CD MAX INC/VA, SB-2/A, 1996-08-07

CD MAX INC/VA
SB-2/A, 1996-08-07
COMPUTER PROGRAMMING SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1996
REGISTRATION NO. 333-5723

=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

------

AMENDMENT
NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------

CD-MAX, INC.
(Name of Small Business Issuer in its Charter)

Delaware 8980 87-0378128
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Classification Code Identification Number)
organization) Number)

11480 Sunset Hills Road, Suite 110
Reston, Virginia 22090
(703) 471-5755
(Address and telephone numberof principal executive offices)
------
Philip J. Gross
CD-MAX, Inc.
11480 Sunset Hills Road, Suite 110
Reston, Virginia 22090
(703) 471-5755
(Name, address and telephone number of agent for service)
------
Copies to:

David M. Lewis, Esq. Rubi Finkelstein, Esq.
Lewis, Goldberg & Ball Orrick, Herrington & Sutcliffe
A Professional Corporation 666 Fifth Avenue
Suite 360, 1320 Old Chain Bridge Road New York, NY 10103-0001
McLean, VA 22101-3930 Telephone: (212) 506-5000
Telephone: (703) 506-0550 Telecopy: (212) 506-5151
Telecopy: (703) 506-6829

------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: [X]
------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said section 8(a), may determine.
=============================================================================
<PAGE>

CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
==========================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount Being Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit(1) Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Units (each Unit consisting of
two shares of Common Stock
("Common Stock"), $.01 par
value, and one Redeemable
Warrant ("Redeemable
Warrant")(2): ................ 1,322,500 $6.125 $8,100,313 $2,793.20
- ----------------------------------------------------------------------------------------------------------
Common Stock included in Units: 2,645,000 $ 0.00 $0.00 $ 0.00
- ----------------------------------------------------------------------------------------------------------
Redeemable Warrants included in
Units (3): ................... 1,322,500 $ 0.00 $0.00 $ 0.00
- ----------------------------------------------------------------------------------------------------------
Common Stock underlying the
Redeemable Warrants included
in Units (3): ................. 1,322,500 $4.59(4) $6,070,275 $2,093.19
- ----------------------------------------------------------------------------------------------------------
Underwriter's Warrants to
purchase Units (5)(6): ....... 115,000 $.0001 $11.50 (7)
- ----------------------------------------------------------------------------------------------------------
Units issuable upon exercise of
Underwriter's Warrants (each
Unit consisting of two shares
of Common Stock and one
Redeemable Warrant) (8): ..... 115,000 $10.11 $1,162,650 $ 401.35
- ----------------------------------------------------------------------------------------------------------
Common Stock included in Units
issuable upon exercise of
Underwriter's Warrants: ...... 230,000 $ 0.00 $0.00 $ 0.00
- ----------------------------------------------------------------------------------------------------------
Redeemable Warrants included in
Units issuable upon exercise
of Underwriter's Warrants: ... 115,000 $ 0.00 $0.00 $ 0.00
- ----------------------------------------------------------------------------------------------------------
Common Stock Underlying
Redeemable Warrants included
in Units issuable upon
exercise of Underwriter's
Warrants: .................... 115,000 $ 4.59 $527,850 $ 182.01
- ----------------------------------------------------------------------------------------------------------
Redeemable Warrants (9): ...... 1,070,000 $ 0.25 $267,500 $ 92.24
- ----------------------------------------------------------------------------------------------------------
Common Stock underlying
Redeemable Warrants (10): .... 1,070,000 $ 4.59 $4,911,300 $1,693.54
- ----------------------------------------------------------------------------------------------------------
Common Stock (11): ............ 60,615 $3.00(12) $181,845 $ 62.70
Total Registration Fee ..................................................................... $7,318.21
==========================================================================================================
</TABLE>
(footnotes on following page)

<PAGE>

(footnotes to Calculation of Registration Fee table)

(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 172,500 Units, which the Underwriter has the option to purchase
to cover over-allotments, if any.
(3) Pursuant to Rule 416, there also are being registered such additional
securities as may be required for issuance pursuant to the anti-
dilution provisions of the Redeemable Warrants.
(4) The price per share of Common Stock issuable upon exercise of the
Redeemable Warrants is based on 75% of the offering price per Unit.
(5) To be issued to the Underwriter at Closing.
(6) Pursuant to Rule 416, there also are being registered such additional
securities as may be required for issuance pursuant to the anti-
dilution provisions of the Underwriter's Warrants.
(7) No registration fee required pursuant to Rule 457(g).
(8) Pursuant to Rule 416, there are also being registered such additional
securities as may be required for issuance pursuant to the anti-
dilution provisions of the Redeemable Warrants underlying the
Underwriter's Warrants.
(9) These Redeemable Warrants are to be issued to the holders of the
warrants issued in certain of the Company's recently completed bridge
financings and certain other prior financings in exchange for such
warrants.
(10) Pursuant to Rule 416, there also are being registered such additional
securities as may be required for issuance pursuant to the anti-
dilution provisions of the Redeemable Warrants.
(11) Represents shares held by certain selling shareholders whose shares are
not included as part of the Units.
(12) Estimated solely for the purpose of calculating the registration fee
based upon the closing bid price of the Common Stock on the NASD OTC
Electronic Bulletin Board on July 31, 1996.

<PAGE>

CD-MAX, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-B

Cross-reference between items of Part I of Form SB-2 and the Prospectus
filed by CD-MAX, Inc. as part of the Registration Statement.

<TABLE>
<CAPTION>
Registration Statement Item Number and Heading Prospectus Heading
------------------------------------------------------- -------------------------------------------------------
<S> <C>
1. Front of Registration Statement and Outside Front
Cover Page of Prospectus .......................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus ......................................... Inside Front Cover and Outside Back Cover Pages of Prospectus;
Additional Information
3. Summary Information and Risk Factors .............. Prospectus Summary; Risk Factors
4. Use of Proceeds ................................... Use of Proceeds
5. Determination of Offering Price ................... Outside Front Cover Page of Prospectus;
Risk Factors; Underwriting
6. Dilution .......................................... Risk Factors; Dilution
7. Selling Security Holders .......................... Selling Securityholders
8. Plan of Distribution .............................. Outside and Inside Front Cover Pages of Prospectus;
Underwriting
9. Legal Proceedings ................................. Business
10. Directors, Executive Officers, Promoters, and Control
Persons ........................................... Management; Certain Transactions;
Principal Stockholders
11. Security Ownership of Certain Beneficial Owners and
Management ........................................ Principal Stockholders
12. Description of Securities ......................... Outside Front Cover Page of Prospectus; Description of
Securities; Underwriting
13. Interest of Named Experts and Counsel ............. Not Applicable
14. Disclosure of Commission Position on Indemnification
for Securities Act Liability ...................... Not Applicable
15. Organization Within Last Five Years ............... Certain Transactions
16. Description of Business ........................... Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan of
Operations ......................................... Management's Discussion and Analysis of Financial Condition
and Results of Operations
18. Description of Property ........................... Business
19. Certain Relationships and Related Transactions .... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters ............................................ Market For Common Equity Stockholder Matters and Related
21. Executive Compensation ............................ Management
22. Financial Statements .............................. Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............... Not Applicable
</TABLE>

<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.

SUBJECT TO COMPLETION, DATED AUGUST 7, 1996

PROSPECTUS

LOGO

1,150,000 UNITS
EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK
AND
ONE REDEEMABLE WARRANT
CD-MAX, Inc., a Delaware Corporation (the "Company"), is hereby offering
(the "Offering") 1,150,000 Units (the "Units"), each Unit consisting of two
shares of common stock, $.01 par value per share ("Common Stock"), and one
redeemable common stock purchase warrant ("Redeemable Warrant"). The shares
of Common Stock and Redeemable Warrants comprising the Units are separately
tradeable commencing upon issuance. Each Redeemable Warrant entitles the
registered holder thereof to purchase one share of Common Stock at an initial
exercise price of $__________ [75% of the public offering price per Unit],
subject to adjustment, at any time from issuance until __________, 2001 [60
months after the date of this Prospectus]. The Company shall have the right
to redeem all, but not less than all, of the Redeemable Warrants, commencing
__________, 1997 [12 months after the date of this Prospectus] at a price of
$.05 per Redeemable Warrant on 30 days' prior written notice, provided that
the Company shall have obtained the consent of Joseph Stevens & Company,
L.P., ("Underwriter"), and the average closing bid price of the Common Stock
equals or exceeds 150% of the then exercise price per share, subject to
adjustment, for any 20 trading days within a period of 30 consecutive trading
days ending on the fifth trading day prior to the date of the notice of
redemption. See "Description of Securities -- Redeemable Warrants."

The Company's Common Stock is publicly traded on the NASD OTC Electronic
Bulletin Board ("OTC") under the symbol "CMAX." On July 31, 1996, the closing
bid price for the Common Stock on the OTC was $3.00. See "Market for Common
Equity and Related Stockholders Matters." Prior to the Offering, there has been
a limited public market for the Common Stock and no public market for the Units
or the Redeemable Warrants, and there can be no assurance that such a market
will develop after the completion of the Offering or, if developed, that it will
be sustained. It is currently anticipated that the public offering price will be
$6.125 per Unit. For information regarding the factors considered in determining
the public offering price of the Units and the exercise price and other terms of
the Redeemable Warrants, see "Risk Factors," "Description of Securities" and
"Underwriting." Application has been made for, and it is anticipated that upon
consummation of the Offering the Units, the Common Stock and the Redeemable
Warrants will be approved for quotation on the Nasdaq SmallCap Market ("Nasdaq")
under the symbols "MAXXU," "MAXX" and "MAXXW," respectively.
------

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS,"
COMMENCING ON PAGE 8, AND "DILUTION."

------

<PAGE>

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATES SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Proceeds to
Public Discounts(1) Company(2)
- --------------------------------------------------------------------------------
Per Unit $ $ $
- --------------------------------------------------------------------------------
Total(3) ... $ $ $
================================================================================

(1) Does not include additional compensation payable to the Underwriter in the
form of a 3% non-accountable expense allowance or the Company's agreement
to sell to the Underwriter warrants to purchase 115,000 Units (the
"Underwriter's Warrants") and to retain the Underwriter as a financial
consultant. In addition, see "Underwriting" for information concerning
indemnification and contribution arrangements with the Underwriter and other
compensation payable to the Underwriter.
(2) Before deducting expenses of the Offering estimated at $611,313 payable
by the Company, including the non-accountable expense allowance payable
to the Underwriter.
(3) The Company has granted to the Underwriter an option (the "Over-Allotment
Option"), exercisable for a period of 45 days after the date of this
Prospectus, to purchase up to 172,500 additional Units upon the same
terms and conditions set forth above, solely to cover over-allotments,
if any. If the Over-Allotment Option is exercised in full, the total
Price to Public, Underwriting Discounts and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."

The Units are being offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, and subject to
approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify the Offering and to reject any order in whole or in part. It is
expected that delivery of the Units offered hereby will be made against
payment, at the offices of Joseph Stevens & Company, L.P., New York, New
York, on or about _________, 1996.

Joseph Stevens & Company, L.P.
, 1996.

<PAGE>

(continued from cover page)

This Prospectus also relates to 1,070,000 Redeemable Warrants (the
"Selling Securityholder Warrants"), and 1,130,615 shares of Common Stock,
including the 1,070,000 shares of Common Stock issuable upon exercise of the
Selling Securityholder Warrants (collectively the "Selling Securityholder
Shares"). The Selling Securityholder Warrants will be issued at the closing
of the Offering to certain security holders (the "Selling Securityholders")
upon the automatic conversion of certain warrants (the "Bridge Warrants")
issued to the Selling Securityholders in a private financings consummated in
February, March, April and May 1996 (the "Bridge Financings"), and in 1995
(the "1995 Financings"). Neither the Selling Securityholder Warrants nor the
Selling Securityholder Shares may be sold for a period of eighteen (18)
months from the effective date of the Registration Statement without the
prior written consent of the Underwriter. The Selling Securityholder Warrants
and the Selling Securityholder Shares are not being underwritten in the
Offering. The Company will not receive any proceeds from the sale of the
Selling Securityholder Warrants or the Selling Securityholder Shares by the
holders thereof, although the Company will receive proceeds from the
exercise, if any, of the Selling Securityholder Warrants (the offer by the
Selling Securityholders of the Selling Securityholder Shares and the Selling
Securityholder Warrants is referred to herein as the "Concurrent Offering").
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources," "Recent Bridge Financings"
and "Selling Securityholders."

[A graphic will be inserted here entitled "The CD-MAX System". The
graphic consists of eight boxes containing graphic figures which are
connected by dotted lines, some of which also have captions. The
first box is the picture of a lock and key, to symbolize the fact
that the CD-MAX System provides encryption software. The second box
is a picture of a parking meter, to symbolize the fact that the
CD-MAX System provides metering software. Dotted lines emanate from
boxes one and two to box three which contains a picture of a CD-ROM
and the caption "CD-MAX encryption and metering software added to
CD-ROM during mastering." A dotted line emanates from box three to
box four which contains a picture of persons gathered around a
computer and contains the caption "Publisher's customers use
CD-ROM," and "Usage is 'metered' and protected by CD-MAX software."
A dotted line emanates from box four to box five which contains a
picture of a modem and the caption "Usage data and access codes
transmitted via modem." A dotted line emanates from box five to box
six which contains a picture of a computer and the caption "CD-MAX
billing services database: Retrieves usage data electronically; and
Issues invoices and processes payments." Dotted lines emanate from
box six to boxes seven and eight. Box seven contains a picture of a
book with the caption "Provides publishers with customized reports
and billing statements." Box eight contains a picture of a bank and
the caption "Payments deposited."]

The Company intends to furnish to the registered holders of the Units,
Redeemable Warrants and Common Stock, annual reports containing financial
statements audited by its independent auditors and quarterly reports for the
first three quarters of each fiscal year containing unaudited interim
financial information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

3
<PAGE>

PROSPECTUS SUMMARY

The following summary does not purport to be complete and is qualified in
its entirety by reference to the detailed information, including the
financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all references to the Company and to
shares of Common Stock of the Company: (a) gives affect to the occurrence of
the following events, all of which occurred in April 1996, (i) the
reincorporation of the Company in Delaware, (ii) the merger into the Company
of its wholly owned subsidiary, CD-MAX, Inc., and the change of the Company's
name to CD-MAX, Inc.; (iii) the consummation of a 1 for 30 share exchange,
and a change in par value to $0.01 per share, (iv) the elimination of the
Class B Common Stock, (v) the elimination of certain grant-back and buy back
rights held by members of management and the Class B shareholders, (vi) the
cancellation of options to purchase 100,000 shares of Common Stock previously
issued to management and the issuance to management of warrants to purchase
990,000 shares of Common Stock; (b) assumes no exercise of (i) the
Underwriter's Over-Allotment Option to purchase up to 172,500 Units; (ii) the
Underwriter's Warrants to purchase up to 115,000 Units; (iii) the Redeemable
Warrants included in the Units; (iv) 1,070,000 Redeemable Warrants issuable
in exchange for the Bridge Warrants upon consummation of the Offering and (c)
assumes the cancellation of common stock purchase warrants previously granted
to the Underwriter in connection with the Second Bridge Financing (as
hereinafter defined).

THE COMPANY

The Company, a development stage company with minimal revenues to date, is
engaged in the business of developing and marketing the CD-MAX(TM) System,
based upon its proprietary technology, which is designed to allow publishers
of professional, corporate, library and educational CD-ROM based information
to sell their information to end-users on a usage basis. Publishers in these
fields currently sell CD-ROM titles for a fixed fee, normally as an annual
subscription. The Company believes that the CD-MAX System has the potential
to increase the revenues of CD-ROM publishers by reducing copyright and
license abuse and enabling them to expand into new markets. The CD-MAX System
consists of proprietary metering and encryption software and billing
services. The CD-MAX System is being adapted for use on the Internet and is
expected to be commercially available during 1996 under the name NET-
MAX(TM).

The Company's strategy is to achieve broad market acceptance of its CD-MAX
System in its target markets and to create a range of services based on
proprietary technology which is expected to produce a continuous revenue
stream. The Company has targeted publishers in the professional, corporate,
library and educational fields as its initial markets. According to InfoTech,
Inc., a leading CD-ROM market research firm, these publishers were estimated
to account for 75% of the approximately $9 billion U.S. CD-ROM software
market for 1995. The U.S. CD-ROM software market is projected to grow 60% in
1996 to over $14 billion, with the worldwide CD-ROM software market
increasing to over $23 billion. The Company is focusing its initial marketing
efforts in the U.S. and Canada. Subsequent marketing efforts may be extended
to European markets. The Company has received an unrestricted export license
from the Department of Commerce. This license allows it to export its
software to most countries in the world, unlike many other hardware and
software encryption methods, which may not be exported due to federal export
restrictions.

Electronic information is currently distributed primarily by three
methods: 1) CD-ROM 2) online services and 3) the Internet. Currently,
professional and business information delivered on CD-ROM is generally sold
on a flat fee or subscription basis for unlimited use. The Company believes
that such forms of access can be inefficient and expensive for many
end-users. Unmetered usage may also prevent publishers from maximizing
revenues from heavy users, particularly users on networks. The second method,
online services, may be advantageous for timely information, such as stock
quotes, but, due to the high costs of building and maintaining a mainframe
computer installation and the high costs of transmission, online is usually a
more expensive alternative to CD-ROM. Hybrid CD-ROM/online systems attempt to

4
<PAGE>

maximize the advantages of both methods of distribution, by combining the
timeliness of online systems with the lower costs of CD-ROM. The Internet is
the third and newest method of distribution. It has only recently been
developed for commercial use and faces similar problems as CD-ROM, including
the need for security and metering services.

The CD-MAX System monitors the amount and type of information accessed
from an encrypted CD-ROM. The usage data is stored in encrypted form on the
computer's hard disk. The CD-MAX System can retrieve this data from the
end-user via modem. The Company can then update the necessary security codes
and bill the end-user on behalf of the publisher. CD-MAX withholds new
security codes if the end-user does not pay the applicable charges which
will terminate access to the CD-ROM. For those personal computers without a
modem, the Company offers alternate billing arrangements.

Information contained on published CD-ROMs is located via the use of
special software on the CD-ROM known as a "search and retrieval engine." The
CD-MAX System is compatible with many popular search and retrieval engines.
The Company has entered into agreements with Dataware Technologies, Inc., and
Folio Corporation, major search and retrieval software firms, to facilitate
the compatibility of the CD-MAX metering and encryption capabilities with the
Dataware and Folio search and retrieval engines.

As of the date hereof, the Company has four contracts with customers for its
CD-MAX System. In March, 1995, the Company entered into a contract with Mitchell
International, a unit of Thomson Publishing that publishes automobile repair
manuals. Mitchell is working with their CD-ROM product "On-Demand Computerized
Repair Information" under the name "Metered On-Demand" using the CD-MAX System.
To date, this contract has resulted in minimal revenues to the Company due to
the fact that this product is still being test marketed. In July, 1995, the
Company entered into a contract with Disclosure, Incorporated, a major provider
of financial and legal information about public companies to the investment and
legal communities. Its CD-ROM title "New Issues" is the first of four titles
under contract and intended to be sold under the name "Metered New Issues." This
product has completed testing and had its initial commercial shipment in late
July, 1996. In May, 1996, the Company entered into a contract with Credential
Information and Verification Services, Inc. ("CIVS"), a health care information
services company, to adapt the CD-Max System to a data base to be marketed by
CIVS using the Dataware search and retrieval engine. This contract is in its
development (pre-testing) stage. An officer, director and principal shareholder
of the Company is an officer, director and principal shareholder of CIVS, see
"Certain Transactions." In July, 1996, the Company entered into a contract with
Information Handling Services, Inc. ("IHS"), a publisher of CD-ROM data bases,
to adapt the CD-MAX System to one of its data bases. The contract with IHS is
also in the development (pre-testing) stage. Each of these contracts requires
the publisher to pay fees for billing services and to pay CD-MAX a percentage of
all revenues generated through the use of CD-MAX encrypted products.

THE OFFERING

Units Offered.................. 1,150,000 Units, each Unit consisting of two
shares of Common Stock and one Redeemable
Warrant. The Common Stock and Redeemable
Warrants will be separately tradeable
immediately upon issuance. See "Description
of Securities-- Units." Each Redeemable
Warrant entitles the holder to purchase one
share of Common Stock for $____ [75% of the
public offering price] per share, subject to
adjustment, exercisable from the date of
issuance until _________________, 2001 [60
months after the date of this Prospectus].
The Company may redeem the Redeemable
Warrants commencing _______________, 1997
[12 months after the date of this
Prospectus] at a redemption price of $0.05
per Redeemable Warrant on thirty days' prior
written notice, provided that (i) the
average closing bid price (or last sales
price) of the Common Stock as

5
<PAGE>

reported on Nasdaq (or on such exchange on
which the Common Stock is then traded) equals
or exceeds 150% of the exercise price per
share, subject to adjustment, for any 20
trading days within a period of 30 consecutive
trading days ending on the fifth trading day
prior to the date on which the notice of
redemption is given and (ii) the Company shall
have obtained written consent from the
Underwriter to redeem the Redeemable Warrants.
See "Description of Securities--Redeemable
Warrants."

Securities offered by Selling
Securityholders.............. 1,070,000 Redeemable Warrants ("Selling
Securityholders Warrants"), which will be
issued to the Selling Securityholders upon
the automatic conversion of the Bridge
Warrants, and an aggregate of 1,130,615
shares ("Selling Securityholders Shares")
1,070,000 of which are issuable upon
exercise of such Selling Securityholders
Warrants. The Selling Securityholders
Warrants and the Selling Securityholders
Shares being registered for the account of
the Selling Securityholders at the Company's
expense are not being underwritten in the
Offering. The Company will not receive any
proceeds from the sale of these securities,
although it will receive proceeds from the
exercise, if any, of the Selling
Securityholders Warrants. See "Recent Bridge
Financings," "Certain Transactions" and
"Selling Securityholders".

Common Stock Outstanding Before
Offering..................... 4,373,270 shares(1)(2)

Common Stock Outstanding After
Offering..................... 2,220,000 shares(1)

Redeemable Warrants Outstanding
After Offering............... 2,220,000 Redeemable Warrants(3)

Use of Proceeds................ Repayment of Bridge Financings: $1,080,000;
payment of deferred management salaries:
$258,497; sales and marketing: $900,000;
product development: $1,800,000; and working
capital: $1,689,565. See "Use of Proceeds."

Risk Factors................... The purchase of the Units offered hereby
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution."

Proposed Nasdaq Symbols........ Units: MAXXU
Common Stock: MAXX
Redeemable Warrants: MAXXW

- ------
(1) Does not include (i) 125,193 shares reserved for issuance upon the exercise
of outstanding warrants at exercise prices ranging from $.30 to $22.50 per
share; (ii) 990,000 shares reserved for issuance upon the exercise of
warrants granted to management at an exercise price of $9.19 per share;
(iii) 86,345 shares reserved for issuance upon the exercise of stock
options granted pursuant to the Company's 1993 Stock Incentive Plan at
exercise prices ranging from $7.00 per share to $45.00 per share (the
Company intends, subject to the completion of this Offering and the terms
of the 1993 Stock Incentive Plan, to reduce the exercise price of
approximately 42,800 of these options to $3.50 per share); and (iv) 113,655
shares reserved for issuance upon the exercise of options which may be
granted under the Company's 1993 Stock Incentive Plan and (v) 25,970 shares
reserved for issuance upon the exercise of warrants to be issued as
anti-dilutive securities after the date of this Offering to a director and
two principal shareholders in accordance with the terms of a private
financing. See "Management," "Certain Transactions," "Description of
Securities," and "Underwriting."

(2) Includes 25,970 shares to be issued as anti-dilutive securities after the
date of this Offering to a director and two principal shareholders in
accordance with the terms of a private financing. See "Certain
Transactions."

(3) Includes 1,070,000 Selling Securityholder Warrants.

6
<PAGE>

CD-MAX, INC.
SUMMARY FINANCIAL DATA

The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus and represents
the financial results of the Company. Such information should be read in
conjunction with such financial statements, including the Notes thereto.

<TABLE>
<CAPTION>
Period from
July 1, 1993
Year ended June 30, (Inception) to
1994 1995 1996 June 30, 1996
----------------------------------------------- --------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ............... $ -- $ 2,500 $ 13,394 $ 15,894
Costs and expenses:
Selling ................ 112,455 120,285 208,757 441,497
General and administrative 710,952 689,597 725,748 2,126,297
Research and development . 107,135 277,120 655,124 1,039,379
Depreciation and
amortization -- -- 83,401 83,401
------------ -------------- -------------- --------------
Total costs and expenses .... 930,542 1,087,000 1,673,030 3,690,574
Other income (expense):
Interest income ........ 547 3,962 13,586 18,095
Interest expense ....... (1,875) 69,283 (71,125)
------------ -------------- -------------- --------------
Net loss .................... $(929,995) $(1,082,415) $(1,715,333) $(3,727,743)
============ ============== ============== ==============

</TABLE>

<TABLE>
<CAPTION>
June 30, 1995 June 30, 1996
--------------- --------------------------------
Pro Forma
Actual As Adjusted(2)
------------- --------------
<S> <C> <C> <C>
Working capital (deficit) ....................... $ (8,686) $(1,130,280) $ 4,564,449
Total assets .................................... 326,868 483,124 4,802,735
Total liabilities ............................... 335,554 1,498,521 193,358
Deficit accumulated during the development stage . (2,012,410) (3,727,743) (3,831,031)
Stockholders' equity (deficit) .................. (8,686) (1,015,397) 4,609,377
</TABLE>
- ------
(1) Adjusted to give effect to (i) the receipt of the net proceeds of this
Offering, after deducting estimated offering expenses, and (ii) the
initial application of such proceeds as described herein, and (iii) an
expense of $69,954 of unamortized debt issuance costs relating to the Second
Bridge Financing and an expense of $33,334 in additional interest expense
related to the debt incurred in the Bridge Financings. See "Use of
Proceeds."

7
<PAGE>

RISK FACTORS

An investment in the Units involves a high degree of risk and should be
made only by investors who can afford the loss of their entire investment.
Prospective investors, prior to making an investment in the securities,
should consider carefully the following risk factors and the other
information included in this Prospectus.

Accumulated Deficit; Limited Operating History; Expectation of Future Losses;
Independent Auditors' Report Regarding Company's Ability to Continue as a Going
Concern. The Company commenced operations in July 1993, is a development stage
company, and has a very limited operating history. From inception through June
30, 1996, the Company recognized insignificant revenues, and had accumulated
operating losses of approximately $3,727,743. At June 30, 1996, the Company had
a working capital deficit of approximately $1,130,280 and stockholders' deficit
of approximately $1,015,397. The Company has continued to operate at a loss
since June 30, 1996, and it expects to continue to operate at a loss until such
time, if ever, as operations generate sufficient revenues to cover its costs.
For the short-term, the Company expects that its losses will increase. The
likelihood of the success of the Company must be considered in light of the
difficulties and risks inherent in a new business. There can be no assurance
that revenues will increase significantly in the future or that the Company will
ever achieve profitable operations. The report of the Company's independent
auditors contains an explanatory paragraph expressing substantial doubt
regarding the Company's ability to continue as a going concern. Among the
factors cited by the auditors as raising substantial doubt as to the Company's
ability to continue as a going concern are that the Company is currently in its
development stage, has not generated revenues or obtained profitable operations
to date. See the Financial Statements and the notes thereto.

Uncertainty of Commercialization of the CD-MAX System; Limited Number of
Customers; Need for Market Acceptance. The CD-MAX System has not achieved any
substantial commercial acceptance. While the Company has agreements with four
database publishers for the use of the Company's technology and services,
none of these contracts has yet generated any substantial revenues for the
Company, or wide-scale acceptance by the publishers' respective customers.
There can be no assurance that these contracts, or other contracts obtained
in the future, may not be terminated before obtaining any substantial
revenues for the Company. The CD-MAX System has only been test marketed by
one of these publishers, and it has not yet been placed in full commercial
operation by any of such publishers. There can be no assurance that the
results of testing by these or other publishers will be satisfactory. The
Company's ability to market the CD-MAX System successfully will depend on the
Company convincing potential customers of the benefits of the CD-MAX System.
Although the Company is engaged in negotiations and discussions with a number
of other potential customers, there can be no assurance that any such
discussions will lead to significant sales of the CD-MAX System, or that the
CD-MAX System will attain significant market acceptance. See "Business."

Long Lead Time in Implementing Contracts; Unknown Profitability. The
Company's experience to date has demonstrated that the process of identifying
a potential customer of the Company's products and services, entering into a
contract with such a customer, customizing the Company's products and
services to meet the customer's needs, allowing the customer to test market
the product, and ultimately completing the final product for the customer is
a lengthy process that is expected to take at least six months, and possibly
much longer. The Company's pricing of its products and services is based upon
the Company's estimates of what publishers will be willing to pay for such
products and services, and an amount sufficient to return profits to the
Company. There can be no assurance that these estimates will prove to be
correct.

Limited Marketing Capabilities. The Company's operating results will
depend to a large extent on its ability to successfully market the CD-MAX
System to publishers. In addition, the Company's revenue stream is dependent
upon the revenue generated by a publisher's customer's use of the CD-MAX
System, over which the Company will have no control. The Company currently
has limited marketing capability. The Company intends to use a portion of the
proceeds of the Offering to hire additional sales and marketing personnel and
outside consultants to market the CD-MAX System. There can be no assurance
that any marketing efforts undertaken by the Company will be successful or
will result in any significant sales of the CD-MAX System. See "Business."

Need for Additional Financing. Although the Company believes that the net
proceeds from this Offering, together with funds expected to be generated
from operations, will be sufficient to finance the Company's work-

8
<PAGE>

ing capital requirements for twelve (12) months following the completion of
this Offering, it is likely that the Company will not generate sufficient
revenues to fund its operations after such period, and will need additional
financing. Further, the Company may be required to seek additional financing
during such twelve (12) month period in the event of delays, cost overruns or
unanticipated expenses associated with a company in such an early stage of
developing and marketing its product. The Company has no commitments to
provide additional financing, if required, and there can be no assurance that
any additional financing will be available if needed or, if available, will
be on terms acceptable to the Company. In the event such necessary financing
is not obtained, the Company will be materially adversely affected and will
have to cease or substantially reduce operations. See "Use of Proceeds."

Dependence on Key Person. The Company's success depends upon the continued
contributions of its executive officers, sales and marketing personnel and
technical personnel, particularly John David Wiedemer, the inventor of the
CD-MAX System. The Company has a key-man term life insurance policy in the
amount of $1,000,000 on the life of John David Wiedemer. Although the Company
has entered into an employment agreement with Mr. Wiedemer expiring in 1998,
competition for qualified personnel is intense and the loss of services of Mr.
Wiedemer could materially adversely affect the Company. There can be no
assurance that the Company will be able to retain existing personnel or attract
additional qualified personnel. See "Management."

Lack of Proprietary Protection. The Company does not currently have any
patent protection for the CD-MAX System. The Company believes that commercial
protection of its products will depend primarily upon the CD-MAX System
proprietary software remaining a trade secret and maintaining copyright
protection. In order to protect its trade secrets, the Company is taking
measures which in its opinion are appropriate procedures to protect its
rights. The Company is also maintaining its copyright rights in this
proprietary software. In any case, there can be no assurance that the
Company's technology will remain secret or that others will not develop
similar technology and use such technology to compete with the Company. Also,
copyright protection does not normally prevent competitors from making
functionally similar products. The CD-MAX System is based upon proprietary
software and related technical data licensed by the Company from an officer
of the Company. In the event that such officer is terminated by the Company
without cause and certain other conditions exist, the officer will have the
right to obtain a sublicense for the proprietary software and related
technical data. Such right will not exist until the year 1999. Although the
Company believes that its technology does not infringe upon the proprietary
hardware or software of others, it is possible that others may have or may be
granted patents claiming products or processes that are necessary for or
useful to the development of the CD-MAX System and that legal actions could
be brought against the Company claiming infringement. In the event that the
Company is unsuccessful against such a claim, it may be required to obtain
licenses to such patents or to other patents or proprietary technology in
order to develop or market the CD-MAX System. There can be no assurance that
the Company will be able to obtain such licenses on commercially reasonable
terms, if at all. See "Business-Proprietary Rights and Intellectual
Property."

Competition. The business of selling encryption and metering services for
CD-ROMs, and for the Internet is in its early stages and is subject to
competition from other companies, substantially all of which have greater
financial and other resources than the Company. The Company is aware of other
companies that are developing metering and encryption systems that are in
some ways similar to the Company's system. In addition, the Company believes
that it is possible to provide some of the same benefits that the CD-MAX
System will offer by other means. It is also possible that other companies
may be developing systems comparable to the CD-MAX System. There can be no
assurance that either existing or new competitors will not develop
technologies that are superior to or more cost-effective than the Company's
systems or that otherwise achieve greater market acceptance. There can be no
assurance that the Company will be able to compete successfully against
existing competitors or future entrants into the market. The Company operates
in an environment that is characterized by rapidly evolving technology. There
can be no assurance that either existing or new competitors will not develop
technologies that are superior to or more cost-effective than the Company's
system or that otherwise achieve greater market acceptance. There can be no
assurance that the Company will be able to compete successfully against
existing competitors or future entrants into the market. See "Business -
Competition."

Rapid Technological Change; New Product Introductions. The market for the
Company's technology is characterized by rapidly changing technology and
frequent new product introductions. Even if the Company's

9
<PAGE>
technology gains initial market acceptance, the Company's success will
depend, among other things, upon its ability to enhance its product and to
develop and introduce new products and services that keep pace with
technological developments, respond to evolving customer requirements and
achieve continued market acceptance. There can be no assurance that the
Company will be able to identify, develop, manufacture, market or support new
products or offer new services successfully, that such new products or
services will gain market acceptance, or that the Company will be able to
respond effectively to technological changes or product announcements by
competitors. Any failure by the Company to anticipate or respond adequately
to technological developments and customer requirements or any significant
delays in product development or introductions could result in a loss of
market share or revenues. The Company has devoted a substantial amount of its
efforts to adapting its technology to the CD-ROM medium. There can be no
assurance that CD-ROM technology will not be replaced by other distribution
and access technologies or that any such replacement will not render the
Company's technology obsolete or require substantial time and expense by the
Company to adapt its technology, if at all possible. In 1996, the Company is
planning to introduce a version of the CD-MAX System, called NET-MAX, that
will work on the Internet. However, there can be no assurance of its
successful development or market acceptance. See "Business - Marketing."

Control by Insiders. Upon completion of this Offering, the executive officers
and directors will beneficially own shares of the Company's capital stock
representing approximately 28.23% of the total voting power of the Company,
(assuming the sale of an aggregate of 138,056 Redeemable Warrants by certain
officers and directors in the Concurrent Offering), and may be able to elect all
the Company's directors and thereby direct the policies of the Company. See
"Principal Stockholders," "Selling Securityholders," and "Description of
Securities."

