Underwriter of this offering subsequently may
engage  in transactions for the  sale or purchase of  such securities through or
with the  Underwriter. Although  they have  no legal  obligation to  do so,  the
Underwriter  from time to time in the future will make a market in and otherwise
effect transactions in the Company's  securities. To the extent the  Underwriter
acts  as marketmaker in the securities, it may be a dominating influence in that
market. The  price and  liquidity of  such  securities may  be affected  by  the
degree,  if any, of the Underwriter's participation in the market, inasmuch as a
significant  amount  of  such  securities  may  be  sold  to  customers  of  the
Underwriter.  Such customers, as customers of  the Underwriter of this offering,
subsequently may  engage  in transactions  for  the  sale or  purchase  of  such
securities   through  or  with  the   Underwriter,  although  no  agreements  or
understandings,  written  or  oral,  exist  for  such  transactions,  and   such
transactions  may further enhance the  Underwriter's dominating influence on the
market. Such market making activities, if commenced, may be discontinued at  any
time or from time to time by the Underwriter without obligation or prior notice.
If  a dominating  influence at such  time, the  Underwriter's discontinuance may
adversely affect the price and liquidity of the securities.
 
    Further,  unless  granted  an  exemption  by  the  Securities  and  Exchange
Commission to its Rule 10b-6, the Underwriter may be prohibited from engaging in
any  market making  activities with regard  to the Company's  securities for the
period from two or nine business days prior to any solicitation of the  exercise
of  Warrants until the later of the termination of such solicitation activity or
the termination, by waiver or otherwise,  of any right that the Underwriter  may
have  to receive a fee for the  exercise of Warrants following the solicitation.
As a result, the Underwriter may be  unable to continue to provide a market  for
the   Company's  securities  during  certain  periods  while  the  Warrants  are
exercisable,  which  may  adversely  affect  the  price  and  liquidity  of  the
securities.
 
   CONTRACTUAL OBLIGATIONS TO UNDERWRITER MAY REDUCE PROCEEDS AVAILABLE TO THE
   COMPANY
 
   
    The  Company has also agreed to pay  fees to the Underwriter, aggregating up
to five  percent  of the  consideration  involved  in the  transaction,  if  the
Underwriter  arranges  equity  financing,  debt  financing  and  assistance with
mergers and acquisitions,  for the  Company other  than this  offering during  a
period  of five years after  the date of this  Prospectus, or if the Underwriter
obtains or are  influential in increasing  any lines of  credit the Company  may
have,  provided such financing or increase is accepted by the Company. Such fees
will reduce the amount of proceeds available to the Company from such  financing
or line of credit. Further, in addition to an ten percent underwriting discount,
the  Company has  also agreed  to pay  the Underwriter  a nonaccountable expense
allowance of three percent of the gross proceeds of this offering, as well as  a
fee of four percent of the exercise price of the Warrants, if certain conditions
are  met. To the extent the foregoing  compensation is paid from the proceeds of
this offering, the  amounts available to  the Company, will  be reduced. On  the
closing  date, the Company will sell to  the Underwriter for a purchase price of
$50, an option to purchase 50,000 Units at 165% of the initial offering price of
$14.00 per  Unit, or  $23.10  per Unit,  on the  date  of this  Prospectus.  See
"Underwriting."
    
 
   EXERCISE OF CLASS A WARRANTS MAY HAVE DILUTIVE EFFECT ON MARKET
 
    The Class A Warrants will provide, during their term, an opportunity for the
holder  to  profit  from a  rise  in the  market  price,  of which  there  is no
assurance, with resulting dilution in the ownership interest in the Company held
by the then  present stockholders.  Holders of  the Warrants  most likely  would
exercise  the Warrants and purchase  the underlying Common Stock  at a time when
the Company may be  able to obtain  capital by a new  offering of securities  on
terms  more favorable than those  provided by such Warrants,  in which event the
terms on which the  Company may be  able to obtain  additional capital would  be
affected adversely. See "Description of Securities" and "Underwriting."
 
   "PENNY STOCK" REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF
   SECURITIES
 
    The   Securities   and  Exchange   Commission  ("Commission")   has  adopted
regulations which generally define "penny stock" to be any equity security  that
has a market price (as defined) less than
 
                                       17
<PAGE>
$5.00  per share or an  exercise price of less than  $5.00 per share, subject to
certain exceptions.  Upon authorization  of the  securities offered  hereby  for
quotation  on  Nasdaq,  such  securities  will  initially  be  exempt  from  the
definition of "penny stock."
 
   
    The Company has applied for  the inclusion of the securities  ("Securities")
on  the National Association  of Securities Dealers,  Inc. ("NASD") OTC Bulletin
Board, an  unorganized,  inter-dealer, over-the-counter  market  which  provides
significantly  less liquidity than the Nasdaq SmallCap Market System ("Nasdaq"),
and quotes for stocks included on the  OTC Bulletin Board are not listed in  the
financial  sections of  newspapers as are  those for the  Nasdaq National Market
System. In the event the Securities are not included on the OTC Bulletin  Board,
quotes  for  the  Securities  may  be included  in  the  "pink  sheets"  for the
over-the-counter market. The Company applied for inclusion of its Securities  on
Nasdaq.  While the application was granted  by the Nasdaq Listing Qualifications
Committee ("Qualifications Committee"),  the Company was  advised by the  Nasdaq
Hearing  and Review Committee ("Review Committee") that it determined to reverse
the decision  of  the Qualifications  Committee  approving the  listing  of  the
Company's Securities on Nasdaq. The determination of the Review Committee is not
final  pending the review  and decision of  the boards of  directors ("Boards of
Directors") of The Nasdaq Stock Market, Inc. and the NASD, Inc., which may occur
in a short time frame. In the  event the Boards of Directors renders a  decision
to  affirm the determination  of the Review  Committee, the Company's securities
will be delisted from Nasdaq and the Company's securities will be traded on  the
OTC Bulletin Board, which may materially affect the trading and liquidity of the
Company's  securities. See "Risk  Factors -- Penny  Stock Regulations May Impose
Certain Restrictions on Marketability of Securities."
    
 
   
    If the securities  offered hereby  fall within  the definition  of a  "penny
stock" following the Effective Date, the Company's securities may become subject
to  rules that impose  additional sales practice  requirements on broker-dealers
who sell  such  securities  to  persons other  than  established  customers  and
accredited  investors (generally  those with assets  in excess  of $1,000,000 or
annual income exceeding $200,000, or  $300,000 together with their spouse).  For
transactions  covered  by these  rules, the  broker-dealer  must make  a special
suitability determination for the purchase of such securities and have  received
the  purchaser's  written  consent to  the  transaction prior  to  the purchase.
Additionally, for any transaction  involving a penny  stock, unless exempt,  the
rules  require  the delivery,  prior to  the transaction,  of a  risk disclosure
document mandated by  the Commission  relating to  the penny  stock market.  The
broker-dealer   also  must  disclose   the  commissions  payable   to  both  the
broker-dealer and  the registered  representative,  current quotations  for  the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must  disclose  this  fact and  the  broker-dealer's presumed  control  over the
market. Finally,  monthly  statements  must  be  sent  disclosing  recent  price
information  for the  penny stock  held in  the account  and information  on the
limited market  in  penny stocks.  Consequently,  the "penny  stock"  rules  may
restrict  the ability of broker-dealers to sell the Company's securities and may
affect the  ability  of  purchasers  in this  Offering  to  sell  the  Company's
securities in the secondary market.
    
 
    SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET
 
   
    All  of  the  Company's currently  outstanding  shares of  Common  Stock are
"restricted securities" and,  in the future,  may be sold  upon compliance  with
Rule  144,  adopted under  the  Securities Act  of  1933, as  amended.  Rule 144
provides, in essence, that a person holding "restricted securities" for a period
of two years may sell only an amount every three months equal to the greater  of
(a)  one percent  of the  Company's issued  and outstanding  shares, or  (b) the
average weekly volume  of sales  during the  four calendar  weeks preceding  the
sale.  The  amount of  "restricted  securities" which  a  person who  is  not an
affiliate of the  Company may sell  is not so  limited, since nonaffiliates  may
sell  without volume limitation  their shares held  for three years  if there is
adequate current public information available  concerning the Company. Upon  the
sale of the securities, and assuming that there is no exercise of any issued and
outstanding Warrants, the Company will have 5,000,000 shares of its common stock
issued   and  outstanding,  of  which   4,000,000  shares  will  be  "restricted
securities." Therefore, during  each three  month period,  beginning January  9,
1997,   a   holder   of   restricted   securities   who   has   held   them  for
    
 
                                       18
<PAGE>
   
at least the two year period  may sell under Rule 144  a number of shares up  to
50,000  shares.  Non-affiliated  persons  who  hold  for  the  three-year period
described above may  sell unlimited  shares once  their holding  period is  met.
Pursuant to the terms of the Underwriting Agreement, the officers, directors and
principal  stockholders of the Company and the  Company have agreed not to sell,
transfer, assign or  issue any  securities of  the Company  for a  period of  36
months  following the date of this Prospectus.  The sale of a significant number
of these shares  in the  public market  may adversely  affect prevailing  market
prices  of  the Company's  securities following  this offering.  See "Dilution,"
"Principal Stockholders,"  "Certain Transactions,"  "Description of  Securities"
and "Underwriting."
    
 
    Prospective  investors should be aware that the possibility of sales may, in
the future, have a depressive effect on the price of the Company's Common  Stock
in  any market which may develop and,  therefore, the ability of any investor to
market his shares may be dependent directly  upon the number of shares that  are
offered  and sold.  Affiliates of  the Company  may sell  their shares  during a
favorable movement in the market price  of the Company's Common Stock which  may
have   a  depressive  effect  on  its  price  per  share.  See  "Description  of
Securities."
 
                                       19
<PAGE>
                                USE OF PROCEEDS
 
   
    After deducting underwriting discounts of $700,000 and other expenses of the
offering  estimated  to   be  $1,000,000,  which   includes  the   Underwriter's
nonaccountable  expense  allowance of  $210,000, assuming  an offering  price of
$14.00 per Unit,  the Company  will receive net  proceeds from  the offering  of
approximately  $5,300,000. These proceeds, excluding the  exercise of any of the
Warrants, will be utilized in order of  priority by the Company as listed  below
for approximately 12 months substantially as follows:
    
 
<TABLE>
<CAPTION>
                                                           APPROXIMATE
                                                          AMOUNT OF NET
ADMINISTRATIVE EXPENSES                                     PROCEEDS          %
                                                         ---------------  ---------
<S>                                                      <C>              <C>
Management Compensation(1).............................    $   750,000        14.15
Employee Salaries and Overhead(2)......................        750,000        14.15
 
OPERATING COSTS AND WORKING CAPITAL
Software Support and Development(3)....................      1,000,000        18.87
Capital Equipment(4)...................................      1,000,000        18.87
Marketing and Sales(5).................................      1,000,000        18.87
Mergers and Acquisitions(6)............................        500,000         9.42
Working Capital(7).....................................        300,000         5.67
                                                         ---------------  ---------
    TOTAL..............................................    $ 5,300,000       100.00
                                                         ---------------  ---------
                                                         ---------------  ---------
</TABLE>
 
- ------------------------
(1) The   officers  and  employees  of  the   Company  also  intend  to  receive
    remuneration as part of  an overall group  insurance plan providing  health,
    life  and disability  insurance benefits for  employees of  the Company. The
    amount  allocable  to  each  individual  officer  and  employee  cannot   be
    specifically  or precisely ascertained,  but, in any  event, will not exceed
    $25,000 per annum as to each  individual. The officers and directors of  the
    Company  also will receive significant compensation  in the form of salaries
    and director fees, respectively. See "Management -- Remuneration."
 
(2) Includes annual general and  administrative employee salaries, exclusive  of
    management   salaries,   associated  benefits,   related  office   rent  and
    miscellaneous office expenses.
 
(3) Includes annual  salaries for  software and  engineering support  personnel.
    Also, includes approximately $500,000 for product development related to the
    Company's  commitment to allocate $1,000,000 of capital by December 31, 1996
    to develop and exploit  the market opportunities of  the patent acquired  in
    March 1996.
 
(4) The  Company  intends to  purchase and/or  lease certain  additional capital
    equipment including,  but  not  limited to,  engineering  and  manufacturing
    equipment,  computer hardware/software and  systems, telephone and facsimile
    systems, security systems and office equipment and furniture.
 
(5) The amount  allocated  by  the  Company for  marketing  and  sales  includes
    marketing   materials,  advertising,  business   travel  and  a  significant
    expansion of its  marketing and  sales staff.  Also, includes  approximately
    $500,000  for marketing  and sales  related to  the Company's  commitment to
    allocate $1,000,000 of capital by December  31, 1996 to develop and  exploit
    the market opportunities of the patent acquired in March 1996.
 
(6) Following  the closing of this offering, the  Company intends to engage in a
    mergers and  acquisitions  campaign  in  order  to  merge  with  or  acquire
    complementary companies in the $10 million to $25 million revenue range. The
    Company  has not entered into  any negotiations, agreements, arrangements or
    understandings with respect to  the merger with or  acquisition of any  such
    target  companies,  or has  any such  agreement  or understandings  with any
    brokers or finders regarding same. The  Company can make no assurances  that
    it will be able to merge with or acquire any companies. Although the Company
    intends  to utilize not  more than $500,000 in  its mergers and acquisitions
    activities during the 12  months following the date  of this Prospectus,  no
    assurances can be made that such funds will enable the Company to expand its
    base  or realize profitable consolidated  operations. Whenever possible, the
    Company intends to issue its securities rather
 
                                       20
<PAGE>
    than use such cash funds to consummate a merger or acquisition. The  ability
    of  the Company to engage in a  mergers and acquisitions campaign in view of
    the Company's resources is uncertain. Should  such funds not be utilized  in
    its  mergers and acquisitions activities, the Company intends to utilize the
    funds in equal amounts in capital equipment and marketing and sales.
 
(7) Working capital will be utilized by  the Company to enhance and,  otherwise,
    stabilize cash flow during the initial 12 months of operations following the
    closing of this offering, such that any shortfalls between cash generated by
    operating  revenues and costs  will be covered  by working capital. Although
    the Company prefers to  retain its working capital  in reserve, the  Company
    may be required to expend part or all of these proceeds as financial demands
    dictate.
 
   
    Although it is uncertain that the Company's shares of Common Stock will rise
to a level at which the Warrants would be exercised, in the event subscribers in
this  offering elect to exercise  all of the Warrants  herein (not including the
Underwriter's Over-allotment Option or  the Underwriter's Purchase Option),  the
Company  will  realize gross  proceeds  of approximately  $7,500,000. Management
anticipates that  the  proceeds from  the  exercise  of the  Warrants  would  be
contributed  to working capital of the  Company. Nonetheless, the Company may at
the time of exercise allocate a portion  of the proceeds to any other  corporate
purposes.  Accordingly, investors who exercise their Warrants will entrust their
funds to management, whose specific intentions  regarding the use of such  funds
are not presently and specifically known.
    
 
    The  Company is unable to predict the precise period for which this offering
will provide financing,  although management  believes that  the Company  should
have  sufficient working capital to meet its cash requirements for the 12 months
period following the date of this offering. Accordingly, the Company may need to
seek additional funds through loans or other financing arrangements during  this
period  of time.  No such arrangements  exist or are  currently contemplated and
there can be no  assurance that they  may be obtained in  the future should  the
need arise.
 
    Pending  utilization, management intends to make temporary investment of the
proceeds in  bank certificates  of deposit,  interest-bearing savings  accounts,
prime commercial paper or federal government securities.
 
                                       21
<PAGE>
                                    DILUTION
 
   
    As of March 31, 1996, the Company had a pro forma net tangible book value of
$1,152,809  or $.29 per  share, derived from  the Company's balance  sheet as of
March 31, 1996 and the total common stock outstanding at March 31, 1996 and  the
issuances in April 1996 related to the bridge financing and certain other equity
transactions  in June 1996. Net tangible book value per share means the tangible
assets of the Company, less all liabilities, divided by the number of shares  of
Common  Stock outstanding. After giving effect to  the sale of the Units offered
hereby at an  assumed price of  $14.00 per Unit,  or $7.00 per  share of  Common
Stock  after deducting  underwriting discounts and  estimated offering expenses,
pro forma net tangible book value would have been $6,452,809 or $1.29 per share.
The result will be an immediate increase in net tangible book value per share of
$1.00 (345%) to existing shareholders and an immediate dilution to new investors
of $5.71 (82%) per share.  As a result, public investors  will bear most of  the
risk  of loss  since their  shares are being  purchased at  a cost substantially
above the price that existing shareholders acquired their shares. "Dilution"  is
determined  by subtracting net tangible book  value per share after the offering
from the  offering price  to  investors. The  following table  illustrates  this
dilution assuming no exercise of the over-allotment option:
    
 
   
<TABLE>
<S>                                                                    <C>        <C>
Public offering price of the Common Stock offered hereby.............             $    7.00
  Pro forma net tangible book value per share, before the offering...  $     .29
  Increase per share attributable to the sale by the Company of the
   Units offered hereby..............................................  $    1.00
                                                                       ---------
Pro forma net tangible book value per share, after the offering......             $    1.29
                                                                                  ---------
Dilution per share to new investors..................................             $    5.71
                                                                                  ---------
                                                                                  ---------
</TABLE>
    
 
    The   above  table  assumes  no  exercise  of  the  Class  A  Warrants,  the
Over-allotment Option or the Underwriter's Purchase Option. See "Description  of
Securities."
 
    The  following table summarizes the investments of all existing stockholders
and new investors after giving  effect to the sale  of the Units offered  hereby
assuming no exercise of the Over-allotment Option:
 
   
<TABLE>
<CAPTION>
                                                                PERCENTAGE                  PERCENT OF     AVERAGE
                                                     SHARES      OF TOTAL      AGGREGATE       TOTAL      PRICE PER
                                                    PURCHASED     SHARES     CONSIDERATION   INVESTED       SHARE
                                                   -----------  -----------  -------------  -----------  -----------
<S>                                                <C>          <C>          <C>            <C>          <C>
Present Stockholders.............................    4,000,000      80.00%   $   1,060,000      13.15%    $     .27
                                                                                                              -----
                                                                                                              -----
Public Stockholders..............................    1,000,000      20.00%   $   7,000,000      86.85%    $    7.00
                                                   -----------  -----------  -------------  -----------       -----
                                                                                                              -----
    Total........................................    5,000,000     100.00%   $   8,060,000     100.00%    $    1.61
                                                   -----------  -----------  -------------  -----------       -----
                                                   -----------  -----------  -------------  -----------       -----
</TABLE>
    
 
   
    If  the Over-allotment Option is exercised  in full, the public stockholders
will have  paid $8,050,000  and  will hold  1,150,000  shares of  Common  Stock,
representing  88.36 percent of the total  consideration and 22.33 percent of the
total number  of  outstanding  shares  of  Common  Stock.  See  "Description  of
Securities" and "Underwriting."
    
 
                                       22
<PAGE>
                                 CAPITALIZATION
                             (DOLLARS IN THOUSANDS)
 
    The following table sets forth the capitalization of the Company as of March
31,  1996, and as adjusted to reflect the  sale of the Units offered hereby. The
table should be read in conjunction with the Financial Statements, and the notes
thereto.
 
   
<TABLE>
<CAPTION>
                                                          MARCH 31,
                                                            1996      PRO FORMA(2)   AS ADJUSTED(1)
                                                         -----------  -------------  --------------
<S>                                                      <C>          <C>            <C>
Long-term debt.........................................   $     500    $   --          $   --
                                                         -----------  -------------
Stockholders' equity
  Common Stock, $.01 par value, 50,000,000 shares
   authorized, 3,750,000 shares outstanding; pro forma
   4,000,000 shares outstanding reflecting the issuance
   of units in connection with the April 1996 bridge
   loan; 5,000,000 shares outstanding, as adjusted.....   $      38    $        40     $       50
Stock subscriptions and notes receivable...............        (280)           (30)           (30)
Unamortized cost of bridge financing...................      (2,885)        (5,385)        (5,385)
Additional paid-in capital.............................       3,817          7,065         12,355
Retained deficit.......................................        (537)          (537)          (537)
                                                         -----------  -------------  --------------
    Total stockholders' equity.........................   $     153    $     1,153     $    6,453
                                                         -----------  -------------  --------------
    Total capitalization...............................   $     653    $     1,153     $    6,453
                                                         -----------  -------------  --------------
                                                         -----------  -------------  --------------
</TABLE>
    
 
- ------------------------
   
(1) As adjusted to reflect this offering. Assumes no exercise of (i) the Class A
    Warrants; (ii) the  Underwriter's Over-allotment  Option to  purchase up  to
    75,000  Units; or (iii) the Underwriter's  Purchase Option to purchase up to
    50,000 Units. See "Description of Securities" and "Underwriting."
    
 
   
(2) The pro  forma capitalization  illustrates  the effect  of the  bridge  loan
    received  in April 1996,  the cancellation of a  promissory note in exchange
    for the return  of 250,000  shares of  Common Stock  in June  1996, and  the
    conversion  of $1,000,000  of debt associated  with bridge loans  to paid in
    capital in June 1996.
    
 
                                DIVIDEND POLICY
 
    Holders of the Company's Common Stock are entitled to dividends when, as and
if declared by the Board of  Directors out of funds legally available  therefor.
The  Company does not anticipate the declaration  or payment of any dividends in
the foreseeable  future. The  Company intends  to retain  earnings, if  any,  to
finance  the development and  expansion of its  business. Future dividend policy
will be  subject  to the  discretion  of the  Board  of Directors  and  will  be
contingent  upon  future earnings,  if any,  the Company's  financial condition,
capital requirements, general business conditions and other factors.  Therefore,
there  can be no assurance that  any dividends of any kind  will ever be paid by
the Company.
 
                                       23
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
PLAN OF OPERATION
 
    e-Net, Inc. ("Company"), develops, markets and supports open client,  server
and   integrated  applications   software  that  enables   local,  national  and
international telephone communications, information  exchange and commerce  over
the  Internet  and  private  Internet Protocol  ("IP")  networks.  The Company's
software products  allow individuals  and organizations  to execute  secure,  or
private,   voice  communications  across  the   Internet,  through  the  use  of
authentication technology,  for  local,  national  and  international  telephone
communications,  information exchange and commerce. In addition, through the use
of the Company's software, organizations  can extend their internal  information
systems  and  enterprise  applications to  geographically  dispersed facilities,
remote offices and mobile  employees. A number of  companies, some with  greater
resources  than  the  Company,  manufacture similar  system  products  which may
compete with  the  Company's  products.  See "Risk  Factors"  and  "Business  --
Competition."
 
    In  March 1996, the  Company acquired all  rights title and  interest in the
first U.S.  patent, U.S.  Patent No.  5,526,353,  for a  system and  method  for
communicating  high fidelity and  clear transmission of audio  or voice over the
Internet, enabling  free  worldwide  high fidelity  and  clear  transmission  of
ordinary  telephone communications over  the Internet. The  Company acquired all
rights, title and  interest in  the patent  from the  inventors, Messrs.  Arthur
Henley  and  Scott  Grau,  who  are original  stockholders  of  the  Company, in
consideration of a five percent overriding royalty interest against gross profit
involving the use of the patent.  The Company has agreed to allocate  $1,000,000
of  capital of this offering to develop  and exploit the market opportunities of
the patent by December 31, 1996, or the patent will be subject to repurchase  by
the  inventors of the patent. The Company  believes that its patent is the first
patent awarded of its kind, specifically involving the transmission of audio  or
voice  over the Internet. The Company also  believes that its patent may provide
certain strategic and technological advantages in the new and burgeoning area of
audio or voice over the Internet.  The Company can make no assurances,  however,
as to the extent of the advantages or protection, if any, that may be granted to
the  Company  as  a  result  of its  patent.  See  "Business,"  "Management" and
"Financial Statements."
 
    The Company's operations to date have concentrated on continuing development
of its  technologies,  products and  services,  establishing acceptance  of  its
software  products in the telecommunications industry, providing services to its
existing customer base,  and securing financing  necessary to fund  development,
operations, and expansion of its business. The Company's products include:
 
    TELECOM-2000-TM-
 
    e-Net's  Telecom-2000  product is  based  on the  patent  rights acquisition
described above  and  consists  of  voice/data  integration  and  authentication
protocol,   voice  packetization  software,  prototype  interfaces  to  Ethernet
telephony  hardware,  address  resolution   and  call  handling  software,   and
interfaces  to  the  traditional telephone  network  through a  PC,  or personal
computer. The Telecom-2000 is designed to allow individuals and organizations to
execute secure, or private,  voice communications across  the Internet, such  as
local,   national  and  international  telephone   communications.  Due  to  the
economical  and  highly   scalable  architecture  that   e-Net  has   developed,
Telecom-2000 can be utilized for integrated data and telephony communications in
very  small offices, enterprise networks, national reseller networks and for the
consumer. The product is  in the final test  stages of its initial  development,
and the Company believes the product will be ready for release by the end of the
Company's  third quarter of fiscal 1997.  Depending on the precise configuration
and volume,  the  Company  intends to  offer  the  Telecom-2000 at  a  price  of
approximately  $750 per unit,  which includes a one  year warranty and technical
service, training and support.
 
    INTELLICD-TM-
 
    The IntelliCD product  was developed by  e-Net to meet  a strategic need  of
Sprint.  Sprint's  larger customers  have reported  a  critical need  to receive
monthly billing  information  (call detail  reports)  in an  easily  accessible,
computer  acceptable input format,  which would allow  direct access, search and
 
                                       24
<PAGE>
retrieval to meet  a wide variety  of requirements. The  CD-ROM medium  provides
rapid  access to  data, uses  ubiquitous PC  equipment for  access, and requires
minimal storage  requirements.  The  e-Net  approach  includes  the  design  and
development of an ergonomic, SQL-based search and retrieval software engine that
permits  users with  little knowledge  of data  processing to  easily define and
generate a wide variety of searches  and reports. Since e-Net's software  design
is  highly  generalized,  the  IntelliCD  process  is  readily  adapted  to  any
requirement involving  repeated use  of large  volume, non-volatile  data  sets.
Depending  on precise configuration and volume, the Company offers the IntelliCD
at a price of approximately  $300 per unit, which  includes a one year  warranty
and  technical service,  training and  support. At  March 31,  1996, the Company
realized $74,500 in sales of  the IntelliCD product, representing  approximately
25 percent of its total sales.
 
    E-NET NMS-TM-
 
    The  e-Net Network Management  System ("e-Net NMS")  is a proprietary expert
systems-based, user  friendly,  object-oriented network  and  system  management
product  that is offered  by the Company. Through  the introduction of automated
problem, configuration,  accounting, performance  and security  management,  the
Company's  e-Net NMS product provides  corporate and government enterprises with
flexibility for the management of global telephone and data networks,  including
networks  connected by the Internet. The e-Net NMS product also provides network
traffic  optimization  and  re-routing,  real-time  configuration  and  database
management,  generation of all needed reports,  and system failure detection and
prediction. Depending on  precise configuration and  volume, the Company  offers
the  e-Net  NMS product  at a  price  of approximately  $60,000 per  unit, which
includes a one  year warranty and  technical service, training  and support.  At
March  31, 1996, the Company realized $43,000 in sales of the e-Net NMS product,
representing approximately 15 percent of its total sales.
 
    DEBITBILL-TM-
 
    The telephone debit card business has experienced strong growth in  response
to  customer acceptance and  increasing demand. e-Net's  experience with its own
proprietary debit billing card product, called DebitBill-TM-, has indicated that
there may be significant market demand for this technology, although the Company
can make no assurances of the extent  of any demand. The Company intends to  use
its  current market  position to  sell its  debit card  product to  the Internet
service  delivery  market.  DebitBill-TM-  interfaces  with  standard  telephone
switches and related accounting management software to identify the customer and
to  record and manage amounts owed.  The Company believes that DebitBill-TM- may
be a significant product in its suite of products because of the ease-of-use and
cash flow  implications  of this  technology.  e-Net has  specifically  designed
DebitBill-TM-  for the  Internet and private  IP networks.  Depending on precise
configuration and volume, the Company has recently begun to offer the  DebitBill
product  at a price of approximately $60,000 per unit, which includes a one year
warranty and technical  service, training and  support. At March  31, 1996,  the
Company has not realized any sales of this product.
 
    SERVICES
 
    In addition to the products listed above, e-Net provides technology services
to  its customers in a number of other  areas. The Company has made a commitment
to provide timely, high quality technical  support to meet the diverse needs  of
its  customers  and partners  and  to facilitate  the  adoption and  use  of its
technologies, products  and  services.  These services  include  e-Net  Helpdesk
support,  consulting on software programming  and network management systems and
training. At March 31, 1996, the  Company realized $176,376 in sales related  to
its  technology support services,  representing approximately 60  percent of its
total sales.
 
    The Company's  plans  for the  next  fiscal year  center  around  continuing
efforts   to  complete  the  first  phase  development  and  test  marketing  of
Telecom-2000. Management believes that the market for such a product is only now
being defined and customers  are waiting for a  product which can deliver  voice
quality  equivalent to existing telephony at a reduced cost. While no assurances
can be  made  of  Telecom-2000's success,  management  believes  this  product's
potential  in the marketplace  may be significant. To  date, no installations of
Telecom-2000 have been sold.  As a result, the  Company's operating results  may
fluctuate significantly based upon future sales.
 
                                       25
<PAGE>
    The  Company  also intends  to continue  internal development  of additional
versions of  Telecom-2000,  as  well as,  other  software  products.  Management
believes  that, as  the market matures,  different market  segments will require
slightly modified versions  of its Telecom-2000.  Management also believes  that
additional  software product requirements will  be recognized while working with
its customers and  installing its  existing products or  providing its  existing
expert services.
 
    Following  the closing of this offering, the  Company intends to engage in a
mergers  and  acquisitions  campaign   in  order  to   merge  with  or   acquire
complementary  companies in  the $10 million  to $25 million  revenue range. The
Company has  not  entered into  any  negotiations, agreements,  arrangements  or
understandings with respect to the merger with or acquisition of any such target
companies,  or  has any  such agreement  or understandings  with any  brokers or
finders regarding same. The Company can make no assurances that it will be  able
to  merge with or acquire any companies. Although the Company intends to utilize
not more than $500,000 in its mergers and acquisitions activities during the  12
months  following the date  of this Prospectus,  no assurances can  be made that
such funds will  enable the  Company to expand  its base  or realize  profitable
consolidated  operations. Whenever  possible, the  Company intends  to issue its
securities  rather  than  use  such  cash  funds  to  consummate  a  merger   or
acquisition.  The ability of the Company to engage in a mergers and acquisitions
campaign in view of the Company's resources is uncertain. Should such funds  not
be  utilized in its mergers and  acquisitions activities, the Company intends to
utilize the funds in equal amounts in capital equipment and marketing and sales.
 
    The Company's objective is to market and distribute its products  worldwide,
in   part  by   disseminating  its   products  through   multiple  national  and
international distribution channels.  However, there can  be no assurances  that
the  Company will be able  to meet this objective.  The Company has designed its
distribution strategy  to address  the particular  requirements of  its  diverse
institutional and individual target customers. The Company's direct distribution
efforts  will consist of a direct sales force and telesales as well as marketing
directly VIA the  e-Net home page  on the Internet.  The Company's products  are
currently  distributed indirectly  through OEMs,  systems integrators,  VARs and
software retailers.
 
   
    As described  in Note  B to  the Financial  Statements, the  Company  issued
500,000  bridge units,  comprising 1,000,000  shares of  Common Stock, 1,000,000
Class A Warrants, and 1,000,000 Class B Warrants as additional consideration for
a bridge loan of $1,000,000,  the proceeds of which  were received in March  and
April  1996. In June 1996,  however, the bridge loan  principal was converted to
paid in capital and accounted for  as consideration paid for the 500,000  bridge
units.  In addition  to the payment  of interest of  8% per annum  on the bridge
loan, interest expense of $6,000,000 related to the issuance of the bridge units
will be  accrued during  the  period from  the date  of  each loan  through  the
effective  date of this offering and a  corresponding credit will be credited to
paid in capital; of this amount $614,865 has been accrued as of March 31, 1996.
    
 
    In addition,  operating  results for  the  year  ended March  31,  1997  and
thereafter,  will  be  negatively  impacted  by  the  expenditure  of  funds for
continuing development of the Company's technologies, products and services.
 
   
    In July 1996,  the Company  caused a  2:1 reverse  split of  its issued  and
outstanding  shares  of common  stock, Class  A Warrants  and Class  B Warrants,
resulting in 4,000,000 shares  of common stock, 1,000,000  Class A Warrants  and
1,000,000 Class B Warrants currently issued and outstanding.
    
 
RESULTS OF OPERATIONS
 
    PERIOD FROM BEGINNING OF OPERATIONS (JUNE 8, 1995) TO MARCH 31, 1996
 
    The Company reported sales for the period of $293,876. For the period ending
March  31, 1996, the Company derived 32% (Sprint), 29% (Comsat), 16% (First Data
Resources) and 13% (Documenta) of  its sales from four customers,  respectively.
The  sales is attributable to  its three main business  areas: sales of software
products, integration and support of software products, integration and  support
of
 
                                       26
<PAGE>
enterprise  computer networks. The cost of product sales and service consists of
salaries and wages, support costs and  other expenses. The gross margin for  its
products and services was approximately 70% of sales.
 
    The  Company  reported  selling,  general  and  administrative  expenses  of
$115,171 which consisted of  salaries of officer  and employees, support  costs,
legal  fees,  the cost  of  product development  charged  to expense  during the
period, and other administrative expenses.
 
    Interest and financing charges were $621,749 including an interest charge of
$614,865  associated  with   the  issuance   of  bridge   units  as   additional
consideration  for a $500,000 bridge loan originating  in March 1996, as well as
interest on loans from the president of the Company.
 
INCOME TAXES
 
    As a result of operating losses  generated during the period from  beginning
of  operations (June 8, 1995) to March 31, 1996, the Company has no income taxes
due. Currently, the Company  maintains a tax year  ending on December 31,  while
its  fiscal year ends on March 31. The  Company is also able to file its returns
using the cash basis method of accounting.
 
CAPITAL RESOURCES, LIQUIDITY AND BACKLOG
 
    The Company has a cash balance available to fund operations as of March  31,
1996,  since $500,000  of the  $1,000,000 in  bridge financing  had already been
received at that time. The Company  believes that these funds are sufficient  to
continue  operations until the closing of this  offering. The Company is also in
the process of establishing  a credit facility  to provide additional  financing
for equipment purchases and for service and support contract operations funding.
The  Underwriter is  playing no  role in  the Company's  efforts to  establish a
credit facility.  No assurance  can be  given  as the  ultimate success  of  the
Company in establishing such a facility.
 
   
    The Company received $500,000 in March 1996 and $500,000 in April 1996 under
bridge  loan transactions  wherein the Company  issued 500,000  units (each unit
consisting of two shares of Common Stock,  two Class A Warrants and two Class  B
Warrants)  as additional financing costs in  consideration for making the loans.
However, such loans were converted to paid in capital in June 1996 and accounted
for as  consideration paid  for the  bridge units.  See "Certain  Transactions,"
"Description of Securities" and "Selling Security-holders."
    
 
    In  addition to the  loan proceeds received  in March and  April 1996, it is
anticipated that the  Company will  raise approximately  $5,300,000 through  its
proposed initial public offering of securities. These funds are intended to fund
continuing  operations,  including  its administrative  expenses  and management
compensation, as well as retire the bridge loan debt. The Company believes  that
the  proceeds from the bridge loans and this offering will be sufficient to meet
its cash  flow needs  for the  12-month  period following  the closing  of  this
offering.
 
    The  Company's  commitments  currently  include  an  agreement  to  allocate
$1,000,000 of capital  by December 31,  1996 to develop  and exploit the  market
opportunities  of  the patent  acquired in  March  1996, or  the patent  will be
subject to repurchase by the inventors  of the patent. In addition, the  Company
is  also committed under an employment agreement effective April 1, 1996 with an
officer which calls for an annual salary  and bonus of $262,500. Other than  the
lease  commitment described  below, the  Company has  no other  significant firm
commitments.
 
    The Company  leases  approximately  1,500  square  feet  for  its  principal
executive  offices  located at  7-4  Metropolitan Court,  Gaithersburg, Maryland
20878. The Company also  leases approximately 1,500  square feet for  additional
operational facilities located at 12325 Hymeadow Drive, Austin, Texas 78750. The
Company  intends to expand its facilities to  3,000 square feet at each facility
following the closing of this offering. Base rental for the current premises are
approximately $1,900 and $1,200 per month, respectively. The lease requires  the
Company  to  pay  certain property  taxes  and certain  operating  expenses. The
Company believes that its  current and anticipated  facilities are suitable  and
adequate for its operations.
 
                                       27
<PAGE>
IMPACT OF INFLATION
 
    The  Company  does not  believe that  inflation has  had a  material adverse
effect on sales or  income since its inception.  Increases in supplies or  other
operating  costs  may adversely  affect the  Company's operations;  however, the
Company believes  it  may increase  prices  of its  technologies,  products  and
services to offset increases in costs of goods sold or other operating costs.
 
TECHNOLOGY CHANGES
 
    Based  on  its limited  experience to  date, the  Company believes  that its
future operating  results may  be subject  to quarterly  variations based  on  a
variety of factors, including technology changes and advances, especially in the
Internet.  Such effects may  not be apparent in  the Company's operating results
during a period of expansion. However,  the Company can make no assurances  that
its business can be significantly expanded under any circumstances.
 
                                       28
<PAGE>
                                    BUSINESS
 
OVERVIEW
 
    e-Net,   Inc.  develops,  markets  and  supports  open  client,  server  and
integrated applications software that enables local, national and  international
telephone  communications, information  exchange and commerce  over the Internet
and private Internet Protocol ("IP")  networks. The Company's software  products
are  designed to deliver high  levels of performance, ease  of use and security.
These software products allow individuals  and organizations to execute  secure,
private,   voice  communications  across  the   Internet,  through  the  use  of
authentication technology,  for  local,  national  and  international  telephone
communications,  information exchange and commerce. In addition, through the use
of the Company's software, organizations  can extend their internal  information
systems  and  enterprise  applications to  geographically  dispersed facilities,
remote offices and mobile employees.
 
    In March 1996, the  Company acquired all rights,  title and interest in  the
first  U.S.  patent, U.S.  Patent  No. 5,526,353  for  a system  and  method for
communicating high fidelity and  clear transmission of audio  or voice over  the
Internet,  enabling  free  worldwide  high fidelity  and  clear  transmission of
ordinary telephone communications  over the Internet.  The Company acquired  all
rights,  title and  interest in  the patent  from the  inventors, Messrs. Arthur
Henley and  Scott  Grau,  who  are original  stockholders  of  the  Company,  in
consideration  of  a  five  percent overriding  royalty  interest  against gross
profits involving the  use of  the patent. The  Company has  agreed to  allocate
$1,000,000  of  capital  of this  offering  to  develop and  exploit  the market
opportunities for the patent by December 31, 1996, or the patent will be subject
to repurchase by  the inventors  of the patent.  The Company  believes that  its
patent  is  the first  patent awarded  of its  kind, specifically  involving the
transmission of audio or voice over the Internet. The Company also believes that
its patent may provide certain strategic and technological advantages in the new
and burgeoning area of audio or voice over the Internet. The Company can make no
assurances, however, as to the extent  of the advantages or protection, if  any,
that  may be  granted to the  Company as a  result of its  patent. The Company's
first product utilizing its patent is Telecom-2000-TM-, a hardware and  software
suite  designed for voice over the Internet, which is in the final testing stage
and projected  to be  available to  market by  the end  of the  Company's  third
quarter of fiscal 1997.
 
    In  March 1996, e-Net  entered into an  agreement with Sprint Communications
Company, L.P.  ("Sprint"), a  leading  telecommunications company,  under  which
e-Net  will  deliver  certain  software  development  services  known  as Sprint
Internet Protocol Dial Services support. Sprint, to date, has been the Company's
largest customer. Under the agreement, e-Net will use highly technical  software
development  services to provide security and  field support to Sprint customers
who use Sprint as a means of accessing the Internet. e-Net's agreement  provides
that  e-Net will  generate all  of the  revenues associated  with the  number of
authorized Sprint  Internet Protocol  Dial Service  user identity  codes.  e-Net
shall  also perform password administration, customer service administration and
emergency help  desk  administration  under  the terms  of  the  agreement.  The
agreement  has a duration of one year, with automatic one year renewals, subject
to mutual consent. e-Net intends to seek additional strategic alliances with the
Regional Bell  Operating Companies  (RBOC's) for  the use  of its  technologies,
products  and services.  The Company  has not  entered into  any negotiations to
enter into any  strategic alliances  with the RBOC's.  The Company  can make  no
assurances  that it will be able to enter into any agreements with such concerns
for its technologies, products and services.
 
    Also, in June 1996, e-Net entered into  a letter of intent with the  Product
Management  Group of the Advanced Data Services Division of Sprint to enter into
an agreement to provide certain  of e-Net's technologies, products and  services
to  Sprint  to  enable  Sprint's  frame  relay  customers,  approximately  1,500
nationwide, to generate  network data reports  on an automated  basis for  their
virtual  private networks. The  Company can make  no assurances that  it will be
able to enter into an agreement  with Sprint for its technologies, products  and
services.
 
                                       29
<PAGE>
INDUSTRY BACKGROUND
 
    INTERNET
 
    The  Internet is a global web of  computer networks. Developed over 25 years
ago, this "network of networks" allows any computer attached to the Internet  to
talk  to any other  using the Internet Protocol.  The Internet has traditionally
been subsidized by  the U.S.  federal government.  As the  number of  commercial
entities  that rely on the Internet for business communications and commerce has
increased, the  level of  federal subsidies  has significantly  diminished,  and
funding  for  the Internet  infrastructure and  backbone operations  has shifted
primarily to the  private sector.  Further, the Internet  has historically  been
used  by  academic  institutions, defense  contractors  and  government agencies
primarily for remote  access to  host computers  and for  sending and  receiving
e-mail.
 
    Further,  individuals  are  connecting  directly  to  the  Internet  through
Internet access  services such  as those  provided by  MCI, NETCOM,  Performance
Systems  International, Inc.  ("PSI"), and  UUNET Technologies,  Inc. ("UUNET").
These services are growing as  easy-to-use software packages make accessing  the
Internet  as easy as getting  onto the popular online  services. To compete with
these direct  Internet  access  providers, consumer  online  services  including
America  Online,  Inc.  ("AOL"), CompuServe,  Inc.  ("CompuServe"),  and Prodigy
Services Co.  ("Prodigy"), have  also introduced  Internet access  gateways  for
their existing subscribers. With these gateways, the online services effectively
become large Internet "on-ramps," bringing large numbers of subscribers onto the
Internet.
 
    WORLD WIDE WEB
 
    Much  of the recent growth in Internet use by businesses and individuals has
been driven by the emergence of  a network of servers and information  available
on  the  Internet  called  the World  Wide  Web  ("Web"). The  Web,  based  on a
client/server  model  and  a  set  of  standards  for  information  access   and
navigation,  can be accessed  using software that  allows non-technical users to
exploit the  capabilities  of the  Internet.  The  Web enables  users  to  find,
retrieve and link information on the Internet in a consistent way that makes the
underlying  complexities  transparent  to  the  user.  Electronic  documents are
published on Web servers  in a common format  described by the Hypertext  Markup
Language  ("HTML"). Web client software can  retrieve these documents across the
Internet by making requests using a standard protocol called Hypertext  Transfer
Protocol  ("HTTP"). The  first Web client  (or "browser") with  a graphical user
interface to utilize these  protocols was NCSA Mosaic,  first released in  April
1993 by the National Center for Supercomputing Applications at the University of
Illinois ("NCSA").
 
    The proliferation of Web clients has created significant demand for software
to enable Internet servers and private servers on corporate networks to function
as  Web servers. These servers are used by organizations to offer their products
and services on the Internet and to publish confidential company information  to
employees  inside the enterprise. Web usage is  expected to be further fueled by
advances in  Web  client,  server  and application  software,  in  concert  with
technological   developments   that  drive   cost  reductions   and  performance
enhancements.
 
    INTERNET COMMERCE
 
    The Internet  provides  organizations  and individuals  with  new  means  to
conduct  business. Commercial uses of  the Internet include business-to-business
and   business-to-consumer   transactions,   product   marketing,   advertising,
entertainment,  electronic publishing, electronic services and customer support.
The Internet offers a  new and powerful medium  for traditional retail and  mail
order  businesses  to target  and  manage a  wider  customer base  more rapidly,
economically and productively. The Company  believes that only a small  fraction
of this retail business is currently conducted electronically. Another important
application  for Internet  commerce is electronic  publishing through advertiser
supported  and  fee-based  Internet   services.  Electronic  publishing   offers
substantial  savings as  compared to publishing  on paper or  computer discs. In
addition, Web software permits the publishing of audio files and video clips  as
well as text and graphical data.
 
                                       30
<PAGE>
    In  addition to retailers and publishers, other new businesses are appearing
on the  Web as  it provides  access  to a  growing base  of home,  business  and
education customers. Business information providers such as Dow Jones & Company,
Inc.,  Individual, Inc. and Reuters Ltd.  have started customizing news services
on  the  Web.  Financial  service  institutions  are  providing  online  banking
information,  stock  information  and  trading  services.  Examples  of  popular
consumer   information    services   recently    introduced   include    ESPNet,
Knight-Ridder's  Mercury  Center  and  Sportsline  U.S.A.  Companies  from  many
industries are  publishing  product and  company  information to  their  channel
partners  and  customers,  providing  customer  support  via  the  Web, allowing
customers to immediately buy products  online, and collecting customer  feedback
and demographic information interactively.
 
    APPLICATIONS
 
    As  an increasing number  of organizations provide  their employees with Web
access from their desktops, an opportunity is emerging for internal  information
systems and enterprise applications hosted on internal Web servers. The Internet
enables   organizations  to  extend  their   internal  information  systems  and
enterprise applications to geographically dispersed facilities, remote  offices,
and mobile employees using Web client and server software.
 
    e-Net  develops,  markets and  supports open  client, server  and integrated
applications software that enables  local, national and international  telephone
communications,  information exchange and commerce over the Internet and private
IP networks. The Company's software products are designed to deliver high levels
of performance,  ease  of  use  and  security.  These  software  products  allow
individuals  and organizations to  execute secure voice  transactions across the
Internet, through the use of authentication technology, for local, national  and
international  telephone communications, information  and commerce. In addition,
through the  use  of the  Company's  software, organizations  can  extend  their
internal  information  systems  and  enterprise  applications  to geographically
dispersed facilities, remote offices and mobile employees.
 
    The Company  believes that  one of  its key  competitive advantages  is  its
technical  experience  and  expertise.  The  Company's  core  development  group
includes individuals  who  have  developed  and  implemented  telecommunications
network  management software and other Internet and network related products and
services as they have emerged as  a recognized application continuously for  the
last 12 years.
 
PRODUCTS
 
    The   Company   provides   a   comprehensive   line   of  telecommunications
science-based products for business and  consumers for use in the  transmission,
management  and billing of  network telephone and  computer usage, including the
Internet. These products  enable the improved  usage, recording, monitoring  and
accounting  of  network operations.  The following  material sets  forth certain
information with respect to the Company's line of products:
 
    TELECOM-2000-TM-
 
    The Company's  most  sophisticated technology  is  a software  and  hardware
product suite known as Telecom-2000. Telecom-2000 on the Internet, as well as on
private wide area networks, is designed to deliver basic telephone service, in a
technically  different and  improved way,  without lag  time, in  terms of voice
quality compared to product offerings in the market today. The Company's product
is based on  Ethernet switching and  Virtual LAN technology  completed with  low
cost  voice  packetization  technology.  The  proliferation  of  affordable  ATM
adapters, switch nodes and Wide Area Network ATM services by the Local  Exchange
Carriers  (LEC's) and Interexchange Carriers  (IXC's) has provided a significant
cost incentive to utilize ATM for voice transport on the Internet and other wide
area networks.
 
    Telecom-2000 consists of voice/data integration and authentication protocol,
voice  packetization  software,  prototype  interfaces  to  Ethernet   telephony
hardware,  address resolution and call handling  software, and interfaces to the
traditional telephone network  through a PC,  or personal computer.  Due to  the
economical   and  highly  scaleable  architecture   developed  by  the  Company,
Telecom-2000 can  be  utilized  for  secure,  or  private,  data  and  telephony
communications in very small offices, enterprise
 
                                       31
<PAGE>
networks,  national  reseller  networks  and for  the  individual  consumer. The
technological basis for the  Telecom-2000 is the  Company's patent, U.S.  Patent
No.  5,526,353, which  provides for a  system and method  for communicating high
fidelity and clear transmission  of audio or voice  over the Internet,  enabling
free  worldwide  high  fidelity  and clear  transmission  of  ordinary telephone
communications over the Internet. The Company is not aware of any other  company
that  possesses the  technological ability  for communicating  high fidelity and
clear transmissions of audio or voice over the Internet. Although the Company is
aware of other  companies providing a  suite of hardware  and software  products
that  enable audio or voice over the Internet, the quality of the audio or voice
is regarded  by the  Company as  poor  to fair  in comparison  to its  suite  of
hardware  and  software  (Telecom-2000)  that  provides  for  communicating high
fidelity and clear transmission  of audio or voice  over the Internet.  However,
the Company is well aware that this technology is rapidly advancing and although
the  Company  believes  that  its  patent  may  provide  certain  strategic  and
technological advantages in the new and  burgeoning area of audio or voice  over
the  Internet,  the Company  can  make no  assurances as  to  the extent  of the
advantages or protection, if any, that may be granted to the Company as a result
of its patented technology.  See "Business --  Patent, Trademark, Copyright  and
Proprietary Rights."
 
    Telecom-2000  elements include  an integrated  Ethernet adapter  and desktop
telephone, a PC  ISA plug  in card  to provide  desktop telephone  access via  a
standard  Ethernet interface, a  PC ISA plug-in card  to terminate four standard
telephone lines or a PC ISA plug-in card to provide four telephone station lines
for desktop computers not equipped with a PC or LAN connection.
 
    The use of  Microsoft's TAPI  assures maximum flexibility  in providing  the
latest CTI features both in hardware and software. The provision of the hardware
assures a unique product with traditional telephone system reliability. The TAPI
compliance assures use of Telecom-2000 for unique applications, as well as third
party  software  for specialty  requirements and  ease  of value  added reseller
software products to quickly open up new markets. All of the hardware,  software
and  protocols  being  developed  and utilized  comply  with  both international
telephony and ATM standards.  This flexibility allows e-Net  to compete in  both
hardware  and  software  markets.  Depending on  the  precise  configuration and
volume, the Company offers the Telecom-2000 at a price of approximately $750 per
unit, which includes  a one year  warranty and technical  service, training  and
support.
 
    INTELLICD-TM-
 
    e-Net  has recently developed  IntelliCD, a product to  provide the market a
simpler and less expensive network  usage and billing capability. IntelliCD  has
been designed to utilize state-of-the-art imaging technology. e-Net has designed
and developed a standards compliant, general purpose search and retrieval engine
which  can  be used  unaltered in  a wide  variety of  user applications  in any
industry. This product  is distributed by  e-Net clients under  their own  trade
names.  One of  e-Net's clients, Sprint,  uses IntelliCD to  provide its clients
with database access to their monthly Call Detail Record (CDR) data. Based  upon
the  strong  market position  of  Sprint, and  that  e-Net is  not contractually
prohibited from selling this product to the other long distance carriers or  the
regional  telephone operating companies,  the Company believes  that this unique
product may have wide  utilization in the  telecommunications industry, but  the
Company  can  make  no  assurances  of  its  utilization.  Depending  on precise
configuration and  volume,  the Company  offers  the  IntelliCD as  a  price  of
approximately  $300 per unit,  which includes a one  year warranty and technical
service, training and support. At March  31, 1996, the Company realized  $74,500
in  sales of the IntelliCD product, representing approximately 25 percent of its
total sales.
 
    E-NET NMS-TM-
 
    The e-Net Network Management  System ("e-Net NMS")  is a proprietary  expert
systems-based,  user  friendly,  object-oriented network  and  system management
product that is offered  by the Company. Through  the introduction of  automated
problem,  configuration,  accounting, performance  and security  management, the
Company's e-Net NMS product provides  corporate and government enterprises  with
flexibility  for the management of global telephone and data networks, including
networks connected by the Internet. The e-Net NMS product also provides  network
traffic optimization and re-
 
                                       32
<PAGE>
routing,  real-time  configuration and  database  management, generation  of all
needed reports,  and  system  failure detection  and  prediction.  Depending  on
precise  configuration and volume, the Company offers the e-Net NMS product in a
price range  of approximately  $40,000 to  $80,000 per  unit, which  includes  a
one-year  warranty and  technical service,  training and  support. At  March 31,
1996,  the  Company  realized  $43,000  in  sales  of  the  e-Net  NMS  product,
representing approximately 15 percent of its total sales.
 
    DEBITBILL-TM-
 
    The  telephone debit card business has experienced strong growth in response
to customer acceptance and  increasing demand. e-Net's  experience with its  own
proprietary  debit billing  card product,  called DebitBill,  has indicated that
there may be significant market demand for this technology, although the Company
can make no assurances of the extent  of any demand. The Company intends to  use
its  current market  position to  sell its  debit card  product to  the Internet
service delivery market. DebitBill  interfaces with standard telephone  switches
and  related  accounting management  software to  identify  the customer  and to
record and manage  amounts owed. The  Company believes that  DebitBill may be  a
significant product in its suite of products because of the ease-of-use and cash
flow  implications of this technology. e-Net has specifically designed DebitBill
for the Internet and private IP networks. Depending on precise configuration and
volume, the Company has recently begun to offer the DebitBill product at a price
of approximately  $60,000 per  unit,  which includes  a  one year  warranty  and
technical  service, training and support. At March 31, 1996, the Company has not
realized any sales of this product.
 
SERVICES
 
    The Company has made a commitment to provide timely, high quality  technical
support  to  meet  the  diverse  needs of  its  customers  and  partners  and to
facilitate the  adoption and  use of  its products,  systems and  services.  The
Company offers the following technical services:
 
    E-NET  HELPDESK  SUPPORT.   The  Company  offers an  annual  support program
intended for organizations who need to internally support large-scale deployment
of e-Net's products and  for authorized VARs  and systems integrators  providing
direct  support  to their  customers.  This program  offers  a full  spectrum of
support, including access to technical experts, support and training  materials,
support tools, call histories, maintenance releases and software updates.
 
    E-NET  CONSULTATION SUPPORT.   For  individuals and  for small  groups using
e-Net's products,  the  Company offers  support  through a  toll-free  telephone
number  on a  time and  materials payment  basis. This  service provides on-line
technical support  and  bug  fixes  or  software  releases  as  required.  e-Net
consultation  support is particularly economical for self-supporting departments
that consolidate  questions  through  a  department  system  administrator.  The
Company  also offers  consulting services  for particularly  complex application
design, integration  and  installation.  Consulting  services  are  provided  at
negotiated  rates, and typically include on-site support during the installation
process by Company engineers.
 
    TRAINING
 
    e-Net offers hands-on training  courses and materials  to resellers and  end
users  covering  installation  configuration and  troubleshooting.  In addition,
courses and materials  cover user  support, data loading  and content  creation,
user interface design, template scripting and integration with the data base.
 
    At  March 31, 1996,  the Company realized  $176,376 in sales  related to its
technology support services, representing approximately 60 percent of its  total
sales.
 
MARKETING AND DISTRIBUTION
 
    The  Company's marketing and  distribution strategy targets  markets such as
Internet commerce,  enterprise-wide private  IP wide  area networks,  enterprise
local area networks, individual PC users and the individual telephone consumer.
 
                                       33
<PAGE>
    INTERNET COMMERCE MARKET.  The Company believes that many major corporations
may  begin to  communicate data  and manage  information on  the Internet  or on
private IP wide  area networks.  Corporations likely  to use  such products  and
services  include telecommunications  companies, information  service providers,
mail  order  and  traditional  retailers,  publishers,  and  financial   service
providers.  Any or all of these corporations  may wish to utilize the advantages
of telephone usage on the Internet or their private IP networks.
 
    ENTERPRISE MARKET.  Medium  and large-sized enterprises, particularly  those
with  geographically disbursed employee bases,  are expected to increasingly use
the Internet  in conjunction  with private  IP networks  to facilitate  internal
communications.  Many Fortune  500 companies already  maintain extensive private
communication networks, which can  be enhanced and extended  through use of  the
Internet.
 
    INDIVIDUAL PC BUSINESS AND HOME USERS.  While the number of business desktop
computer  users  accessing  the  Internet  is  increasing  rapidly,  the Company
believes that only a small fraction of business computer uses currently use  the
Internet.  The corporate employer, even for  small proprietorships will give due
consideration to the cost and other advantages of the Company's products. Demand
can be measured by the growth in usage of Prodigy, CompuServe and America Online
("AOL"), as  well as  home shopping  services,  such as  QVC and  Home  Shopping
Network,  which suggests that the home market for commercial applications on the
Internet will be substantial. The accessibility and ease of use of the Company's
systems and products are designed to address the demands of this marketplace.
 
    The market for the Company's software  and services has only recently  begun
to  develop, is rapidly evolving and is characterized by an increasing number of
market entrants  who have  introduced  or developed  products and  services  for
communication  and commerce  over the  Internet and  private IP  networks. As is
typical in the case of  a new and rapidly  evolving industry, demand and  market
acceptance  for recently introduced products and  services are subject to a high
level of  uncertainty.  The industry  is  young  and has  few  proven  products.
Moreover,  critical  issues  concerning  the  commercial  use  of  the  Internet
(including security, reliability, cost  ease of use and  access, and quality  of
service)  remain unresolved and may impact the growth of Internet use. While the
Company believes that  its software  products offer  significant advantages  for
commerce  and communication over the Internet and private IP networks, there can
be no assurance that Internet commerce and communication will become widespread,
or that the Company's systems and  products for commerce and communication  over
the Internet and private IP networks will become adopted for these purposes.
 
    MARKETING
 
    The  Company  uses  direct  marketing  of  its  technologies,  products  and
services, and intends to use a variety of other marketing programs to  stimulate
demand  for its technologies, products and  services. These programs are focused
on the target markets mentioned above and are designed to leverage the  Internet
itself  as a  powerful marketing  vehicle. In  addition, the  Company intends to
develop co-marketing programs with strategic corporate partners designed to take
advantage of complementary marketing capabilities.  Due to a lack of  resources,
the  Company has  only recently begun  to implement its  marketing strategy. The
Company can make no assurances as to the success of its marketing strategy.  The
key elements of the Company's marketing strategy include:
 
        MARKETING  ON THE INTERNET.   e-Net will be accessible  with its own Web
site. This  Web  site will  provide  directories to  a  variety of  product  and
technical  support information. The Company will make its products available for
evaluation and purchase through Web site.
 
        TARGET MARKETING.  The  Company will focus  direct marketing efforts  on
enterprise  network  users, companies  now publishing  on  the Web  and decision
makers  using  the  Internet  for   internal  use  in  medium  and   large-sized
enterprises,  and  vertically  targeted  small  offers.  Outbound telemarketing,
direct response advertising and seminar programs.  The goal of these efforts  is
to  identify potential buyers of the Company's products, create awareness of the
Company's product offerings and generate leads for follow-on sales.
 
                                       34
<PAGE>
        MARKETING TO PC USERS.   Client products will  be marketed widely to  PC
users  in both  the business and  home PC market  segments. Distribution through
national resellers,  reseller agreements  with  Internet access  providers,  and
bundling  arrangements with PC hardware  and software OEMs will  be used to make
Company's products rapidly available to  a large number of potential  customers.
In  order to stimulate demand for its products, the Company will advertise in PC
industry publications and engage in sales promotions with distribution partners,
with particular emphasis on trade shows and technology expositions at convention
centers.
 
    DISTRIBUTION
 
    The Company's objective is to market and distribute its products  worldwide,
in   part  by   disseminating  its   products  through   multiple  national  and
international distribution  channels. However,  the  Company has  only  recently
begun  to implement its distribution  strategy and has not  yet entered into any
distribution agreements for its products. The Company can make no assurances  as
to  the  success  of its  distribution  strategy. Furthermore,  the  Company has
limited resources to achieve the distribution of its products and no  assurances
can  be made that the  Company will not require  additional financing, which may
not be  available, to  achieve  such objective.  The  Company has  designed  its
distribution  strategy  to address  the particular  requirements of  its diverse
institutional and individual target customers. The Company's direct distribution
efforts will consist of a direct sales force and telesales as well as  marketing
directly  VIA the e-Net  home page on  the Internet. The  Company's products are
currently distributed  indirectly through  OEMs, systems  integrators, VARs  and
software retailers.
 
    DIRECT  SALES.  The Company's direct sales force targets primarily medium to
large-sized  enterprises,  including  telecommunications  companies  and  public
sector  network  users.  The  Company  currently  has  only  three  employees in
marketing and sales, but  intends to add three  more employees in marketing  and
sales  following the closing  of this offering. The  Company believes that these
organizations are most likely  to become large  network users interconnected  to
the Internet. In addition, these organizations have a substantial installed base
of  private IP  networks and  are expected  to employ  Web servers  for internal
enterprise applications.
 
    TELESALES.  The Company's telesales  organization, based in the  Washington,
D.C.  metropolitan area, receives customer orders  as well as contacts potential
customers. The organization comprises three telesales representatives, who  also
are  employed in marketing  and sales, on  behalf of the  Company. Following the
closing of this  offering, the  Company intends to  add three  employees to  its
telesales force.
 
    INTERNET   SALES.    The  Company  will  offer  its  products  and  services
electronically VIA the Internet. Internet sales and distribution is particularly
well suited to  address the  large base  of Internet  users who  may choose  the
Company's products and services for many of their telephone needs.
 
    OEMS,  VARS AND SYSTEMS INTEGRATORS.  OEMs, VARs and systems integrators may
customize, configure  and  install  the Company's  products  with  complementary
hardware, software and services. In combining these products and services, these
resellers  are  able  to deliver  more  complete solutions  to  address specific
customer needs,  deriving  maximum benefit  from  the Company's  products  while
tailoring  system solutions, which allows e-Net to avoid customization costs and
invest in focused product improvement.
 
    The Company has historically  sold its products  only through direct  sales.
The  Company  intends  to  increasingly  utilize  the  Internet,  OEMs,  systems
integrators and VARs. The  Company expects that any  material increase in  sales
through  resellers  as  a  percentage  of  total  revenues,  especially  in  the
percentage of sales through OEMs and  VARs, will adversely affect the  Company's
average selling prices and gross margins due to the discounts that are typically
extended  when  selling through  indirect channels.  Moreover,  there can  be no
assurance that the Company will be able  to attract resellers that will be  able
to  market the Company's  products effectively and will  be qualified to provide
timely and cost-effective customer support and service or that the Company  will
be able to manage
 
                                       35
<PAGE>
conflicts  among its  resellers. In addition,  the agreements  with resellers in
Company's  industry  typically  do  not  restrict  resellers  from  distributing
competing products, and in many cases will be terminable by either party without
cause.  It is ordinary in the Company's industry to grant exclusive distribution
rights which are limited by territory and in duration. Consequently, the Company
may be adversely affected should any  reseller fail to adequately penetrate  its
market segment. The inability to recruit, manage and retain important resellers,
or their inability to penetrate their respective market segments, may materially
adversely   affect  the  Company's  business,  operating  results  or  financial
condition.
 
    The Company  intends to  expand  its field  sales  force and  its  telesales
organization.  There can  be no assurance  that such internal  expansion will be
successfully completed, that  the cost  of such  expansion will  not exceed  the
revenues  generated, or that the Company's sales and marketing organization will
be able to  successfully compete  against the significantly  more extensive  and
well-funded  sales and marketing operations of  many of the Company's current or
potential  competitors.  The  Company's  inability  to  effectively  manage  its
internal expansion may have a material adverse effect on the Company's business,
operating results or financial condition.
 
    In  addition  to  expanding  its direct  sales  channels,  the  Company will
distribute its products  electronically through the  Internet. Distributing  the
Company's  products  through  the  Internet makes  the  Company's  software more
susceptible than other  software to  unauthorized copying and  use. The  Company
intends  to continue to allow potential customers to electronically download its
software for a  free evaluation  period. There can  be no  assurance that,  upon
expiration of the evaluation period, the Company will be able to collect payment
from  users  that retain  a  copy of  the  Company's software.  In  addition, by
distributing its products for free evaluation over the Internet, the Company may
have reduced the future  demand for its  products. If, as  a result of  changing
legal  interpretations  of  liability  for  unauthorized  use  of  the Company's
software or otherwise, users were to become less sensitive to avoiding copyright
infringement, the Company's business, operating results and financial  condition
may  be  materially  adversely  affected.  Any  such  export  restrictions,  new
legislation or regulation or  unlawful exportation may  have a material  adverse
impact on the Company's business, operating results or financial condition.
 
PRODUCT DEVELOPMENT
 
    The  Company's  current development  efforts  are focused  on  new products,
product enhancements  and implementing  existing  products into  new  enterprise
networks.  In particular, e-Net is in  the final testing stages of Telecom-2000.
This testing is currently on schedule and  it is estimated by the Company to  be
successfully concluded, resulting in product market readiness, by the end of the
Company's third quarter of fiscal 1997. There can be no assurance, however, that
any  Company  products  will  be  made  commercially  available  as  expected or
otherwise on a  timely and  cost-effective basis,  or that  if introduced,  that
these products will achieve market acceptance.
 
    The  Company's  ability to  attract  and retain  highly  qualified technical
employees will  be  the principal  determinant  of its  success  in  maintaining
technological   leadership.  e-Net  intends   to  develop  a   policy  of  using
equity-based compensation  programs,  which have  not  yet been  instituted,  to
reward and motivate significant contributors among its employees.
 
    To  date, all product development costs  have been expensed as incurred. The
Company believes that  significant investments in  research and development  are
required  to  remain  competitive.  As a  consequence,  the  Company  intends to
increase the amount of its research and development expenditures in the future.
 
    Substantially  all  of  the  Company's  revenues  have  been  derived,   and
substantially  all of the Company's future  revenues are expected to be derived,
from  the  license  of  its  software  and  sale  of  its  associated  services.
Accordingly,  broad  acceptance  of  the  Company's  products  and  services  by
customers is  critical to  the Company's  future success,  as is  the  Company's
ability  to  design,  develop,  test  and  support  new  software  products  and
enhancements   on    a    timely    basis   that    meet    changing    customer
 
                                       36
<PAGE>
needs and respond to technological developments and emerging industry standards.
There  can be no assurance that the Company will be successful in developing and
marketing new  products  and enhancements  that  meet changing  customer  needs.
Current  products are designed around certain  standards, and current and future
sales of  the  Company's  products  will be  dependent,  in  part,  on  industry
acceptance  of such standards. In  addition, there can be  no assurance that the
Company  will  not  experience  difficulties  that  may  delay  or  prevent  the
successful   development,  introduction  and  marketing   of  new  products  and
enhancements, or that its new products and enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. Further,  because
the  Company has only recently commenced shipment  of its products, there can be
no assurance that, despite testing by  the Company and by current and  potential
customers,  errors  will  not  be  found  in  the  Company's  products,  or,  if
discovered, successfully corrected in a timely manner. If the Company is  unable
to  develop on  a timely basis  new software products,  enhancements to existing
products or error corrections,  or if such new  products or enhancements do  not
achieve  market  acceptance,  the  Company's  business,  operating  results  and
financial condition will be materially adversely affected.
 
PATENT, TRADEMARK, COPYRIGHT AND PROPRIETARY RIGHTS
 
    In March 1996, the  Company acquired all rights,  title and interest in  the
first  U.S.  patent, U.S.  Patent No.  5,526,353,  for a  system and  method for
communicating high fidelity and  clear transmission of audio  or voice over  the
Internet,  enabling  free  worldwide  high fidelity  and  clear  transmission of
ordinary telephone communications  over the Internet.  The Company acquired  all
rights,  title and  interest in  the patent  from the  inventors, Messrs. Arthur
Henley and  Scott  Grau,  who  are original  stockholders  of  the  Company,  in
consideration  of a five percent overriding royalty interest against gross sales
involving the use of the patent.  The Company has agreed to allocate  $1,000,000
of  capital of this offering to develop and exploit the market opportunities for
the patent by December 31, 1996, or the patent will be subject to repurchase  by
the  inventors of the patent. The Company  believes that its patent is the first
patent awarded of its kind, specifically involving the transmission of audio  or
voice  over the Internet. The Company also  believes that its patent may provide
certain strategic and technological advantages in the new and burgeoning area of
audio or voice over the Internet.  The Company can make no assurances,  however,
as to the extent of the advantages or protection, if any, that may be granted to
the Company as a result of its patent.
 
    The   Company  currently  does  not  have  any  other  patent  or  copyright
applications pending. However,  the Company has  trademark applications  pending
related  to  certain of  its  products and  technologies.  The Company  may file
additional patent, trademark and copyright  applications relating to certain  of
the  Company's products and  technologies. If patents,  registered trademarks or
copyrights were to be issued, there can be no assurance as to the extent of  the
protection  that  will be  granted to  the Company  as a  result of  having such
patents, trademarks or copyrights or that the Company will be able to afford the
expenses of  any  complex litigation  which  may  be necessary  to  enforce  its
proprietary  rights. Failure of  the Company's patents,  trademark and copyright
applications may  have a  material  adverse impact  on the  Company's  business.
Except  as may  be required  by the  filing of  patent, trademark  and copyright
applications, the Company will attempt to keep all other proprietary information
secret and to take such actions as may be necessary to insure the results of its
development activities are not disclosed and are protected under the common  law
concerning trade secrets. Such steps will include the execution of nondisclosure
agreements  by  key Company  personnel and  may also  include the  imposition of
restrictive agreements on  purchasers of  the Company's  products and  services.
There is no assurance that the execution of such agreements will be effective to
protect  the Company, that the Company will be able to enforce the provisions of
such nondisclosure agreements or that technology and other information  acquired
by  the  Company  pursuant  to  its development  activities  will  be  deemed to
constitute trade secrets by any court of competent jurisdiction.
 
SECURITY RISKS
 
    The Company has included in certain  of its products an implementation of  a
security  protocol which operates in  conjunction with authentication technology
that it has developed. Despite the
 
                                       37
<PAGE>
existence of  this  technology, the  Company's  products may  be  vulnerable  to
break-ins and similar disruptive problems caused by certain Internet users. Such
computer  break-ins  and  other  disruptions would  jeopardize  the  security of
information stored in and transmitted through the computer systems of end  users
of  the Company's  products, which  may result  in significant  liability to the
Company and may  also deter  potential customers.  Persistent security  problems
continue  to plague public and private  data networks. Recent break-ins at major
government institutions, banks and corporations have involved hackers  bypassing
firewalls  and missappropriating confidential  information. Alleviating problems
caused by  third parties  may require  significant expenditures  of capital  and
resources  by the  Company and may  cause interruptions, delays  or cessation of
service to the Company's customers; such expenditures or interruptions may  have
a  material  adverse effect  on the  Company's  business, operating  results and
financial condition. Moreover, the security and privacy concerns of existing and
potential customers,  as  well as  concerns  related to  computer  viruses,  may
inhibit  the growth  of the Internet  marketplace, generally,  and the Company's
customer base  and revenues,  specifically.  The Company  intends to  limit  its
liability  to  customers,  including liability  arising  from a  failure  of the
security features contained in the Company's products, through provisions in its
future contracts.  However,  the  Company  can  make  no  assurances  that  such
contractual limitations will be enforceable. The Company currently does not have
liability insurance to protect against these risks and there can be no assurance
that  such insurance will be available to the Company on commercially reasonable
terms, or available on any terms.
 
GOVERNMENT REGULATION
 
    The Company is not currently subject to direct regulation by any  government
agency, other than regulations applicable to businesses generally, and there are
currently  few laws or regulations directly  applicable to access to or commerce
on the  Internet. However,  due to  the  increasing popularity  and use  of  the
Internet,  it is possible that  a number of laws  and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing  and
characteristics and quality of products and services. For example, the Exon Bill
(which  was  recently approved  by the  Senate)  would prohibit  distribution of
obscene, lascivious or indecent communications on the Internet. The adoption  of
any  such laws or regulations may decrease the growth of the Internet, which may
in turn  decrease  the  demand  for the  Company's  products  and  increase  the
Company's  cost of  doing business  or otherwise have  an adverse  effect on the
Company's business,  operating results  or  financial condition.  Moreover,  the
applicability to the Internet of existing laws governing issues such as property
ownership, libel and personal privacy is uncertain.
 
    The  Company's success and ability to compete  is dependent in part upon its
proprietary technology. While  the Company  relies on  patent, trademark,  trade
secret  and copyright law  to protect its technology,  the Company believes that
factors such as  the technological  and creative  skills of  its personnel,  new
product  developments,  frequent  product  enhancements,  name  recognition  and
reliable product maintenance are more essential to establishing and  maintaining
a technology position. The source code for the Company's proprietary software is
protected  both  as  a trade  secret  and  as a  copyrighted  work.  The Company
generally enters into confidentiality or license agreements with its  employees,
consultants and vendors, and generally controls access to an distribution of its
software,   documentation  and  other  proprietary  information.  Despite  these
precautions, it may be possible  for a third party  to copy or otherwise  obtain
and  use  the  Company's products  or  technology without  authorization,  or to
develop similar technology independently.  In addition, effective copyright  and
trade  secret  protection  may  be unavailable  or  limited  in  certain foreign
countries, and the global nature of  the Internet makes it virtually  impossible
to  control  the ultimate  designation of  the  Company's products.  Despite the
Company's efforts to  protect its proprietary  rights, unauthorized parties  may
attempt  to copy  aspects of  the Company's  products to  "reverse engineer" the
Company's designs, or to obtain and use information that the Company regards  as
proprietary.  In addition, litigation may be  necessary in the future to enforce
the Company's  intellectual  property rights,  to  protect the  Company's  trade
secrets,  to  determine the  validity  and scope  of  the proprietary  rights of
others, or to
 
                                       38
<PAGE>
defend against claims of infringement or invalidity. Such litigation may  result
in  substantial costs and diversion of resources and may have a material adverse
effect on the Company's business, operating results or financial condition.
 
    The Company also relies on certain  technology which it licenses from  third
parties,  including  software  which  is  integrated  with  internally developed
software and used in the Company's products to perform key functions. There  can
be  no assurance that these third party  technology licenses will continue to be
available to  the Company  on  commercially reasonable  terms.  The loss  of  or
inability  to maintain any of these technology  licenses may result in delays or
reductions in product shipments until  equivalent technology may be  identified,
licensed  and integrated. Any such delays or reductions in product shipments may
materially adversely  affect  the  Company's  business,  operating  results  and
financial condition.
 
COMPETITION
 
    The  market  for  Internet-based  software and  services  is  new, intensely
competitive, rapidly evolving  and subject  to rapid  technological change.  The
Company  expects competition to  persist, intensify and  increase in the future,
from start-up  companies  to  major  technology companies.  Almost  all  of  the
Company's  current and  potential competitors  have longer  operating histories,
greater name  recognition, larger  installed  customer bases  and  significantly
greater  financial,  technical and  marketing resources  than the  Company. Such
competition may materially  adversely affect the  Company's business,  operating
results  or financial condition. The Company's current and potential competitors
can be divided  into several  groups: Microsoft, browser  software vendors,  Web
server  software and  service vendors, PC  and Unix software  vendors and online
service providers.
 
    MICROSOFT  CORPORATION.    Microsoft  has  licensed  browser  software  from
Spyglass  and has announced its intention to improve and bundle the browser with
its Windows 95 operating system.  Microsoft's browser will access the  Microsoft
Network,  its announced  online service,  and will  also offer  Internet access.
While the anticipated  penetration of this  software into Microsoft's  installed
base  of PC users will increase the size  and usefulness of the Internet, it may
have a material adverse  impact on e-Net's ability  to sell client software.  In
addition,  because the  Company's client software  products will not  be able to
access Microsoft Network,  the Company's client  software products may  be at  a
competitive  disadvantage  VERSUS  Microsoft's browser.  Further,  Microsoft may
choose to  develop  Web  server, applications  software  and  software  products
specifically  designed to deliver high levels of performance that enables local,
material and international  telephone communications,  information exchange  and
commerce  over the Internet as  a complement to its  product line and to support
the Microsoft Network, which may materially adversely affect e-Net's ability  to
sell  its technologies,  products and services.  To the  extent that Microsoft's
browser gains market acceptance,  Microsoft will be  better positioned than  the
Company  to sell  Web server and  applications products. Microsoft  has a longer
operating history, a  much larger installed  base and number  of employees,  and
substantially  greater financial,  technical and marketing  resources, access to
distribution channels and name recognition than the Company.
 