Management's Broad Discretion in Use of Proceeds. Although the Company
intends to apply the net proceeds of the Offering in the manner described
under "Use of Proceeds," it has broad discretion as to the specific
allocation of the net proceeds, the timing of expenditures and all other
aspects of the use thereof.

Repayment of Indebtedness. Approximately nineteen percent (19%) of the
net proceeds of the Offering have been allocated for the repayment of the
Bridge Notes which were issued in the Bridge Financings and are currently
outstanding in the aggregate principal amount of $1,080,000.

Benefits From Offering to Officers, Directors and Principal Shareholders;
Conflicts of Interest. Approximately $258,497 or five percent (5%) of the net
proceeds of the Offering have been allocated for the repayment of the
deferred compensation of the four executive officers of the Company, and, of
the $1,080,000 of aggregate principal amount of Bridge Notes to be repaid
from the proceeds of this Offering, $337,500 is to paid to officers,
directors and principal stockholders. Accordingly, these officers, directors
and principal stockholders will benefit directly to the extent that the net
proceeds of the Offering are used to pay deferred compensation or to repay
the Bridge Notes. Conflicts between the personal interest of such officers,
directors and principal stockholders and the Company may be created as a
result thereof. The Company's Chief Financial Officer is a principal
stockholder, chief operating officer, and a director of a health care
information services company. Although, in the opinion of the Company, his
employment by this other company has had not an impact on his services to the
Company, conflicts may arise with respect to the allocation of his time
between his duties for the Company and for this other company. Additionally,
the Company has entered into a contract to provide its services to this other
company. While the Company's Chief Financial Officer did not participate in
either company's board of directors consideration of this contract, conflicts
may also arise as a result of this contract. See "Recent Bridge Financings,"
"Use of Proceeds," "Management," "Certain Transactions," "Principal
Stockholders," and "Selling Securityholders."

Limitation of Director Liability. The Company's Certificate of
Incorporation provides that a director of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of
the fiduciary duty of care as a director, including breaches which constitute
gross negligence, subject to certain limitations imposed by the Delaware
General Corporation Law. Thus, under certain circumstances, neither the
Company nor the stockholders will be able to recover damages even if
directors take actions which harm the Company. See "Management--Limitation of
Liability of Directors and Officers and Indemnification."

Future Sales of Common Stock. Of the 4,373,270 shares of Common Stock to
be outstanding upon completion of this Offering, 2,691,052 shares of Common
Stock, including the 2,300,000 shares underlying the

10
<PAGE>

units offered hereby, will be freely tradeable without restriction under the
Securities Act of 1933, as amended (the "Securities Act") except for any
shares of Common Stock purchased by an "affiliate" of the Company (as that
term is defined under the rules and regulations of the Securities Act), which
will be subject to the resale limitations of Rule 144 under the Securities
Act. The remaining 1,682,218 shares of Common Stock outstanding are
"restricted stock" as that term is defined under Rule 144 under the
Securities Act and under certain circumstances may be sold without
registration pursuant to such rule. The Company is unable to predict the
effect that sales made under Rule 144, or otherwise, may have on the then
prevailing market price of the Company's securities although any future sales
of substantial amounts of securities pursuant to Rule 144 could adversely
affect prevailing market prices. Holders of 1,661,406 of such restricted
stock, including each of the Company's officers, directors and principal
stockholders have agreed not to, directly or indirectly, issue, offer to
sell, grant an option for the sale of, assign, transfer, pledge, hypothecate
or otherwise encumber or dispose of (collectively "Transfer") any of their
shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock for a period commencing on the date of this
Prospectus and ending eighteen months after the effective date of this
Offering, without the prior written consent of the Underwriter. See
"Principal Stockholders," "Shares Eligible For Future Sale" and
"Underwriting."

The Redeemable Warrants underlying the Units offered hereby and the shares
of Common Stock underlying such Redeemable Warrants, upon exercise thereof,
will be freely tradeable without restriction under the Securities Act, except
for any Redeemable Warrants of shares of Common Stock purchased by an
"affiliate" of the Company, which will be subject to the resale limitations
of Rule 144 under the Securities Act. In addition, 1,070,000 Redeemable
Warrants and 1,130,615 shares of Common Stock, including the 1,070,000 shares
of Common Stock underlying such Redeemable Warrants, are being registered on
behalf of the Selling Securityholders. The Selling Securityholders have
agreed not to Transfer such Redeemable Warrants, or shares of Common Stock,
for a period of eighteen (18) months from the effective date of the
Registration Statement, without the prior written consent of the Underwriter.

In addition, without the consent of the Underwriter, the Company has
agreed not to sell or offer for sale any of its securities for a period of 18
months following the effective date of the Registration Statement, except
pursuant to outstanding options and warrants and pursuant to the Company's
existing option plans and no option shall have an exercise price that is less
than the fair market value per share of Common Stock on the date of grant.

In addition, 200,000 shares of Common Stock will be available for issuance
upon the exercise of options which may be granted under the Company's Stock
Incentive Plan and 1,141,163 shares of Common Stock will be issuable upon the
exercise of other outstanding warrants. To the extent that options or
warrants are exercised, dilution to the interests of the Company's
shareholders may occur. Moreover, the terms upon which the Company will be
able to obtain additional equity capital may be adversely affected, since the
holders of the outstanding options or warrants can be expected to exercise
them, to the extent they are able to, at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more favorable
to the Company than those provided in the options or warrants. See
"Management," "Certain Transactions", "Description of Securities", and
"Shares Eligible for Future Sale."

Absence of Dividends. The Company has not paid any cash dividends on its
Common Stock and does not intend to declare or pay cash dividends in the
foreseeable future. The Company expects that it will retain all available
earnings, if any, to finance and expand its business. See "Dividend Policy."

Dilution; Disparity of Consideration. Purchasers of Units offered hereby will
incur an immediate and substantial dilution in the net tangible book value of
the Common Stock. Dilution represents the difference between the price of the
Common Stock sold hereby and the pro forma net tangible book value per share of
the Company after the Offering. Additional dilution to future net tangible book
value per share may occur upon exercise of the Redeemable Warrants, the
Underwriter's Warrants, certain options that may be issued or exercised under
the Company's stock option plan and other outstanding warrants. The immediate
dilution per share of Common Stock to purchasers of the Units offered hereby is
$2.01 per share, or 66% per share. Certain existing stockholders, including
officers and directors, acquired their shares for normal consideration and,
accordingly, new investors will bear a disproportionate share of the risks
inherent in an investment in the Company. See "Dilution."

Absence of Public Market; Arbitrary Determination of Offering Price;
Possible Volatility of Stock Price. Prior to this Offering, there has been no
public market for the Units or the Redeemable Warrants. There is

11
<PAGE>

a limited public market for the Company's Common Stock. There is no assurance
that a more active market will develop, or, if one does develop, that it will
be sustained. The offering price for the Units has been arbitrarily
determined by negotiation between the Company and the Underwriter and is not
necessarily related to the Company's asset value, net worth or other
established criteria of value. Market prices for the Company's Common Stock
following this Offering will be influenced by a number of factors, including
quarterly variations in the financial results of the Company and its
competitors, changes in earnings, estimates by analysts, conditions in the
digital information market, the overall economy and the financial markets.
See "Market Price for Common Equity and Related Stockholder Matters" and
"Underwriting."

Lack of Experience of Underwriter. Joseph Stevens & Company, L.P.
commenced operations in May 1994 and does not have extensive experience as an
underwriter of public offerings of securities. Joseph Stevens & Company,
L.P., has acted as the managing underwriter for four firm commitment public
offerings. The Underwriter is a relatively small firm and no assurance can be
given that the firm will be able to participate as a market maker in the
Units, the Common Stock, or the Redeemable Warrants, and no assurance can be
given that any broker-dealer will make a market in the Units, the Common
Stock or the Redeemable Warrants. See "Underwriting."

Underwriter's Potential Influence in the Market. It is anticipated that a
significant amount of the Units will be sold to customers of the Underwriter.
Although the Underwriter has advised the Company that it intends to make a
market in the Units, Common Stock and Redeemable Warrants, it will have no
legal obligation to do so. The prices and the liquidity of the Units, Common
Stock and Redeemable Warrants may be significantly affected by the degree, if
any, of the Underwriter's participation in the market. Moreover, if the
Underwriter sells the securities issuable upon exercise of the Underwriter's
Warrants, it may be required under the Exchange Act, as amended, to
temporarily suspend its market-making activities. No assurance can be given
that any market activities of the Underwriter, if commenced, will continue
for any minimum or significant period of time, and the withdrawal of the
Underwriter from market making activities in any of such securities could
materially adversely affect the prevailing market prices therefor. See
"Underwriting."

Possible Adverse Effects of Authorization of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of shares of
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval (but subject to
applicable government regulatory restrictions), to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although the
Company has no present intention to issue any shares of its preferred stock
there can be no assurance that the Company will not do so in the future. See
"Management," "Principal Stockholders" and "Description of Securities."

No Public Trading Market; Possible Delisting from Nasdaq SmallCap Market;
Disclosure Relating to Low Priced Stocks. Prior to the Offering there has
been no public trading market for the Units or the Redeemable Warrants and
there has been only a limited trading market for the Common Stock. Although
the Company has applied to have the Units, the Common Stock and the
Redeemable Warrants quoted on Nasdaq and it anticipates that such application
will be approved, there can be no assurance that a trading market will
develop or, if developed, that it will be maintained. In addition, there can
be no assurance that the Company will in the future meet the maintenance
criteria for continued quotation of the securities on Nasdaq SmallCap Market.
The continued quotation criteria for Nasdaq SmallCap Market include, among
other things, $2,000,000 in total assets, $1,000,000 in capital and surplus,
a public float of 100,000 shares with a market value equal to $200,000, two
market makers and a minimum bid price of $1.00 per share of common stock. If
an issuer does not meet the $1.00 minimum bid price standard, it may,
however, remain on Nasdaq if the market value of its public float is at least
$1,000,000 and the issuer has at least $2,000,000 in equity. If the Company
were removed from Nasdaq, trading, if any, in the Units, the Common Stock or
the Redeemable Warrants would thereafter have to be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
the NASD's OTC Electronic Bulletin Board. As a result, an investor would find
it more difficult to dispose of, and to obtain accurate quotations as to the
value of such securities.

12
<PAGE>

In addition, if the Common Stock is delisted from trading in Nasdaq and
the trading price of the Common Stock is less than $5.00 per share, trading
in the Common Stock would also be subject to the requirements of Rule 15g-9
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Under such rule, broker/dealers who recommend such
low-priced securities to persons other than established customers and
accredited investors must satisfy special sales practice requirements,
including a requirement that they make an individualized written suitability
determination for the purchaser and receive the purchaser's written consent
prior to the transaction. The Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 also requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally, according to
recent regulations adopted by the Securities and Exchange Commission (the
"Commission"), any equity security not traded on an exchange or quoted on
Nasdaq that has a market price of less than $5.00 per share, subject to
certain exceptions), including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and
the risks associated therewith. Such requirements could severely limit the
market liquidity of the Units, the Common Stock and the Redeemable Warrants
and the ability of purchasers in the Offering to sell their securities in the
secondary market. There can be no assurance that the Units, the Common Stock
and the Redeemable Warrants will not be delisted or treated as a penny stock.
Prior to completion of this Offering, the Company's Common Stock was subject
to Rule 15g-9 under the Exchange Act.

Potential Adverse Effect of Redemption of Redeemable Warrants. The
Redeemable Warrants are redeemable by the Company with the prior written
consent of the Underwriter at a price of $.05 per Warrant commencing
, 1997, one year from the Effective Date, provided that (i) 30 days prior
written notice is given to the holders of the Redeemable Warrants and (ii)
the closing bid price per share of the Common Stock as reported on Nasdaq (or
the last sale price, if quoted on a national securities exchange) for any 20
trading days within a period of 30 consecutive trading days, ending on the
fifth day prior to the date of the notice of redemption, has been at least
150% of the then exercise price per share, subject to adjustment in certain
events. The holders of the Redeemable Warrants will automatically forfeit
their rights to purchase the shares of Common Stock issuable upon exercise of
such Redeemable Warrants unless the Redeemable Warrants are exercised before
they are redeemed. Notice of redemption of the Redeemable Warrants could
force the holders to exercise the Redeemable Warrants and pay the respective
exercise prices at a time when it may be disadvantageous for them to do so,
to sell the Redeemable Warrants at the market price when they might otherwise
wish to hold the Redeemable Warrants, or to accept the redemption price which
is likely to be substantially less than the market value of the Redeemable
Warrants at the time of redemption. See "Description of Securities --
Redeemable Warrants."

Current Prospectus and State Blue Sky Registration Required to Exercise
Redeemable Warrants. Holders will have the right to exercise the Redeemable
Warrants and purchase shares of Common Stock only if a current prospectus
relating to such shares is then in effect and only if the shares are
qualified for sale under the securities laws of the applicable state or
states, or there is an exemption from the applicable qualification
requirements. The Company has undertaken and intends to file and keep
effective and current a prospectus which will permit the purchase and sale of
the Common Stock underlying the Redeemable Warrants, but there can be no
assurance that the Company will be able to do so. Although the Company
intends to qualify for sale the shares of Common Stock underlying the
Redeemable Warrants in those states in which the securities are to be
offered, no assurance can be given that such qualification will occur. The
Redeemable Warrants may be deprived of any value if a prospectus covering the
shares issuable upon the exercise thereof is not kept effective and current
or if such underlying shares are not, or cannot be, registered in the
applicable states. Although the Company does not presently intend to do so,
the Company reserves the right to call the Redeemable Warrants for redemption
whether or not a current prospectus is in effect or such underlying shares
are not, or cannot be, registered in the applicable states. See "Description
of Securities -- Redeemable Warrants."

Forward-Looking Statements and Associated Risk. This prospectus contains
forward-looking statements within the meaning of section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding, among other items (i) the Company's
growth strategies, (ii) the impact of the Company's products and anticipated
trends in the Company's business, and (iii) the Company's ability to enter
into contracts with publishers and strategic partners. These forward-looking
statements are based largely on the Company's expectations and are subject to
a number of risks and uncertainties, certain of which are

<PAGE>

beyond the Company's control. Actual results could differ materially from
these forward-looking statements as a result of the factors described in
"Risk Factors," including, among others, regulatory or economic influences.
In light of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Prospectus will in fact
transpire or prove to be accurate.

THE COMPANY

The Company's predecessor was originally incorporated in Montana in 1931,
and for many years prior to December, 1993 it had been a shell corporation
with no business or assets. In December, 1993, the Company changed its name
to InfoServe, Inc. and formed a subsidiary, CD-MAX, Inc. In April 1996, the
Company merged into a newly formed Delaware corporation, and merged CD-MAX,
Inc. into the Company and changed the Company's name to CD-MAX, Inc. The
Company's executive offices are located at 11480 Sunset Hills Road, Suite
110, Reston, Virginia 22090; its telephone number is (703) 471-5755, and its
facsimile number is (703) 471-2806.

RECENT BRIDGE FINANCINGS

In February, and March 1996, Steven P. Schnipper, a director of the
Company, and two principal stockholders of the Company, advanced an aggregate
of $200,000 to the Company, and in April 1996 the same investors advanced an
aggregate of $100,000 to the Company (the "First Bridge Financing"). The
initial $100,000 was advanced pursuant to a one-year, 10% promissory note
that was repaid from the net proceeds of the Second Bridge Financing, as
described below. In addition, the Company issued an aggregate of (i) $180,000
principal amount of promissory notes (the "First Bridge Notes") which bear
interest at the rate of 10% per annum and are due and payable upon the
earlier of (a) the consummation of a public financing of the Company through
the sale of equity securities from which the Company receives gross proceeds
of at least $3,000,000 or (b) May 16, 1997, and (ii) 170,000 Common Stock
purchase warrants (the "First Bridge Warrants"), each First Bridge Warrant
entitling the holder to purchase one share of Common Stock at an initial
exercise price of $3.37 (subject to adjustment upon the occurrence of certain
events) during the three-year period commencing May 16, 1997. See "Certain
Transactions."

On May 16, 1996, the Company consummated a $1,000,000 bridge financing
(the "Second Bridge Financing", collectively the First Bridge Financing and
the Second Bridge Financing are referred to as the "Bridge Financings"),
pursuant to which it issued an aggregate of (i) $900,000 principal amount of
promissory notes (the "Second Bridge Notes", collectively the First Bridge
Notes and the Second Bridge Notes are referred to as the "Bridge Notes")
which bear interest at the rate of 10% per annum and are due and payable upon
the earlier of (a) the consummation of a public financing of the Company
through the sale of equity securities from which the Company receives gross
proceeds of at least $3,000,000 or (b) May 16, 1997, and (ii) 600,000
warrants with an aggregate purchase price of $100,000, (the "Second Bridge
Warrants", collectively the First Bridge Warrants, the Second Bridge Warrants
and 300,000 warrants issued in connection with certain financings consummated
in 1995 (the "1995 Financings") are referred to as the "Bridge Warrants")
each Second Bridge Warrant entitling the holder to purchase one share of
Common Stock at an initial exercise price of $3.37 (subject to adjustment
upon the occurrence of certain events) during the three-year period
commencing May 16, 1997.

The net proceeds of $1,144,546 from the Bridge Financings were applied by
the Company to pay off the first $100,000 advanced under the First Bridge
Financing, reduce accounts payable and accrued liabilities, and fund working
capital. Upon the consummation of this Offering, each Bridge Warrant shall
automatically, without any action by the holder thereof, be converted into a
Redeemable Warrant (sometimes hereinafter referred to as the "New Warrant")
having terms identical to those of the Redeemable Warrants underlying the
Units offered hereby. The New Warrants and the underlying shares of Common
Stock issuable upon exercise of the New Warrants are being registered under
the Securities Act in the Registration Statement of which this Prospectus is
a part. The Company intends to use a portion of the proceeds of this Offering
to repay the entire principal amount of, and accrued interest on, the Bridge
Notes. See "Use of Proceeds."

14
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Units
offered by the Company hereby at an assumed offering price of $6.125 per Unit,
after deducting underwriting discounts and expenses payable by the Company,
are estimated to be $5,728,063 ($6,647,273 if the Over-allotment Option is
exercised in full). The Company presently intends to use the net proceeds
(assuming no exercise of the Over-allotment Option) as follows:

Dollar
Amount Percentage
------------ ------------
Repay Bridge Notes(1)(2) .... $1,080,000 19%
Payment of Deferred Management
Salaries(3) ................ 258,497 5%
Sales and Marketing(4) ...... 900,000 16%
Product Development(5) ...... 1,800,000 31%
Working Capital ............. 1,689,565 29%
------------ ------------
Total Net Proceeds .......... $5,728,062 100%

- ------
(1) The Company intends to repay the aggregate principal amount of
$1,080,000, plus accrued interest thereon of the Bridge Notes (as
hereinafter defined). The Bridge Notes bear interest at the rate of 10%
per annum and mature on the earlier of (i) consummation of an offering of
the Company's securities from which the Company receives gross proceeds
of at least $3,000,000 or (ii) May 16, 1997, one year from the date of
issuance. See "Recent Bridge Financings."

(2) Of the $1,080,000 of aggregate principal amount of Bridge Notes to be
repaid, $337,500 is to be paid to officers, directors and principal
shareholders of the Company, as follows: Philip J. Gross, $22,500; Steven
P. Schnipper, $72,000; SUAN Investments, $135,000; and Stourbridge
Investments, $108,000. See "Recent Bridge Financings," "Management" and
"Principal Stockholders."

(3) The Deferred Management Salaries are to be paid to the Company's four
senior executive officers, as follows: Robert A. Wiedemer, $99,231; John
D. Wiedemer, $83,200; Philip J. Gross, $66,416; and David B. Boelio,
$9,650.

(4) The major components, and relative magnitude of the anticipated Sales and
Marketing Expenses are: primarily personnel costs and, to a significantly
lesser extent, advertising and marketing costs, including trade shows, and
travel related to customer presentations and trade show attendance.

(5) The major components, and relative magnitude of the anticipated Product
Development Expenses are: primarily personnel costs, and, to a significantly
lesser extent, the acquisition of software.

The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based upon the current status of its
business operations, its current plans and current economic conditions.
Future events, including the problems, delays, expenses, and complications
frequently encountered by early stage companies as well as changes in
competitive conditions affecting the Company's business and the success or
lack thereof of the Company's marketing efforts, may make adjustments in the
allocation of funds necessary or desirable.

The Company believes that the estimated net proceeds to be received by the
Company from this Offering will be sufficient to meet the Company's cash
requirements for a period of at least 12 months following the date of this
Prospectus. Thereafter, if the Company has insufficient funds for its needs,
there can be no assurance that additional funds can be obtained on acceptable
terms, if at all. If necessary funds are not available, the Company's
business would be materially adverse affected.

The Company will not receive any of the proceeds from the sale of the
Selling Securityholder Warrants or the Selling Securityholder Shares by the
holders thereof, although the Company will receive proceeds from the
exercise, if any, of the Selling Securityholder Warrants. See "Recent Bridge
Financings," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Selling
Securityholders."

Prior to expenditure, the net proceeds will be invested in short-term
interest bearing securities, such as bank certificates of deposit, United
States government obligations, or money market instruments.

15
<PAGE>

MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

Prior to the acquisition of CD-MAX, Inc. in December 1993, the Company was
a shell corporation without any active trading. The Company's Common Stock
trades on the NASD OTC Electronic Bulletin Board. The following table sets
forth the range of high and low bid prices for the Company's Common Stock for
the fiscal quarters indicated as reported by NASDAQ Research Services. The
prices have been adjusted to reflect the 1 for 30 share exchange of the
Company's Common Stock in April 1996. Such quotations represent inter-dealer
quotations without retail markups, markdowns or commissions and may not
necessarily represent actual transactions. Furthermore, the Company does not
believe that the quotations for the Common Stock for the periods set forth
below are true indicators of the prices at which a substantial number of
shares could be bought or sold since, during such periods, trading in the
Common Stock was relatively inactive.

Bid Prices(1)
-------------------------
High Low
--------- --------
(Fiscal Year Ending 6/30/95)
First Quarter .............. $45.00 $22.50
Second Quarter ............. 29.06 13.125
Third Quarter .............. 18.75 8.4375
Fourth Quarter ............. 16.875 9.375
(Fiscal Year Ending 6/30/96)
First Quarter .............. $13.125 $ 9.375
Second Quarter ............. 15.00 3.75
Third Quarter .............. 27.00 9.375
Fourth Quarter ............. $13.125 $ 5.00

- ------
(1) These prices have been adjusted to reflect the 1 for 30 share exchange of
the Company's Common Stock in April 1996.

At July 31, 1996, there were approximately 383 holders of record of the
Common Stock. On July 31, 1996, the closing bid price on the OTC was $3.00
for the Common Stock according to NASDAQ Research Services.

DIVIDEND POLICY

Since the acquisition of CD-MAX, Inc. in 1993, the Company has not paid
any cash dividends on its Common Stock. The Company presently intends to
retain earnings to provide for the operation and expansion of its business
and therefore does not anticipate paying cash dividends on its Common Stock
in the foreseeable future.

16
<PAGE>

DILUTION

As of June 30, 1996, the net tangible book value (deficit) of the Company's
Common Stock was $(1,085,351), or $(0.53) per share. The net tangible book value
(deficit) per share of the Company is its total tangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding.
Dilution per share represents the difference between the amount per share paid
by purchasers in the Offering and the pro forma net tangible book value per
share after the Offering. After giving effect to the receipt and application of
the net proceeds of the Offering, based upon the offering price of $6.125 per
Unit (assuming no value is attributed to the Redeemable Warrants included in the
Units), the pro forma as adjusted net tangible book value of the Company as of
June 30, 1996, would have been $4,609,377, or $1.05 per share. This represents
an increase in net tangible book value per share of $1.58 to the Company's
existing stockholders and an immediate dilution of $2.01 per share, or 66% to
public investors in this Offering (assuming no value is attributed to the
Redeemable Warrants included in the Units). The following table illustrates this
dilution on a per share basis:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per share of Common Stock ............... $3.06
Net tangible book value per share before Offering ..................... $ (0.53)
Pro forma increase per share attributable to new investors ............ $ 1.58
Pro forma net tangible book value per share after Offering(1)........... $1.05
Dilution per share to new investors ................................... $2.01

</TABLE>

The following table summarizes, as of June 30, 1996, the number and
percentage of shares of Common Stock purchased from the Company, the amount and
percentage of cash consideration paid and the average price per share paid by
existing stockholders and by new investors in the Offering.

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------------------- -------------------------------------------------------
Percentage of
Percentage of Consideration Total Average Price
Number Outstanding Shares Paid Consideration Paid Per Share
----------- ------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>

Present Stockholders . 2,073,270(1) 47% $2,286,272 25% $1.10
New Investors ...... 2,300,000 53 7,043,750(2) 75 $3.06
Total .............. 4,373,270 100% $9,330,022 100%

</TABLE>

- ------
(1) Includes 25,970 shares to be issued as anti-dilutive securities after the
date of this Offering to a director and two principal shareholders in
accordance with the terms of private financing. See "Certain Transactions."
(2) Assumes no value for the Redeemable Warrants.

If the Underwriter's Over-Allotment Option is exercised in full, the increase
per share attributable to new investors would be $1.70, the pro forma net
tangible book value per share of Common Stock after the Offering would be $1.17
and the dilution to new investors would be $1.89 per share or 62%.

17
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
June 30, 1996, on an actual basis which reflects the restructuring of the
Company, including the 1 for 30 share exchange of the Common Stock and receipt
of $300,000 of the First Bridge Financing, of which $20,000 was allocated to the
purchase of 170,000 Bridge Warrants, the repayment of $100,000 from the First
Bridge Financing and the receipt of the net proceeds of the Second Bridge
Financing of $844,546 of which $100,000 was allocated to the purchase of 600,000
Bridge Warrants and (ii) as of June 30, 1996 on a proforma as adjusted basis to
reflect the sale by the Company of the Units offered hereby at an assumed public
offering price of $6.125 per Unit and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Recent Bridge Financings."

<TABLE>
<CAPTION>
June 30
------------------------------
Pro Forma
Actual(3) As Adjusted(4)
------------- -------------
<S> <C> <C>

Short-term debt:
10% Promissory Notes, less unamortized
interest of $33,334 ..................... $ 1,046,666 $ --
Long-term debt ............................ -- --
------------- -------------
Total debt ................................ 1,046,666 --
------------- -------------
Stockholders' equity (deficit):
Preferred Stock, $1.00 par value; 1,000,000
shares authorized; no shares outstanding . -- --
Common Stock, $.01 par value; 10,000,000
shares authorized, 2,047,300(1) shares
outstanding on an actual basis,
4,373,270(1)(2) shares outstanding on a
proforma as adjusted basis................ 20,473 43,773
Capital in excess of par value ............ 2,691,873 8,396,675
Deficit accumulated during the development
stage ................................... (3,727,743) (3,831,031)
------------- -------------
Total stockholders' equity (deficit) ...... (1,015,397) 4,609,377
------------- -------------
Total capitalization ...................... $ 31,269 $ 4,609,377
============= =============
</TABLE>

- ------
(1) Does not include (i) 125,193 shares reserved for issuance upon the exercise
of outstanding warrants at exercise prices ranging from $.30 to $22.50 per
share; (ii) 990,000 shares reserved for issuance upon the exercise of
warrants granted to management at an exercise price of $9.19 per share;
(iii) 86,345 shares reserved for issuance upon the exercise of stock options
granted pursuant to the Company's 1993 Stock Incentive Plan at exercise
prices ranging from $7.00 per share to $45.00 per share (the Company
intends, subject to the completion of this Offering and the terms of the
1993 Stock Incentive Plan, to reduce the exercise price of approximately
42,800 of these options to $3.50 per share); and (iv) 113,655 shares
reserved for issuance upon the exercise of options which may be granted
under the Company's 1993 Stock Incentive Plan and (v) a total of 25,970
shares reserved for issuance upon the exercise of warrants to be issued as
anti-dilutive securities after the date of this Offering to a director and
two principal shareholders in accordance with the terms of private
financing. See "Management," "Certain Transactions," "Description of
Securities," and "Underwriting."

(3) As part of the Second Bridge Financing approximately $140,000 has been
reflected as deferred financing costs of which $69,954 remains unamortized.

(4) As adjusted to reflect (i) an expense of $69,954 of unamortized debt
issuance costs relating to the Second Bridge Notes which would have
otherwise been amortized over the term of the Second Bridge Notes, and (ii)
an expense of $33,334 of additional interest expense related to the Second
Bridge Notes.

18
<PAGE>

SELECTED FINANCIAL DATA

The statement of operations data for the years ended June 30, 1995 and 1996,
and for the period from July 1, 1993 (Inception) through June 30, 1996 and the
balance sheet data as of June 30, 1996 are derived from the financial statements
included elsewhere in this Prospectus. The statements of operation data for the
year ended June 30, 1994, and the balance sheet data as of June 30, 1994 and
1995 are derived from audited financial statements of the Company not included
in this Prospectus. The information set forth below should be read in
conjunction with the Company's financial statements, and Management's Discussion
and Analysis of Financial Condition, appearing elsewhere in this Prospectus.

Period from
July 1, 1993
Year ended June 30, (Inception) to
1994 1995 1996 June 30, 1996
--------------------------------------------- --------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues .................... $ -- $ 2,500 $ 13,394 $ 15,894
Costs and expenses:
Selling ..................... 112,455 120,285 208,757 441,497
General and administrative .. 710,952 689,597 725,748 2,126,297
Research and development .... 107,135 277,120 655,124 1,039,379
Depreciation and
amortization............... -- -- 83,401 83,401
------------- -------------- -------------- --------------
Total costs and expenses ...... 930,542 1,087,002 1,673,030 3,690,574
Other income (expense)
Interest income ............ 547 3,962 13,586 18,095
Interest expense ............ -- (1,875) (69,283) (71,158)
------------- -------------- -------------- --------------
Net loss ...................... $ (929,995) $(1,082,415) $(1,715,333) $(3,727,743)
============= ============== ============== ==============
Net loss per share(1) ......... $ (.89) $ (.91) $ (.88)
============= ============== ==============
Weighted average number of common
stock shares outstanding(1) 1,046,540 1,192,279 1,954,255
============= ============== ==============

</TABLE>

Balance Sheet Data:
Cash and cash equivalents ...................... $ 74,670 $ 321,856 $ 316,012
Working capital (deficit) ...................... (147,806) (8,686) (1,130,280)
Total assets ................................... 74,670 326,868 483,124
Total liabilities .............................. 222,476 335,554 1,498,521
Deficit accumulated during the development stage. (929,995) (2,012,410) (3,727,743)
Total stockholders' equity (deficit) ........... (147,806) (8,686) (1,015,397)

</TABLE>

- ------
(1) Computed on the basis described in Note 1 of the Notes to the Financial
Statements

19
<PAGE>

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

OVERVIEW

The Company is a development stage company engaged in the development and
marketing of the CD-MAX technology to publishers of digitally stored
information. The Company commenced operations in July 1993. Prior thereto,
the principals of the Company were involved in the development of the CD-MAX
technology, development of the business plan and arranging for the initial
capitalization of the Company.

From July 1, 1993 (inception) through June 30, 1996, the Company
recognized revenues from operations of $15,894 and had an accumulated deficit
of approximately $3,727,743. The Company has continued to operate at a
deficit since inception and expects to incur significant additional operating
losses until the Company generates significant revenues from operations which
are sufficient to cover its monthly operating expenses.

The Company's strategy is to achieve market acceptance of the CD-MAX
System with publishers of professional, general corporate, library and
educational materials which use CD-ROMs as the method of information
distribution. The Company has an Internet version of its service under
development and expects to introduce it in 1996. The Company has entered into
agreements with four information publishers pursuant to which it may receive
product development, transaction and licensing fees (which represent a
percentage of the revenue billed by the Company on behalf of the publisher),
provided that the publishers are successful in marketing their CD-ROMs, of
which there can be no assurance. The first commercial test of the CD-MAX
System began in August, 1995, and to date, only $15,894 in revenues have been
generated.

RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 1996 COMPARED WITH YEAR ENDED JUNE 30, 1995

For the year ended June 30, 1996, the Company recognized revenues of $13,394
as license fee income pursuant to its agreements with publishers. For the year
ending June 30, 1995, the Company recognized revenues of $2,500 operations.

The Company's operating expenses were $1,673,030 for the year ended June 30,
1996, compared to $1,087,002 for the year ended June 30, 1995. This increase of
$586,028 or 54% was attributable primarily to the following factors:

Selling expenses were $208,757 for the year ended June 30, 1996, compared to
$120,285 for the year ended June 30, 1995. This increase of $88,472 or 74% was
attributable primarily to increased expenses associated with the design and
production of marketing materials and an increase in public relations expenses.

General and administrative expenses were $725,748 for the year ended June 30,
1996, compared to $689,597 for the year ended June 30, 1995. This increase of
$36,151 or 5% was primarily due to a $37,239 increase in administrative salaries
(annual salary increase for key employees, additional staff and temporary
services); a $11,277 increase due to an increase in travel (finance related
activities); a $43,243 increase in legal expenses; a $18,656 increase in
Virginia office rent (twelve months versus five months rent in prior year); and
a $53,666 increase in general office expenses; offset by a decrease of $127,930
in investors' and financial relations expense.

Research and development expenses were $655,124 for the year ended June 30,
1996, compared to $277,120 for the year ending June 30, 1995. This increase of
$378,004 or 136% was primarily attributed to the increase of nine additional
personnel in software development and operations. This increase in staff also
resulted in an increase of equipment and related expenses.

Depreciation and amortization expense was $83,401 for the year ended June
30, 1996, compared to $0 for the year ended June 30, 1995. This increase of
$83,401 was primarily attributed to the capitalization of equipment leases and
the capitalization of debt issuance costs associated with the Second Bridge
Financing.

Due to the above, the Company had a net loss of $1,715,333 for the year ended
June 30, 1996, compared to a net loss of $1,082,415 for the year ended June 30,
1995.

20
<PAGE>

YEAR ENDED JUNE 30, 1995 COMPARED WITH YEAR ENDED JUNE 30, 1994

For fiscal year ended June 30, 1995 ("Fiscal 1995"), the Company
recognized revenues of $2,500 as license fee income pursuant to an agreement
with a publisher. For the fiscal year ending June 30, 1994 ("Fiscal 1994"),
the Company did not recognize any revenue from operations.

The Company's operating expenses were $1,087,002 in Fiscal 1995, compared
to $930,542 in Fiscal 1994. The increase of $156,960 or 17% was attributable
primarily to the growth in the Company's operations. More specifically to the
following factors:

Selling expenses were $120,285 for Fiscal 1995, compared to $112,455 for
Fiscal 1994. The increase of $7,830 or 7% was primarily due to an increase in
public relations expense.