    BROWSER  SOFTWARE  VENDORS.    Several  companies  are  currently   offering
client-based   Web   browser   products,   including   Netscape   Communications
Corporation,  Spry,  Inc.  (a  subsidiary  of  CompuServe),  Spyglass,  Booklink
Technologies,  Inc. ("Booklink," a  subsidiary of AOL),  NetManage Inc., Network
Computing Devices, Inc. and  Quarterdeck Office Systems,  Inc. In addition,  the
NCSA  at the  University of Illinois  distributes its product,  NCSA Mosaic, for
free for noncommercial use. Further, Spyglass has an exclusive license for  NCSA
Mosaic  and  is  actively sublicensing  it  to other  commercial  vendors. These
sublicensees are expected to  offer derivative products  that will compete  with
the Company's product line.
 
    SERVER SOFTWARE AND SERVICE VENDORS.  Some companies are offering Web server
software  that they install and operate on  behalf of their customers, and other
companies are offering services using Web serves. Companies offering Web  server
software include Open Market, Inc. ("Open Market"),
 
                                       39
<PAGE>
which  has a Web server  for various Unix platforms,  Process Software Corp. and
O'Reilly &  Associates,  Inc.,  which  have  Windows  NT  Web  server  products,
Spyglass,  which has  announced a  Web server  for Windows  NT and  various Unix
platforms, and Terisa, which offers a  toolkit for adding security functions  to
the  existing NCSA and  CERN Web servers. Service  companies include Open Market
and Internet Media Services, which publish  content from third parties on  their
own Web servers. In the future, software companies which have server products in
other  product categories  may choose to  enhance the  functionality of existing
products or develop new  products which are competitive  with the Company's  Web
server  and  integrated  applications products.  These  companies  include Lotus
(which IBM  recently acquired),  which  may extend  Notes  in this  manner,  and
Novell,  which may choose to  provide add-ons to Netware  for Web publishing. In
addition, Oracle, Sybase and Informix  may incorporate Web server  functionality
into  their  database  products.  Oracle  has  recently  announced  a technology
licensing agreement  with  Spyglass and  its  intention to  introduce  Web-based
software that enables electronic commerce and communication.
 
    PC AND UNIX SOFTWARE VENDORS.  The Company believes that PC software vendors
may  become particularly formidable  competitors. In addition  to Microsoft, IBM
has incorporated client software in its  OS/2 operating system, and the  Company
believes  that other  PC operating  system vendors,  including Apple,  will also
eventually incorporate  some  Web  client  functionality  into  their  operating
systems  as standard features. This  may also be true  of Unix operating systems
vendors, such  as  Sun,  HP, IBM,  Digital,  SCO  and SGI.  If  these  companies
incorporate  Web browser functionality into  their software products, they could
subsequently offer  this  functionality  at  little or  no  additional  cost  to
customers.  Further,  in  the  event  that  client  products  incorporated  into
operating systems by Microsoft or other PC or Unix software vendors gain  market
acceptance,  these organizations will  be better positioned  than the Company to
sell Web server and applications software products.
 
    ONLINE  SERVICE  PROVIDERS.    Although  the  online  services  provided  by
companies  such as Prodigy, CompuServe and  AOL are not Internet-based services,
these  services  currently  present  an  alternative  medium  to   organizations
considering  Internet-based publishing.  In addition, due  to the  appeal of the
Internet to content publishers and end users, these companies are adapting their
service offerings to provide  Internet access. At least  two of these  companies
compete  directly with the  Company in the  Internet-based software and services
market: AOL, which acquired Booklink,  and CompuServe, which acquired Spry.  The
Company's  client software products do not  offer access to any online services,
including Microsoft  Network,  and  are at  a  competitive  disadvantage  VERSUS
browser  products  which offer  both access  to  the Internet  and to  an online
service.
 
    Additional competition could come from client/server applications and  tools
vendors,  other  database companies,  multimedia companies,  document management
companies, networking  software  companies,  network  management  companies  and
educational  software  companies. Further,  the  Company's current  products are
designed  around  certain  standards,  and  industry  acceptance  of   competing
standards  could decrease  the demand for  the Company's  products. For example,
Microsoft and  IBM are  each  proposing an  alternative security  standard,  and
widespread adoption of either standard may have a material adverse effect on the
Company's business, operating results or financial condition.
 
    Competitive  factors  in  the Internet-based  software  and  services market
include core technology, breadth of product features, product quality, marketing
and distribution  resources,  and customer  service  and support.  However,  the
market  and competition are still new and  rapidly emerging, and there can be no
assurance that the Company will be able to compete successfully against  current
or  future competitors, or  that this competition will  not adversely affect the
Company's business, operating results or financial condition.
 
EMPLOYEES
 
    As of  the  date of  this  prospectus, the  Company  has a  total  of  eight
employees,  all  of  whom  are  full time  employees.  Of  the  total  number of
employees, three  are engaged  in  software development,  three are  engaged  in
marketing,  sales and customer  support and three  are engaged in administration
and finance. Four of  these employees were hired  in May 1996. Certain  software
development activities and
 
                                       40
<PAGE>
additional  financial  and administrative  support  required to  date  have been
purchased on  an as  needed basis  from independent  consultants. Following  the
closing  of  this  offering,  the  Company  intends  to  hire  approximately ten
additional employees, including five in software development, three in marketing
and sales and two  in administration and finance.  The Company's future  success
depends  in significant part upon the continued service of its key technical and
senior management personnel  and its  continuing ability to  attract and  retain
highly  qualified  technical and  managerial  personnel. Competition  for highly
qualified technical personnel is intense and there can be no assurance that  the
Company  will be able  to retain its  key managerial and  technical employees or
that it will be able to attract and retain additional highly qualified technical
and managerial  personnel in  the future.  None of  the Company's  employees  is
represented  by labor union. The Company  has not experienced any work stoppages
and considers its relations with its employees to be good.
 
    The rapid execution necessary  for the Company to  fully exploit the  market
window  for  its  products  and  services  requires  an  effective  planning and
management process. The Company's growth has placed, and is expected to continue
to place,  a significant  strain on  the Company's  managerial, operational  and
financial  resources. In addition, most of the Company's management, development
and engineering staff was only recently hired. To manage its growth, the Company
must continue to implement and improve its operational and financial systems and
to expand,  train and  manage its  employee base.  For example,  the Company  is
currently  in  the  process of  building  its internal  maintenance  and support
organization. Although the Company believes that it has made adequate allowances
for the  costs  and  risks associated  with  this  expansion, there  can  be  no
assurance that the Company's systems, procedures or controls will be adequate to
support  the Company's  operations or  that Company  management will  be able to
achieve the rapid execution necessary to fully exploit the market window for the
Company's products  and services.  If the  Company is  unable to  manage  growth
effectively,  the Company's business, operating  results and financial condition
will be materially adversely affected.
 
FACILITIES
 
    The Company  leases  approximately  1,500  square  feet  for  its  principal
executive  offices  located at  7-4  Metropolitan Court,  Gaithersburg, Maryland
20878. The Company also  leases approximately 1,500  square feet for  additional
operational facilities located at 12325 Hymeadow Drive, Austin, Texas 78750. The
Company  intends to expand its facilities to  3,000 square feet at each facility
following the closing of this offering. Base rental for the current premises are
approximately  $1,900  and   $1,200  per  month,   respectively,  and  will   be
approximately  $3,800  and  $2,400  per  month,  respectively,  in  the expanded
facilities. The lease  requires the Company  to pay certain  property taxes  and
certain   operating  expenses.  The  Company   believes  that  its  current  and
anticipated facilities are suitable and adequate for its operations.
 
                                       41
<PAGE>
                                   MANAGEMENT
 
    The officers and directors of the Company are as follows:
 
<TABLE>
<CAPTION>
               NAME                                  TITLE
- ----------------------------------  ----------------------------------------
<S>                                 <C>
Alonzo E. Short, Jr.,               Chairman of the Board
 Lt. Gen., USA (ret.)
Robert A. Veschi                    President, Chief Executive Officer,
                                     Secretary, Director
George Porta                        Vice President, Operations
William L. Hooton                   Director
Edward Ratkovich,                   Director
 Maj. Gen., USAF (ret.)
Clive Whittenbury, Ph.D.            Director
</TABLE>
 
    Each of  the directors  of the  Company hold  office for  a one-year  period
expiring  December 31, 1996.  At present, the Company's  By-laws provide for not
less than one director nor more  than nine directors. Currently, there are  five
directors  in the Company. The By-laws permit the Board of Directors to fill any
vacancy  and  such  director  may  serve  until  the  next  annual  meeting   of
shareholders  or until his successor is elected and qualified. Officers serve at
the discretion of  the Board  of Directors.  There are  no family  relationships
among  any officers  or directors  of the  Company. Mr.  Veschi has  served as a
promoter of the  Company and the  consideration received for  such services  has
been limited to the compensation disclosed under "Remuneration." The officers of
the  Company  devote full  time to  the  business of  the Company.  See "Certain
Transactions."
 
    The principal  occupation  and  business experience  for  each  officer  and
director of the Company for at least the last five years are as follows:
 
    ALONZO  E. SHORT, JR.,  LT. GEN., USA  (RET.), 57, has  been chairman of the
board of the Company since  January 1996. General Short  has more than 30  years
experience  in executive management, operations  and the engineering, design and
development of large  scale telecommunications and  data systems. General  Short
retired  from the service  in 1994 following  a career that  included serving as
deputy commanding general (1988-1990) and commanding general (1990-1991) of  the
U.S.   Army  Information   Systems  Command,  a   major  information  technology
organization, which was responsible for all telecommunications during the Desert
Shield/Desert Storm operation, among other responsibilities. From 1991 to  1994,
General  Short was director  of the Defense Information  Systems Agency, a major
information technology organization which is responsible for  telecommunications
and  related services  to the  President of  the United  States, Secret Service,
Joint Chiefs of  Staff, Secretary  of Defense,  among other  high level  federal
entities.  Since  1994, General  Short has  been  president and  chief executive
officer of  MICAH Systems,  Inc.,  a Washington,  D.C. metropolitan  area  based
information,  technologies management  and consulting firm.  Since January 1996,
General Short has been instrumental in  the organization and development of  the
business of the Company.
 
    ROBERT A. VESCHI, 34, has been president, chief executive officer, secretary
and  a director of the Company since January  1995. Mr. Veschi is the founder of
the Company, which began its operations in June 1995. Mr. Veschi has significant
experience in executive management, operations  and the engineering, design  and
development  of telecommunications and computer  products and systems. From 1986
to 1990,  Mr.  Veschi  was  manager of  systems  engineering  for  International
Telemanagement,  Inc., a  Washington, D.C. metropolitan  area based information,
data and  network systems  firm.  From 1990  to 1994,  Mr.  Veschi was  a  group
president   of  I-Net,  Inc.,   a  Washington,  D.C.   metropolitan  area  based
information, data and network systems firm. From December 1994 to May 1995,  for
approximately  six months, Mr. Veschi was  president and chief executive officer
of Octacom, Inc., a Washington,  D.C. metropolitan area based information,  data
and network systems firm, and a wholly-
 
                                       42
<PAGE>
owned  subsidiary of Octagon, Inc., an  Orlando, Florida metropolitan area based
publicly held  technical  services  firm.  From  July  1994  to  May  1995,  for
approximately nine months, Mr. Veschi was a vice president of telecommunications
for  Octagon, Inc., and  from January 1995  to May 1995,  for approximately four
months, Mr. Veschi was a member of the board of directors of such company. Since
June 1995, Mr. Veschi has been instrumental in the organization, development and
promotion of the Company.
 
    GEORGE PORTA, 35, has been vice president of operations of the Company since
May 1996. Mr. Porta has significant experience in management, operations and the
engineering, design and development of telecommunications and computer  products
and  systems. From  1987 to  1994, Mr.  Porta was  a senior  network planner and
manager, sales engineering for Sprint Corp., a major telecommunications company.
From 1994 to 1996,  Mr. Porta was senior  director, network operations and  vice
president,  global networks of I-Net, Inc., a Washington, D.C. metropolitan area
based information, data and network systems firm. Since May 1996, Mr. Porta  has
been  vice president of operations  of the Company and  has been instrumental in
the organization and development of the Company. Mr. Porta holds B.S. degrees in
electrical engineering and computer science from Washington University.
 
    WILLIAM L. HOOTON,  45, has  been a director  of the  Company since  January
1996.   Mr.  Hooton  has  substantial  experience  in  the  management,  design,
operation, marketing and sales of  image conversion systems, electronic  imaging
system   integration,  data   automation  and  high   performance  data  storage
subsystems. From 1990 to 1993, Mr.  Hooton was vice president of operations  and
technical  and business development of  the Electronic Information Systems Group
of I-Net, Inc., a Washington, D.C. metropolitan area based information, data and
network systems  firm. Since  1993,  Mr. Hooton  has  been president  and  chief
executive  officer  of  Q  Corp.,  a  Washington,  D.C.  metropolitan  area high
technology consulting firm  specializing in  digital imaging  systems and  other
complex  imagery in media. Since January 1996, Mr. Hooton has been a director of
the Company and has been instrumental in the organization and development of the
Company. Mr. Hooton holds a B.B.A. degree from the University of Texas.
 
    EDWARD RATKOVICH, MAJ.  GEN., USAF (RET.),  71, has been  a director of  the
Company  since June  1996. General  Ratkovich is  a highly  decorated air combat
command pilot veteran  of World War  II (European Theater)  and has  substantial
senior  management,  operations  and  consulting  experience.  General Ratkovich
retired from the U.S. Air Force in 1975 after 33 years of active duty service as
a senior intelligence staff officer, operations staff officer and command pilot,
ultimately serving as Deputy Assistant Chief of Staff for Intelligence, U.S. Air
Force,  Pentagon,   Washington,  D.C.   and  also   Director  of   Intelligence,
Headquarters,  U.S. European  Command, a  major operations  command of  the U.S.
Joint Chiefs  of  Staff.  In  this  latter  assignment,  General  Ratkovich  was
responsible  for all military, political and  economic intelligence for the U.S.
European Command. Since 1975,  General Ratkovich has served  as a technical  and
operations  consultant to numerous major systems engineering and technical firms
in the United States.  From 1981 to  1986, General Ratkovich  was a founder  and
served  as  a  director of  Verdix  Corporation (now,  Rational  Corporation), a
publicly held (Nasdaq  National Market  System --  "RATL") software  development
company.  From 1987 to  1994, General Ratkovich  was an officer  and director of
Continual Technology Corporation, a McLean, Virginia based computer hardware and
software company. Since 1994, General Ratkovich  has been chairman of the  board
and  chief executive officer of  MVSI, Inc., a publicly  held (Nasdaq -- "MVSI")
McLean, Virginia based laser vision  robotics company. Since June 1996,  General
Ratkovich  has  been instrumental  in the  organization  and development  of the
business of the Company.
 
    CLIVE G. WHITTENBURY, PH.D.,  61, has been a  director of the Company  since
June  1996. Dr.  Whittenbury has  substantial senior  management, operations and
technical advisory experience. From 1972 to  1979, Dr. Whittenbury was a  senior
vice  president  and, from  1976  to 1986,  a  director of  Science Applications
International  Corporation  ("SAIC"),  a   La  Jolla,  California  based   major
international   systems  engineering  firm  with   current  annual  revenues  of
approximately $2 billion. Since  1979, Dr. Whittenbury  has been executive  vice
president   and   a   director   of   the   Erickson   Group,   Inc.,   a  major
 
                                       43
<PAGE>
international diversified products firm. Since 1994, Dr. Whittenbury has been  a
director  of MVSI,  Inc., a  publicly held  (Nasdaq --  "MVSI") McLean, Virginia
based laser  vision  robotics  company.  Dr. Whittenbury  is  a  member  of  the
International   Advisory  Board  for  the   British  Columbia  Advanced  Systems
Institute, which manages commercialization programs  in technology at the  three
major Vancouver/Victoria universities, a member of the Advisory Board of Compass
Technology  Partners, an investment fund, and  is chairman of the Advisory Board
(Laser  Directorate)  for  the  Lawrence  Livermore  National  Laboratory.   Dr.
Whittenbury  has also served as a  technical advisor to three U.S. Congressional
Committees, the Grace Commission and numerous major U.S. and foreign  companies.
Since  June 1996, Dr. Whittenbury has  been instrumental in the organization and
development of the Company. Dr. Whittenbury  holds a B.S. degree (physics)  from
Manchester  University (England)  and a Ph.D.  degree (aeronautical engineering)
from the University of Illinois.
 
                                       44
<PAGE>
REMUNERATION
 
  EXECUTIVE COMPENSATION
 
    The following table sets forth remuneration  paid for the fiscal year  ended
March  31, 1996 and proposed to be paid for the fiscal year ended March 31, 1997
to the officers and directors of the Company:
 
<TABLE>
<CAPTION>
                                                                       SUMMARY COMPENSATION TABLE (1)(2)
                                                                ------------------------------------------------
                                                                                                       OTHER
NAME OF INDIVIDUAL OR NUMBER                                                                          ANNUAL
     OF PERSONS IN GROUP            POSITION WITH COMPANY         YEAR       SALARY       BONUS    COMPENSATION
- -----------------------------  -------------------------------  ---------  -----------  ---------  -------------
<S>                            <C>                              <C>        <C>          <C>        <C>
Alonzo E. Short, Jr.,          Chairman of the Board              1997     $        --  $      --   $    42,000
 Lt. Gen., USA (ret.)                                             1996     $        --  $  --       $        --
Robert A. Veschi               President, Chief Executive         1997     $   175,000  $  87,500   $        --
                                Officer, Secretary, Director      1996     $    25,000  $  --       $        --
George Porta                   Vice President, Operations         1997     $   100,000  $  50,000   $        --
                                                                  1996     $        --  $      --   $        --
William L. Hooton              Director                           1997     $        --  $      --   $    42,000
                                                                  1996     $        --  $      --   $        --
Edward Ratkovich,              Director                           1997     $        --  $      --   $    42,000
 Maj. Gen., USAF (ret.)                                           1996     $        --  $      --   $        --
Clive Whittenbury, Ph.D.       Director                           1997     $        --  $      --   $    42,000
                                                                  1996     $        --  $      --   $        --
</TABLE>
 
- ------------------------
(1) The persons named in the table  immediately above reflect the management  of
    the  Company as of the  date hereof. The directors  of the Company, with the
    exception of  Mr. Veschi,  are entitled  to annual  remuneration of  $42,000
    pursuant  to oral  agreements between  such directors  and the  Company. The
    Company has agreed to purchase key-man term life insurance on Mr. Veschi  in
    the amount of $1 million following the closing of this offering. The Company
    will be the owner and beneficiary of such life insurance policy.
 
(2) The  officers of the Company may receive  remuneration as part of an overall
    group  insurance  plan  providing  health,  life  and  disability  insurance
    benefits  for  employees  of  the  Company.  The  amount  allocable  to each
    individual officer cannot  be specifically ascertained,  but, in any  event,
    will not exceed $25,000 as to each individual.
 
(3) Each  outside  director of  the Company  is  entitled to  receive reasonable
    expenses incurred in  attending meetings of  the Board of  Directors of  the
    Company.  The members  of the  Board of  Directors intend  to meet  at least
    quarterly during the  Company's fiscal year,  and at such  other times  duly
    called. The Company presently has two outside directors.
 
  EMPLOYMENT AGREEMENT
 
    The  Company  has entered  into an  employment agreement  ("Agreement") with
Robert A. Veschi,  the president  and chief  executive officer  of the  Company,
dated  as of  April 1, 1996.  The Agreement will  expire on March  31, 2001. The
current annual salary  under the  Agreement is  $175,000. The  salary under  the
Agreement may be increased to reflect annual cost of living increases and may be
supplemented  by discretionary merit and  performance increases as determined by
the Board of Directors of the Company, except that during the first three  years
following  the  date  of  the  Prospectus  with  respect  to  the  offering,  no
executive's salary may  exceed $200,000.  Mr. Veschi  is entitled  to an  annual
bonus  equal to 50 percent of the  salary provided under his Agreement, which is
not subject to any performance criteria.
 
    The  Agreement  provides,  among  other  things,  for  participation  in  an
equitable  manner  in any  profit-sharing or  retirement  plan for  employees or
executives and for participation in other employee
 
                                       45
<PAGE>
benefits applicable to employees  and executives of  the Company. The  Agreement
provides  for the use  of an automobile,  payment of club  dues and other fringe
benefits commensurate with his duties  and responsibilities. The Agreement  also
provides  for benefits in  the event of disability.  The Agreement also contains
non-compete  provisions  but  are  limited  in  geographical  scope,  I.E.,  the
Washington, D.C. metropolitan area.
 
    Pursuant  to the Agreement, employment may be terminated by the Company with
cause or  by the  executive with  or  without good  reason. Termination  by  the
Company  without cause, or by  the executive for good  reason, would subject the
Company to liability for liquidated damages in an amount equal to the terminated
executive's current  salary  and a  PRO  RATA portion  of  their bonus  for  the
remaining term of the Agreement, payable in a lump sum cash payment, without any
set-off  for compensation  received from  any new  employment. In  addition, the
terminated executive would be entitled to continue to participate in and  accrue
benefits under all employee benefit plans and to receive supplemental retirement
benefits  to replace benefits under any qualified plan for the remaining term of
the Agreement to the extent permitted by law.
 
LIMITATION ON LIABILITY OF DIRECTORS
 
    As permitted by  Delaware law,  the Company's  Certificate of  Incorporation
includes  a provision which provides that a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for  a
breach  of  fiduciary duty  as  a director,  except (i)  for  any breach  of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts  or
omissions  not in good faith or that involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law  of
the  State of Delaware, which prohibits the unlawful payment of dividends or the
unlawful repurchase or  redemption of stock,  or (iv) for  any transaction  from
which  the  director derives  an improper  personal  benefit. This  provision is
intended to afford directors  protection against, and  to limit their  potential
liability  for monetary damages  resulting from, suits alleging  a breach of the
duty of care by a director. As a consequence of this provision, stockholders  of
the  Company will  be unable to  recover monetary damages  against directors for
action taken  by them  that may  constitute negligence  or gross  negligence  in
performance  of  their  duties  unless  such conduct  falls  within  one  of the
foregoing exceptions.  The provision,  however, does  not alter  the  applicable
standards  governing a director's fiduciary duty and does not eliminate or limit
the right of the Company or any stockholder to obtain an injunction or any other
type of  nonmonetary  relief  in  the  event of  a  breach  of  fiduciary  duty.
Management  of the  Company believes this  provision will assist  the Company in
securing and retaining qualified persons to  serve as directors. The Company  is
unaware  of  any pending  or threatened  litigation against  the Company  or its
directors that would result in any liability for which such director would  seek
indemnification or similar protection.
 
    Such  indemnification  provisions are  intended  to increase  the protection
provided directors  and, thus,  increase the  Company's ability  to attract  and
retain  qualified  persons to  serve as  directors. Because  directors liability
insurance is only available at considerable  cost and with low dollar limits  of
coverage  and broad policy exclusions, the Company does not currently maintain a
liability insurance policy for the benefit of its directors although the Company
may attempt to acquire such insurance  in the future. The Company believes  that
the  substantial increase  in the number  of lawsuits being  threatened or filed
against corporations  and  their directors  and  the general  unavailability  of
directors  liability insurance to provide  protection against the increased risk
of personal liability resulting from such lawsuits have combined to result in  a
growing  reluctance on the part of capable persons to serve as members of boards
of directors of public companies. The  Company also believes that the  increased
risk  of  personal  liability  without  adequate  insurance  or  other indemnity
protection for its  directors could  result in overcautious  and less  effective
direction  and management of the Company. Although no directors have resigned or
have threatened  to resign  as a  result  of the  Company's failure  to  provide
insurance  or other indemnity protection from liability, it is uncertain whether
the Company's directors would continue to  serve in such capacities if  improved
protection from liability were not provided.
 
                                       46
<PAGE>
    The  provisions affecting  personal liability  do not  abrogate a director's
fiduciary duty  to the  Company  and its  shareholders, but  eliminate  personal
liability  for monetary damages for breach of  that duty. The provisions do not,
however, eliminate or limit the  liability of a director  for failing to act  in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for  authorizing the illegal payment  of a dividend or  repurchase of stock, for
obtaining an  improper personal  benefit,  for breaching  a director's  duty  of
loyalty  (which  is  generally  described  as the  duty  not  to  engage  in any
transaction which involves a  conflict between the interest  of the Company  and
those  of the director)  or for violations  of the federal  securities laws. The
provisions also  limit or  indemnify against  liability resulting  from  grossly
negligent  decisions including grossly negligent  business decisions relating to
attempts to change control of the Company.
 
    The provisions  regarding  indemnification  provide, in  essence,  that  the
Company  will  indemnify its  directors  against expenses  (including attorneys'
fees), judgments, fines and amounts  paid in settlement actually and  reasonably
incurred  in connection with any  action, suit or proceeding  arising out of the
director's status as a director of the Company, including actions brought by  or
on behalf of the Company (shareholder derivative actions). The provisions do not
require  a showing of good faith.  Moreover, they do not provide indemnification
for liability  arising out  of  willful misconduct,  fraud, or  dishonesty,  for
"short-swing"  profits violations under the federal  securities laws, or for the
receipt  of  illegal   remuneration.  The   provisions  also   do  not   provide
indemnification  for any  liability to the  extent such liability  is covered by
insurance. One purpose of the provisions is to supplement the coverage  provided
by  such insurance. However, as mentioned  above, the Company does not currently
provide such insurance  to its  directors, and there  is no  guarantee that  the
Company will provide such insurance to its directors in the near future although
the Company may attempt to obtain such insurance.
 
    The provisions diminish the potential rights of action which might otherwise
be available to shareholders by limiting the liability of officers and directors
to   the  maximum  extent   allowable  under  Delaware   law  and  by  affording
indemnification against most damages and  settlement amounts paid by a  director
of  the Company in connection with  any shareholders derivative action. However,
the provisions do not have the effect of limiting the right of a shareholder  to
enjoin  a director from  taking actions in  breach of his  fiduciary duty, or to
cause the Company  to rescind  actions already  taken, although  as a  practical
matter courts may be unwilling to grant such equitable remedies in circumstances
in which such actions have already been taken. Although the Company has procured
directors  liability  insurance coverage,  there is  no  assurance that  it will
provide coverage  to the  extent directors  would be  indemnified and,  in  such
event,  the Company may be  forced to bear a  portion or all of  the cost of the
director's claims for  indemnification. If  the Company  is forced  to bear  the
costs  for  indemnification, the  value of  the Company  stock may  be adversely
affected.  In  the   opinion  of   the  Securities   and  Exchange   Commission,
indemnification  for liabilities  arising under  the Securities  Act of  1933 is
contrary to public policy and, therefore, is unenforceable.
 
                                       47
<PAGE>
                             PRINCIPAL STOCKHOLDERS
 
    The following table sets forth  certain information regarding the  Company's
Common  Stock owned on the date of  this Prospectus and, as adjusted, to reflect
the sale of shares offered by this  Prospectus, by (i) each person who is  known
by  the Company  to own  beneficially more  than five  percent of  the Company's
Common Stock; (ii) each of the  Company's officers and directors; and (iii)  all
officers and directors as a group:
 
   
<TABLE>
<CAPTION>
                                                                                                          PERCENTAGE OF SHARES
                                                                                                       --------------------------
                                                                                            NUMBER       BEFORE         AFTER
NAME AND ADDRESS (1)                                          POSITION WITH COMPANY        OF SHARES    OFFERING    OFFERING (2)
- -------------------------------------------------------  -------------------------------  -----------  -----------  -------------
<S>                                                      <C>                              <C>          <C>          <C>
Alonzo E. Short, Jr., Lt. Gen., USA (ret.)               Chairman of the Board                 90,000        2.25          1.80
Robert A. Veschi                                         President, Chief Executive         1,300,000       32.50         26.00
                                                          Officer, Secretary, Director
George Porta                                             Vice President, Operations            50,000        1.25          1.00
William L. Hooton                                        Director                              50,000        1.25          1.00
Edward Ratkovich, Maj. Gen., USAF (ret.) (3)             Director                             500,000       12.50         10.00
Clive Whittenbury, Ph.D. (4)                             Director                              50,000        1.25          1.00
Arthur Henley (5)                                        Stockholder                          475,000       11.88          9.50
Thomas T. Prousalis, Jr., Esq. (6)                       Stockholder                          450,000       11.25          9.00
Robert Foise (7)                                         Stockholder                          250,000        6.25          5.00
All Officers and Directors as a Group (6 persons)                                           2,040,000       51.00         40.80
</TABLE>
    
 
- ------------------------
(1) c/o e-Net, Inc., 7-4 Metropolitan Court, Gaithersburg, Maryland 20878.
   
(2) Does  not include the exercise  of up to 1,000,000  Class A Warrants offered
    herein. The Company is offering 500,000 Units at a price of $14.00 per Unit.
    Each Unit consists of two shares of Common Stock and two redeemable Class  A
    Warrants.  The Class  A Warrants  shall be  exercisable commencing  one year
    after the Effective Date of this  Prospectus. Each Class A Warrant  entitles
    the  holder to purchase one share of  Common Stock at $7.50 per share during
    the four year period commencing one year from the Effective Date. The  Class
    A  Warrants  are  redeemable upon  certain  conditions. Should  the  Class A
    Warrants be exercised,  of which  there is  no assurance,  the Company  will
    receive  the proceeds therefrom, aggregating up to an additional $7,500,000.
    See "Description of Securities."
    
   
(3) 1030 Delf Drive, McLean, Virginia 22101. General Ratkovich also owns 500,000
    Class A Warrants and 500,000 Class B Warrants. See "Certain Transactions."
    
(4) 511 Trinity Avenue, Yuba City, California 95991.
(5) 10705 Bay Laurel Trail, Austin, Texas 78750.
(6) 1919 Pennsylvania  Avenue,  N.W., Suite  800,  Washington, D.C.  20006.  See
    "Legal Matters."
   
(7) Executive  Air Center,  Brainard Airport,  Hartford, Connecticut  06114. Mr.
    Foise also owns 250,000 Class A  Warrants and 250,000 Class B Warrants.  See
    "Certain Transactions."
    
 
                                       48
<PAGE>
                              CERTAIN TRANSACTIONS
 
   
    The  Company was incorporated in  the State of Delaware  on January 9, 1995,
and began its operations on June 8, 1995. The Company has authorized capital  of
50,000,000  shares of  Common Stock, $.01  par value. The  Company currently has
4,000,000  shares  of  Common  Stock  issued  and  outstanding.  See  "Principal
Stockholders" and "Description of Securities."
    
 
   
    In  January 1995,  the Company issued  3,000,000 shares of  its Common Stock
(which includes a 600:1 stock split in  January 1996 and a 2:1 reverse split  in
July  1996) to 16 persons, including the  officers and directors of the Company,
in a private placement transaction in consideration of $100, or its par value at
the time of issuance.
    
 
   
    In March 1996, the Company issued 250,000 shares of its Common Stock to  ATG
Group,  Inc.,  a  Brookville,  New  York based  investment  firm,  in  a private
placement transaction for aggregate consideration of $250,000, represented by  a
full recourse promissory note for the entire purchase price. The promissory note
is due in full in March 2001 and bears interest, payable upon maturity at 8% per
annum.  Andrew T. Greene, a  former officer and director  of the Underwriter, is
the officer, director  and stockholder of  ATG Group,  Inc. At the  time of  the
acquisition  of the shares  of Common Stock  of the Company  by ATG Group, Inc.,
neither ATG Group, Inc. nor Mr. Greene had an association or affiliation, in any
manner whatsoever, with the Underwriter or any other member firm of the National
Association of Securities Dealers, Inc. However,  in June 1996, ATG Group,  Inc.
agreed   to  cancel  its  250,000  shares  of  the  Company's  Common  Stock  in
consideration of the cancellation of its $250,000 full recourse promissory note.
    
 
   
    Also, in March and April 1996,  the Company borrowed $1,000,000 in a  bridge
loan  from  four persons  who  are nonaffiliated  with  the Underwriter  and the
Company, to wit: Edward Ratkovich ($500,000), Robert Foise ($250,000), Armstrong
Industries ($200,000)  and Martin  Sumichrast ($50,000),  at the  rate of  eight
percent  simple  annual  interest.  General  Ratkovich  and  Mr.  Sumichrast are
officers, directors  and  principal  stockholders  of  Nasdaq  listed  companies
recently  underwritten by  the Underwriter.  Mr. Foise  and Armstrong Industries
have previously participated as investors in companies recently underwritten  by
the Underwriter. In further consideration of the bridge loan, the Company issued
1,000,000 shares of Common Stock, 1,000,000 Class A Warrants and 1,000,000 Class
B  Warrants to such persons. However, in June 1996, such persons converted their
loans to equity in  consideration of the prior  issuance of the securities.  See
"Description of Securities."
    
 
   
    In  July 1996,  the Company  caused a  2:1 reverse  split of  its issued and
outstanding shares  of common  stock, Class  A Warrants  and Class  B  Warrants,
resulting  in 4,000,000 shares  of common stock, 1,000,000  Class A Warrants and
1,000,000 Class B Warrants currently issued and outstanding.
    
 
    All unregistered securities issued by the Company prior to this offering are
deemed "restricted securities"  within the meaning  of that term  as defined  in
Rule 144 and have been issued pursuant to certain "private placement" exemptions
under  Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations  as  promulgated   by  the  Securities   and  Exchange   Commission,
Washington,  D.C. 20549, such that the sales of the securities were transactions
by an issuer not involving any public offering. See "Description of Securities."
 
    In March 1996, the  Company acquired all rights,  title and interest in  the
first  U.S. patent for a  system and method for  communicating high fidelity and
clear transmission of audio or voice over the Internet, enabling free  worldwide
transmission of ordinary telephone communications over the Internet. The Company
acquired  all  rights, title  and  interest in  the  patent from  the inventors,
Messrs. Arthur  Henley and  Scott Grau,  who are  original stockholders  of  the
Company,  in consideration of a five percent overriding royalty interest against
gross profits involving  the use of  the patent. The  Company believes that  its
patent  is  the first  patent awarded  of its  kind, specifically  involving the
transmission of audio or voice over the Internet. The Company also believes that
its patent may
 
                                       49
<PAGE>
provide certain strategic and technological advantages in the new and burgeoning
area of audio or voice  over the Internet. The  Company can make no  assurances,
however,  as to the extent of the advantages  or protection, if any, that may be
granted to the Company as a result of its patent.
 
    The Company intends  to indemnify  its officers  and directors  to the  full
extent  permitted  by  Delaware  law.  Under  Delaware  law,  a  corporation may
indemnify its agents for expenses and  amounts paid in third party actions  and,
upon court approval in derivative actions, if the agents acted in good faith and
with reasonable care. A majority vote of the Board of Directors, approval of the
shareholders or court approval is required to effectuate indemnification.
 
    Insofar  as indemnification for liabilities arising under the Securities Act
of 1933,  as  amended,  may  be permitted  to  officers,  directors  or  persons
controlling  the Company, the Company  has been advised that,  in the opinion of
the  Securities   and  Exchange   Commission,  Washington,   D.C.  20549,   such
indemnification  is  against public  policy  as expressed  in  such Act  and is,
therefore, unenforceable. In the event that a claim for indemnification  against
such  liabilities (other than the payment by the Company of expenses incurred or
paid by  an  officer, director  or  controlling person  of  the Company  in  the
successful  defense  of any  action,  suit or  proceeding)  is asserted  by such
officer, director or controlling person in connection with the securities  being
registered,  the Company 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 such Act and  will be governed by the final  adjudication
of such issue.
 
    Any  future transactions with affiliates will  be on terms no less favorable
than could be  obtained from  nonaffiliated parties and  will be  approved by  a
majority  of  the  independent and  disinterested  directors, as  required  by a
resolution of the  Board of  Directors. Any  future loans  to Company  officers,
directors,  affiliates and/or shareholders will be approved by a majority of the
independent and  disinterested directors,  as required  by a  resolution of  the
Board of Directors.
 
                                       50
<PAGE>
                           DESCRIPTION OF SECURITIES
 
UNITS
 
   
    Each  of the 500,000 Units offered hereby at $14.00 per Unit consists of two
shares of the Company's Common Stock, $.01 par value, and two redeemable Class A
Warrants. The Common  Stock and Class  A Warrants are  detachable and may  trade
separately  immediately upon issuance. Should the Class A Warrants be exercised,
of which there is no assurance, the Company will receive the proceeds therefrom,
aggregating up to an additional $7,500,000.
    
 
COMMON STOCK
 
   
    The authorized capital stock of the Company consists of 50,000,000 shares of
Common  Stock,  $.01  par  value.  There  are  presently  4,000,000  issued  and
outstanding  shares of  Common Stock.  Holders of the  Common Stock  do not have
preemptive rights  to  purchase  additional  shares of  Common  Stock  or  other
subscription  rights. The Common  Stock carries no conversion  rights and is not
subject to redemption or  to any sinking fund  provisions. All shares of  Common
Stock  are entitled to share equally in dividends from sources legally available
therefor when,  as  and  if  declared  by  the  Board  of  Directors  and,  upon
liquidation  or dissolution of the Company, whether voluntary or involuntary, to
share equally  in  the assets  of  the  Company available  for  distribution  to
stockholders.  All outstanding shares of Common Stock are validly authorized and
issued, fully paid and nonassessable,  and all shares to  be sold and issued  as
contemplated  hereby,  will be  validly authorized  and  issued, fully  paid and
nonassessable. The Board of Directors  is authorized to issue additional  shares
of  Common  Stock,  not  to  exceed  the  amount  authorized  by  the  Company's
Certificate of Incorporation, and to issue options and warrants for the purchase
of such shares, on such terms and  conditions and for such consideration as  the
Board  may  deem  appropriate  without  further  stockholder  action.  The above
description concerning the Common  Stock of the Company  does not purport to  be
complete.  Reference is made  to the Company's  Certificate of Incorporation and
By-laws which are available for inspection  upon proper notice at the  Company's
offices,  as well as to  the applicable statutes of the  State of Delaware for a
more complete description concerning the rights and liabilities of stockholders.
    
 
    Prior to this offering, there has been no market for the Common Stock of the
Company, and no predictions can be made of the effect, if any, that market sales
of shares or the availability of shares  for sale will have on the market  price
prevailing  from time to time. Nevertheless, sales of significant amounts of the
Common Stock of the Company in the public market may adversely affect prevailing
market prices, and  may impair the  Company's ability to  raise capital at  that
time through the sale of its equity securities.
 
    Each holder of Common Stock is entitled to one vote per share on all matters
on  which such  stockholders are  entitled to vote.  Since the  shares of Common
Stock do not have cumulative voting rights, the holders of more than 50  percent
of  the shares voting for the election  of directors can elect all the directors
if they choose to do so and, in such event, the holders of the remaining  shares
will not be able to elect any person to the Board of Directors.
 
CLASS A AND CLASS B WARRANTS
 
   
    The  Company is offering 500,000  Units at a price  of $14.00 per Unit. Each
Unit consists of two shares of Common Stock, $.01 par value, and two  redeemable
Class  A Warrants. The Common Stock and  Class A Warrants are detachable and may
trade separately immediately upon issuance.
    
 
   
    The Class A Warrants shall be exercisable commencing one year after the date
of this Prospectus ("Effective Date"). Each Class A Warrant entitles the  holder
to  purchase one share of  Common Stock at $7.50 per  share during the four year
period commencing one  year from the  Effective Date. The  Class A Warrants  are
redeemable  by the Company  for $.05 per Warrant,  at any time after  August   ,
1998, upon thirty (30) days' prior written notice, if the average closing  price
or bid price of the Common Stock, as reported by the principal exchange on which
the  Common Stock  is traded,  the Nasdaq  National Market  System, OTC Bulletin
Board or the National Quotation Bureau, Incorporated, as the case may be, equals
or  exceeds  $10.00  per  share,   for  any  twenty  (20)  consecutive   trading
    
 
                                       51
<PAGE>
days  within a  period of thirty  (30) days ending  within ten (10)  days of the
notice of redemption. Upon  thirty (30) days' written  notice to all holders  of
the  Class A Warrants, the  Company shall have the  right to reduce the exercise
price and/or extend the term of the Class A Warrants.
 
   
    In March and April  1996, the Company borrowed  $1,000,000 in a bridge  loan
from four persons who are nonaffiliated with the Underwriter and the Company, to
wit:  Edward Ratkovich ($500,000), Robert Foise ($250,000), Armstrong Industries
($200,000) and Martin Sumichrast ($50,000), at the rate of eight percent  simple
annual  interest. General Ratkovich  and Mr. Sumichrast  are officers, directors
and principal stockholders of Nasdaq  listed companies recently underwritten  by
the Underwriter. Mr. Foise and Armstrong Industries have previously participated
as  investors in companies recently underwritten  by the Underwriter. In further
consideration of the bridge loan, the Company issued 1,000,000 shares of  Common
Stock,  1,000,000  Class  A Warrants  and  1,000,000  Class B  Warrants  to such
persons. However, in June 1996, such persons converted their loans to equity  in
consideration of the prior issuance of the securities.
    
 
   
    The  Class B Warrants owned by the four investors above are identical to the
Class A Warrants except that the exercise price is $8.00.
    
 
    The Warrants  can  only be  exercised  when  there is  a  current  effective
registration  statement  covering  the  shares of  common  stock  underlying the
Warrants. If the Company does not or  is unable to maintain a current  effective
registration  statement  the  Warrant holders  will  be unable  to  exercise the
Warrants and  the Warrants  may become  valueless. Moreover,  if the  shares  of
common stock underlying the Warrants are not registered or qualified for sale in
the  state in which a Warrant holder resides, such holder might not be permitted
to exercise the Warrants.
 
    The Company will  deliver Warrant  certificates to the  purchasers of  Units
representing   two  Warrants  for  each   Unit  purchased.  Thereafter,  Warrant
certificates may be exchanged for  new certificates of different  denominations,
and  may be exercised  or transferred by  presenting them at  the offices of the
Transfer Agent. Holders of the Warrants may sell the Warrants if a market exists
rather than exercise them. However, there can be no assurance that a market will
develop or continue as to such Warrants. If the Company is unable to qualify its
common stock underlying such Warrants for sale in certain states, holders of the
Company's Warrants in those states will have  no choice but to either sell  such
Warrants or allow them to expire.
 
    Each  Warrant may be exercised by surrendering the Warrant certificate, with
the form of election to purchase on the reverse side of the Warrant  certificate
properly  completed and executed, together with payment of the exercise price to
the Warrant Agent. The Warrants may be  exercised in whole or from time to  time
in part. If less than all of the Warrants evidenced by a Warrant certificate are
exercised,  a new Warrant certificate will be issued for the remaining number of
Warrants. Upon the  exercise of the  Warrants, the shares  of Common Stock  when
issued will be fully paid and nonassessable.
 
    Holders  of  the  Warrants  are protected  against  dilution  of  the equity
interest  represented  by  the  underlying  shares  of  common  stock  upon  the
occurrence  of certain events, including, but  not limited to, issuance of stock
dividends. If the Company merges, reorganizes or is acquired in such a way as to
terminate the Warrants, the Warrants may be exercised immediately prior to  such
action.  In the event of liquidation, dissolution  or winding up of the Company,
holders of the Warrants are not entitled to participate in the Company's assets.
 
    For the life of the Warrants, the holders thereof are given the opportunity,
at nominal cost, to profit from a rise  in the market price of the common  stock
of  the Company. The exercise of the Warrants will result in the dilution of the
then book value of the Common Stock of the Company held by the public  investors
and would result in a dilution of their percentage ownership of the Company. The
terms  upon which  the Company  may obtain  additional capital  may be adversely
affected through the period that the Warrants remain exercisable. The holders of
these Warrants may  be expected  to exercise  them at  a time  when the  Company
would,  in  all likelihood,  be  able to  obtain  equity capital  on  terms more
favorable than those provided for by the Warrants.
 
                                       52
<PAGE>
    Because the  Warrants included  in the  Units being  offered hereby  may  be
transferred,  it  is  possible that  the  Warrants  may be  acquired  by persons
residing in states where the Company has  not registered, or is not exempt  from
registration  such that the  shares of common stock  underlying the Warrants may
not be  sold  or  transferred  upon exercise  of  the  Warrants.  Warrantholders
residing  in those  states would  have no  choice but  to attempt  to sell their
Warrants or  to let  them expire  unexercised.  Also, it  is possible  that  the
Company may be unable, for unforeseen reasons, to cause a registration statement
covering  the shares underlying the  Warrants to be in  effect when the Warrants
are exercisable. In that event, the  Warrants may expire unless extended by  the
Company  as permitted by the Warrant because a registration statement must be in
effect, including audited financial statements for companies acquired, in  order
for warrantholders to exercise their Warrants.
 
   
    The  Company will be able to issue  the securities offered hereby, shares of
its Common  Stock  upon the  exercise  of  the Warrants  and  the  Underwriter's
Purchase  Option  only if  (i) there  is  a current  prospectus relating  to the
securities offered hereby under an  effective registration statement filed  with
the  Securities  and Exchange  Commission, and  (ii) such  Common Stock  is then
qualified for sale or exempt therefrom under applicable state securities laws of
the jurisdictions in which the various holders of Warrants reside. Although  the
Company  intends to maintain  a current registration statement,  there can be no
assurance, however, that the Company will be successful in maintaining a current
registration statement. After a registration statement becomes effective, it may
require updating by the filing  of a post-effective amendment. A  post-effective
amendment  is required (i) anytime after nine months subsequent to the Effective
Date when any  information contained in  the prospectus is  over sixteen  months
old;  (ii)  when facts  or events  have occurred  which represent  a fundamental
change in the information contained in the registration statement; or (iii) when
any  material  change  occurs  in  the  information  relating  to  the  plan  or
distribution  of the securities  registered by such  registration statement. The
Company anticipates that this Registration  Statement will remain effective  for
not more than nine months following the date of this Prospectus or until May   ,
1997, assuming a post-effective amendment is not filed by the Company, which may
be  required. The Company intends to qualify the  sale of the Units in a limited
number of states,  although certain  exemptions under  certain state  securities
("Blue  Sky") laws may  permit the Warrants  to be transferred  to purchasers in
states other than  those in  which the  Warrants were  initially qualified.  The
Company  will be prevented, however, from  issuing Common Stock upon exercise of
the Warrants in those  states where exemptions are  unavailable and the  Company
has  failed to qualify the Common Stock  issuable upon exercise of the Warrants.
The Company may decide not to seek,  or may not be able to obtain  qualification
of  the issuance of such Common Stock in all of the states in which the ultimate
purchasers of  the  Warrants  reside.  In  such  case,  the  Warrants  of  those
purchasers will expire and have no value if such Warrants cannot be exercised or
sold.  Accordingly, the market  for the Warrants  may be limited  because of the
Company's obligation to fulfill both of the foregoing requirements.
    
 
    As a result of the Permanent Injunction, the states of Pennsylvania, Indiana
and Illinois  have commenced  administrative  proceedings seeking,  among  other
things,  to revoke Stratton Oakmont's license to  do business in such states. In
Indiana, the Commissioner suspended Stratton Oakmont's license for a three  year
period.  Stratton Oakmont  has appealed  the decision  and has  requested a stay
pending appeal. The requested stay would maintain the status quo pending appeal.
In Illinois, Stratton Oakmont  intends to file an  answer to the  administrative
complaint  denying the basis for revocation.  The District of Columbia suspended
Stratton Oakmont's license pending the  outcome of an investigation. The  states
of  North Carolina and  Arkansas also have  suspended Stratton Oakmont's license
pending a  resolution  of  the  proceedings  in  those  states.  The  states  of
Minnesota,  Vermont, and  Nevada have  served upon  Stratton Oakmont  notices of
intent to revoke Stratton Oakmont's license  in such states. The state of  Rhode
Island  has served on Stratton Oakmont a Notice of Intent to suspend its license
in that state. The state of Connecticut has served on Stratton Oakmont a  notice
of intent to suspend or revoke registration in that state with a notice of right
to  hearing.  In the  state of  Mississippi,  Stratton Oakmont  has agreed  to a
suspension of its license pending resolution of certain claims and review of its
procedures and practices by the state authorities. In addition, Stratton Oakmont
withdrew its  registration in  the state  of New  Hampshire (with  the right  of
reapplication) and in the
 
                                       53
<PAGE>
state  of Maryland. There may be  further administrative action against the firm
in Maryland. The firm withdrew its registration in Massachusetts with a right to
reapply for registration after two years, withdrew its registration in  Delaware
with  a right to reapply  in three years and agreed  to a temporary cessation of
business in  Utah  pending  an on-site  inspection  and  further  administrative
proceedings.  Stratton Oakmont's license in the  state of New Jersey was revoked
by an administrative law judge, which revocation was affirmed by the New  Jersey
Bureau  of Securities, and an appeal has  been filed with the appellate division
of the  New Jersey  Superior Court.  The states  of Georgia,  Alabama and  South
Carolina  have  lifted  their  suspensions  and  have  granted  Stratton Oakmont
conditional licenses.  Such conditional  licenses were  granted pursuant  to  an
order,  which Stratton  Oakmont has proposed  to various  states, which provides
provisions  for:  (i)  the  suspension  of  revocation,  (ii)  compliance   with
recommendations   of  the  Consultant,  (iii)   an  expedited  claims  mediation
arbitration process, (iv) resolution of claims seeking compensatory damages, (v)
restrictions on use of operating revenue,  (vi) the limitation on selling  group
members  in offerings  underwritten by Stratton  Oakmont and  the prohibition of
participating as a  selling group  member in offerings  underwritten by  certain
other NASD member firms, (vii) the periodic review of Stratton Oakmont's agents,
(viii)  the retention of an accounting  firm, and (ix) supervision and training,
restrictions on trading, discretionary accounts and other matters. The state  of
Oregon, as a result of the Permanent Injunction, has filed a notice of intent to
revoke  Stratton  Oakmont's  license subject  to  the  holding of  a  hearing to
determine definitively Stratton Oakmont's license status, and Stratton  Oakmont,
in  this  proceeding  as  well  as other  proceedings,  expects  to  be  able to
demonstrate that the Permanent Injunction is not  of a nature as to be a  lawful
basis  to  revoke  Stratton  Oakmont's  license  permanently.  Finally, Stratton
Oakmont has received an  order limiting license in  the state of Nebraska.  Such
proceedings,  if ultimately successful, may adversely  affect the market for and
liquidity of the Company's securities if additional broker-dealers do not make a
market in the Company's securities.  Moreover, should investors purchase any  of
the  securities in this offering from Stratton  Oakmont prior to a revocation of
Stratton Oakmont's license in  their state, such investors  will not be able  to
resell  such  securities in  such  state through  Stratton  Oakmont but  will be
required to retain a new broker-dealer firm for such purpose. The Company cannot
ensure that other broker-dealers will make a market in the Company's securities.
In the event that other  broker-dealers fail to make  a market in the  Company's
securities,  the possibility exists that the market for and the liquidity of the
Company's securities may  be adversely affected  to such an  extent that  public
security  holders may not have anyone  to purchase their securities when offered
for sale at any price. In such  event, the market for, and liquidity and  prices
of  the Company's  securities may  not exist. It  should be  noted that although
Stratton Oakmont may not be the  sole market maker in the Company's  securities,
it will most likely be the dominant market maker in the Company's securities. In
addition,  in the event that the Underwriter's license to do business is revoked
in the states set forth above, the Underwriter has advised the Company that  the
members  of the selling syndicate in this offering  may be able to make a market
in the Company's securities in such states and that such an event will not  have
a  materially adverse effect on this offering, although no assurance can be made
that such an event will not have  a materially adverse effect on this  offering.
The  Company has applied to register this offering for the offer and sale of its
securities in the following states: California, Colorado, Connecticut, Delaware,
Florida, Georgia,  Hawaii,  Illinois,  Louisiana, New  York,  Rhode  Island  and
Virginia.  The  offer  and sale  of  the  securities of  this  offering  are not
available in  any  other  state,  absent an  exemption  from  registration.  See
"Underwriting."
 
RESTRICTED SHARES ELIGIBLE FOR FUTURE SALE
 
   
    Upon  completion of this offering, the Company will have 5,000,000 shares of
Common Stock issued and outstanding. Of these shares of Common Stock,  1,000,000
shares  are  being sold  in this  offering. Of  the remaining  shares, 4,000,000
shares ("Restricted Shares")  were issued  and sold  by the  Company in  private
transactions   in  reliance   upon  certain  private   placement  exemptions  as
promulgated by the Securities and  Exchange Commission, Washington, D.C.  20549.
See "Certain Transactions."
    
 
                                       54
<PAGE>
   
    In  general, under  Rule 144  as currently in  effect, a  person (or persons
whose shares are aggregated)  who has beneficially owned  his or her  Restricted
Shares  for at least two years, including persons who may be deemed "affiliates"
of the Company, as that term is defined under the Act, would be entitled to sell
in broker's transactions within any three  month period a number of shares  that
does not exceed the greater of one percent of the then outstanding shares of the
Company's   common  stock,  or   the  average  weekly   trading  volume  in  the
over-the-counter market in the Company's  common stock during the four  calendar
weeks  preceding such sale. Therefore, during each three month period, beginning
January 9, 1997,  a holder of  restricted securities  who has held  them for  at
least  the two year period may  sell under Rule 144 a  number of shares at least
equal to 50,000 shares. A person who is not deemed to have been an affiliate  of
the  Company  at any  time during  the 90  days  preceding a  sale, and  who has
beneficially owned his or her Restricted Shares for at least three years,  would
be  entitled to  sell such shares  under Rule  144 without regard  to the volume
limitations described above, provided that certain public information concerning
the Company as required by the Rule is available.
    
 
    Prior to this offering, there has been no market for the Common Stock of the
Company, and no  precise predictions can  be made  of the effect,  if any,  that
market  sales of shares or the availability of  shares for sale will have on the
market price prevailing from  time to time.  Nevertheless, sales of  substantial
amounts  of the Common Stock  of the Company in  the public market may adversely
affect prevailing market prices  and may impair the  Company's ability to  raise
capital at the time through the sale of its equity securities.
 
    Pursuant   to  the  terms  of  the  Underwriting  Agreement,  the  Company's
restricted stockholders  and the  Company  have agreed  not to  sell,  transfer,
assign  or issue any restricted shares of Common Stock for a period of 36 months
following the date of this Prospectus. The sale of a significant number of these
shares in the public market in the future may adversely affect prevailing market
prices of  the  Company's securities  following  this offering.  See  "Principal
Stockholders" and "Certain Transactions."
 
    No  predictions can be made  as to the effect, if  any, that sales of shares
under Rule 144 or otherwise or the availability of shares for sale will have  on
the  market, if any, prevailing from time  to time. Sales of significant amounts
of the Company's shares of  Common Stock pursuant to  Rule 144 or otherwise  may
adversely affect the market price of the securities offered hereby.
 
TRANSFER AGENT AND REGISTRAR
 
    The  transfer  agent and  registrar  for the  securities  of the  Company is
American Stock Transfer & Trust Company located at 40 Wall Street, New York, New
York 10005.
 
REPORTS TO SECURITY-HOLDERS
 
    The Company  will  furnish  to  holders of  its  securities  annual  reports
containing  audited financial statements. The  Company may issue other unaudited
interim reports to its security-holders as it deems appropriate.
 
    Contemporaneously, with this offering, the  Company intends to register  its
securities  with the Securities and Exchange Commission, Washington, D.C. 20549,
under the provisions of Section 12(g) of the Securities Exchange Act of 1934, as
amended ("Exchange  Act"), and,  in accordance  therewith, the  Company will  be
required  to  comply  with  certain  reporting,  proxy  solicitation  and  other
requirements of the Exchange Act.
 
                                       55
<PAGE>
                                  UNDERWRITING
 
   
    Subject  to  the  terms  and   conditions  of  the  underwriting   agreement
("Underwriting  Agreement") by and between the  Company and the Underwriter, the
Company has  agreed  to  sell  to  the Underwriter  500,000  Units  on  a  "firm
commitment"  basis. The Underwriter has advised  the Company that it proposes to
offer the Units to the public at $14.00 per Unit as set forth on the cover  page
of this Prospectus and that it may allow to certain dealers who are NASD members
concessions  not to exceed $.  per  Unit. After the initial public offering, the
public offering  price,  concession  and  reallowance  may  be  changed  by  the
Underwriter. The Underwriter has informed the Company that it does not intend to
confirm sales to any accounts over which it exercises discretionary authority.
    
 
   
    In  addition to underwriting discounts and commissions of ten percent of the
entire offering, the  Underwriter will  receive additional  compensation in  the
form  of (i) a  nonaccountable expense allowance of  $210,000 if 1,000,000 Units
are sold  (or  $241,500 if  the  Underwriter's Over-allotment  Option  is  fully
exercised);  and  (ii)  an  option  (exercisable  for  a  period  of  four years
commencing one year after the date of this Prospectus) entitling the Underwriter
to purchase 50,000 Units at $23.10 per Unit ("Underwriter's Purchase Option").
    
 
    The public offering  price of  the Units and  the exercise  price and  other
terms  of the Warrants  were arbitrarily determined  by negotiations between the
Company and the Underwriter  and do not necessarily  relate to the assets,  book
value  or results of operations of the Company or any other established criteria
of value.
 
   
    The Company has granted an option to the Underwriter, exercisable during the
30-day period from the date of this  Prospectus, to purchase up to a maximum  of
75,000  additional Units at the offering  price, less the underwriting discount,
to cover over-allotments, if any.
    
 
    The Underwriting Agreement provides  for reciprocal indemnification  between
the  Company and the Underwriter against  certain liabilities in connection with
the Registration Statement,  including liabilities under  the Securities Act  of
1933,  as  amended  ("1933  Act"). Insofar  as  indemnification  for liabilities
arising under the  1933 Act may  be provided to  officers, directors or  persons
controlling  the Company, the Company  has been informed that  in the opinion of
the Securities and Exchange Commission,  such indemnification is against  public
policy and is therefore unenforceable.
 
    The  Company will  also pay  a warrant  solicitation fee  to the Underwriter
equal to four percent of the exercise price of the Warrants, beginning one  year
from  the date of this  Prospectus, if the Underwriter  solicits the exercise of
such Warrants  prior to  the expiration  thereof  as set  forth in  the  Warrant
Agreement,   subject  to  the  Underwriter's   compliance  with  the  rules  and
regulations of the  NASD. In accordance  with NASD Notice  to Members 81-38,  no
warrant  solicitation fee shall be paid (i) upon exercise where the market price
of the underlying Common Stock  is lower than the  exercise price; (ii) for  the
exercise  of warrants held in any discretionary account; (iii) upon the exercise
of warrants where disclosure of compensation  arrangements has not been made  in
documents provided to customers both as part of the original offering and at the
time  of  exercise;  and  (iv)  upon the  exercise  of  warrants  in unsolicited
transactions. The broker-dealer to receive the warrant solicitation fee will  be
designated,  in writing, as the soliciting broker. See "Risk Factors -- Exercise
of Class  A  Warrants May  Have  Dilutive  Effect on  Market  and  Underwriter's
Influence on the Market May Have Adverse Consequences."
 
   
    The  Company has agreed to sell to the Underwriter, or its designees, for an
aggregate purchase price of $50, an option ("Underwriter's Purchase Option")  to
purchase  up to an aggregate of  50,000 Units. The Underwriter's Purchase Option
shall be exercisable during the four-year  period commencing one year after  the
effective  date of this  offering. The Underwriter's Purchase  Option may not be
assigned, transferred, sold or hypothecated  by the Underwriter until 12  months
after  the effective date of this Prospectus,  except to officers or partners of
the Underwriter and selling group members in this offering. Any profits realized
by the Underwriter  upon the sale  of the  Units issuable upon  exercise of  the
Underwriter's  Purchase  Option  may  be deemed  to  be  additional underwriting
    
 
                                       56
<PAGE>
   
compensation. The exercise  price of  the Units  issuable upon  exercise of  the
Underwriter's  Purchase Option during the period  of exercisability shall be 165
percent of the initial public offering price of the Units. The exercise price of
the warrants underlying the Units in the Underwriter's Purchase Option is $7.50.
The exercise price of the Underwriter's Purchase Option and the number of shares
covered thereby are subject to adjustment in certain events to prevent dilution.
For the  life of  the Underwriter's  Purchase Option,  the holders  thereof  are
given,  at a nominal cost,  the opportunity to profit from  a rise in the market
price of the Company's securities with  a resulting dilution in the interest  of
other  stockholders. The Company may find it more difficult to raise capital for
its business if the need should arise while the Underwriter's Purchase Option is
outstanding. At any time when the  holders of the Underwriter's Purchase  Option
might  be expected to exercise it, the  Company would probably be able to obtain
additional capital on more favorable terms.
    
 
    If the Company enters into a transaction (including a merger, joint  venture
or  the  acquisition  of  another  entity)  introduced  to  the  Company  by the
Underwriter, the Company has  agreed to pay the  Underwriter a maximum  finder's
fee  equal to five percent of the  first $3,000,000 of consideration involved in
the transaction, four percent of the next $3,000,000, three percent of the  next
$2,000,000, two percent of the next $2,000,000 and one percent of the excess, if
any, over $10,000,000.
 
    The Underwriter has the right to designate a non-director observer to attend
meetings  of the Company's Board  of Directors for three  years from the date of
this offering. The Underwriter does not have a right to designate or nominate  a
director  to the Company's Board of Directors.  The observer, which has not been
chosen, will be reimbursed for reasonable expenses incurred by him in connection
with his activities.
 
    Pursuant  to  the  terms  of  the  Underwriting  Agreement,  the   Company's
restricted  stockholders  and the  Company have  agreed  not to  sell, transfer,
assign or issue any restricted shares of Common Stock for a period of 36  months
following the date of this Prospectus. The sale of a significant number of these
shares in the public market may adversely affect prevailing market prices of the
Company's  securities following this offering.  See "Principal Stockholders" and
"Certain Transactions."
 
   
    The foregoing  is  a  summary  of certain  provisions  of  the  Underwriting
Agreement  and  the Underwriter's  Purchase Option  which has  been filed  as an
exhibit to the Registration Statement of which this Prospectus is a part.
    
 
    The Company has been  advised by the Underwriter  that the NASD (Direct  10)
filed  a complaint (No. C10950081) on  October 5, 1995 ("Complaint") against the
Underwriter, Steven  Sanders, the  head  trader of  the Underwriter,  Daniel  M.
Porush,  the  president of  the  Underwriter, and  Paul  F. Byrne,  formerly the
Underwriter's director of compliance (collectively, the "Respondents"), alleging
various violations of the NASD Rules  of Fair Practice. The complaint  consisted
of  three  causes. The  first  cause alleged  that  the Underwriter  and Sanders
effected principal retail sales of  securities at prices that were  fraudulently
excessive.  The second  cause alleged that  the Underwriter  and Sanders charged
excessive markups.  The third  cause alleged  that the  Underwriter, Porush  and
Byrne   failed  to  establish,  maintain   and  enforce  reasonable  supervisory
procedures designed to assure compliance with the NASD's rules and policies.
 
    On April 15,  1996 the NASD  in its  decision found all  of the  Respondents
except  Paul Byrne in  violation of all  three causes and  imposed the following
sanctions:
 
    - Sanders was censured,  fined $25,000  and was  suspended from  association
      with any member of the NASD in any capacity for a period of one year.
 
    - The  Underwriter was censured, fined $500,000 and was required to disgorge
      its excess profits to its customers, totaling $1,876,205, plus prejudgment
      interest. In addition, the Underwriter was  suspended for a period of  one
      year from effecting any principal retail transactions.
 
    - Porush  was censured, fined $250,000 and  barred from association with any
      member of the NASD in any capacity.
 
                                       57
<PAGE>
    The Underwriter,  Porush  and  Sanders have  appealed  the  NASD's  decision
thereby staying imposition of the sanctions.
 
    If  the sanctions imposed on the Underwriter are not reversed on appeal, the
Underwriter's ability to act as a market maker of the Company's securities  will
be  restricted. The Company cannot ensure that  other broker dealers will make a
market in the Company's securities. In the event that other broker dealers  fail
to  make a market in  the Company's securities, the  possibility exists that the
market for  and the  liquidity  of the  Company's  securities may  be  adversely
affected  to such an extent that public  security holders may not have anyone to
purchase their securities when offered for sale at any price. In such event, the
market for and liquidity of the Company's securities may not exist. It should be
noted that although  the Underwriter may  not be  the sole market  maker in  the
Company's  securities,  it  may  likely  be the  dominant  market  maker  in the
Company's securities.
 
    In April 1996, the NASD settled an action whereby it fined Stratton  Oakmont
$325,000  for fraud and other violations (which were neither admitted or denied)
in connection  with  its underwriting  of  an initial  public  offering.  Steven
Sanders  was  fined $50,000  and  was suspended  for a  period  of 45  days from
associating with an NASD member and agreed not to engage in any  trading-related
activities  for any  NASD member for  a period  of 50 days.  The settlement also
required that Stratton Oakmont file certain new supervisory procedures with  the
NASD.  The Underwriter filed with the NASD on April 11, 1996 procedures relating
to the conduct  of associated  persons during  and preceding  an initial  public
offering,  which  were  aimed  at  preventing violations  of  Section  5  of the
Securities Act of  1933 and Rule  10b-6 promulgated under  Section 10(b) of  the
Securities  Exchange  Act  of  1934  and aimed  at  preventing  SEC  Rule 10b-10
violations and the type of arbitrary  pricing which occurred in connection  with
the  trading of securities underwritten by  the Underwriter on January 16, 1991.
These procedures have been in effect since April 11, 1996.
 
   
    The Company has been advised by the Underwriter that the NASD (District  10)
filed  a  complaint (No.  C10960080)  on June  6,  1996 ("June  1996 Complaint")
against the Underwriter, Daniel Porush, Steven Sanders, Irving Stitsky, a former
registered  representative  of  the  Underwriter,  and  Jordan  Shamah,  a  vice
president  and a director of  the Underwriter (collectively, the "Respondents"),
alleging various  violations of  the Exchange  Act and  the NASD  Rules of  Fair
Practice.  The June 1996 Complaint consists of seven causes of action. The first
cause alleges that the Underwriter, through  Porush and Sanders, engaged in  the
use  of fraudulent  and manipulative  devices in the  failure to  make bona fide
distributions in  five  public  offerings  of  securities  underwritten  by  the
Underwriter  between June 1993 and April 1994. The second cause alleges that the
Underwriter, through Porush, Sanders, Stitsky and Shamah, engaged in the use  of
fraudulent  and  manipulative  devices  in  the  failure  to  make  a  bona fide
distribution of the common stock of a company whose initial public offering  was
underwritten  by the Underwriter. The third  cause alleges that the Underwriter,
through Porush and Sanders  for a period of  three days, manipulated the  common
stock  of such company.  The fourth cause alleges  that the Underwriter, through
Sanders, charged fraudulently excessive markups in connection with the  warrants
of  such company. The fifth cause  alleges that the Underwriter, through Porush,
violated the NASD's  Free-Riding and Withholding  Interpretation inasmuch as  he
allegedly allocated securities in certain public offerings to persons restricted
from purchasing such securities. The sixth cause alleges that Porush and Stitsky
failed  to  adequately  supervise  the Underwriter's  activity  relating  to the
various alleged violations. The seventh  cause alleges that the Underwriter  and
Porush  failed to  establish and  maintain reasonable  supervisory procedures to
prevent the  Underwriter's violative  conduct. The  Respondents intend  to  file
answers  to the June 1996 Complaint denying all material allegations and alleged
violations.
    
 
    In addition, the Company has been  advised by the Underwriter that the  NASD
(District  10) filed a  complaint (No. C10960068) on  June 6, 1996 ("Complaint")
against the Underwriter and Patrick Gerard Hayes, the compliance director of the
Underwriter (collectively, the "Respondents"),  alleging violations of the  NASD
Rules  of Fair  Practice. The  Complaint consists of  two causes  of action. The
first cause alleges that the Underwriter failed to report information  regarding
at  least 59  customer complaints the  Underwriter received  during the relevant
time periods as required by the NASD Rules
 
                                       58
<PAGE>
   
of Fair Practice.  The second cause  alleges that the  Underwriter, through  its
compliance   director,  failed  to  establish,   maintain  and  enforce  written
procedures designed to ensure that the Underwriter complied with the NASD  Rules
of Fair Practice. The Respondents have filed answers to the Complaint contesting
the proceeding.
    
 
    On  or  about July  13, 1996,  the District  Business Conduct  Committee for
District No. 10 ("District  Committee") of the NASD  issued a complaint  against
the  Underwriter alleging that  the Underwriter violated  Article III, Section 1
and Article IV, Section 5  of the NASD Rules of  Fair Practice by entering  into
settlement  agreements with former customers  which condition customers' ability
to cooperate with NASD investigations. The charges in the complaint were  upheld
by  the District Committee  on this same  date as well  as the National Business
Conduct Committee  of the  NASD, and  a fine  of $20,000  was assessed  and  the
Underwriter  was ordered to get the NASD's agreement on language used in certain
customer settlement agreements. The firm also is required, if asked by the NASD,
to identify customers that  should be released  from settlement agreements  that
impose  conditions on a  customer's ability to provide  information to the NASD.
The sanctions follow an appeal of findings that the firm used certain agreements
when settling  customer complaints  that precluded,  restricted, or  conditioned
customers'   ability  to  cooperate  with  the   NASD  in  connection  with  its
investigation of customer complaints. The firm also failed to release a customer
from the  restrictive provisions  of such  a settlement.  This action  had  been
appealed  to the SEC and the sanctions aren't in effect pending consideration of
the appeal. The Underwriter contests the charges and has perfected an appeal  to
the Securities and Exchange Commission.
 
    The  Company has been advised by  Stratton Oakmont, Inc. that the Commission
instituted an action on  December 14, 1994 in  the United States District  Court
for  the District  of Columbia against  Stratton Oakmont.  The complaint alleged
that Stratton Oakmont was not complying  with the March 17, 1994  Administrative
Order  by failing to adopt the recommendations of an independent consultant. The
Administrative Order was  previously consented to  by Stratton Oakmont,  without
admitting  or denying the findings contained therein, as settlement of an action
commenced against Stratton Oakmont by the Commission in March 1992, which  found
willful violations of the anti-fraud provisions of the securities laws such that
Stratton Oakmont:
 
    -engaged in fraudulent sales practices;
 
    -engaged in and/or permitted unauthorized trading in customer accounts;
 
    -knowingly  and  recklessly  manipulated  the market  price  of  a company's
     securities by dominating and controlling the market for those securities;
 
    -made improper and unsupported price predictions with regard to  recommended
     over-the-counter securities; and
 
    -made material misrepresentations and omissions regarding certain securities
     and its experience in the securities industry.
 
    Pursuant  to the Administrative Order, Stratton Oakmont was censured and the
Stratton Consultant was  chosen by  the Commission  to advise  and consult  with
Stratton  Oakmont and  to review  and recommend  new supervisory  and compliance
procedures. The complaint sought:
 
    -a to enjoin Stratton Oakmont from violating the Administrative Order;
 
    -an order  commanding Stratton  Oakmont to  comply with  the  Administrative
     Order; and
 
    -to  have a Special  Compliance Monitor appointed  to ensure compliance with
     the Administrative  Order.  Stratton  Oakmont  claimed  that  the  Stratton
     Consultant  exceeded his authority  under the Administrative  Order and had
     violated the terms of the Administrative Order.
 
                                       59
<PAGE>
    On February 28,  1995, the  court granted  the Commission's  motion for  the
Permanent   Injunction  and  ordered   Stratton  Oakmont  to   comply  with  the
Administrative  Order,  which  required   the  appointment  of  an   independent
consultant,   and  a  separate   independent  auditor  and   required  that  all
recommendations  be  complied  with,  including  the  taping  of  all  telephone
conversations  between the  Stratton Oakmont's  brokers and  their customers. In
granting  the  Commission's  motion  for  a  Permanent  Injunction,  the   Court
determined that Stratton Oakmont's conduct unequivocally demonstrated that there
is  a substantial likelihood that it will continue to evade its responsibilities
under the Administrative Order. On April  20, 1995, Stratton Oakmont also  filed
an  appeal to the United  States Court of Appeals  for the District of Columbia,
and on April 24, 1995  filed a motion to  stay the permanent injunction  pending
the outcome of the appeal. The motion to stay was denied. Subsequently, Stratton
Oakmont  voluntarily dismissed  its appeal. The  failure by  Stratton Oakmont to
comply with  the  Administrative Order  or  Permanent Injunction  may  adversely
effect Stratton Oakmont's activities in that the court may enter a further order
restricting  the ability  of Stratton Oakmont  to act  as a market  maker of the
Company's securities. The effect of such  action may prevent the holders of  the
Company's  securities from selling such securities since Stratton Oakmont may be
restricted from acting  as a market  maker of the  Company's securities and,  in
such  event, will  not be able  to execute a  sale of such  securities. Also, if
other broker dealers  fail to  make a market  in the  Company's securities,  the
public  security holders may  not have anyone to  purchase their securities when
offered for sale at any  price and the security holders  may suffer the loss  of
their entire investment.
 
    As a result of the Permanent Injunction, the states of Pennsylvania, Indiana
and  Illinois  have commenced  administrative  proceedings seeking,  among other
things, to revoke Stratton Oakmont's license  to do business in such states.  In
Indiana,  the Commissioner suspended Stratton Oakmont's license for a three year
period. Stratton Oakmont  has appealed  the decision  and has  requested a  stay
pending appeal. The requested stay would maintain the status quo pending appeal.
In  Illinois, Stratton Oakmont  intends to file an  answer to the administrative
complaint denying the basis for  revocation. The District of Columbia  suspended
Stratton  Oakmont's license pending the outcome  of an investigation. The states
of North Carolina and  Arkansas also have  suspended Stratton Oakmont's  license
pending  a  resolution  of  the  proceedings  in  those  states.  The  states of
Minnesota, Vermont,  and Nevada  have served  upon Stratton  Oakmont notices  of
intent  to revoke Stratton Oakmont's license in  such states. The state of Rhode
Island has served on Stratton Oakmont a Notice of Intent to suspend its  license
in  that state. The state of Connecticut has served on Stratton Oakmont a notice
of intent to suspend or revoke registration in that state with a notice of right
to hearing.  In the  state of  Mississippi,  Stratton Oakmont  has agreed  to  a
suspension of its license pending resolution of certain claims and review of its
procedures and practices by the state authorities. In addition, Stratton Oakmont
withdrew  its registration  in the  state of  New Hampshire  (with the  right of
reapplication) and in the state of Maryland. There may be further administrative
action against  the firm  in Maryland.  The firm  withdrew its  registration  in
Massachusetts with a right to reapply for registration after two years, withdrew
its  registration in Delaware with a right  to reapply in three years and agreed
to a temporary cessation of business  in Utah pending an on-site inspection  and
further  administrative proceedings. Stratton Oakmont's  license in the state of
New Jersey was  revoked by  an administrative  law judge,  which revocation  was
affirmed  by the New Jersey  Bureau of Securities, and  an appeal has been filed
with the appellate  division of  the New Jersey  Superior Court.  The states  of
Georgia,  Alabama  and  South Carolina  have  lifted their  suspension  and have
granted Stratton Oakmont  conditional licenses. Such  conditional licenses  were
granted  pursuant to  an order, which  Stratton Oakmont has  proposed to various
states, which provides provisions  for: (i) the  suspension of revocation,  (ii)
compliance  with recommendations  of the  Consultant, (iii)  an expedited claims
mediation arbitration process,  (iv) resolution of  claims seeking  compensatory
damages,  (v) restrictions on  use of operating revenue,  (vi) the limitation on
selling group  members in  offerings underwritten  by Stratton  Oakmont and  the
prohibition of participating as a selling group member in offerings underwritten
by  certain  other NASD  member  firms, (vii)  the  periodic review  of Stratton
Oakmont's  agents,  (viii)  the  retention  of  an  accounting  firm,  and  (ix)
supervision  and training,  restrictions on trading,  discretionary accounts and
 
                                       60
<PAGE>
other matters. The state of Oregon, as a result of the Permanent Injunction, has
filed a notice  of intent to  revoke Stratton Oakmont's  license subject to  the
holding  of  a  hearing  to determine  definitively  Stratton  Oakmont's license
status, and Stratton Oakmont, in this  proceeding as well as other  proceedings,
expects  to be  able to demonstrate  that the  Permanent Injunction is  not of a
nature as to be a lawful basis to revoke Stratton Oakmont's license permanently.
Finally, Stratton Oakmont has received an order limiting license in the state of
Nebraska. Such proceedings, if ultimately  successful, may adversely affect  the
market  for  and liquidity  of the  Company's  securities if  additional broker-
dealers do  not make  a market  in the  Company's securities.  Moreover,  should
investors  purchase any of the securities in this offering from Stratton Oakmont
prior to  a  revocation of  Stratton  Oakmont's  license in  their  state,  such
investors  will not  be able  to resell  such securities  in such  state through
Stratton Oakmont but  will be required  to retain a  new broker-dealer firm  for
such  purpose. The Company  cannot ensure that other  broker-dealers will make a
market in the Company's securities. In the event that other broker-dealers  fail
to  make a market in  the Company's securities, the  possibility exists that the
market for  and the  liquidity  of the  Company's  securities may  be  adversely
affected  to such an extent that public  security holders may not have anyone to
purchase their securities when offered for sale at any price. In such event, the
market for, and liquidity and prices of the Company's securities may not  exist.
It  should be noted  that although Stratton  Oakmont may not  be the sole market
maker in the Company's  securities, it will most  likely be the dominant  market
maker  in  the  Company's  securities.  In  addition,  in  the  event  that  the
Underwriter's license to do business is  revoked in the states set forth  above,
the  Underwriter  has  advised  the  Company that  the  members  of  the selling
syndicate in  this offering  may  be able  to make  a  market in  the  Company's
securities  in such  states and that  such an  event will not  have a materially
adverse effect on this offering, although no assurance can be made that such  an
event will not have a materially adverse effect on this offering.The Company has
applied  to register this offering  for the offer and  sale of its securities in
the following  states:  California, Colorado,  Connecticut,  Delaware,  Florida,
Georgia,  Hawaii, Illinois, Louisiana, New York,  Rhode Island and Virginia. The
offer and sale of the securities of this offering are not available in any other
state, absent an exemption from registration. See "Underwriting."
 