General and administrative expenses were $689,597 for Fiscal 1995, compared
to $710,952 for Fiscal 1994. The decrease of $21,355 or 3% was due primarily to
a $64,130 increase in salaries, where management received or accrued salaries
for 12 months of Fiscal 1995, versus nine months for Fiscal 1994, a $131,125
decrease in financial public relations expense, and a $45,640 increase in
general office expenses.

Research and development expenses were $277,120 for Fiscal 1995, compared
to $107,135 for Fiscal 1994. This increase of $169,985 or 159% was primarily
attributable to an increase in head count and temporary services in the
software development and operations areas. The Company opened its Northern
Virginia Operations Center late in Fiscal 1994, and only incurred nominal
office related costs for this facility in Fiscal 1994, versus Fiscal 1995.

Due to the above, the Company had a net loss of $1,082,415 in Fiscal 1995,
compared to a net loss of $929,995 in Fiscal 1994.

RECENT PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which is effective for the
Company's 1997 financial statements. SFAS No. 123 allows companies to account
for stock-based compensation under either the new provisions of SFAS 123 or
the provisions of APB No. 25, but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of
SFAS No. 123 had been adopted. At this time, the Company intends to continue
accounting for its stock based compensation in accordance with the provisions
of APB No. 25. As such, the implementation of SFAS No. 123 will not
materially impact the financial position or results of operations of the
Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company has experienced net losses and negative cash flow from operations
since its inception and at June 30, 1996 had a working capital deficiency of
$1,130,280. Other than routine trade payables, the Company's primary liability
is for accrued expenses of $341,220, which as of June 30, 1996, represents back
salary due management of $258,497, fringe benefit accruals of $19,299, and other
accruals of $63,424.

The Company has financed its operations primarily through funds obtained from
the sale of Common Stock in private placement transactions of $2,286,272 and the
deferral of management salaries, which as of June 30, 1996, amounted to
$258,497. During the period July 1, 1995 through June 30, 1996, the Company
received $1,825,000 of additional financing through the sale of equity and the
issuance of debt securities to fund the Company's operations until this Offering
is completed.

The Company has no material capital commitments. Most of its capital assets
consist of computers and related peripheral equipment which have either been
purchased or leased. The Company's obligations under its equipment leases are
not material. The Company does have employment agreements with four of its
senior executives which call for annual salaries of approximately $56,000 to
$79,500 per year per individual. And, the Company has office lease obligations
for its offices in Murray Hill, NJ and Reston, VA, in the aggregate of $95,889
in Fiscal 1997 and $65,112 in Fiscal 1998.

21
<PAGE>

At June 30, 1996, the Company had available net operating loss carry forwards
of approximately $2,800,000 to offset future taxable income for federal tax
purposes. The utilization of the loss carry forwards to reduce future income
taxes will depend upon the Company's ability to generate sufficient taxable
income prior to the expiration of the net operating loss carry forwards. The
carry forwards expire in the year 2008 through 2010. However, the Internal
Revenue Code of 1986, as amended, (the "Code") limits the maximum annual use of
net operating loss and tax credit carry forwards in certain situations where
changes occur in the stock ownership of a corporation. As a result of this
Offering, a change in ownership is likely to occur which would substantially
restrict the Company's use of the net operating loss carry forwards for federal
and state income tax purposes. See Note 5 to Financial Statements.

The report of the Company's independent auditors on the Company's
financial statements as of June 30, 1996 and for the years ended June 30,
1995 and 1996 and for the period from July 1, 1993 (inception) to June 30,
1996, contains an explanatory paragraph expressing substantial doubt with
respect to the ability of the Company to continue as a going concern. The
Company believes that the net proceeds from this Offering will be sufficient
to finance the Company's working capital requirements for 12 months following
the completion of the Offering. See "Use of Proceeds." There can be no
assurance that the Company will generate sufficient revenues or be able to
raise additional capital to fund its operations after such period.

22
<PAGE>

BUSINESS

The CD-MAX System monitors the amount and type of information accessed
from an encrypted CD-ROM. The usage data is stored in encrypted form on the
computer's hard disk. The CD-MAX System can retrieve this data from the
end-user via modem. The Company can then update the necessary security codes
and bill the end- user on behalf of the publisher. CD-MAX withholds new
security codes if the end-user does not pay the applicable charges which will
terminate access to the CD-ROM. For those personal computers without a modem,
the Company offers alternate billing arrangements.

The Company has been working with industry leaders and associations to
gain industry acceptance of the CD-MAX System. The Company was the only
information security and metering firm invited to speak at the Information
Industry Association's Annual Investor's Conference in June, 1995. Company
management was also invited to chair three sessions at the Information
Industry Association's annual conference in September, 1995. An article in
CD-ROM Professional written by two of the Company's executives, received an
award for Best Article at the annual Online/CD-ROM convention in October,
1995.

The Company's executive offices are located at 11480 Sunset Hills Road,
Suite 110, Reston, Virginia 22090; its telephone number at this location is
(703) 471-5755.

INDUSTRY BACKGROUND

The sale of electronic information on CD-ROMs is a large and growing
market. The Company has targeted publishers of professional, corporate,
library and educational fields as its initial markets. According to InfoTech,

23
<PAGE>

Inc., a leading CD-ROM market research firm, these publishers were estimated
to account for 75% of the approximately $9 billion U.S. CD-ROM software
market for 1995. The U.S. CD-ROM software market is projected to grow 60% in
1996 to over $14 billion, with the worldwide CD-ROM software market
increasing to over $23 billion.

Sales of CD-ROM hardware generate sales of CD-ROM software. InfoTech
reports that approximately 12 million CD-ROM drives were installed in the
U.S. in 1994 and more than 20 million were installed in 1995, an increase in
excess of 60%. Additionally, CD-ROM drives are increasingly being installed
in networks where one CD-ROM drive may serve dozens or even hundreds of
users.

The introduction of the new high density CD-ROM drives, known as Digital
Video Disk ("DVD"), which are expected to ship in mid-year 1996, may expand
the CD-ROM market further by expanding the capacity of a CD-ROM by 700% or
more. DVD is expected to also allow for greater use of full-motion video
which will enhance the value of CD-ROM titles, particularly interactive
training titles.

DISTRIBUTION OF ELECTRONIC INFORMATION

Currently, electronic information databases are primarily distributed in
three ways: CD-ROM, online services and the Internet.

CD-ROM: CD-ROM titles in the professional, corporate, library and
educational markets are currently sold on a fixed fee basis, normally as an
annual subscription where the user usually receives a new disc (or set of
discs) monthly or quarterly. For many titles, the price exceeds $2,000 per
year. Without usage billing services, a publisher's customers are faced with
a difficult "all or nothing" purchase decision. Many potential customers who
need occasional access may be unwilling to commit to the large up-front costs
under the current pricing system. Furthermore, the tremendous information
storage capacity of optical technology allows multiple databases on one
CD-ROM. Current technology and practices, however, discourage publishers from
offering multiple databases on one CD-ROM since the total cost for the
databases to the end-user could be prohibitive.

Even when publishers charge a higher flat fee for network licenses, they
are finding network users can easily abuse their network licenses by
unauthorized use. The CD-MAX System is designed to capture all use for
billing purposes in order to prevent unrecorded sharing of data from a CD-ROM
and to provide the publishers with the option of billing network users based
upon usage.

CD-ROM publishers face the problem of piracy of their CD-ROM based
information. Recently developed low cost writable optical technologies and
high-capacity cartridge tape drives make it possible to copy all or part of a
CD-ROM easily and inexpensively. The applications software industry suffers
substantial losses of potential revenue due to piracy. Providers of
information on CD-ROMs are becoming equally susceptible, but are at greater
risk because of the much higher price of their products. The Company's
proprietary encryption software is designed to address this problem.

Online: An alternative to CD-ROM is online information services. These
services often cost many times what a comparable CD-ROM would cost. Online
information costs are high because the provider must pass along the
telecommunications costs and the cost of maintaining a mainframe computer
installation that must be large enough to handle peak periods, but is often
not used to capacity.

Some publishers currently offer a hybrid CD-ROM/online service. In a
hybrid environment, users receive a subscription to the CD-ROM product for
which they receive monthly updates. All of the searches for information would
normally begin with the CD-ROM. Only if the user wanted information that was
issued since the last monthly CD-ROM update would he need to go online for
the most recent information. In this way, online time is minimized and the
low cost and large storage capacity of CD-ROM is maximized. The Company
believes the hybrid CD-ROM/online distribution method will ultimately become
a dominant method of distribution for professional and business information.

Internet: Closely related to the CD-ROM industry is the Internet market.
The Internet market for published information has only recently developed and
is not as large as the current CD-ROM market, but, it may become a
multi-billion dollar industry. Professional, corporate, library and
educational information publishers on the Internet have a similar need for
metering and security technology as CD-ROM publishers. The Company is

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<PAGE>

in the process of developing the Internet version of its CD-MAX System, under
the name NET-MAX. It expects to introduce a commercial version of NET-MAX in
1996. There can be no assurance that the Company will develop this product,
or that it will find any commercial acceptance.

THE CD-MAX SYSTEM

The CD-MAX System consists of software installed on the end-user's
computer, which includes an encrypted file structure containing security
codes and transaction tracking programs, and an encrypted CD-ROM. The CD-MAX
System is installed on the end-user's computer by means of a short CD-MAX
program contained on the CD-ROM itself, or on an accompanying diskette.

Information on a CD-ROM may be protected from unauthorized use by
encrypting the data on the CD-ROM. The Company employs a proprietary data
encryption process to protect CD-ROM information. CD-ROM files are encrypted
on a pre-master disk from which the CD-ROMs are then pressed in the
manufacturing process.

An encrypted CD-ROM will be accessible only when three elements interact
and match properly: (1) the encrypted CD-ROM, (2) security codes contained in
the metering software, and (3) electronic code updates gained through
registration and reauthorization with the CD-MAX billing center. When a
CD-MAX encrypted CD-ROM is read by an authorized end-user, the proper
security codes unlock the information automatically. The Company's encryption
technique produces no discernible effect on a CD-ROM's performance.

Once the CD-MAX System is installed (in either single-user or network
settings), any use of a CD-MAX encrypted CD-ROM is recorded for
transaction-tracking and billing purposes. The CD-MAX System automatically
monitors and records information transactions according to the publisher's
specifications and stores them in a file on the user's hard disk. The stored
transaction data is periodically retrieved via modem, with minimal customer
involvement. The Company's billing operations then process the data, prepare
and mail billing statements, and accept payment of fees from end-users. For
users who do not have a modem, the CD-MAX System can be used with alternative
arrangements, with usage information retrieved via diskette.

Security codes are changed whenever transaction data is retrieved from the
end-user. Transaction data retrieval is based on the user's credit limit or
an expiration date. To prevent non-paying users from accessing the CD-ROM
information, the system will not function without access to the new codes.

The CD-MAX system is designed to monitor and record end-user transaction
data; therefore, trends and patterns of use can be reported to publishers for
each of their CD-ROM databases. Publishers may learn how their customers use
databases, which databases are used frequently and which are used
infrequently for marketing and product development purposes. The Company
includes transaction reports to publishers with its billing services.

The CD-MAX System is customized to the needs of each publisher. This
process involves consulting with the publisher to determine product
parameters such as pricing, data measurement goals and possible marketing
enhancements. Publishers typically rely on outside firms to pre-master and
master the software files contained on a CD-ROM. The Company's involvement in
the production process is limited to encrypting the pre-mastered files and
testing for errors. The Company provides support to end-users and publishers
with a telephone help-line.

CD-MAX Billing Services: On behalf of publishers, the Company bills and
accepts payment of transaction fees from all users of CD-ROM based
information sources which use the CD-MAX System. The Company currently offers
two alternatives for billing: after-use and pay-in-advance billing.

For after-use billing, the user's computer accesses the Company's billing
computer via a standard modem at the end of a billing period. Upon access,
the Company downloads the transaction information and calculates billing
accordingly. If bills are not paid within a predetermined period of time, the
Company will not download new access codes and the CD-MAX System will
automatically terminate access to the CD-ROM until the bill has been paid and
new codes are downloaded to the user's computer. For most publishers,
after-use billing is the preferred option. Although the Company does not
assume liability for unpaid customer invoices, it charges publishers a
percentage only of revenues collected.

25
<PAGE>

For pay-in-advance billing, users are required to contact the Company and
pay for a certain amount of transactions, normally via credit card or check
debit. The Company then updates the access control codes in the CD-MAX
software. The software tracks the transactions and notifies the user when the
advances have been depleted.

ARCHITECTURE OF THE PRIMARY ELEMENTS OF CD-MAX SYSTEM

The primary elements of the CD-MAX System are data encryption, metering
and security.

Data Encryption. Data encryption is a method of generating and expanding
codes. An algorithm reads the code, expands it and combines it with the
unencrypted text (the "plaintext") to create encrypted text (the
"cyphertext"). This cyphertext is unreadable by the user without the
appropriate code and algorithm to decrypt the data. The reverse process is
decryption, which reads the code, expands it and combines it with the
cyphertext to create the plaintext. The CD-MAX System uses a proprietary
encryption method specifically designed for information on CD-ROMs. The
CD-MAX System has no discernible effect on retrieval times and provides a
high level of security relative to the value of the information on the disc.
The encryption method is not designed to stop all attempts to break it, but
rather to provide an economic level of security that is intended to deter all
normal unauthorized access to the information. In addition, the Company's
encryption method has been approved by the U.S. Department of Commerce for an
unrestricted export license so that, unlike other encryption methods, the
CD-MAX System can be exported outside the United States.

Once integrated with the publisher's search and retrieval engine, the
CD-MAX System decrypts data continuously, provided that the user has either
paid for data retrieval or established credit with the CD-MAX billing center.
To facilitate encrypted information updates, the Company has created an
Automated Encryption Program, which allows publishers to encrypt additional
data without the Company's intervention.

Metering. Metering is a method of measuring and recording information. The
CD-MAX System measures and records actual data access, which allows
publishers to charge on a "One Chargeable Unit" ("OCU") basis. An OCU is a
small data segment. The ability to meter by OCU gives the publisher
flexibility in pricing information. Retrieving, printing and transferring
(copying) data are the main functions recorded. Each time an OCU is retrieved
from the database, information about that OCU is recorded in a transaction
file. The CD-MAX system automatically calculates the transaction charges,
according to specific base prices and transaction fees the publisher chooses.

Security. The CD-MAX System provides security at many different levels.
Security begins with the proprietary CD-ROM encryption technology employed to
protect CD-ROM information. User login security is provided to prevent
unauthorized users from retrieving data, as well as giving the publisher's
customers the ability to charge departments within their organizations for
their transactions. Installation diskette security protects publishers from
lost revenues since users must register with the CD-MAX billing center in
order to retrieve the data. Authorization codes are entered into the user's
CD-MAX system during reauthorization. The transaction data cannot be read by
ordinary means as it is encrypted using a special one-way encryption process
that is decrypted at the CD-MAX facility.

ARCHITECTURE OF THE NET-MAX SYSTEM FOR THE INTERNET

The Company is in the process of developing an Internet version of the
CD-MAX System, to be named NET-MAX. There can be no assurance that this
Internet product will be successfully developed or commercialized. Based upon
the Company's development to date, it is expected that the architecture of
the NET-MAX System will be as follows:

The publisher's data will be prepared with embedded NET-MAX encryption
tags in the Internet source document. The data will then be stored at the
publisher's web site. Data tagged with the NET-MAX encryption tag will be
stored in encrypted format and will be unreadable to a unauthorized user.

To retrieve the NET-MAX encrypted data, the Company will make available a
complex set of programs that administer tracking, metering and security on
the user's computer (the "metering stub") which can be down-

26
<PAGE>

loaded from an Internet Web Site. When the NET-MAX metering stub is
installed, the user will be required to register with the CD-MAX billing
center. All sensitive transactions will be subject to encryption using
available Internet encryption software, such as the Netscape standard Secure
Sockets Layer.

The metering stub inserts itself into the protocol layer looking at each
packet destined for the user's web browser. Once a NET-MAX encryption tag is
found in the data stream, the metering stub determines the appropriate
charges and communicates this to a metering server at the Company's facility.
If the user's authorization codes are accepted by the Company's metering
server, the decryption of the packet is accomplished at the user site.
Without the NET-MAX metering stub, the data is unreadable to the web browser.

Many browsers save the publisher's Internet document. The CD-MAX metering
stub also intercepts requests to store the data into the local hard disk and
ensures that the data remains stored in encrypted format. When the data is
again requested from the local hard disk, the metering stub decrypts the
data. Depending on the publisher's requirements, verification and approval
from the NET-MAX metering server may be required prior to data decryption.
The publisher's data is safe from unauthorized users even when it has been
downloaded from the publisher's web site.

Finally, users can send the encrypted data by mail to another user
(redistribution). If that user is also registered with the Company, the
NET-MAX metering stub will intercept requests to read that file. Once the
CD-MAX metering server recognizes the new user's authorization codes, the
encrypted data is decrypted. The publisher's data remains inaccessible to
unauthorized users.

MARKETING

The primary method of marketing the CD-MAX System to publishers is the
Company's internal sales force. All end-user marketing will be done by the
publishers. Presently the Company's sales force consists of two people. The
Company expects to increase the sales force to four persons in the second
half of 1996, assuming available resources. Based on the nature of the
Company's initial target markets, the Company believes that a four person
sales force will be sufficient for the foreseeable future.

Information contained on published CD-ROMs is located and retrieved via
the use of special software included on the CD-ROM known as a "search and
retrieval engine." There are a small number of companies that sell search and
retrieval engines to a large number of CD-ROM publishers. The Company's
marketing strategy includes working with search and retrieval engine software
companies to have the CD-MAX System incorporated into their software. The
Company believes this strategy will provide the CD-MAX System with the
approval of the search and retrieval software companies and convince
publishers that the CD-MAX System is compatible with the search and retrieval
software. The Company has entered into agreements with Dataware Technologies,
Inc., and Folio Corporation, major search and retrieval software firms, to
facilitate the compatibility of the CD-MAX metering and encryption
capabilities with the Dataware and Folio search and retrieval engines. The
agreements provide for the Company to work with Dataware and Folio to share
proprietary information for the integration of their respective products so
as to facilitate joint service offerings. The Company is currently
negotiating with several potential customers who are users of the Folio and
Dataware search and retrieval engines, and it has recently entered into a
contract with a customer that intends to use the Dataware search and
retrieval engine. Neither Dataware nor Folio is under any obligation to make
their search and retrieval software compatible with the CD-MAX System.

The Company has been working with industry leaders and associations to
gain industry acceptance of the CD-MAX System. The Company was the only
information security and metering firm invited to speak at the Information
Industry Association's Annual Investor's Conference in June, 1995. Company
management was also invited to chair three sessions at the Information
Industry Association's annual conference in September, 1995. An article in
CD-ROM Professional that was written by two of the Company's executives
received an award for Best Article at the annual Online/CD-ROM convention in
October, 1995.

The Company has utilized trade advertising to increase its name
recognition within its target market. The Company advertises in major
industry publications. The Company has also retained a public relations firm.
To expand its contacts within the industry, the Company has created an
advisory board comprised of senior executives who have been employed at large
publishing firms. See "Management -- Advisory Board."

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<PAGE>

PRINCIPAL CONTRACTS

As of the date hereof, the Company has four contracts with customers for its
CD-MAX System. In March, 1995, the Company entered into a contract with Mitchell
International, a unit of Thomson Publishing that publishes automobile repair
manuals. Mitchell is working with their CD-ROM product "On-Demand Computerized
Repair Information" under the name "Metered On-Demand" using the CD-MAX System.
To date, this contract has resulted in minimal revenues to the Company due to
the fact that the product is still being test marketed. In July, 1995, the
Company entered into a contract with Disclosure, Incorporated, a major provider
of financial and legal information about public companies to the investment and
legal communities. Its CD-ROM title "New Issues" is the first of four titles
under contract and intended to be sold under the name "Metered New Issues." This
product has completed testing and had its initial commercial shipment in late
July, 1996. In May, 1996, the Company entered into a contract with Credential
Information and Verification Services, Inc. ("CIVS"), a health care information
services company, to adapt the CD-Max System to a data base to be marketed by
CIVS using the Dataware search and retrieval engine. This contract is in its
development (pre-testing) stage. An officer, director and principal shareholder
of the Company is an officer, director and principal shareholder of CIVS, see
"Certain Transactions." In July, 1996, the Company entered into a contract with
Information Handling Services, Inc. ("IHS"), a publisher of CD-ROM data bases,
to adapt the CD-MAX System to one of its data bases. The contract with IHS is
also in its development (pre-testing) stage. Each of these contracts requires
the publisher to pay fees for billing services and to pay CD-MAX a percentage of
all revenues generated through the use of CD-MAX encrypted products.

COMPETITION

The Company is aware of other companies that are developing metering and
encryption systems that are in some ways similar to the Company's system. In
addition, the Company believes that it is possible to provide some of the
same benefits that the CD-MAX System will offer by other means. It is also
possible that other companies may be developing systems comparable to the
CD-MAX System. There can be no assurance that either existing or new
competitors will not develop technologies that are superior to, or more
cost-effective than, the Company's system or that otherwise achieve greater
market acceptance. There can be no assurance that the Company will be able to
compete successfully against existing competitors or future entrants into the
market.

No security and pricing/billing technology has yet emerged as the standard
for the CD-ROM industry. Individual information providers, however, have
begun to actively seek solutions to the security-related problem of license
abuse, and to the pricing issues that arise when multiple databases are
loaded onto one CD-ROM. Both software and hardware solutions are currently
available from the Company's competitors, and each category is profiled
below.

Software-only systems. Software-based security systems have been available
to the software and information industries for a number of years. These
systems provide security in the form of copy protection, but do not have any
capability for usage-based pricing. Only a few CD-ROM publishers in CD-MAX's
target markets use software based security systems.

CD-MAX has encountered only three firms that are actively selling
software-based security systems to CD-ROM providers. Rainbow Technologies,
Inc. ("Rainbow"), TestDrive Corporation and Softbank, Inc. These systems all
allow catalogs of software programs to be distributed on CD-ROM, either
gratis or at a nominal subscription price. Customers may review descriptions
and trial versions of individual products at their convenience, with the
option of unlocking access to any program they desire. Sellers take credit
card payment and provide pass codes over the telephone. This approach is
viewed as most acceptable for selling large quantities of low-priced
consumer educational and entertainment programs, since they are usually
self-contained and require small amounts of memory. Simple unlocking systems,
such as Rainbow's VendorSystem and the others, do not, however, adequately
address the pricing, security and customer-convenience needs of high-priced
CD-ROM databases that contain large numbers of records and require ongoing
copyright protection. The Company believes it is unlikely that CD-MAX's
target markets will adopt the approach offered by these three companies.

Hardware-based security systems. The introduction of a hardware element
into a security system increases the level of security that can be attained,
since protection of codes no longer rests solely on software barriers.

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<PAGE>

Hardware security systems, such as Rainbow's Sentinel Hardware Key, are
commonly used to protect high-priced workstation software. End-users insert
a hardware plug into the parallel port of their computer in order to gain
access to the software program. Since the security codes are both fixed and
proprietary, each software program that uses this approach requires a
separate hardware plug in the parallel port of the computer. This type of
hardware system lacks a metering capability.

The Company knows of two companies that have developed hardware-based
security systems which have metering capability. Wave Systems Corp. ("Wave")
uses a board that is installed in the user's computer. In addition to
metering, the board facilitates the use of Data Encryption Standard ("DES"),
a government encryption standard developed in the 1970's. CD-MAX uses a
proprietary approach that the Company believes is more flexible and
appropriate for information sold on CD-ROM and does not require additional
hardware. Wave is also attempting to adopt an alternative approach that uses
a proprietary microchip, instead of a board, which would be installed in the
user's computer at the time the computer is manufactured. This would require
the cooperation of computer manufacturers. As of the date hereof, to the
Company's knowledge, no manufacturer has agreed to install Wave's microchip
in their computers. Wave is also currently attempting to develop a
satellite-based information delivery system.

InfoSafe Systems, Inc. ("InfoSafe") has developed an encryption system to
meter CD-ROM usage and bill customers accordingly. Certain elements of
InfoSafe's Keystone System -- principally the encryption of files and use of
a hardware device -- are similar to Wave's approach. InfoSafe's system uses
an external control box that connects to a Small Computer System Interface
("SCSI") port on a computer.

PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY

The CD-MAX System is based upon software and related technical data that
the Company believes is a "trade secret." The Company believes that
commercial protection of its products will depend primarily upon the CD-MAX
System proprietary software remaining a trade secret and on copyright
protection. In order to protect trade secrets, the Company is taking
measurements which in its opinion are appropriate procedures to protect its
rights. The Company is also maintaining its copyright rights in this
proprietary software. In any case, there can be no assurance that the
Company's technology will remain secret or that others will not develop
similar technology and use such technology to compete with the Company. While
the Company has certain rights with respect to patents (see discussion below)
those patents do not cover the CD-MAX System as it is presently configured.

Prior to the formation of CD-MAX, John David Wiedemer, Senior Vice
President, Operations, developed the technology, which led to the creation of
the CD-MAX System. In connection with the formation of the CD-MAX System, he
entered into an exclusive, 99 year, worldwide, master license with CD-MAX to
certain intellectual property, technology and patents (the "Intellectual
Property") free and clear of any liens or claims (the "Master License").

The Intellectual Property includes rights to certain patents, and the
following non-patented intellectual property: a demonstration program
(original and subsequent versions), a hardware card (original and subsequent
versions), and software outlines, including an Overview of Software
Components of CD-MAX System (July 15, 1993); Functional Program Description
(August 25, 1993); and Preliminary Notes on Billing System Design (Sept. 21,
1993). None of the patents have been and none of the patents can be filed in
Europe.

The field of use of the Intellectual Property covered by the Master
License is for text and related multimedia information on any electronic
medium, including the Internet, online and CD-ROM market. The Master License
includes standard default provisions, such as the reversion of the license to
the licensor (or assigns), should CD-MAX file for bankruptcy or not protect
and defend from infringement any of the intellectual property covered by the
license. The Master License also permits John David Wiedemer to compete with
the Company after 1999, if he is terminated by the Company without cause and
if the Company fails to have gross revenues from sales of products and
services using the Intellectual Property, as adjusted for transaction related
taxes, returns, refunds, bad debts, and direct payments to third parties for
the material being distributed ("Adjusted Gross Revenues"), of at least
$3,000,000 in 1999, $4,000,000 in 2000, and $5,000,000 in 2001, and each year
after 2001 Adjusted Gross Revenues equal to the prior year's Adjusted Gross
Revenues requirement plus 15%,

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<PAGE>

adjusted for inflation. The Master License provides for a royalty to a
Royalty Trust (the beneficiaries of which include John David Wiedemer, Robert
Wiedemer, members of their family, David B. Boelio, Philip J. Gross and
Weldon P. Rackley) of 1.25% of the Adjusted Gross Revenues of CD-MAX in
excess of $15 million but under $100 million per year, and 2.5% of the
Adjusted Gross Revenues on amounts over $100 million. However, no royalties
are due or payable unless the closing bid price for the Company's Common
Stock has been at least $52.50, as adjusted for any stock dividends, stock
splits or recapitalization, for a thirty calendar day period, and the
Company's net income during any fiscal year is at least equal to three
percent (3%) of the shareholders' equity after payment of the royalty. See
"Certain Transactions."

The above referred to patents do not cover the CD-MAX System as it is
currently configured, and thus the Company does not currently have any patent
protection for the CD-MAX System.

RESEARCH AND DEVELOPMENT

The Company is engaged in research and development efforts aimed at
improving and expanding the potential markets for its products. The Company's
research and development resources consist of a nine person product
development staff. Primary projects presently being researched and developed
include: adapting the CD-MAX System to the Internet; product enhancements to
the CD-MAX System relating to the user interface, tracking capabilities, and
the system security; expanding potential computer platforms that can be used
with the CD-MAX System; improving the efficiency and capability of the back
end support software, including improvement in usage reporting and market
research capabilities for publishers; improving testing, customer service and
publisher support capabilities; planning improvements necessary to allow for
rapid growth in operations and development; and support for the marketing
efforts, which include improved product demonstrations and demonstration
support capabilities.

EMPLOYEES.

The Company has nineteen (19) full time employees. Two employees are in
marketing, four are in management and administrative positions, and thirteen
(13) are in product research and development. Management considers its
employee relations to be satisfactory.

FACILITIES.

The Company leases space for offices in Murray Hill, New Jersey
(approximately 1,650 square feet) on a five (5) year lease expiring in
January, 2000 and Reston, Virginia (approximately 4,400 square feet) on a two
year lease. The Company also owns or leases office equipment and personal
computers.

LEGAL PROCEEDINGS.

The Company is not a party to any legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS.

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position with Company
-------------------------- ----- -----------------------------------------------------
<S> <C> <C>
Robert A. Wiedemer ....... 36 President, Chief Executive Officer, Chairman of Board
Philip J. Gross .......... 44 Secretary, Treasurer, Vice President-Chief Financial
Officer, Director
John David Wiedemer, Ph.D. . 42 Senior Vice President, Operations, Director
David B. Boelio .......... 42 Executive Vice President, Marketing and Sales
Steven P. Schnipper ...... 25 Director
Weldon P. Rackley ........ 60 Director

</TABLE>

Robert A. Wiedemer, Chairman of the Board since 1995, President, Chief
Executive Officer and a Director of the Company since 1993. Together with his
brother John David Wiedemer, Mr. Wiedemer co-founded the Company. From March
1990 until June 1993, he worked with Dr. Wiedemer in the development of the
CD-MAX technology. Mr. Wiedemer received his B.A. from the University of
Texas and a Master's Degree in Business from the University of
Wisconsin-Madison with a specialty in Marketing.

Philip J. Gross, Secretary/Treasurer, Chief Financial Officer, and
Director since 1993. From 1986 until 1989 Mr. Gross was chief financial
officer, treasurer and secretary of America Online. From 1985 until May,
1994, he was a director of National Digital Corporation of McLean, Virginia,
a digital photo transmission company. From 1990 through June, 1993, Mr. Gross
was chief financial officer of Phone Base Systems of Vienna, Virginia, a
telecommunications firm. From 1991 to the present, he has been the chief
operating officer and a director of Credential Information and Verification
Services, Inc. of Rockville, Maryland, a health care credential information
services company. Mr. Gross is a Certified Public Accountant. He holds AB and
MBA degrees from Syracuse University.

John David Wiedemer, Ph.D., a Director, since 1995, and Senior Vice
President--Operations since 1993. Dr. Wiedemer co-founded the Company with
his brother Robert Wiedemer. From March 1990 until June 1993, Dr. Wiedemer
was involved in efforts to develop the CD-MAX technology. Dr. Wiedemer holds
Ph.D. and Masters degrees in economics from the University of
Wisconsin-Madison, and a Bachelor of Arts degree (Magna cum laude) from the
University of Pennsylvania.

David B. Boelio, Executive Vice President, Marketing and Sales since July,
1993. From 1990 until June, 1992 he was vice-president, editor in chief at
Macmillan Publishing of New York City. From June, 1992 through July, 1993, he
was a self employed consultant to the publishing industry. He holds a BA
degree from the University of Michigan.

Steven P. Schnipper, Director since 1995. Since 1992, he has been a
financial consultant, working with individual and corporate clients. From
1993 to November, 1994, Mr. Schnipper was employed by the City of Elizabeth,
NJ designing, implementing and troubleshooting computerized systems and
applications. Mr. Schnipper holds BA and MBA degrees from Rutgers University.
Prior to 1992, Mr. Schnipper was a student.

Weldon P. Rackley, Director since May 1996. From 1991 to November 1994 he
was executive director of AMACOM Books, the book publishing division of the
American Management Association, located in New York City, and from November
1994 to the present he has been the managing director of publications for the
American Management Association.

ADVISORY BOARD

The CD-MAX Advisory Board consists of the persons set forth below. The
Advisory Board members serve one year terms from the date of their
appointment and receive options to purchase the Company's Common Stock in
consideration of their service on the Advisory Board. The Company policy is
to annually grant stock options to members of the Advisory Board. The number
of options to be granted is at the discretion of the Company's Board of
Directors.

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<PAGE>

John H. Davis, the former chairman and chief executive officer of The
Thomson Corporation's Book/Reference Group, retired from Thomson in 1993.
Previously he held executive positions with Simon & Schuster, Inc. and its
subsidiary, Prentice-Hall, Inc., including president of the Simon & Schuster
Higher Education Group and president of the Prentice-Hall College Division.
Until 1993, Mr. Davis served as treasurer of the Board of Directors of the
Association of American Publishers ("AAP") and as a member of its Executive
Committee. In May, 1994, he received the AAP's James F. Leisy Achievement
Award in recognition of the positive influence he has exerted on the careers
of many publishing industry executives.

James D. Ramsey, III is president and chief executive officer of Evoke,
Inc., a new venture serving the information needs of various professional and
corporate markets. From 1991 to 1994, Mr. Ramsey was senior vice president of
Research Institute of America ("RIA"), a publisher of tax information owned
by The Thomson Corporation. As general manager of RIA's electronic publishing
unit, he bore primary responsibility for planning and executing the company's
move from print into CD-ROM-based distribution of information.

William Saffady, Ph.D. is a Professor in the School of Information Science
and Policy, State University of New York at Albany. As the author of over 30
books and dozens of articles, Dr. Saffady is a recognized authority on many
aspects of information management, including the use of optical discs and the
cost of online search services.

Fraser P. Seitel is managing partner of Emerald Partners, communications
counselors, and senior counselor to Burston-Marsteller. For 21 years, Mr.
Seitel was a communications executive of the Chase Manhattan Bank, resigning
in 1992 after 10 years as senior vice president and director of public
affairs. Mr. Seitel teaches and lectures extensively on the field of public
relations. He is the author of the Prentice-Hall textbook, The Practice of
Public Relations.

William E. Strum served until recently as Vice President of Advanced
Products and Tools at America Online, Inc., where he developed future
strategies for enhanced browser, server and Internet server products.
Previously, Mr. Strum was president and chief technical officer of Media
Cybernetics, Inc., a producer and marketer of imaging and multimedia software
products. Mr. Strum is currently providing business development consulting
services to companies involved in Internet and interactive technologies.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid during the fiscal
year ended June 30, 1996, to the Company's Chief Executive Officer. No other
officer, director, or employee earned more than $100,000 for the fiscal year
ended June 30, 1996.