    The Company has  been advised  by Stratton  Oakmont that  Honorable John  E.
Sprizzo,  United States Judge for  the Southern District of  New York, on May 6,
1994 denied  the  class certification  motion  in PAUL  CARMICHAEL  V.  STRATTON
OAKMONT,  INC., ET AL., Civ.  0720 (JES), of the  plaintiff Paul Carmichael. The
class action complaint  alleges manipulation and  fraudulent sales practices  in
connection  with  a number  of  securities. The  allegations  were substantially
similar and  involve much  of the  same time  period as  the Commission's  civil
complaint  (discussed above). The Company has further been informed that counsel
for the  class  action  plaintiff  sought  to  re-argue  the  motion  for  class
certification, which motion for re-argument was denied.
 
DETERMINATION OF PUBLIC OFFERING PRICE
 
    Prior  to this offering, there has been  no public market for the securities
of the Company. The initial public offering price for the Units and the exercise
price of the Class A Warrants  have been determined by negotiations between  the
Company  and the Underwriter.  Among the factors  considered in the negotiations
were an analysis of the areas of  activity in which the Company is engaged,  the
present  state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of  management, the general condition of  the
securities  market  at the  time of  this  offering and  the demand  for similar
securities of comparable companies. The public  offering price of the Units  and
the  exercise  prices  of the  Class  A  Warrants do  not  necessarily  bear any
relationship to  assets,  earnings,  book  value  or  other  criteria  of  value
applicable to the Company.
 
                               LEGAL PROCEEDINGS
 
    e-Net,  Inc. is not a party to any legal proceedings and, to the best of its
information, knowledge and belief, none is contemplated or has been threatened.
 
                                       61
<PAGE>
                                 LEGAL MATTERS
 
   
    The validity of the securities being offered hereby will be passed upon  for
the  Company by Thomas T. Prousalis,  Jr., Esq., 1919 Pennsylvania Avenue, N.W.,
Suite 800, Washington,  D.C. 20006.  Mr. Prousalis  is the  beneficial owner  of
450,000  shares of  Common Stock of  the Company.  See "Principal Stockholders."
Certain legal matters  will be passed  upon for the  Underwriter by Bernstein  &
Wasserman, LLP, 950 Third Avenue, New York, New York 10022.
    
 
                                    EXPERTS
 
    The  financial statements of e-Net,  Inc. as of March  31, 1996, included in
the Registration  Statement and  this Prospectus  have been  included herein  in
reliance  on the report dated April 12, 1996, of Grant Thornton LLP, Independent
Certified Public Accountants, and upon the authority of such firm as experts  in
accounting and auditing.
 
                             ADDITIONAL INFORMATION
 
    The  Company has  filed with the  Commission an  SB-2 Registration Statement
under the Securities  Act of 1933,  as amended, with  respect to the  securities
offered  by  this  Prospectus.  This  Prospectus does  not  contain  all  of the
information set forth  in the  Registration Statement  and exhibits,  to all  of
which  reference is hereby  made. Statements contained in  this Prospectus as to
the contents of any contract or  other document referred to are not  necessarily
complete;  with  respect  to  each  such contract  or  other  document  filed or
incorporated by reference as an exhibit to the Registration Statement, reference
is made to the exhibit for a  more complete description of the matter  involved,
and  each such statement shall be deemed to be qualified in its entirety by such
reference. All of these documents may be inspected without charge at the  public
reference  facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549.
 
                                       62
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
 
<S>                                                                         <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................  F-2
 
FINANCIAL STATEMENTS
 
  Balance Sheet...........................................................  F-3
 
  Statement of Operations.................................................  F-4
 
  Statement of Cash Flows.................................................  F-5
 
  Statement of Stockholders' Equity.......................................  F-6
 
  Notes to Financial Statements...........................................  F-7
</TABLE>
 
                                      F-1
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
Board of Directors
e-Net, Inc.
 
    We  have audited the  accompanying balance sheet of  e-Net, Inc. (a Delaware
Corporation) as of  March 31, 1996,  and the related  statements of  operations,
stockholders'  equity and cash flows for the period from beginning of operations
(June  8,  1995)  to  March  31,  1996.  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  consolidated financial  statements referred  to  above
present  fairly, in all material respects, the financial position of e-Net, Inc.
as of March 31, 1996, and the results  of its operations and its cash flows  for
the  period from beginning  of operations (June  8, 1995) to  March 31, 1996, in
conformity with generally accepted accounting principles.
 
                                          GRANT THORNTON LLP
 
   
Vienna, Virginia
April 12, 1996 (except for
note B, as to which the
date is June 24, 1996 and
note G, as to which the
date is July 31, 1996)
    
 
                                      F-2
<PAGE>
                                  E-NET, INC.
                                 BALANCE SHEET
                                 MARCH 31, 1996
                                     ASSETS
 
   
<TABLE>
<CAPTION>
                                                                                                         PRO
                                                                                                        FORMA
                                                                                      HISTORICAL       (NOTE B)
                                                                                    --------------  --------------
 
<S>                                                                                 <C>             <C>
CURRENT ASSETS
  Cash and cash equivalents.......................................................  $      557,960  $    1,057,960
  Accounts receivable.............................................................          53,677          53,677
                                                                                    --------------  --------------
TOTAL CURRENT ASSETS..............................................................         611,637       1,111,637
PROPERTY, PLANT AND EQUIPMENT, NET................................................         134,285         134,285
                                                                                    --------------  --------------
                                                                                    $      745,922  $    1,245,922
                                                                                    --------------  --------------
                                                                                    --------------  --------------
 
                               LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
  Stockholder/Officer notes payable...............................................  $       45,000  $       45,000
  Accounts payable -- trade.......................................................           5,326           5,326
  Accrued liabilities.............................................................          22,787          22,787
  Deferred revenue................................................................          20,000          20,000
                                                                                    --------------  --------------
TOTAL CURRENT LIABILITIES.........................................................          93,113          93,113
LONG-TERM DEBT....................................................................         500,000        --
                                                                                    --------------  --------------
TOTAL LIABILITIES.................................................................         593,113          93,113
 
STOCKHOLDERS' EQUITY
  Common stock, $.01 par value, 50,000,000 shares authorized, 3,750,000 shares
   outstanding, historical; 4,000,000 shares outstanding, pro forma...............          37,500          40,000
  Stock subscriptions and notes receivable........................................        (280,000)        (30,000)
  Unamortized cost of bridge financing............................................      (2,885,135)     (5,385,135)
  Additional paid-in capital......................................................       3,817,500       7,065,000
  Retained deficit................................................................        (537,056)       (537,056)
                                                                                    --------------  --------------
TOTAL STOCKHOLDERS' EQUITY........................................................         152,809       1,152,809
                                                                                    --------------  --------------
                                                                                    $      745,922  $    1,245,922
                                                                                    --------------  --------------
                                                                                    --------------  --------------
</TABLE>
    
 
         The accompanying notes are an integral part of this statement.
 
                                      F-3
<PAGE>
                                  E-NET, INC.
                            STATEMENT OF OPERATIONS
      PERIOD FROM BEGINNING OF OPERATIONS (JUNE 8, 1995) TO MARCH 31, 1996
 
   
<TABLE>
<S>                                                                              <C>
SALES..........................................................................  $  293,876
 
OPERATING EXPENSES
  Cost of product sales and service............................................      88,360
  Selling, general and administrative..........................................     115,171
                                                                                 ----------
INCOME FROM OPERATIONS.........................................................      90,345
 
INTEREST AND FINANCING CHARGES
  Interest expense -- private placement........................................    (614,865)
  Interest expense.............................................................      (6,884)
  Other expenses...............................................................      (6,143)
  Interest Income..............................................................         491
                                                                                 ----------
LOSS BEFORE INCOME TAXES.......................................................    (537,056)
 
INCOME TAX PROVISION...........................................................      --
                                                                                 ----------
NET LOSS.......................................................................  $ (537,056)
                                                                                 ----------
                                                                                 ----------
PRO FORMA ADJUSTMENT TO REFLECT ADDITIONAL COMPENSATION EXPENSE................    (237,500)
                                                                                 ----------
PRO FORMA NET LOSS.............................................................    (774,556)
                                                                                 ----------
                                                                                 ----------
PRO FORMA LOSS PER SHARE.......................................................  $     (.26)
                                                                                 ----------
                                                                                 ----------
 
WEIGHTED AVERAGE SHARES OUTSTANDING............................................   3,017,808
</TABLE>
    
 
         The accompanying notes are an integral part of this statement.
 
                                      F-4
<PAGE>
                                  E-NET, INC.
                            STATEMENTS OF CASH FLOWS
      PERIOD FROM BEGINNING OF OPERATIONS (JUNE 8, 1995) TO MARCH 31, 1996
 
<TABLE>
<S>                                                                               <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss......................................................................  $(537,056)
                                                                                  ---------
  Adjustments to reconcile net loss to net cash from operating activities
    Interest expense -- private placement.......................................    614,865
    Depreciation and amortization...............................................     30,715
    Changes in operating assets and liabilities
      (Increase) in accounts receivable.........................................    (53,677)
      Increase in accounts payable and accrued liabilities......................     28,113
      Increase in deferred revenue..............................................     20,000
                                                                                  ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................................    102,960
                                                                                  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from shareholder/officer loans.......................................     30,000
  Payment of shareholder/officer loans..........................................    (25,000)
  Payment of notes payable arising from asset acquisition.......................    (50,000)
  Proceeds from Issuance of bridge notes payable................................    500,000
                                                                                  ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......................................    455,000
                                                                                  ---------
NET INCREASE IN CASH............................................................    557,960
CASH AT BEGINNING OF PERIOD.....................................................     --
                                                                                  ---------
CASH AT END OF PERIOD...........................................................  $ 557,960
                                                                                  ---------
                                                                                  ---------
 
SUPPLEMENTAL DISCLOSURES:
  Income Taxes Paid.............................................................  $  --
                                                                                  ---------
                                                                                  ---------
  Interest Paid.................................................................  $     688
                                                                                  ---------
                                                                                  ---------
</TABLE>
 
NONCASH INVESTING AND FINANCING ACTIVITIES
 
The Company acquired fixed assets of  $165,000 in exchange for notes payable  of
$90,000 and a capital contribution of $75,000.
 
   
The  Company issued  3,250,000 shares  of common  stock for  notes receivable of
$310,000.
    
 
         The accompanying notes are an integral part of this statement.
 
                                      F-5
<PAGE>
                                  E-NET, INC.
                       STATEMENT OF STOCKHOLDERS' EQUITY
      PERIOD FROM BEGINNING OF OPERATIONS (JUNE 8, 1995) TO MARCH 31, 1996
 
   
<TABLE>
<CAPTION>
                                                  COMMON STOCK         STOCK       UNAMORTIZED
                                               ------------------  SUBSCRIPTIONS     COST OF    ADDITIONAL                TOTAL
                                                NO. OF               AND NOTES       BRIDGE      PAID IN    RETAINED   STOCKHOLDERS
                                                SHARES    AMOUNT    RECEIVABLE      FINANCING    CAPITAL     DEFICIT      EQUITY
                                               ---------  -------  -------------   -----------  ----------  ---------  ------------
<S>                                            <C>        <C>      <C>             <C>          <C>         <C>        <C>
Balance, inception
Initial capitalization.......................  3,000,000  $30,000    $ (30,000)    $   --       $   --      $  --       $  --
Contribution of assets from
 stockholder/officer.........................     --        --         --              --           75,000     --          75,000
Sale of common stock for note................    250,000    2,500     (250,000)        --          247,500     --          --
Issuance of common stock and additional
 capital associated with the financing cost
 from the issuance of bridge units...........    500,000    5,000      --           (2,885,135)  3,495,000     --         614,865
Net loss.....................................     --        --         --              --           --       (537,056)   (537,056)
                                               ---------  -------  -------------   -----------  ----------  ---------  ------------
Balance, March 31, 1996......................  3,750,000  $37,500    $(280,000)    $(2,885,135) $3,817,500  $(537,056)  $ 152,809
                                               ---------  -------  -------------   -----------  ----------  ---------  ------------
                                               ---------  -------  -------------   -----------  ----------  ---------  ------------
</TABLE>
    
 
         The accompanying notes are an integral part of this statement.
 
                                      F-6
<PAGE>
                                  E-NET, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 1996
 
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    NATURE OF OPERATIONS
 
   
    e-Net,   Inc.  was  incorporated   on  January  9,   1995  with  an  initial
capitalization of 3,000,000  shares of  Common Stock  after giving  effect to  a
600:1  stock split in January  1996 and a 2:1 reverse  stock split in July 1996.
The Company commenced operations on June 8, 1995. The Company develops, markets,
and supports  open  client, server  and  integrated applications  software  that
enables  local, national and international telephone communications, information
exchange and commerce over the Internet  and private networks. The Company  also
sells  other products  used in the  management and billing  of computer network,
telephone and computer usage.
    
 
    The Company's operations to date have concentrated on continuing development
of its  products,  establishing  acceptance  of its  software  products  in  the
telecommunications  industry, providing  services to its  existing customer base
and securing financing necessary to  fund development, operations and  expansion
of  its  business.  Management believes  cash  flow provided  by  operations and
proceeds of  $1,000,000  from bridge  financing  described  in Note  B  will  be
sufficient  to sustain  operations in fiscal  1997. Additional  financing may be
necessary to provide for continued product development and further expansion  of
operations.  While assurance cannot be given as  to its success, the Company has
entered into a letter  of intent in  March 1996 with an  underwriter for a  firm
commitment offering of securities as described in Note G.
 
    REVENUE RECOGNITION
 
    Revenue  is recognized on the sale of software products upon shipment unless
future obligations exist wherein a portion of the revenue is deferred until  the
obligation  is satisfied. Revenue from services rendered is recognized either as
the services are  rendered based  upon fixed  hourly rates  or at  contractually
determined fixed monthly fees. Approximately 20% of the total revenue recognized
was  derived from the sale  of software products. The  remaining revenue was the
result of providing services.
 
    For the period ending March 31, 1996, the Company derived 32%, 29%, 16%  and
13% of its sales from four customers, respectively.
 
    ACCOUNTS RECEIVABLE
 
    Accounts  receivable are  stated at the  unpaid balances,  less allowance on
uncollectible accounts, if any. Management periodically reviews its  outstanding
accounts   receivable  to  assess  collectibility  of  balances  based  on  past
experience and  evaluation  of  current  adverse  situations  which  may  affect
collectibility of receivables. At March 31, 1996, management deemed all balances
fully collectible and did not establish an allowance for uncollectible accounts.
 
    USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
 
    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.
 
    PROPERTY AND EQUIPMENT
 
    Property  and  equipment  are  carried  at cost,  net  of  an  allowance for
accumulated depreciation and amortization. Depreciation is computed on equipment
and furniture, using a declining balance method over a five-year period.
 
                                      F-7
<PAGE>
                                  E-NET, INC.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1996
 
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    EARNINGS PER SHARE
 
   
    Earnings per share for each period presented are based upon weighted average
shares outstanding  during  the  period  from June  1995,  the  date  operations
commenced, through March 31, 1996, adjusted retroactively, where applicable, for
the  effect of a 600:1 stock split in January 1996 and a 2:1 reverse stock split
in July 1996. The weighted average shares outstanding also includes the weighted
average effect (17,808 shares) of 500,000 shares of Common Stock issued in March
1996 pursuant  to  the issuance  of  the Bridge  Units.  The Bridge  Units  have
otherwise  not been taken  into account in  computing earnings per  share as the
value of the Bridge Units  is equivalent to the  Units offered in the  Company's
initial  public offering. The effect of the issuance of 250,000 shares of Common
Stock in March 1996  for a $250,000  promissory note has  not been reflected  in
weighted  average shares outstanding because the note was cancelled in June 1996
in exchange for the return of all such shares.
    
 
NOTE B -- SIGNIFICANT TRANSACTIONS
 
    PRIVATE PLACEMENT TRANSACTIONS
 
   
    In March  1996, the  Company issued  250,000  shares of  Common Stock  to  a
nonaffiliated  investment banking  firm in  a private  placement transaction for
aggregate consideration of $250,000, represented  by a full recourse  promissory
note  for the  entire purchase  price. In  June 1996,  this promissory  note was
cancelled in exchange for the return of the 250,000 shares of Common Stock.
    
 
   
    In March 1996, in a transaction arranged by the underwriter of the Company's
initial public  offering, the  Company was  loaned $500,000  by a  nonaffiliated
person.  Principal and interest computed at the  rate of eight percent per annum
becomes due at the earlier  of June 1, 1997, or  the closing date of an  initial
public  offering of securities of the Company which is expected to occur in June
1996. As  additional consideration  for  making such  loan, the  Company  issued
250,000  Units ("Bridge Units") each containing  two shares of Common Stock, two
Class A Warrants and two Class B Warrants to the lender. In June 1996, the  loan
principal  was converted to  paid in capital and  accounted for as consideration
for the 250,000 Bridge Units received  in connection with the loan. Inasmuch  as
these  Bridge Units have been issued  in contemplation of the proposed offering,
financing expense, valued using the  proposed offering price per share,  related
to  the issuance of these securities of  $3,000,000 will be recorded between the
date of issuance and the anticipated offering date, with a corresponding  credit
to paid-in capital. The value of $3,000,000 attributed to issuance of the Bridge
Units  was  computed  using the  offering  price  of the  Units  offered  in the
Company's proposed public offering less the amount of debt converted to paid  in
capital  in June 1996. As of March 31, 1996, the Company had accrued $614,865 of
this financing  expense. The  Company has  recorded the  loan of  $500,000 as  a
noncurrent  liability at March 31,  1996. It is not  practicable to estimate the
fair value of  this debt  as there  are no quoted  market prices  for debt  with
similar  terms.  The effect  of the  June  1996 conversion  of the  bridge loans
outstanding as of March  31, 1996 to  equity will be  recorded in the  Company's
fiscal 1997 financial statements.
    
 
   
    In April 1996, in a transaction arranged by the underwriter of the Company's
initial  public offering, the Company was loaned $500,000 by three nonaffiliated
persons. Principal and interest computed at the rate of eight percent per  annum
becomes  due at the earlier of  June 1, 1997, or the  closing date of an initial
public offering of securities of the Company which is expected to occur in  June
1996.  As  additional consideration  for making  such  loan, the  Company issued
250,000 Bridge Units identical to those issued in March 1996 as described above.
In June 1996, the loan principal was converted to paid in capital and  accounted
for  as consideration for  the 250,000 Bridge Units  received in connection with
the loan. Inasmuch as  these Bridge Units have  been issued in contemplation  of
the
    
 
                                      F-8
<PAGE>
                                  E-NET, INC.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1996
 
NOTE B -- SIGNIFICANT TRANSACTIONS (CONTINUED)
proposed offering, financing expense related to the issuance of these securities
of  $3,000,000 will be recorded between the date of issuance and the anticipated
offering date, with  a corresponding  credit to  paid-in capital.  The value  of
$3,000,000  attributed to  issuance of the  Bridge Units was  computed using the
offering price of the  Units offered in the  Company's proposed public  offering
less the amount of debt converted to paid in capital in June 1996.
 
    Due to the significance of the transactions which occurred in April and June
1996, a pro forma balance sheet has been presented in the accompanying financial
statements  to present the financial position of the Company as if the following
transactions had occurred on March 31, 1996:
 
    -Proceeds from $500,000  bridge loan in  April 1996 which  was converted  to
     capital  in June 1996 in connection  with the issuance of associated bridge
     units.
 
    -Increase in the unamortized cost associated with the issuance of the bridge
     units in  April  1996 and  corresponding  credit  to paid  in  capital  for
     $3,000,000.
 
    -Decrease  in the  unamortized cost associated  with the  issuance of bridge
     units in March 1996 as a result of the conversion of debt to equity in June
     1996 of $500,000.
 
   
    -Cancellation of the $250,000 note receivable  in June 1996 upon the  return
     of 250,000 shares of common stock.
    
 
    ACQUISITIONS
 
    In  June 1995, the Company acquired the rights and title to certain tangible
assets comprised  primarily  of  computer  equipment  and  peripherals,  certain
products  and intangible assets  related thereto, and  contract rights in return
for a promissory  note of  $50,000 and the  release of  the seller's  obligation
valued at $75,000 for compensation formerly due to the president of the Company.
The  Company allocated  the entire  purchase price  of $125,000  to the tangible
assets acquired based upon their fair  value. The portion of the purchase  price
attributable   to  the  release  of  the  compensation  obligation  due  to  the
stockholder/officer was  credited  to additional  paid  in capital.  The  entire
principal  balance due under the promissory note and interest thereon was repaid
by the Company in March 1996.
 
    In March 1996, the Company acquired the right, title and interest to certain
inventions and related patents ("Technology") from two individuals who are  also
stockholders  of the  Company in  an assignment of  patent rights  in return for
future royalties to each individual computed quarterly equal to 2 1/2% of  gross
profit  from products sold related to the acquired Technology. Royalties will be
expensed in the  period in which  related sales are  recognized. The  assignment
agreement provides for the right of the individuals to repurchase the Technology
if  the Company  fails to  make reasonable  efforts to  develop and  exploit the
market opportunities made  available by the  Technology. The agreement  provides
that  the Company allocate $1,000,000 of paid  in capital to develop and exploit
the market  opportunities  of  the  Technology by  December  31,  1996,  or  the
Technology will be subject to repurchase by the inventors of the Technology.
 
                                      F-9
<PAGE>
                                  E-NET, INC.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1996
 
NOTE C -- PROPERTY AND EQUIPMENT
    Property and equipment consist of the following at March 31, 1996:
 
<TABLE>
<S>                                                                <C>
Furniture and office equipment...................................  $ 125,000
Airplane.........................................................     40,000
                                                                   ---------
                                                                     165,000
Less accumulated depreciation....................................    (30,715)
                                                                   ---------
Property and equipment -- net....................................  $ 134,285
                                                                   ---------
                                                                   ---------
</TABLE>
 
NOTE D -- STOCKHOLDER/OFFICER NOTES PAYABLE
    Stockholder notes payable consist of the following as of March 31, 1996:
 
<TABLE>
<S>                                                                 <C>
Loan from an officer of the Company, bearing interest at 8% per
 annum with principal and interest due June 3, 1996. The note is
 collateralized by an airplane....................................  $  40,000
Loan from an officer of the Company, bearing interest at 10% per
 annum with payment of principal and interest due June 15,
 1996.............................................................      5,000
                                                                    ---------
                                                                    $  45,000
                                                                    ---------
                                                                    ---------
</TABLE>
 
    Management's estimate of the fair value of these liabilities is the carrying
value.
 
NOTE E -- INCOME TAXES
    The  income tax  provision consists  of the  following for  the period ended
March 31, 1996:
 
<TABLE>
<S>                                                                 <C>
Deferred
  Federal.........................................................  $   2,267
  State...........................................................        426
  Valuation allowance.............................................     (2,693)
                                                                    ---------
Net provision.....................................................  $  --
                                                                    ---------
                                                                    ---------
</TABLE>
 
    The effective tax rate  for the period  ended March 31,  1996 was (7.4)%.  A
reconciliations  between  the  United  States  federal  statutory  rate  and the
effective tax rate follows:
 
<TABLE>
<S>                                                               <C>
Tax (benefit) at U.S. federal statutory rates...................  $(182,599)
Increase (decrease) resulting from:
  State tax (benefit)...........................................    (21,267)
  Permanent difference -- interest expense private placement....    200,812
  Other permanent differences...................................        361
  Valuation allowance...........................................      2,693
                                                                  ---------
  Income tax provision..........................................  $  --
                                                                  ---------
                                                                  ---------
</TABLE>
 
    The Company's reporting period for tax purposes is the calendar year.  Taxes
on  the  net loss  for  the period  January through  March  is reflected  in the
calculation of the deferred tax asset. A valuation allowance has been recognized
in an amount equal to the deferred tax asset.
 
                                      F-10
<PAGE>
                                  E-NET, INC.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1996
 
NOTE E -- INCOME TAXES (CONTINUED)
    The tax  effect of  temporary differences  between the  financial  statement
amounts  and tax bases of  assets and liabilities which  give rise to a deferred
tax asset is as follows at March 31, 1996:
 
<TABLE>
<S>                                                                 <C>
Net loss for January 1 through March 31, 1996.....................  $  31,997
Accounts Receivable...............................................    (28,704)
Accounts Payable and Accrued Expenses.............................        893
Depreciation expense..............................................     (1,493)
Valuation allowance...............................................     (2,693)
                                                                    ---------
Deferred taxes payable............................................  $  --
                                                                    ---------
                                                                    ---------
</TABLE>
 
NOTE F -- COMMITMENTS AND CONTINGENT LIABILITIES
 
    LEASE COMMITMENT
 
    The Company leases  office space  under an  month to  month operating  lease
which provides for monthly rent payments of $1,900.
 
    EMPLOYMENT AGREEMENT
 
    The  Company entered  into an employment  agreement effective  April 1, 1996
with an officer. Minimum future annual  salary commitments of the Company  under
the agreements are as follows:
 
<TABLE>
<CAPTION>
              YEAR ENDING
               MARCH 31,                    SALARY        BONUS         TOTAL
- ----------------------------------------  -----------  -----------  -------------
<S>                                       <C>          <C>          <C>
   1997.................................  $   175,000  $    87,500  $     262,500
   1998.................................      175,000       87,500        262,500
   1999.................................      175,000       87,500        262,500
   2000.................................      175,000       87,500        262,500
   2001.................................      175,000       87,500        262,500
                                          -----------  -----------  -------------
                                          $   875,000  $   437,500  $   1,312,500
                                          -----------  -----------  -------------
                                          -----------  -----------  -------------
</TABLE>
 
    The agreement also provides for bonuses upon certain performance criteria of
the  Company and the  determination of the  Board of Directors.  Pursuant to the
agreement, employment may  be terminated  by the Company  with cause  or by  the
executive with or without good reason. Termination by the Company without cause,
or  by the executive for good reason, would subject the Company to liability for
in an amount equal  to six months  of the terminated  executive's salary at  the
date  of termination plus comparable insurance  benefits being received prior to
termination.
 
    The accompanying financial statements reflect compensation paid and  accrued
for  services rendered,  if any, by  the officer  at the salary  level which the
Company believes is reasonable under the circumstances. PRO FORMA data presented
in the accompanying statement of operations reflects the result of operations on
a PRO FORMA basis had  the officer been employed by  the Company for the  entire
period at a compensation level equal to that contained in the above agreement.
 
   
NOTE G -- STOCKHOLDERS' EQUITY
    
 
   
    PROPOSED INITIAL PUBLIC OFFERING
    
 
   
    The  Company has entered into  a letter of intent  with an underwriter for a
firm commitment offering of 500,000  Units at a price  of $14.00 per Unit.  Each
Unit consists of two shares of Common Stock and two redeemable Class A Warrants.
The Class A Warrants shall be exercisable commencing
    
 
                                      F-11
<PAGE>
                                  E-NET, INC.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1996
 
   
NOTE G -- STOCKHOLDERS' EQUITY (CONTINUED)
    
   
one  year after the date  of the prospectus and  entitles the holder to purchase
one share  of Common  Stock  at $7.50  per share  during  the four  year  period
commencing  one  year from  the  effective date  of  the offering.  The  Class A
Warrants are redeemable under certain conditions.
    
 
    The Company  paid  $50,000 in  April  1996 to  an  attorney who  is  also  a
stockholder  of the Company  in return for services  rendered in connection with
the offering.
 
   
    REVERSE STOCK SPLIT
    
 
   
    In July 1996, the Company caused a 2:1 reverse stock split of its issued and
outstanding securities. Accordingly,  all references  to the  securities of  the
Company have been retroactively adjusted to reflect this reverse split.
    
 
NOTE H -- SUBSEQUENT EVENT
    In  January 1996, the Company signed a  letter of intent to purchase certain
assets from an entity of which two of the three owners are also stockholders  of
the  Company. These assets  are prototype boards,  proprietary software code and
existing  research  and  development  relating  to  specific  computer  software
products.  In May 1996, the Company completed  the purchase for cash of $50,000.
Management intends to allocate the entire purchase price of $50,000 to  research
and  development expense and therefore, record  a charge to operations in fiscal
year 1997 for that amount. The entity  from which the assets are intended to  be
acquired  is  dormant and  contains no  assets other  than the  above intangible
assets. As a result, condensed financial statements of this entity have not been
presented.
 
                                      F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
    NO  DEALER,  SALESMAN  OR  OTHER  PERSON HAS  BEEN  AUTHORIZED  TO  GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS  NOT CONTAINED IN THIS PROSPECTUS  IN
CONNECTION  WITH THE OFFER  MADE HEREBY. IF  GIVEN OR MADE,  SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT  CONSTITUTE AN OFFER OF  ANY SECURITIES OTHER THAN  THE
SECURITIES  TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER WOULD BE UNLAWFUL. ANY MATERIAL MODIFICATION OF THE OFFERING
WILL BE ACCOMPLISHED BY MEANS OF AN AMENDMENT TO THE REGISTRATION STATEMENT.  IN
ADDITION,  THE RIGHT IS  RESERVED BY THE  COMPANY TO CANCEL  ANY CONFIRMATION OF
SALE PRIOR  TO  THE  RELEASE OF  FUNDS,  IF,  IN THE  OPINION  OF  THE  COMPANY,
COMPLETION OF SUCH SALE WOULD VIOLATE FEDERAL OR STATE SECURITIES LAWS OR A RULE
OR  POLICY OF THE NATIONAL ASSOCIATION  OF SECURITIES DEALERS, INC., WASHINGTON,
D.C. 20006.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Summary........................................................    3
Risk Factors..............................................................    7
Use of Proceeds...........................................................   20
Dilution..................................................................   22
Capitalization............................................................   23
Dividend Policy...........................................................   23
Management's Discussion and Analysis or Plan of Operation.................   24
Business..................................................................   29
Management................................................................   42
Principal Stockholders....................................................   48
Certain Transactions......................................................   49
Description of Securities.................................................   51
Underwriting..............................................................   56
Legal Proceedings.........................................................   61
Legal Matters.............................................................   62
Experts...................................................................   62
Additional Information....................................................   62
Index to Financial Statements.............................................  F-1
Report of Independent Certified Public Accountants........................  F-2
</TABLE>
    
 
                            ------------------------
 
    UNTIL AUGUST   , 1996 (25 DAYS AFTER THE EFFECTIVE DATE OF THIS PROSPECTUS),
ALL BROKER-DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,  WHETHER
OR  NOT  PARTICIPATING  IN  THIS  DISTRIBUTION, MAY  BE  REQUIRED  TO  DELIVER A
PROSPECTUS. THIS  IS IN  ADDITION TO  THE  OBLIGATION OF  DEALERS TO  DELIVER  A
PROSPECTUS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
   
                                 500,000 UNITS
    
 
                                  E-NET, INC.
 
                             ---------------------
 
                                   PROSPECTUS
 
                             ---------------------
 
                             STRATTON OAKMONT, INC.
 
                                AUGUST   , 1996
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                    PART TWO
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 24.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
    As  permitted by  Delaware law,  the Company's  Certificate of Incorporation
includes a provision which provides that a director of the Company shall not  be
personally  liable to the Company or its stockholders for monetary damages for a
breach of  fiduciary duty  as  a director,  except (i)  for  any breach  of  the
director's  duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a  knowing
violation  of the law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware, which prohibits the unlawful payment of dividends or  the
unlawful  repurchase or  redemption of stock,  or (iv) for  any transaction from
which the  director derives  an  improper personal  benefit. This  provision  is
intended  to afford directors  protection against, and  to limit their potential
liability for monetary damages  resulting from, suits alleging  a breach of  the
duty  of care by a director. As a consequence of this provision, stockholders of
the Company will  be unable to  recover monetary damages  against directors  for
action  taken  by them  that may  constitute negligence  or gross  negligence in
performance of  their  duties  unless  such conduct  falls  within  one  of  the
foregoing  exceptions.  The provision,  however, does  not alter  the applicable
standards governing a director's fiduciary duty and does not eliminate or  limit
the right of the Company or any stockholder to obtain an injunction or any other
type  of  nonmonetary  relief  in  the event  of  a  breach  of  fiduciary duty.
Management of the  Company believes this  provision will assist  the Company  in
securing  and retaining qualified persons to  serve as directors. The Company is
unaware of  any pending  or threatened  litigation against  the Company  or  its
directors  that would result in any liability for which such director would seek
indemnification or similar protection.
 
    Such indemnification  provisions are  intended  to increase  the  protection
provided  directors and,  thus, increase  the Company's  ability to  attract and
retain qualified  persons to  serve as  directors. Because  directors  liability
insurance  is only available at considerable cost  and with low dollar limits of
coverage and broad policy exclusions, the Company does not currently maintain  a
liability insurance policy for the benefit of its directors although the Company
may  attempt to acquire such insurance in  the future. The Company believes that
the substantial increase  in the number  of lawsuits being  threatened or  filed
against  corporations  and their  directors  and the  general  unavailability of
directors liability insurance to provide  protection against the increased  risk
of  personal liability resulting from such lawsuits have combined to result in a
growing reluctance on the part of capable persons to serve as members of  boards
of  directors of public companies. The  Company also believes that the increased
risk of  personal  liability  without  adequate  insurance  or  other  indemnity
protection  for its  directors could result  in overcautious  and less effective
direction and management of the Company. Although no directors have resigned  or
have  threatened  to resign  as a  result  of the  Company's failure  to provide
insurance or other indemnity protection from liability, it is uncertain  whether
the  Company's directors would continue to  serve in such capacities if improved
protection from liability were not provided.
 
    The provisions affecting  personal liability  do not  abrogate a  director's
fiduciary  duty  to the  Company and  its  shareholders, but  eliminate personal
liability for monetary damages for breach  of that duty. The provisions do  not,
however,  eliminate or limit the  liability of a director  for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal  payment of a dividend  or repurchase of stock,  for
obtaining  an  improper personal  benefit, for  breaching  a director's  duty of
loyalty (which  is  generally  described  as  the duty  not  to  engage  in  any
transaction  which involves a  conflict between the interest  of the Company and
those of the  director) or for  violations of the  federal securities laws.  The
provisions  also  limit or  indemnify against  liability resulting  from grossly
negligent decisions including grossly  negligent business decisions relating  to
attempts to change control of the Company.
 
    The  provisions  regarding  indemnification provide,  in  essence,  that the
Company will  indemnify its  directors  against expenses  (including  attorneys'
fees),  judgments, fines and amounts paid  in settlement actually and reasonably
incurred  in   connection  with   any  action,   suit  or   proceeding   arising
 
                                      II-1
<PAGE>
out  of the director's  status as a  director of the  Company, including actions
brought by or  on behalf of  the Company (shareholder  derivative actions).  The
provisions do not require a showing of good faith. Moreover, they do not provide
indemnification  for  liability arising  out  of willful  misconduct,  fraud, or
dishonesty, for "short-swing"  profits violations under  the federal  securities
laws,  or for the  receipt of illegal  remuneration. The provisions  also do not
provide indemnification  for  any liability  to  the extent  such  liability  is
covered  by  insurance.  One purpose  of  the  provisions is  to  supplement the
coverage provided by such  insurance. However, as  mentioned above, the  Company
does  not currently  provide such  insurance to its  directors, and  there is no
guarantee that the Company will provide  such insurance to its directors in  the
near future although the Company may attempt to obtain such insurance.
 
    The provisions diminish the potential rights of action which might otherwise
be available to shareholders by limiting the liability of officers and directors
to   the  maximum  extent   allowable  under  Delaware   law  and  by  affording
indemnification against most damages and  settlement amounts paid by a  director
of  the Company in connection with  any shareholders derivative action. However,
the provisions do not have the effect of limiting the right of a shareholder  to
enjoin  a director from  taking actions in  breach of his  fiduciary duty, or to
cause the Company  to rescind  actions already  taken, although  as a  practical
matter courts may be unwilling to grant such equitable remedies in circumstances
in  which such actions have  already been taken. Also,  because the Company does
not presently  have  directors  liability  insurance and  because  there  is  no
assurance that the Company will procure such insurance or that if such insurance
is  procured  it  will  provide  coverage  to  the  extent  directors  would  be
indemnified under the provisions, the Company may be forced to bear a portion or
all of  the  cost  of  the director's  claims  for  indemnification  under  such
provisions.  If the Company is forced to bear the costs for indemnification, the
value of the  Company stock may  be adversely  affected. In the  opinion of  the
Securities  and  Exchange  Commission, indemnification  for  liabilities arising
under the Securities Act of 1933 is contrary to public policy and, therefore, is
unenforceable.
 
ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
   
    The following is an itemization of expenses, payable by the Company from the
net proceeds of this  offering, incurred by the  Company in connection with  the
issuance and distribution of the securities of the Company being offered hereby.
The Company has agreed to pay all of the expenses related to the registration of
the  securities by the Selling Security-holders,  which are included herein. All
expenses are estimated except the SEC,  NASD and Nasdaq Registration and  Filing
Fees. See "Use of Proceeds."
    
 
   
<TABLE>
<S>                                                              <C>
SEC Registration and Filing Fee(1).............................  $    6,407
NASD Registration and Filing Fee(1)............................       2,358
Nasdaq Registration and Filing Fee.............................      10,000
Financial Printing.............................................     175,000
Transfer Agent Fees............................................      10,000
Accounting Fees and Expenses...................................      85,000
Legal Fees and Expenses........................................     375,000
Blue Sky Fees and Expenses.....................................      85,000
Underwriter's Nonaccountable Expense Allowance.................     241,500
Miscellaneous..................................................       9,735
                                                                 ----------
    TOTAL......................................................  $1,000,000
                                                                 ----------
                                                                 ----------
</TABLE>
    
 
- ------------------------
(1) Paid  upon  initial  filing  of  this  Registration  Statement  and  related
    Prospectus.
 
ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES.
 
   
    The following information sets forth all  securities of the Company sold  by
it  within the past three years, adjusted  retroactively for a 600:1 stock split
in January 1996 and  a 2:1 reverse  stock split in  July 1996, which  securities
were not registered under the Securities Act of 1933, as amended.
    
 
                                      II-2
<PAGE>
   
    In  January 1995,  the Company issued  3,000,000 shares of  its common stock
(which includes a 600:1 stock split in  January 1996 and a 2:1 reverse split  in
July  1996) to 15 persons, including the  officers and directors of the Company,
in a private placement transaction in consideration of $100, or its par value at
the time of issuance.
    
 
   
    In March 1996, the Company issued 250,000 shares of its Common Stock to  ATG
Group,  Inc.,  a  Brookville,  New  York based  investment  firm,  in  a private
placement transaction for aggregate consideration of $250,000, represented by  a
full recourse promissory note for the entire purchase price. The promissory note
is due in full in March 2001 and bears interest, payable upon maturity at 8% per
annum.  Andrew T. Greene, a  former officer and director  of the Underwriter, is
the officer, director  and stockholder of  ATG Group,  Inc. At the  time of  the
acquisition  of the shares  of Common Stock  of the Company  by ATG Group, Inc.,
neither ATG Group, Inc. nor Mr. Greene had an association or affiliation, in any
manner whatsoever, with the Underwriter or any other member firm of the National
Association of Securities Dealers, Inc. However,  in June 1996, ATG Group,  Inc.
agreed   to  cancel  its  250,000  shares  of  the  Company's  Common  Stock  in
consideration of the cancellation of its $250,000 full recourse promissory note.
    
 
   
    Also, in March and April 1996,  the Company borrowed $1,000,000 in a  bridge
loan  from  four persons  who  are nonaffiliated  with  the Underwriter  and the
Company, each  of whom  is  an accredited  investor,  to wit:  Edward  Ratkovich
($500,000),  Robert Foise ($250,000), Armstrong Industries ($200,000) and Martin
Sumichrast ($50,000),  at the  rate  of eight  percent simple  annual  interest.
General  Ratkovich  and Mr.  Sumichrast  are officers,  directors  and principal
stockholders  of   Nasdaq  listed   companies  recently   underwritten  by   the
Underwriter.  Mr. Foise and Armstrong Industries have previously participated as
investors in  companies recently  underwritten by  the Underwriter.  In  further
consideration  of the bridge loan, the Company issued 1,000,000 shares of Common
Stock, 1,000,000  Class  A Warrants  and  1,000,000  Class B  Warrants  to  such
persons.  However, in June 1996, such persons converted their loans to equity in
consideration of  the prior  issuance  of the  securities. See  "Description  of
Securities."
    
 
   
    In  July 1996,  the Company  caused a  2:1 reverse  split of  its issued and
outstanding shares  of common  stock, Class  A Warrants  and Class  B  Warrants,
resulting  in 4,000,000 shares  of common stock, 1,000,000  Class A Warrants and
1,000,000 Class B Warrants currently issued and outstanding.
    
 
    All unregistered securities issued by the Company prior to this offering are
deemed "restricted securities"  within the meaning  of that term  as defined  in
Rule 144 and have been issued pursuant to certain "private placement" exemptions
under  Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations  as  promulgated   by  the  Securities   and  Exchange   Commission,
Washington,  D.C. 20549, such that the sales of the securities were transactions
by an issuer not involving any public offering. See "Description of Securities."
 
    Reference is  also  made  hereby to  "Dilution,"  "Principal  Stockholders,"
"Certain  Transactions" and  "Description of  Securities" in  the Prospectus for
more information with respect to the previous issuance and sale of the Company's
securities.
 
    All of  the  aforesaid securities  have  been appropriately  marked  with  a
restricted legend and are "restricted securities," as defined in Rule 144 of the
rules  and regulations  of the  Securities and  Exchange Commission, Washington,
D.C. 20549. All of the aforesaid securities were issued for investment  purposes
only  and not  with a  view to redistribution,  absent registration.  All of the
aforesaid  persons  have  been  fully   informed  and  advised  concerning   the
Registrant,  its  business, financial  and  other matters.  Transactions  by the
Registrant involving the sales of these  securities set forth above were  issued
pursuant to the "private placement" exemptions under the Securities Act of 1933,
as  amended, as transactions by an issuer not involving any public offering. The
Registrant has been informed that each person is able to bear the economic  risk
of his investment and is aware that the securities were not registered under the
Securities  Act of 1933, as  amended, and cannot be  re-offered or re-sold until
they have  been  so  registered  or  until  the  availability  of  an  exemption
therefrom. The
 
                                      II-3
<PAGE>
transfer  agent and registrar of the Registrant will be instructed to mark "stop
transfer" on its ledgers to assure that these securities will not be transferred
absent registration  or until  the  availability of  an exemption  therefrom  is
determined.
 
ITEM 27.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
   
    This  following  is a  list  of Exhibits  marked  by an  asterisk  (*) filed
herewith by e-Net, Inc.  as part of  Amendment No. 11  to the SB-2  Registration
Statement and related Prospectus:
    
 
   
<TABLE>
<C>      <S>
      1.0 Form of Underwriting Agreement.*
      1.1 Selected Dealers Agreement.*
      3.0 Certificate of Incorporation, filed January 9, 1995.
      3.1 By-laws, as amended.
      4.0 Specimen Copy of Common Stock Certificate.
      4.1 Form of Class A Warrant Certificate.
      4.2 Form of Class B Warrant Certificate.
      4.3 Form of Underwriter's Purchase Option.*
      4.4 Form of Warrant Agreement.*
      5.0 Opinion of Thomas T. Prousalis, Jr., Esq. for Registrant.
     10.0 Employment Agreement, Robert A. Veschi, dated April 1, 1996.
     10.1 United States Patent, Notice of Allowance, dated January 23, 1996.
     10.2 Assignment of Patent Rights, dated March 22, 1996.
     10.3 Sprint Agreement, dated March 1, 1996.
     11.0 Computation of Per Share Loss.
     23.0 Consent of Thomas T. Prousalis, Jr., Esq. is contained on page II-7 of
          the Registration Statement.
     24.0 Consent of Grant Thornton LLP is contained on page II-8 of the
          Registration Statement.
     25.0 Power of Attorney appointing Robert A. Veschi is contained on page II-6
          of the Registration Statement.
</TABLE>
    
 
ITEM 28.  UNDERTAKINGS
 
    The  undersigned Registrant  hereby undertakes  to provide  to participating
broker-dealers,  at  the  closing,   certificates  in  such  denominations   and
registered  in such  names as required  by the  participating broker-dealers, to
permit prompt delivery to each purchaser.
 
    The undersigned Registrant also undertakes:
 
       (1) To file, during any period in which offers or sales are being made, a
           post-effective amendment to this registration statement:
 
           (i) To include any  prospectus required  by section  10(a)(3) of  the
               Securities Act of 1933;
 
           (ii)To  reflect in the  prospectus any facts  or events arising after
               the effective date  of the  registration statement  (or the  most
               recent  post-effective amendment thereof)  which, individually or
               in  the  aggregate,  represent   a  fundamental  change  in   the
               information set forth in the registration statement:
 
           (iii)
               To  include any material information with  respect to the plan of
               distribution  not  previously   disclosed  in  the   registration
               statement  or  any material  change  to such  information  in the
               registration statement;
 
           Provided, however, that  paragraphs (a)(1)(i) and  (a)(1)(ii) do  not
           apply  if the registration statement is on  Form S-3 or Form S-8, and
           the information required to be included in a post-effective amendment
           by those paragraphs  is contained  in periodic reports  filed by  the
           registrant  pursuant to section 13 or section 15(d) of the Securities
           Exchange Act  of  1934 that  are  incorporated by  reference  in  the
           registration statement.
 
                                      II-4
<PAGE>
       (2) That,  for  the  purpose  of  determining  any  liability  under  the
           Securities Act of 1933, each  such post-effective amendment shall  be
           deemed  to be a new registration statement relating to the securities
           offered therein, and  the offering  of such securities  at that  time
           shall be deemed to be the initial bona fide offering thereof.
 
       (3) To  remove from registration  by means of  a post-effective amendment
           any of the  securities being  registered which remain  unsold at  the
           termination of the offering.
 
    Insofar  as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to  directors, officers and controlling persons of  the
registrant  pursuant to the  foregoing provisions, 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 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 Act and will be governed by the final adjudication of
such issue.
 
    This Registration Statement consists of the following:
 
<TABLE>
<C>        <S>
       1.  Facing page.
       2.  Cross-Reference Sheet.
       3.  Prospectus.
       4.  Complete text of Items 24-28 in Part Two of Registration Statement.
       5.  Exhibits.
       6.  Signature page.
       7.  Consents of:
           Thomas T. Prousalis, Jr., Esq.
           Grant Thornton LLP
</TABLE>
 
                                      II-5
<PAGE>
                                   SIGNATURES
 
   
    In  accordance  with the  requirements of  the Securities  Act of  1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements  for filing on  Form SB-2 and  authorized this  registration
statement  to  be  signed  on  its behalf  by  the  undersigned,  thereunto duly
authorized, in the City of Washington, District of Columbia, on July 31, 1996.
    
 
                                e-NET, INC.
 
                                By:               ROBERT A. VESCHI
                                     -------------------------------------------
                                                  Robert A. Veschi
                                                      President
 
    In accordance with  the requirements  of the  Securities Act  of 1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated:
 
   
<TABLE>
<CAPTION>
                      SIGNATURE                                      TITLE                     DATE
- ------------------------------------------------------  -------------------------------  ----------------
 
<C>                                                     <S>                              <C>
     ALONZO E. SHORT, JR., LT. GEN., USA (RET.)*
     -------------------------------------------        Chairman of the Board             July 31, 1996
      Alonzo E. Short, Jr., Lt. Gen., USA (ret.)
 
                                                        President, Chief Executive
                   ROBERT A. VESCHI                      Officer, Chief Financial
     -------------------------------------------         Officer, Controller,             July 31, 1996
                   Robert A. Veschi                      Secretary, Director
 
                    GEORGE PORTA*
     -------------------------------------------        Vice President, Operations        July 31, 1996
                     George Porta
 
                  WILLIAM L. HOOTON*
     -------------------------------------------        Director                          July 31, 1996
                  William L. Hooton
 
       EDWARD RATKOVICH, MAJ. GEN., USAF (RET.)
     -------------------------------------------        Director                          July 31, 1996
       Edward Ratkovich, Maj. Gen., USAF (ret.)
 
               CLIVE WHITTENBURY, PH.D.
     -------------------------------------------        Director                          July 31, 1996
               Clive Whittenbury, Ph.D.
 
                       By:           ROBERT A. VESCHI*
            ------------------------------------------
                                      Robert A. Veschi
                                      ATTORNEY-IN-FACT
</TABLE>
    
 
                                      II-6
<PAGE>
                               CONSENT OF COUNSEL
 
    The  consent of  Thomas T. Prousalis,  Jr., Esq.,  1919 Pennsylvania Avenue,
N.W., Suite 800, Washington,  D.C. 20006, to  the use of his  name in this  Form
SB-2  Registration Statement, and related Prospectus, as amended, of e-Net, Inc.
is contained in his opinion filed as Exhibit 5.0 hereto.
 
                                      II-7
<PAGE>
              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
    We have issued our  report dated April 12,  1996 accompanying the  Financial
Statements   of  e-Net,  Inc.  contained   in  the  Registration  Statement  and
Prospectus.  We  consent  to  the  use  of  the  aforementioned  report  in  the
Registration  Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts."
 
                                          GRANT THORNTON LLP
 
   
Washington, D.C.
July 31, 1996
    
 
                                      II-8
<PAGE>
                                  E-NET, INC.
                               INDEX TO EXHIBITS
 
   
    The following is a list of Exhibits marked by an asterisk (*) filed herewith
by  e-Net, Inc. as part  of Amendment No. 11  to the SB-2 Registration Statement
and related Prospectus:
    
 
   
<TABLE>
<C>        <S>                                                                       <C>
      1.0  Form of Underwriting Agreement.*
      1.1  Selected Dealers Agreement.*
      3.0  Certificate of Incorporation, filed January 9, 1995.
      3.1  By-laws, as amended.
      4.0  Specimen Copy of Common Stock Certificate.
      4.1  Form of Class A Warrant Certificate.
      4.2  Form of Class B Warrant Certificate.
      4.3  Form of Underwriter's Purchase Option.*
      4.4  Form of Warrant Agreement.*
      5.0  Opinion of Thomas T. Prousalis, Jr., Esq. for Registrant.
     10.0  Employment Agreement, Robert A. Veschi, dated April 1, 1996.
     10.1  United States Patent, Notice of Allowance, dated January 23, 1996.
     10.2  Assignment of Patent Rights, dated March 22, 1996.
     10.3  Sprint Agreement, dated March 1, 1996.
     11.0  Computation of Per Share Loss.
     23.0  Consent of Thomas T. Prousalis, Jr., Esq. is contained on page II-7 of
            the Registration Statement.
     24.0  Consent of Grant Thornton LLP is contained on page II-8 of the
            Registration Statement.
     25.0  Power of Attorney appointing Robert A. Veschi is contained on page II-6
            of the Registration Statement.
</TABLE>
    

<PAGE>


                                    500,000 Units


    (Each Unit consisting of two shares of Common Stock, par value $.01
    per share and two Class A Redeemable Common Stock Purchase Warrants,
    each to purchase one share of Common Stock.)


                                     e-NET, INC.

                                UNDERWRITING AGREEMENT


                                                              New York, New York
                                                                August___,  1996



Stratton Oakmont, Inc.
1979 Marcus Avenue
Lake Success, New York  11042

    e-NET, Inc., a Delaware corporation (the "Company"), proposes to issue and
sell to you (the "Underwriter") an aggregate of 500,000 Units, each Unit
consisting of two (2) shares of Common Stock, par value $.01 per share ("Common
Stock") and two (2) Class A Redeemable Common Stock Purchase Warrants ("Class A
Warrants"), each to purchase one share of Common Stock at $7.50 per share from
August ___ , 1997 until August ___ , 2001, subject to redemption, in certain
instances.  In addition, the Company proposes to grant to the Underwriter the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 75,000 additional Units.

    Unless the context otherwise requires, the aggregate of 500,000 Units to be
sold by the Company, together with all or any part of the 75,000 Units which the
Underwriter has the option to purchase, and the shares of Common Stock and the
Warrants comprising such Units, are herein called the "Units."  The Common Stock
to be outstanding after giving effect to the sale of the Units are herein called
the "Shares."  The Shares and Warrants included in the Units (including the
Units which the Underwriter

<PAGE>

has the option to purchase pursuant to paragraph 2(b)), are herein collectively
called the "Securities."

    You have advised the Company that you desire to purchase the Units.  The
Company confirms the agreements made by it with respect to the purchase of the
Units by the Underwriter as follows:

    1.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company represents
and warrants to, and agrees with you that:

         (a)  A registration statement (File No. 333-3860) on Form SB-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed.  After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration statement),
with such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement.  As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration


                                          2

<PAGE>

Statement or any amendment thereto at the time it was or is declared effective);
and the term "Prospectus" means the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Act, or, if no prospectus is required to be
filed pursuant to said Rule 424(b), such term means the prospectus included in
the Registration Statement; except that if such registration statement or
prospectus is amended or such prospectus is supplemented, after the effective
date of such registration statement and prior to the Option Closing Date (as
hereinafter defined), the terms "Registration Statement" and "Prospectus" shall
include such registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both, as the
case may be.

         (b)  The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus.  At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the First
Closing Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus will in all respects
conform to the requirements of the Act and the Rules and Regulations; and
(ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein not misleading;
provided, however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof.  It is understood that the
statements set forth in the Prospectus on page 2 with respect to stabilization,
the paragraph under the heading "Underwriting" relating to concessions to
certain dealers, the three legends on page 2 of the Prospectus, all descriptions
involving litigation of the Underwriter, the "Underwriting" Section of the
Prospectus and the identity of counsel to the Underwriter under the heading
"Legal Matters" constitute for purposes of this Section and Section 6(b) the
only information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.


                                          3
<PAGE>

         (c)  The Company and each of its subsidiaries ("the Subsidiaries")
have been duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of incorporation, with
full corporate power and authority to own its properties and conduct its
business as described in the Prospectus and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which the nature of its business or the character or location of
its properties requires such qualification, except where the failure to so
qualify will not materially adversely affect the Company's or Subsidiaries'
business, properties or financial condition.

         (d)  The authorized, issued and outstanding capital stock of the
Company, including the predecessors of the Company, as of March 31, 1996 is as
set forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and nonassessable; except as set
forth in the Prospectus, no options, warrants, or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the capital stock conforms to
all statements relating thereto contained in the Registration Statement and
Prospectus.

         (e)  The Units and Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights of any security
holder of the Company.  Neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated in this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.

         The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the right


                                          4

<PAGE>

of creditors generally or by general equitable principles, and entitled to the
benefits provided by the warrant agreement pursuant to which such Warrants are
to be issued (the "Warrant Agreement"), which will be substantially in the form
filed as an exhibit to the Registration Statement.  The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance upon the
exercise of the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable, and free of preemptive rights and no
personal liability will attach to the ownership thereof.  The Warrant Agreement
has been duly authorized and, when executed and delivered pursuant to this
Agreement, will have been duly executed and delivered and will constitute the
valid and legally binding obligation of the Company enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles.  The Warrants and Warrant Agreement conform to the
respective descriptions thereof in the Registration Statement and Prospectus.

         The Shares, Warrants and Common Stock contained in the  Purchase
Option (as defined as the Underwriters' Purchase Option in the Registration
Statement) have been duly authorized and, when duly issued and delivered, such
Warrants will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits provided
by the Purchase Option, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles and the indemnification contained in paragraph 7 of
the Purchase Option may be unenforceable.  The shares of Common Stock included
in the Purchase Option (and the shares of Common Stock issuable upon exercise of
the Warrants included therein) when issued and sold, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights and
no personal liability will attach to the ownership thereof.

         (f)  This Agreement and the Purchase Option have been duly and validly
authorized, executed, and delivered by the Company.  The Company has full power
and authority to authorize, issue, and sell the Units to be sold by it hereunder
on the terms and conditions set forth herein, and no consent, approval,


                                          5

<PAGE>

authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or in connection with
the authorization, issuance, and sale of the Units or the Purchase Option,
except such as may be required under the Act or state securities laws.

         (g)  Except as described in the Prospectus, or which would not have a
material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company and Subsidiaries taken as a
whole (a "Material Adverse Effect"), the Company and Subsidiaries are not in
material violation, breach, or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a material breach or violation
of, any of the terms or provisions of, or constitute a material default under,
or result in the creation or imposition of any material lien, charge, or
encumbrance upon any of the property or assets of the Company or the
Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of
trust, loan agreement, or other material agreement or instrument to which the
Company or the Subsidiaries is a party or by which the Company or the
subsidiaries may be bound or to which any of the property or assets of the
Company or the Subsidiaries is subject, nor will such action result in any
violation of the provisions of the articles of incorporation or the by-laws of
the Company or the Subsidiaries, as amended, or any statute or any order, rule
or regulation applicable to the Company of any court or of any regulatory
authority or other governmental body having jurisdiction over the Company or the
Subsidiaries.

         (h)  Subject to the qualifications stated in the Prospectus, the
Company and Subsidiaries have good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to their business; subject to the
qualifications stated in the Prospectus, all of the material leases and
subleases under which the Company or the Subsidiaries is the lessor or sublessor
of properties or assets or under which the Company or the Subsidiaries holds
properties or assets as lessee or sublessee as described in the Prospectus are
in full force and effect, and, except as described in the Prospectus, the
Company and Subsidiaries are not in default in any material respect with 

                                          6

<PAGE>

respect to any of the terms or provisions of any of such leases or subleases, 
and, to the best knowledge of the Company, no claim has been asserted by 
anyone adverse to rights of the Company or the Subsidiaries as lessor, 
sublessor, lessee, or sublessee under any of the leases or subleases 
mentioned above, or affecting or questioning the right of the Company or the 
Subsidiaries to continued possession of the leased or subleased premises or 
assets under any such lease or sublease except as described or referred to in 
the Prospectus; and the Company and Subsidiaries own  or lease  all such 
properties described in the Prospectus as are necessary to its operations as 
now conducted and, except as otherwise stated in the Prospectus, as proposed 
to be conducted as set forth in the Prospectus.

         (i)  Grant Thornton LLP, who have given its reports on certain
financial statements filed with the Commission as a part of the Registration
Statement, are with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.

         (j)  The combined/consolidated financial statements, and schedules
together with related notes, set forth in the Prospectus or the Registration
Statement present fairly the financial position and results of operations and
changes in cash flow position of the Company and the Subsidiaries on the basis
stated in the Registration Statement, at the respective dates and for the
respective periods to which they apply.  Said statements and schedules and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved except as disclosed in the Prospectus and Registration Statement.  The
information set forth under the caption "Selected Financial Data" in the
Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein.

         (k)  Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, the Company and the Subsidiaries have not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which would have a Material Adverse Effect, and there has
not been any change in the capital stock of, or any


                                          7

<PAGE>

incurrence of short-term or long-term debt by, the Company or the Subsidiaries
or any issuance of options, warrants or other rights to purchase the capital
stock of the Company or the Subsidiaries or any Material Adverse Effect or any
development involving, so far as the Company or the Subsidiaries can now
reasonably foresee a prospective Material Adverse Effect.

         (l)  Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened, any action, suit or proceeding
to which the Company or the Subsidiaries is a party before or by any court or
governmental agency or body, which might result in any Material Adverse Effect,
nor are there any actions, suits or proceedings related to environmental matters
or related to discrimination on the basis of age, sex, religion or race; and no
labor disputes involving the employees of the Company or the Subsidiaries exist
or to the knowledge of the Company, are threatened which might be reasonably
expected to have a Material Adverse Effect.

         (m)  Except as disclosed in the Prospectus, the Company and the
Subsidiaries have filed all necessary federal, state, and foreign income and
franchise tax returns required to be filed as of the date hereof and have paid
all taxes shown as due thereon; and there is no tax deficiency which has been
asserted against the Company or the Subsidiaries.

         (n)  Except as disclosed in the Registration Statement, the Company
and each of the Subsidiaries has sufficient licenses, permits, and other
governmental authorizations currently necessary for the conduct of its business
or the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights,
and licenses necessary for the conduct of such business and has not received any
notice of conflict with the asserted rights of others in respect thereof.  To
the best knowledge of the Company, none of the activities or business of the
Company and the Subsidiaries are in violation of, or cause the Company or the
Subsidiaries to violate, any law, rule, regulation, or order of the United
States, any state, county, or locality, or of any agency or body of the United
States or of any state, county


                                          8

<PAGE>

or locality, the violation of which would have a Material Adverse Effect.

         (o)  The Company and the Subsidiaries have not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law.  The Company's internal accounting controls and procedures are sufficient
to cause the Company and the Subsidiaries to comply in all material respects
with the Foreign Corrupt Practices Act of 1977, as amended.

         (p)  On the Closing Dates (as hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been complied with in all material respects.

         (q)  All contracts and other documents of the Company and the
Subsidiaries which are, under the Rules and Regulations, required to be filed as
exhibits to the Registration Statement have been so filed.

         (r)  Except as disclosed in the Registration Statement, the Company
has no other subsidiaries.

         (s)  Except as disclosed in the Registration Statement, the Company
and the Subsidiaries have not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company or the Subsidiaries for services as a finder in connection with the
proposed public offering.

         (t)  Except as disclosed in the Prospectus, no officer, director, or
stockholder of the Company has any National Association of Securities
Dealers, Inc. (the "NASD") affiliation.


                                          9

<PAGE>

         (u)  No other firm, corporation or person has any rights to underwrite
an offering of any of the Company's securities.

    2.   PURCHASE, DELIVERY AND SALE OF THE UNITS.

         (a)  Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties, and agreements herein contained,
the Company agrees to issue and sell to the Underwriter, and the Representative
agrees to buy from the Company at $12.60 per Unit, at the place and time
hereinafter specified, 500,000 Units (the "First Units").

              Delivery of the First Units against payment therefor shall take
place at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York,
New York (or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, on August ___ , 1996,
or at such later time and date as the Underwriter may designate in writing to
the Company at least two business days prior to such purchase, but not later
than August ___  , 1996, such time and date of payment and delivery for the
First Units being herein called the "First Closing Date."

         (b)  In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 75,000 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units").  This option may be
exercised within 30 days after the effective date of the Registration Statement
upon written notice by the Underwriter to the Company advising as to the amount
of Option Units as to which the option is being exercised, the names and
denominations in which the certificates for such Option Units are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Underwriter but shall not be
earlier than four nor later than ten full business days after the exercise of
said option (but in no event more than 40 days after the First Closing Date),
nor in any event prior to the First Closing Date, and such time and date is
referred to herein as the "Option Closing Date." Delivery of the


                                          10

<PAGE>

Option Units against payment therefor shall take place at the offices of
Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York (or at such
other place as may be designated by agreement between the Underwriter and the
Company).  The Option granted hereunder may be exercised only to cover over-
allotments in the sale by the Underwriter of First Units referred to in
subsection (a) above.  No Option Units shall be delivered unless all First Units
shall have been delivered to the Underwriter as provided herein.

         (c)  The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter hereunder available to
the Underwriter for checking at least two full business days prior to the First
Closing Date or the Option Closing Date (which are collectively referred to
herein as the "Closing Dates").  The certificates shall be in such names and
denominations as the Underwriter may request, at least three full business days
prior to the Closing Dates.  Delivery of the certificates at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriter.

         Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the respective
purchase prices by the Underwriter, by wire transfer in immediately available
funds, payable to the Company.

         In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
immediately available funds at the offices of Bernstein & Wasserman, LLP,
950 Third Avenue, New York, New York (or at such other place as may be
designated by agreement between the Underwriter and the Company), at the time
and date of delivery of such Units as required by the provisions of
subsection (b) above, against receipt of the certificates for such Units by the
Underwriter for the Underwriter's account registered in such names and in such
denominations as the Underwriter may reasonably request.


                                          11


<PAGE>

         It is understood that the Underwriter proposes to offer the Units to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.

    3.   COVENANTS OF THE COMPANY.  The Company covenants and agrees with the
Underwriter that:

         (a)  The Company will use its best efforts to cause the Registration
Statement to become effective.  If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rule 424(b) under the Act.  Upon
notification from the Commission that the Registration Statement has become
effective, the Company will so advise the Underwriter and will not at any time,
whether before or after the effective date, file any amendment to the
Registration Statement or supplement to the Prospectus of which the Underwriter
shall not previously have been advised and furnished with a copy or to which the
Underwriter or its counsel shall have reasonably objected in writing or which is
not in compliance with the Act and the Rules and Regulations.  At any time prior
to the later of (A) the completion by the Underwriter of the distribution of the
Units contemplated hereby (but in no event more than nine months after the date
on which the Registration Statement shall have become or been declared
effective) and (B) 25 days after the date on which the Registration Statement
shall have become or been declared effective, the Company will prepare and file
with the Commission, promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or Prospectus which, in the opinion of
counsel to the Company and the Underwriter, may be reasonably necessary or
advisable in connection with the distribution of the Units.

         As soon as the Company is advised thereof, the Company will advise the
Underwriter, and provide the Underwriter copies of any written advice, of the
receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for an amendment of the Registration Statement or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance by the Commission or any state or


                                          12

<PAGE>

regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its best
efforts to prevent the issuance of any such order, and, if issued, to obtain as
soon as possible the lifting thereof.

         The Company has caused to be delivered to the Underwriter copies of
each Preliminary Prospectus, and the Company has consented and hereby consents
to the use of such copies for the purposes permitted by the Act.  The Company
authorizes the Underwriter and dealers to use the Prospectus in connection with
the sale of the Units for such period as in the opinion of counsel to the
Underwriter and the Company the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations.  In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by the Underwriter or dealer of any
event of which the Company has knowledge and which has a Material Adverse Effect
on the Company or the securities of the Company, or which in the opinion of
counsel for the Company and counsel for the Underwriter should be set forth in
an amendment of the Registration Statement or a supplement to the Prospectus in
order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be delivered to
a purchaser of the Units or in case it shall be necessary to amend or supplement
the Prospectus to comply with law or with the Rules and Regulations, the Company
will notify the Underwriter promptly and forthwith prepare and furnish to the
Underwriter copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as the Underwriter may reasonably
request, in order that the Prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to state any material
facts necessary in order to make the statements in the Prospectus, in the light
of the circumstances under which they are made, not misleading.  The preparation
and furnishing of any such amendment or supplement to the Registration Statement
or amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriter, except that in case the Underwriter is
required, in connection with the sale of the Units  to deliver a


                                          13

<PAGE>

Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.

         The Company will comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.

         (b)  The Company will furnish such information as may be required and
to otherwise cooperate and use its best efforts to qualify to register the Units
for sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent of service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Units.  The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long a period as the counsel to the Company and the Underwriter
deem reasonably necessary.

         (c)  If the sale of the Units provided for herein is not consummated
as a result of the Company not performing its obligations hereunder in all
material respects, the Company shall pay all costs and expenses incurred by it
which are incident to the performance of the Company's obligations hereunder,
including but not limited to, all of the accountable out of pocket expenses of
the Underwriter up to $150,000.00 (including the reasonable fees and expenses of
counsel to the Underwriter).

         (d)  The Company will use its best efforts to (i) cause a registration
statement under the Securities Exchange Act of 1934 to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii)
obtain and keep current a listing in the Standard & Poors or Moody's OTC
Industrial Manual.


                                          14

<PAGE>

         (e)  For so long as the Company is a reporting company under either
Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the Company, at
its expense, will furnish to its stockholders an annual report (including
financial statements audited by independent public accountants), in reasonable
detail and at its expense, will furnish to the Underwriter during the period
ending five (5) years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, but no earlier than the filing of such information with
the Commission a balance sheet of the Company and any of its subsidiaries as at
the end of such fiscal year, together with statements of income, surplus and
cash flow of the Company and any  subsidiaries  for  such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent accountants; (ii) as soon as practicable after the end of each of
the first three fiscal quarters of each fiscal year, but no earlier than the
filing of such information with the Commission, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as soon
as they are publicly available, a copy of all reports (financial or other)
mailed to security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.  Notwithstanding the above,
reports provided by the Company to the Commission shall be deemed satisfactory
for the foregoing purposes.

         (f)  So long as the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.

         (g)  The Company will deliver to the Underwriter at or before the
First Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request.  The Company will deliver to or upon the Underwriter's order, from time
to time until the effective date of


                                          15

<PAGE>

the Registration Statement, as many copies of any Preliminary Prospectus filed
with the Commission prior to the effective date of the Registration Statement as
the Underwriter may reasonably request.  The Company will deliver to the
Underwriter on the effective date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from time
to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriter may from time to time reasonably
request.

         (h)  The Company will make generally available to its security holders
and to the registered holders of its Warrants and deliver to the Underwriter as
soon as it is practicable to do so but in no event later than 90 days after the
end of twelve months after its current fiscal quarter, an earnings statement
(which need not be audited) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement, which
shall satisfy the requirements of Section 11(a) of the Act.

         (i)  The Company will apply the net proceeds from the sale of the
Units substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.

         (j)  The Company will promptly prepare and file with the Commission
any amendments or supplements to the Registration Statement, Preliminary
Prospectus or Prospectus and take any other action, which in the opinion of
counsel to the Underwriter and counsel to the Company, may be reasonably
necessary or advisable in connection with the distribution of the Units, and
will use its best efforts to cause the same to become effective as promptly as
possible.

         (k)  The Company will reserve and keep available that maximum number
of its authorized but unissued securities which are issuable upon exercise of
the Purchase Option outstanding from time to time.

         (l)  (1) For a period of thirty- six (36) months from the First
Closing Date, no shareholder prior to the offering will,


                                          16

<PAGE>

directly or indirectly, offer, sell (including any short sale), grant any option
for the sale of, acquire any option to dispose of, or otherwise dispose of any
shares of Common Stock. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the shares owned by every
shareholder prior to the offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement).  If necessary to comply with any applicable Blue-sky Law, the shares
held by such shareholders will be escrowed with counsel for the Company or
otherwise as required.

         (2) except for the issuance of shares of capital stock by the Company
in connection with a dividend, recapitalization, reorganization or similar
transactions or as result of the exercise of warrants or options disclosed in or
issued or granted pursuant to plans disclosed in the Registration Statement, the
Company shall not, for a period of twenty four (24) months following the First
Closing Date, directly or indirectly, offer, sell, issue or transfer any shares
of its capital stock, or any security exchangeable or exercisable for, or
convertible into, shares of the capital stock, without the prior written consent
of the Underwriter.

         (m) Upon completion of this offering, the Company will make all
filings required, including registration under the Securities Exchange Act of
1934, to obtain the listing of the Units, Common Stock, and Warrants in the
NASDAQ system, and will use its best efforts to effect and maintain such listing
or a listing on a national securities exchange for at least five years from the
date of this Agreement to the extent that the Company has at least 300 record
holders of Common Stock.

         (n) Except for the transactions contemplated by this Agreement or as
otherwise permitted by law, the Company represents that it has not taken and
agrees that it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of the Units, Shares, the
Warrants or to facilitate the sale or resale of the Securities.

         (o)  On the First Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to


                                          17

<PAGE>

you the Purchase Option.  The Purchase Option will be substantially in the form
filed as an Exhibit to the Registration Statement.

         (p)  Intentionally Omitted

         (q) Upon the Closing Dates, the Company will have in force key person
life insurance on the life of Mr. Veschi in an amount of not less than
$1,000,000.00, payable to the Company, and will use its best efforts to maintain
such insurance for a three year period.

         (r)  So long as any Warrants are outstanding and the exercise price of
the Warrants is less than the market price of the Common Stock, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter and each
dealer as many copies of each such Prospectus as such Underwriter or dealer may
reasonably request.  The Company shall not call for redemption any of the
Warrants unless a registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains current at
least until the date fixed for redemption.

         (s)  For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) the Company's financial statements
for each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders,
provided that the Company shall not be required to file a report of such
accountants relating to such review with the Commission.

         (t)  For the three (3) year period commencing on the First Closing
Date, the Underwriter shall have the right to appoint an advisor who will be
able to attend all meetings of the Board of Directors.  However, if the Board of
Directors determines that confidential information is to be discussed during any
part of any meeting attended by such advisor, it shall have the right to


                                          18

<PAGE>

exclude the advisor from the meeting during such discussion.  The Underwriter
shall also have the right to obtain copies of the minutes, if requested, from
all Board of Directors meetings for three (3) years following the Effective Date
of the Registration Statement, whether or not a nominee of the Underwriter
attends or participates in any such Board meeting.  The Company agrees to
reimburse the Underwriter immediately upon the Underwriter's request therefor of
any reasonable travel and lodging expenses directly incurred by the Underwriter
in connection with its representative attending Company Board meetings on the
same basis for other Board members.

         (u)  The Company agrees to pay to the Underwriter a finder's fee of
5.0% of the first $3,000,000.00, 4.0% of the next $3,000,000.00, 3.0% of the
next $2,000,000.00, 2% of next $2,000,000.00 and 1% of the excess, if any, over
$10,000,000.00, of the aggregate consideration received by the Company with
respect to any transaction (including, but not limited to, mergers,
acquisitions, joint ventures, and any other capital business transaction for the
Company) introduced to the Company by the Underwriter and consummated by the
Company (an "Introduced Consummated Transaction") during the five (5) year
period commencing on the First Closing Date.  The entire amount of any such
finder's fee due and payable to the Underwriter shall be paid in full by
certified funds or cashier's check payable to the order of the Underwriter or in
cash, in each case in the discretion of the Company, at the first closing of the
Introduced Consummated Transaction for which the finder's fee is due.  For the
purposes hereof, a party shall not be deemed to be introduced by the Underwriter
unless and until (a) a written disclosure of the identity of such prospective
party shall have been given by the Underwriter and received by the Company
during the period; (b) such party was not previously known to the Company; and
(c) such party shall have commenced substantive negotiations with the Company
relating to a Introduced Consummated Transaction during such five (5) year
period.

         (v)  The Company agrees to pay the Underwriter a warrant solicitation
fee of 4.0% of the exercise price of any of the Warrants exercised beginning one
(1) year after the Effective Date (not including warrants exercised by the
Underwriter) if (a) the market price of the Company's Common Stock on the date
the Warrant is exercised is greater than the exercise price of the Warrant, (b)


                                          19

<PAGE>

the exercise of the Warrant was solicited by the Underwriter and the Underwriter
was designated by the holder of the Warrant in writing as having solicited the
exercise of the Warrant, (c) the Warrant is not held in a discretionary account,
(d) disclosure of the compensation arrangement is made upon the sale and
exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities  Exchange Act of 1934, and (f) solicitation of
the exercise is in compliance with the NASD Notice to Members 81-38 (September
22, 1981).

    4.   CONDITIONS OF UNDERWRITER'S OBLIGATION.  The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:

         (a)  The Registration Statement shall have become effective and you
shall have received notice thereof not later than 10:00 a.m., New York time, on
the day following the date of this Agreement, or at such later time or on such
later date as to which the Underwriter may agree in writing; on or prior to the
Closing Dates no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that or a similar
purpose shall have been instituted or shall be pending or, to the Underwriter's
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional information
shall have been complied with to the satisfaction of the Commission; and no stop
order shall be in effect denying or suspending effectiveness of such
qualification nor shall any stop order proceedings with respect thereto be
instituted or pending or threatened.  If required, the Prospectus shall have
been filed with the Commission in the manner and within the time period required
by Rule 424(b) under the Act.