<TABLE>
<CAPTION>
Annual Compensation Long-Term
---------------------------------------- --------------
Compensation
Name and Other Annual Awards
Principal Position Salary Bonus Compensation Options
------------------------------------ ------------ ------- -------------- --------------
<S> <C> <C> <C>
Robert A. Wiedemer, President, Chief
Executive Officer(1) .............. $79,500(2) -- --(3) --
</TABLE>

- ------
(1) The named executive officer did not receive any annual compensation,
stock options, restricted stock awards, stock appreciation rights, long
term incentive plan payouts, or any perquisites or other personal
benefits, securities or property that exceeded the lesser of $50,000 or
10% of the salary and bonus for such officer during the fiscal year ended
June 30, 1996.

(2) Payment of a portion of the salary due to Mr. R. Wiedemer since 1994 as
of the date of this Offering, totaling $99,231, has been deferred until
such time as the Company has adequate funding. The Company intends to pay
Mr. Wiedemer's deferred salary from the net proceeds of this Offering.

(3) In April, 1996 the Company issued to Mr. R. Wiedemer 247,500 ten year
common stock purchase warrants exercisable at a price of $9.19 per share
any time after December 1, 1996, and only at such time as the Common Stock
has traded for twenty days in any thirty day period at a closing bid
price equal to or greater than $9.19, as adjusted for any stock splits
or recapitalizations. See "Management -- Management Warrants."

32
<PAGE>

EMPLOYMENT CONTRACTS

CD-MAX has entered into employment agreements with Messrs. Boelio, Gross,
J.D. Wiedemer, and R. Wiedemer which terminate on October 1, 1998. Each
employment agreement provides for automatic one-year renewals subject to
earlier termination by either party with or without cause on certain terms
and conditions. Each agreement is terminable by either the employee or the
Company by notice at least 90 days prior to the end of the term or any
renewal term. If the agreement is terminated by the Company prior to the end
of the term or any renewal thereof without cause, as such term is defined in
the agreement, the Company must pay the employee his base salary for six (6)
months thereafter as severance pay. In addition, the Company may terminate
the agreement for breach of the agreement, including neglect of duty,
malfeasance or misfeasance, or inability to perform specified duties upon 30
days prior notice. Each employee has agreed with the Company that the
employee shall not, directly or indirectly, in the United States in
geographical locations in which the Company does or is in the process of
extending its capability to market and sell its products, for a period of 18
months after termination, engage in any competitive business, or solicit
customers of the Company in competition with the Company. Each of the
employment contracts provides for the payment of a base salary, and at the
Company's discretion, a bonus. The base salary for Messrs. J.D. Wiedemer, R.
Wiedemer and D. Boelio is $60,000 per year and for Mr. P. Gross $45,000 per
year. Mr. D. Boelio's contract provides for automatic increases in his base
salary upon the Company achieving certain sales goals, and for automatic
bonuses to be paid upon the Company achieving specified objectives, however,
no specific objectives have yet been established for fiscal year 1997. The
salaries for fiscal year 1997 of the senior executive officers are
approximately: R. Wiedemer, $79,500; J.D. Wiedemer. $75,000; P. Gross, $56,000;
and D. Boelio, $80,000.

Robert A. Wiedemer is employed as President and Chief Executive Officer,
is in charge of all operations, and entrusted with the direction,
administration, and implementation of the Company's plans and policies. John
David Wiedemer is employed as Senior Vice President of Operations and is
responsible for supervising and managing the Company's product development.
David B. Boelio is the Executive Vice President, Marketing and Sales and is
responsible for supervising and managing the Company's marketing and sales
activities. Philip J. Gross is employed as Chief Financial Officer and is
responsible for all accounting records, all other economic and financial
information and systems of the Company, and for apprising the President and
the Board of Directors of all corporate financial information relevant to
their determinations. Mr. Gross is also employed as the chief operating
officer of a health care information service company. Mr. Gross does not
devote a fixed amount of time to the Company's business, but instead devotes
such time as is necessary to carry out his functions to the Company. There
can be no assurance that the demands upon Mr. Gross from his employment by
the Company and the other company will not create a conflict of interest
between Mr. Gross and the Company, or that such demands may not result in the
Company having less availability of Mr. Gross' services,

STOCK INCENTIVE PLAN

In September, 1993, the Board of Directors adopted, and in December, 1993,
the stockholders approved, the 1993 Stock Incentive Option Plan (the "Plan"),
which provides for the grant of options to purchase an aggregate of 200,000
shares of the Company's Common Stock. The Plan provides for the grant to key
employees of incentive stock options within the meaning of Section 422 of the
Code, and for the grant of non-qualified stock options, and restricted stock
awards to eligible executive officers, directors, consultants and key
employees of the Company. The Plan, which expires in 2003, is administered by
the Board of Directors or a committee designated by the Board of Directors.
The purposes of the Plan are to ensure the retention of existing executive
personnel, key employees and consultants of the Company, to attract and
retain new executive personnel, key employees and consultants and to provide
additional incentive by permitting such individuals to participate in the
ownership of the Company. The criteria to be utilized by the Board of
Directors or committee in granting options pursuant to the Plan will be
consistent with these purposes. Senior management of the Company is not
expected to participate in this Plan; however, they have been granted
Management Warrants which are described below.

Incentive stock options granted under the Plan may be exercisable for a
period of up to 10 years or from the date of grant at an exercise price which
is not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive stock option granted under the
Plan to a stockholder own-

33
<PAGE>

ing more than 10% of the outstanding Common Stock may not exceed five years
and its exercise price may not be less than 110% of the fair market value of
the Common Stock on the date of the grant. To the extent that the aggregate
fair market value, as of the date of grant, of the shares of which incentive
stock options become exercisable for the first time by an optionee during the
calendar year exceeds $100,000, the portion of such option which is in excess
of the $100,000 limitation will be treated as a non-qualified stock option.
Upon the exercise of an option, payment may be made by cash, check or any
other means that the Board or the committee determines. No option may be
granted under the Plan after December 2003.

To date the Company has issued 86,345 stock options to its non-management
directors, key employees, and consultants exercisable at a prices ranging from
$7.00 to $45.00 per share. The Company has not issued any restricted stock
awards. The Company intends, subject to the completion of the Offering and the
terms of the 1993 Stock Incentive Plan, to reprice approximately 42,800 stock
options granted under the 1993 Stock Incentive Plan to current, nonexecutive,
employees and members of the Advisory Board, to an exercise price of $3.50 per
share.

MANAGEMENT WARRANTS

In April, 1996, the Company issued to its senior management an aggregate
of 990,000 ten year, common stock purchase warrants that are exercisable
after December 1, 1996 and only at such time as the Common Stock has traded
for twenty days in any thirty business day period at a closing bid price
equal to or greater than $9.19, as adjusted for any stock splits or
recapitalizations, provided, however, that if the Company does not consummate
a public offering of its securities by December 31, 1997, the warrants shall
expire. The exercise price of these Warrants is $9.19 per share, subject to
adjustment for stock splits or recapitalizations.

LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS AND INDEMNIFICATION

The Certificate of Incorporation limits, to the fullest extent now or
hereafter permitted by the Delaware General Corporation Law, liability of the
Company's directors to the Company or its stockholders for monetary damages
arising from a breach of their fiduciary duties as directors in certain
circumstances. This provision presently limits a director's liability except
where a director (i) breaches his or her duty of loyalty to the Company or
its stockholders, (ii) fails to act in good faith or engages in intentional
misconduct or a knowing violation of law, (iii) authorizes payment of an
unlawful dividend or stock purchase or redemption or (iv) obtains an improper
personal benefit. This provision does not prevent the Company or its
stockholders from seeking equitable remedies, such as injunctive relief or
recision. If equitable remedies are found not to be available to stockholders
in any particular case, stockholders may not have any effective remedy
against actions taken by directors that constitute negligence or gross
negligence.

The Certificate of Incorporation also authorizes the Company to indemnify
its directors, officers or other persons serving at the request of the
Company against liabilities arising from their services in such capacities to
the fullest extent permitted by law, including payment in advance of a final
disposition of a director's or officer's expenses or attorneys' fees incurred
in defending any action, suit or proceeding, other than in the case of an
action, suit or proceeding brought by the Company on its own behalf against
an officer. Presently, the Delaware General Corporation Law provides that to
be entitled to indemnification an individual shall have acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
Company's best interests.

The Company currently maintains director and officer liability insurance.

CERTAIN TRANSACTIONS

In July, 1993, John David Wiedemer and Robert Wiedemer formed CD-MAX for
the purpose of developing the CD-MAX System. Prior to that time they had
engaged in limited development efforts through a number of different entities
owned entirely by Messrs. Wiedemer and members of their family.

CD-MAX entered into the Master License Agreement with John David Wiedemer
which agreement gave CD-MAX rights in certain specified Intellectual
Property. The Master License includes standard license provisions, such as
the reversion of the license to the licensor (or assigns), should CD-MAX file
for bankruptcy or not protect and defend from infringement any of the
intellectual property covered by the license. The Master License provides for
a royalty to a Royalty Trust of 1.25% of the Adjusted Gross Revenues of
CD-MAX in excess of $15 million, but under $100 million per year, and 2.5% of
the adjusted gross revenues on amounts over $100 million. However, no
royalties are due or payable until such time as the closing bid price for the
Company's Common Stock is at least $52.50, as adjusted for any stock
dividends, stock splits or recapitaliza-

34
<PAGE>

tion, for a thirty calendar day period, and the Company's net income during
any fiscal year after payment of the royalty is at least equal to three
percent (3%) of the shareholders' equity after payment of the royalty. The
Master License also permits John David Wiedemer to compete with the Company
after 1999, if he is terminated by the Company without cause and if the
Company fails to have Adjusted Gross Revenues from sales of products and
services using the Intellectual Property of at least $3,000,000 in 1999,
$4,000,000 in 2000, and $5,000,000 in 2001 (the "Minimum Revenue Goal"), and
each year after 2001 Adjusted Gross Revenues equal to the prior year's
Minimum Revenue Goal plus 15%, adjusted for inflation. See "Business --
Proprietary Rights and Intellectual Property."

In December, 1995, the Company issued 80,825 shares of Common Stock and
80,825 warrants to purchase Common Stock with an exercise price of $6.60 per
share to Steven P. Schnipper, a director of the Company, and two other
existing shareholders of the Company, Suan Investments and Stourbridge
Investments, Ltd., in return for their guarantee to provide interim financing
of up to $300,000 to the Company. The stock and warrant issuance was the
result of negotiations between the Company and the investors and represents
the repricing of the investors' earlier equity investments in the Company.
This is subject to further adjustment if the price per share of the public
offering is less than the effective price per share ($3.30) paid by these
investors. Based upon the assumed initial public offering price of $6.125 per
Unit, the shares and warrants issued will be adjusted by issuing an additional
25,970 shares of Common Stock and an additional 25,970 warrants.

Pursuant to their guarantees, in February, March and April 1996, Steven P.
Schnipper, and the two principal stockholders of the Company, advanced an
aggregate of $300,000 to the Company. In exchange for the initial $100,000
advance of the First Bridge Financing, the Company issued 50,000 Bridge
Warrants and a one-year, 10% promissory note that was repaid from the net
proceeds of the Second Bridge Financing. For the remaining $200,000 the
Company issued an aggregate of (i) $180,000 principal amount of promissory
notes which bear interest at the rate of 10% per annum and are due and
payable upon the earlier of (a) the consummation of a public financing of the
Company through the sale of equity securities from which the Company receives
gross proceeds of at least $3,000,000 or (b) May 16, 1997, and (ii) 120,000
Bridge Warrants. See "Recent Bridge Financings."

Some of the Company's officers, directors and principal shareholders (or
their family members) purchased an aggregate of $200,000 of the Second Bridge
Financing on terms identical to the other investors in that offering. See
"Selling Securityholders."

In May, 1996, the Company entered into a contract with Credential
Information and Verification Services, Inc. ("CIVS"), a health care
information services company, to adapt the CD-MAX System to a data base to be
marketed by CIVS using the Dataware search and retrieval engine. This
contract is in its development (pre-testing) stage. Philip J. Gross, an
officer, director and principal shareholder of the Company is also an officer
and director and principal shareholder of CIVS, and also works on a part-time
basis for CIVS. Mr. Gross abstained from voting as a director on the
Company's and CIVS' approval of the contract.

Each of the transactions between the Company and each officer and
shareholder of the Company was made on terms no less favorable to the Company
than those that were available from unaffiliated third parties. All future
transactions, including loans, between the Company and its officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the Board of Directors, including a majority of independent and
disinterested outside directors on the Board of Directors, and will be on
terms no less favorable to the Company than those that could be obtained from
unaffiliated third parties.

35
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the
beneficial ownership of Common Stock as of July 31, 1996, and as adjusted to
reflect the sale of the 1,800,000 shares of Common Stock offered hereby, by
(i) each stockholder known by the Company to own beneficially five percent or
more of the outstanding Common Stock, (ii) each director, (iii) each "Named
Executive" officer, and (iv) all executive officers and directors of the
Company as a group.

Percentage of Outstanding
Shares of Common Stock
-------------------------
Name and
Addresses of Shares Beneficially Prior to After
Beneficial Owners Owned(1) Offering Offering
-------------------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
David B. Boelio 223,487 10.92% 5.11%
Philip J. Gross 197,986(2) 9.60% 4.18%(3)
John D. Wiedemer 477,062(4) 23.30% 10.91%
Robert A. Wiedemer 187,950(5) 9.18% 4.30%
Wiedemer Charitable Trust 230,050(6) 11.24% 5.26%
c/o John D. Wiedemer, Trustee
Steven P. Schnipper 256,003(7) 11.50% 3.26%(8)
Weldon P. Rackley 70,575 3.45% 1.61%
Stourbridge Investments, Ltd. 213,057(9) 9.71% 1.44%(10)
c/o Private Trust Ltd.
P.O. Box N-65
Nassau, Bahamas
Suan Investments 504,341(11) 21.38% 5.04(12)
c/o Ernest Gottdiener
911 Sterner Road
Hillside, NJ 07205
All Executive Officers and
Directors as a group
(six persons) 1,413,063(13) 63.03% 28.23%(14)
</TABLE>

- ------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended. Generally, a person is
deemed to be the beneficial owner of a security if he has the right to
acquire voting or investment power within 60 days. Except as otherwise
noted, each individual or entity has sole voting and investment power
over the securities listed.

(2) Includes 15,000 shares of Common Stock issuable upon exercise of
Redeemable Warrants to be issued upon consummation of this Offering in
exchange for Bridge Warrants. See "Recent Bridge Financings" and "Selling
Securityholders."

(3) Assumes the sale of 15,000 Redeemable Warrants in the Concurrent
Offering. See "Selling Securityholders."

(4) Robert A. Wiedemer and John D. Wiedemer are brothers. Includes 230,050
shares owned by the Wiedemer Charitable Residual Trust over which Mr.
John David Wiedemer exercises voting control, and in which he has a
beneficial interest.

(5) Robert A. Wiedemer and John D. Wiedemer are brothers. Does not include
any shares owned by the Wiedemer Charitable Residual Trust in which Mr.
Robert Wiedemer has a beneficial interest but does not exercise any
voting or investment control.

(6) John D. Wiedemer is the trustee of this trust and he and Robert A.
Wiedemer have a beneficial interest in the trust.

(7) Includes 19,152 shares subject to Common Stock options exercisable at
$9.00 per share, 37,397 shares subject to Common Stock warrants that are
immediately exercisable at prices ranging from $.30 to $6.00

36
<PAGE>

per share, and 123,056 shares of Common Stock issuable upon exercise of
Redeemable Warrants to be issued upon consummation of this Offering in
exchange for Bridge Warrants. Does not include 5,925 shares, and 5,925
warrants to be issued as anti-dilutive securities after the date of this
Offering in accordance with the terms of a private financing. See "Recent
Bridge Financings," "Certain Transactions" and "Selling Securityholders."
(8) Assumes the sale of 123,056 Redeemable Warrants in the Concurrent Offering.
Includes 5,925 shares, and 5,925 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing. See "Certain Transactions" and "Selling
Securityholders."
(9) Includes 11,000 shares subject to Common Stock warrants that are
immediately exercisable at $6.00 per share and 136,612 shares of Common
Stock issuable upon exercise of Redeemable Warrants to be issued upon
consummation of this Offering in exchange for Bridge Warrants. Does not
include 5,076 shares, and 5,076 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of a
private financing. See "Recent Bridge Financings," "Certain Transactions"
and "Selling Securityholders." To the best of the Company's knowledge, the
person exercising voting and investment control of these securities is Kalis
Shvarcbir, the president of Stourbridge Investments, Ltd.
(10) Assumes the sale of 136,612 Redeemable Warrants and 23,842 shares of Common
Stock in the Concurrent Offering. Includes 5,076 shares, and 5,076 warrants
to be issued as anti-dilutive securities after the date of this Offering in
accordance with the terms of a private financing. See "Certain
Transactions" and "Selling Securityholders."
(11) Includes 32,439 shares subject to Common Stock warrants that are
immediately exercisable at $6.00 per share, and 278,896 shares of Common
Stock issuable upon exercise of Redeemable Warrants to be issued upon
consummation of this Offering in exchange for Bridge Warrants. Does not
include 14,969 shares, and 14,969 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing. See "Recent Bridge Financings," "Certain Transactions"
and "Selling Securityholders." To the best of the Company's knowledge, the
persons exercising voting and investment control of these securities are
Benjamin Bundheim and Ernest Gottdiener, respectively, the president and
vice president of SUAN Investments.
(12) Assumes the sale of 278,896 Redeemable Warrants and 32,442 shares of Common
Stock in the Concurrent Offering. Includes 14,969 shares, and 14,969
warrants to be issued as anti-dilutive securities after the date of this
Offering in accordance with the terms of a private financing. See "Certain
Transactions" and "Selling Securityholders."

(13) Includes 19,152 shares subject to Common Stock options exercisable at $9.00
per share and 37,397 shares subject to Common Stock warrants that are
immediately exercisable at prices ranging from $.30 to $6.00 per share, and
138,056 shares of Common Stock issuable upon exercise of Redeemable
Warrants to be issued upon consummation of this Offering in exchange for
Bridge Warrants. Does not include 5,925 shares, and 5,925 warrants to be
issued as anti-dilutive securities after the date of this Offering in
accordance with the terms of a private financing. See "Recent Bridge
Financings," "Certain Transactions" and "Selling Securityholders."
(14) Assumes the sale of 138,056 Redeemable Warrants in the Concurrent Offering.
Includes 5,925 shares, and 5,925 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing. See "Certain Transactions" and "Selling
Securityholders."

37
<PAGE>
SELLING SECURITYHOLDERS

An aggregate of 1,070,000 Redeemable Warrants which will be issued to
certain Selling Securityholders in exchange for the Bridge Warrants, together
with 1,070,000 shares of Common Stock issuable upon their exercise, and an
additional 60,615 shares of Common Stock are being registered under the
Registration Statement, at the expense of the Company, for the account of
such Selling Securityholders. See "Recent Bridge Financings" and "Shares
Eligible for Future Sale." Sales of such Redeemable Warrants and shares of
Common Stock may depress the price of the Common Stock or Redeemable Warrants
in any market that may develop for such securities.

The following table sets forth information with respect to persons for
whom the Company is registering the Selling Securityholder Warrants and the
Selling Securityholder Shares for resale to the public in the Concurrent
Offering. Beneficial ownership of Redeemable Warrants and Common Stock by
such Selling Securityholders after the Offering will depend on the number of
securities sold by each Selling Securityholder in the Concurrent Offering.
See "Certain Transactions."

<TABLE>
<CAPTION>
Beneficial Ownership Prior to the Offerings
------------------------------------------------------
Redeemable Warrants(2) Common Stock
--------------------------- -------------------------
Selling Securityholder Number Percentage Number Percentage
- ---------------------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C>

Norman B. and Gail B.
Antin 15,000 1.4% -- --
Stanley S. Arkin 30,000 2.8% -- --
Mark Banach 4,781 * 6,713 *
Edwin R. Bindseil 15,000 1.4% -- --
Elliot Y. Braun 15,000 1.4% -- --
Dominick Casale 30,000 2.8% -- --
D'Arbra Fetzer 15,000 1.4% -- --
Michael Gauss 9,562 * 13,426 *
Morton and DeVera
Gordon 15,000 1.4% -- --
Martin J. Gross 9,000 * -- --
Philip J. Gross 15,000 1.4% 182,986 8.9%
Stanley J. Gross 6,000 * 367 *
Fred Kassner 60,000 5.6% -- --
Ery W. and Helga L.
Kehaya 15,000 1.4% -- --
Paul E. Keitel 15,000 1.4% -- --
Bernard P. Kolkana 15,000 1.4% -- --
Cecil Lee 15,000 1.4% -- --
Ernest P. Lee 15,000 1.4% -- --
Edward Leibowitz 15,000 1.4% -- --
S. Alan Lisenby 15,000 1.4% -- --
Hawk Management and
Financial Services,
Inc. 30,000 2.8% -- --
Alfred Palagonia 15,000 1.4% -- --
Brett Raymer 60,000 5.6% -- --
Richard B. Schechter,
DMD 15,000 1.4% -- --
Steven P. Schnipper 123,056 11.5% 132,947(5) 6.3%
Harold Staenberg 5,180 * 8,605 *
Stourbridge
Investments, Ltd. 136,612 12.8% 76,445(7) 3.7%
Suan Investments 278,896 26.1% 225,445(9) 10.8%
Walter E. Scott 15,000 1.4% -- --
Murray Sussman IRA 15,000 1.4% -- --
Saeed S. Toghraie 15,000 1.4% -- --
Jay Varon 1,913 * 2,685 *
Alan Young 15,000 1.4% -- --
----------- ------------ --------- ------------
1,070,000 100.% 649,618 30.4%
=========== ============ ========= ============
</TABLE>

<PAGE>

Amount of Securities Being Beneficial Ownership After
Registered for Resale the Offerings(1)(4)
--------------------------------------------------- --------------------------
Redeemable Warrants(2) Common Stock Common Stock
---------------------------- ---------------------- --------------------------
Selling Securityholder Number Percentage(3) Number Percentage(3) Number Percentage(3)
- ---------------------- ----------- ------------- -------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>

Norman B. and Gail B.
Antin 15,000 * -- -- -- --
Stanley S. Arkin 30,000 1.4% -- -- -- --
Mark Banach 4,781 * 966 * 5,747 *
Edwin R. Bindseil 15,000 * -- -- -- --
Elliot Y. Braun 15,000 * -- -- -- --
Dominick Casale 30,000 1.4% -- -- -- --
D'Arbra Fetzer 15,000 * -- -- -- --
Michael Gauss 9,562 * 1,932 * 11,494 *
Morton and DeVera
Gordon 15,000 * -- -- -- --
Martin J. Gross 9,000 * -- -- -- --
Philip J. Gross 15,000 * -- -- 182,986 4.2%
Stanley J. Gross 6,000 * -- -- 367 *
Fred Kassner 60,000 2.7% -- -- -- --
Ery W. and Helga L.
Kehaya 15,000 * -- -- -- --
Paul E. Keitel 15,000 * -- -- -- --
Bernard P. Kolkana 15,000 * -- -- -- --
Cecil Lee 15,000 * -- -- -- --
Ernest P. Lee 15,000 * -- -- -- --
Edward Leibowitz 15,000 * -- -- -- --
S. Alan Lisenby 15,000 * -- -- -- --
Hawk Management and
Financial Services,
Inc. 30,000 1.4% -- -- -- --
Alfred Palagonia 15,000 * -- -- -- --
Brett Raymer 60,000 2.7% -- -- -- --
Richard B. Schechter,
DMD 15,000 * -- -- -- --
Steven P. Schnipper 123,056 5.5% -- * 144,797(6) 3.3%
Harold Staenberg 5,180 * 1,047 * 7,558 *
Stourbridge
Investments, Ltd. 136,612 6.2% 23,872 * 62,755(8) 1.4%
Suan Investments 278,896 12.6% 32,442 * 222,941(10) 5.1%
Walter E. Scott 15,000 6 * -- -- -- --
Murray Sussman IRA 15,000 * -- -- -- --
Saeed S. Toghraie 15,000 * -- -- -- --
Jay Varon 1,913 * 386 * 2,299 *
Alan Young 15,000 * -- -- -- --
----------- ------------- -------- -------- --------- -------------
1,070,000 48.2% 60,615 1.4% 640,944 14.6%
=========== ============= ======== ======== ========= =============
</TABLE>

- ------
The symbol "*" indicates that the interest is less than 1%.
(footnotes on following page)

38
<PAGE>

(footnotes to chart on page 38)

(1) Assuming no purchase by any Selling Securityholder of Common Stock or
Redeemable Warrants offered in the Offering.
(2) Assumes conversion of the Bridge Warrants to Redeemable Warrants upon the
Closing of the Offering.
(3) Percentage based upon securities to be outstanding after offering.
(4) Assumes the sale of all Selling Securityholder Warrants and Shares, which
results in no Redeemable Warrants being held by the Selling Securityholders
at the conclusion of the Offering and the Concurrent Offering.
(5) Does not include 5,925 shares, and 5,925 warrants to be issued as
anti-dilutive securities after the date of this Offering in accordance with
the terms of a private financing.
(6) Includes 5,925 shares, and 5,925 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing.
(7) Does not include 5,076 shares, and 5,076 warrants to be issued as
anti-dilutive securities after the date of this Offering in accordance with
the terms of a private financing.
(8) Includes 5,076 shares, and 5,076 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing.
(9) Does not include 14,969 shares, and 14,969 warrants to be issued as
anti-dilutive securities after the date of this Offering in accordance with
the terms of a private financing.
(10) Includes 14,969 shares, and 14,969 warrants to be issued as anti-dilutive
securities after the date of this Offering in accordance with the terms of
a private financing.

There are no material relationships between any of the Selling
Securityholders and the Company or any of its predecessors or affiliates
except (i) Philip J. Gross is an officer and director of the Company, and
Martin J. Gross and Stanley J. Gross are his relatives; (ii) Steven P.
Schnipper is a director of the Company; and (iii) Suan Investments is a
principal stockholder of the Company. The Securities offered by the Selling
Securityholders are not being underwritten by the Underwriter. The Selling
Securityholders may sell the Selling Securityholder Warrants and/or the
Selling Securityholder Shares at any time on or after the date hereof,
provided prior consent is given by the Underwriter. In addition, the Selling
Securityholders have agreed with the Company that, during the period ending
on the second anniversary of the effective date of the Registration
Statement, the Selling Securityholders will not sell such securities other
than through the Underwriter, and that the Selling Securityholders shall
compensate the Underwriter in accordance with its customary compensation
practices. Subject to these restrictions, the Company anticipates that sales
of the Selling Securityholder Warrants and/or the Selling Securityholder
Shares may be effected from time to time in transactions (which may include
block transactions) in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Selling Securityholders may effect such transactions
by selling the Selling Securityholder Warrants and/or the Selling
Securityholder Shares directly to purchasers or through broker-dealers that
may act as agents or principals. Such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of the Selling Securityholder Warrants
and/or the Selling Securityholder Shares for whom such broker-dealers may act
as agents or to whom they sell as principals, or both (which compensation as
to a particular broker-dealer might be in excess of customary commissions).
<PAGE>

The Selling Securityholders and any broker-dealers that act in connection
with the sale of the Selling Securityholder Warrants and/or the Selling
Securityholder Shares as principals may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act and any commission
received by them and any profit on the resale of such securities as
principals might be deemed to be underwriting discounts and commissions under
the Act. The Selling Securityholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of such
securities against certain liabilities, including liabilities arising under
the Securities Act. The Company will not receive any proceeds from the sales
of the Selling Securityholder Warrants and/or the Selling Securityholder
Shares by the Selling Securityholders, although the Company will receive
proceeds from the exercise of the Selling Securityholder Warrants. Sales of
the Selling Securityholder Warrants and/or the Selling Securityholder Shares
by the Selling Securityholders, or even the potential of such sales, would
likely have an adverse effect on the market price of the Units, the
Redeemable Warrants and Common Stock.

At the time a particular offer of Selling Securityholder Warrants and/or
the Selling Securityholder Shares is made, except as herein contemplated, by
or on behalf of the Selling Securityholder, to the extent required, a
Prospectus will be distributed which will set forth the number of Selling
Securityholder Warrants and/or the Selling Securityholder Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase price paid by any
underwriter for shares purchased from the Selling Securityholder and any
discounts, commissions or concessions allowed or reallowed or paid to
dealers.

Under the Exchange Act, and the regulations thereunder, any person engaged
in a distribution of the securities of the Company offered by this Prospectus
may not simultaneously engage in market-making activities with respect to
such securities of the Company during the applicable "cooling-off" period
(two or nine days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, including, without limitation, Rules 10b-6 and
10b-7, in connection with transactions in such securities, which provisions
may limit the timing of purchases and sales of such securities by the Selling
Securityholders.

39
<PAGE>

DESCRIPTION OF SECURITIES

UNITS

Each Unit consists of two shares of Common Stock, $.01 par value, of the
Company, together with one Redeemable Warrant. The Common Stock and the
Redeemable Warrants may only be purchased as Units in the Offering, but are
immediately detachable and separately tradeable.

AUTHORIZED EQUITY SECURITIES

The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, $.01 par value, and 1,000,000 shares of preferred stock, $1.00
par value (the "Preferred Stock"). As of the date hereof, there were
outstanding 2,047,300 shares of Common Stock and no outstanding shares of
Preferred Stock. The following summary description of capital stock of the
Company is qualified in its entirety by reference to the Company's
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and its Bylaws, as amended (the "Bylaws").

PREFERRED STOCK

The Company's Certificate of Incorporation provides for the issuance of
1,000,000 shares of Preferred Stock none of which are currently outstanding.
The Board of Directors, within the limitations and restrictions contained in
the Certificate of Incorporation and without further action by the Company's
stockholders, has the authority to issue shares of Preferred Stock from time
to time in one or more series and to fix the number of shares and the
relative rights, conversion rights, voting rights, and terms of redemption,
liquidation preferences and any other preferences, special rights and
qualifications of any such series. Any issuance of Preferred Stock could,
under certain circumstances, have the effect of delaying, deferring or
preventing a change in control of the Company and may adversely affect the
rights of holders of Common Stock. The Company has no present plans to issue
any shares of Preferred Stock.

COMMON STOCK

The holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of holders of Common Stock,
including the election of directors. The Common Stock votes together as a
single class on all matters on which stockholders may vote, except when class
voting is required by applicable law, or the terms of any other security
issued by the Company.

Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors, from funds legally available therefore,
subject to the rights of holders of any outstanding Preferred Stock. In the
event of the liquidation, dissolution or winding up of the affairs of the
Company, all assets and funds of the Company remaining after the payment of
all debts and other liabilities, subject to the rights of the holders of any
outstanding Preferred Stock, shall be distributed, pro rata, among the
holders of the Common Stock. Holders of Common Stock are not entitled to
preemptive, subscription, cumulative voting or conversion rights, and there
are no redemption or sinking fund provisions applicable to the Common Stock.
All outstanding shares of Common Stock are fully paid and non-assessable.

REDEEMABLE WARRANTS

At the conclusion of the Offering the Company will have outstanding
2,220,000 Redeemable Warrants (2,392,500 if the Over-Allotment Option is
exercised). Each of the Redeemable Warrants expires five years from the
effective date, and entitles the holder to purchase one share of Common Stock
for $ [75% of the initial offering price per Unit] per share, subject to
adjustment in certain events. The Redeemable Warrants are redeemable by the
Company with the prior written consent of the Underwriter at a price of $.05
per Redeemable Warrant commencing __________, 1997, one year from the
effective date, provided that (i) 30 days prior written notice is given to
the holders of the Redeemable Warrants (the "Warrantholders") and (ii) the
closing bid price per share of the Common Stock as reported on Nasdaq (or the
last sale price, if quoted on a national securities exchange) for any 20
trading days within a period of 30 consecutive trading days, ending on the
fifth day prior to the date of the notice of redemption, has been at least
150% of the then exercise price, subject to adjustment in certain events. The
Warrantholders shall have exercise rights until the close of the business day
immediately preceding the date fixed for redemption.

40
<PAGE>

The Warrants provide for adjustment of the exercise price and for a change
in the number of shares issuable upon exercise to protect holders against
dilution in the event of a stock dividend, stock split, combination or
reclassification of the Common Stock.

The exercise prices of the Redeemable Warrants were determined by
negotiation between the Company and the Underwriter thereof and should not be
construed to be predictive of or to imply that any price increases in the
Company's securities will occur.

The Warrants do not confer upon the Warrantholder any voting or other
rights of a stockholder of the Company.

OTHER WARRANTS

As of the date of this Prospectus the Company had outstanding warrants to
purchase an aggregate of 125,193 shares of Common Stock which are exercisable
for various periods of time up through the year 2006, at exercise prices ranging
from $0.30 per share to $22.50 per share. In April 1996, the Company issued to
its senior management 990,000 Warrants to purchase Common Stock with an exercise
price of $9.19 per share. See "Management-Management Warrants." A total of
25,970 warrants will be issued as anti-dilutive securities after the date of
this Offering to a director and two principal shareholders in accordance with
the terms of a private financing, See "Certain Transactions." The warrants
provide for adjustment of the exercise price and for a change in the number of
shares issuable upon exercise to protect holders against dilution in the event
of a stock dividend, stock split, combination or reclassification of the Common
Stock. The exercise prices of the warrants were determined by negotiation
between the Company and the purchasers thereof and should not be construed to be
predictive of or to imply that any price increases in the Company's securities
will occur. The warrants do not confer upon the warrantholder any voting or
other rights of a stockholder of the Company.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned
(x) by persons who are directors and also officers and (y) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the
business combination is approved by the board of directors and authorized at
an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66-2/3% of the outstanding voting stock that
is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder;
or (v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.

TRANSFER AGENT, REGISTRAR AND WARRANT AGENT

The Transfer Agent and Registrar for the Units, Common Stock and
Redeemable Warrants is Continental Stock Transfer & Trust Company, New York
City ("Continental"). Continental can be reached at (212) 509-4000.
Continental will also act as Warrant Agent for the Redeemable Warrants.

41
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Of the 4,373,270, shares of Common Stock to be outstanding upon completion
of this Offering, approximately 2,691,052 shares of Common Stock, including
the 2,300,000 shares underlying the units offered hereby, will be freely
tradeable without restriction under the Securities Act of 1933, as amended
(the "Securities Act") except for any shares of Common Stock purchased by an
"affiliate" of the Company (as that term is defined under the rules and
regulations of the Securities Act), which will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining 1,682,218
shares of Common Stock outstanding are "restricted stock" as that term is
defined under Rule 144 under the Securities Act and under certain
circumstances may be sold without registration pursuant to such rule. In
general, under Rule 144, as currently in effect, a person (or persons whose
shares are aggregated), with respect to restricted securities that satisfy a
two-year holding period, may sell within any three-month period a number of
restricted shares which does not exceed the greater of 1% of the then
outstanding shares of such class of securities or the average weekly trading
volume during the four calendar weeks prior to such sale. Sales under Rule
144 are also subject to certain requirements as to the manner of sale, notice
and the availability of current public information about the Company. Rule
144 also permits, under certain circumstances, the sale of shares by a person
who is not an affiliate of the Company, with respect to restricted securities
that satisfy a three-year holding period, without regard to the volume or
other resale limitations. The above is a brief summary of Rule 144 and is not
intended to be a complete description of the Rule.