         (b)(1)    At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of the Law Offices of Thomas T.
Prousalis, Jr., Esq., counsel for the Company, in form and substance
satisfactory to counsel for the Underwriter, to the effect that:


                                          20

<PAGE>

              (i)  the Company and each of its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, with all requisite
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
other jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification except where the failure to
qualify or be licensed will not have a Material Adverse Effect;

              (ii) the authorized capitalization of the Company as of March 31,
1996 is as set forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding Common Stock requiring authorization for issuance by
directors have been duly authorized and upon payment of consideration therefor,
will be validly issued, fully paid and non-assessable and conform in all
material respects to the description thereof contained in the Prospectus; to
such counsel's knowledge the outstanding shares of Common Stock of the Company
have not been issued in violation of the preemptive rights of any shareholder
and the shareholders of the Company do not have any preemptive rights or other
rights to subscribe for or to purchase, nor are there any restrictions upon the
voting or transfer of any of the Common Stock except as provided in the
Prospectus; the Common Stock, the Warrants, the Purchase Option, and the Warrant
Agreement conform in all material respects to the respective descriptions
thereof contained in the Prospectus; the Shares have been, and the shares of
Common Stock to be issued upon exercise of the Warrants and the Purchase Option,
upon issuance in accordance with the terms of such Warrants, the Warrant
Agreement and Purchase Option will have been duly authorized and, when issued
and delivered in accordance with their respective terms, will be duly and
validly issued, fully paid, non-assessable, free of preemptive rights and no
personal liability will attach to the ownership thereof; all prior sales by the
Company of the Company's securities have been made in compliance with or under
an exemption from registration under the Act and applicable state securities
laws; a sufficient number of shares of Common Stock has been reserved for
issuance upon exercise of the Warrants and Purchase Option and to the best of
such counsel's knowledge, neither the filing of the Registration Statement nor
the offering or sale of the Units as contemplated by this Agreement


                                          21

<PAGE>

gives rise to any registration rights other than those which have been waived or
satisfied for or relating to the registration of any shares of Common Stock or
as otherwise being exercised in connection with the concurrent offering;

              (iii) this Agreement, the Purchase Option, and the Warrant
Agreement have been duly and validly authorized, executed, and delivered by the
Company;

              (iv)  the certificates evidencing the shares of Common Stock
comply with the Delaware General Corporation Law; the Warrants will be
exercisable for shares of Common Stock in accordance with the terms of the
Warrants and Warrant Agreement and at the prices therein provided for;

              (v)  except as otherwise disclosed in the Registration Statement,
such counsel knows of no pending or threatened legal or governmental proceedings
to which the Company or any Subsidiary is a party which would materially
adversely affect the business, property, financial condition, or operations of
the Company or any Subsidiary; or which question the validity of the Securities,
this Agreement, the Warrant Agreement, or the  Purchase Option, or of any action
taken or to be taken by the Company pursuant to this Agreement, the Warrant
Agreement, or the   Purchase Option; to such counsel's knowledge there are no
governmental proceedings or regulations required to be described or referred to
in the Registration Statement which are not so described or referred to;

              (vi)  the execution and delivery of this Agreement, the Purchase
Option, or the Warrant Agreement and the incurrence of the obligations herein
and therein set forth and the consummation of the transactions herein or therein
contemplated, will not result in a breach or violation of, or constitute a
default under the certificate or articles of incorporation or by-laws of the
Company or any Subsidiary, or to the best knowledge of counsel after due
inquiry, in the performance or observance of any material obligations,
agreement, covenant, or condition contained in any bond, debenture, note, or
other evidence of indebtedness or in any material contract, indenture, mortgage,
loan agreement, lease, joint venture, or other agreement or instrument to which
the Company or any Subsidiary is a party or by which it or any of its properties
is bound or in violation of any order, rule, regulation,


                                          22

<PAGE>

writ, injunction, or decree of any government, governmental instrumentality, or
court, domestic or foreign, the result of which would have a Material Adverse
Effect;

              (vii) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no proceedings for
that purpose have been instituted or are pending before, or threatened by, the
Commission; the Registration Statement and the Prospectus (except for the
financial statements and other financial data contained therein, or omitted
therefrom, as to which such counsel need express no opinion) as of the Effective
Date comply as to form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;

              (viii) in the course of preparation of the Registration Statement
and the Prospectus such counsel has participated in conferences with the
President and Chief Executive Officer of the Company with respect to the
Registration Statement and Prospectus and such discussions did not disclose to
such counsel any information which gives such counsel reason to believe that the
Registration Statement or any amendment thereto at the time it became effective
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus or any
supplement thereto contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make statements therein, in light of
the circumstances under which they were made, not misleading (except, in the
case of both the Registration Statement and any amendment thereto and the
Prospectus and any supplement thereto, for the financial statements, notes
thereto, and other financial information (including without limitation, the pro
forma financial information) and schedules contained therein, as to which such
counsel need express no opinion);

              (ix)  all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
agreements to which the Company or any Subsidiary is a party are accurate and
fairly present in all material respects the information required to be shown,
and such


                                          23

<PAGE>

counsel is familiar with all contracts and other agreements referred to in the
Registration Statement and the Prospectus and any such amendment or supplement
or filed as exhibits to the Registration Statement, and such counsel does not
know of any contracts or agreements to which the Company or any Subsidiary is a
party of a character required to be summarized or described therein or to be
filed as exhibits thereto which are not so summarized, described, or filed;

              (x)  no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection with
the authorization, issuance, transfer, sale, or delivery of the Units by the
Company, in connection with the execution, delivery, and performance of this
Agreement by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Purchase Option or the Securities
underlying the Purchase Option, other than registrations or qualifications of
the Units under applicable state or foreign securities or Blue Sky laws and
registration under the Act; and

              (xi) the Units, Common Stock and Warrants have been duly
authorized for quotation on the NASD OTC Bulletin Board.

         Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request.  In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the laws of
the United States or of the States of Delaware and New York upon opinions of
counsel satisfactory to the Underwriter, in which case the opinion shall state
that they have no reason to believe that the Underwriter and they are not
entitled to so rely.

    (2) At the First Closing Date, you shall have received the Opinion of Hitt,
Chwang & Gaines, P.C., special patent and trademark counsel, in form and
substance satisfactory to you, describing any patent searches conducted with
respect to the Company's patents/patent applications including those licensed to
the Company and providing that the description in the Registration Statement
with respect to the status of such patents/patent applications and trademarks is
accurate, that the Company and each of the Subsidiaries owns or possesses
adequate rights to use all


                                          24

<PAGE>

material patents, patent applications, trademarks, service marks, trade-names,
trademark registrations, service mark registration, copyrights and licenses
necessary for the conduct of such business and as described in the Prospectus
and has not received any notice of conflict with the asserted rights of others
in respect thereof and that the statements in the Prospectus under the captions
"Prospectus Summary - The Company", Risk Factors - Uncertain Protection of
Patent, Trademark, Copyright and Proprietary Rights", Business-Overview", and
"Business - Patent, Trademark, Copyright and Proprietary Rights" are accurate.

         (b)  All corporate proceedings and other legal matters relating to
this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bernstein & Wasserman, LLP,
counsel to the Underwriter.

         (c)  The Underwriter shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the First
Closing Date from Grant Thornton LLP, independent public accountants for the
Company, substantially in the form reasonably acceptable to the Underwriter.

         (d)  At the Closing Dates, (i) the representations and warranties of
the Company  contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of the Closing Dates
taking into account for the Option Closing Dates the effect of the transactions
contemplated hereby and the Company  shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Date; (ii) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; (iii) there shall have
been, since the respective dates as of which information is given, no Material
Adverse Effect, or to the Company's knowledge, any development involving a
prospective Material Adverse Effect from that set forth in the Registration
Statement and the Prospectus,


                                          25

<PAGE>

except changes which the Registration Statement and Prospectus indicate might
occur after the effective date of the Registration Statement, and the Company
and the Subsidiaries shall not have incurred any material liabilities or entered
into any material agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; (iv) except as set
forth in the Prospectus, no action, suit, or proceeding at law or in equity
shall be pending or threatened against the Company or any Subsidiaries which
would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company or any Subsidiary
before or by any commission, board, or administrative agency in the United
States or elsewhere, wherein an unfavorable decision, ruling, or finding would
have a Material Adverse Effect, (v) the Underwriter shall have received, at the
First Closing Date, a certificate signed by the President and the Chief
Executive Officer of the Company, dated as of the First Closing Date, evidencing
compliance with the provisions of this subsection (e) and (vi) the Underwriter
shall have received, at the First Closing Date, such opinions, certificates,
letters and other documents as it reasonably requests.

         (e)  Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the Underwriter to purchase and pay for the Option Units
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:

              (i)  The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness thereof
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending, or, to the Underwriter's knowledge or the
knowledge of the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for additional information
shall have been complied with to the satisfaction of the Commission.

              (ii)  At the Option Closing Date there shall have been delivered
to the Representative the signed opinions of Thomas  T. Prousalis, Jr., Esq. and
Hitt, Chwang & Gaines, P.C., counsel and special patent counsel to the Company,
respectively, dated as of the Option Closing Date, in form and substance
reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the


                                          26

<PAGE>

Underwriter, which opinion shall be substantially the same in scope and
substance as the opinion furnished to you at the First Closing Date pursuant to
Sections 4(b) hereof, except that such opinion, where appropriate, shall cover
the Option Units.

              (iii) At the Option Closing Date there shall have be delivered to
the Underwriter a certificate of the President and the Chief Executive Officer
of the Company and such other opinions, certificates, letters and other
documents as it reasonably requests, dated the Option Closing Date, in form and
substance reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the
Underwriter, substantially the same in scope and substance as the certificate or
certificates furnished to you at the First Closing Date pursuant to Section 4(e)
hereof.

              (iv)  At the Option Closing Date there shall have been delivered
to the Representative a letter in form and substance satisfactory to the
Representative from Grant Thornton LLP, dated the Option Closing Date and
addressed to the Representative confirming the information in their letter
referred to in Section 4(d) hereof and stating that nothing has come to their
attention during the period from the ending date of their review referred to in
said letter to a date not more than five business days prior to the Option
Closing Date, which would require any change in said letter if it were required
to be dated the Option Closing Date.


         (f)  All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Units shall be reasonably
satisfactory in form and substance to you, and you and Bernstein & Wasserman,
LLP, counsel to the Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties, or statements of the
Company or its compliance with any of the covenants or conditions contained
herein.

         (g)  No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to either of the
Closing Dates, for members of the NASD to execute transactions (as principal or
agent) in the Units, Common


                                          27

<PAGE>

Stock or the Warrants and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriter or the Company, shall be contemplated by the Commission or the NASD.
The Company represents that at the date hereof it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD.

         (h)  If any of the conditions herein provided for in this Section
shall not have been fulfilled in all material respects as of the date indicated,
this Agreement and all obligations of the Underwriter under this Agreement may
be cancelled at, or at any time prior to, either of the Closing Dates by the
Underwriter notifying the Company of such cancellation in writing or by telegram
at or prior to the applicable Closing Date.  Any such cancellation shall be
without liability of the Underwriter to the Company.

    5.   CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.  The obligation of the
Company to sell and deliver the Units is subject to the following conditions:

         (a)  The Registration Statement shall have become effective not later
than 10:00 a.m. New York time, on the day following the date of this Agreement,
or on such later date as the Company and the Representative may agree in
writing.

         (b)  At the Closing Dates, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.

              If the conditions to the obligations of the Company provided for
in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.


                                          28

<PAGE>

    6.   INDEMNIFICATION.

         (a)  The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any losses, claims, damages, or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages, or liabilities; insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
relating to (i) and (ii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application"), or arise out of or are based upon the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, Prospectus, or any amendment or supplement thereto, or in any Blue
Sky Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
will not be required to indemnify the Underwriter and any controlling person or
be liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto,


                                          29

<PAGE>

provided, further that the indemnity with respect to any Preliminary Prospectus
shall not be applicable on account of any losses, claims, damages, liabilities,
or litigation arising from the sale of Units to any person if a copy of the
Prospectus was not delivered to such person at or prior to the written
confirmation of the sale to such person.  This indemnity will be in addition to
any liability which the Company may otherwise have.

         (b)  The Underwriter will indemnify and hold harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages, or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and reasonable attorneys' fees) to which the Company or any
such director, nominee, officer, or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof and for any violation by the
Underwriter in the sale of such Units of any applicable state or federal law or
any rule, regulation or instruction thereunder relating to violations based on
unauthorized statements by Underwriter or its representative, provided that such
violation is not based upon any violation of such law, rule, or regulation or
instruction by the party claiming indemnification or inaccurate or misleading
information furnished by the Company or its representatives, including
information furnished to the Underwriter as contemplated herein. This indemnity
agreement will be in addition to any liability which the Underwriter may
otherwise have.


                                          30

<PAGE>

         (c)  Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section.  In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.  The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the reasonable fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party and in
the reasonable judgment of the counsel to the indemnified party, it is advisable
for the indemnified party to be represented by separate counsel (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party, which firm shall be designated in writing by the indemnified
party).  No


                                          31

<PAGE>

settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.  If it is
ultimately determined that indemnification is not permitted, then an indemnified
party will return all monies advanced to the indemnifying party.

    7.   CONTRIBUTION.  In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in Section 6
hereof is requested but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case,
then the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) (after
contribution from others) in such proportions that the Underwriter is
responsible in the aggregate for that portion of such losses, claims, damages,
or liabilities represented by the percentage that the underwriting discount per
Unit appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon and the Company shall be responsible for the remaining
portion, provided, however, that if such allocation is not permitted by
applicable law, then allocated in such proportion as is appropriate to reflect
relative benefits but also the relative fault of the Company and the
Underwriter, in the aggregate, in connection with the statements or omissions
which resulted in such damages and other relevant equitable considerations shall
also be considered.  The relative fault shall be determined by reference to,
among other things, whether in the case of an untrue statement of a material
fact or the omission to state a material fact, such statement or omission
relates to information supplied by the Company or the Underwriter and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such untrue statement or omission.  The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of


                                          32

<PAGE>

allocation that does not take account of the equitable considerations referred
to in this Section 7.  No person guilty of a fraudulent misrepresentation
(within the meaning of Section 1(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.  If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Underwriter and each person who
controls the Underwriter shall be entitled to contribution from the Company and
the Company, its officers, directors, and controlling persons shall be entitled
to contribution from the Underwriter to the full extent permitted by law.  The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriter.  No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.

    8.   COSTS AND EXPENSES.

         (a)  Whether or not this Agreement becomes effective or the sale of
the Units to the Underwriter is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company and of the
Company's accountants; the costs and expenses incident to the preparation,
printing, filing, and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), Preliminary Prospectus, and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all expenses,
including fees (which does not include blue sky filing fees) and disbursements
of counsel to the Underwriter, in connection with the qualification of the Units
under the state securities or blue sky laws which the Underwriter shall
designate; the cost of printing and furnishing to the Underwriter copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, and the Blue Sky Memorandum, any fees relating to the listing of the
Units, Common Stock, and Warrants on NASDAQ or any other securities exchange;
the cost of printing the certificates representing the securities comprising the
Units; fees for bound


                                          33

<PAGE>

volumes and prospectus memorabilia; and the fees of the transfer agent and
warrant agent.  The Company shall pay any and all taxes (including any transfer,
franchise, capital stock, or other tax imposed by any jurisdiction) on sales to
the Underwriter hereunder.  The Company will also pay all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.

         (b)  In addition to the foregoing expenses the Company shall at the
First Closing Date pay to the Underwriter a non-accountable expense allowance of
$210,000.  In the event the over-allotment option is exercised, the Company
shall pay to the Underwriter at the Option Closing Date an additional amount in
the aggregate equal to 3.0% of the gross proceeds received upon exercise of the
over-allotment option.  In the event the transactions contemplated hereby are
not consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation, or warranty contained herein or because any other condition to
the Underwriter's obligations hereunder required to be fulfilled by the Company
is not fulfilled) the Company shall not be liable for any expenses of the
Underwriter, including the Underwriter's legal fees.  In the event the
transactions contemplated hereby are not consummated by reason of the Company
being unable to perform its obligations hereunder in all material respects, the
Company shall be liable for the actual accountable out-of-pocket expenses of the
Underwriter, including reasonable legal fees, not to exceed in the aggregate
$150,000.00.

         (c)  Except as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages, or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or person may become subject insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a


                                          34

<PAGE>

finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.

    9.   EFFECTIVE DATE.  The Agreement shall become effective upon its
execution except that the Underwriter may, at its option, delay its
effectiveness until 11:00 a.m., New York time on the first full business day
following the effective date of the Registration Statement, or at such earlier
time on such business day after the effective date of the Registration Statement
as the Underwriter in its discretion shall first commence the initial public
offering of the Units.  The time of the initial public offering shall mean the
time of release by the Underwriter of the first newspaper advertisement with
respect to the Units, or the time when the Units are first generally offered by
the Underwriter to dealers by letter or telegram, whichever shall first occur.
This Agreement may be terminated by the Underwriter at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13,
14, and 15 shall remain in effect notwithstanding such termination.

    10.  TERMINATION.

         (a)  After this Agreement becomes effective, this Agreement, except
for Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 hereof, may be terminated at any
time prior to the First Closing Date, and the option referred to in Section 2(b)
hereof, if exercised, may be cancelled at any time prior to the Option Closing
Date, by the Underwriter if in the Underwriter's judgment it is impracticable to
offer for sale or to enforce contracts made by the Underwriter for the resale of
the Units agreed to be purchased hereunder by reason of (i) the Company having
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident, or other calamity, or from any labor dispute or
court or government action, order, or decree, which has caused a Material
Adverse Effect, (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited, (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof), (iv) a banking moratorium having
been declared by federal or New York state authorities, (v) an outbreak of major
international hostilities involving the United States or other substantial
national or international calamity having occurred,


                                          35

<PAGE>

(vi) a pending or threatened legal or governmental proceeding or action relating
generally to the Company's or any of the Subsidiaries' business, or a
notification having been received by the Company or any Subsidiary, of the
threat of any such proceeding or action, which would have a Material Adverse
Effect;(vii) except as contemplated by the Prospectus, the Company is merged
with or consolidated into or acquired by another company or group or there
exists a binding legal commitment for the foregoing or any other material change
of ownership or control occurs; (viii) the passage by the Congress of the United
States or by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is reasonably believed likely by the Underwriter to have a
material adverse impact on the business, financial condition, or financial
statements of the Company and its Subsidiaries taken as a whole, (ix) any
material adverse change in the financial or securities markets beyond normal
market fluctuations having occurred since the date of this Agreement, or (x) any
Material Adverse Effect having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus.

         (b)  If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by the Underwriter, by telephone or telegram,
confirmed by letter.

    11.  PURCHASE OPTION.  At or before the First Closing Date, the Company
will sell the Underwriter or its designees for a consideration of $50.00, and
upon the terms and conditions set forth in the form of Purchase Option annexed
as an exhibit to the Registration Statement, a Purchase Option to purchase an
aggregate of 50,000 Units.  In the event of conflict in the terms of this
Agreement and the Purchase Option with respect to language relating to the
Purchase Option, the language of the Purchase Option shall control.

    12.  REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER.  The Underwriter
represents and warrants to the Company that it is registered as a broker-dealer
in all jurisdictions in which it is offering the Units and that it will comply
with all applicable state or federal laws relating to the sale of the Units
including


                                          36

<PAGE>

but not limited to, violations based on unauthorized statements by the
Underwriter or its representatives.

    13.  REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.  The
respective indemnities, agreements, representations, warranties, and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect until
three years from the date of this Agreement, regardless of any investigation
made by or on behalf of the Underwriter, the Company, or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.

    14.  NOTICE.  Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered, or telecopied
and confirmed to them at Stratton Oakmont, Inc., 1979 Marcus Avenue, Lake
Success, New York 11042, with a copy sent to Bernstein & Wasserman, LLP, 950
Third Avenue, New York, NY  10022,  Attention:  Hartley T. Bernstein, Esq., or
if sent to the Company, will be mailed, delivered, or telecopied and confirmed
to it at 7-4 Metropolitan Court, Gaithersburg, Maryland 20878 Attention: Robert
A. Veschi, with a copy sent to Thomas T. Prousalis, Jr., Esq., 1919 Pennsylvania
Avenue, N.W., Washington, D.C. 20006.  Notice shall be deemed to have been duly
given if mailed or transmitted by any standard form of telecommunication.

    15.  PARTIES IN INTEREST.  The Agreement herein set forth is made solely
for the benefit of the Underwriter, the Company, any person controlling the
Company or the Underwriter, and directors of the Company, nominees for directors
(if any) named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement.  The term "successors and assigns" shall not include any purchaser,
as such purchaser, from the Underwriter of the Units.

    16.  APPLICABLE LAW.  This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.


                                          37

<PAGE>

    17.  COUNTERPARTS.  This agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).

    18.  ENTIRE AGREEMENT; AMENDMENTS.  This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof.  This Agreement may not be amended except in writing, signed by the
Underwriter and the Company.


                                          38

<PAGE>



     If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.

                                  Very truly yours,

                                  e-NET, INC.


                                  By: __________________________
                                        Its




          The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.


                                  STRATTON OAKMONT, INC.


                                  By:__________________________

                                       Its


                                          39

<PAGE>

         The undersigned are executing this Agreement solely to be bound by the
provisions of Section 3(l) hereof.


                                  ____________________________
                                  Alonzo Short

____________________________      ____________________________
Arthur Henley                     Robert A. Veschi

____________________________      ____________________________
George Porta                      William Hooton

____________________________      ____________________________
Thomas T. Pousalis                Scott Grau

___________________________       ____________________________
David W. Wells                    William Kingsley

___________________________       ____________________________
Christine Swisher                 Sandra Lenga

____________________________      ____________________________
Donald Shoff                      Patricia Robertson

__________________________        ______________________________
Michael Nickel                    Robert L. Veschi

____________________________      ______________________________
William Rodgers                   Edward Ratkovich

____________________________      ______________________________
Robert Foise                      Martin Sumichrast




Armstrong Industries


By _____________________
   Name:
   Title:


                                          40


<PAGE>

    A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.  NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE.


                                     e-NET, INC.
                                    500,000 UNITS
                                    CONSISTING OF
                          1,000,000 SHARES OF COMMON STOCK
                                         AND
             1,000,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS

                              SELECTED DEALERS AGREEMENT


                                                     _____________________, 1996


Dear Sirs:

    1.   Stratton Oakmont, Inc., named as the underwriter in the enclosed
Preliminary Prospectus (the "Underwriter"), proposes to offer on a firm
commitment basis, subject to the terms and conditions and execution of the
Underwriting Agreement, 500,000 units (including any additional units offered
pursuant to an over-allotment option, the "Firm Units") of e-NET, Inc.  (the
"Company") each consisting of two (2) shares of common stock par value $.01 per
share (the "Common Stock") and two (2) Class A Redeemable Common Stock Purchase
Warrants (the "Warrants"), each to purchase one share of Common Stock.  The Firm
Units are more particularly described in the enclosed Preliminary Prospectus,
additional copies of which as well as the Prospectus (after effective date) will
be supplied in reasonable quantities upon request.

    2.   The Underwriter is soliciting offers to buy Units upon the terms and
conditions hereof, from Selected Dealers, who are to act as principals,
including you, who are (i) registered with the Securities and Exchange
Commission ("the Commission") as broker-dealers under the Securities Exchange
Act of 1934, as amended ("the 1934 Act"), and members in good standing with the
National Association of Securities Dealers, Inc. ("the NASD"), or (ii) dealers
of institutions with their principal place of business located outside the
United States, its territories and possessions and not registered under the 1934
Act who agree to make no sales within the United States, its territories and
possessions or to persons who are nationals thereof or residents therein and, in
making sales, to comply with the NASD's interpretation


<PAGE>

with respect to free-riding and withholding.  Units are to be offered to the
public at a price of $14.00 per Unit.  Selected Dealers will be allowed a
concession of not less than _____% of the offering price.  You will be notified
of the precise amount of such concession prior to the effective date of the
Registration Statement.  The offer is solicited subject to the issuance and
delivery of the Units and their acceptance by the Underwriter to the approval of
legal matters by counsel and to the terms and conditions as herein set forth.

    3.   Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the registration
statement covering the Units has become effective with the Commission.  Subject
to the foregoing, upon execution by you of the Offer to Purchase below and the
return of same to us, you shall be deemed to have offered to purchase the number
of Units set forth in your offer on the basis set forth in paragraph 2 above.
Any oral notice by us of acceptance of your offer shall be immediately followed
by written or telegraphic confirmation preceded or accompanied by a copy of the
Prospectus.  If a contractual commitment arises hereunder, all the terms of this
Selected Dealers Agreement shall be applicable.  We may also make available to
you an allotment to purchase Units, but such allotment shall be subject to
modification or termination upon notice from us any time prior to an exchange of
confirmations reflecting completed transactions.  All references hereafter in
this Agreement to the purchase and sale of the Units assume and are applicable
only if contractual commitments to purchase are completed in accordance with the
foregoing.

    4.   You agree that in re-offering the Units, if your offer is accepted
after the Effective Date, you will make a bona fide public distribution of same.
You will advise us upon request of the Units purchased by you remaining unsold,
and we shall have the right to repurchase such Units upon demand at the public
offering price less the concession as set forth in paragraph 2 above.  Any of
the Units purchased by you pursuant to this Agreement are to be re-offered by
you to the public at the public offering price, subject to the terms hereof and
shall not be offered or sold by you below the public offering price before the
termination of this Agreement.

    5.   Payment for Units which you purchase hereunder shall be made by you on
such date as we may determine by certified or bank cashier's check payable in
New York Clearinghouse funds to Stratton Oakmont, Inc. Certificates for the
securities shall be delivered as soon as practicable at the offices of Stratton
Oakmont, Inc., 1979 Marcus Avenue, Lake Success, New York, New York 11042.
Unless specifically authorized by us, payment by you may not be deferred until
delivery of certificates to you.

    6.   A registration statement covering the offering has been filed with the
Commission in respect to the Units.  You will be promptly advised when the
registration statement becomes effective.  Each Selected Dealer in selling the
Units pursuant hereto agrees (which agreement shall also be for the benefit of
the Company) that it will comply with the applicable requirements of the
Securities Act of 1933 and of the 1934 Act and any applicable

                                          2

<PAGE>

rules and regulations issued under said Acts.  No person is authorized by the
Company or by the Underwriter to give any information or to make any
representations other than those contained in the Prospectus in connection with
the sale of the Units.  Nothing contained herein shall render the Selected
Dealers a member of the underwriting group or partners with the Underwriter or
with one another.

    7.   You will be informed by us as to the states in which we have been
advised by counsel the Units have been qualified for sale or are exempt under
the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Units in any state.

    8.   The Underwriter shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder.  The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933 and the rules
and regulations thereunder, except for lack of good faith and except for
obligations assumed by us in this Agreement, and no obligation on our part shall
be implied or inferred herefrom.

    9.   Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated.  This Agreement will terminate when the
offering is completed.  Nothing herein contained shall be deemed a commitment on
our part to sell you any Units; such contractual commitment can only be made in
accordance with the provisions of paragraph 3 hereof.

    10.  You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("Association") and registered as a
broker-dealer or are not eligible for membership under Section I of the By-Laws
of the Association who agree to make no sales within the United States, its
territories, or possessions or to persons who are nationals thereof or residents
therein and, in making sales, to comply with the NASD's interpretation with
respect to free-riding and withholding.  Your attention is called to the
following:  (a) Article III, Sections 1, 8, 24, 25, 26 and 36 of the Rules of
Fair Practice of the Association and the interpretations of said Section
promulgated by the Board of Governors of such Association including the
interpretation with respect to "Free-Riding and Withholding"; (b) Section 10(b)
of the 1934 Act and Rules 10b-6 and 10b-10 of the general rules and regulations
promulgated under said Act; (c) Securities Act Release #3907; (d) Securities Act
Release #4150; and (e) Securities Act Release #4968 requiring the distribution
of a Preliminary Prospectus to all persons reasonably expected to be purchasers
of Shares from you at least 48 hours prior to the time you expect to mail
confirmations.  You, if a member of the Association, by signing this Agreement,
acknowledge that you are familiar with the cited law, rules, and releases, and
agree that you will not directly and/or indirectly violate any provisions of
applicable law in connection with your participation in the distribution of the
Shares.

                                          3


<PAGE>

    11.  In addition to compliance with the provisions of paragraph 10 hereof,
you will not, until advised by us in writing or by wire that the entire offering
has been distributed and closed, bid for or purchase Units or its component
securities in the open market or otherwise make a market in such securities or
otherwise attempt to induce others to purchase such securities in the open
market.  Nothing contained in this paragraph 11 shall, however, preclude you
from acting as agent in the execution of unsolicited orders of customers in
transactions effectuated for them through a market maker.

    12.  You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions.  If  the Underwriter contracts for
or purchases in the open market in connection with such stabilization any Units
sold to you hereunder and not effectively placed by you, the Underwriter may
charge you the Selected Dealer's concession originally allowed you on the Units
so purchased, and you agree to pay such amount to us on demand.

    13.  By submitting an Offer to Purchase you confirm that your net capital
is such that you may, in accordance with Rule 15c3-1 adopted under the 1934 Act,
agree to purchase the number of Units you may become obligated to purchase under
the provisions of this Agreement.

    14.    You agree that (i) you shall not recommend to a customer the
purchase of Firm Units unless you shall have reasonable grounds to believe that
the recommendation is suitable for such customer on the basis of information
furnished by such customer concerning the customer's investment objectives,
financial situation and needs, and any other information known to you, (ii) in
connection with all such determinations, you shall maintain in your files the
basis for such determination, and (iii) you shall not execute any transaction in
Firm Units in a discretionary account without the prior specific written
approval of the customer.

                                          4


<PAGE>

    15.  All communications from you should be directed to us at the office of
the Underwriter, Stratton Oakmont, Inc., 1979 Marcus Avenue, Lake Success,
New York 11042.  All communications from us to you shall be directed to the
address to which this letter is mailed.


                                       Very truly yours,

                                       STRATTON OAKMONT, INC.


                                       By:  ______________________________

                                            Its


ACCEPTED AND AGREED TO AS OF THE _____
DAY OF _____________________, 1996


[Name of Dealer]


By: ______________________________

    Its

                                          5


<PAGE>

To: Stratton Oakmont, Inc.
    1979 Marcus Avenue
    Lake Success, New York  11042


    We hereby subscribe for _____________ Units of  e-NET, Inc., each Unit
consisting of two (2) shares of common stock, par value $.01 per share (the
"Common Stock") and two (2) Class A Redeemable Common Stock Purchase Warrants
(the "Class A Warrants"), each to purchase one share of Common Stock, in
accordance with the terms and conditions stated in the foregoing letter.  We
hereby acknowledge receipt of the Prospectus referred to in the first paragraph
thereof relating to said Units.  We further state that in purchasing said Units
we have relied upon said Prospectus and upon no other statement whatsoever,
whether written or oral.  We confirm that we are a dealer actually engaged in
the investment banking or securities business and that we are either (i) a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") or (ii) a dealer with its principal place of business located
outside the United States, its territories and its possessions and not
registered as a broker or dealer under the Securities Exchange Act of 1934, as
amended, who hereby agrees not to make any sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein.  We hereby agree to comply with the provisions of Section 24
of Article III of the Rules of Fair Practice of the NASD, and if we are a
foreign dealer and not a member of the NASD, we also agree to comply with the
NASD's interpretation with respect to free-riding and withholding, to comply, as
though we were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III thereof as that Section applies to non-member foreign dealers.

                                       [Name of Dealer]

                                       ______________________________

                                       By:  ______________________________

                                       Address

                                       ______________________________

                                       ______________________________

Dated _____________________, 1996

<PAGE>


                               Option to Purchase
                                  50,000 Units


                                   e-NET, INC.


                                 PURCHASE OPTION


                             Dated: August ___, 1996



     THIS CERTIFIES that STRATTON OAKMONT, INC., 1979 Marcus Avenue, Lake
Success, New York 11042 (hereinafter sometimes referred to as the "Holder" which
shall include any permitted transferee hereunder), is entitled to purchase from
e-NET, INC., a Delaware corporation (hereinafter referred to as the "Company"),
at the prices and during the periods as hereinafter specified, up to
50,000 Units consisting of the Company's Common Stock and Warrants to purchase
the Company's Common Stock.  Each Unit consists of two (2) shares of the
Company's Common Stock, $.01 par value, as now constituted ("Common Stock") and
two (2) Class A Redeemable Common Stock Purchase Warrants, each to purchase one
(1) share of Common Stock as now constituted at an exercise price of $7.50 per
share (the "Class A Warrants"). The Warrants are exercisable until August ___,
2001.

     The Units have been registered under a Registration Statement on Form SB-2
(File No. 333-3860) declared effective by the Securities and Exchange Commission
on August ___, 1996 (the "Registration Statement").  This Option (the "Option")
to purchase 50,000 Units (the "Option Units") was originally issued pursuant to
an underwriting agreement between the Company and Stratton Oakmont, Inc., as
underwriter (the "Underwriter"), in connection with a public offering of 500,000
Units (the "Public Units") through the Underwriter, in consideration of $50.00
received for the Option.

     Except as specifically otherwise provided herein, the Common Stock and the
Warrants issued pursuant to this Option shall bear the same terms and conditions
as described under the caption "Description of Securities" in the Registration
Statement, and the


<PAGE>

Warrants shall be governed by the terms of the Warrant Agreement dated as of
August ___, 1996, executed in connection with such public offering (the "Warrant
Agreement"), and except that  the Holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Option, the Common
Stock and the Warrants included in the Units, and the shares of Common Stock
underlying the Warrants, as more fully described in paragraph 6 of this Option .
In the event of any reduction of the exercise price of the Warrants included in
the Public Units, the same changes to the Warrants included in the Option Units
shall be simultaneously effected.

     1.   The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option, and
during the periods as follows:

          (a)  Between August ___, 1997 and August ___, 2001, inclusive, the
Holder shall have the option to purchase Units hereunder at a price of $23.10
per Unit(subject to adjustment pursuant to paragraph 8 hereof) (the "Exercise
Price").

          (b)  After August ___, 2001, the Holder shall have no right to
purchase any Units hereunder.

     2.   The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the applicable Exercise Price then in effect for the number of Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any; and (iii) delivery to the Company of a duly executed
agreement signed by the person(s)' designated in the purchase form to the effect
that such person(s) agree(s) to be bound by the provisions of paragraph 6 and
subparagraphs (b), (c) and (d) of paragraph 7 hereof.  This Option shall be
deemed to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance with the foregoing provisions of
this paragraph 2, and the person or persons in whose name or names the
certificates for shares of


                                        2

<PAGE>

Common Stock and Warrants shall be issuable upon such exercise shall become the
Holder or Holders of record of such Common Stock and Warrants at that time and
date.  The Common Stock and Warrants and the certificates for the Common Stock
and Warrants so purchased shall be delivered to the Holder within a reasonable
time, not exceeding ten (10) days, after the rights represented by this Option
shall have been so exercised.

     3.   For a period of one (1) year from the Effective Date, this Option
shall not be transferred, sold, assigned, or hypothecated, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder during such period.  Any such
assignment shall be effected by the Holder (i) executing the form of assignment
at the end hereof and (ii) surrendering this Option for cancellation at the
office or agency of the Company referred to in paragraph 2 hereof, accompanied
by a certificate (signed by an officer of the Holder if the Holder is a
corporation), stating that each transferee is a permitted transferee under this
paragraph 3 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Option or Options of like
tenor and representing in the aggregate rights to purchase the same number of
Units as are purchasable hereunder.

     4.   The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Units purchased hereunder and the Common Stock
which may be issued upon exercise of the Warrants will, upon issuance, be duly
and validly issued, fully paid and nonassessable, and no personal liability will
attach to the Holder thereof.  The Company further covenants and agrees that
during the periods within which this Option may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of this Option and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants included in the Units.

     5.   This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.

     6.   (a)  During the period set forth in paragraph l(a) hereof, the Company
shall advise the Holder or its transferee, whether the Holder holds the Option
or has exercised the Option and



                                        3

<PAGE>

holds Units, or any of the securities underlying the Units by written notice at
least thirty (30) days prior to the filing of any post-effective amendment to
the Registration Statement or of any new registration statement or post-
effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others (other than a
registration statement on Form S-4 or S-8 or any successor forms thereto), and
will for a period of five years from the effective date of the Registration
Statement, upon the request of the Holder, include in any such post-effective
amendment or registration statement, such information as may be required to
permit a public offering of the Option, all or any of the Units underlying the
Option, the Common Stock, or Warrants included in the Units or the Common Stock
issuable upon the exercise of the Warrants (the "Registrable Securities").  The
Company shall supply prospectuses and such other documents as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states as such Holder designates;
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action; and do any and all other acts and
things which may be reasonably necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable Securities,
and furnish indemnification in the manner provided in paragraph 7 hereof.  The
Holder shall furnish information and indemnification as set forth in paragraph
7, except that the maximum amount which may be recovered from the Holder shall
be limited to the amount of proceeds received by the Holder from the sale of the
Registrable Securities.  The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Holders of Registrable Securities requested to be included in the
registration to include such securities in such underwritten offering on the
same terms and conditions as any similar securities of the Company included
therein.  Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering advises the Holders of Registrable Securities that
the total amount of securities which they intend to include in such offering is
such as to materially and adversely affect the success of such offering, then
the amount of securities to be offered for the accounts of Holders of
Registrable Securities shall be eliminated, reduced, or limited to


                                        4

<PAGE>

the extent necessary to reduce the total amount of securities to be included in
such offering to the amount, if any, recommended by such managing underwriter or
underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
Holders of Registrable Securities proposed to be included therein pro rata).
The Holder will pay its own legal fees and expenses and any underwriting
discounts and commissions on the securities sold by such Holder and shall not be
responsible for any other expenses of such registration.