The Company is unable to predict the effect that sales made under Rule
144, or otherwise, may have on the then prevailing market price of the
Company's securities although any future sales of substantial amounts of
securities pursuant to Rule 144 could adversely affect prevailing market
prices. Holders of 1,661,406 shares of such restricted stock, including each
of the Company's officers, directors and principal stockholders have agreed
not to, directly or indirectly, issue, offer to sell, grant an option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of (collectively "Transfer") any of their shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock
for a period commencing on the date of this Prospectus and ending eighteen
months after the effective date of this Offering, without the prior written
consent of the Underwriter. See "Principal Stockholders," and "Underwriting."

The Redeemable Warrants underlying the Units offered hereby and the shares
of Common Stock underlying such Redeemable Warrants, upon exercise thereof,
will be freely tradeable without restriction under the Securities Act, except
for any Redeemable Warrants of shares of Common Stock purchased by an
"affiliate" of the Company, which will be subject to the resale limitations
of Rule 144 under the Securities Act. In addition, 1,070,000 Redeemable
Warrants and the shares of Common Stock underlying such Redeemable Warrants
are being registered on behalf of the Selling Securityholders. Holders of
such Redeemable Warrants have agreed not to Transfer such Redeemable
Warrants, or the underlying shares of Common Stock, for a period of eighteen
(18) months from the effective date of the Registration Statement, without
the prior written consent of the Underwriter.

In addition, 200,000 shares of Common Stock will be available for issuance
upon the exercise of options which may be granted under the Company's Stock
Option Plan and, in addition to the 1,141,163 Redeemable Warrants being
registered on behalf of the Selling Securityholders, 1,115,193 shares of
Common Stock will be issuable upon the exercise of other outstanding
warrants. To the extent that options or warrants are exercised, dilution to
the interests of the Company's shareholders may occur. Moreover, the terms
upon which the Company will be able to obtain additional equity capital may
be adversely affected, since the holders of the outstanding options or
warrants can be expected to exercise them, to the extent they are able to, at
a time when the Company would, in all likelihood, be able to obtain any
needed capital on terms more favorable to the Company than those provided in
the options or warrants. See "Management," "Certain Transactions", and
"Description of Securities."

42
<PAGE>

UNDERWRITING

Joseph Sevens & Company, L.P. (the "Underwriter") has entered into an
Underwriting Agreement with the Company pursuant to which, and subject to the
terms and conditions thereof, it has agreed to purchase from the Company, and
the Company has agreed to sell to the Underwriter, on a firm commitment
basis, all of the Units offered by the Company hereby.

The Company has been advised that the Underwriter initially proposes to
offer the Units to the public at the public offering price set forth on the
cover page of this Prospectus and that the Underwriter may allow to certain
dealers who are members of the National Association of Securities Dealers,
Inc. ("NASD") concessions not in excess of $____ per Unit, of which amount a
sum not in excess of $__________ per Unit may in turn be reallowed by such
dealers to other dealers. After the commencement of the Offering, the public
offering price, concessions and reallowances may be changed. The Underwriter
has informed the Company that it does not expect sales to discretionary
accounts by the Underwriter to exceed five percent of the securities offered
by the Company hereby.

The Company has granted to the Underwriter an option, exercisable within
45 days of the date of this Prospectus, to purchase from the Company at the
offering price, less underwriting discounts and the non-accountable expense
allowance, all or part of an additional 172,500 Units on the same terms and
conditions of the Offering for the sole purpose of covering over-allotments,
if any.

The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to pay to the Underwriter a non-accountable expense allowance equal to
three percent of the gross proceeds derived from the sale of the Units
underwritten, $25,000 of which has been paid to date.

Upon the exercise of any Redeemable Warrants more than one year after the
date of this Prospectus, which exercise was solicited by the Underwriter, and
to the extent not inconsistent with the guidelines of the NASD and the Rules
and Regulations of the Commission, the Company has agreed to pay the
Underwriter a commission which shall not exceed five percent of the aggregate
exercise price of such Redeemable Warrants in connection with bona fide
services provided by the Underwriter relating to any warrant solicitation. In
addition, the individual must designate the firm entitled to such warrant
solicitation fee. However, no compensation will be paid to the Underwriter in
connection with the exercise of the Redeemable Warrants if (a) the market
price of the Common Stock is lower than the exercise price of the Redeemable
Warrants, (b) the Redeemable Warrants were held in a discretionary account or
(c) the Redeemable Warrants are exercised in an unsolicited transaction.
Unless granted an exemption by the Commission from its Rule 10b-6 promulgated
under the Exchange Act, the Underwriter and any soliciting broker-dealers
will be prohibited from engaging in any market-making activities with regard
to the Company's securities for the period from nine (9) business days (or
such applicable periods as Rule 10b-6 may provide) prior to any solicitation
of the exercise of the Redeemable Warrants until the later of the termination
of such solicitation activity or the termination (by waiver or otherwise) of
any right the Underwriter or the soliciting broker-dealers may have to
receive a fee for the exercise of warrants following such solicitation. As a
result, the Underwriter and any soliciting broker-dealers may be unable to
continue to provide a market for the Company's Units, Common Stock or
Redeemable Warrants during certain periods while the Redeemable Warrants are
exercisable. If the Underwriter has engaged in any of the activities
prohibited by Rule 10b-6 during the periods described above, the Underwriter
undertakes to waive unconditionally its rights to receive a commission on the
exercise of such Redeemable Warrants.

Of the 4,373,270 shares of Common Stock to be outstanding upon completion
of the Offering, the holders of 1,661,406 shares of Common Stock, including
each officer, director and principal stockholder, have agreed (i) not to,
directly or indirectly, issue, offer to sell, sell, grant an option for the
sale of, transfer, pledge, assign, hypothecate, or otherwise encumber or
dispose of (collectively, "Transfer"), any securities issued by the Company,
including shares of Common Stock or securities convertible into or
exchangeable or exercisable for or evidencing any right to purchase or
subscribe for any shares of Common Stock for a period of eighteen (18) months
from the effective date of the Registration Statement (the "Lock-Up Period"),
without the prior written consent of the Underwriter and (ii) that, for
twenty-four (24) months following the effective date of the Registration
Statement, any sales of the Company's securities shall be made through the
Underwriter in accordance with its customary brokerage practices either on a
principal or agency basis. An appropriate legend shall be marked on the face
of certificates representing all such securities.

43
<PAGE>

In connection with the Offering, the Company has agreed to issue and sell
to the Underwriter and/or its designees, at the closing of the proposed
underwriting, for nominal consideration, five (5) year Underwriter's Warrants
(the "Underwriter's Warrants") to purchase 115,000 Units. The Underwriter's
Warrants are exercisable at any time during a period of four (4) years
commencing twelve months after their issuance at a price of $__________ [165%
of the offering price of the Units] per Unit. The shares of Common Stock,
Redeemable Warrants, and shares of Common Stock underlying the Redeemable
Warrants issuable upon the exercise of the Underwriter's Warrants are
identical to those offered to the public. The Underwriter's Warrants contain
anti-dilution provisions providing for adjustment of the number of warrants
and exercise price under certain circumstances. The Underwriter's Warrants
grant to the holders thereof and to the holders of the underlying securities
certain rights of registration of the securities underlying the Underwriter's
Warrants.

In connection with the Second Bridge Financing, the Company paid to the
Underwriter, as placement agent, $100,000 in cash as commissions, a
non-accountable expense allowance of $30,000 and warrants (the "Placement
Agent's Warrants") to purchase 150,000 shares of Common Stock at an exercise
price of $3.37 per share commencing May 16, 1997. The Placement Agent's
Warrants will be canceled prior to the consummation of the Offering and are
not being replaced with new warrants.

The Company has agreed that for five (5) years from the effective date of the
Registration Statement, the Underwriter may designate one person for election to
the Company's Board of Directors (the "Designation Right"). As of the date of
this Prospectus, the Underwriter has not exercised its Designation Right. In the
event that the Underwriter elects not to exercise its Designation Right, then it
may designate one person to attend all meetings of the Company's Board of
Directors for a period of five (5) years. The Company has agreed to reimburse
the Underwriter's designee for all out-of-pocket expenses incurred in connection
with the designee's attendance at meetings of the Board of Directors. The
Company has also agreed to retain the Underwriter as the Company's financial
consultant for a period of twenty-four (24) months from the date hereof and to
pay the Underwriter a monthly retainer of $2,000, all of which is payable in
advance on the closing date set forth in the Underwriting Agreement.

Prior to this Offering, there has been a limited public market for the
Common Stock and no public market for the Units or the Redeemable Warrants.
Accordingly, the initial public offering price of the Units and the terms of
the Redeemable Warrants were determined by negotiation between the Company
and the Underwriter. Among the factors considered in determining such prices
and terms, in addition to the prevailing market conditions, included the
history of and the prospects for the industry in which the Company competes,
the market price of the Common Stock, an assessment of the Company's
management, the prospects of the Company, its capital structure and such
other factors that were deemed relevant. The offering price does not
necessarily bear any relationship to the assets, results of operations or net
worth of the Company.

The Underwriter commenced operations in May 1994 and therefore does not
have extensive expertise as an underwriter of public offerings of securities.
In addition, the Underwriter is a relatively small firm and no assurance can
be given that the Underwriter will be able to participate as a market maker
in the Units, the Common Stock or in the Redeemable Warrants, and no
assurance can be given that any broker-dealer will make a market in the
Units, the Common Stock or the Redeemable Warrants. The Underwriter has acted
as the managing underwriter for four firm commitments public offerings.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a
copy of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."

LEGAL MATTERS

Certain legal matters with respect to the issuance of the securities offered
hereby will be passed upon for the Company by Lewis, Goldberg & Ball, A
Professional Corporation, Suite 360, 1320 Old Chain Bridge Road, McLean,
Virginia 22101. Certain legal matters relating to intellectual property law will
be passed upon for the Company by Quarles & Brady, Suite 600, One South Pinckney
Street, Madison, Wisconsin. Certain legal matters in connection with the
Offering will be passed upon for the Underwriter by Orrick, Herrington &
Sutcliffe, 666 Fifth Avenue, New York, New York 10103-0001.

44
<PAGE>

EXPERTS

The financial statements of CD-MAX, Inc. (formerly InfoServe, Inc.) at
June 30, 1996, and for each of the two fiscal years in the period ended June
30 1996, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon (which contains an explanatory paragraph regarding substantial
doubt about the Company's ability to continue as a going concern mentioned in
Note 8 to the financial statements) appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

A Registration Statement on Form SB-2 (the "Registration Statement"),
under the Securities Act, relating to the securities offered hereby has been
filed by the Company with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and
the securities offered hereby, reference is made to such Registration
Statement, exhibits and schedules. Statements contained in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as exhibits to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal offices in Washington, D.C., and copies
of all or any part thereof may be obtained from the Commission upon the
payment of certain fees prescribed by the Commission.

Following the Offering, the Company will be subject to the information
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and
in accordance therewith will file periodic reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information concerning the Company may be inspected or copied at the
public reference facilities at the Commission located at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional
Offices in New York, 7 World Trade Center, 13th Floor, New York, New York
10048, and in Chicago, Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such documents can be
obtained at the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors............................... F-2

Balance Sheet as of June 30, 1996 .............................................. F-3

Statements of Operations for the years ended June 30, 1995 and 1996
and for the period from July 1, 1993 (inception) through June 30, 1996....... F-4

Statements of Stockholders' Deficit for the years ended June 30, 1995
and 1996..................................................................... F-5

Statements of Cash Flows for the years ended June 30, 1995 and 1996
and for the period from July 1, 1993 (inception) through June 30, 1996 ...... F-6

Notes to Financial Statements................................................... F-8
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
CD-MAX, Inc.

We have audited the accompanying balance sheet of CD-MAX, Inc., formerly
InfoServe, Inc., (a development stage company) as of June 30, 1996, and the
related statements of operations, stockholders' deficit, and cash flows for
the years ended June 30, 1995 and 1996 and for the period July 1, 1993
(inception) to June 30, 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 financial statements referred to above present fairly,
in all material respects, the financial position of CD-MAX, Inc. (formerly
InfoServe, Inc.) at June 30, 1996, and the results of its operations and
its cash flows for the two years then ended June 30, 1996 and for the
period July 1, 1993 (inception) to June 30, 1996 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
CD-MAX, Inc. (formerly InfoServe, Inc.) will continue as a going concern.
As more fully described in Note 8, the Company is still in its development
stage, is not generating significant revenue from the sale of its products
and has not attained profitable operations. The success of the Company is
dependent on obtaining additional financing and the ability of the Company
to generate revenues which are sufficient to cover operating expenses, the
likelihood of which cannot be determined at this time. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in
Note 8. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Vienna, Virginia
July 11, 1996 /s/ ERNST & YOUNG LLP
------------------------

F-2
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

BALANCE SHEET

<TABLE>
<CAPTION>
ASSETS

June 30,
1996
-----------
<S> <C>
Current assets:
Cash $ 296,012
Accounts receivable 5,994
Short-term investments 20,000
Prepaid expenses 25,263
-----------
Total current assets 347,269

Computer equipment 67,518
Less accumulated depreciation (13,446
-----------
54,072

Other assets 11,829
Debt issuance costs, net 69,954
-----------

Total assets $ 483,124
===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable $ 48,861
Accrued expenses 341,220
Unearned royalties 17,180
Notes payable 875,000
Notes payable to related parties 171,666
Current portion of capital lease obligations 23,622
------------
Total current liabilities 1,477,549

Capital lease obligations, net of current portion 20,972

Stockholders' deficit:
Preferred stock, $1.00 par value; 1,000,000
shares authorized; no shares issued and -
outstanding
Common stock, $.01 par value;
10,000,000 shares authorized; 2,047,300 shares
issued and outstanding at June 30, 1996 20,473
Capital in excess of par value 2,691,873
Deficit accumulated during the development stage (3,727,743)
-----------
Total stockholders' deficit (1,015,397)
===========
Total liabilities and stockholders' deficit $ 483,124
===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period from July 1,
Year ended June 30, 1993 (inception) to
1995 1996 June 30, 1996
---- ---- ---------------
<S> <C> <C> <C>
Revenues $ 2,500 $ 13,394 $ 15,894

Costs and expenses:
Selling 120,285 208,757 441,497
General and administrative 689,597 725,748 2,126,297
Research and development 277,120 655,124 1,039,379
Depreciation and amortization -- 83,401 83,401
----------- ----------- -----------
Total costs and expenses 1,087,002 1,673,030 3,690,574
----------- ----------- -----------
Other income (expense):
Interest income 3,962 13,586 18,095
Interest expense (1,875) (69,283) (71,158)
----------- ----------- -----------
Net loss $(1,082,415) $(1,715,333) $(3,727,743)
=========== =========== ===========
Net loss per share $ (.91) $ (.88)
=========== ===========
Weighted average number of common shares
outstanding 1,192,279 1,954,255
=========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Statements of Stockholders' Deficit

Period from July 1, 1993 (inception) through June 30, 1996

<TABLE>
<CAPTION>
Deficit
Accumulated
During the Total
Common Stock Capital in excess Development Stockholders'
Shares Par Value of par value Stage Deficit
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1993 34 $ -- $ 100 $ -- $ 100
Entries to record reverse acquisition, December 29,
1993:
Issuance of common stock 701,566 7,015 (7,015) -- --
Adjustment to record existing capitalization of
public shell company 330,403 3,304 (3,304) -- --
Conversion of debt to equity, December 31, 1993 200 2 2,998 -- 3,000
Conversion of debt to equity, December 31, 1993 30,769 308 170,281 -- 170,589
Issuance of compensatory stock options,
December, 1993 -- -- 171,000 -- 171,000
Conversion of debt to equity, June 30, 1994 4,861 49 437,451 -- 437,500
Net loss -- -- -- (929,995) (929,995)
--------- ------- ---------- ----------- -----------
Balance at June 30, 1994 1,067,833 10,678 771,511 (929,995) (147,806)
Issuance of common stock, November 14, 1994 11,494 115 49,885 -- 50,000
Conversion of debt to equity, December 15, 1994 13,333 133 450,367 -- 450,500
Conversion of debt to equity, February 21, 1995 6,226 62 27,021 -- 27,083
Issuance of common stock, March 31, 1995 2,299 23 9,977 -- 10,000
Issuance of common stock, April 28, 1995 5,747 58 24,942 -- 25,000
Issuance of common stock, June 30, 1995 143 2 7,498 -- 7,500
Issuance of common stock, June 30, 1995 333,590 3,336 (3,336) -- --
Issuance of common stock, June 30, 1995 133,333 1,333 578,667 -- 580,000
Compensatory stock options earned during 1995 -- -- 71,452 -- 71,452
Net loss -- -- -- (1,082,415) (1,082,415)
--------- ------- ---------- ----------- -----------
Balance at June 30, 1995 1,573,998 15,740 1,987,984 (2,012,410) (8,686)
Issuance of common stock, August 5, 1995 120,690 1,207 523,793 -- 525,000
Issuance of common stock, August 5, 1995 217,242 2,172 (2,172) -- --
Issuance of common stock, December 15, 1995 80,825 808 (808) -- --
Issuance of common stock, December 15, 1995 54,545 546 (546) -- --
Issuance of warrants in connection
with the Bridge Loan Agreement, March 31, 1996 -- -- 20,000 -- 20,000
Allocation of interest in connection with the Bridge
Loan Agreement, March 31, 1996 -- -- 29,167 -- 29,167
Issuance of warrants in connection
with the Private Placement, May 16, 1996 -- -- 84,455 -- 84,455
Additional interest expense associated with warrants
issued during 1996 -- -- 50,000 -- 50,000
Net loss -- -- -- (1,715,333) (1,715,333)
--------- ------- ---------- ----------- -----------
Balance at June 30, 1996 2,047,300 $20,473 $2,691,873 $(3,727,743) $(1,015,397)
========= ======= ========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period from
July 1, 1993
Year ended June 30, (inception) to
1995 1996 June 30, 1996
---- ---- -------------
<S> <C> <C> <C>
Operating activities:
Net loss $(1,082,415) $(1,715,333) $(3,727,743)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization -- 83,401 83,401
Issuance of compensatory stock
options 71,452 -- 242,452
Interest expense associated with
warrants issued in connection with
the Bridge Loan Agreement -- 20,833 20,833
Interest expense associated with
warrants issued in connection with
the Private Placement -- 25,000 25,000
Changes in operating assets
and liabilities:
Accounts receivable -- (5,994) (5,994)
Prepaid expenses (5,012) (20,251) (25,263)
Deposits -- (11,829) (11,829)
Debt issuance costs -- (139,909) (139,909)
Accounts payable (39,727) (26,613) 48,861
Accrued expenses 162,388 98,640 343,303
Unearned royalties 17,500 (320) 17,180
----------- ----------- -----------
Net cash used in operating activities (875,814) (1,692,375) (3,129,708)

Investing activities:
Purchase of equipment (1,085) (1,085)
Purchase of short-term investments (20,000) -- (20,000)
----------- ----------- -----------
Net cash used in investing activities (20,000) (1,085) (21,085)

Financing activities:
Net proceeds from notes payable 450,500 1,180,000 1,655,500
Net proceeds from issuance of warrants -- 104,455 104,455
Principal payments on notes payable -- (100,000) (100,000)
Principal payments on capital lease
obligations -- (21,839) (21,839)
Net cash proceeds from issuance
of common stock 672,500 525,000 1,808,689
----------- ----------- -----------
Net cash provided by financing
activities 1,123,000 1,687,616 3,446,805
----------- ----------- -----------
Net increase (decrease) in cash 227,186 (5,844) 296,012
Cash at beginning of period 74,670 301,856 --
----------- ----------- -----------
Cash at end of period $ 301,856 $ 296,012 $ 296,012
=========== =========== ===========
</TABLE>
See accompanying notes.

F-6
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

STATEMENTS OF CASH FLOWS (continued)

Supplemental Schedule of Noncash Financing Activities

During the year ended June 30, 1996, $79,167 of the notes payable proceeds was
allocated to capital in excess of par and will be charged to interest expense
over the term of the related notes payable. In addition, the Company capitalized
$66,433 of equipment under capital leases.

During the year ended June 30, 1995, two loans were converted into 19,559 shares
of common stock. The principal balances of the loans amounted to $450,500 and
$25,000. Accrued interest of $2,083 related to the $25,000 note payable was also
converted to equity.

During the year ended June 30, 1994, three loans were converted into 35,830
shares of common stock. The principal balances of the loans amounted to
$437,500, $3,000 and $170,589.

F-7
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Organization

CD-MAX, Inc., formerly InfoServe, Inc., (the "Company") is engaged in the
business of developing and marketing the CD-MAX(TM) System, based upon its
proprietary technology, which is designed to allow publishers of professional,
corporate, library and educational CD-ROM based information to sell their
information to end-users on a usage basis. The CD-MAX System consists of
proprietary metering and encryption software and billing services. The Company
believes that the CD-MAX System has the potential to increase revenues of CD-ROM
publishers by reducing copyright and license abuse and to enable them to expand
into new markets. The CD-MAX System is being adapted for use on the Internet and
is expected to be commercially available during 1996, under the name
NET-MAX(TM).

On December 29, 1993, CD-MAX, Inc., (formerly InfoServe, Inc.), a public shell
company incorporated in Montana, acquired the outstanding stock of Signal
Security Technologies Inc. ("Sigtek") in exchange for 701,566 shares of common
stock. Sigtek was a privately held company formed on July 1, 1993. For
accounting purposes the acquisition was treated as a recapitalization of Sigtek
with Sigtek as the acquirer (a reverse acquisition). The historical financial
statements prior to December 29, 1993 are those of Sigtek. Effective December
29, 1993, Sigtek merged with CD-MAX, Inc., (formerly InfoServe, Inc.).

In March 1996, the Board of Directors and stockholders of InfoServe, Inc., a
Montana corporation, approved the mergers of InfoServe, Inc. and its
wholly-owned subsidiary, CD-MAX, Inc. into a new Delaware corporation, CDMII,
Inc. ("CDMII"). As part of the merger, the Board of Directors and stockholders
approved a 1 for 30 stock exchange under which the holders of InfoServe, Inc.
stock would receive one share of stock in CDMII for 30 shares of stock in
InfoServe, Inc. The mergers of InfoServe, Inc. and CD-MAX, Inc. into CDMII were
effective as of April 15, 1996. Subsequently, the name of CDMII was changed to
CD-MAX, Inc. All references in the accompanying financial statements to the
number of shares of common stock and per-share amounts have been restated to
reflect the stock exchange.

Net Loss Per Share

The Company's net loss per share calculations are based upon the weighted
average number of shares of Common Stock outstanding. Other shares of common
stock issuable upon the exercise of stock options or warrants have been excluded
from the computation because the effect of their inclusion would be
antidulitive. In subsequent periods, stock options and warrants under the
treasury stock method will be included to the extent they are dilutive.

Income Taxes

The Company provides for income taxes in accordance with the liability method.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

F-8
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (Continued)

1. Organization and Significant Accounting Policies (continued)

Cash

For the purposes of the statements of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less at the time of
purchase to be cash equivalents.

Short-Term Investments

The short-term investments are stated at cost, which as of June 30, 1996
approximates market, and consists of a certificate of deposit.

Computer Equipment

Computer equipment, held under capital leases, is recorded at cost. Depreciation
and amortization is calculated using the straight-line method over the lesser
of the estimated useful life of three years or the lease term.

Debt issuance costs

Debt issuance costs are costs associated with the private placement of debt and
warrants. Amortization expense is calculated using the straight-line method over
the estimated term of the debt.

Recent Pronouncements

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" which is effective for the Company's
1997 financial statements. SFAS No. 123 allows companies to account for
stock-based compensation under either the new provisions of SFAS No. 123 or the
provisions of APB No. 25, but requires pro forma disclosure in the footnotes to
the financial statements as if the measurement provisions of SFAS No. 123 had
been adopted. The Company intends to continue accounting for its stock-based
compensation in accordance with the provisions of APB No. 25. As such, the
implementation of SFAS No. 123 will not materially impact the financial position
or results of operations of the Company.

Use of Estimates

The preparation of the 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.

F-9
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (Continued)

1. Organization and Significant Accounting Policies (continued)

Product Development Costs

Through June 30, 1996, the Company expensed its product development costs as
research and development costs. It will continue to expense such costs until
such time as the realizability of the Company's software is established.

Revenue Recognition

The Company recognizes license revenue upon completion of each CD-ROM. The
Company records transaction and transaction related revenues in the month in
which the services are provided.

During the years ended June 30, 1995 and 1996, the Company's total revenues were
derived from one and three customers, respectively.

2. Stockholders' Deficit

Financing Transactions

On May 16, 1996, the Company completed a private placement (the "Private
Placement") to raise approximately $1,000,000 from current and new investors.
The Company sold 20 units of which each unit consisted of a $45,000 unsecured
promissory note and 30,000 warrants. The $45,000 promissory note bears interest
at an annual rate of 10% and the principal balance plus accrued interest is due
on the earlier of (1) the closing of a public offering, which results in net
proceeds to the Company of at least $3,000,000 or (2) one year from the issuance
date. Each warrant is exercisable to purchase one share of common stock at a
price equal to $3.37 commencing May 16, 1997. Upon closing of the Public
Offering, the warrants will convert to redeemable warrants if redeemable
warrants are included in the Public Offering. The Company allocated
approximately $50,000 of the promissory note proceeds to the warrants issued.
The $50,000 allocated to the warrants will be amortized to interest expense
using the effective interest method over the period (three months) the related
debt is expected to be outstanding. The effect of this allocation results in an
effective interest rate of 35%. As of June 30, 1996, the Company has recognized
$25,000 of additional interest expense.

On December 15, 1995, the Company executed an agreement (the "Bridge Loan
Agreement") with a group of existing stockholders to provide up to $300,000 of
interim financing under terms similar to the Private Placement of $1,000,000. In
conjunction with this interim financing, the existing stockholders received a
total of 170,000 warrants to purchase common stock at a price of $3.37 per share
(See Warrants). In addition, the investors renegotiated the price of their
earlier investments in the Company, which occurred in August, 1995. This
renegotiation was based on management's estimate of the fair market value of the
common stock expected to be sold in the anticipated public offering. As a result
of this re-negotiation and to effect the negotiated decrease in price per share
to $3.30, the investors were issued 80,825 shares of common stock and warrants
to purchase 80,825 shares of common stock (currently exercisable at $6.60 per
share). This is subject to further adjustment if the price per share of the
public offering is less than the effective price per share ($3.30) paid by these
investors. The investors provided this interim financing to the Company between
February and April 1996. In the event of a public offering, the warrants will be
exchanged for warrants sold in the public offering. The Company repaid $100,000
of the total amount due with the proceeds from the Private Placement.

F-10
<PAGE>
CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (Continued)

2. Stockholders' Deficit (continued)

Financing Transactions (continued)

In August 1995, the Company issued warrants to purchase 120,690 shares of common
stock in connection with the private placement of $525,000 to certain existing
stockholders. In connection with this private placement, 22,444 warrants were
also issued as payment for finders' fees. The warrants are currently
exercisable, and the exercise price for the warrants ranges from $.30 to $8.70
per share.

During June 1995, the Company issued 143 shares of common stock to a financial
advisory firm in lieu of a $7,500 retainer.

During the years ended June 30, 1995 and 1996, the Company issued 333,590 and
271,242 shares, respectively of common stock to Class B stockholders in
accordance with the anti-dilution provision related to the Sigtek transaction.
(See Note 1). These issued shares related to all equity issuances during the
years ended June 30, 1995 and 1996, respectively. All Class B stockholders,
which consisted of employees of the Company and outside stockholders, were
afforded the identical anti-dilution right. In March, 1996, all shares of Class
B common stock were converted to common stock, pursuant to the merger
transactions discussed in Note 1.

Common stock was issued to the founders of Sigtek on the reverse acquisition
date. Additionally, at the reverse acquisition date, the issued and outstanding
common shares of the public shell company became common shares of CD-MAX, Inc.
(formerly InfoServe, Inc.).

Common Stock Options

The Company adopted the CD-MAX, Inc., (formerly InfoServe, Inc.) Stock Incentive
Plan (the "Plan") in 1993. The Plan provides for the issuance of incentive stock
options, nonqualified options and restricted stock to key employees, consultants
and directors. Exercise prices for incentive stock options may not be less than
fair market value on the date of grant. Two-hundred thousand shares (200,000) of
common stock have been reserved for possible issuance under the Plan.

F-11
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (continued)

2. Stockholders' Deficit (continued)

Common Stock Options (continued)

Stock option activity for the years ended June 30, 1995 and 1996 is as follows:

Outstanding Options
-------------------
Number
of Shares
---------
Balance at June 30, 1994 14,668
Options granted 116,011
---------
Balance at June 30, 1995 130,679
Options granted 55,666
Options cancelled (100,000)
---------
Balance at June 30, 1996 86,345
=========
Options exercisable at June 30, 1996 37,251
=========

Exercise prices of the options range from $7.00 to $45.00 per share. The options
generally vest on a time-based schedule over a period of one to three years and
expire over a period of five to ten years.

During the years ended June 30, 1994 and 1995, the Company recognized
compensation, marketing, and investor relations expenses amounting to $171,000
and $71,452, respectively, in connection with options granted. These charges
represent the differences between the exercise price of the options and the
public bid price of the related shares on the date of grant.

Reserve for Common Stock

In connection with the stock options and warrants, the Company has reserved
2,535,193 shares of common stock for issuance as of June 30, 1996.

Warrants

In connection with the closing of the Private Placement (See Financing
Transactions), the Company issued warrants to purchase 600,000 shares of common
stock at a price of $3.37 per share. The purchase price of these warrants was
$100,000. In addition, the Company allocated $50,000 of the notes payable
proceeds to the warrants issued. The $50,000 allocated to the warrants is being
amortized to interest expense using the effective interest method over the
period (three months) the related debt is expected to be outstanding. The effect
of this allocation results in an effective interest rate of 35%. As of June 30,
1996, the Company had recognized additional interest expense of $25,000 related
to this allocation.

On April 17, 1996, the Company issued warrants to purchase 990,000 shares of
common stock to four employees. The warrants are exercisable after October 1,
1996 and only at such time as the Common Stock has traded for twenty days in any
thirty business day period at a closing bid equal to or greater than $9.19;
however if the Company does not consummate a public offering by December 31,
1997, the warrants will expire. The warrants are exercisable at $9.19 per
share. Additionally, 100,000 options to purchase common stock which had
previously been granted to these four employees, were canceled.

F-12
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (continued)

2. Stockholders' Deficit (continued)

Warrants (continued)

In connection with the execution of the Bridge Loan Agreement in December 1995
(See Financing Transactions), the Company issued warrants to purchase 170,000
shares of common stock at a price of $3.37 per share. The purchase price of
these warrants was $200,000. In addition, the Company allocated $29,167 of the
interim bridge loan proceeds to the warrants issued. The $29,167 allocated to
the warrants is being amortized to interest expense using the effective interest
method over the period (four to five months) the related debt is expected to be
outstanding. The effect of this allocation results in an effective interest rate
of 35%. As of June 30, 1996, the Company had recognized additional interest
expense of $20,833 related to this allocation.

In July 1995, the Company issued 1,200 warrants to a software development firm
in connection with a settlement of a contract. In September 1995, the Company
issued 609 warrants to a vendor in lieu of fees owed to this vendor. These
warrants are currently exercisable at a price of $.30 per share. The expenses
associated with the contract settlement and fees to the vendor are considered
immaterial to the financial statements.

During 1995, the Company received $1,142,583 in additional capital from private
investors through the sale of 172,432 shares of common stock. In conjunction
with these equity placements, the Company issued warrants for the purchase of
172,432 shares of common stock. The warrants are currently exercisable at prices
ranging from $8.70 to $22.50 per share. Also, the Company granted warrants to
purchase 26,667 shares of common stock to certain individuals for assisting in
these equity placements. The warrants are currently exercisable at prices
ranging from $0.30 to $8.70 per share.

3. Commitments

The Company leases office space in Murray Hill, New Jersey, pursuant to an
operating lease which terminates in December, 2000; and in Reston, Virginia, the
Company leases office space under a lease which terminates in December, 1997.
Additionally, the Company leases various office and computer equipment under
noncancelable operating and capital leases.

At June 30, 1996, there was $66,433 of computer equipment held under capital
leases. Accumulated amortization of the equipment amounted to $13,446 at June
30, 1996. Amortization expense related to capital leases is classified as
depreciation and amortization in the statements of cash flows. The non-cash
portion of this transaction has been excluded from the statements of cash flows.

Rent expense for the years ended June 30, 1995 and 1996, and for the period from
July 1, 1993 (inception) to June 30, 1996 was $48,007, $66,663 and $135,696,
respectively.

F-13
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (continued)

3. Commitments (continued)

Future minimum lease payments under noncancelable operating leases are as follow
as of June 30, 1996:

Year ending June 30:

1997 $ 95,889
1998 65,112
1999 36,576
2000 36,576
2001 12,192
------------
$ 246,345
============

Future minimum lease payments under noncancelable capital leases as of June 30,
1996 are $29,315 in 1997, $15,962 in 1998, and $8,062 in 1999 less $8,745 in
interest.

4. Accrued Expenses

The Company partially funded its operations through the deferral of compensation
by management. As of June 30, 1996, the Company owed four of its executives a
of $258,497, in accrued compensation. This amount is classified as
accrued expenses on the balance sheet.

5. Income Taxes

Net deferred income tax assets are as follows:

<TABLE>
<CAPTION>
June 30,
1995 1996
---- ----
<S> <C> <C>
Start-up costs $ 169,000 $ 156,000
Operating loss carryforwards 442,000 1,128,000
Accrued expenses 134,000 131,000
Other 31,000 31,000
----------- -------------
Deferred tax assets 776,000 1,446,000
Valuation allowance (776,000) (1,446,000)
----------- -------------
Net deferred tax assets $ -- $ --
=========== =============
</TABLE>

The valuation allowance increased by $670,000 from June 30, 1995 to June 30,
1996 primarily as a result of an increase in operating loss carryforwards due to
ongoing net losses.

At June 30, 1995 and 1996, the Company has net operating loss carryforwards
amounting to approximately $1,104,000 and $2,819,000, respectively. Operating
loss carryforwards expire in 2008 through 2011.

F-14
<PAGE>

CD-MAX, INC.
(formerly InfoServe, Inc.)
(A Development Stage Company)

Notes to Financial Statements (continued)

6. Related Party Transactions

An officer of CD-MAX, Inc. (formerly InfoServe, Inc.) granted a license to the
Company under which the Company has been assigned certain proprietary and
intellectual property rights to certain U.S. patents and other business and
technological know-how related to the Company's CD-MAX(TM) business. Under the
terms of the license agreement, the Company will pay specified royalties to a
royalty trust, the beneficiaries of which include that officer, certain other
members of his family, and certain other officers and directors of the Company.
No amounts are currently due or have been paid pursuant to the agreement.

As part of the merger agreement between Sigtek and CD-MAX, Inc. (formerly
InfoServe, Inc.), the Company assumed a $3,000 loan made by an officer to
Sigtek. This loan was satisfied in 1993 in return for the issuance of 200 shares
of common stock to the officer. In 1994, a family member of an officer of
CD-MAX, Inc. (formerly InfoServe, Inc.), loaned the Company $25,000. During
1995, the loan and accrued interest of $2,083 were converted into 6,226 shares
of common stock.

During 1996, the Company entered into the Bridge Loan agreements with existing
significant stockholders (See Financing Transactions).

7. 401(K) Plan

On July 1, 1995, the Company adopted a 401(k) Plan (the "Plan"). The Plan, which
covers all employees who have completed six months of service, stipulates that
employees may elect an amount between 1% and 15% of their total compensation to
contribute to the Plan. Contributions were made by the Company in the amount of
$6,404 during the year ended June 30, 1996.

8. Management Plans

The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. During the
year ended June 30, 1995, the Company raised equity capital amounting to
approximately $1.1 million from several investors. During the year ended June
30, 1996, the Company raised $525,000 in additional equity capital from several
private investors. The Company has also borrowed periodically from officers and
other related parties. During February to April 1996, the Company raised
$300,000 in interim bridge financing (See Note 2), as well as successfully
completed a Private Placement to raise approximately $1,000,000 in exchange for
$900,000 of promissory notes and warrants to purchase 600,000 shares of common
stock (see Note 2). The Company has filed a registration statement with the
Securities and Exchange Commission to raise approximately $7 million. If this
offering is not consummated, the Company must obtain financing from current
investors or other private and public investors, significantly reduce its
development activities, or generate revenues from sale of products. However,
there can be no assurance that the Company will be able to obtain the required
financing.

9. Event (unaudited) Subsequent to Date of Independent Auditor's Report

In August 1996, the Company decided, subject to the completion of the offering
and the terms of the 1993 Stock Incentive Plan, to reduce the exercise price to
$3.50 per share, of certain stock options previously granted to former and
current directors, employees and advisors of the Company.

F-15

<PAGE>

==============================================================================
No underwriter, dealer, salesperson or any other person has been
authorized to give any information or to make any representations other than
those contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any Underwriter. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any date
subsequent to the date hereof. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.

------
TABLE OF CONTENTS

Page
--------
Prospectus Summary ........................ 4
Risk Factors .............................. 8
The Company ............................... 14
Recent Bridge Financings .................. 14
Use of Proceeds ........................... 15
Market for Common Equity and Related
Stockholder Matters ...................... 16
Dividend Policy ........................... 16
Dilution .................................. 17
Capitalization ............................ 18
Selected Financial Data ................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 20
Business .................................. 23
Management ................................ 31
Certain Transactions ...................... 34
Principal Stockholders .................... 36
Selling Securityholders ................... 38
Description of Securities ................. 41
Shares Eligible for Future Sale ........... 43
Underwriting .............................. 44
Legal Matters ............................. 45
Experts ................................... 46
Additional Information .................... 46
Index to Financial Statements ............. F-1

Until ________, 1996, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This delivery requirement is in addition to
the obligations of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
===============================================================================
<PAGE>

===============================================================================

LOGO

1,150,000 Units
Each Unit Consisting
of
Two Shares of Common Stock
and
One Redeemable Warrant

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

JOSEPH STEVENS &
COMPANY, L.P.

, 1996

===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

A. Section 145 of the Delaware General Corporation Law ("Section 145")
permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer or agent of the corporation or another enterprise if
serving at the request of the corporation. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with such action, suit or proceeding if
the person indemnified acted in good faith and in a manner the person
reasonably believed to be in or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. In the case
of an action by or in the right of the corporation, no indemnification may be
made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the court of chancery or the court in which such action or suit
was brought shall determine that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper. Section 145 further provides that to the extent
a director or officer of a corporation has been successful in the defense of
any action, suit or proceeding referred to above or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually or reasonably incurred by such person in
connection therewith.

B. As permitted by the Delaware General Corporation Law, the Company has
included a provision in its Certificate of Incorporation (Exhibit 3.1
hereto), that, subject to certain limitations, eliminates the ability of the
Company and its stockholders to recover monetary damages from a director of
the Company for breach of fiduciary duty as a director. The Company's By-Laws
(Exhibit 3.2 hereto) provides for indemnification of the Company's directors
and officers and advancement of expenses to the extent otherwise permitted by
Section 145.

C. Reference is made to Section 7 of the Underwriting Agreement (Exhibit 1
hereto) which provides for indemnification among the Company and the
Underwriter.

Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to directors, officers, and controlling persons
pursuant to the foregoing provisions, the Registrant has been informed that
in the opinion of the Securities and Exchange Commission such indemnification
is contrary to public policy as expressed in the Securities Act and,
therefore, is unenforceable. (See "ITEM 28. UNDERTAKINGS.")

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are the estimated expenses, other than the underwriting
discounts and the non-accountable expenses payable to the Underwriter, in
connection with the distribution of the securities being registered:

SEC registration fee ................................... $ 7,318
Legal fees and expenses ................................ 125,000
"Blue Sky" fees and expenses (including attorneys' fees). 50,000
Accounting fees and expenses ........................... 75,000
Printing expenses ...................................... 75,000
NASD filing fee ........................................ 2,622
Transfer agent and registrar fee ....................... 5,000
Nasdaq listing fees .................................... 10,000
Directors and Officers liability insurance............... 46,000
Miscellaneous .......................................... 4,060
Total .................................................. $400,000

II-1
<PAGE>
All expenses, except the SEC fees and the NASD filing fee, are estimates.
The above expenses include the registration fees and other expenses with
respect to the Selling Securityholders, other than commissions, or other
charges made in connection with the sale of their securities being registered
herein and their attorney's fees, if any.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

During the three years last preceding the filing of this Registration
Statement, the Registrant issued the following securities without
registration under the Securities Act of 1933:

On December 27, 1993 the Company issued 223,233 shares of its then Class A
Common Stock and 478,333 shares of its then Class B Common Stock in
connection with a merger of Signal Security Technology, Inc. ("SigTek") into
a then wholly owned subsidiary of the Company. Prior to this transaction the
Company was a shell corporation without any assets or operations. The assets
acquired in the merger included the existing technology and intellectual
property with respect to the CD-MAX System. The eight existing shareholders
of SigTek (including David B. Boelio, Philip J. Gross, Weldon Rackley, John
D. Wiedemer, and Robert A. Wiedemer) became shareholders of the Company. This
transaction was exempt from registration under the Act as a private
transaction pursuant to Section 4(2) of the Act and Rule 145 promulgated
thereunder.

On December 30, 1993 the Company issued 30,969 shares to two persons, one
of whom was Philip J. Gross, an officer and director of the Company, and the
other whom was an institutional investor, to convert approximately $173,589
in advances previously made to the Company to equity. These transactions were
exempt from registration as private transactions pursuant to Section 4(2) of
the Act.

On June 30, 1994 the Company issued 4,861 shares to the institutional
investor mentioned above, to convert approximately $437,500 in advances
previously made to the Company to equity. This transaction was exempt from
registration as a private transactions pursuant to Section 4(2) of the Act.

On November 14, 1994 the Company sold to one accredited investor 11,494
shares of its Common Stock and 11,494 common stock purchase warrants for a
total consideration of $50,000. This transaction was exempt from registration
as a private transactions pursuant to Section 4(2) of the Act.

On December 15, 1994 the Company sold to the institutional investor
referred to above 13,333 shares of its Common Stock for a total consideration
of $450,500. This transaction was exempt from registration as a private
transaction pursuant to Section 4(2) of the Act.

On January 25, February 13, April 6, May 2, June 2, and August 5, 1995,
the Company sold to Suan Investments, an accredited investor, a total of
161,393 shares of its Common Stock and 161,393 common stock purchase warrants
for a total consideration of $702,061. These transactions were exempt from
registration as private transactions pursuant to Section 4(2) of the Act.

On February 21, 1995 the Company sold 6,226 shares of its Common Stock and
6,226 common stock purchase warrants in return for the conversion of $27,083
in indebtedness due to an accredited investor. This transaction was exempt
from registration as a private transaction pursuant to Section 4(2) of the
Act.

On March 31, 1995 the Company sold 2,299 shares of its Common Stock and
2,299 common stock purchase warrants to one accredited investor for a total
consideration of $10,000. This transaction was exempt from registration as a
private transaction pursuant to Section 4(2) of the Act.

On April 28, 1995 the Company sold 5,747 shares of its common stock and
5,747 common stock purchase warrants to one accredited investor for a total
consideration of $25,000. This transaction was exempt from registration as a
private transaction pursuant to Section 4(2) of the Act.

On June 30, 1995 the Company sold 143 shares of its Common Stock to a
consulting firm in lieu of paying $7,500 in fees that the Company owed the
firm. This transaction was exempt from registration as a private transaction
pursuant to Section 4(2) of the Act.

On August 5, 1995, in addition to the sale to Suan Investments referred to
above, the Company sold a total of 92,630 shares of its Common Stock and
92,630 common stock purchase warrants to two investors, Stourbridge
Investments, Ltd., an accredited investor, and Steven P. Schnipper, a
director of the Company for a total consideration of $402,939. These
transactions were exempt from registration as a private transactions pursuant
to Section 4(2) of the Act.

II-2
<PAGE>
On December 15, 1995, the Company issued a total of 80,825 shares of
Common Stock and 80,825 common stock purchase warrants to Steven P.
Schnipper, Suan Investments and Stourbridge Investments, Ltd., in return for
their guarantee to provide interim financing of up to $300,000 to the
Company. The stock and warrant issuance was the result of negotiations
between the Company and the investors and represents the repricing of the
investors' earlier equity investments in the Company. These transactions were
exempt from registration as a private transactions pursuant to Section 4(2)
of the Act.

In February, March and April 1996, Steven P. Schnipper, Suan Investments
and Stourbridge Investments, Ltd. advanced an aggregate of $300,000 to the
Company. The initial $100,000 was advanced pursuant to a promissory note that
was repaid from the net proceeds of a subsequent financing, as described
below. The Company issued an aggregate of $180,000 principal amount of
promissory notes, and 170,000 Common Stock purchase warrants. These
transactions were exempt from registration as a private transactions pursuant
to Section 4(2) of the Act.

On May 16, 1996, the Company consummated a $1,000,000 bridge financing,
pursuant to which it issued an aggregate of (i) $900,000 principal amount of
promissory notes which bear interest at the rate of 10% per annum and are due
and payable upon the earlier of (a) the consummation of a public financing of
the Company through the sale of equity securities from which the Company
receives gross proceeds of at least $3,000,000 or (b) May 16, 1997, and (ii)
600,000 warrants with an aggregate purchase price of $100,000, each warrant
entitling the holder to purchase one share of Common Stock at an initial
exercise price of $3.37 (subject to adjustment upon the occurrence of certain
events) during the three-year period commencing May 16, 1997. This financing
was placed for the Company by Joseph Stevens & Company, LP with accredited
investors. These transactions were exempt from registration as a private
transactions pursuant to Section 4(2) of the Act, and pursuant to Regulation
D promulgated thereunder.

ITEM 27. EXHIBITS

Copies of the following documents are included as exhibits to this
Registration Statement, pursuant to item 601 of Regulation S-K.
<TABLE>
<CAPTION>
SEC Title of
Reference No. Exhibit No. Document
--------------- ------------- ---------
<S> <C> <C>

(1) 1 Underwriting Agreement
(3)(i) 3.1 Articles of Incorporation
(3)(ii) 3.2 By-Laws
(4) 4.1 Form of Common Stock Certificate
(4) 4.2 Form of Redeemable Warrant**
(4) 4.3 Form of Warrant Agreement
(4) 4.4 Form of Underwriter's Warrant Agreement
(5) 5.1 Opinion of Lewis, Goldberg & Ball, A Professional Corporation**
(10)(i) 10.1 Amended Master License Agreement between John D. Wiedemer and CD-MAX, Inc.
(10)(i) 10.2 Employment Agreement by and between CD-MAX, Inc. and John David Wiedemer and Amendment
One thereto.
(10)(i) 10.3 Employment Agreement by and between CD-MAX, Inc. and Robert A. Wiedemer and Amendment
One thereto.
(10)(i) 10.4 Employment Agreement by and between CD-MAX, Inc. and Philip J. Gross and Amendment
One thereto.
(10)(i) 10.5 Employment Agreement by and between CD-MAX, Inc. and David B. Boelio and Amendment
One thereto.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>

SEC Title of
Reference No. Exhibit No. Document
--------------- ------------- --------
<S> <C> <C>
(10)(i) 10.6 Letter from CD-MAX, Inc. to Dataware Technologies, Inc. dated September 6, 1995
(10)(i) 10.7 CD-MAX Data Security, Usage Billing and Information Management Services Agreement
with Mitchell International, Inc. ** ***
(10)(i) 10.8 CD-MAX Data Security, Usage Billing and Information Management Services Agreement
with Disclosure Incorporated ** ***
(10)(i) 10.9 Folio Corporation Reciprocal Nondisclosure Agreement
(10)(i) 10.10 E-Data Systems Limited License Agreement
(10)(ii) 10.11 Incentive Stock Option Plan
(10)(ii) 10.12 Board of Director Resolution and Agreement with Officers re Management Warrants
(10)(i) 10.13 Form of Financial Advisory and Consulting Agreement
10.14 Information Management Services Agreement with CIVS ** ***
10.15 IHS/CD-MAX Agreement*
(23) 23.1 Consent of Ernst & Young LLP.**
(23) 23.2 Consent of Lewis, Goldberg & Ball, A Professional Corporation (included in Exhibit
5.1)
(23) 23.3 Consent of Quarles & Brady **
(24) 24.1 Power of Attorney
(27) 27.1 Financial Data Schedule
</TABLE>
- ------
*Indicates that exhibit was filed with Amendment No. 1.
**Indicates that exhibit was filed with Amendment No. 2.
***Indicates that confidential treatment has been requested with respect to this
exhibit.

ITEM 28. UNDERTAKINGS

POST-EFFECTIVE AMENDMENTS. [REGULATION S-B, ITEM 512(A)]

The undersigned Registrant will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and, notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) of if, in the aggregate, the changes in the volume
and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.

II-4
<PAGE>
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

DELIVERY OF CERTIFICATES. [REGULATION S-B, ITEM 512(D)]

The undersigned Registrant will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.

INDEMNIFICATION. [REGULATION S-B, ITEM 512(E)]

The undersigned Registrant undertakes that:

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer 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 small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business
issuer 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 small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

RULE 430. [REGULATION S-B, ITEM 512(F)]

The undersigned Registrant hereby undertakes that:

(1) For determining any liability under the Securities Act, it will treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.

(2) For determining any liability under the Securities Act, it will treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.

II-5
<PAGE>
SIGNATURE PAGE

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 Form SB-2 and authorized this Amendment
No. 2 to this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Fairfax, State of
Virginia, on August 6, 1996.

CD-MAX, Inc.
By:/s/ Robert A. Wiedemer
--------------------------------
Robert A. Wiedemer, President
and Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, Amendment
No. 1 to this registration statement has been signed by the following persons
in the capacities and on the dates stated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

/s/ Robert A. Wiedemer President, Chief Executive Officer, Chairman August 6, 1996
- ------------------------------ of Board of Directors
Robert A. Wiedemer

/s/ Philip J. Gross Secretary, Treasurer, Vice-President-Chief August 6, 1996
- ------------------------------ Financial Officer (principal financial officer,
Philip J. Gross principal accounting officer)

John David Wiedemer* Senior Vice President-Operations, Director August 6, 1996
- ------------------------------
John David Wiedemer

David B. Boelio* Senior Vice President-Marketing and Sales August 6, 1996
- ------------------------------
David B. Boelio

Steven P. Schnipper* Director August 6, 1996
- ------------------------------
Steven P. Schnipper

Weldon P. Rackley* Director August 6, 1996
- ------------------------------
Weldon P. Rackley

*By:/s/ Robert A. Wiedemer
--------------------------
Robert A. Wiedemer
Attorney-in-fact

</TABLE>

II-6
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEC Title of
Reference No. Exhibit No. Document
<S> <C> <C>
(1) 1 Underwriting Agreement
(3)(i) 2.1 Articles of Incorporation
(3)(ii) 2.2 By-Laws
(4) 4.1 Form of Common Stock Certificate
(4) 4.2 Form of Redeemable Warrant**
(4) 4.3 Form of Warrant Agreement
(4) 4.4 Form of Underwriter's Warrant Agreement
(5) 5.1 Opinion of Lewis, Goldberg & Ball, A Professional Corporation**
(10)(i) 10.1 Amended Master License Agreement between John D. Wiedemer and CD-MAX, Inc.
(10)(i) 10.2 Employment Agreement by and between CD-MAX, Inc. and John David Wiedemer and Amendment
One thereto.
(10)(i) 10.3 Employment Agreement by and between CD-MAX, Inc. and Robert A. Wiedemer and Amendment
One thereto.
(10)(i) 10.4 Employment Agreement by and between CD-MAX, Inc. and Philip J. Gross and Amendment
One thereto.
(10)(i) 10.5 Employment Agreement by and between CD-MAX, Inc. and David B. Boelio and Amendment
One thereto.
(10)(i) 10.6 Letter from CD-MAX, Inc. to Dataware Technologies, Inc. dated September 6, 1995
(10)(i) 10.7 CD-MAX Data Security, Usage Billing and Information Management Services Agreement
with Mitchell International, Inc. ** ***
(10)(i) 10.8 CD-MAX Data Security, Usage Billing and Information Management Services Agreement
with Disclosure Incorporated ** ***
(10)(i) 10.9 Folio Corporation Reciprocal Nondisclosure Agreement
(10)(i) 10.10 E-Data Systems Limited License Agreement
(10)(ii) 10.11 Incentive Stock Option Plan
(10)(ii) 10.12 Board of Director Resolution and Agreement with Officers re Management Warrants
(10)(i) 10.13 Form of Financial Advisory and Consulting Agreement
10.14 Information Management Services Agreement with CIVS ** ***
10.15 IHS/CD-MAX Agreement*
(23) 23.1 Consent of Ernst & Young LLP.**
(23) 23.2 Consent of Lewis, Goldberg & Ball, A Professional Corporation (included in Exhibit
5.1)
(23) 23.3 Consent of Quarles & Brady **
(24) 24.1 Power of Attorney
(27) 27.1 Financial Data Schedule
</TABLE>

- ------
*Indicates that exhibit was filed with Amendment No. 1.
**Indicates that exhibit was filed with Amendment No. 2.
***Indicates that confidential treatment has been requested with respect to
this exhibit.

<PAGE>

EXHIBIT A

No. W ___________ VOID AFTER ____________________, 2001

_________ WARRANTS

REDEEMABLE WARRANT CERTIFICATE TO

PURCHASE SHARES OF COMMON STOCK

CD-MAX, INC.

CUSIP____________

THIS CERTIFIES THAT, FOR VALUE RECEIVED

or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. One 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 non-assessable share of Common Stock, $.01 par
value per share, of CD-MAX, Inc., a Delaware corporation (the "Company"), at any
time from _____________, 1996 [the effective date of the Registration Statement]
and prior to 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 Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004 as Warrant Agent,
or its successor (the "Warrant Agent"), accompanied by payment of $__________
[75% of the initial public offering price per Unit] subject to adjustment (the
"Purchase Price"), in lawful money of the United States of America in cash or by
check made payable to the Warrant Agent for the account of the Company.

This Warrant Certificate is, 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 __________,
1996 [the effective date of the Registration Statement], by and between the
Company and the Warrant Agent.

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

Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all of 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.

A-1

<PAGE>

The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 2001 [the 60 month anniversary of the issuance of the Warrant]. If
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 p.m. (New York
time) on the next 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 (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
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 and payment of any tax or other
charge imposed in connection therewith or incident thereto, 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 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.

Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, in whole and not in part, at a redemption
price of $.05 per Warrant, at any time commencing __________, 1997 [twelve (12)
months from issuance] provided that the average closing bid price for the
Company's Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System (or, if not so quoted, as reported by any
other recognized quotation system on which the price of the Common Stock is
quoted), shall have, for any twenty (20) trading days within a period of thirty
(30) consecutive trading days ending on the fifth (5th) trading day prior to the
date on which the Notice of Redemption (as defined below) is given, equalled or
exceeded 150% of the then exercise price per share (subject to adjustment in the
event of any stock splits or other similar events). Notice of redemption (the
"Notice of Redemption") shall be given not later than the thirtieth (30th) 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.

A-2

<PAGE>

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, except as provided in the
Warrant Agreement.

This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.

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

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.

Dated: ___________, 1996

CD-MAX, INC.

[SEAL]

By: ________________________________
Name:
Title:

ATTEST:

By: ________________________________
Name:
Title:

COUNTERSIGNED:

CONTINENTAL STOCK TRANSFER & TRUST

COMPANY, as Warrant Agent

By: _________________________
Authorized Officer

A-3

<PAGE>

SUBSCRIPTION FORM

To Be Executed by the Registered Holder

in Order to Exercise Warrant

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 name of

PLEASE INSERT SOCIAL SECURITY

OR OTHER IDENTIFYING NUMBER

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

(please print or type name and address)

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.

A-4

<PAGE>

IMPORTANT: PLEASE COMPLETE THE FOLLOWING:

1. If the exercise of this Warrant was
solicited by Joseph Stevens & Company,
L.P. please check the
following box [ ]

2. The exercise of this Warrant was
solicited by [ ]

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

3. If the exercise of this Warrant was
not solicited, please check the
following box [ ]

Dated:
X
---------------------- ---------------------------------

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

---------------------------------
Address

---------------------------------
Social Security or Taxpayer
Identification Number

---------------------------------
Signature Guaranteed

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

A-5

<PAGE>

ASSIGNMENT

To Be Executed by the Registered Holder

in Order to Assign Warrants

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

PLEASE INSERT SOCIAL SECURITY 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.

Dated:
X
---------------------- ---------------------------------

---------------------------------
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 A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.

A-6

<PAGE>

EXHIBIT 5.1

LEWIS, GOLDBERG & BALL LETTERHEAD

August 6, 1996

CD-MAX, Inc.
11480 Sunset Hills Road
Suite 110
Reston, VA 20190-5208

RE: Offer and Sale of 900,000 Units, Each Consisting of Two Shares
Common Stock, Par Value $.01 per Share and One Redeemable
Warrant, Pursuant to a Form SB-2 Registration Statement
(No. 333-5723)

Gentlemen:

We have acted as counsel to CD-MAX, Inc. (the "Company") in connection
with the registration of certain securities of the Company on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), and in connection with the conduct of corporate proceedings relating
thereto. The Registration Statement will effect the registration of 900,000
Units, each unit consisting of two shares of Common Stock, par value $.01 per
share ("Common Stock") and one Redeemable Warrant and an aggregate of 1,070,000
Redeemable Warrants and 60,615 shares of Common Stock.

As such counsel, we have examined the corporate records of the Company,
including its Certificate of Incorporation, its By-Laws, stock records, and
Minutes of Meetings of its Board of Directors and Stockholders. In addition, we
have examined the Registration Statement and the prospectus which constitutes
Part I of the Registration Statement (the "Prospectus"), the underwriting
agreement between the Company and Joseph Stevens & Company L.P. the form of
which has been filed as Exhibit 1.1 to the Registration Statement (the
"Underwriting Agreement"), and such other documents as we have deemed necessary
as a basis for the opinions herein expressed.

In our examination of the documents described in the preceding
paragraph, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to the
corresponding originals of all documents submitted to us as copies, and the
authenticity of the originals of such copies.
<PAGE>

CD-MAX, Inc.
August 6, 1996
Page 2

Our opinion herein is also qualified to the extent that the validity or
enforceability of any of the agreements or other documents or obligations
referred to herein, or any rights granted pursuant to such agreements, documents
or obligations, may be subject to, and affected by, applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally. Further, we express no opinion as to the
availability of equitable enforcement upon breach of any such agreements,
documents or obligations.

Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:

(1) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Delaware, with an authorized and issued capital stock as set forth
in the Prospectus.

(2) When (a) the Registration Statement, as amended, shall have been
ordered effective by the U.S. Securities and Exchange Commission in
accordance with the Act, and (b) the Units shall have been sold and
certificates evidencing the Units shall have been duly executed and
issued as provided in the Registration Statement and the
Underwriting Agreement, then the units thus sold by the Company and
the Common Stock and Warrants included therein will have been duly
and validly authorized and issued, fully paid and nonassessable as
stated in the Prospectus, and will conform to the description
thereof contained in the Prospectus.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, as amended, and to the reference to this firm under the
heading "Legal Matters" in the Prospectus.

Sincerely,

LEWIS, GOLDBERG & BALL
A Professional Corporation

/s/ David M. Lewis
---------------------------------
David M. Lewis
DML/kad

<PAGE>

Exhibit 10.7

CD-MAX(TM) DATA SECURITY, USAGE BILLING AND
INFORMATION MANAGEMENT SERVICES AGREEMENT

This CD-MAX(TM) Data Security, Usage Billing and Information Management Services
Agreement is entered into this the _____ day of __________, 1995. by and between
CD- MAX, Inc., a Delaware corporation ("CD-MAX") and Mitchell International, a
division of Thomson Publishing Corporation, a Delaware corporation ("CUSTOMER").

WITNESSETH:

WHEREAS, CUSTOMER is engaged in the business of providing copyrighted
information and information services on CD-ROM for which CUSTOMER desires to
adopt security measures and bill End-Users on a usage basis; and

WHEREAS, CD-MAX has the ability to provide data security, usage billing and
information management services for CUSTOMER, and CUSTOMER desires to obtain
such services from CD-MAX under the terms and conditions contained herein:

NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable considerations, do
hereby agree as follows:

SECTION 1. DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context otherwise requires:

Business Day: A day other than Saturday and Sunday on which commercial banks are
open for business in the Commonwealth of Virginia.

Billing Records: Computer readable records containing END-USER billing data for
CUSTOMER's qualifying information products and services, which CD-MAX has the
capability of processing through its billing, reporting and collection systems.

CD-MAX(TM) Publisher System: A proprietary software system owned by CD-MAX,
Inc., provided in object code form for publisher use that includes the Automatic
Encryption Program (AEP) customized for use with the title(s) listed in Exhibit
A, and installation/setup programs. This system uses CD-MAX's proprietary
encryption technology to create an encrypted version of CUSTOMER's Title(s) as a
means of protecting the Title(s) against unauthorized or unlicensed access by
non-paying END-USERs. The System includes CD-MAX(TM) patented technology and the
computer programs comprising the system are protected under U.S. Copyright law.

<PAGE>

CD-MAX(TM) END-USER System: A software system in object code form that is used
with each CD-ROM Title that has been encrypted by use of the CD-MAX(TM)
Publisher System. The END- USER System is integrated with the CUSTOMER Title(s)
search and rendering software and includes a security module that performs
decryption for authorized paying END-USERs, meters and tracks usage of the
Title(s) by END-USERs, and includes copy protection and a reauthorization
process module. The System includes CD-MAX(TM) patented technology and the
computer programs comprising the system are protected under U.S. Copyright law.

CD-ROM (Compact Disc-Read Only Memory) Title: A CUSTOMER's information product
or offering, contained on one or more discs.

Export License Designation: A phrase or acronym identifying the type of export
license applicable to a given system. The CD-MAX(TM) END-USER System has been
granted the Export License Designation "GTDU." This indicates the END-USER
System can be freely exported to all countries except Cuba, Cambodia, Libya,
North Korea, or Viet Nam. At the time of the execution of this agreement the
CD-MAX Publisher System has not been approved for export.

Post-Billing Adjustment or Credit: Rate adjustment or credit applied to an
END-USER's account that is granted by the CUSTOMER Service Department of either
CD-MAX, with prior approval of CUSTOMER, or CUSTOMER.

Uncollectible Amounts: Those amounts that are posted to END-USERs' accounts for
CUSTOMER's BILLING RECORDS and are billed to END-USERs, but are not collected
due to the END-USER receiving a post-billing adjustment or credit to his/her
invoice or the END- USER failing to pay its bill to CD-MAX and the account
subsequently being written off as a bad debt by the CUSTOMER.

Written-Off Accounts: Those END-USER accounts that are not paid by the END-USER
and are subsequently written off by the CUSTOMER. CUSTOMER retains the right to
turn over delinquent accounts to a collection agency.

SECTION 2. SCOPE OF AGREEMENT

CUSTOMER hereby agrees to purchase from CD-MAX the services described in
Sections 3 and 4 and CD-MAX agrees to provide such services at the time and in
the manner set forth herein, subject to the terms and conditions set forth
herein. CUSTOMER agrees that CD-MAX shall be its exclusive agent for security,
usage billing, and information management services for the CD-ROM Titles listed
in Exhibit "A" hereto for the term of this Agreement, provided, however, that
nothing herein contained shall be interpreted to prohibit CUSTOMER from billing
and collecting fees on information or information products and services in its
usual and customary manner with other third parties.

<PAGE>

SECTION 3. DATA SECURITY SERVICES

CD-MAX Data Security Services are based on use of the CD-MAX(TM) Publisher
System by the CUSTOMER and use of the CD-MAX(TM) END-USER System by each of
CUSTOMER's END-USERs for the Title(s) listed in Exhibit A. Accordingly, in order
to provide these services to CUSTOMER, CUSTOMER is granted a software license to
use the CD-MAX(TM) Publisher System; and a license to use, copy, and distribute
the CD-MAX(TM) END-USER System as part of its C-ROM Title(s); as follows:

As an essential part of this agreement, CD-MAX grants CUSTOMER a non-exclusive
license to use the CD-MAX(TM) Publisher System software for a period coterminous
with the term of this agreement. CD-MAX shall support and maintain the
CD-MAX(TM) Publisher System so that periodic updates of the CUSTOMER's CD-ROM
Title(s) listed in Exhibit "A" may be developed and produced without the direct
involvement of CD-MAX; provided, however, that the extent of CUSTOMER's
information updates do not materially affect the structure of the underlying
data. If the updating is extensive or if the structure of the data changes,
CD-MAX shall revise and update the CD-MAX(TM) Publisher System accordingly.

CUSTOMER is prohibited from reverse engineering, decompiling, disassembling,
modifying, or, creating derivative works from, the CD-MAX(TM) Publisher System.
However, CUSTOMER is authorized to copy the program to hard disk on one or more
standalones used within CUSTOMER's organization by its employees or contractors,
or in a server on an internal local area network, the users of which are
confined to CUSTOMER employees or contractors, and to make a back-up copy.
CD-MAX approval is required before providing a copy to a non-employee of
CUSTOMER, except that employees of CUSTOMER's development contractor, do not
need prior approval to receive copies.

CD-MAX will provide CUSTOMER with a Master Copy of the CD-MAX(TM) END-USER
System. CUSTOMER is hereby granted a nonexclusive license to make copies of this
system and to distribute copies to END-USERs. CD-MAX will provide CUSTOMER with
a copy of the CD-MAX END-USER License so that it's provisions can be
incorporated into CUSTOMER's Agreement with its END-USERs.

CUSTOMER is prohibited from reverse engineering, decompiling, disassembling,
modifying, or creating derivative works from, the CD-MAX END-USER System.

SECTION 4. USAGE BILLING AND INFORMATION MANAGEMENT SERVICES

During the term of this Agreement, CD-MAX agrees to provide the following
information management, billing and collection services to the extent and in the
manner described below:

Documentation: CD-MAX shall provide CUSTOMER a master set of camera-ready
documentation and printed materials for use with END-USERs that explain CD-MAX's
installation, setup and billing procedures.

<PAGE>

New Account Setup: Upon notification and authorization by CUSTOMER, through use
of CD-MAX's installation/setup programs, CD-MAX will create and maintain a
separate account and billing record for each END-USER who contracts with
CUSTOMER for its information services on a usage basis. Each account shall
include name of company or institution, the name of the individual placing the
order, billing address, account number (if applicable) and telephone number.
Each account shall be maintained in computer-readable form and shall be made
available for review as reasonably required by CUSTOMER.

Technical Support: CD-MAX shall provide installation/setup assistance, if
required, either directly to the END-USER or through CUSTOMER's technical staff
in a manner agreed upon by both parties.

Account Maintenance: On a periodic basis or as required, CD-MAX shall make any
changes or corrections deemed reasonably necessary to properly maintain END-USER
accounts.

Communications With END-USER: CD-MAX shall set up and maintain, for the term of
this Agreement, a means of communication between CD-MAX and each END-USER
capable of retrieving usage data on a monthly basis (unless otherwise agreed by
both parties) and of updating security codes. It is END-USER's responsibility to
provide and maintain his/her own equipment and hardware in a satisfactory
manner.

Information Retrieval: CD-MAX shall retrieve billing and usage information
pertaining to Title(s) from END-USERs during the specified period, either
through direct modem communications or through the exchange of computer
diskettes between CD-MAX and END-USERs.

Delivery of New Security Codes: CD-MAX shall provide updated security codes, on
a schedule to be mutually agreed upon with CUSTOMER, to END-USERs whose accounts
are in good standing. These updates shall provide END-USERs continued access to
CUSTOMER's Title(s) as security codes change.

Invoicing: Based on the usage information retrieved from the END-USER, CD-MAX
shall prepare, print and mail to END-USERs either invoices (for after-use
billing) or usage statements (for pre-pay and credit card billing). CD-MAX shall
then use all commercially reasonable efforts to collect moneys owed based on
those invoices. CD-MAX shall further receive and post such funds collected to
its accounting ledgers.

Reconciliation and Payment: Once a month, CD-MAX shall reconcile its financial
accounts with the CUSTOMER for funds collected, uncollectible amounts,
written-off accounts and post-billing adjustments or credits. CD-MAX or the
CUSTOMER shall then remit any funds owed to the other party in a timely manner.

General Assistance: CD-MAX shall provide general assistance to END-USERs, as
commercially reasonably necessary, regarding questions relating to its software
programs or billing services.

<PAGE>

SECTION 5. CD-MAX TRANSACTION FEES, CHARGES AND CHARGE-BACKS

In full consideration for the licenses and services provided for herein (as
defined in Sections 3 and 4), CUSTOMER shall pay to CD-MAX the amounts detailed
in Exhibit B of this Agreement. Exhibit B also specifies the formula used to
calculate the transaction/usage fee that will be paid to CD-MAX.