          (b)  If any 50% Holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph l(a) hereof to the
effect that such Holder desires to register under the Act this Option, the
Units, or any of the underlying securities contained in the Units underlying the
Option under such circumstances that a public distribution (within the meaning
of the Act) of any such securities will be involved then the Company will
promptly, but no later than sixty (60) days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option, the
Units, and/or any of the securities underlying the Units may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective for a
period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such Holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing.  The 50% Holder (which for
purposes hereof shall mean any direct or indirect transferee of such Holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only one occasion during the term
of this Option.  The Holder may at its option request the registration of the
Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by Section 6(a) or in connection
with a request made pursuant to this Section 6(b) prior to acquisition of the
Units issuable upon exercise of the Option and even though the Holder has not
given notice of exercise of the Option.  The 50% Holder may, at its option,
request such post-effective amendment or new registration


                                        5

<PAGE>

statement during the described period with respect to the Option, the Units as a
Unit, or separately as to the Common Stock and/or Warrants included in the
Units, and/or the Common Stock issuable upon the exercise of the Warrants, and
such registration rights may be exercised by the 50% Holder prior to or
subsequent to the exercise of the Option.  Within ten (10) business days after
receiving any such notice pursuant to this subsection (b) of paragraph 6, the
Company shall give notice to the other Holders of the Options, advising that the
Company is proceeding with such post-effective amendment or registration
statement and offering to include therein the securities underlying the Options
of the other Holders.  Each Holder electing to include its Registrable
Securities in any such offering shall provide written notice to the Company
within twenty (20) days after receipt of notice from the Company.  The failure
to provide such notice to the Company shall be deemed conclusive evidence of
such Holder's election not to include its Registrable Securities in such
offering.  Each Holder electing to include its Registrable Securities shall
furnish the Company with such appropriate information (relating to the
intentions of such Holders) in connection therewith as the Company shall
reasonably request in writing. All costs and expenses of the first such post-
effective amendment or new registration statement shall be borne by the Company,
except that the Holders shall bear the fees of their own counsel and any
underwriting discounts or commissions applicable to any of the securities sold
by them.  If the Company determines to include securities to be sold by it in
any registration statement pursuant to this Section 6(b), such registration
shall be deemed to have been a registration under Section 6(a).  In no event
shall the demand registration right  granted hereunder extend beyond five years
from the effective date of the Registration Statement.  Notwithstanding anything
herein to the contrary, there shall be only one (1) demand registration right
granted hereunder.

               The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to be
prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing



                                        6

<PAGE>

that such a registration statement would have a material adverse effect on the
consummation of such offering or (iv) the Company is subject to an underwriter's
lock-up as a result of an underwritten public offering and such underwriter has
refused in writing, the Company's request to waive such lock-up.  In the event
of such postponement, the Company shall be required to file the registration
statement pursuant to this Section 6(b), within sixty (60) days of the
consummation of the event requiring such postponement.

               The Company will use its best efforts to maintain such
registration statement or post-effective amendment current under the Act for a
period of at least six (6) months (and for up to an additional three (3) months
if requested by the Holder) from the effective date thereof.  The Company shall
supply prospectuses, and such other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities, use its best efforts to register and qualify any of the
Registrable Securities for sale in such states as such Holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action and furnish indemnification in the
manner provided in paragraph 7 hereof.

          (c)  The term "50% Holder" as used in this paragraph 6 shall mean the
Holder of at least 50% of the Common Stock and the Warrants underlying the
Option (considered in the aggregate) and Additional Stock and shall include any
owner or combination of owners of such securities, which ownership shall be
calculated by determining the number of shares of Common Stock held by such
owner or owners as well as the number of shares then issuable upon exercise of
the Warrants.

     7.   (a)  Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any shares or warrants issued or issuable upon the
exercise of any Options, is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each Holder of the securities covered
by such registration statement, amendment, or supplement (such Holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such


                                        7

<PAGE>

securities and each person, if any, who controls (within the meaning of the Act)
any such underwriter, against any losses, claims, damages, or liabilities, joint
or several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder, for use in the
preparation thereof.

          (b)  The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or


                                        8

<PAGE>

alleged untrue statement or omission or alleged omission was made in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the preparation
thereof; and will reimburse the Company or any such director, officer, or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action.

          (c)  Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Paragraph 7.

          (d)  In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.

     8.   With respect to the Option Units, the Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of this
Option shall be subject to adjustment from time to time upon the happening of
certain events as follows:

          (a)  In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common


                                        9

<PAGE>

Stock into a smaller number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action.  Notwithstanding anything to the contrary contained in the Warrant
Agreement, in the event an adjustment to the Exercise Price is effected pursuant
to this Subsection (a) (and a corresponding adjustment to the number of Option
Units is made pursuant to Subsection (g) below), the exercise price of the
Warrants shall be adjusted so that it shall equal the price determined by
multiplying the exercise price of the Warrants by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
In such event, there shall be no adjustment to the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants.  Such
adjustment shall be made successively whenever any event listed above shall
occur.

          (b)  In case the Company shall fix a record date for the issuance of
rights or warrants to all Holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of shares then comprising an Option Unit by
the product of the Exercise Price in effect immediately prior to the date of
such issuance multiplied by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered) would
purchase at such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock


                                       10

<PAGE>

outstanding on such record date and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible
securities so offered are convertible).  Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.

          (c)  In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and-dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of shares
then comprising an Option Unit by the product of the Exercise Price in effect
immediately prior thereto multiplied by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (e)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock.  Such adjustment shall be made successively whenever such
a record date is fixed.  Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.

          (d)  Whenever the Exercise Price payable upon exercise of this Option
is adjusted pursuant to Subsections (a), (b), or (c), above, the number of
Option Units purchasable upon exercise of this Option shall simultaneously be
adjusted by multiplying the number of Option Units initially issuable upon
exercise of this Option by


                                       11

<PAGE>

the Exercise Price in effect on the date hereof and dividing the product so
obtained by the Exercise Price, as adjusted.

          (e)  For the purpose of any computation under Subsections (b) or (c)
above, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing prices for twenty (20) consecutive
business days before such date.  The closing price for each day shall be the
last sale price regular way or, in case no such reported sale takes place on
such day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.

          (f)  No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
Subsection (f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.  Anything in this Section
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such changes in the Exercise Price, in addition to those
required by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to the
holders of Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Option).

          (g)  Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than twenty(20) days after any request for
such an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Option Units issuable upon exercise of
this Option and,


                                       12

<PAGE>

if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Holder, at the address set forth herein, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.

          (h)  In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections (a) to (g), inclusive above.

     9.   This Agreement shall be governed by and in accordance with the laws of
the State of New York.


     IN WITNESS WHEREOF, e-NET, Inc. has caused this Option to be signed by its
duly authorized officers under its corporate seal, and this Option to be dated
as of the date first above written.


                             e-NET, Inc.


                             By:    ______________________________
                                    Robert A. Veschi
                                    Its President


(Corporate Seal)


                                       13

<PAGE>

                                  PURCHASE FORM


                   (To be signed only upon exercise of option)



     THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,

     Units of e-NET, Inc., each Unit consisting of two shares of $.01 Par Value
Common Stock and two Class A Redeemable Common Stock Purchase Warrants and
herewith makes payment of $______________ therefor, and requests that the
Warrants and certificates for shares of Common Stock be issued in the name(s)
of, and delivered to ________________________ whose address(es) is
(are)_________________________________________.







Dated:


<PAGE>

                                  TRANSFER FORM


                 (To be signed only upon transfer of the Option)



     For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase Units represented
by the foregoing Option to the extent of _______ Units and appoints
_________________________________ attorney to transfer such rights on the books
of e-NET, Inc. with full power of substitution in the premises.




Dated:




                             By:    ______________________________



                                Address:


                                ______________________________

                                ______________________________

                                ______________________________



In the presence of:

<PAGE>


                                WARRANT AGREEMENT


     AGREEMENT, dated as of this __th day of August 1996, by and between e-NET,
INC., a Delaware corporation ("Company"), and American Stock Transfer & Trust
Company, as Warrant Agent (the "Warrant Agent").


                                   WITNESSETH:


     WHEREAS, in connection with a public offering of up to 575,000 units
("Units"), each unit consisting of two (2) shares of the Company's Common Stock,
$.01 par value ("Common Stock") and two (2) Class A Redeemable Common Stock
Purchase Warrants (the "Class A Warrants") pursuant to an underwriting agreement
(the "Underwriting Agreement") dated August __, 1996 between the Company and
Stratton Oakmont, Inc. ("Stratton"), and the issuance(i) to Stratton or its
designees of a Purchase Option to purchase 50,000 additional Units, (the
"Purchase Option"), and (ii) the issuance of 500,000 Bridge Units consisting of
two (2) shares of Common Stock, two (2) Class A Warrants and two (2) Class B
Redeemable Common Stock Purchase Warrants (the "Class B Warrants", and together
with Class A Warrants, the "Warrants") the Company will issue up to 2,250,000
Class A Warrants and 1,000,000 Class B Warrants;

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:


<PAGE>


     1.   DEFINITIONS.  As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:

          (a)  "Common Stock" shall mean the common stock of the Company of
which at the date hereof consists of 50,000,000 authorized shares, $.01 par
value, and shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum or percentage in
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary liquidation, dissolution, or
winding up of the Company; provided, however, that the shares issuable upon
exercise of the Warrants shall include (1) only shares of such class designated
in the Company's Certificate of Incorporation as Common Stock on the date of the
original issue of the Warrants or (ii), in the case of any reclassification,
change, consolidation, merger, sale, or conveyance of the character referred to
in Section 9(c) hereof, the stock, securities, or property provided for in such
section or (iii), in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of the Warrants as a
result of a subdivision or combination or a change in par value, or from par
value to no par value, or from no par value to par value, such shares of Common
Stock as so reclassified or changed.

          (b)  "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 40 Wall Street, 
New York, New York 10005.

          (c)  "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder (as defined below) thereof or his attorney duly authorized in
writing, and (b) payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the United States of
America equal to the applicable Purchase Price (as defined below).

          (d)  "Initial Warrant Exercise Date" shall mean August __, 1997.


                                        2

<PAGE>


          (e)  "Purchase Price" shall mean the purchase price per share to be
paid upon exercise of each Warrant in accordance with the terms hereof, which
price shall be $7.50 per share for the Class A Warrant and $8.00 per share for
the Class B Warrant, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right, in its sole
discretion, upon thirty (30) days written notice, to reduce the Purchase Price
upon notice to all warrant holders.

          (f)  "Redemption Price" shall mean the price at which the Company may,
at its option, redeem the Warrants, in accordance with the terms hereof, which
price shall be $0.05 per Warrant.

          (g)  "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.

          (h)  "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.

          (i)  "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
August __, 2001 or the Redemption Date as defined in Section 8, whichever is
earlier; provided that if such date shall in the State of New York be a holiday
or a day on which banks are authorized or required to close, then 5:00 P.M. (New
York time) on the next following day which in the State of New York is not a
holiday or a day on which banks are authorized or required to close.  Upon
notice to all warrantholders, the Company shall have the right to extend the
warrant expiration date.

     2.   WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.

          (a)  A Warrant initially shall entitle the Registered Holder of the
Warrant representing such Warrant to purchase one share of Common Stock upon the
exercise thereof, in accordance with the terms hereof, subject to modification
and adjustment as provided in Section 9.

          (b)  Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
shall be executed by the Company and


                                        3

<PAGE>


delivered to the Warrant Agent.  Upon written order of the Company signed by its
President or a Vice President and by its Secretary or an Assistant Secretary,
the Warrant Certificates shall be countersigned, issued, and delivered by the
Warrant Agent.

          (c)  From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 3,250,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise of
Warrants in accordance with this Agreement.

          (d)  From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Warrants represented by any Warrant Certificate, to evidence any
unexercised warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in
replacement of lost, stolen, destroyed, or mutilated Warrant Certificates
pursuant to Section 7; (v) those issued pursuant to the  Purchase Option; and
(vi) those issued at the option of the Company, in such form as may be approved
by the its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon exercise
of the Warrants or the Redemption Price therefor made pursuant to Section 9
hereof.

          (e)  Pursuant to the terms of the Purchase Option, Stratton may
purchase up to 50,000 Units which include up to 100,000 Class A Warrants.

     3.   FORM AND EXECUTION OF WARRANT CERTIFICATES.

          (a)  The Class A Warrant Certificates and Class B Warrant Certificates
shall be substantially in the forms annexed hereto as Exhibits A and B (the
provisions of which are hereby incorporated herein) and may have such letters,
numbers, or other marks of identification or designation and such legends,
summaries, or


                                        4

<PAGE>


endorsements printed, lithographed, or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage or to the requirements of
Section 2(b).  The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange, or in lieu of
mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in
registered form.  Warrant Certificates shall be numbered serially with the
letter W.

          (b)  Warrant Certificates shall be executed on behalf of the Company
by its President, or any Vice President and by its Secretary or an Assistant
Secretary, by manual signatures or by facsimile signatures printed thereon, and
shall have imprinted thereon a facsimile of the Company's seal.  Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned.  In case any officer of the
Company who shall have signed any of the Warrant Certificates shall cease to be
an officer of the Company or to hold the particular office referenced in the
Warrant Certificate before the date of issuance of the Warrant Certificates or
before countersignature by the Warrant Agent and issue and delivery thereof,
such Warrant Certificates may nevertheless be countersigned by the Warrant
Agent, issued and delivered with the same force and effect as though the person
who signed such Warrant Certificates had not ceased to be an officer of the
Company or to hold such office.  After countersignature by the Warrant Agent,
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as otherwise provided by
Section 4 hereof.

     4.   EXERCISE.  Each Class A Warrant and Class B Warrant may be exercised
by the Registered Holder thereof at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein and in the applicable Warrant
Certificate.  A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the Exercise Date and the person entitled to receive
the securities deliverable upon such exercise shall be treated for all purposes
as the holder of those securities upon the exercise of the Warrant as of the
close of business on the Exercise


                                        5

<PAGE>


Date.  As soon as practicable on or after the Exercise Date, the Warrant Agent
shall deposit the proceeds received from the exercise of a Warrant and shall
notify the Company in writing of the exercise of the Warrants.  Promptly
following, and in any event within five (5) business days after the date of such
notice from the Warrant Agent, the Warrant Agent, on behalf of the Company,
shall cause to be issued and delivered by the Transfer Agent, to the person or
persons entitled to receive the same, a certificate or certificates for the
securities deliverable upon such exercise (plus a certificate for any remaining
unexercised Warrants of the Registered Holder), unless prior to the date of
issuance of such certificates the Company shall instruct the Warrant Agent to
refrain from causing such issuance of certificates pending clearance of checks
received in payment of the Purchase Price pursuant to such Warrants.  Upon the
exercise of any Warrant and clearance of the funds received, the Warrant Agent
shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing.

     5.   RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES, ETC.

          (a)  The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants.  The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery, be duly and validly issued,
fully paid, nonassessable, and free from all taxes, liens, and charges with
respect to the issue thereof, (other than those which the Company shall promptly
pay or discharge) and that upon issuance such shares shall be listed on each
national securities exchange or eligible for inclusion in each automated
quotation system, if any, on which the other shares of outstanding Common Stock
of the Company are then listed or eligible for inclusion.

          (b)  The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will, to the extent the Purchase Price is less than the Market Price (as
hereinafter defined), in good faith and as expeditiously as


                                        6

<PAGE>



reasonably possible, endeavor to secure such registration or approval and will
use its reasonable efforts to obtain appropriate approvals or registrations
under state "blue sky" securities laws.  With respect to any such securities,
however, Warrants may not be exercised by, or shares of Common Stock issued to,
any Registered Holder in any state in which such exercise would be unlawful.

          (c)  The Company shall pay all documentary, stamp, or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.

          (d)  The Warrant Agent is hereby irrevocably authorized for such time
as it is acting as such to requisition the Company's Transfer Agent from time
to time for certificates representing shares of Common Stock issuable upon
exercise of the Warrants, and the Company will authorize the Transfer Agent to
comply with all such proper requisitions.  The Company will file with the
Warrant Agent a statement setting forth the name and address of the Transfer
Agent of the Company for shares of Common Stock issuable upon exercise of the
Warrants.

     6.   EXCHANGE AND REGISTRATION OF TRANSFER.

          (a)  Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part.  Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue, and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.

          (b)  The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in


                                        7

<PAGE>


accordance with its regular practice.  Upon due presentment for registration of
transfer of any Warrant Certificate at such office, the Company shall execute
and the Warrant Agent shall issue and deliver to the transferee or transferees a
new Warrant Certificate or Certificates representing an equal aggregate number
of Warrants.

          (c)  With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.

          (d)  A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates.  In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.

          (e)  All Warrant Certificates surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly canceled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or disposed of or destroyed, at
the direction of the Company.

          (f)  Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.  The Warrants which are being publicly offered in Units with
shares of Common Stock pursuant to the Underwriting Agreement will be
immediately detachable from the Common Stock and transferable separately
therefrom.

     7.   LOSS OR MUTILATION.  Upon receipt by the Company and the Warrant Agent
of evidence satisfactory to them of the ownership of and loss, theft,
destruction, or mutilation of any Warrant Certificate and (in case of loss,
theft, or destruction) of


                                        8

<PAGE>


indemnity satisfactory to them, and (in the case of mutilation) upon surrender
and cancellation thereof, the Company shall execute and the Warrant Agent shall
(in the absence of notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bona fide purchaser) countersign and deliver
to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor
representing an equal aggregate number of Warrants.  Applicants for a substitute
Warrant Certificate shall comply with such other reasonable regulations and pay
such other reasonable charges as the Warrant Agent may prescribe.

     8.   REDEMPTION.

          (a)  Subject to the provisions of paragraph 2(e) hereof, on not less
than thirty (30) days notice given at any time after (1) year from the Initial
Warrant Exercise Date, the Warrants may be redeemed, at the option of the
Company, at a redemption price of $0.05 per Warrant, provided the Market Price
of the Common Stock receivable upon exercise of the Warrant shall equal or
exceed $10.00 (the "Target Price") subject to adjustment as set forth in Section
8(f) below.  Market Price for the purpose of this Section 8 shall mean (i) the
average closing bid price for any twenty (20) consecutive trading days within a
period of thirty (30) consecutive trading days ending within ten (10) days prior
to the date of the notice of redemption, which notice shall be mailed no later
than five (5) days thereafter, of the Common Stock as reported by the National
Association of Securities Dealers, Inc.  Automatic Quotation System or the NASD
Bulletin Board or (ii) the last reported sale price, for twenty (20) consecutive
business days within a period of thirty (30) consecutive trading days ending
within ten (10) days of the date of the notice of redemption, which notice shall
be mailed no later than five (5) days thereafter, on the primary exchange on
which the Common Stock is traded, if the Common Stock is traded on a national
securities exchange.

          (b)  If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Class A Warrants and/or
Class B Warrants, it shall mail a notice of redemption to each of the Registered
Holders of the Warrants to be redeemed, first class, postage prepaid, not later
than the thirtieth day before the date fixed for redemption, at their last
address as shall appear on the records maintained pursuant to Section 6(b).  Any
notice mailed in the manner provided herein


                                        9

<PAGE>


shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice.

          (c)  The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on
the business day immediately preceding the date fixed for redemption.  The date
fixed for the redemption of the Class A Warrants or Class B Warrants shall be
the Redemption Date.  No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a Registered Holder (a) to whom notice was not mailed or
(b) whose notice was defective and then only to the extent that the Registered
Holder is prejudiced thereby.  An affidavit of the Warrant Agent or of the
Secretary or an Assistant Secretary of the Company that notice of redemption has
been mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.

          (d)  Any right to exercise a Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date.  On
and after the Redemption Date, Holders of the Warrants shall have no further
rights except to receive, upon surrender of the Warrant, the Redemption Price.

          (e)  From and after the Redemption Date specified for, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Registered Holder thereof of one
or more Warrant Certificates evidencing Warrants to be redeemed, deliver or
cause to be delivered to or upon the written order of such Holder a sum in cash
equal to the redemption price of each such Warrant.  From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the redemption price, shall
cease.

          (f)  If the shares of the Company's Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted


                                       10

<PAGE>


by the ratio which the total number of shares of Common Stock outstanding
immediately prior to such event bears to the total number of shares of Common
Stock to be outstanding immediately after such event.

     9.   ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF COMMON STOCK OR
WARRANTS.

          (a)  Subject to the exceptions referred to in Section 9(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Market Price of the Common Stock (as defined in Section 8) on the date of
the sale or issue any shares of Common Stock as a stock dividend to the holders
of Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision,
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
9(f) below) for the issuance of such additional shares would purchase at such
current market price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.  Such adjustment shall be made
successively whenever such an issuance is made.

               Upon each adjustment of the Purchase Price pursuant to this
Section 9, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in Section
9(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price in effect immediately prior to such adjustment
multiplied by a fraction, the numerator of which shall be the Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the Purchase Price in effect immediately after such adjustment.


                                       11

<PAGE>


          (b)  The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest tenth)
determined by multiplying the number one by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect immediately after
such adjustment.  Upon each adjustment of the number of Warrants pursuant to
this Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.

          (c)  In case of any reclassification, capital reorganization, or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization, or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage, or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization, or other change, consolidation,
merger, sale, or conveyance by a holder of the number of shares of Common Stock
that


                                       12

<PAGE>


might have been purchased upon exercise of such Warrant immediately prior to
such reclassification, capital reorganization, or other change, consolidation,
merger, sale, or conveyance.  Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The Company shall not effect any
such consolidation, merger, or sale unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Warrant Agent, the obligation to deliver to the holder of
each Warrant such shares of stock, securities, or assets as, in accordance with
the foregoing provisions, such holders may be entitled to purchase and the other
obligations under this Agreement.  The foregoing provisions shall similarly
apply to successive reclassification, capital reorganizations, and other changes
of outstanding shares of Common Stock and to successive consolidations, mergers,
sales, or conveyances.

          (d)  Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder, and the Redemption Price
therefor as the Purchase Price per share, and the number of shares purchasable
and the Redemption Price therefore were expressed in the Warrant Certificates
when the same were originally issued.

          (e)  After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
President or a Vice President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will promptly
file such


                                       13

<PAGE>


certificate with the Warrant Agent and cause a brief summary thereof to be sent
by ordinary first class mail to Stratton and to each registered holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent.  No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective.  The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.

          (f)  For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) to (vii) shall also be applicable:

               (i)  The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of said sections.

               (ii) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.10 in such
price; provided that any adjustments which by reason of this subsection (ii) are
not required to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $.10 in the Purchase Price then in effect hereunder.

               (iii)  In case of (1) the sale by the Company for cash of any
rights or warrants to subscribe for or purchase, or any options for the purchase
of, Common Stock or any securities convertible into or exchangeable for Common
Stock without the payment of any further consideration other than cash, if any
(such convertible or exchangeable securities being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration


                                       14

<PAGE>


payable to the Company upon the exercise of such rights, warrants, or options
shall consist of cash, whether or not such rights, warrants, or options, or the
right to convert or exchange such Convertible Securities, are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such rights, warrants, or options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights, warrants,
or options, plus the consideration received by the Company for the issuance or
sale of such rights, warrants, or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock issuable upon
the exercise of such rights, warrants, or options or upon the conversion or
exchange of such Convertible Securities issuable upon the exercise of such
rights, warrants, or options) is less than the fair market value of the Common
Stock on the date of the issuance or sale of such rights, warrants, or options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such rights, warrants, or options or upon the conversion or exchange
of such Convertible Securities (as of the date of the issuance or sale of such
rights, warrants, or options) shall be deemed to be outstanding shares of Common
Stock for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have
been sold for cash in an amount equal to such price per share.

               (iv) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the fair market value of
the Common Stock on the date of the sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the


                                       15


<PAGE>


date of the sale of such Convertible Securities) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to such price
per share.

               (v)  In case the Company shall modify the rights of conversion,
exchange, or exercise of any of the securities referred to in subsection (iii)
above or any other securities of the Company convertible, exchangeable, or
exercisable for shares of Common Stock, for any reason other than an event that
would require adjustment to prevent dilution, so that the consideration per
share received by the Company after such modification is less than the market
price on the date prior to such modification, the Purchase Price to be in effect
after such modification shall be determined by multiplying the Purchase Price in
effect immediately prior to such event by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding multiplied by the
market price on the date prior to the modification plus the number of shares of
Common Stock which the aggregate consideration receivable by the Company for the
securities affected by the modification would purchase at the market price and
of which the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock to be issued
upon conversion, exchange, or exercise of the modified securities at the
modified rate.  Such adjustment shall become effective as of the date upon which
such modification shall take effect.

               (vi) On the expiration of any such right, warrant, or option or
the termination of any such right to convert or exchange any such Convertible
Securities, the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (a) had the adjustments
made upon the issuance or sale of such rights, warrants, options, or Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants, or options or
upon the conversion or exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as adjusted under
clause (a) for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such rights, warrants,
options, or Convertible Securities.


                                       16

<PAGE>


               (vii)  In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be deemed
to be the gross sales price therefor without deducting therefrom any expense
paid or incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith.

          (g)  No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each Warrant
will be made, however,

               (i)  upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants or Common Stock
comprising the  Purchase Option; or

               (ii) upon the sale of any shares of Common Stock in the Company's
initial public offering, including, without limitation, shares sold upon the
exercise of any over-allotment option granted to the Underwriters in connection
with such offering; or

               (iii)  upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants, or options were outstanding on
the date of the original sale of the Warrants or were thereafter issued or sold;
or

               (iv) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of the original sale of the Warrants or were thereafter
issued or sold; or

               (v)  upon the issuance or sale of Common Stock or Convertible
Securities in a private placement unless the issuance or sale price is less than
85% of the fair market value of the Common Stock on the date of issuance, in
which case the adjustment


                                       17

<PAGE>


shall only be for the difference between 85% of the fair market value and the
issue or sale price;

               (vi) upon the issuance or sale of Common Stock or Convertible
Securities to shareholders of any corporation which merges and/or consolidates
into or is acquired by the Company or from which the Company acquires assets and
some or all of the consideration consists of equity securities of the Company,
in proportion to their stock holdings of such corporation immediately prior to
the acquisition but only if no adjustment is required pursuant to any other
provision of this Section 9;

               (vii) upon the issuance or exercise of options granted to the
Company's directors, employees or consultants under a plan or plans adopted by
the Company's Board of Directors and approved by its stockholders (but only to
the extent that the aggregate number of shares excluded hereby and issued after
the date hereof shall not exceed ten percent (10%) of the Company's Common Stock
at the time of issuance);

               (viii) upon the issuance of Common Stock to the Company's
directors, employees or consultants under a plan or plans which are qualified
under the Internal Revenue Code; or

               (ix) upon the issuance of Common Stock in a bona fide public
offering pursuant to a firm commitment underwriting.

          (h)  As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution, or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale, or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities, or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common


                                       18

<PAGE>


Stock issuable upon exercise of the Warrants as a result of a subdivision or
combination or a change in par value, or from par value to no par value, or from
no par value to par value, such shares of Common Stock as so reclassified or
changed.

          (i)  Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.

          (j)  If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant, or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants, or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants, or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section 9(j), that
exercise of warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants.  Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.

     10.  FRACTIONAL WARRANTS AND FRACTIONAL SHARES.

          (a)  If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares.  In such event, the Company may at its option elect to round
up the number of shares to which the Holder is entitled to the nearest whole
share or to pay cash in respect of fractional shares in accordance with the
following:  With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by


                                       19

<PAGE>


the current market value of such fractional share, determined as follows:

               (i)  If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ Quotation System or the NASD Bulletin Board, the
current value shall be the last reported sale price of the Common Stock on such
exchange on the last business day prior to the date of exercise of this Warrant
or if no such sale is made on such day, the average of the closing bid and asked
prices for such day on such exchange; or

               (ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. or the NASD
Bulletin Board on the last business day prior to the date of the exercise of
this Warrant; or

               (iii)  If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.

     11.  WARRANT HOLDERS NOT DEEMED STOCKHOLDERS.  No holder of Warrants shall,
as such, be entitled to vote or to receive dividends or be deemed the holder of
Common Stock that may at any time be issuable upon exercise of such Warrants for
any purpose whatsoever, nor shall anything contained herein be construed to
confer upon the holder of Warrants, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, or conveyance or otherwise), or to receive notice
of meetings, or to receive dividends or subscription rights, until such Holder
shall have exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.

     12.  RIGHTS OF ACTION.  All rights of action with respect to this Agreement
are vested in the respective Registered Holders of


                                       20

<PAGE>


the Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf and
for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificate and this Agreement.

     13.  AGREEMENT OF WARRANT HOLDERS.  Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a warrant that:

          (a)  The warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their mutual discretion, together with payment of any
applicable transfer taxes; and

          (b)  The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true, and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.

     14.  CANCELLATION OF WARRANT CERTIFICATES.  If the Company shall purchase
or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and canceled by it and retired.  The Warrant Agent shall also cancel
Common Stock following exercise of any or all of the Warrants represented
thereby or delivered to it for transfer, split up, combination, or exchange.

     15.  CONCERNING THE WARRANT AGENT.  The Warrant Agent acts hereunder as
agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof.  The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value, or authorization
of the


                                       21

<PAGE>


Warrant Certificates or the Warrants represented thereby or of any securities or
other property delivered upon exercise of any Warrant or whether any stock
issued upon exercise of any Warrant is fully paid and nonassessable.

          The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same.  It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered, or omitted by it in reliance on any warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.

          The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.

          Any notice, statement, instruction, request, direction, order, or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the President, any Vice President, its Secretary, or Assistant Secretary,
(unless other evidence in respect thereof is herein specifically prescribed).
The Warrant Agent shall not be liable for any action taken, suffered or omitted
by it in accordance with such notice, statement, instruction, request,
direction, order, or demand reasonably believed by it to be genuine.

          The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses,


                                       22

<PAGE>


expenses, and liabilities, including judgments, costs, and counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses, and liabilities arising as a result of
the Warrant Agent's negligence or wilful misconduct.

          The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving thirty
(30) days prior written notice to the Company.  At least fifteen (15) days prior
to the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered Holder
of each Warrant Certificate at the Company's expense.  Upon such resignation, or
any inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing.  If the Company shall fail to make such
appointment within a period of fifteen (15) days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the Registered
Holder of any Warrant Certificate may apply to any court of competent
jurisdiction in the State of New York for the appointment of a new warrant
agent.  Any new warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having a capital and surplus, as shown
by its last published report to its stockholders, of not less than $10,000,000
or a stock transfer company.  After acceptance in writing of such appointment by
the new warrant agent is received by the Company, such new warrant agent shall
be vested with the same powers, rights, duties, and responsibilities as if it
had been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act, or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act, or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent.  Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.

          Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any


                                       23

<PAGE>


new warrant agent shall be a party or any corporation succeeding to the trust
business of the Warrant Agent shall be a successor warrant agent under this
Agreement without any further act, provided that such corporation is eligible
for appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph.  Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.

          The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not the Warrant
Agent.  Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company if so authorized by the Company or for any other legal
entity.

     16.  MODIFICATION OF AGREEMENT.  The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates; PROVIDED,
HOWEVER, that this Agreement shall not otherwise be modified, supplemented, or
altered in any respect except with the consent in writing of the Registered
Holders of Warrant Certificates representing not less than fifty percent (50%)
of the Warrants then outstanding; and PROVIDED, FURTHER, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
or the Purchase Price therefor, or the acceleration of the Warrant Expiration
Date, shall be made without the consent in writing of the Registered Holder of
the Warrant Certificate representing such Warrant, other than such changes as
are specifically prescribed by this Agreement as originally executed or are made
in compliance with applicable law.

     17.  NOTICES.  All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid as
follows: if to the Registered


                                       24

<PAGE>


Holder of a Warrant Certificate, at the address of such holder as shown on the
registry books maintained by the Warrant Agent; if to the Company, 7-4
Metropolitan Court, Gaithersburg, Maryland 20878, Attention: Robert Veschi, or
at such other address as may have been furnished to the Warrant Agent in writing
by the Company; and if to the Warrant Agent, at its corporate office.

     18.  GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.

     19.  BINDING EFFECT.  This Agreement shall be binding upon and inure to the
benefit of the Company and the Warrant Agent, and their respective successors
and assigns, and the holders from time to time of Warrant Certificates.  Nothing
in this Agreement is intended or shall be construed to confer upon any other
person any right, remedy, or claim, in equity or at law, or to impose upon any
other person any duty, liability, or obligation.

     20.  TERMINATION.  This Agreement shall terminate at the close of business
on the Warrant Expiration Date of all the Warrants or such earlier date upon
which all Warrants have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 15
hereof shall survive such termination.

     21.  COUNTERPARTS.  This Agreement may be executed in several counterparts,
which taken together shall constitute a single document.


                                       25

<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.


                             e-NET, INC.


                             By:   ______________________________

                                Its




                             AMERICAN STOCK TRANSFER & TRUST COMPANY


                             By:   ______________________________

                                Its
                                Authorized Officer


                                       26

<PAGE>


                                    EXHIBIT A

                  [Form of Face of Class A Warrant Certificate]

No. W                           Class A Warrants


                           VOID AFTER AUGUST    , 2001


         STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK

                                   MVSI, INC.


                     THIS CERTIFIES THAT FOR VALUE RECEIVED

or registered assigns (the "Registered Holder") is the owner of the number of
Class A Redeemable Common Stock Purchase Warrants ("Warrants") specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common
Stock, $.01 par value ("Common Stock"), of e-NET, INC., a Delaware corporation
(the "Company"), at any time between the Initial Warrant Exercise Date (as
herein defined) and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of AMERICAN
STOCK TRANSFER & TRUST COMPANY as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $7.50 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to e-NET, Inc.

     This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated August __, 1996,
by and between the Company and the Warrant Agent.

     In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.


<PAGE>


     Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued.  In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.

     The term "Initial Warrant Exercise Date" shall mean August __, 1997.

     The term "Expiration Date" shall mean 5:00 p.m. (New York time on
August __, 2001, or such earlier date as the Warrants shall be redeemed.  If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.

     The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective.  The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding.  This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.

     This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender.  Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.

     Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to


                                        2

<PAGE>


vote or to receive dividends or other distributions, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided in
the Warrant Agreement.

     This Warrant may be redeemed at the option of the Company, at a redemption
price of $.05 per Warrant at any time after two (2) years from the Effective
Date, provided the Market Price (as defined in the Warrant Agreement) for the
securities issuable upon exercise of such Warrant shall equal or exceed
$10.00 per share.  Notice of redemption shall be given not later than the
thirtieth day before the date fixed for redemption, all as provided in the
Warrant Agreement.  On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.05 per Warrant upon surrender of this Certificate.

     Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.

     This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.

     This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.


                                        3

<PAGE>


     IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.


                                e-NET, INC.


                                By: ______________________________

                                    Its



Date:  ______________________________





                                     [Seal]




COUNTERSIGNED:

AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent


By:  ______________________________

     Its
     Authorized Officer


                                        4

<PAGE>


                [Form of Reverse of Class A Warrant Certificate]

                                SUBSCRIPTION FORM

      To Be Executed by the Registered Holder in Order to Exercise Warrants


     THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of

                  ____________________________________________

       (please insert taxpayer identification or other identifying number)


and be delivered to
                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                     (please print or type name and address)

and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                                    (Address)

                        _________________________________
                                     (Date)

                        _________________________________
                        (Taxpayer Identification Number)


<PAGE>


                              SIGNATURE GUARANTEED

                                   ASSIGNMENT

       To Be Executed by the Registered Holder in Order to Assign Warrants

     FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto


                  ____________________________________________

       (please insert taxpayer identification or other identifying number)

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                     (please print or type name and address)

of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints _________________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.


                        _________________________________
                                     (Date)



                              SIGNATURE GUARANTEED


THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.


                                        2

<PAGE>


                                    EXHIBIT B

                  [Form of Face of Class B Warrant Certificate]

No. W                           Class B Warrants


                           VOID AFTER AUGUST   , 2001


         STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK

                                   MVSI, INC.


                     THIS CERTIFIES THAT FOR VALUE RECEIVED

or registered assigns (the "Registered Holder") is the owner of the number of
Class B Redeemable Common Stock Purchase Warrants ("Warrants") specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common
Stock, $.01 par value ("Common Stock"), of e-NET, INC., a Delaware corporation
(the "Company"), at any time between the Initial Warrant Exercise Date (as
herein defined) and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of AMERICAN
STOCK TRANSFER & TRUST COMPANY as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $8.00 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to e-NET, Inc.

     This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated August __, 1996,
by and between the Company and the Warrant Agent.

     In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.


<PAGE>


     Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued.  In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.

     The term "Initial Warrant Exercise Date" shall mean August __, 1997.

     The term "Expiration Date" shall mean 5:00 p.m. (New York time on
August __, 2001, or such earlier date as the Warrants shall be redeemed.  If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.

     The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective.  The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding.  This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.

     This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender.  Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.

     Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to


                                        2

<PAGE>


vote or to receive dividends or other distributions, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided in
the Warrant Agreement.

     This Warrant may be redeemed at the option of the Company, at a redemption
price of $.05 per Warrant at any time after two (2) years from the Effective
Date, provided the Market Price (as defined in the Warrant Agreement) for the
securities issuable upon exercise of such Warrant shall equal or exceed
$10.00 per share.  Notice of redemption shall be given not later than the
thirtieth day before the date fixed for redemption, all as provided in the
Warrant Agreement.  On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.05 per Warrant upon surrender of this Certificate.

     Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.

     This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.

     This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.


                                        3

<PAGE>


     IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.


                                e-NET, INC.


                                By: ______________________________

                                    Its



Date:  ______________________________





                                     [Seal]




COUNTERSIGNED:

AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent


By:  ______________________________

     Its
     Authorized Officer


                                        4

<PAGE>


                [Form of Reverse of Class B Warrant Certificate]

                                SUBSCRIPTION FORM

      To Be Executed by the Registered Holder in Order to Exercise Warrants


     THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of

                  ____________________________________________

       (please insert taxpayer identification or other identifying number)


and be delivered to
                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                     (please print or type name and address)

and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                                    (Address)

                        _________________________________
                                     (Date)

                        _________________________________
                        (Taxpayer Identification Number)


<PAGE>


                              SIGNATURE GUARANTEED

                                   ASSIGNMENT

       To Be Executed by the Registered Holder in Order to Assign Warrants

     FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto


                  ____________________________________________

       (please insert taxpayer identification or other identifying number)

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                  ____________________________________________

                     (please print or type name and address)

of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints _________________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.


                        _________________________________
                                     (Date)



                              SIGNATURE GUARANTEED


THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.


                                        2


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