The charges and fees covered by the services and licenses provided herein
include the following:

CD-MAX(TM) Publisher System license: An annual fee for the use of the system and
for covering the costs of customizing, maintaining and enhancing the CD-MAX(TM)
Publishing System software.

New Account Set-Up Charge: A one-time registration fee to cover the costs of
establishing a new account and providing END-USER support during the first year.

Account Maintenance Fee: An annual charge, beginning on the first anniversary of
the account set-up, to cover the cost of providing END-USER support during the
second and subsequent years.

Billing Fee - A per-invoice/statement fee, regardless of payment method, to
cover the costs of preparing and mailing invoices, and of receiving, posting and
reconciling payments. The fee is incurred regardless of whether the invoice is
actually paid by END-USER.

Transaction/Usage Fee - A monthly fee, based on billable usage during the month
per Title (adjusted for applicable credits and debits). Credit

Card/Debit Card Fees - A pass-through fee to cover the merchant processing
charges of credit card and bank card transactions by the END-USER.

SECTION 6. CUSTOMER'S OBLIGATIONS

In connection with this Agreement, the CUSTOMER agrees to fulfill its
obligations as set forth below:

Cooperation by CUSTOMER: CUSTOMER agrees to use reasonable efforts within
reasonable cost limits to cooperate with CD-MAX to facilitate the services to be
provided by CD-MAX as described in Sections 3 and 4. All such cooperation shall
be supplied in a reasonable and timely manner.

Certification of Authority: CUSTOMER agrees to provide reasonable certification,
if necessary, of CD-MAX's authority to carry out its billing services on behalf
of CUSTOMER.

Technical Support: CUSTOMER agrees to provide technical information, support
and/or access to CUSTOMER's technical facilities, if necessary, to facilitate
CD-MAX's performance of its services under this Agreement.

<PAGE>

Notification: CUSTOMER agrees to evaluate and determine the final disposition of
any END-USER account that CD-MAX identifies as being in question. Such
notification shall be provided in a timely manner.

Shipper's Export Declaration Form and Destination Control Notice: When export is
made of the CD-ROM Title, CUSTOMER agrees to enter the general license symbol
"GTDU" on the Shipper's Export Declaration Form (Form 7525-V) to cover export of
the CD-MAX(TM) technology. In addition, the commercial invoice and the bill of
lading must contain the following destination control notice: "United States law
prohibits disposition of these commodities to Cuba, Cambodia, Libya, North
Korea, or Viet Nam unless otherwise authorized by the United States."

CUSTOMER End User Subscription/License Agreement: CUSTOMER agrees to update its
END- USER Subscription or License Agreement for the Title(s) listed in Exhibit A
to reflect the inclusion of CD-MAX's proprietary software program into the
package of materials supplied to END-USERs. Such update shall incorporate the
provisions of the CD-MAX(TM) END-USER System license agreement, but it will not
be necessary to repeat provisions that offer the same degree of control and
protection as in the CD-MAX license, as long as it is made clear the provisions
apply to the CD-MAX(TM) software. Said END-USER Agreement shall also contain
notice that the CD-MAX(TM) software contains patented technology, patented by
CD-MAX, Inc.

SECTION 7. PROTECTION OF CONFIDENTIAL INFORMATION

The parties hereto expressly recognize that, as a result of the provision of
services pursuant to this Agreement, information which may be proprietary to
each party may be disclosed to the other. "Confidential Information" shall be
information designated as confidential or otherwise disclosed in a manner
consistent with its confidential nature. Each party hereby agrees that it will
make no disclosure of Confidential Information provided under this Agreement
without the prior written consent of the other party. Additionally, each party
shall restrict disclosure of said information to its own employees, agents or
independent contractors to whom disclosure is necessary and who have agreed to
be bound by the obligations of confidentiality hereunder. Such employees, agents
or independent contractors shall use reasonable care, but not less care than
they use with respect to their own information of like character, to prevent
disclosure of any Confidential Information. Nothing contained in this Agreement
shall be considered as granting or conferring rights by license or otherwise in
any Confidential Information disclosed.

CUSTOMER agrees that it shall require all employees with access to CD-MAX source
code to sign nondisclosure agreements that make it clear that CD-MAX
Confidential information is subject to the same obligations as CUSTOMER
proprietary information; and that any independent contractors or other third
parties who work for customer on any programming efforts related to the Title(s)
in Exhibit A shall also sign such nondisclosure agreements before working on the
Title(s).

In addition to the clause stated above, CD-MAX acknowledges that CUSTOMER is the
owner of END-USER account information and related sales information. CD-MAX
shall use commercially reasonable efforts to protect and hold such information
in the strictest confidence. CD-MAX shall not use END-USER information for any
other purpose than that stated within this Agreement.

<PAGE>

SECTION 8. TAXES

The reporting and payment of Federal, state and local taxes to the applicable
jurisdiction is the sole responsibility of the CUSTOMER. In the course of
providing its service, CD-MAX will bill appropriate state taxes (if required by
the jurisdiction) and collect same from END-USERs along with standard usage
fees. All collected taxes will be identified as such and be forwarded to
CUSTOMER in the normal manner of financial transfers prescribed herein.

SECTION 9. FORCE MAJEURE

Neither party shall be held liable for any delay or failure in performance of
any part of this Agreement or Exhibits attached hereto from any cause beyond its
control and without its fault or negligence, such as acts of God, acts of civil
or military authority, government regulations, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear
accidents, floods, strikes, power blackouts, major environmental disturbances,
unusually severe weather conditions, inability to secure products or services of
other persons or transportation facilities, or acts or omissions of common
transportation carriers.

SECTION 10. WARRANTIES

CD-MAX agrees to exercise reasonable care and workmanlike effort to provide
prompt and efficient service; however, CD-MAX makes no warranties or
representations regarding services except as specifically stated in this
Section. CD-MAX shall use due care in processing all accounts submitted to it by
CUSTOMER and agrees that it will, at its expense, correct any errors which are
due solely to problems with CD-MAX's operating systems or programs or errors by
CD-MAX's employees or agents. Correction shall be limited to correction of any
system or software problems and reprocessing of any affected END-USER BILLING
RECORDS. CD-MAX shall not be responsible in any manner for failures of, or
errors in proprietary systems and programs other then those of CD-MAX, nor shall
CD-MAX be liable for errors or failures of CUSTOMER's software or operational
systems.

THESE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, AND
CUSTOMER HEREBY WAIVES ALL OTHER WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
USE FOR A PARTICULAR PURPOSE.

<PAGE>

SECTION 11. LIMITATION OF LIABILITY

CUSTOMER agrees that any liability on the part of CD-MAX arising from breach of
warranty, breach of contract, negligence, strict liability in tort, or any other
legal theory, shall not exceed the amounts paid by CUSTOMER to CD-MAX for the
Title(s) listed in Exhibit A during the preceding six months minus the costs
CD-MAX incurred directly related to this Title(s).

Nothing herein is intended to limit CD-MAX's indemnification liability pursuant
to Section 13 hereof.

SECTION 12. TRADEMARK

"CD-MAX" is a trademark of CD-MAX, Inc. No right, or interest in such trademark
is granted hereunder, and CUSTOMER agrees that no such right or interest shall
be asserted with respect to the trademark.

SECTION 13. HOLD HARMLESS

CD-MAX agrees to defend, indemnify and hold CUSTOMER harmless from and against
any action brought against CUSTOMER to the extent it is based on a claim that
the CD-MAX(TM) Publisher System or CD-MAX(TM) END-USER System infringes any
patent, copyright, trademark, or trade secret, or other proprietary right of any
third party, provided that CD-MAX is immediately notified in writing of such a
claim. CD-MAX shall have the right to control the defense of all such claims,
lawsuits, and other proceedings.

CD-MAX further agrees to defend, indemnify and hold CUSTOMER harmless from and
against any action brought against CUSTOMER to the extent it is based on a claim
that damages were suffered as a result of use of the CD-MAX(TM) Publisher System
or the CD-MAX(TM) END-USER System, or because of the performance of the services
provided under this agreement, provided that CD-MAX is immediately notified in
writing of such a claim. CD-MAX shall have the right to control the defense of
all such claims, lawsuits, and other proceedings.

CUSTOMER agrees to defend, indemnify and hold CD-MAX harmless from and against
any action in which CD-MAX is named as a party, to the extent said action is
based on an act or failure to act of CUSTOMER and growing out of use of the

<PAGE>

CUSTOMER's CD-ROM Title(s) listed in Exhibit A hereto, provided that CUSTOMER is
immediately notified in writing of such a claim. CUSTOMER shall have the right
to control the defense of all such claims, lawsuits, and other proceedings.

SECTION 14. TERM OF AGREEMENT

This Agreement shall be effective as of the date first indicated above and shall
continue for a period of one (1) year. This Agreement will automatically renew
for a successive period of one (1) year unless either party shall give written
notice of its intent to terminate or renegotiate this Agreement at least sixty
(60) calendar days prior to the expiration of the then-current term. CD- MAX
shall provide CUSTOMER with its then-prevailing prices for its services at least
ninety (90) calendar days prior to the expiration of the then current term.

Notwithstanding anything contrary contained herein, CUSTOMER may terminate this
Agreement at any time between the third month and fourth month anniversary date
of this Agreement by providing at least ten (10) days prior written notice to
CD-MAX.

SECTION 15. EXPIRATION OR TERMINATION

This Agreement may be terminated by either party by written notice to the other
upon the occurrence of any of the following events:

a) Default on any payment specified hereunder and such default continues for
twenty (20) BUSINESS DAYs after written notice.

b) The material breach of any of the terms or conditions of this Agreement,
which breach is not remedied by the breaching party within a period of
twenty (20) BUSINESS DAYs after the receipt of written notice of such
material breach from the non-breaching party; provided, that if the breach
cannot reasonably be cured within twenty (20) business days, but the
breaching party has commenced to cure the breach within the twenty (20) day
period and diligently and in good faith continues to cure the breach, the
twenty (day) time limitation shall not apply.

c) The institution by or against either party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of
debts, provided that in any such case the proceeding is not vacated or
otherwise dismissed within sixty (60) calendar days of initiation, or upon
either party's dissolution.

Upon the expiration or termination of this Agreement for any reason, both
parties agree to satisfy any and all of its outstanding current and known
obligations. CUSTOMER agrees to pay CD-MAX all compensation associated with its
licenses, charges and fees on all invoices issued prior to expiration or
termination and not subject to a bona fide dispute.

<PAGE>

SECTION 16. AMENDMENTS; WAIVERS

This Agreement, or any Exhibits attached hereto and made a part hereof, may be
modified or additional provisions may be added only by written agreement signed
by or on behalf of both parties. No amendment or waiver of any provision of this
Agreement, and no consent to any default under this Agreement, shall be
effective unless the same shall be in writing and signed by or on behalf of the
party against whom such amendment, waiver or consent is claimed. In addition, no
course of dealing or failure of any party to strictly enforce any term, right or
condition of this Agreement shall be construed as a waiver of such term, right
or condition.

SECTION 17. ASSIGNMENT

Neither party shall sell, transfer, or assign any right or obligation hereunder,
except as expressly provided herein, without the prior written consent of the
other party except to a parent corporation or a wholly owned subsidiary, or to a
successor in ownership of substantially all of the assets, stock, or line of
business of the assigning party. All obligations and duties of any party under
this Agreement shall be binding on all successors in interest and assigns of
such party and shall survive any acquisition, merger, reorganization or other
business combination to which it is a party.

SECTION 18 INDEPENDENT CONTRACTORS

The parties may determine, however, that it is necessary to appoint CD-MAX as an
authorized agent of the CUSTOMER in the matter of merchant credit card or bank
card account transactions. If such authorization is deemed necessary, the
parties agree to outline the responsibilities and obligations of each party
under a separate written document which shall then be incorporated as an
attachment to this Agreement.

SECTION 19. THIRD PARTY BENEFICIARIES

This Agreement shall not provide any person not a party to this Agreement with
any remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.

<PAGE>

SECTION 20. NOTICES AND DEMANDS

Except as otherwise provided under this Agreement, all notices, demands or
requests which may be given by any party to the other party shall be in writing
and shall be deemed fully received immediately if sent by telecopy, with receipt
confirmed, or after five (5) BUSINESS DAYs if sent by certified mail, return
receipt requested, to the respective parties at the addresses set forth below:

If to CD-MAX: If to CUSTOMER:

Attn: Attn:

Robert A. Wiedemer
President
CD-MAX, Inc.
Suite 203
219 South Street
Murray Hill, NJ 07974-2100

If personal delivery is selected as the method of giving notice under this
Section, a receipt for such delivery shall be obtained. The address to which
such notices, demands, requests, elections or other communications may be given
by either party may be changed by written notice given by such party to the
other party pursuant to this Section.

SECTION 21. GOVERNING LAW

This Agreement shall be deemed to be a contract made under the laws of the
Commonwealth of Virginia, and the construction, interpretation and performance
of this Agreement and all transactions hereunder shall be governed by the
domestic laws of such jurisdiction. Both parties agree that jurisdiction and
venue for all legal proceedings relating to the subject matter of this Agreement
shall be maintained in Federal or state courts located in the Commonwealth of
Virginia.

SECTION 22. ENTIRE AGREEMENT

This Agreement, including the Exhibits attached hereto, and any written
amendments hereto, constitutes the entire and exclusive Agreement between the
parties and supersedes all prior or contemporaneous agreements, and oral or
written representations with regard to the subject matter contained herein.

SECTION 23. EXECUTION IN COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same document.

<PAGE>

SECTION 24. SEVERABILITY

A determination that any provision of this Agreement is invalid, illegal or
unenforceable shall not affect the enforceability of any other provision.

SECTION 25. HEADINGS

The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning or
interpretation of this Agreement:

SECTION 26. PUBLICITY

CD-MAX shall have the right to use the name of CUSTOMER in publicity releases,
advertising, or similar activities during the term of this Agreement, with the
prior consent of CUSTOMER, which shall not be unreasonably withheld. CD-MAX
shall make any changes reasonably requested by CUSTOMER.

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

CD-MAX, Inc. CUSTOMER

By:___________________________ By:
Robert A. Wiedemer
President (Printed Name)

Date:_________________________ Title:

Date:

12
<PAGE>

Exhibit A

Mitchell International -- CD-MAX Agreement

CD-ROM TITLE(S):

Mitchell On-Demand
Computerized Repair Information System
for Windows

Mitchell On-Demand
Computerized Repair Information System
for DOS

13
<PAGE>

CD-MAX, INC.

EXHIBIT B--PRICE SCHEDULE

<TABLE>
<CAPTION>
ITEM UNIT RATE FREQUENCY NOTES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) CD-MAX(TM) Publisher System
Software License Per Title [Confidential Portion Annually a.
Omitted; Filed
Separately with SEC]

2) New Account Setup Charge Per End-User Account [Confidential Portion One Time Fee b.
Omitted; Filed
Separately with SEC]

3) Billing Fee Per Invoice Or Statement [Confidential Portion As issued--Not To Exceed c.
Omitted; Filed Monthly
Separately with SEC]

4) Transaction/Usage fee Per Usage/Per Title [Confidential Portion Monthly Aggregate d.
Omitted; Filed
Separately with SEC]

5) Credit/Bank Card Fees Per Transaction [Confidential Portion As Required e.
Omitted; Filed
Separately with SEC]

6) Initial Payment Per Agreement [Confidential Portion Contract Execution f.
Omitted; Filed
Separately with SEC]
</TABLE>

NOTES:

a. Annual License Fee covers each set of information CD-ROMs contained under a
single title. One-half of License Fee is due as part of the Initial Payment
of [Confidential Portion Omitted; Filed Separately with SEC]. The other half
of License Fee is due at the end of the seventh month of the term of the
Agreement.

b. A one time fee per each end-user account (one account per location) which is
realized upon initial account registration.

c. Optional annual fee which is realized on the anniversary of each end-user
account setup. Customer and CD-MAX will mutually agree to the applicability
of this option upon the first renewal of this Agreement.

d. This fee is realized each time an invoice is generated (regardless of method
of payment).

e. This Transaction/Usage Fee is calculated on a percentage of collected amounts
of billable transactions. The formula used to determine this amount is as
follows: Transaction/Usage Fee = [Confidential Portion Omitted; Filed
Separately with SEC] x (Collected amounts of billable transactions -- credit
card/bank transaction fees).

f. Pass through charges by banking institutions to process credit card/bank
payment transactions.

g. Initial Payment by Customer within 15 days of Agreement execution. The amount
represents one-half of the initial Software License Fee (or [Confidential
Portion Omitted; Filed Separately with SEC]) and a non-refundable advance
against future Transaction/Usage Fees earned by CD-MAX.

<PAGE>
Exhibit 10.8

CD-MAX(TM)DATA SECURITY, USAGE BILLING AND INFORMATION
MANAGEMENT SERVICES AGREEMENT

This CD-MAX(TM)Data Security, Usage Billing and Information Management Services
Agreement is entered into this the _____ day of __________, 1995. by and between
CD-MAX, Inc., a Delaware corporation with its principal offices at 219 South
Street, Suite 203, Murray Hill, New Jersey 07974-2100 ("CD-MAX") and DISCLOSURE
Incorporated, a Delaware corporation with its principal offices at 5161 River
Road, Bethesda, Maryland 20816 ("DI").

WITNESSETH:
-----------

WHEREAS, DI is engaged in the business of providing copyrighted information and
information services on CD-ROM for which DI desires to adopt security measures
and bill End-Users on a usage basis; and

WHEREAS, CD-MAX has the ability to provide data security, usage billing and
information management services for DI, and DI desires to obtain such services
from CD-MAX under the terms and conditions contained herein:

NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable considerations, do
hereby agree as follows:

SECTION 1. DEFINITIONS
-----------------------

As used in this Agreement, the following terms shall have the meanings set forth
below:

Business Day: A day other than Saturday and Sunday on which commercial banks are
open for business in the Commonwealth of Virginia.

Billing Records: Computer readable records containing END-USER billing data for
DI's qualifying information products and services, which CD-MAX has the
capability of processing through its billing, reporting and collection systems.

CD-MAX(TM)Publisher System: A proprietary software system owned by CD-MAX, Inc.,
provided in object code form for publisher use that includes the Automatic
Encryption Program (AEP) customized for use with the title(s) listed in Exhibit
A, and installation/setup programs. This system uses CD-MAX's proprietary
encryption technology to create an encrypted version of DI's Title(s) as a means
of protecting the Title(s) against unauthorized or unlicensed access by
non-paying END-USERs. The System includes CD-MAX(TM)patented technology and the
computer programs comprising the system are protected under U.S. Copyright law.

<PAGE>

security module that performs decryption for authorized paying END-USERs, meters
and tracks usage of the Title(s) by END-USERs, and includes copy protection and
a reauthorization process module. The System includes CD-MAX(TM) patented
technology and the computer programs comprising the system are protected under
U.S. Copyright law.

CD-ROM (Compact Disc-Read Only Memory) Title: One of DI's information products
or offerings, listed in Exhibit A, which is incorporated by reference. A CD-ROM
Title may be contained on one or more discs.

Post-Billing Adjustment or Credit: Rate adjustment or
credit applied to an END-USER's account that is granted by the DI Service
Department of either CD-MAX or DI.

Services: CD-MAX's services described in Sections 3 and 4.

Titles: Synonymous with CD-ROM Title defined above.

Uncollectible Amounts: Those amounts that are posted to END-USERs' accounts for
DI's BILLING RECORDS and are billed to END-USERs, but are not collected due to
the END- USER receiving a post-billing adjustment or credit to his/her invoice
or the END-USER failing to pay its bill to CD-MAX and the account subsequently
being written off as a bad debt by the DI.

Written-Off Accounts: Those END-USER accounts that are not paid by the END-USER
and are subsequently written off by DI.

SECTION 2. SCOPE OF AGREEMENT

DI hereby agrees to purchase from CD-MAX the services described in Sections 3
and 4 and CD- MAX agrees to provide such services at the time and in the manner
set forth herein, subject to the terms and conditions set forth herein. DI
agrees that CD-MAX shall be its nonexclusive agent for security, usage billing,
and information management services for the Metered Version of any of the CD-ROM
Titles listed in Exhibit "A" hereto for the term of this Agreement, provided,
however, that nothing herein contained shall be interpreted to prohibit DI from
billing and collecting fees on information or information products and services
in its usual and

<PAGE>

customary manner with other third parties.

SECTION 3. DATA SECURITY SERVICES

CD-MAX Data Security Services are based on use of the CD-MAX(TM) Publisher
System by the DI and use of the CD-MAX(TM) END-USER System by each of DI's
END-USERs for the Title(s) listed in Exhibit A. Accordingly, in order to provide
these services to DI, CD-MAX grants to DI a software license to use the
CD-MAX(TM) Publisher System; and a license to use, copy, and distribute the
CD-MAX(TM) END-USER System as part of its C-ROM Title(s); as follows:

As an essential part of this agreement, CD-MAX grants DI a non-exclusive license
to use the CD-MAX(TM) Publisher System software for a period coterminous with
the term of this agreement. CD-MAX shall support and maintain the CD-MAX(TM)
Publisher System so that periodic updates of the DI's CD-ROM Title(s) listed in
Exhibit "A" may be developed and produced without the direct involvement of
CD-MAX; provided, however, that the extent of DI's information updates do not
materially affect the structure of the underlying data. If the updating is
extensive or if the structure of the data changes, CD-MAX shall revise and
update the CD-MAX(TM) Publisher System accordingly.

DI is prohibited from reverse engineering, decompiling, disassembling,
modifying, or creating derivative works from, the CD-MAX(TM) Publisher System.
However, DI is authorized to copy the program to hard disk on one or more
standalones used within DI's organization by its employees, or in a server on an
internal local area network, the users of which are confined to DI employees or
consultants, and to make a back-up copy.

CD-MAX will provide DI with a Master Copy of the CD-MAX(TM) END-USER System. CD-
MAX grants to DI a nonexclusive license to make copies of the CD-MAX(TM)
END-USER System and to distribute copies to END-USERs. CD-MAX will provide DI
with a copy of the CD-MAX END-USER License in a single-page form that can be
used as an addendum to the DI Order Form and License, and can be signed by
END-USERS concomitant with signing of the DI license and forwarded to DI as part
of the Order Form package for the Titles in Exhibit A, for signing by the
parties. DI agrees to annex the CD-MAX addendum (which shall contain language
acceptable to the parties) to its Order/License Form.

DI is prohibited from reverse engineering, decompiling, disassembling,
modifying, or creating derivative works from, the CD-MAX END-USER System.

SECTION 4. USAGE BILLING AND INFORMATION MANAGEMENT SERVICES

During the term of this Agreement, CD-MAX agrees to provide the following
information management, billing and collection services to the extent and in the
manner described below:

<PAGE>

Documentation: CD-MAX shall provide DI a master set of camera-ready
documentation and printed materials for use with END-USERs that explain CD-MAX's
installation, setup and billing procedures.

New Account Setup: Upon notification and authorization by DI, through use of
CD-MAX's installation/setup programs, CD-MAX will create and maintain a separate
account and billing record for each END-USER who contracts with DI for its
information services on a usage basis. Each account shall include name of
company or institution, the name of the individual placing the order, billing
address, account number (if applicable), fax number, and telephone number. Each
account shall be maintained in computer-readable form and shall be made
available for review as reasonably required by DI.

Professionalism: CD-MAX shall at all times conduct itself in a professional
manner and perform Services on behalf of DI to END-USERS in a manner which will
reflect favorably on DI. Any action or conduct by CD-MAX which causes harm to DI
shall be material cause for termination of this Agreement by DI. CD-MAX shall
use its best commercial efforts to resolve each END-USER problem or issue
within one business day. However, if the complexity of the problem precludes
resolution within that time, CD-MAX will actively pursue resolution in as short
a period as feasible.

Technical Support: CD-MAX shall provide installation/setup assistance, if
required, either directly to the END-USER or through DI's technical staff in a
manner agreed upon by both parties.

Account Maintenance: On a periodic basis or as required, CD-MAX shall make any
changes or corrections deemed reasonably necessary to properly maintain END-USER
accounts.

Information Retrieval: CD-MAX shall retrieve
billing and usage information pertaining to Title(s) from END-USERs during the
specified period, either through direct modem communications or through the
exchange of computer diskettes between CD-MAX and END-USERs.

Delivery of New Security Codes: CD-MAX shall provide updated security codes, on
a schedule to be mutually agreed upon with DI, to END-USERs whose accounts are
in good standing. These updates shall provide END-USERs continued access to DI's
Title(s) as security codes change.

Invoicing: Based on the usage information retrieved from the END-USER, CD-MAX
shall prepare, print and mail to END-USERs either invoices (for after-use
billing) or usage statements

<PAGE>

(for pre-pay and credit card billing). CD-MAX shall then use all commercially
reasonable efforts to collect moneys owed based on those invoices. In 30 days,
CD-MAX will send an overdue notice to clients. At 45 days, CD-MAX will turn
collections over to DI's Accounting department.

Reconciliation and Payment: Once a month, CD-MAX shall reconcile its financial
accounts with DI for funds collected, uncollectible amounts, written-off
accounts and post-billing adjustments or credits. CD-MAX will bill DI monthly
for royalty and fees owed to CD-MAX. CD-MAX can only post Exhibit B fees to the
CD-MAX ledger. Payment shall be within twenty days of the receipt of invoice.

Bank Account/Lock Box: CD-MAX will deposit DI's cash into DI's own account (DI
name only). CD-MAX may utilize a lock box to sort DI's cash from other client's
cash. DI will have access to cash in DI's account daily.

General Billing: Disclosure reserves the right to assume billing of Disclosure
clients from CD-MAX with 60 days notice.

Reporting: CD-MAX will provide Disclosure with invoice amount information by
client within 24 hours of invoicing via the Internet or some other electronic
file transfer.

General Assistance: CD-MAX shall provide general assistance to END-USERs, as
commercially reasonably necessary, regarding questions relating to its software
programs or billing services.

Nonsolicitation: As a material inducement for DI to enter into this Agreement,
CD-MAX agrees not to solicit, directly, indirectly or on behalf of any third
person, any Customers and/or END-USERs of DI to buy, license, lease, or
otherwise acquire any product or service of CD-MAX. Nothing herein shall be
construed to prevent CD-MAX from providing services to other publishers who,
independently and with no information on customers from CD-MAX, solicit entities
and enter into agreements with entities that also happen to be DI Customers.

SECTION 5. CD-MAX TRANSACTION FEES, CHARGES AND CHARGE-BACKS

In full consideration for the licenses and services provided for herein (as
defined in Sections 3 and 4), DI shall pay to CD-MAX the amounts detailed in
Exhibit B of this Agreement. Schedule B also specifies the formula used to
calculate the transaction/usage fee that will be paid to CD-MAX.

The charges and fees covered by the services and licenses provided herein
include the following:

CD-MAX(TM) Publisher System license: An annual fee for the use of the system and
for covering the costs of customizing, maintaining and enhancing the CD-MAX(TM)
Publishing System software.

<PAGE>

New Account Set-Up Charge: A one-time registration fee to cover the costs of
establishing a new account and providing END-USER support during the first year.

Account Maintenance Fee: An annual charge, beginning on the first anniversary of
the account set-up, to cover the cost of providing END-USER support during the
second and subsequent years.

Transaction/Usage Fee - A monthly fee, based on billable usage during the month
per Title (adjusted for applicable credits and debits).

Credit Card/Debit Card Fees - A pass-through fee to cover the merchant
processing charges of credit card and bank card transactions by the END-USER.

SECTION 6. DI'S OBLIGATIONS

In connection with this Agreement, the DI agrees to fulfill its obligations as
set forth below:

Certification of Authority: DI agrees to provide certification, if necessary, of
CD-MAX's authority to carry out its billing services on behalf of DI.

Technical Support: DI agrees to provide technical information, support and/or
access to DI's technical facilities, if necessary, to facilitate CD-MAX's
performance of its services under this Agreement.

Notification: DI agrees to evaluate and determine the final disposition of any
END-USER account that CD-MAX identifies as being in question. Such notification
shall be provided in a timely manner.

Shipper's Export Declaration Form and Destination Control Notice: When export is
made of the CD-ROM Title, DI agrees to enter the general license symbol "GTDU"
on the Shipper's Export Declaration Form (Form 7525-V) to cover export of the
CD-MAX(TM) technology. In addition, the commercial invoice and the bill of
lading must contain the following destination control notice: "United States law
prohibits disposition of these commodities to Cuba, Cambodia, Libya, North
Korea, or Viet Nam unless otherwise authorized by the United States."

DI End User Subscription/License Agreement: DI agrees to annex the CD-MAX(TM)
END-USER License as an addendum to DI's END-USER Subscription/License/Order
Form.

<PAGE>

SECTION 7. PROTECTION OF CONFIDENTIAL INFORMATION

The parties hereto expressly recognize that, as a result of the provision of
services pursuant to this Agreement, information which may be proprietary to
each party may be disclosed to the other. Each party agrees to preserve the
confidentiality of all Confidential Information of the other party that is
disclosed pursuant to or obtained in connection with this Agreement, and shall
not, without the prior written consent of the other party, disclose or make
available to any other person, or use for its own benefit other than as
contemplated by this Agreement, any such Confidential Information of the other
party. The term "Confidential Information" shall include, without limitation,
the terms of this Agreement, all information pertaining to the business,
strategies, customers, financial information, employees, databases, trade
secrets, product development of either party which is disclosed to the other
party. Notwithstanding the foregoing, the term "Confidential Information" shall
not include any information which: (a) is or becomes publicly available (other
than through unauthorized disclosure by the receiving party); (b) is in the
possession of or is known to the receiving party prior to its disclosure
hereunder; (c) is independently developed by the receiving party; or (d) is made
available to the receiving party by any person other than the disclosing party
without breach of any obligation of confidentiality of such other person.
Additionally, each party shall restrict disclosure of said information to its
own employees, agents or independent contractors to whom disclosure is necessary
and who have agreed to be bound by the obligations of confidentiality hereunder.
Such employees, agents or independent contractors shall use reasonable care, but
not less care than they use with respect to their own information of like
character, to prevent any unauthorized disclosure or use of any Confidential
Information. Nothing contained in this Agreement shall be considered as granting
or conferring rights by license or otherwise in any Confidential Information
disclosed.

As part of providing billing services, CD-MAX will collect End-User usage
information required to determine the charges for use according to DI's pricing
method. CD-MAX shall treat such information as Confidential Information and
shall not use END-USER usage information for any purpose other than that stated
within this Agreement.

SECTION 8. TAXES

The reporting and payment of Federal, state and local taxes to the applicable
jurisdiction on fees collected by CD-MAX from END-USERS and paid to DI, is the
sole responsibility of DI. In the course of providing its service, CD-MAX will
bill appropriate state taxes (if required by the jurisdiction, and directed by
DI) and collect same from END-USERs along with standard usage fees. All
collected taxes will be identified as such and be forwarded to DI in the normal
manner of financial transfers prescribed herein. CD-MAX shall be responsible for
payment of all taxes on CD-MAX's revenue under this Agreement.

<PAGE>

SECTION 9. FORCE MAJEURE

SECTION 10. WARRANTIES

CD-MAX warrants that it originally developed and has clear title to the
CD-MAX(TM) Publisher System and the CD-MAX(TM) END-USER System, and that the
CD-MAX(TM)Publisher System and CD-MAX(TM) END-USER System will each
substantially perform the functions set forth in the CD-MAX documentation.
CD-MAX further warrants to DI that: (1) each of the CD-MAX(TM) Publisher System
and CD-MAX END-USER System do not infringe any intellectual property right
(including patent, trademark, copyright, and trade secret) of any third person;
and (2) CD-MAX is not aware of any claim that the CD-MAX Publisher System
and\or CD-MAX END-USER System infringes any intellectual property right
(including patent, trademark, copyright, and trade secret) of any third person.

CD-MAX warrants to DI that: (1) all Services shall be performed by trained,
qualified and professional employees of CD-MAX; (2) CD-MAX shall perform all
Services on a timely basis and at the highest professional level of service
possible; and (3) CD-MAX shall at all times conduct itself and perform all
Services in a professional manner to reflect favorably on DI and its goodwill
and business.

CD-MAX agrees to exercise reasonable care and workmanlike effort to provide
prompt and efficient service; however, CD-MAX makes no warranties or
representations regarding services except as specifically stated in this
Section. CD-MAX shall use due care in processing all accounts submitted to it by
DI and agrees that it will, at its expense, correct any errors which are due
solely or in part to problems with CD-MAX's operating systems or programs or
errors by CD-MAX's employees or agents. Correction shall be limited to
correction of any system or software problems and reprocessing of any affected
END-USER BILLING RECORDS. CD-MAX shall not be responsible in any manner for
failures of, or errors in proprietary systems and programs other then those of
CD-MAX, nor shall CD-MAX be liable for errors or failures of DI's software or
operational systems.

THESE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, AND DI
HEREBY WAIVES ALL OTHER WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE.

<PAGE>

SECTION 11. LIMITATION OF LIABILITY

Due to the nature of the services being performed by CD-MAX, it is agreed that
in no event will CD-MAX be liable for any claim, loss, liability, correction,
cost, damage or expense caused by problems with CD-MAX's systems or performance
of services hereunder which is not reported by DI within fifteen (15) BUSINESS
DAYs from receipt of adequate information to identify such problems. [Note: The
CD-MAX END-USER License will contain an equivalent provision requiring
notification of problems by the END-USER within fifteen (15) business days.]

DI agrees that any liability on the part of CD-MAX arising from breach of
warranty, breach of contract, negligence, strict liability in tort, or any other
legal theory, shall not exceed the amounts paid by DI to CD-MAX for the Title(s)
listed in Exhibit A during the preceding twelve months of this Agreement.

SECTION 12. TRADEMARK

"CD-MAX" is a trademark of CD-MAX, Inc. No right, title or interest in such
trademark is granted hereunder, and DI agrees that no such right, title or
interest shall be asserted with respect to the trademark.

"DISCLOSURE" is a registered trade and service mark of DI. "COMPACT D" and
"EDGARPLUS" are trademarks of DI. "WORLDSCOPE" is a trademark of
Worldscope/Disclosure Partners. No right, title or interest in any DI trademark
is granted hereunder and CD-MAX agrees that no such right, title or interest
shall be asserted with respect to any DI trademark.

SECTION 13. HOLD HARMLESS

CD-MAX agrees to defend, indemnify and hold DI harmless from and against any
claim or action brought against DI to the extent it is based on a claim that the
CD-MAX(TM) Publisher System or CD-MAX(TM) END-USER System infringes any patent,
copyright, trademark, or trade

<PAGE>

secret, provided that CD-MAX is immediately notified in writing of such a claim.
CD-MAX shall have the right to control the defense of all such claims, lawsuits,
and other proceedings.

CD-MAX further agrees to defend, indemnify and hold DI harmless from and against
any claim or action brought against DI to the extent it is based on a claim that
damages were suffered as a result of use of the CD-MAX(TM) Publisher System or
the CD-MAX(TM) END-USER System, or because of the performance of the services
provided under this agreement, provided that CD-MAX is immediately notified in
writing of such a claim. CD-MAX shall have the right to control the defense of
all such claims, lawsuits, and other proceedings.

DI agrees to defend, indemnify and hold CD-MAX harmless from and against any
claim or action brought against CD-MAX, to the extent said action is based on an
act or failure to act of DI and growing out of use of the DI's CD-ROM Title(s)
listed in Exhibit A hereto, provided that DI is immediately notified in writing
of such a claim. DI shall have the right to control the defense of all such
claims, lawsuits, and other proceedings.

DI further agrees to defend, indemnify and hold CD-MAX harmless from and against
any claim or action brought against CD-MAX based on a claim that the contents of
any of the Exhibit A CD-ROM TITLES infringe a third person's copyright, patent,
trademark, or trade secret.

SECTION 14. TERM OF AGREEMENT

This Agreement shall be effective as of the date first indicated above and shall
continue for a period of one (1) year. This Agreement will automatically renew
for a successive period of one (1) year unless either party shall give written
notice of its intent to terminate or renegotiate this Agreement at least sixty
(60) calendar days prior to the expiration of the then-current term. CD-MAX
shall provide DI with its then-prevailing prices for its services at least
ninety (90) calendar days prior to the expiration of the then-current term.

SECTION 15. EXPIRATION OR TERMINATION

This Agreement may be terminated by either party by written notice to the other
upon the occurrence of any of the following events:

a) The material breach of any of the terms or conditions of this Agreement,
which breach is not remedied by the breaching party within a period of
twenty (20) BUSINESS DAYs after the receipt of written notice of such
material breach from the non-breaching party; provided, that if the breach
cannot reasonably be cured within twenty (20) BUSINESS DAYS, but the
breaching party has commenced to cure the breach within the twenty (20) day
period and diligently and in good faith continues to cure the breach, then
the parties will meet and discuss in good faith a reasonable cut-off date
by which the breach shall be cured; or

<PAGE>

b) The institution by or against either party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of
debts, provided that in any such case the proceeding is not vacated or
otherwise dismissed within sixty (60) calendar days of initiation, or upon
either party's dissolution.

Upon the expiration or termination of this Agreement for any reason, both
parties agree to satisfy any and all of its outstanding current and known
obligations. DI agrees to pay CD-MAX all compensation associated with its
licenses, charges and fees on all invoices issued prior to expiration or
termination.

The terms and provisions of Sections 1, 7, 8, 10, 11, 12, 13, and 21, shall
survive any termination or expiration of this Agreement.

Within twenty (20) days of any termination or expiration of this Agreement or
earlier upon request by DI, CD-MAX shall deliver to DI all materials, documents
or information concerning CD-MAX'S Services and END-USERS to DI and certify such
delivery to DI.

Notwithstanding any termination or expiration of this Agreement, and unless
advised by DI, any outstanding leases or licenses of DI's TITLES including the
CD-MAX(TM) END-USER System shall continue for a period of at most one (1) year,
and CD-MAX will continue to provide services for the unexpired term of all
extant END-USER Licenses, or any additional negotiated term.

SECTION 16. AMENDMENTS; WAIVERS

SECTION 17. ASSIGNMENT

<PAGE>

SECTION 18 INDEPENDENT CONTRACTORS

The parties may determine, however, that it is necessary to appoint CD-MAX as an
authorized agent of the DI in the matter of merchant credit card or bank card
account transactions. If such authorization is deemed necessary, the parties
agree to outline the responsibilities and obligations of each party under a
separate written document which shall then be incorporated as an attachment to
this Agreement.

SECTION 19. THIRD PARTY BENEFICIARIES

SECTION 20. NOTICES AND DEMANDS

If to CD-MAX: If to DI:

Attn: Attn:

Robert A.Wiedemer President & General Counsel
President Disclosure Incorporated
CD-MAX, Inc. 5161 River Road
Suite 203 Bethesda, MD 20816
219 South Street
Murray Hill, NJ 07974-2100

<PAGE>

SECTION 21. GOVERNING LAW

SECTION 22. ENTIRE AGREEMENT

SECTION 23. EXECUTION IN COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same document.

SECTION 24. SEVERABILITY

A determination that any provision of this Agreement is invalid, illegal or
unenforceable shall not affect the enforceability of any other provision.

SECTION 25. HEADINGS

The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning or
interpretation of this Agreement:

SECTION 26. PUBLICITY (CORPORATE NAME LICENSES)

By DI. DI hereby grants to CD-MAX a license to use, during the term of this
Agreement, the corporate name DISCLOSURE INCORPORATED in connection with the
Services and publicity releases, advertising or similar activities which are
each pre-approved in writing by DI and subject to the terms and restrictions set
forth below.

CD-MAX's use of the corporate name DISCLOSURE INCORPORATED shall be
limited to use in literature, supporting documentation, and publicity releases
prepared by CD-MAX. CD-MAX will supply to DI advance copies of any intended use.
DI shall have at least five (5) business days to provide comments regarding such
usage. CD-MAX shall provide DI with at least one copy of each piece of
literature in which DI's name is used, and shall make changes thereto if they do
not reasonably conform to this Section.

By CD-MAX. CD-MAX hereby grants to DI a license to use, during the term of this
Agreement, the corporate name CD-MAX, INC. in connection with the Metered CD-ROM
Titles, Services, and publicity releases, advertising or similar activities
which are each pre-approved in writing by CD-MAX and subject to the terms and
restrictions set forth below.

<PAGE>

DI's use of the corporate name CD-MAX INC. shall be limited to use in
literature, supporting documentation, and publicity releases prepared by DI. DI
will supply to CD-MAX advance copies of any intended use. CD-MAX shall have at
least five (5) business days to provide comments regarding such usage. DI shall
provide CD-MAX with at least one copy of each piece of literature in which
CD-MAX's name is used, and shall make changes thereto if they do not reasonably
conform to this Section.

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

CD-MAX, Inc. DI

By:__________________________ By:____________________________
Robert A. Wiedemer
President (Printed Name)_________________

Date:________________________ Title:_________________________

Disclosure Incorporated

Date:__________________________

14
<PAGE>

CONFIDENTIAL TREATMENT REQUESTED FOR THIS MATERIAL

Exhibit A

DISCLOSURE Incorporated -- CD-MAX Agreement

CD-ROM TITLE(S) Compact D/New Issues
Compact D/SEC
Compact D/Worldscope
Compact D/EdgarPlus

15
<PAGE>

Exhibit B

CD-MAX, INC.

PRICE SCHEDULE

2) New Account Setup Charge Per End-User Account [Confidential Portion One Time Fee b.
Omitted; Filed
Separately with SEC]

3) Billing Fee Per Invoice Or Statement [Confidential Portion As issued--Not To Exceed c.
Sent Omitted; Filed Monthly
Separately with SEC]

4) Transaction/Usage fee Per Usage/Per Title [Confidential Portion Monthly Aggregate d.
Omitted; Filed
Separately with SEC]

5) Credit/Bank Card Fees Per Transaction [Confidential Portion As Required e.
Omitted; Filed
Separately with SEC]

6) Initial Payment Per Agreement [Confidential Portion Contract Execution f.
Omitted; Filed
Separately with SEC]
</TABLE>

NOTES:

a. Annual Software License Fee covers each set of information CD-ROMs contained
under a single title.

b. A one time fee per each end-user account (one account per location) which is
realized upon initial account registration.

c. This fee is realized each time an invoice is generated (regardless of method
of payment).

d. This Transaction/Usage Fee is calculated as a percentage of billable
transactions.

e. Pass through charges by banking institutions to process credit card/bank
payment transactions.

f. Initial Payment by Customer covers CD-MAX(TM) Publisher System Software
License for the first title, and is due within 15 days of Agreement
execution. (Same as #1)

* [Confidential Portion Omitted; Filed Separately with SEC] for license fee;
[Confidential Portion Omitted; Filed Separately with SEC] for services and
maintenance.

<PAGE>

EXHIBIT 10.14

5-29

CD-MAX(TM) DATA SECURITY, USAGE BILLING AND

INFORMATION MANAGEMENT SERVICES AGREEMENT

This CD-MAX(TM) Data Security, Usage Billing and Information Management Services
Agreement is entered into this the _____ day of __________, 1996. by and between
CD-MAX, Inc., a Delaware corporation with its principal offices at 219 South
Street, Suite 101, Murray Hill, New Jersey 07974-2100 (hereinafter "CD-MAX") and
Credential Information and Verification Services, Inc., a __________________
corporation with its principal offices at 6000 Executive Boulevard, Suite 202,
Rockville, Maryland 20852 (hereinafter "CIVS").

WHEREAS, CIVS is engaged in the business of providing corporital information
for healthcare providers on CD-ROM for which CIVS desires to adopt security
measures and bill End-Users on a usage basis; and

WHEREAS, CD-MAX provides copyrighted and proprietary information protection,
usage monitoring, and transaction processing/billing services through its
CD-MAX(TM) software systems and will customize and integrate its systems with
systems used by the CIVS CD-ROM product, and CIVS desires to obtain such
services from CD-MAX under the terms and conditions contained herein:
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable considerations, do
hereby agree as follows:

SECTION 1. DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
Business Day: A day other than Saturday and Sunday on which commercial banks are
open for business in the Commonwealth of Virginia.
Billing Records: Computer readable records containing END-USER billing data for
CIVS's qualifying information products and services, which CD-MAX has the
capability of processing through its billing, reporting and collection systems.
CD-MAX(TM) Publisher System: A proprietary software system owned by CD-MAX,
Inc., provided in object code form for publisher use that includes the Automatic
Encryption Program (AEP) customized for use with the title(s) listed in Exhibit
A, and installation/setup programs. This system uses CD-MAX's proprietary
encryption technology to create an encrypted version of CIVS's Title(s) as a
means of protecting the Title(s) against unauthorized or unlicensed access by
non-paying END-USERs. The System includes CD-MAX(TM) patented technology and the
computer programs comprising the system are protected under U.S. Copyright law.
CD-MAX(TM) END-USER System: A software system in object code form that is used
with each CD-ROM Title that has been encrypted by use of the CD-MAX(TM)
Publisher System. The END-USER System is integrated with the CIVS Title(s)
search and rendering software and includes a security module that performs
decryption for authorized paying END-USERs, meters and tracks usage of the
Title(s) by END-USERs, and includes copy protection and a reauthorization
process module. The System includes CD-MAX(TM) patented technology and the
computer programs comprising the system are protected under U.S. Copyright law.
CD-ROM (Compact Disc-Read Only Memory) Title: CIVS's information product or
offering, contained on one or more discs.

1
<PAGE>

END-USER: A natural person, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental
agency or instrumentality, or other entity that subscribes to or uses CIVS's
information products and services.
Export License Designation: A phrase or acronym identifying the type of export
license applicable to a given system. The CD-MAX(TM) END-USER System has been
granted the Export License Designation "GTDU." This indicates the END-USER
System can be freely exported to all countries except Cuba, Cambodia, Libya,
North Korea, or Viet Nam. At the time of the execution of this agreement the
CD-MAX Publisher System has not been approved for export. Post-Billing
Adjustment or Credit: Rate adjustment or credit applied to an END-USER's account
that is granted by the CIVS Service Department of either CD-MAX, with prior
approval of CIVS, or CIVS.
Uncollectible Amounts: Those amounts that are posted to END-USERs' accounts for
CIVS's BILLING RECORDS and are billed to END-USERs, but are not collected due to
the END- USER receiving a post-billing adjustment or credit to his/her invoice
or the END-USER failing to pay its bill to CD-MAX and the account subsequently
being written off as a bad debt by the CIVS.
Written-Off Accounts: Those END-USER accounts that are not paid by the END-USER
and are subsequently written off by CIVS. CIVS retains the right to turn over
delinquent accounts to a collection agency.

SECTION 2. SCOPE OF AGREEMENT

CIVS hereby agrees to purchase from CD-MAX the services described in Sections 3,
4, and 5, and CD-MAX agrees to provide such services at the time and in the
manner set forth herein, subject to the terms and conditions set forth herein.
CIVS agrees that CD-MAX shall be its exclusive agent for security, usage
billing, and information management services for the CD- ROM Titles listed in
Exhibit "A" hereto for the term of this Agreement. CD-MAX agrees that, in
recognition of the sensitivity of CIVS's new business model, for a one-year
period beginning with the release date of the metered product, it will not
license its software to either a company who provides healthcare credential
verification or to the following companies providing these services: Equifax (or
a medical credential verification subsidiary), HealthCheck, Gadrian Corporation,
MMI (or a medical credential verification subsidiary), MedArc, Quality
Management Services, Sweetwater Health Enterprises, CAGA, CompHealth,
CheckPoint, or, Professional Credetnials Verification Service (Massachusetts
Medical Society).

SECTION 3. DEVELOPMENT

3.1 Development Overview

The major tasks and events necessary to customize and integrate the CD-MAX
software systems with the software systems used by the CIVS CD-ROM product are
as follows:

1. Development of a Requirements Document by CD-MAX for CIVS approval;
2. Development of an Alpha (prototype)Version of the customized,
integrated systems for CIVS testing;
3. Acceptance of Alpha Version by CIVS;
4. Development of a Beta Version by CD-MAX for CIVS testing;
5. Acceptance of Beta Version by CIVS;

2
<PAGE>

6. Development of a Commercial Version by CD-MAX;
3.2 Schedule
1. Development of Requirements Document by CD-MAX: June, 1996.
2. Development of Alpha Version by CD-MAX: 60 days after CIVS approval
of Requirements Document
3. Development of Beta Version by CD-MAX: 30 days after completion of
Alpha testing
4. Development of Commercial Version by CD-MAX: 30 days after completion of
Beta testing
3.3 Development Condition Precedent
Completion of development efforts on schedule are conditioned upon use by CIVS
of the Dataware Software System for its database search and rendering software,
and by completion of the necessary integration software on the part of Dataware
on a timely basis.
3.4 Development Project Coordination and Management.
CD-MAX will assign Greg Campbell to coordinate the development efforts for
CD-MAX. His mission will be to assist in translating CIVS's requirements into
specific programming tasks; to keep the project on schedule by raising and
resolving any issues needing attention; and to keep CIVS closely informed on
status and progress. It is understood CIVS will provide CD-MAX with direct
contacts for marketing, development, testing, and operations. CD-MAX software
development will be under the management of Sean Tsai, Vice President of
Software Development, who will direct the CD-MAX programming staff.

SECTION 4. DATA SECURITY SERVICES

CD-MAX Data Security Services are based on use of the CD-MAX(TM) Publisher
System by the CIVS and use of the CD-MAX(TM) END-USER System by each of CIVS's
END-USERs for the Title(s) listed in Exhibit A. Accordingly, in order to provide
these services to CIVS, CIVS is granted a software license to use the CD-MAX(TM)
Publisher System; and a license to use, copy, and distribute the CD-MAX(TM)
END-USER System as part of its C-ROM Title(s); as follows:
As an essential part of this agreement, CD-MAX grants CIVS a non-exclusive
license to use the CD-MAX(TM) Publisher System software for a period coterminous
with the term of this agreement. CD-MAX shall support and maintain the
CD-MAX(TM) Publisher System so that periodic updates of CIVS's CD-ROM Title(s)
listed in Exhibit "A" may be developed and produced without the direct
involvement of CD-MAX; provided, however, that the extent of CIVS's information
updates do not materially affect the structure of the underlying data. If the
updating is extensive or if the structure of the data changes, CD-MAX shall
revise and update the CD-MAX(TM) Publisher System accordingly.
CIVS is prohibited from reverse engineering, decompiling, disassembling,
modifying, or, creating derivative works from, the CD-MAX(TM) Publisher System.
However, CIVS is authorized to copy the program to hard disk on one or more
standalones used within CIVS's organization by its employees or contractors, or
in a server on an internal local area network, the users of which are confined
to CIVS employees or contractors, and to make a back-up copy. CD-MAX approval is
required before providing a copy to a non-employee of CIVS. CD-MAX will provide
CIVS with a Master Copy of the CD-MAX(TM) END-USER System. CIVS is hereby
granted a nonexclusive license to make copies of this system and to distribute

3
<PAGE>

copies to END-USERs. CD-MAX will provide CIVS with a copy of the CD-MAX END-
USER License so that it's provisions can be incorporated into CIVS's Agreement
with its END-USERs.
CIVS is prohibited from reverse engineering, decompiling, disassembling,
modifying, or creating derivative works from, the CD-MAX END-USER System.

SECTION 5. USAGE BILLING AND INFORMATION MANAGEMENT SERVICES

During the term of this Agreement, CD-MAX agrees to provide the following
information management, billing and collection services to the extent and in the
manner described below: Documentation: CD-MAX shall provide CIVS a master set of
camera-ready documentation and printed materials for use with END-USERs that
explain CD-MAX's installation, setup and billing procedures.
New Account Setup: Upon notification and authorization by CIVS, through use of
CD-MAX's installation/setup programs, CD-MAX will create and maintain a
separate account and billing record for each END-USER who contracts with CIVS
for its information services on a usage basis. Each account shall include name
of company or institution, the name of the individual placing the order, billing
address, account number (if applicable) and telephone number. Each account shall
be maintained in computer-readable form and shall be made available for review
as reasonably required by CIVS.
Technical Support: CD-MAX shall provide installation/setup assistance, if
required, either directly to the END-USER or through CIVS's technical staff in a
manner agreed upon by both parties.
Account Maintenance: On a periodic basis or as required, CD-MAX shall make any
changes or corrections deemed reasonably necessary to properly maintain END-USER
accounts.
Communications With END-USER: CD-MAX shall set up and maintain, for the term of
this Agreement, a means of communication between CD-MAX and each END-USER
capable of retrieving usage data on a monthly basis (unless otherwise agreed by
both parties) and of updating security codes. It is END-USER's responsibility to
provide and maintain his/her own equipment and hardware in a satisfactory
manner.
Information Retrieval: CD-MAX shall retrieve billing and usage information
pertaining to Title(s) from END-USERs during the specified period, either
through direct modem communications or through the exchange of computer
diskettes between CD-MAX and END-USERs.
Delivery of New Security Codes: CD-MAX shall provide updated security codes, on
a schedule to be mutually agreed upon with CIVS, to END-USERs whose accounts are
in good standing. These updates shall provide END-USERs continued access to
CIVS's Title(s) as security codes change.
Invoicing: Based on the usage information retrieved from the END-USER, CD-MAX
shall prepare, print and mail to END-USERs invoices based on usage and CIVS-set
pricing. CD-MAX shall then use all commercially reasonable efforts to collect
moneys owed based on those invoices. CD-MAX shall further receive and post such
funds collected to its accounting ledgers.
Reconciliation and Payment: Once a month, CD-MAX shall reconcile its financial
accounts with the CIVS for funds collected, uncollectible amounts, written-off
accounts and post-billing adjustments or credits. CD-MAX or the CIVS shall then
remit any funds owed to the other party in a timely manner.

4
<PAGE>

General Assistance: CD-MAX shall provide general assistance to END-USERs, as
commercially reasonably necessary, regarding questions relating to its software
programs or billing services.

SECTION 6. CD-MAX TRANSACTION FEES, CHARGES AND CHARGE-BACKS

In full consideration for the licenses and services provided for herein (as
defined in Sections 3, 4 and 5), CIVS shall pay to CD-MAX the amounts detailed
in Exhibit B of this Agreement, titled "CD-MAX, INC. PRICE SCHEDULE, a copy of
which is attached hereto. Exhibit B also specifies the formula used to calculate
the transaction/usage fee that will be paid to CD-MAX. The charges and fees
covered by the services and licenses provided herein include the following:
Design and Protoyping Fee: A one-time fee to cover the cost of customizing
CD-MAX(TM) software and billing procedures to meet CIVS requirements. The
minimum fee in Exhibit B. is due upon execution of this Agreement.
CD-MAX(TM) Publisher System license: An annual fee for the use of the system and
for covering the costs of customizing, maintaining and enhancing the CD-MAX(TM)
Publishing System software.
New Account Set-Up Charge/Annual Service Charge: A per-user fee that includess a
one-time registration fee to cover the costs of establishing a new account and
providing END-USER support during the first year; and a separate Annual Service
Charge, payable on each anniversary date, for providing END-USER support and
maintaining each account each year therafter.
Billing Fee - A per-invoice/statement fee, regardless of payment method, to
cover the costs of preparing and mailing invoices, and of receiving, posting and
reconciling payments. The fee is incurred regardless of whether the invoice is
actually paid by END-USER.
Transaction/Usage Fee - A monthly fee, based on billable usage during the month
per Title (adjusted for applicable credits and debits).
Credit Card/Debit Card Fees - A pass-through fee to cover the merchant
processing charges of credit card and bank card transactions by the END-USER.

SECTION 7. CIVS'S OBLIGATIONS

In connection with this Agreement, the CIVS agrees to fulfill its obligations as
set forth below:
Cooperation by CIVS: CIVS agrees to use reasonable efforts within reasonable
cost limits to cooperate with CD-MAX to facilitate the services to be provided
by CD-MAX as described in Sections 3, 4, and 5. All such cooperation shall be
supplied in a reasonable and timely manner.
Certification of Authority: CIVS agrees to provide reasonable certification, if
necessary, of CD-MAX's authority to carry out its billing services on behalf of
CIVS.
Technical Support: CIVS agrees to provide technical information, support and/or
access to CIVS's technical facilities, if necessary, to facilitate CD-MAX's
performance of its services under this Agreement.
Notification: CIVS agrees to evaluate and determine the final disposition of any
END-USER account that CD-MAX identifies as being in question. Such notification
shall be provided in a timely manner.
Shipper's Export Declaration Form and Destination Control Notice: When export is
made of the CD-ROM Title, CIVS agrees to enter the general license symbol "GTDU"
on the Shipper's Export Declaration Form (Form 7525-V) to cover export of the

5
<PAGE>

CD-MAX(TM) technology. In addition, the commercial invoice and the bill of
lading must contain the following destination control notice: "United States law
prohibits disposition of these commodities to Cuba, Cambodia, Libya, North
Korea, or Viet Nam unless otherwise authorized by the United States."
CIVS End User Subscription/License Agreement: Because of the CIVS marketing
strategy for its CD-ROM product(s), it apparently will not be possible to obtain
signed written agreements from subscribers/customers/End-users. However, CIVS,
CD-MAX, and DATAWARE, all have proprietary works involving copyrighted materials
- -- and in CD-MAX's case -- patented materials, which require contract protection
against infringement. Accordingly, CIVS agrees that it will work with CD-MAX and
with DATAWARE to prepare an integrated software and database license or
licenses, which shall be presented to each End-User on a screen(s) at the time
of Registration, and for which End-User Acceptance shall be required through an
affirmative act on the End-User's part indicating acceptance of the provisions
of said license(s). CD-MAX will work with CIVS by providing its End-User license
provisions and by cooperating with CIVS in developing the integrated license or
licenses. CIVS shall be responsible for obtaining the license provisions that
DATAWARE requires for its software.

SECTION 8. PROTECTION OF CONFIDENTIAL INFORMATION

SECTION 9. TAXES

The reporting and payment of Federal, state and local taxes to the applicable
jurisdiction is the sole responsibility of CIVS. In the course of providing its
service, CD-MAX will bill appropriate state taxes (if required by the
jurisdiction) and collect same from END-USERs along with standard usage fees.
All collected taxes will be identified as such and be forwarded to CIVS in the
normal manner of financial transfers prescribed herein.

6
<PAGE>

SECTION 10. FORCE MAJEURE

SECTION 11. WARRANTIES

CD-MAX warrants that it has clear title to the CD-MAX Publisher System and the
CD-MAX End-User System, and that the software systems will substantially perform
the functions set forth in the CD-MAX documentation.
CD-MAX agrees to exercise reasonable care and workmanlike effort to provide
prompt and efficient service; however, CD-MAX makes no warranties or
representations regarding services except as specifically stated in this
Section. CD-MAX shall use due care in processing all accounts submitted to it by
CIVS and agrees that it will, at its expense, correct any errors which are due
solely to problems with CD-MAX's operating systems or programs or errors by CD-
MAX's employees or agents. Correction shall be limited to correction of any
system or software problems and reprocessing of any affected END-USER BILLING
RECORDS. CD-MAX shall not be responsible in any manner for failures of, or
errors in proprietary systems and programs other then those of CD-MAX, nor shall
CD-MAX be liable for errors or failures of CIVS's software or operational
systems.
THESE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, AND CIVS
HEREBY WAIVES ALL OTHER WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE.

SECTION 12. LIMITATION OF LIABILITY

Should there be any problems with operation of CD-MAX's systems, or errors or
omissions with respect to the information being processed for billing and
collection, CD-MAX's liability shall be limited to making such corrections as
may be reasonable under the circumstances to remedy such system problems or
errors or omissions. In no event, except as specifically set forth herein, shall
CD-MAX be liable to CIVS or any third parties (including CIVS's END-USERs) for
any claim, loss or damage, ordinary, special, indirect or consequential,
including without limitation, lost profits or revenues, arising from
performance, or the lack or delay of performance, under this Agreement, whether
or not the party has been advised of the possibility of such damage. The terms
of this provision shall survive termination of this Agreement.
CIVS agrees that any liability on the part of CD-MAX arising from breach of
warranty, breach of contract, negligence, strict liability in tort, or any other
legal theory, shall not exceed the amounts paid by CIVS to CD-MAX for the
Title(s) listed in Exhibit A during the preceding six months minus the costs
CD-MAX incurred directly related to this Title(s).
Nothing herein is intended to limit CD-MAX's indemnification liability pursuant
to Section 14 hereof.

7
<PAGE>

SECTION 13. TRADEMARK

"CD-MAX" is a trademark of CD-MAX, Inc. No right, or interest in such trademark
is granted hereunder, and CIVS agrees that no such right or interest shall be
asserted with respect to the trademark.

SECTION 14. HOLD HARMLESS

CD-MAX agrees to defend, indemnify and hold CIVS harmless from and against any
action brought against CIVS to the extent it is based on a claim that the
CD-MAX(TM) Publisher System or CD-MAX(TM) END-USER System infringes any patent,
copyright, trademark, or trade secret, or other proprietary right of any third
party, provided that CD-MAX is immediately notified in writing of such a claim.
CD-MAX shall have the right to control the defense of all such claims, lawsuits,
and other proceedings.
CD-MAX further agrees to defend, indemnify and hold CIVS harmless from and
against any action brought against CIVS to the extent it is based on a claim
that damages were suffered as a result of use of the CD-MAX(TM) Publisher System
or the CD-MAX(TM) END-USER System, or because of the performance of the services
provided under this agreement, provided that CD-MAX is immediately notified in
writing of such a claim. CD-MAX shall have the right to control the defense of
all such claims, lawsuits, and other proceedings.
CIVS agrees to defend, indemnify and hold CD-MAX harmless from and against any
action in which CD-MAX is named as a party, to the extent said action is based
on an act or failure to act of CIVS and growing out of use of CIVS's CD-ROM
Title(s) listed in Exhibit A hereto, provided that CIVS is immediately notified
in writing of such a claim. CIVS shall have the right to control the defense of
all such claims, lawsuits, and other proceedings.

SECTION 15. TERM OF AGREEMENT

This Agreement shall be effective as of the date first indicated above and shall
continue for a period of one (1) year. This Agreement will automatically renew
for a successive period of one (1) year unless either party shall give written
notice of its intent to terminate or renegotiate this Agreement at least sixty
(60) calendar days prior to the expiration of the then-current term. CD-MAX
shall provide CIVS with its then-prevailing prices for its services at least
ninety (90) calendar days prior to the expiration of the then current term.

SECTION 16. EXPIRATION OR TERMINATION

This Agreement may be terminated by either party by written notice to the other
upon the occurrence of any of the following events:
a)Default on any payment specified hereunder and such default continues for
twenty (20) BUSINESS DAYs after written notice.
b)The material breach of any of the terms or conditions of this Agreement, which
breach is not remedied by the breaching party within a period of twenty (20)
BUSINESS DAYs after the receipt of written notice of such material breach from
the non-breaching party; provided, that if the breach cannot reasonably be cured
within twenty (20) business days, but the breaching party has commenced to cure
the breach within the twenty (20) day period and diligently and in good faith
continues to cure the breach, the twenty (day) time limitation shall not apply.
c)The institution by or against either party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of debts,
provided that in any such case the proceeding is not vacated or otherwise
dismissed within sixty (60) calendar days of initiation, or upon either party's
dissolution.

8
<PAGE>

d) Upon the expiration or termination of this Agreement for any reason, both
parties agree to satisfy any and all of its outstanding current and known
obligations. CIVS agrees to pay CD-MAX all compensation associated with its
licenses, charges and fees on all invoices issued prior to expiration or
termination and not subject to a bona fide dispute.

SECTION 17. AMENDMENTS; WAIVERS

SECTION 18. ASSIGNMENT

SECTION 19 INDEPENDENT CONTRACTORS

With the exception noted below, the parties acknowledge and agree that they are
dealing with each other hereunder as independent contractors. Neither party nor
any of its partners, agents, employees or representatives are, nor shall they be
deemed to be, affiliates, employees or legal representatives of the other.
Nothing contained in this Agreement shall be interpreted as constituting either
party as the joint venturer or partner of the other party or as conferring upon
either party the power or authority to bind the other party in any transaction
with third parties. The parties may determine, however, that it is necessary to
appoint CD-MAX as an authorized agent of the CIVS in the matter of merchant
credit card or bank card account transactions. If such authorization is deemed
necessary, the parties agree to outline the responsibilities and obligations of
each party under a separate written document which shall then be incorporated as
an attachment to this Agreement.

SECTION 20. THIRD PARTY BENEFICIARIES

9
<PAGE>

SECTION 21. NOTICES AND DEMANDS

If to CD-MAX: If to CIVS:
- ------------- -----------
Attn: Attn:
Robert A. Wiedemer
President
CD-MAX, Inc.
Suite 101
219 South Street
Murray Hill, NJ 07974-2100

SECTION 22. GOVERNING LAW

SECTION 23. ENTIRE AGREEMENT

SECTION 24. EXECUTION IN COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same document.

SECTION 25. SEVERABILITY

A determination that any provision of this Agreement is invalid, illegal or
unenforceable shall not affect the enforceability of any other provision.

SECTION 26. HEADINGS

The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning or
interpretation of this Agreement:

SECTION 27. PUBLICITY

CD-MAX shall have the right to use the name of CIVS in publicity releases,
advertising, or similar activities during the term of this Agreement, with the
prior consent of CIVS, which shall not be unreasonably withheld. CD-MAX shall
make any changes reasonably requested by CIVS.

<PAGE>

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

CD-MAX, Inc. CIVS
By:_____________________________ By:______________________________
Robert A. Wiedemer
President (Printed Name)___________________
Date:___________________________ Title:___________________________
Date:____________________________

Exhibit A

_________________________________________
<PAGE>

EXHIBIT B

CD-MAX, INC. PRICE SCHEDULE
<TABLE>
<CAPTION>
ITEM UNIT RATE FREQUENCY PURPOSE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Design And Prototyping Fee 1st CD-MAX [Confidential One Time Fee; Partial To Cover The Cost of
Application portion omitted, Payment Due On Signing Customizing CD-MAX(TM)
(Per Platform) filed separately Contract, Balance Due On Software and Billing
with SEC] Delivery Of Prototype Procedures To Meet
Publisher's Requirements.

CD-MAX(TM) Publisher Per Title [Confidential Annually To Cover The Cost Of
System Softer License portion omitted, Developing, Maintaining
filed separately And Enhancing CD-MAX(TM)
with SEC] Software For A Given
Title.

New Acct Setup Per End-User Acct [Confidential At Initial Account To Cover The Costs Of
Charge/Annual Service portion omitted, Registration Establishing A New
Charge filed separately Account And Providing
with SEC] Customer Support.

On Anniversary Date,
Yearly

Billing Fee Per Invoice Or [Confidential As Issued To Cover The Cost Of
Statement Sent portion omitted, Preparing And Mailing
filed separately Invoices, And Of
with SEC] Receiving, Posting And
Reconciling Payments.

Transactions/Usage Fee Per Usage/Billable [Confidential Calculated Monthly On To Recover The Cost Of
Event, Per Title portion omitted, Billable Transactions; Research And
filed separately Development, And Of
with SEC] Ongoing Product
Maintenance And
Enhancements.

VISA/MC Fees Per Transaction Actual (Set By As Required Pass-Through Charges By
VISA/MC) Banks To Process
VISA/Mastercard
Transactions.
</TABLE>

Effective 2/96. Prices subject to change without notice.
All prices quoted in U.S. dollars
CD-MAX, Inc.
Proprietary and Confidential

<PAGE>

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 11, 1996 in the Registration Statement (Amendment
No. 2 to Form SB-2 No. 333-5723) and related Prospectus of CD-MAX, Inc.
(formerly InfoServe, Inc.) for the registration of 1,150,000 units.

Vienna, Virginia
August 5, 1996 /s/ ERNST & YOUNG LLP
------------------------

<PAGE>

[LETTERHEAD OF QUARLES & BRADY]

August 6, 1996

VIA FACSIMILE 703/471-2806

Mr. Robert Wiedemer, President
CD-MAX, Incorporated
11480 Sunset Hills Road - Ste 110
Reston, VA 22090-5208

Re: Prospectus
----------

Dear Bob:

This is to confirm that you have my permission to use the name of
myself and our firm as intellectual property counsel to CD-MAX, Inc. in
connection with the current securities offering being prepared by your
company.

Sincerely,

QUARLES & BRADY

/s/ Nicholas J. Seay
----------------------
Nicholas J. Seay

NJS:rmk\110382

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM (A) CD-MAX, IN. (FORMERLY INFORSERVE, INC.) AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS AS OF AND
FOR THE YEAR ENDED JUNE 30, 1996.
</LEGEND>
<NAME> CD-MAX INC.
<CIK> 0001015457
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 296,012
<SECURITIES> 20,000
<RECEIVABLES> 5,994
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 347,269
<PP&E> 67,518
<DEPRECIATION> 13,446
<TOTAL-ASSETS> 483,124
<CURRENT-LIABILITIES> 1,477,549
<BONDS> 0
0
0
<COMMON> 20,473
<OTHER-SE> (1,035,870)
<TOTAL-LIABILITY-AND-EQUITY> 483,124
<SALES> 13,394
<TOTAL-REVENUES> 13,394
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,283
<INCOME-PRETAX> (1,715,333)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,715,333)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,715,333)
<EPS-PRIMARY> (.88)
<EPS-DILUTED> 0

</TABLE>